Does a successful merchandising strategy involve integrating or segregating your natural product mix? It's a hot debate, but I think there's a clear winner.
First, the basics. Categories are divided into segments and segments are defined by the way the consumer shops the category. For example, powder or liquid laundry detergent. These decisions make up the consumer decision tree, the choices the consumer makes when making a purchasing decision.
Knowing how the consumer shops the category will help retailers develop an effective merchandising strategy. This is information that should be supplied by the manufacturer, assuming it knows its customers' needs.
How consumers shop
Think about how your customers shop the store. Do customers only see items that are at least 70 percent natural/organic or do they see all of the items in the category?
Think of the decisions and the choices every consumer makes when buying cereal. Do they want adult or kids cereal? Do they want healthy cereal? Oats or bran flakes? Processed or natural grain? Mainstream or conventional? With or without fruit? Hot or cold? Ready-to-eat or something that needs to be cooked? Packaged in a bag or a box? They will also consider the quality of the brand either economy, premium, or super-premium.
The choices can seem endless but the savvy retailer will merchandise products that help consumers wade through the choices more easily.
The cons of a standalone 'natural' section
Merchandising like items in a separate natural section can be an effective strategy in some markets, but not all. The term "natural" is generic in the eyes of many consumers. This should be considered when developing a merchandising strategy. A properly merchandised cereal section will help guide consumers to the products they want.
Are your customers only interested in natural items or do they shop at your store to buy both conventional and natural items? If the latter is true then having items in a separate natural/organic section will cause customers to overlook other items you sell.
Conversely, customers shopping the conventional section will completely ignore your natural product offerings. Integrating natural and conventional gives your customers the opportunity to compare items side-by-side and then choose what’s best for their needs, while also giving you an opportunity to up-sell and convert them to natural/organic products.
Segmenting the integrated section will make it more shopper-friendly. This is the best of both options: a section that is both integrated and segmented.
Why this method works:
A customer shopping for cereal will not take the time to travel back and forth between two entirely different areas in a store searching for the best deal. The same customer will, however, compare items shelved in the same section.
A customer looking for healthy cereal will then gladly pay $.35 more for a natural/organic product if they perceive it to be healthier or better for them. Having both natural and conventional items in the same section communicates to your customers that you offer the best selection and that you are appealing to a broader audience.
What do you think about integrating natural/organic with conventional products? Share in the comments.
Daniel Lohman is the owner of Category Management Solutions (CMS) which provides innovative strategic solutions for natural and organic CPG companies interested in gaining a significant competitive advantage.