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Shopper Decision Hierarchy in an Omnichannel World

September 2020 | JEFF REHLING

Purchase Decision Hierarchy is foundational research in every Sales Strategy, Category Management and Shopper Marketing Manager’s tool kit. Understanding how shoppers make decisions in an aisle filled with hundreds of choices is a tried and true input into the development of a category’s optimal merchandising strategy.


Edgewood Consulting Group conducts and/or leverages this type of research in nearly every category leadership project we deliver for our clients and their retail partners. Most importantly, we don’t evaluate these studies as researchers; we measure a hierarchy’s impact based on its ability to drive retail activation and optimization.


Historically, there are two primary methods to identify a category’s decision hierarchy: a panel-based market structure or a custom shopper decision hierarchy research study (SDH). These two approaches are based on fundamentally different methodologies, each with its advantages and disadvantages. The key difference is that one is based on actual purchase history (e.g., market structure) and the other is based on a series of research exercises which are used to derive the category hierarchy (e.g. SDH).

Can your Category Market Structure reflect the typical shopping decision process when shopping today is anything but typical?

Which method is most relevant now? Both research methodologies have been used extensively for years, but the question is, which is most relevant now?

 

Given how COVID-19 has significantly impacted how shoppers shop and how retailers merchandise, which can serve as the better predictor of shopper behavior tomorrow?  Which can provide a stronger foundation when planning for the new non-normal?


Both are viable options in normal times, when shopping behavior can be characterized as “typical”, but what about when behavior isn’t typical? What happens when a global pandemic forces shoppers to behave atypically?  “Atypical” behaviors such as: 

  • Chronic out-of-stocks that have driven higher walk rates, category switching and brand substitutions.
  • The dynamics of more time spent at home due to work at home, remote learning and dining out restrictions that have changed purchase quantities and frequency in many categories (e.g. stocking up on and using more pantry staples).
  • Product shortages and panic buying that have resulted in inconsistent demand curves.
  • COVID-related concerns that have brought new buyers into some categories, increased frequency of buying in others and shifted volume to certain products within a category.
  • Ongoing concerns about safety that have changed where consumers shop, shifting more purchases online, increasing the use of Click and Collect, and driving more consolidated shopping trips.

This atypical shopping behavior means market structure or any decision hierarchy based on actual purchase behavior during this pandemic would generate less reliable decision process models.  As Edgewood has been studying the impact of COVID-19 on the retail environment, we believe actual shopping behavior data (panel-based or point-of-sale) cannot reliably project “typical” shopper behavior while the pandemic continues.  Therefore, using actual purchase data to generate market structures has significant risk in any category where the dynamics have been impacted by the pandemic.


To be clear, actual buying behavior data (Panel and POS) is still required for tracking shopping behavior and retail environmental changes throughout the pandemic.  However, in regards to forward-looking leadership projects, a custom shopper decision hierarchy offers a better alternative as it is “uncoupled” from the shopping environment and the many challenges that environment presents.  Additionally, a custom SDH can provide some key differentiating benefits. 

A custom SDH approach should be the preferred option, not only during the pandemic, but for up to 12 months after we return to “normal.” This is because traditional market structures rely on past behavior. In addition, if even a portion of pandemic shopping habits “stick” in the future, panel data may provide less coverage as shoppers shift more of their shopping to under-represented retailers and channels (e.g., e-commerce). In contrast, since custom SDH uncouples the shopper’s purchase decision process from the channel, it also avoids issues related to coverage.

For nearly 20 years, Edgewood has successfully leveraged a custom SDH approach for our clients. SDH results provide the primary category structure needed for assortment optimization decisions (a key input into Edgewood’s award- winning AssortmentEdge® optimization tool). SDH’s also provide important insights into Edgewood’s aisle transformation and AisleMaximizerSM optimization efforts. And, they often support our clients’ innovation and competitive strategy initiatives.


Understanding the decision hierarchy for your category is too important to risk building it on the shifting sands of today’s uncertain environment. If there is one thing we know for certain, it’s that today’s shopping dynamics are anything but typical. Your approach to building your category’s decision hierarchy shouldn’t be typical either.


Before you decide to invest in another market structure, give your Edgewood partner a call at 973-644-9788 or email us at jrehling@edgewoodcg.com and let’s talk about your options.


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