RETAILERS TAKING MORE CONTROL OF IN-STORE SAMPLING EVENTS

JAMES TENSER

With the popularity of in-store sampling soaring among brand marketers, retailers across the country are taking more control over the practice. Sampling may never be the same.

Manufacturers wishing to do in-store sampling at H.E. Butt Grocery Co., San Antonio, are directed to an exclusive provider, Quality Demos, a Sonora, Calif.-based firm the retailer granted exclusive access to about a year ago. Other demo firms are not permitted in the stores.

Eagle Food Centers, Milan, Ill., named a single firm to administer, audit and bill out in-store sampling programs last March. Mass Connections, La Mirada, Calif., is the gate-keeper for the program, which is open to all demo companies, but with this catch: Their performance is tracked and rated. The productivity of Eagle's demo programs has reportedly doubled vs. a year ago.

These chains -- and many others -- may see much wisdom in controlling demo firms' access to the selling floor. They ensure quality execution and limit the number of outside people working in their stores, among other benefits. For many brand marketers, however, the trend is troubling.

When Lifesavers Co. mounts a national in-store sampling and demonstration program these days, it faces tough decisions over whether the promotion should include some of its largest accounts.

Mandated services are the issue for those retailers, said Cathy Snow, group promotion manager at Lifesavers, Winston-Salem, N.C., an operating unit of Nabisco. She said her company is encountering more chains that require brand marketers to work through sampling and demo agencies the retailer, not the brand marketer, has designated.

"In those situations, we have no choice. We have to comply with whatever the retailers want. It makes things a little bit more expensive and it can make them a little more complicated," Snow said.

Like other heavy users of in-store sampling in recent years, Lifesavers is learning to work within the store access rules established by its accounts. Much of the time that simply means doing it their way. Sometimes it means paying a premium to gain access to certain chains.

"In our sampling activities, we work within the guidelines set by our customers," said Lynn Markley, senior group manager of public relations at Frito-Lay, Dallas, which has mounted several large-scale sampling programs for its new snacks in the past two years.

While the brand marketers contacted for this article keep a calm demeanor about retailers' preferred provider requirements, the companies in the highly competitive in-store sampling and demonstration industry are sharply divided about the practice.

Some are openly courting retailers with the promise of a new profit center and greater control over their store environments. Others are warning that restrictive, profit-motivated retailer policies threaten to undermine many of the benefits of sampling programs.

The two points of view on retailer mandates tend to track closely with the agencies' belief about who is their primary customer. In a business activity that depends on both the retailer's grant of access and the manufacturer's willingness to pay, there may be no simple answer.

"It's a real difficult dynamic," said John Block, managing director of Market Growth Resources, a promotion agency in Wilton, Conn. His company sold its Smart Demo division to Time Inc. In-Store Marketing, New York, about two years ago.

"When a sampling agency is invited to participate by a retailer but is selling its services to the manufacturer, whom are you responsible to? Can you continue to have two masters?" he said.

Jim Harmon, vice president of sales at Sunflower Group, Overland Park, Kan., said his company has tracked an upsurge among retailers who opt for exclusive contract arrangements with local and, occasionally, national demonstration companies.

Harmon is especially critical of competitors that champion the notion of demos as a retail profit center. "I'm a purist; I think there is no validity there. It is far better to look at the cash registers and focus on the outcome -- the benefits of the event to sales."

Among Sunflower's national competitors, at least three -- U.S. Concepts, New York; ActMedia, Norwalk, Conn., and Mass Connections -- are frequently mentioned as active pursuers of retailer exclusives.

None have been more successful in this pursuit than Mass Connections, which concluded an exclusive agreement last September with Wal-Mart Stores, Bentonville, Ark. All in-store events at the chain now must be coordinated through the agency, which in turn subcontracts the in-store work to a network of some 200 local demonstration companies, many of which compete with one another.

