BAB1012C
This case was prepared by Krista Hill, Assistant Professor of Management at Bridgewater State College, Anne Roggeveen, Professor of Marketing at Babson College, Dhruv Grewal, Professor of Marketing at Babson College, and Jens Nordfält, Assistant Professor of Marketing, Stockholm School of Economics. It was developed as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. It is not intended to serve as an endorsement, source of primary data or illustration of effective or ineffective management. Copyright © 2014 Babson College and licensed for publication to Harvard Business School Publishing. All rights reserved. No part of this publication can be reproduced, stored or transmitted in any form or by any means without prior written permission of Babson College.
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Babson Worldwide
BAB274 DECEMBER 2014
ICA: Changing the Supermarket Business, One Screen at a Time
At the end of 2007, after several rounds of testing the effectiveness of its brand new
digital signage initiative, the ICA Group needed to decide whether it should install monitors throughout all its many stores. The tests had been designed with the goal of providing a clear answer about whether this initiative was worthwhile, yet the results revealed conflicting information. Customers reported not enjoying their shopping experience as much with digital signs in place, yet sales data suggested they had bought more than when digital signs were not present. Managers were torn: Should they invest the money to install digital signs in all their stores?
The ICA Group As a large, profitable retail group, ICA ran approximately 2,400 of its own and retailer-
owned stores in Sweden, Norway, and the Baltic region. The group comprised ICA Sweden, ICA Norway, and Rimi Baltic. It also included ICA Bank, which offered financial services to clients of its retail stores, and ICA Real Estate, which provided the company with properties on which to build retail stores. Prior to 2013, Royal Ahold N.V. and Hakon Invest AB owned the group; but in March 2013, Hakon Invest AB bought all the shares and changed the name to ICA Group. Consolidated 2012 net sales reached SEK 96,863 million. According to CEO Per Strömberg in the Annual Report and Sustainability Report 2012,1 the year 2012 …
1 http://reports.ica.se/ar2012en/Materiale/Files/ICA+annual+report+and+sustainability+report+2012_opt.pdf accessed November 2014.
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…was another successful year for ICA, despite the economic concerns in the market. ICA Sweden continued to outperform the market as a whole. We saw fine performances by our private labels, Cura pharmacies and ICA non-foods. Rimi Baltic developed well, as did ICA Bank, which launched an interesting new package of mutual funds. ICA Real Estate was stable and generated satisfactory operating income for the year. Another achievement is that our Swedish sourcing and logistics processes are now certified according to quality and environmental standards.
ICA operated multiple store formats in Sweden: (1) ICA Nära, a convenience-type store
meeting consumers’ daily retail needs; (2) ICA Supermarkets, mid-sized stores typically located in cities and carrying a wide range of products; (3) ICA Kvantum superstores, usually located outside of cities and supporting large, planned purchases; and (4) MAXI ICA hypermarkets with full product ranges including groceries, clothing, and housewares. Recently the group had added Cura pharmacies and ICA-to-go. Cura pharmacies were located within larger ICA stores, and ICA-to-go sold nutritious, portable meals. Independent retailers owned and managed many stores, though all had entered into agreements with ICA Group to receive support in areas such as logistics, retail development, and marketing communications.
The grocery market in Sweden was substantial, worth several hundred billion SEK. It
was served by various competitors of ICA, including Axfood, Coop, and Bergendahls. However, ICA stores dominated the market, holding a 36.7% share. Strong competition existed in other channels in Sweden including home delivery services and restaurants. Growth opportunities were notable. Urbanization in Sweden had occurred faster than in any other European country.2 Prominent market trends included an interest in health, environmental awareness, and a focus on convenience. Because Swedes spent approximately 12% of disposable income on food, they were generally price-sensitive and readily checked food prices on their mobile devices or computers.
