Shopper marketing and society

Economic development has lifted millions of people out of poverty in emerging and developing economies, and has tinned developed economies from markets of scarcity into markets of oversupply. Industrialization has made more and cheaper products available. Combined with more free time and access to cheaper money, shopping has turned from a necessity into a mass and leisure activity. Shopping is today a key engine of the economy. Infrastructural and technological development have profoundly changed the way we shop thr ough improved availability and reach of products and services, and have made the management of shoppers, retailers, distributors and other partners more complex.

Successfill shopper marketing strategies are dependent on a good understanding of the economic, sociopolitical, and technological environment. The development of this environment has a direct influence on shoppers and their behavior in terms of omnichannel shopping, segmentation and personalization, and values.

The relevance of shopper marketing

Private consumption is an important engine of the economy. With the ending of the gold standard and the Bretton Woods system in the seventies, the amount of money, as well as credits, that were available in the marketplace multiplied exponentially. In the 1980s, during the era of the new conservatism led in the United States by Ronald Reagan and in the United Kingdom by Margaret Thatcher, political decisions with important implications on the economy were taken. The ideas had academic support from the liberal theories of free market economics from the University of Chicago that were critical to demand-side economics and Keynesianism. Among the academics who gave theoretical support for that political development were Milton Friedman with his theory of monetarism (Nobel Prize winner in 1976)¹; George Stigler with his description of how lobbying formed economic policy in its favor (Nobel Prize winner in 1982)²; Gary Becker, describing that titles of economics could also be applied to social situations outside the economy (Nobel Prize winner in 1992)³; or Robert Lucas who won the Nobel Prize in 1995 and was a strong critic of Keynesianism⁴; and other important academics such as Frank Knight, who is seen as one of the founders of the Chicago School and who showed the important role of the entrepreneur.⁵ The Chicago School of Economics was the driving force behind the famous Chicago Boys, the economists in the 1980s who had a major impact, first in Chile and then in other South American countries, on economic policy.⁶

The 1980s were the point at which the idea of the free market won against opposing political ideas, such as communism as well as many of the more socialist ideas in Western

Figure 1.1 Debts in relation to disposable income

Household debt in the United States relative to disposable income.

Source: Stewart, 2010

societies. Francis Fukuyama, in his famous article, even proclaimed the end of history, as with the collapse of the Soviet Union, the last ideological alternative to liberalism had been eliminated.⁷ From the communist bloc only North Korea really remains today. Other communist countries, such as China, have strong ingredients of market economics. Countries with strong socio-democratic traditions, like Sweden or Austria, started to introduce important privatization reforms in the 1980s, and more heavily in the 1990s, based on the conviction that the state can never distribute products or services as effectively as a functioning free market.

The idea of the benefits of free market forces, especially when it comes to efficient distribution of scarce resources, is increasingly coming under criticism when it comes to public sendees. In addition, with the growing income divide, globalization is under criticism,⁸ a criticism that is strongly associated with the economic crisis of 2008 and the real estate bubble that started in the United States with subprime products. Those who entered late into the real estate game had less potential value to gain and those with low incomes were the ones who lost the most, in relative terms. Today, we are in a situation of high debts, low inflation and growth in most Western societies, but also countries traditionally associated with strong growth are losing speed, such as China and South American countries.

Private debts have grown very strongly in recent years as the money has been decoupled from tangible securities, like gold, and with the lowering of strict bank security rules, i.e. the ratio between credit and security. The increase of available money, and more credit has given a boost to shopping. The situation of high debt and low growth is forcing companies to become more professional and competitive to convert shoppers into buyers.

With increased productivity and economic development, countries are increasingly becoming service economies.

Not only has productivity increased, important cost savings have been made through outsourcing to low-cost countries. Companies like Nike, IKEA or H&M are no longer production companies, they are marketing and sales companies. They produce through subcontracted companies in low-cost countries, while they focus on innovation, design, marketing and sales.

Figure 1.2 Development of the composition of GDP in different parts of the world

Composition of GDP in South Asia, East Asia, the European Union and the United States in 2012 compared to 1970.

Source: The World Bank, 2017

Figure 1.3 National and international job changes in the United States

Cumulative change in millions of jobs between 1999 and 2009 in multinationals in the United States.

Source: Jilani, 2017

The price of many consumer products or services, like clothing, food and electronics, has fallen in relative terms in the last 30 to 40 years.

What has increased in relative price are the cost of housing and personal insurance and pensions, while relative prices on items like groceries, clothes and services have decreased.

With the access to more money and credits and the decrease of relative prices of products and services, shopping has developed from a necessity to a leisure activity. Additionally, people today have more time because of stricter regulations on working hours and holidays. Shopping has become a social activity, about experiences beyond the mere products and services, it has become about brands, experiencing new things, being part of social groups, discussing products and brands and identifying with these. Shopping as a mass activity is something recent, something that emerged in the seventies, gained speed in the eighties, and now has a central place in modem societies.

Figure 1.4 Change in food spending in the USA, 1951-2013

Relative importance of food spending as a percentage of the consumer price index (CPI) between 1951 and 2013 for urban consumers in the United States.

Source: Bureau of Labor Statistics, 2017

Table 1.1 Change in the composition of household costs

Change in average household cost composition between 1950 and 2007 in the United States.

Source: Chao & Utgoff, 2006; Bureau of Labor Statistics, 2017

Shopping and consumption have developed into key economic drivers, especially in developed economies.

Industrialization with its productivity gains has led to important decreases in prices and increases in income in relative terms. Together with infrastructure investments, products are now cheaper and can more easily reach people with more money everywhere, a situation that has led to overproduction and oversupply.