Keely Beene, demo coordinator at Wal-Mart, confirmed the arrangement, which covers the entire 2,000-store chain. In a letter to demo companies circulated Sept. 26, she designated Mass Connections as the sole agent permitted to schedule programs, coordinate and contract with local agencies, then monitor, report and handle billing.

The arrangement puts Mass Connections, which takes an incremental $15 per store a day as its fee, in a position of considerable power. Not only must account-specific programs be coordinated through the agency, but national programs must be handed off to it. To critics, that's a pretty good definition of cost and complexity.

But Caroline Nakken, a principal owner of Mass Connections, says the arrangement does not mean that Wal-Mart has compromised on its core principles. "Wal-Mart doesn't want added layers of cost. If they thought we were adding to the cost of goods, we would not be there," she said.

Mass Connections earns its fee, Nakken says, by ensuring continuity and program performance for both the retailer and the manufacturer. Working from pre-established program criteria, its job is to book the services locally, work with the store managers, manage the schedule to avoid any conflicting items and audit reports on the programs.

"We act as a watchdog over what goes into the store as far as point-of-sale materials, coupons. We make sure it is consistent with Wal-Mart policy," she said.

In contrast, at Kmart, Troy, Mich., preferred access took on a different form. Three years ago the retailer handed Flair Communications, Chicago, the responsibility for administering its store Greeter Sampling Program. The program ran fairly successfully through March of this year, when Kmart -- which has been systematically reviewing many aspects of its store operations -- suspended its use of store greeters.

Kevin Kennedy, vice president of client services, was Flair's account manager on Kmart. "We did probably about 20 to 25 events in that time," he said. "We would like to do more."

Flair solicited manufacturers to participate in the Greeter program, which covered 2,100 Kmart stores. Brand marketers paid 4 cents per sample for what could amount to blanket coverage of Kmart shoppers, or 6 cents for more targeted distribution. Since samples were distributed by Kmart employees as consumers entered the store, labor costs were low. Wet sampling or hot-food preparation demos were not possible.

Ken Kramer, director of sales at Kmart, said the program was not designed to be a profit center for the chain. "We want to control access," he said, adding that "the whole thing was intended to improve sales and move more products."

While the Greeter program was exclusively administered by Flair, Kmart allowed other sampling agencies with paid samplers in its stores for separate programs to have a policy.

Nakken of Mass Connections said her company has pursued the preferred provider strategy with other retailers, establishing exclusive relationships with several other chains and large wholesalers, totaling 11,000 retail stores so far.

She said its arrangement with Fleming Cos., Oklahoma City, should simplify program management for brand marketers working with Fleming's numerous independent grocers.

"Before, manufacturers had to call store-by-store to sell a demo to each independent, then set up a 'you order.' It was a very laborious, big job, with no guarantees," she said. Mass Connections now is set up to serve Fleming's entire network of stores. It can even force product distribution.

But one entrepreneur's definition of an added-value service may be a brand marketer's idea of an unwanted cost.

"Sometimes the value-added services, which preferred agencies provide, aren't important to us. We do a lot of sampling and we know it works. We don't want to pay the extra money to get research done," said Lifesavers' Snow.

She said the company has recently used Smart Demo to set up its national sampling programs. "They identify which retailers have preferred agencies, and we have to use those. On most programs we are doing, we have so many store days budgeted, we haven't asked Smart Demo to identify which retailers have these policies."

She noted that up-front access fees, another form of retailer mandate, are sometimes intertwined with preferred provider relationships. "It costs about $9 per day on the average. I try to get the brand groups to say, 'Let's not use them,' but the brand groups want to be in those accounts."

Such compromises can strain budgets, Snow maintains. "So it reduces the reach. There are several accounts where we do not sample because of this."

Observers in the sampling business have long noted that retailer mandates have tended to be most onerous among supermarket chains on the East and West coasts. High access fees may be associated with higher degrees of financial leverage, which burden many of those retailers.