To function in such a market environment, the ICA Group relied on extensive research to
explore and test the effectiveness of new ideas and strategies. In its long-standing relationship with the Center for Retailing at the Stockholm School of Economics, the ICA Group continually tested new retailing ideas by using large-scale quasi-experiments. As one researcher from the Stockholm School of Economics noted, unlike in many traditional retail firms that depended on store managers to communicate information up the hierarchy, at ICA, research “plays a major role, greater than many know or think about…. They want to make this [process] theoretical and get theory.” Fredrik Holmvik, ICA’s media manager, agreed with this assessment, explaining that “Basically all new ideas we try to test and analyze before the launch/no launch decision. Research is the foundation for more extensive tests or gives us the toolbox for simpler tests…. It also gives us new angles/ideas to test.” 3
In 2005, when increasing competition and a sluggish market resulted in a 2.3% decrease
in net sales, the Group sought new ideas to boost sales. Digital signage— in-store video screens that displayed pertinent content—was just beginning to gain traction with retailers. Kalle Fahlin, head of media development, suggested the Group consider using digital signage, arguing that ICA TV could broadcast promotions or other in-store information to shoppers. This practice
2 Magnusson, Erik (2012), “The fastest urbanization in Europe,” Sydsvenska Dagbladet, April 8 2012. 3 July 3, 2013
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would enhance the in-store environment and help stores promote certain products. (See Exhibit 1.) Although the idea of digital signage was not totally new, it was innovative to ICA and its franchisees. According to Holmvik, “Many liked the idea of communicating with ‘the shopper’ in-store versus ‘the consumer’ at home; the response was positive from that angle. But then we had people wondering if it would work or not.” Specifically, might the signage overwhelm or overstimulate shoppers?
Digital Signage
The digital signage industry, part of the broader billboard and sign manufacturing industry (in which revenues were an estimated $12.8 billion in 2012), grew notably in the early 2000s, mainly due to increasing demand for non-traditional means of communication in response to the growing presence of online retailers. Overall, the digital signage industry was fragmented with small businesses functioning in regional niche markets. However, several firms held significant influence within the industry, including Daktronics (with the largest market share at 3.8%), Young Electric Sign Company, Brady Corporation, Clear Channel Outdoor Holdings, and Lamar Advertising Company. These providers typically targeted key businesses in industries such as gas stations and convenience stores, department stores, billboard and outdoor advertising, fast-food restaurants, and coffee/snack shops.
Instead of traditional vinyl or plastic sheets, digital signage used high-resolution, digital
video screens or LEDs, in sizes ranging from small screens (.5 foot 1 foot) to large screens (50
feet 140 feet) to huge wrap-around (quarter-mile 3 feet) arena displays. Signs combined high-tech software and hardware, including screens, servers, routers, transponders, mounting equipment, wiring, and antennas. Displays could be controlled by PCs/servers, so software represented a relatively minimal capital expenditure.
To create value for customers, digital signage promised to improve the shopping
experience. For advertisers, it offered an additional source of revenue; and for stores, its purpose varied with the type of store. Clothing stores might use music videos to enhance their environments; big box stores might present how-to videos to provoke interest in a new product; restaurants might use digital signs to display a menu; and service providers (e.g., corporate buildings, universities) might adopt digital signs for information displays. In addition, digital sign content could be classified into three types: active, passive, or interactive. Active content engaged onlookers directly and called them to action, with the goal of creating interested, informed consumers. Passive content remained part of the background scene, designed to enhance the atmosphere and possibly draw customers into stores. Finally, interactive content combined these forms by offering interactive features while simultaneously displaying background imagery or video.
Across these various purposes and types, digital signage offered consistent advantages
over traditional analog signs. It enabled quick turnover and distribution of content, and it allowed varying content (e.g., promotions, entertainment, news, product advertisements) to be displayed in the same space. Profit potential increased with digital signage, because a store could send multiple advertising messages in the same space, cut back on printing costs, and set individual-level time and location targets to specific audiences at any moment.
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BAB274 DECEMBER 2014
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Researching and Evaluating ICA TV In line with its tradition of researching every new idea before implementing it, ICA
conducted three rounds of testing in 2006 and 2007 to determine the in-store efficacy of digital signage, which it designated “ICA TV.” The first series of experiments examined the main effects of digital displays on customer attention, emotions, attitudes, and behavior in large stores. The second round replicated the first but in smaller stores. As one researcher explained:
We used a Latin square design in all three experiments to rule out calendar effects, and to rule out that a certain effect only held for a specific store. This means that we had some experimental stores and some control stores in one period and then switched them, so that the experimental stores became control stores and vice versa in a second period. Of course we did not dismount any TV screens, but just turned them off when the store was used as a control store.
