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06.07.2006
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| NOW AVAILABLE» Organic2006 Organic2006 provides comprehensive analysis of attitudes and behavior by organic consumer segment, as well as insights on perceptions and language about organics, |
Click to learn more...For more Hartman Group articles on ORGANIC, click here...
05.17.2006 "Who's Buying Organic?: Demographics 2006"
04.12.2006 "Wal-Mart Goes Organic"
11.18.2004 "The Branding of Organics: What Works & What Doesn't"
04.27.2004 "The Symbolic Power of 'Organic'"
07.12.2002 "The Organic Consumer May Not Be Who You Think It Is"
12.20.2002 "What Does 'Organic' Mean to Today's Consumer"
12.13.2002 "Hanging on to Your Organic Consumers"
10.15.2002 "The True Effects of Regulation on Organic Consumers"
04.07.2000 "Organic Products: How Do Consumers Choose?"
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What is The Value of Organic?
Between the extensive coverage in mainstream business press and the recent FMI show in Chicago, one might reasonably conclude that organic is the hottest thing to happen to food and grocery since the online grocery frenzy of the late 1990s.
And the central issue on the minds of many these days concerns the effects of Wal-Mart's decision to fully enter the organic marketplace. Many seem to believe Wal-Mart's recent announcement will put pressure on competitors such as Safeway, Albertsons, Wegmans or Wild Oats to lower prices on comparable organic products. Others contend that Wal-Mart's organic offerings will capture value-conscious, health-minded shoppers who are frustrated at the (perceived) high prices of many natural and specialty retailers. At the recent FMI show in Chicago, we can't recall encountering a single person who didn't ask us about this situation.
Before we can make sense of this situation, however, it is important to correct a frequent misunderstanding regarding consumers, shopping and the organic marketplace. Namely, many of the writers, analysts and marketers we encounter still construe consumers as price-sensitive shoppers searching for products among a set of channels.
In fact, nothing could be further from the truth.
As we learned in our ground-breaking shopper insights research, consumers do not arrive at a channel in search of a set of products available at the lowest prices, they arrive to accomplish tasks on specific shopping occasions by engaging in a compelling set of experiences. To be certain, price matters, but it isn't as important as accomplishing tasks and compelling experiences.
These tasks may include procuring dinner, relaxation, an after-workout snack, indulging one's child, the monthly "stock-up" trip, and so forth. While it is important that retailers offer an appropriate mix of products and prices to match the tasks consumers seek to accomplish on these occasions, the specific products themselves are of only secondary importance.
For example, procuring dinner on the fly requires only a smattering of options in key fresh departments, few of which are even branded. Consumers are remarkably flexible on such occasions and highly prone to brand switching. They are there to ensure dinner gets on the table, a process that involves a complex mix of competing desires within the household. They are not there to express brand loyalty or worry about prices. Wherever they go, they understand the price parameters (consciously or unconsciously).
Ditto for the retail experience. While product mix and selection is surely a very important component of any retail experience, the individual products are themselves of much less importance than the larger retail experience at hand.
The bottom line is that consumers set out to accomplish tasks amid a variety of competing experiences. Some head out to Costco for the monthly stock-up trip in search of the value experience, others head to Wegmans in search of a recreational foodie experience, still others may head to Wild Oats to treat their daughter to a nourishing meal. Finally, many prefer Wal-Mart for the "high value experience."
Most importantly, because the products themselves are only of secondary importance - compared to the occasions and experiences - we find that consumer perceptions of the products found within these stores are very often shaped and contoured by the larger occasions and experiences at hand. Understanding this distinction is critical to making sense of how consumers come to perceive organic products - branded or otherwise - across a variety of channels.
Viewed from this perspective, it would be an analytic blunder then to assume that the Muir Glen Organic Tomatoes found amid the aisles of Wal-Mart necessarily share much in common with Muir Glen Organic Tomatoes at Wild Oats. While it might be true that both retailers offer identical SKUs, most consumers construe the products differently because they are engaged in different experiences and different tasks.
To organic-interested consumers at Wal-Mart, Muir Glen tomatoes may represent an organic option amid their value-conscious shopping excursions. To busy parents stopping by Wild Oats to grab a few things for a quick dinner, Muir Glen tomatoes are a convenient meal solution; and because they are shopping at Wild Oats, they can feel good about their role as family caretaker. In the former situation, consumers will demonstrate significant price sensitivity, whereas in the latter situation they will demonstrate almost none.
While technically speaking these are identical products, to the consumer they are very different things worthy of different prices.
So even if the same can of Muir Glen organic tomatoes carries a 20-30% price premium at Wild Oats, the odds are good that the premium will go unnoticed by most consumers. Moreover, the chances are equally good that even if a single consumer were to purchase these same Muir Glen organic tomatoes on these two separate occasions, at Wal-Mart and Wild Oats, she would not recognize/remember those price differences.
Perhaps a useful analogy here would be to consider martinis crafted from Bombay gin. On special occasions, our loyal consumer is known to frequent the swank lounge of his favorite luxury hotel where he often orders a martini crafted from Bombay's Sapphire gin. Aware of his surroundings and the specialness of the occasion, he doesn't even think about the fact that the drinks there are $13 each. Then one day while stopping by his casual neighborhood bar after work, he notices that they too have begun stocking Bombay Sapphire. Much to his delight, however, the martinis here are only $5 each.
Both prices are, of course, acceptable given the context (the location and nature of the occasion). As such, any discrepancies - if they are even noted - will likely have no effect on future behavior. And because the price differences are ascribed to the experience and not the product in question, we would similarly expect no differences in product impressions or future brand loyalty. In fact, to the degree that he is now more likely to encounter Bombay Sapphire on a more frequent basis, the gin figures more prominently in top-of-mind scenarios. In other words, the greater availability is driving increased awareness and interest, regardless of the discrepancy in prices.
In a similar fashion, we predict Wal-Mart's entrance into the organic marketplace should have little effect on other retailers - on margins, sales or otherwise - so long as they continue to provide compelling experiences that match the occasions and tasks at hand consumers seek to accomplish. Likewise, to the degree that they increase overall awareness, Wal-Mart's move into organics may actually serve to attract new customers across the board for all retailers.
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