The components of Physical Availability
Our updated1 framework of Physical Availability includes three components (Fig. 1):
Presence – being where buying happens; in the right place at the right time.
Prominence – making the brand easily found in all of its shopping environments.
Portfolio – having a product range that works well for the range of buying and consumption occasions.
In particular we want to highlight the importance of Presence and how to make sensible decisions in a fragmented distribution channel world. In this report we explain how Physical Availability is more than just counting weighted distribution points (Presence). Other Ehrenberg-Bass Sponsor reports will cover portfolio management and building retail visibility in more detail, so we will not duplicate those discussions.
1. Presence: Is your brand where shoppers shop?
Presence, also referred to as distribution, is the backbone of Physical Availability – if the brand is not present, it cannot be bought. This sounds blindingly obvious, and it is to most CEOs and Sales Directors, but in marketing departments it’s not uncommon to hear talk of deliberately restricting distribution e.g. in the hope this will make a brand more desirable, and will lead consumers to seek out the brand2. Meanwhile, in the real-world there is a ‘law-like’ relationship between distribution and market share (see Figure 2), observed for brands in multiple categories and countries (Reibstein and Farris, 1995); over time for brands that gained and lost share and distribution (Farris et al 1989); and also at Stock Keeping Units (SKUs) level (Wilbur and Farris 2014).
Researchers documenting this law-like relationship conclude that higher share brands tend to sell more “per point” of retail distribution than their smaller share rivals. This is an advantage of scale: bigger brands gain efficiencies. We know from the Duplication of Purchase Law (see Ehrenberg-Bass Sponsor report #51) that there is asymmetry of customer overlap. One way of expressing this asymmetry is to say that small brands compete closely with big brands, but big brands don’t compete as closely with small brands. Part of the reason for this asymmetry is that as brands gain very broad distribution, they enter areas where they are stocked alongside smaller numbers of competitors (e.g. convenience stores, vending machines, limited assortment retailers such as Aldi or Lidl). This lower competition means the last points of weighted distribution deliver disproportional share gains.
However, there is an even more interesting implication of this empirical pattern, when we examine the wide variance in distribution amongst smaller share brands. It suggests that while a brand can’t achieve a high market share without widespread presence (80%+ weighted distribution), widespread presence alone does not guarantee a high market share. Brands that suffer low market share vary greatly in their presence: some are in few stores, while some are in nearly all the locations. This suggests these brands are lacking in either Mental Availability, and/or in other components of Physical Availability (Prominence or Portfolio).
How do you (sensibly) build Presence?
In an ideal world we would want our brand to be everywhere that someone might develop a need the brand could satisfy. However it is costly, and we understand that each distribution point gained also needs to be maintained – in the face of competition from other brands, and pressure from retailers. Therefore decisions need to be made.
Extending Physical Availability can be expensive. For example, gaining distribution in the major supermarkets may give a grocery brand substantial availability, and this is indeed where a disproportionately large volume of sales are made — so there are potential economies of scale. Extending distribution beyond this, however, which might involve moving to an online channel, setting up a vending machine network, or selling into many small convenience stores – are more complex endeavours. There are, however, advantages that offset this additional complexity. As a brand expands its distribution it tends to enter progressively less competitive retail environments. An extreme example is vending machines that only stock your brands in locations where there are no other vending machines or shops.
We still sometimes hear marketers say, “But we already have practically 100% distribution”. They point to their brand’s Presence in all the leading supermarket chains, their national branch network, or their website that can take orders 24 hours a day. This is the difference between distribution and Presence. Distribution is you putting the product in place to be bought, Presence is the buyer reaching for the product/service – you want that reach to be as short as possible. 100% Presence is a goal akin to the often reported aim of Coca-Cola to be no more than an arm’s length away. It’s rare to find a brand that can’t further build Presence, even Visa which claims to be “everywhere you want to be” is still not accepted in certain stores.
To wisely invest and build Presence, there are two important areas to build your shopper knowledge:
- Transaction view – where the transactions for your category are (or could be) happening – are transactions happening online versus offline; mobile versus desktop; rural vs urban; modern vs traditional trade; retailer formats; on-trade vs off-trade)? What are the projected growth areas for transactions in the future?