Most comparisons therefore referred to experimental stores (i.e., screen “on” stores) versus control stores (i.e., screen “off” stores). Test 1
The first round of testing, undertaken in Maxi and Kvantum stores, sought to answer
several questions, including whether customers noticed the displays and liked them, and whether customers believed they experienced more positive shopping experiences as a result. Some group members feared the screens might distract or scare customers away. Thus, another important question of interest was whether customers were more likely to purchase a product located near a digital display.
In each store, approximately fifty 42-inch digital signs were installed in six zones. (See
Exhibit 2.) Different content was developed for each zone. To monitor customer responses, the ICA Group placed researchers throughout the stores and also relied on cameras and sensors to measure whether customers approached or avoided digital displays. Self-scanning devices held by customers themselves logged the time they spent in the store, the time spent at checkout, and their average spending. Furthermore, researchers conducted approximately 2,500 interviews with customers to ask them about their experiences and how long they believed they waited in the checkout line. The behavior of almost 34,000 customers was analyzed in terms of average time and money spent in stores. This information was calculated from data gathered by the handheld devices customers carried and used to scan products as they placed them in shopping carts. Approximately 12,000 in-store observations came from researchers who noted whether shoppers viewed the end-of-aisle displays that were complemented by digital signage, stopped at them, or purchased from them. Finally, nearly 60,000 mechanical observations using cameras as sensors were obtained showing customer behavior as they approached digital displays.
For the basic question whether customers noticed the digital displays, the results
revealed that screens were noticed: 35% of customers reported seeing a digital sign in at least one of the zones. The visibility rates were higher in Kvantum stores and at checkout. (See Exhibit 3.)
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BAB274 DECEMBER 2014
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Next, to examine whether customers approached or avoided the digital displays, the
experiment featured a long table holding bananas, with two smaller screens behind it. One screen was always on, and the other was always off. The screens were counterbalanced so that if a screen was on one day, it was off the next, and vice versa. These results showed that customers tended to shop closer to the on screen than to the off screen. Specifically, a lead researcher recognized, “Even when the screen closest to the perimeter was turned off, a significant number of customers walked by it to pick bananas closer to the screen that was turned on.”
For retailers, a more important question was whether sales would improve if they
supplemented end-cap displays with digital displays. To the delight of ICA, when end-of-aisle displays were accompanied by a digital sign, sales increased significantly for 17 product categories across manufacturer brands and private labels. Researchers also discovered a sales increase for items on an end cap positioned just beyond one featuring a digital sign when the second end cap contained a related product.
Once shoppers reached the checkout line, their average perceived waiting time was two
minutes and 15 seconds; their actual average waiting time was only one minute and 45 seconds. That is, customers believed they waited longer than they actually did, regardless of whether they shopped in a store with digital signage. However, for customers who indicated they liked digital signage, its presence decreased their perception of waiting time. Furthermore, regardless of perceived waiting time, average spending on products in the checkout area increased by more than 50% when screens were turned on. The final and most staggering result was the large increase in average time and money spent in stores. An average shopping trip without TV screens lasted approximately 30 minutes. Shopping time expanded by 10% when screens were turned on. The same was true for the average amount of money spent. From a baseline of approximately U.S. $70 per customer, average spending increased slightly more than 10%.
Despite these extremely positive effects of digital displays on sales and customer
behavior, the effects on customer attitudes and emotions suggested different outcomes. Curiously, customers indicated their experience seemed more negative than usual, reporting they had less interest in returning to the store, approaching sales staff, or exploring the store, in contrast to customers in the control stores without digital displays. (See Exhibit 4.) Test 2
Test 1 offered interesting but perplexing results. Customers said they were not enjoying
the digital display experience, but they also stayed in the store longer and bought more. With Test 2, the Group wanted to understand the increase in customer buying behavior and determine what was causing customer dissatisfaction. After five months of running digital signage, ICA turned off all displays for several weeks. When displays were switched on, they were only switched on in half the number of stores. These stores became the treatment stores, whereas the other half became the controls. The pattern was reversed halfway through the test: treatment stores turned off displays and became controls, whereas control stores turned on displays to become treatment stores.