Figure 1.5 US consumption in relation to GDP

The development of consumption in the USA in relation to GDP.

Source: Federal Reserve Bank of St. Louis: Economic Research, 2017

Figure 1.6 Worldwide overproduction of calories Production and waste in daily calories per person.

Source: Stockholm International Water Institute, 2008

In many parts of the world, societies have gone from being societies of scarcity to societies of overproduction. Economic development has lifted millions of people out of poverty. In parallel, the economic division is increasing. Not only are there important differences between markets, but also within countries. On one side are educated professionals with relatively secure jobs, and on the other side a growing precariousness driven by new low-paid service jobs.

We come from a world that seemed more orderly, in which communication and knowledge generation were firmly organized. Mail, library, telephones, all had their clear place.

This has changed; everything can be found on the internet, accessed from a computer or a mobile device. Today the internet industry has developed into the world’s leading industry with the world’s most valuable companies.

Digital solutions will reach more and more industries, given that the productivity advantages are immense and the market reach, and its impact on the so-called consumer democracy, has no parallel. The digital revolution is not only changing the way products and services are offered and how they are purchased, but the products and services themselves. In addition, these are changes that have an impact beyond products and services; they are affecting the market and society. The emergence of the shared economy with companies like Uber and Airbnb has not only changed how we buy transportation services or accommodation during the holidays, it has also impacted the market for those sendees as a whole and has sparked discussions about the new job market of the gig economy.

Digitalization has made shoppers and consumers a part of the purchase process. Shoppers now follow a more deliberate cycle of search, evaluation, point of purchase choice, pinchase and purchase evaluation.⁹ In particular, social platforms of different types on which shoppers and consumers give advice and exchange opinions on products and services are playing a critical role in the forming of these new shopping journeys. There are information forums on how products or services are used. Consumers and shoppers can be friends with brands, products or companies through Facebook. Manufacturers and companies are trying to influence these flows of information generated directly from shoppers and consumers or other agents, such as influencers. The touchpoints between shopper, consumer

Table 1.2 Change in ranking of brands

The change in the most valuable brands between 2000 and 2015.

Source: Best global brands, 2016

Shopper marketing and society 7 and brands, products and services have multiplied and are no longer under the foil control of manufacturers.

At the same time, shoppers and consumers have not become the active shoppers and consumers who seek out, evaluate and exchange information about every potential purchase. Rather, most people are busy with their daily lives and do not wish to devote time to this. From a marketing perspective, the involvement in the category in these cases is too low to generate engagement outside the actual moment of purchase. The involvement is clearly different whether you are buying a car or a loaf of bread.¹⁰ In addition, most shoppers still go to existing stores (brick and mortar) to buy and/or find out about products and services. Here there are important differences between categories of goods.

Traditional sales channels continue to be key in emerging countries, and in developed countries the classic brick-and-mortar retailer, in different formats, still represents the lion’s share of sales. At the same time, digital services such as MPESA, the mobile to mobile money transfer system, can radically change the game, including in emerging markets in Africa. The touchpoints along the shopping journey are in most cases the classic and more passive ones, such as television, radio, street or shops. One touchpoint that has certainly decreased in importance are paper newspapers. As an example, the Independent of England abandoned its paper edition in 2016 and is now available only on the internet. The Huffington Post of the United States was founded only for digital editions. Here a significant number of touchpoints has migrated from paper to digital click touchpoints. The shopper marketing environment and purchasing processes are under constant change, especially due to the digital revolution, the economic development in emerging markets, and the increasing economic divide. In parallel, traditional shopping processes remain, which results in a more complex shopping environment and more complex purchasing processes impacting the discipline of shopper marketing.¹¹ Together with a hardening competitive environment, winning at the moment of truth has become a key concent for manufacturers. It is not enough to win the preference of consumers; the critical point is to turn that preference into a purchase to generate sales.

The increasing importance of marketing became evident in Kotler’s book on marketing in the eighties.¹² Kotler’s classic 4Ps approach (product, price, place, promotion) already included the idea of channel management and place, but it did not treat shopper marketing as a discipline and approach of its own.¹³

Figure 1.7 Sources of product information

Sources of product information on groceries, clothing and appliances in the UK, 2010.

Source: Cognizant, June 2011

A company can only survive and succeed if it has income, i.e. it must sell its products or services. The act of selling and buying is the fundamental act in a free market economy. Historically, this happened at markets, for example, when farmers transported their produce to villages or towns to sell their surplus production to receive money to buy products that they could not produce themselves. Today, the division of labor is much finer and more complex. The challenge of distributing products and services has decreased while the challenge of selling them has increased. To sell, companies have developed systems and academia has developed disciplines to understand and educate professionals who are dedicated to managing these more and more complex systems. Given that finances are key, subjects such as accounting developed first, which has evolved into controlling, not only to monitor but also to actively direct the company in aligning different areas with their financial objectives. Logistics is key to ensuring that products and services reach buyers and more complex and efficient systems have been developed. In many cases, it is already cheaper to produce in another part of the world and transport the goods to their destination. A company can have the best products and services in the world, but if they are not sold, the product and service will not continue. Philip Kotler emphasized the importance of marketing to the success of companies. To him, marketing was about strategy, and included topics such as product and service development and innovation.¹⁴ Shopper marketing focuses on how to ensure the encounter between product and service and buyer and how specifically to manage that process. It touches many other marketing and company processes that have to be aligned. Shopper marketing is a discipline that ensures effective and efficient sales in coordination and coherence with the company’s overall marketing strategy.