- Category buyer view – how do category buyers shop across locations and time – what is the typical shopper repertoire? How many outlets do they shop from, and what factors shape their shopping choices? Are any outlets privy to a captive audience?
Together these two views of buying help a brand achieve market coverage by revealing the retail choices that cover as many different buying occasions as possible.
It’s a multi-channel/retailer world
The growth of online and mobile technology has led to more channels. Research shows that when more retail options become available, people add to their repertoire of channel options, rather than totally replacing one channel with another (Dawes and Nenycz-Thiel, 2014). This is illustrated in Table 1, a subset of data in How Brands Grow Part 2, which shows that while modern trade and online channels have grown, the vast majority of grocery buyers still report shopping for groceries at local/traditional markets. This means channels are often competing with each other for buyers, something that retailers are feeling more and more.
New channels initially add to, rather than take over, the category buyer repertoire. For example, look at online shopping in China and South Korea amongst an urban, online savvy sample. While 88% report shopping for groceries online in China, only 6% report this as the channel where most money is spent. Similarly in South Korea, 69% report shopping for groceries online, but only 10% report this as where they spend the most money.
Old (shopping) habits die hard. Along with negotiating the new, marketers still need to maintain Presence in the old channels, even in rapidly changing emerging markets.
However resources are finite so priorities are important, both across channels and across retailers within a channel. Laws of Shopping Behaviour can help us to both understand how current channel options work and prioritise options for expanding the brand’s Presence. These laws apply to channels and retailers within channels.
Laws of Shopping Behaviour
Those familiar with the Laws documented by Institute researchers will be reassured to know the patterns of buying across brands described in our reports also apply to shopping behaviour across retail channels or retailer brands. Put simply, bigger channels/retailers reach more buyers, who visit them more often and spend more money with them (Double Jeopardy, see Table 2 example from Mexico). Sole loyalty to a retail channel is rare, despite all of the retail loyalty programs, (again see Table 2). The Duplication of Purchase Law also applies for retailers, all chains share customers, and any chain’s shopper base overlaps more with bigger channels/retailers than smaller channels/retailers. So Presence achieved in a large retailer will typically also cover many of those that also shop at any small retailer (Duplication of Purchase/Shopping Law, see Table 3 for an example from the UK).
The obvious take-out is that size matters, aim for larger retailers first. However a smaller retailer or channel might be an attractive option if:
- It is cheap to secure distribution, perhaps a new retailer or channel that is keen for stock to be competitive;
- You can charge a higher price, such as gas/petrol or cinema retailers;
- You can negotiate for better Portfolio or Prominence elements of Physical Availability; or
- The outlet has a somewhat exclusive audience that is difficult to reach elsewhere.
The laws can help identify where some distribution points might have value beyond mere size. A retailer or channel that deviates from Double Jeopardy in its customer patronage might offer an advantage to be capitalised on, or it might simply be a shortfall in the location/reach of the retail outlets. If there are two retailers that share more customers than expected under the Duplication of Purchase Law, then you can select one of these and avoid overweighting reach to specific customers. If there are two retailers or channels that share fewer customers than expected then these might provide a good pair of options in which to invest.
However don’t chase exceptions at the expense of scale – the ultimate aim of Presence is to achieve market coverage across different shopping occasions in time and location to minimise the chance of not being bought. Ultimately, all distribution points matter. Remember it’s very unlikely a brand will be big without 80%+ weighted distribution.
2. Prominence: Is your brand easy to find?
Shopping environments are full of competitor clutter from other brands, situational clutter from people, signage and advertising. And if that is not distracting enough, there is the shoppers’ mental clutter to compete with (as they get distracted by thoughts about the day, family, work etc.). It’s far from guaranteed they will notice your brand, even if it has some Mental Availability.
The brand therefore benefits from standing out in any shopping environment.
