GfK -vlerick fmcg conference - the price sensitive shopper reality or fairy tail
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Presentation shared at the vlerick fast moving consumer goods conference 2012 by Koenraad Dierick
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GfK -vlerick fmcg conference - the price sensitive shopper reality or fairy tail
- 1. THE PRICE FOCUSED SHOPPER: REALITY OR FAIRYTALE © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 1
- 2. GfK: Who buys what, where, when, how much…? © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 2
- 3. GfK: 1 in every 900 Belgian households is monitored across total FMCG Hypermarkets Supermarkets Discounters Proximity Special Outlets Other Food •TECNO •Peter-Goovers •Oth.Supermarkets (1-2 checkouts) •Foreign Supermarkets •Louis Delhaize Super • Rob • Delhaize Superette •…………. • Alma • Prima •Bio Planet • Deli Traiteur • Caddy Home, Delhaize •Supra Direct/Wineworld •Spar (excL. Eurospar) •Ecomarché •Carrefour winkel Online • Petrol stations •Profi Total Belgium = Hyper + Super + Discounter + Proximity + Special Outlets + Other Food © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 3
- 4. At the end of this session… We’ll answer the following question together: Does the price focused shopper exist? Option 1: YES, every shopper is price focused Option 2: YES, and it concerns a large portion of the population Option 3: YES, and it concerns a small portion of the population Option 4: No, but this will very likely change in the near future Option 5: No Option 6: I have another opinion © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 4
- 5. How we will try to answer the question How price aware are you? Some Macro-economics An eye on price elasticity Price as a driver for Aldi’s growth? Impact of price promotions Classification of Belgian Households The closing question © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 5
- 6. How we will try to answer the question How price aware are you? Some Macro-economics An eye on price elasticity Price as a driver for Aldi’s growth? Impact of price promotions Classification of Belgian Households The closing question © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 6
- 7. WHAT IS MISSING HERE? © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 7
- 8. How price awareon sensitivities Segmentation based are you? Expected PRICE I love this Last time BRAND it was GAP price X Posted PRICE Posted PRICE 40% does not notify the gap between the expected price and Purchase the posted price Purchase consideration consideration I’m used to This time it is buying this more product. Purchase expensive 40% © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 8
- 9. How price aware are you? What about your price sensitivity…? © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 9
- 10. How price aware are you? Would you be able to rank the following products on their price per liter / Kilo? © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 10
- 11. How price aware are you? 3 6 10 9 8 4 1 5 2 7 € 1,53 € 2,59 € 3,63 € 6,6 € 12,12 € 12,18 Price per volume (Kg / L) € 13,10 € 13,9 €15,95 © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 11
- 12. How we will try to answer the question How price aware are you? Some Macro-economics An eye on price elasticity Price as a driver for Aldi’s growth? Impact of price promotions Classification of Belgian Households The closing question © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 12
- 13. Some Macro-Economics Paradigm : Indexed salaries Vs Increase of costs PURCHASE POWER : Reality for private HH = Increase of Cost of living © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 13
- 14. Some Macro-Economics 35 PL shares Inflation 15 Private 34 13 Label Value Shares 33 11 Western 32 9 Europe 31 7 30 5 29 3 28 1 27 -1 26 -3 Q1 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Source Europanel consumer index – 10 countries © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 14
- 15. Some Macro-Economics Downtrading of some sectors can represent growth potential 4 Retail in FMCG ? Channels Assortment Brands CONSUMER Crisis Crisis Neutraal Crisis Resistant Neutral Prone © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 15
- 16. How we will try to answer the question How price aware are you? Some Macro-economics An eye on price elasticity Price as a driver for Aldi’s growth? Impact of price promotions Classification of Belgian Households The closing question © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 16
- 17. An eye on price elasticity SOFTDRINKS | BREAD SPREADS |FEMALE HYGIENE © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 17
- 18. An eye on price elasticity Very elastic, Elasticity > 1 Perfect elasticity, elasticity = 1 Δ% Volume Non elastic, elasticity < 1 Δ % Price © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 18
