Natural Foods Merchandiser

How Independents Can Out-Market The Chains

Mention the phrase "marketing program" and many independent retailers conjure images of big-budget campaigns that small businesses can't afford. But creative ideas, solid commitment and sustained execution—not lots of money—are the keys to a successful marketing campaign, say national experts and leading independent retailers.

Independents can use marketing efforts much more effectively than chain-store operations to attract target clientele, the experts say. And even though more mainstream retailers are entering the natural products business, there's still an overwhelming potential for independents to significantly increase their sales, says Jay Jacobowitz, president of Retail Insights, a natural products consulting firm based in Vermont.

"The natural foods market is about $24 billion annually, compared with $464 billion for traditional stores. So natural products sales still represent only a small fraction of the total," Jacobowitz says. "But our market is growing at 8 percent to 10 percent per year, while traditional retailers are growing sales by only 1 percent. This provides independents with a significant advantage."

Jacobowitz, with more than 25 years experience in the natural products industry, offers a contrary view of current industry trends. While some independents worry about the chain-operators' aggressive pursuit of the market, Jacobowitz believes it is positive for the small retailers.

"The chain stores are introducing a big swath of the population to natural products, and that actually works as a marketing front-end for independents," he says.

The majority of people will always shop at traditional stores. But health-conscious consumers, who are generally more affluent, will shift their allegiance to independents when they see that a full offering of natural products will help improve their quality of life, he says.

And that's exactly the audience to which independents can appeal with targeted marketing campaigns.

"This is where independents can prove that they are the authority on natural products, that they have the knowledge and want to build personal relationships with customers. The opportunities are limitless to be creative and become the destination store for this market," Jacobowitz says.

Building relationships with customers is the most important function of a marketing campaign. While chain stores compete primarily on price, independents compete by adding value to the consumers' preference for a natural, healthy lifestyle.

"They're open to the message, so make a commitment to deliver it." Jacobowitz says.

A Clear Vision
Before implementing a marketing program, the retailer must be clear on two points: the focus of the business and the target market.

Too many small retailers, especially in the natural products industry, attempt to provide too many products and services, says Marty Baird, president of Nutritional Marketing, a consulting firm based in Phoenix.

"There's a retailer out there who has developed a store for left-handed people. That's a very sharp focus," Baird says. "With a clear focus, a natural products retailers can serve their markets much easier."

Baird recommends that small retailers develop no more than four target customer areas, but with some common links to allow marketing leverage among the groups.

"Identify who you like to work with," Baird says. "For example, you might decide that you want to help mothers with children ages 2 to 10. Think specific, and you'll develop specific solutions for the target group."

Customers are attracted to stores that know their needs. "If you understand what's going on in their lives, their fears, their frustrations, you'll know the products they need and the messages that will reach them," Baird says.

Step By Step
Marketing can generally be segmented into five areas: research, public relations, advertising, in-store promotions and cross-marketing. A good marketing program should contain elements of each, although each retailer will develop an emphasis.

  • Research. Every retailer, no matter the size, should conduct research. The primary goal is to understand the customers and what they want. This knowledge then drives decisions regarding product and service offerings, appropriate marketing messages, where to advertise and where to locate.

    For almost no cost, customer research can be conducted right in the store.

    "See your customers as sources of information," says Mike Cianciarulo, president and CEO of Earth Fair, a natural products grocer based in North Carolina with five stores.

    "Customers who shop at health foods stores want to help make the stores better. They are willing to share their ideas and information."

    A simple survey with basic questions can provide great insights into customer preferences and behaviors, Cianciarulo says. Survey questions should be designed to be answered easily—this makes it convenient for customers and for you when you evaluate the data later. Multiple-choice questions are easiest. For example: How often do you visit the store?—once a week, once per month, twice per month, every six months.

    Other possible questions: How far do you travel to get to the store? How did you find out about the store? What local and national media do you read, watch and listen to? Do you use supplements and vitamins? Are you interested in specific health topics? What specific products are you looking for? How much do you spend per month on natural products? What are your special interests—yoga, bicycling, etc.?

    Small store owners might need to collect surveys for several months to make sure they've obtained a representative sample of their customers. Major decisions should be based on a sample size of at least 100 surveys.

    At Earth Fair, each store conducts 100 interviews per quarter. Customers are given a $5 coupon for merchandise in exchange for the 15-minute interview. The questions are designed to obtain more information about a customer's lifestyle, shopping habits, preferences and reasons for buying natural products.

    The most basic research that any store can conduct is collecting customers' names for a mailing list.

    "The cashier should always ask three questions," says Phillip Nabors, president and co-owner of Mustard Seed Market & Cafe, who runs two stores in northern Ohio. "How are you today? Did you find everything you were looking for? Are you on our mailing list?"

    It's easiest to market to existing customers, so retailers need their own data base, Nabors says. Mustard Seed uses its list to send out 30,000 newsletters to customers every month. He also recommends that retailers assure customers that the list won't be shared or sold.

  • Public Relations. Because every business is subject to competitive pressure, marketing gurus spend a lot of time talking about branding and positioning. Basically, these terms mean establishing a recognizable presence in the marketplace.