Most retail outlets offer (often costly) ways to make the brand more Prominent, such as endcaps (Ehrenberg-Bass Sponsor Report 77: Endcap Insights – Visual Reach and Sales), shelf-talkers in a bricks and mortar store, and priority listings in an online retail outlet. The costs of these options need to be weighed against the sales or retailer relationship benefits that are accrued, as with any in-store promotion. A disadvantage of these activities is that any sales advantage is only gained when the promotion is active. Rarely are there lasting effects of in-store activities (see Ehrenberg-Bass Sponsor report #8).
An alternative to these intermittent activities is to build retail Prominence via smart use of Distinctive Assets in-store (Romaniuk 2016b). Distinctive Assets are the non-brand name elements, such as colours, logos, characters or jingles, that trigger the brand for category buyers. These assets can help build both Mental and Physical Availability, by making a brand more noticeable in its advertising and shopping environment (Romaniuk and Hartnett, 2010). Strong Distinctive Assets in a shopping environment act like a beacon, drawing a category buyer to the brand (Romaniuk & Caruso, 2018).
When you build a brand’s Mental Availability, you prepare the mind of a category buyer to look for/screen in a brand. Being Prominent in-store allows the brand to stand out from other brands, which is like moving your brand closer towards the mind of the category buyer. If what is in buyers’ minds visually matches what is on shelf, and if what is on shelf differs sufficiently from competitor brands, then the brand is easy to find.
Humans are extremely visual creatures. We shop with our eyes, and visual shortcuts help focus attention, but not all visual elements are equal in grabbing attention. In a series of in-store tests, consumers were asked to identify what made brands stand out on shelf. Colour was the most common reason given across brands and categories, irrespective of whether the brand was red, green or any other colour (Gaillard et al, 2006; Piñero et al, 2010). This highlights the importance of developing a colour asset if possible, and protecting any current colour assets.
Romaniuk and Caruso (2018) highlight two challenges to building strong shopping Distinctive Assets:
Lack of innovative thinking around possible assets
A wide range of options might help brands stand out in a shopping environment, however we find the assets marketers put forward for testing are often very narrow in scope. The proposed assets often concentrate on colour, shape and logos, which leads to brands in the same category trying to build the same type of assets. Figure 3, taken from our book on Distinctive Assets by the Ehrenberg-Bass Institute, shows the broad range of packaging assets that are available.
Continual modification (i.e. inconsistency)
Shopping assets get modified in two ways. First are continual ‘tweaks’ aimed at improving the packaging, and second are limited edition/seasonal designs to draw attention to the brand. Any such changes need to be carefully weighed up as to whether the benefits are greater than the longer term costs of disrupting people’s mental structures for what the brand should look like.
Visual Distinctive Assets that cut through the competitive environment give the brand a chance of catching someone’s eye in its shopping environment, and can create on-the-spot heightened Mental Availability.
Given how important Distinctive Assets and the pack itself are as navigational tools for consumers, we recommend that any changes to Distinctive Assets and pack, any attempt to win attention, are carefully tested prior to implementation. Unless there is a major advantage to the change, don’t risk it.
3. Portfolio: Does your brand have something for each relevant buying occasion?
Once the brand has as widespread Presence as possible, the challenge is to identify the key options to offer in each distribution point. A useful background to this section is Ehrenberg-Bass Sponsor Report #32, which discusses buying across price tiers as well as the Sponsor report on Portfolio Management.
Three tasks can help you identify what Portfolio options should be the most beneficial to develop.
Matching Variants to Category Entry Points
Category Entry Points (CEPs) are the thoughts that buyers have as they enter a category (Romaniuk, 2016a). These are the retrieval cues that buyers use to access their memory, and narrow down the potential brands to buy. Knowing how the brand is performing, relative to competitors, for each CEP can highlight areas where the brand’s messaging can be employed to increase mental competitiveness and widen either the number of people or number of situations where the brand has a good chance of being salient. This mostly does not require a new variant, but rather a new message for an existing part of the Portfolio. For example, a CEP for coffee is to get you through something boring, and this message could be attached to the vast majority of coffee brands.
If there are CEPs not well served by any of the brand’s Portfolio, then this can suggest the need for a new variant. For example, if a Champagne brand wanted to build links to a CEP of an indulgent moment to myself, it might create a half bottle size for this consumption moment.