- 19. An eye on price elasticity Elasticity Bread Spread Soft drinks 1 Price per volume Female Hygiene 0 © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 19
- 20. How we will try to answer the question How price aware are you? Some Macro-economics An eye on price elasticity Price as a driver for Aldi’s growth? Impact of price promotions Classification of Belgian Households The closing question © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 20
- 21. Price as a driver for Aldi’s growth Aldi has been growing in Sales value and market penetration since 2004. 2 questions can be asked what will they do in 2013 and what have been the main drivers for this growth? 1600000 Sales Value (€1000) Penetration (%) 78 1400000 76 74 1200000 72 1000000 70 800000 68 600000 66 400000 64 200000 62 0 60 © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 21 21
- 22. © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 22
- 23. Price as a driver for Aldi’s growth Offers Prices Quality Assortment Fresh Cleanliness Friendliness 10 8 6 4 2 0 2004_Summer 2004_Winter 2005_Summer 2005_Winter 2006_Summer 2006_Winter 2007_Summer 2007_Winter 2008_Summer 2008_Winter 2009_Summer 2009_Winter 2010_Summer 2011_Winter 2011_Summer 2011_Winter 2012_Summer Sales Value (€1000) ? Penetration (%) 1600000 78 1400000 76 1200000 74 1000000 72 70 800000 68 600000 66 400000 64 200000 62 0 60 © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 23 23
- 24. Price as a driver for Aldi’s growth α* Price Sales results Performance β* Offers γ * Quality δ* Assortment ε * Fresh δ* Cleanliness ε* Friendliness © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 24 24
- 25. Price as a driver for Aldi’s growth α* Price Sales results Performance β* Offers γ * Quality Price / Quality δ* performance Assortment ε * Fresh δ* Cleanliness ε* No significant impact Friendliness © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 25 25
- 26. Price as a driver for Aldi’s growth α* Price/Quality Sales results performance β* Assortment γ * Fresh The sales performance of Aldi can be δ* Adjusting for explained by the amount of Belgian seasonality Households that visit the Aldi stores per season and their evaluation of the price / δ * Adjusting for quality ratio, the available penetration assortment, and the performance of the fresh department! © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 26 26
- 27. Price as a driver for Aldi’s growth Sales Aldi = Basic sales – A * Price/Quality + B * Assortment + C * Fresh department - D * Winter/Summer + E * Penetration Adjusted R² = 0.95 Actual sales Sales Model 3 1680000 1480000 1280000 1080000 880000 680000 480000 280000 80000 © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 27 27
- 28. Price as a driver for Aldi’s growth Further improvements on the price quality ratio have not resulted in additional sales. Or any negative changes in the price performance evaluation did not negatively affect the sales of Aldi The assortment has been a driver of Aldi’s success – A * Price/Quality + B * Assortment The fresh department has been a driver of + C * Fresh department Aldi’s success – D * Winter/Summer Aldi performs less good during the summer © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 28 28
- 29. Price as a driver for Aldi’s growth Actual sales data Predicition Sales 1680000 +2.5% 1480000 1280000 1080000 880000 680000 480000 280000 80000 © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 29 29
- 30. Price as a driver for Aldi’s growth © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 30
- 31. Price as a driver for Aldi’s growth © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 31
- 32. Price as a driver for Aldi’s growth © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 32
- 33. Price as a driver for Aldi’s growth Aldi continuous to improve or expand its assortment © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 33
- 34. Price as a driver for Aldi’s growth Aldi continuous to improve or expand its assortment © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 34
- 35. Price as a driver for Aldi’s growth The price gap is big enough for Aldi, they are not generating additional sales by lowering their prices. As a matter of fact they might have some potential to increase prices on “must buy” products: e.g. female hygiene © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 35
- 36. How we will try to answer the question How price aware are you? Some Macro-economics An eye on price elasticity Price as a driver for Aldi’s growth? Impact of price promotions Classification of Belgian Households The closing question © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 36
- 37. Impact of price promotions Segmentation based on sensitivities NO DEALS NO PLEASURE • Consumers react to uncertainty in the marketplace • Focusing on saving • Purchasing items on promotions • Increased share of PL • Specific group starts to buy more frequently • Actually feel better doing so • Pleasure of getting deals • Obsessive deal seekers • These are: • More knowledgeable • Brand conscious • Price sensitive © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 37
