What does a retailer look for when it comes to ad opportunities?
Mike Mauti: There are several different objectives that retailers are looking to satisfy through advertising. The most basic answer is they're looking to entice their competitors' customers into their store by offering a product they want to buy at a good price. Take strawberries for example, assuming $1.99 is the magic price to draw customers into your store, as a retail buyer you would be looking for an awful lot of volume at a cost that is conducive to your advertising program. In my day, we always wanted our most aggressive costs for our front-page flyer items. Typically, you would go to the supplier community and look for strawberries at an aggressive FOB price, then add freight and other incidental costs, plus if you are in Canada, as I was, you would calculate the exchange rate. If that resulted in our target cost, we would continue with the ad. With strawberries being a prime product to drive massive amounts of tonnage with a hot ad price; we could be in the market looking for approximately ten times our normal volumes. Not always an easy task that brought with it many rewards.
There's an interesting statistic that suggests even your best customers will only give you approximately 60% of their wallet. That means even the customers that are most loyal to you are still going to shop your competitors - a lot. Likewise, shoppers loyal to your competitors are also in your store. If you can capture that group of people from your competitors who are in your store shopping your ad, then you can use other tools in your merchandising tool chest to turn that occasional customer into something more than occasional. And it all starts with advertising and getting them into your store.
Another advertising objective would be to grow customer basket size or drive the sales of specific products. Certainly, people have their favorite fruits. But a lot of fruit is interchangeable with a lot of other fruits. If I'm shopping, and I see strawberries are $1.99, strawberries are going to get in my cart. If I see peaches at 99 cents, peaches are going in my cart, maybe in addition to strawberries. If the quality is right, and it's at the price that entices me to act, I'm going to pick it up, but often, I need the push of an advertisement to get it in my cart.
Read the full interview here: Retail 101: Part One with Mike Mauti