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““Paying Attention to Your Customers”Paying Attention to Your Customers”
National Produce Market Managers National Produce Market Managers AssociationAssociation
Dallas March 27, 2010Dallas March 27, 2010
ByLarry E. Lund
Real Estate Planning GroupChicago
It’s All About CustomersIt’s All About Customers
Markets have two Kings– Vendors– Consumers
Ultimately the Public is King
Real Estate Planning Group
A Theory of ShoppingA Theory of Shopping
Shopping Demonstrates Social Relationships – What do we care about?
Shopping is a Devotional Rite – Pleasing others– Shopping as a “treat” - pleasing oneself
Veblen – “Conspicuous consumption”
– Shopping as “thrift” Hegelian dialectics – household interests (saving money) vs.
community interests (Green). Shopping as a moral act
Shopping as Personal Identity
Source: Daniel Miller writingsReal Estate Planning Group
Four Behavior Patterns You Four Behavior Patterns You Need to KnowNeed to Know
with Fancy Nameswith Fancy Names
Real Estate Planning Group
Law of ConvenienceLaw of Convenience
Every additional step that stands between people's desires and the fulfillment of those desires greatly decreases the likelihood that they will undertake the activity.
Real Estate Planning Group
Zipf’s Principle of Least-EffortZipf’s Principle of Least-Effort
This Principle predicts that most people, most of the time, are turned back by modest hurdles that they know could be overcome, with effort. To be habitual, an action must be relatively effortless or carry a particularly LARGE PSYCHIC REWARD. And in what constitutes a "large reward," opinions and motivations vary widely across individuals.
Real Estate Planning Group
Nash’s Equilibrium TheoremNash’s Equilibrium Theoremthe Principle behind Marketsthe Principle behind Markets
In Game Theory, two vendors selling the same merchandise will maximize their locational advantage by locating right next to each other at the mid-point: where half their consumers are located
Real Estate Planning Group
John Nash won the 1994 Nobel Prize in Economics for his theorem. Beautiful Mind was the 2001 film about his schizophrenia.
Reilly’s Law of Retail GravitationReilly’s Law of Retail Gravitation
Reilly's Law of Retail Gravitation states that larger retail offerings will have larger trade areas than smaller ones, meaning people travel further to reach a larger retail offerings.
Real Estate Planning Group
Trade Area by Surveying Trade Area by Surveying CustomersCustomers
Real Estate Planning Group
Competitive Market AnalysisCompetitive Market Analysis
Real Estate Planning Group
Drawing PowerDrawing Power
Real Estate Planning Group
Market ShareMarket ShareSelected Store Estimated Area
(S.F.)Estimated %
Market Share (Fresh Food Items Only)
Lexington Market 74,400 (240,000)
30%
Safeway 50,000 14%
Superfresh 35,000 13%
Hollins Market 15,500 (50,000) 12%
The Avenue Market 17,360 (56,000) 6%
Stop Shop & Save - Pratt
15,000 5%
Cross Street Market 27,900 (90,000) 4%
Market Potential vs. RealtyMarket Potential vs. Realty
Selected Fresh Category Hollins Market Potential from Huff Forecasting
Model
Bakery $234,000
Meat & Poultry $1,342,000
Fish & Seafood $97,000
Fresh Fruit & Vegetables
$219,000
Real Estate Planning Group
Marketing 101Marketing 101Three P’s of MarketingThree P’s of Marketing
ProductPlacePricePromotion
Real Estate Planning Group
Produce Market UpsideProduce Market Upside
$47.1 Billion in Fresh Produce Expenditures for at home consumption (BLS 2007)
2007 Census of Retail– Produce:
2,908 Produce establishments with employees $3.413 Billion in sales avg. $1.173 Million/store 8,274 Sole Proprietors produce establishments $487,636,000 in Sales, avg. $58,935 annually
– 3.9 Billion or 8% of produce purchased at Produce est.