- 38. Impact of price promotions Segmentation based on sensitivities NO DEALS NO PLEASURE Example send in by GfK panel member NL That is €42 of Rexona products for only €12 © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 38
- 39. Impact of INTO PROMOTION EFFECTIVENESS DEEP DIVE price promotions TOTAL SALES PROMOTION EFFECTS SALES CANNIBALIZATION LONG TERM BUMP IN BRAND SWITCHING: PROMO “Buying something else” COMPETIVE SWITCHING SHORT TERM INCREASED BUYING TIMING EFFECT: FREQUENCY DEFENSIVE “Buying earlier” STOCKPILING CATEGORY VOLUME UPLIFT: SWITCHING “Buying more” RETAILER SWITCHING NEUTRAL INCREASED CONSUMPTION © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 39
- 40. Impact of INTO PROMOTION EFFECTIVENESS DEEP DIVE price promotions Brand Switching Extra volume Faster buying Shop Shifting 20% 23% 23% 30% 45% 42% 10% 10% 15% 10% 20% 23% 10% 21% 20% 35% 17% 25% 20% 23% 17% 10% 8% 11% 17% 18% 25% 24% 18% 10% Price Other Volume Multibuy Retailer Premium promotion Price promotion (e.g. 2+1 actions promotion coupon promotion (e.g. 5+1) SKU) (e.g. Pixar) © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 40
- 41. Buying development – Black Friday Black Friday • Radical deals on popular items • To create publicity • Encourage traffic into the store • Increase the sales of other items on their shelves) © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 41
- 42. How we will try to answer the question How price aware are you? Some Macro-economics An eye on price elasticity Price as a driver for Aldi’s growth? Impact of price promotions Classification of Belgian Households The closing question © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 42
- 43. Segmentation based on Classification of the Belgian Households sensitivities In biology, specimen are classified based on their characteristics. We can apply the same methodology on shoppers © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 43
- 44. Segmentation based on Classification of the Belgian Households sensitivities In biology, specimen are classified based on their characteristics. We can apply the same methodology on shoppers © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 44
- 45. Classification of the Belgian Households Segmentation based on sensitivities PRICE FOCUS QUALITY FOCUS BRAND FOCUS PROMO SENSITIVITY ADOPTING TO INNOVATIONS MEDIA SENSITIVITY PRODUCT SPECIFIC FEATURES RETAILER © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 45
- 46. Segmentation based on sensitivities Segmentation based on sensitivities SPECIMEN FOUND IN GFK DATABASE © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 46
- 47. High promo Early: Classification of the Belgian sensitiv 2% Households based on sensitivities Segmentation e: 10% Late: 7% Low promo Fair sensitiv Early: Quality: e: 7% 2% 3,5% Indiffer High ent:7% Premiu promo Late: 5% ADOPTING TO INNOVATIONS m sensitiv Quality: e:11% Early: PROMO SENSITIVITY 3,5% 3% Low promo QUALITY FOCUS Fair sensitiv Late: 8% PRICE FOCUS Quality: e: 6% 19% Sensiti High ve: 38% Early:2% promo Premiu sensitiv m e:8% Quality: Late:4% 19% Low promo Early: sensitiv 3% Fair e:2% Brand Focus: Quality: oriented High Late:5% 11% BRAND FOCUS 55% : 42% promo sensitiv Premiu e: 38% Early: m Not 30% Quality: brand Low 44% oriented promo : 2% Late: 8% sensitiv © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick e: 4% 47
- 48. Shopper decision hierarchy Segmentation based on sensitivities Price Price Price Focus: Indifferent:7 sensitive: 55% % 38% Quality Quality Price 1 Relative importance in purchasing decision Product features Price Quality 2 Brand Brand Promotions 3 Price Media Brand Media Promotions Media Promotions Innovations Innovations Innovations Product features Product features © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 48
- 49. How we will try to answer the question How price aware are you? Some Macro-economics An eye on price elasticity Price as a driver for Aldi’s growth? Impact of price promotions Classification of Belgian Households The closing question © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 49
- 50. At the end of this session… We’ll answer the following question together: Does the price focused shopper exist? Option 1: YES, every shopper is price focused Option 2: YES, and it concerns a large portion of the population Option 3: YES, and it concerns a small portion of the population Option 4: No, but this will very likely change in the near future Option 5: No Option 6: I have another opinion © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 50
- 51. More information? Koenraad Dierick (BE) Consultant Advanced Business Made by Sanne Van Hoef Solutions (ABS) 02/558 0551 | 0473/33 47 70 Koenraad.Dierick@gfk.com © GfK 2012 | Price sensitivity in FMCG | Koenraad Dierick 51