    A multifaceted public relations effort is the best method for retailers with a limited budget.

    "PR is far more powerful than advertising," Jacobowitz says. "If you are willing to be dynamic in how you view your resources, you can drive awareness of your store in the market."

    Public relations efforts include a wide variety of ideas from the basic to the sophisticated.

    Some basic ideas: Join the local chamber of commerce; conduct in-store fundraisers for charitable organizations; give talks at service clubs about health issues; join organizations aligned with your business and interests; sponsor community, children's and school events; and participate in local health and holistic fairs.

    Sophisticated ideas: send press releases regularly and contact the local media to establish yourself as the resident expert on a particular topic; sponsor health-screening programs; work with the local radio station to set up a call-in show; and work with the local hospital, or health care and wellness providers to sponsor educational programs.

    "With PR, you must be persistent and intentional. Build it into your to-do list on a daily basis; be methodical," Jacobowitz says.

  • Advertising. Based on customer research, retailers can determine the best places to advertise. Independents report that direct mail is most effective. They recommend sending solid information that helps educate customers on healthy living—don't send only product information. Nabors also recommends buying the local mailing list of national publications that appeal to health-conscious consumers.

    Specialized local publications that focus on holistic and health topics are more likely to reach the target audience than traditional newspapers or television stations, retailers say. Advertising, especially in traditional media outlets, can be very expensive. So research carefully where advertising dollars will be spent. Advertise in media that suits your customers; don't spend money on advertising based only on the recommendations of a sales representative.

    "Frequency is very important in advertising. Make sure you have a program that you can sustain throughout the year," Nabors says.

    He also recommends using coupon promotions when possible to measure the effectiveness of advertising. Make sure it's worth the customers' time to clip the coupon. "They probably won't clip it to save 20 cents, but for a $1 or more, they might," Nabors says.

    Deep in south Texas, Hector's Health Company has sold supplements and cosmetics for 27 years. Owner Hector Madrigal believes strongly in local newspaper advertising and regularly offers $5 coupons. He says he always sees immediate results. He also hosts a Saturday-morning call-in radio show on the local Hispanic station. The Spanish-language show appeals to the large Hispanic population in the region—a demographic group whose interest in natural products is growing, Madrigal says.

    In-store promotions. Start by taking a look at what the customers see.

    "You've got to put on a good show that is worthy of your customers' interest," Nabors says. "Make sure your sign is visible from the street, that your entryway is well lighted and not cluttered with posters and papers. Make sure the store is clean, and that the offerings are easy to see. Real basic stuff, but real important."

    Health-conscious customers are eager to learn more about products, trends and ideas. So place educational materials in convenient locations. The more customers learn in your store, the more likely it is that they'll return. Store employees, too, should learn about products so they can answer customers' questions. At Earth Fair, employees are awarded financial bonuses for attending educational seminars.

    The most popular—and most effective—in-store promotions are educational seminars and cooking classes. "It's not unusual for our stores to have 40 to 50 people at a cooking class on a Saturday or Sunday," says Cianciarulo of Earth Fair. "That tells us people want to learn how to buy and cook our products."

Marketing Ideas

To help market their stores, natural products retailers throughout the country offer a variety of programs to customers. Following is a list of some of their ideas:

  • Develop a survey you can use to learn more about your customers. Test it on friends before distributing it to customers.
  • Get on the local media's radar screen: If you have a specific expertise, call reporters, editors, radio personalities and TV news producers and explain to them that you are available to be interviewed on related issues. Media often "localize" national stories by talking with local experts. Send press releases when you have real "news" to report: new employees, special programs, new locations, etc. Don't send specific product information.
  • Approach a local radio station to set up a call-in show on healthy living. A station would be especially interested if you provided financial sponsorship. This could also be done in cooperation with other natural products retailers in your town.
  • Take samples of your products to other retailers where your customers might shop, a running or cycling store, book stores and spiritual products stores, for example.
  • Give talks to local organizations, service clubs and special-interest groups. Emphasize healthful-living topics. Talks should not be a sales pitch, but should provide helpful information.
  • Sponsor educational seminars and cooking classes in your store.
  • Develop a mailing list of your customers and potential customers.
  • Sponsor community events such as children's fairs, races, charity walks and health fairs.
  • Encourage recycling by offering rewards for customers who bring in their own bags for groceries. One store in the Midwest pledges 10 cents to a community organization for every bag. A new group is allowed to participate every month, and the program regularly raises $1,000 or more.
  • Tap into students at local colleges and universities to conduct market research. Talk to the professors at the business school; most encourage students to develop some real-world experience.
  • The Senior Corp of Retired Executives is an organization, usually affiliated with chambers of commerce, that offers free consulting to small business owners. Contact the group to discuss business ideas.
  • Develop a basic, informative newsletter. Lay out a simple template with your logo, and make copies. Don't worry about writing long articles—just provide tidbits of healthful-living hints, news and information.

Natural Foods Merchandiser volume XXII/number 10/p. 38, 46-48

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