Mapping category variants
The term ‘variant’ here is used to describe the offshoots of a parent brand. This can include (amongst others) different pack sizes to cover different occasions, flavours such as strawberry or chocolate, functions such as whitening or sensitivity for a toothpaste, purpose such as owner-occupier or investment home loans for a financial institution, or price tiers such as Dove and Tresemme in haircare.
A good first step is to map what your brand has versus what is offered in the category. If you have multiple brands in the same category (such as Cathay Pacific and Cathay Dragon), then look across the brand Portfolio. Are you covering all of the options?
A map of category variants can help ensure that the brand has something that is buyable for most of the situations that any category buyer would encounter. People’s loyalty to individual variant types mirrors their loyalty to brands (Singh et al, 2008) – people buy from repertoires of variants, whether that be price, flavour or function. However this doesn’t mean a brand has to offer every variant.
With resource constraints in mind, a product/service Portfolio should be designed to:
- Have an option to buy in all the variants that capture substantial part of the market – scale is important for profitability and having variants that sell to a lot of people is key to this;
- Have options to compete in areas that are growing in popularity (e.g. capsules in coffee, gluten free for bakery or pet insurance for an insurance company) to future-proof the brand;
- Have an option in any major sub-market (partitions discovered in the Duplication of Purchase analysis (see Ehrenberg-Bass Sponsor Report #53) to avoid big gaps in market coverage; and
- Avoid overweighting to any one area and over-cannibalising.
The distribution environment can also influence the part of the Portfolio that has the best chance of success. Simple examples abound, e.g. hypermarkets have scope for more bigger pack size formats compared to petrol and convenience stores or kiosks. Given the lack of personal interaction online, a financial institution might find consumers will mostly look for easy-to-understand financial products on the website, and these products could be prioritised on the website. Complex products where sales personnel interaction is more desirable could be prioritised in branches.
Overcoming barriers to purchase
Mapping current variants lets you identify gaps in your brand’s Portfolio, but you also want to innovate for the future. This is where identifying barriers to purchase/consumption can be useful.
These barriers might be about the product, category, consumer or the environment. They are problems that are yet to have a solution.
Take soft drinks as an example – for a long time the main barrier to penetration was that they included sugar, something undesirable to a proportion of the beverage market. Initially that segment was small (e.g. diabetics), but over time, as people looked to reduce their calorie intake and sugar was identified as a culprit, the size of this low/no sugar sub-market grew and grew, as demographic appeal broadened. Adding low/zero sugar options allowed brands to capture a sizeable part of the market who otherwise wouldn’t have bought (as much). Zero sugar brands that targeted the growing market did particularly well.
In the travel industry, some cruise ships are now offering sets of smaller rooms for solo travellers with an exclusive lounge area. This provides an attractive option for solo travellers who don’t want to pay a single supplement or share a room with a stranger. The lounge compensates for the smaller room and serves as a socialising space for solo travellers to easily meet each other without having to go to ‘singles’ events. The overall benefit is to expand the potential customer base for the cruise ship from the couple/family market to the lucrative and growing solo traveller market.
Barriers to purchase/consumption are particularly rife in emerging economies, where irregular and low income, insufficient payment security or poor infrastructure may present major difficulties in making category purchases. There are many examples of innovations occurring in such markets and we expect there will be a technology transfer where the innovations for emerging markets find their way to developed markets. Many of the solutions in terms of logistics or payment methods that employ more efficient use of resources can apply to anywhere looking to increase efficiency and sustainability.
Summary
Physical Availability is more than just gaining distribution. It is about making smart investments in current and future distribution, building Distinctive Assets so the brand is easily found in any shopping environment, and having a sufficient Portfolio that covers current purchase occasions, and future proofs the brand for ongoing category trends.
These are the challenges that stand between your brand’s Mental Availability and sales.
Footnotes:
1 The name and order varies slightly from that put forward in ‘How Brands Grow Part 2’, but the substance of the three pillars is the same.
2 Indeed such thinking persists in some luxury marketing circles today, despite evidence to the contrary (for example see Romaniuk and Sharp, 2016a).