Real Estate Planning Group
Changes in Expenditure ShareChanges in Expenditure Share1901
Food42.4%
Housing23.5%
Apparel14.0%
Entertain1.6%
Other18.6%
1972
Food19.3%
Housing30.8%Apparel
7.8%
Trans19.3%
Health6.4%
Entertain8.6%
Other7.8%
1950
Food29.7%
Housing27.2%
Apparel11.5%
Trans13.4%
Health5.2%
Entertain4.4% Other
8.6%
Source: BLS Real Estate Planning Group
2008
Food12.8%
Housing33.9%
Apparel3.6%Transp
17.1%
Healthcare5.9%
Entertain5.6%
Ins/Pen11.1%
Other10.0%
How is your Diet?How is your Diet?Diet for Food at Home
0% 10% 20% 30% 40% 50% 60%
Healthy as Can Be
Healthy Enough
Could be Healthier
Lot Healthier
US Detroit Office Reading Mkt Core RTM
Organic FarmingOrganic Farming
14,540 farms & ranches certified organic 20% organic farms are in California representing
36% of organic sales U.S. Organics $3.16 B -- $1.94 B in crops, $1.22
B livestock, poultry, etc. 83% organics sold to wholesale channels 10% organics sold direct to retailers 7% organics sold direct to consumers ($221.2 M)
Source: 2008 Organic Production Survey, USDA
Local the New Organic?Local the New Organic?Reasons for Buying Local Grown Products
0% 20% 40% 60% 80% 100%
Freshness
Help Economy
Taste
Source
Price
Nutrition
Environment
Appearance
U.S. Detroit Reading Terminal Mkt RTM Core
Public Markets Finding the Public Markets Finding the Opportunity Opportunity
92 Percent of Americans do most of their Food Shopping at Supermarkets – So Where is the Market’s Niche?– Choice/Assortment
Internal Competition
– Costs High Margin/Low Margin– Quality– Organic/Local
Real Estate Planning Group
What Does Market Research What Does Market Research Do?Do?
Research is sometimes about Reducing RiskResearch sometimes Tests HypothesisAll Research is about answering a QuestionResearch is not a Product,
it’s an Interactive Process
Real Estate Planning Group
General Overview of Research General Overview of Research OpportunitiesOpportunities
Assess your Market’s PotentialHelp Identify Best CustomersImprove AdjacenciesIndexing to NormsImportance/PerformanceMarket SegmentationBehavioral Mapping
Real Estate Planning Group
Focus on Core Customers Focus on Core Customers Pareto’s PrinciplePareto’s Principle
80/20 Rule states that for many phenomena 80% of results stem from 20% of the effort.
In other words, focus on those who buys more at the Market.
Real Estate Planning Group
Core CustomerCore Customer
Geographic OriginsMarket SegmentationHow do you Reward your
Core Customer?
Real Estate Planning Group
Core Customer BenefitsCore Customer BenefitsPercent of Core Shoppers Making Purchase by Food Category
Food Cat. Percent Core Customer
Making Purchase
Index of Core Customer Making
Purchase to All Customers
Eat at Market
44% .90
Foods to Go 29% 1.45
Meat/ Poultry
40% 1.90
Fish/ Seafood
33% 2.20
Bakery 37% 1.37
Produce 66% 1.50Real Estate Planning Group
Geographic Market SegmentationGeographic Market Segmentation
Live Downtown / Work Downtown
Live Downtown / Work Outside Downtown
Live in City Outside Downtown / Work Downtown
Live in City Outside Downtown / Work Outside Downtown
Live Metro Outside City / Work Downtown
Live Metro Outside City/ Work Outside Downtown
Live Downtown/ Not Work
Live in City Outside Downtown/ Not Work
Live in Metro Outside City/ Not Work
Live Outside Metro/ Not Work Real Estate Planning Group
Cross Vendor Shopping MatrixCross Vendor Shopping Matrix
What Vendors are Customers Shopping?What Type Vendors are Attracting
Customers?
Real Estate Planning Group
2009 Cross Category Shopping Matrix
Category EatIn
Prepare
Foods
Meat
Poul. Fish/Sea
Bake
Prod.
Oth.Foo
d
NonFoo
d
Total # 738
175 72 41 28 37 86 198 91 10
% N=401
44% 18% 10% 7% 9% 21% 49% 23% 2%
Eat-In -- 25% 22% 25% 19% 30% 24% 52% 90%
Prepared 10% -- 20% 7% 8% 13% 12% 23% 40%
Meat 5% 3% -- 36% 32% 16% 18% 12% 10%
Poultry 3% 3% 24% -- 16% 12% 11% 4% 20%
Fish/Sea 4% 4% 29% 21% -- 9% 16% 7% 20%
Bakery 21% 15% 37% 29% 22% -- 19% 27% 40%
Produce 27% 33% 88% 79% 86% 43% -- 35% 30%
Other Food
27% 29% 27% 14% 16% 29% 16% -- 60%
Non-Food 5% 6% 2% 7% 5% 5% 2% 7% --Across: 27% who Ate In bought Produce/24% who bought Produce Ate In
Indexing Market Performance
Market Survey
National Survey
Index
Variety of Fresh Food
3.24
Quality of Fresh Food
3.36 3.2 1.05
Ambience/Atmosphere/Character of Place
3.36
Local Products 3.21
Average 3.16
Cleanliness 3.09 3.3 .94
Convenient Location
2.97 3.0 .99
Adequacy of Parking
2.82
Pricing 2.64 3.0 .88
Selection of Ethnic Foods
2.58 Real Estate Planning Group
Importance / Performance Matrix of Primary Food Store Where Customers
