Grazing Nation

Understanding snack ‘demand spaces’ can help retailers earn and retain customer loyalty.

October 26, 2018

This interview with Jamie Cavallo, customer vice president, Mondelēz International, originally appeared in the October issue of NACS Magazine. It was brought to you by support from Mondelēz International, a NACS Hunter Club Gold member.

The importance of snacking these days cannot be underestimated. Where does Mondelēz International see the present and the future of snacking?
Snacking is very much on-trend right now, and we see the future of snacking continuing to evolve as consumers become increasingly focused on convenience and saving time. As we look at consumer groups like millennials, Gen Z and even Baby Boomers, these consumer cohorts will continue to demand to have snacking individualized around their lifestyles. We also know that traditional meals (breakfast, lunch, dinner) continue to be redefined as many consumers consume snacks throughout the day.

At Mondelēz International, we see the consumer demand still on both ends of the “bow tie,” with indulgent snacking growing along with “better for you” snacking. We have also worked to align our brands against a “demand space” matrix, specific to snacking, which has helped us to better understand the growth potential in our brands as you look at how they stretch across these different consumer demand spaces. This work has also helped us to identify future white space for product innovation and has inspired some different thought around how we better engage with our consumers.

What are demand spaces?
A demand space is a moment that defines the consumer motivation to purchase or enjoy a snack. That space is a combination of a need and the context. For example, the need may be for a particular emotion that I have, it could be something functional, or perhaps something to pick me up for the remainder of the day.

The context could be whether I am entertaining a group of people or am I by myself. Am I studying for a big exam or sitting on my couch playing a game with my kids? Am I on my morning drive to work, or is it an afternoon snack to bridge me to dinner?

We have defined the largest demand spaces for each of our brands, which has helped us to better prioritize our resources, and we believe there are opportunities to partner with our retailers around these demand spaces to help further drive the category.

How can c-store retailers use demand spaces to drive more sales and traffic?
For the retailer, demand spaces offer an opportunity to better tailor merchandising in store around snacking solutions that deliver against what your customer is looking for.

If I have a high index of customers that are pursuing “better for you” snacks to complement their lifestyle, then what if I had a dedicated endcap toward the front of my store around healthy or functional snack options?

If I have a high index of customers that visit my store in the morning on their daily commute, then do I have a rack up by the register with different snacks that complement a morning coffee or orange juice?
Ideally, if I had a store that catered to both of these groups, then I could have a rack up near the register that I merchandise at the different parts of the day, dependent on what my customer make-up may be for each different day part.
 
Your consumers are looking for this type of individualized communication and engagement with the stores that they visit and with the brands that they purchase.

And better knowing your customer can clearly help drive loyalty, right?
Yes, ultimately, we are talking about consistently delivering against your customer’s needs. When you can deliver what the customer is looking for, when they want it and how they expect it, you will build loyalty. In a world that continues to offer more and more choices to the customer, the retailers that will win will be those that can consistently deliver against customer needs and build that loyalty to their store/their brand.

Where the retailer can really have a unique advantage is to combine “demand spaces” with their own loyalty data.

It sounds like it’s all about the data you gather to test and learn.
Data is the key. It will help you unlock and prioritize the demand spaces that will resonate the most with your customers. If you have the data to mine, then you can start to segment your stores. You may have stores that index high with millennials or Boomers. You may have stores that appeal to high-income households, certain ethnicities or that may be located near a college. The deeper you can dig into your customer base, understand their demand spaces and tailor your store to them (assortment, merchandising), then the more successful you will be.

With a rich database, you can always trace your customer behavior. It really offers a powerful test-and-learn environment, where you can identify pre- and post-purchase behavior around anything that you would like to test within your store.

For instance, if I want to test a “better for you” endcap in my store, then I can capture the households that purchase the items on that rack over a given month. Not only can I see how my sales on those items increased for the month, but I can also see how those same households purchased products in my store, before I had the rack in place and how they have purchased after the rack was in place. Ideally, you would see an increase in items purchased from that household on each visit, and the real win would be if they now visit your store with greater frequency.

At the end of the day, understanding who your customer is at all times is the secret to success. Those retailers that can stay in tune with their customer consistently, and who can be nimble and quick to react to their changing demands, will be the ones that win.

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