THE INSIGHT BUSINESS

NANCY BRUMBACK

SCHAUMBURG, Ill. (FNS) -- "Supermarkets are in the business of retailing. How far do they go outside that business into technology, into information management?"

Steve Schmidt, president of ACNielsen's U.S. operations, hopes his firm will be able to help retailers answer this question, as the market research giant celebrates its 75th anniversary.

"Globalization and technology have made our lives much more complex, not easier," Schmidt noted. "The dilemma is how to sort through all the clutter and focus on things that matter."

ACNielsen aims to help both retailers and manufacturers do that with such new information sources as the Homescan Consumer Panel Service and the Fresh Foods Index. At the same time, ACNielsen is reshaping its own identity.

"ACNielsen today is light years different than it was just three or five years ago," Schmidt told SN in an interview at the company's U.S. headquarters here.

"Today, we fully understand that we're in the market-research business, that we are a service company," not a software or technology company, he noted.

"ACNielsen was viewed as a data company. We are transforming ourselves into an insights and knowledge company. Data -- the highest quality data at the fastest speed -- is the foundation, but the focus and business strategy is around insights and knowledge that allow us to interpret the data to bring solutions to our customers," Schmidt said.

"We are also looking to extend our brand equity outside consumer packaged goods," he added, but declined to comment on which specific areas are being explored.

For retailers, some ACNielsen solutions might involve providing retailer-specific, retailer-defined trading areas for purposes of market-share comparison and consumer data. Rather than looking at the entire metropolitan Atlanta area, for example, ACNielsen can create trading area profiles for a store or store clusters.

The information can also include how a chain is doing relative to all channels of retailing, not just other supermarkets, in a given geographical area.

ACNielsen can also help both retailers and manufacturers use available information to make crucial decisions on product pricing, to determine cannibalization rates from new product introductions, to predict how new products will affect the growth of an entire category, and to optimize both revenues and profitability of categories.

A key factor in data development has been the formation of the Homescan Consumer Panel. This service allows ACNielsen to gather information on what was purchased, where it was purchased, who purchased each item and the demographics for each shopper.

Currently, consumers in about 52,000 homes scan the Universal Product Codes of every product they buy. The number of households will expand to 55,000 early in 1999 with the addition of the Philadelphia and San Francisco markets.

"Understanding the way the consumer shops, the link between behavior and attitudes, is the marketing Holy Grail," Schmidt noted.

For the approximately 54 retailers who are already purchasing and using Homescan data from ACNielsen, "we can provide a view of total consumption and help retailers understand where they are overdeveloped and where underdeveloped."

Last year, ACNielsen expanded Homescan into the perishables area with the Fresh Foods Index. About 12,000 homes now report their meat, produce and other perishables purchases, including brand names where applicable.

"Perishables are the key destination categories for a lot of retailers, but there is not a lot of very good, tangible information available because every retailer uses its own local codes," Schmidt said.

The Homescan data complements data ACNielsen is gathering from weekly scanning reports at about 30,000 stores.

But, Schmidt concedes, "no one wants more data. They want insight and knowledge."

A combination of overall market analysis and market-basket analysis can help retailers compete more effectively, he said. "Successful retailers today have to look externally, not just at their own operations."

Another key area where the insights and data provided by ACNielsen can help retailers is pricing. "There is an enormous opportunity to improve margins by more effectively understanding pricing from a consumer standpoint," said Schmidt. "Developing a price strategy by category and by market has a tremendous upside in terms of margins."

A retailer's analysis of pricing strategy can, and should, include numerous variables, he noted. Options include pricing by store, by season or by demographics. Other influences can include competitors' behavior, whether a product is in a destination category, the level of brand loyalty the product generates and the product's status as a planned or impulse purchase.

The same sort of multivariable analysis can be applied to such areas as controlling inventory, improving cash flow and increasing product turnover, he said.

"The answers and insights are endless, and offer opportunities to create differentiation and competitive advantages in the marketplace," he said.

In developing the information needed for this quest, he added, "the retailer is critically important to this equation. If we can demonstrate to retailers the value of providing us with this information, then it truly creates a partnership."

ACNielsen takes the position that the information retailers provide can, in turn, help them run their businesses more effectively. The company currently has "letters of endorsement," naming ACNielsen as a preferred information supplier, from some 112 retailers across all channels of distribution, he said.

While the research firm has no plans to actually manage data for retailers or manufacturers, "we can help them think through how to manage the data more effectively," Schmidt said.

Asked about major trends affecting retailing generally, and how market research is affected by those trends, Schmidt pointed first to the consolidation he expects will continue across the industry, "because you have to be a low-cost producer." Increasingly, global ownership of retailers is part of this consolidation trend, providing opportunities of scale, implementation of best practices and abilities to source globally.

Targeted marketing "to a consumer of one" will continue to grow as more information becomes available about individual consumers, he added.

Category management, he believes, will become more complex. "People define category management differently, but there is a need for a sophisticated focus over all aspects of an operation, not just one category."

Finally, "as the bigger get bigger, gaps or niches will be created for specialty stores. We may create a whole new segment of midsize stores" that sacrifice some product selection for speed, convenience and lower costs, Schmidt noted.