Spend the Most Money
Quadrant IIAreas Important to Customer but Primary Store Does Not Meet Expectations. Market Opportunity Area:Lower PricesItems on Sale
Quadrant IAreas Important to Customer and Primary Store has High PerformanceMarket challenged to compete with theseHigh Quality ProduceHigh Quality MeatsClean and Neat StoreConvenient LocationGood Variety
Quadrant IIIAreas of Lesser Importance to Customer and Primary Store Performs PoorlyMarket has marginal opportunityImproved Safety Outside StoreMore Natural FoodsMore Ethnic FoodsMore Local FoodsBetter Recycling Programs
Quadrant IVAreas of Lesser Importance to Customer and Primary Store Performs WellMarket has very marginal opportunityKnowledgeable Staff
Importance / Performance Matrix of with Market Customers
Quadrant IIAreas Important to Customer but Primary Store Does Not Meet Expectations. Market Needs Improvement.Lower PricesNeat and CleanHaving Items on Sale
Quadrant IAreas Important to Customer and Primary Store has High PerformanceMarket StrengthsHigh-Quality ProduceHigh-Quality MeatsConvenient LocationGood Variety
Quadrant IIIAreas of Lesser Importance to Customer and Primary Store Performs PoorlyMarket improvements will result in marginal resultsImprove Safety Outside MarketMore Natural and Organic ProductsImprove Recycling Efforts
Quadrant IVAreas of Lesser Importance to Customer and Primary Store Performs WellMarket performs well, but not valued highly by its customers.Good Selection of Ethnic foodsServes Local Food ProductsHas Knowledgeable Staff
Grocery Market SegmentationGrocery Market SegmentationSpending and TripsSpending and Trips
27%
18%16%
10%
9%
2%4%5%
9%
Care for Family
Smart Budget Shopper
Efficient Stock-Up
Bargain-Hunting
Discovery Buyers
Specific Item
Grab & Go
Reluctant Buyer
Immediate Consumption
21%
17%14%11%
8%
2%9%6%
12%
Real Estate Planning Group
Grocery Market Segmentation Grocery Market Segmentation Cluster AnalysisCluster Analysis
Care for Family – 27% of spending 19% of trips.– Trust and High-Quality, Fresh Products
Smart Budget Shopping– 18% of spending, 15% trips– Value for Money, sales important
Efficient Stock-Up– 16% of Spending, 13% trips– Ready to eat meals
Real Estate Planning Group
Segments ContinuedSegments Continued
Bargain-Hunting– 10% of spending and 13% of trips– All about saving money travel different stores.
Discovery Buyers– 9% of spending and 7% of trips– New items, selection and atmosphere
Specific Item– 9% of spending and 11% of trips– Mission and Convenience driven
Real Estate Planning Group
Segments ContinuedSegments Continued
Small Basket Grab & Go– 5% of spending and 9% of trips– Same as Specific Item, but buy more items and want
other services like banking, video rental Reluctant Buyer
– 4% of spending, 8% of trips– State of mind, not like shopping, self-service
Immediate Consumption– 2% of spending, 5% of trips– Convenience, snacks, eat in store
Real Estate Planning Group
Farmer’s Market SegmentationFarmer’s Market Segmentation
9%
11%
18%
30%
32%
Enthusiasts Basic Shopper Serious Shopper
Low-Involvement Recreational
Real Estate Planning Group
Farmer Segments ContinuedFarmer Segments Continued
Enthusiasts – 32%– Professionals with high education and incomes– High Quality Fresh Products Organics and want
full market experienceBasic Shoppers – 30%
– Educated with medium-high incomes– High Quality Fresh Products – Doesn’t need to be at farmer’s market
Real Estate Planning Group
Farmer Segment ContinuedFarmer Segment Continued
Serious Shoppers – 18%– Have Children at home and likely younger– Variety important enough to over inconvenience of
shopping at Market. Low-Involvement – 11%
– Highly educated and high incomes– Male shopper, not primary shopper
Recreational – 9%– Younger, less educated, lower incomes– Enjoy Market events and non-produce products
Source: Consumer Segments in Urban and Suburban Farmers Markets, April 2010
Real Estate Planning Group
Behavioral MappingBehavioral Mapping
How long at Market?How many vendors do people visit?What vendors are anchors?What is your geographic syntax?
Real Estate Planning Group
Focus GroupsFocus Groups
Qualitative researchAbout Listening to CustomersCan lead or follow Quantitative research
Real Estate Planning Group
Knowledge Can Transform Knowledge Can Transform Your MarketYour Market
Use Different Techniques for Discovery– Customer Surveys – Sample Size/Correlations
(Quantitative)
– Focus Groups – Memories (Qualitative)– Behavioral Tracking – Memory vs. Reality
Watch the Cool-Aid
Real Estate Planning Group