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BAB274 DECEMBER 2014
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With this shift, ICA also examined how customers reacted to two types of programming:
inspiration, which featured photos, recipes, and tips in an attempt to improve store ambience; and be/price, which was informational and described prices, deals, loyalty cards, available bonuses, and other relevant details. The research team believed that “If the negative attitude shift was due to the screen itself, the content would not matter. Hence, no matter what the content was, merely using the digital sign would yield the negative attitude shift. However, if the negative attitude shift were due to the content, we would get different results depending on the way we presented our communication on the screens. This test offered three results.
1. The attitude shift changed direction. Approximately nine months after initial installation of displays, consumers expressed more positive attitudes in response to digital signs that were turned on rather than off.
2. The sales increase realized when digital signs were on remained significant.
3. The two types of digital content elicited results the ICA Group had predicted, according to shopper survey responses. Shoppers in stores featuring inspiration content believed they would spend more, whereas shoppers who saw be/price content reported they would not change their purchases, compared to purchases they would make in a control store with no digital displays. However, the sales transaction log showed the opposite pattern: Sales went up with promotional messages and down with ambience-improving images, on average by a small but significant amount. Thus, both retailers and customers were incorrect in their predictions for behavioral effects brought about by different types of content. (See Exhibit 5.)
Test 3
The ICA Group worried about extrapolating to smaller stores the results from these two
tests conducted in larger stores. Therefore, it ran Test 3 to examine effects of the displays in smaller stores. In these environments, the Group inserted fewer screens per store to avoid a sense of clutter. As in Test 1, findings revealed that customers noticed the screens; shoppers even seemed to notice the signs more. They offered comments such as, “There are many digital screens in the store today,” suggesting that they strongly sensed the presence of digital signs.
Yet other outcomes were reversed in the smaller stores. Consumer attitudes were more
positive, and sales decreased. For example, when consumers were asked how positively they perceived a store overall, on a scale of one (very negative) to 10 (very positive), those shopping with screens on rated a store as significantly more positive (M = 8.33) than those shopping with screens off (M = 8.03, p = .003). The digital signage had positive sales effects on adjacent end- cap displays in larger stores; but in smaller stores, the number of sales to consumers who looked at an end cap without signage after viewing one with signage fell by approximately one-quarter.
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BAB274 DECEMBER 2014
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Summary and Remaining Questions The ICA Group had done a thorough job testing the effects of digital signage in both large
and small store formats. Intriguingly, researchers found that customers disliked screens in large stores but increased spending of both time and money when screens were present. In small stores they found the opposite effects: Customers appreciated stores more with screens present, but purchases dropped. Thus, the ICA Group had spent months running multiple tests in various stores, and it had invested in adding displays to a substantial sample of stores. But was it any closer to a choice? Should it implement ICA TV chain-wide?
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BAB274 DECEMBER 2014
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Exhibit 1 ICA Group Digital Signage
Source: Photos by author Anne Roggeveen with permission of company.
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BAB274 DECEMBER 2014
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Exhibit 2 Location of Digital Signage in Stores, Test 1
Source: Diagram prepared by the company.
Checkout 4–6 screens
Deli 1–2 screens
End caps 5 st pelare (Kvantum) à 3 skärmar Försäljning/intäkter -Vara-pris -Produktnyheter
Produce 1–2 screens
Entrance 2 screens
Perimeter 6–8 screens
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BAB274 DECEMBER 2014
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Exhibit 3 Percentage of Customers Noticing Digital Signage Location in Store
Stores Fruits and
Vegetables
Deli Aisle Before Checkout
Line
At Checkout
Line
Total
Solna 38% 24% 39.8% 34% 41% 35.7%
Haninge 24% 37.9% 23.8% 28.4% 61.8% 36.9%
Ahus 19.8% 53% 61% 44.5% 36% 42.4%
Norrtalje 30.3% 33% 58.8% 40.5% 56.3% 44.4%
Total 28% 36.96% 45.64% 36.5% 48.74% 39.84%
Note: These percentages refer to the percentages of customers who noticed the signage in these locations throughout the store; total refers to the total percentage of customers who noticed any signage in the store. Source: Provided by the company.
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BAB274 DECEMBER 2014
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Exhibit 4 Comparison of Customer Attitudes: Screens On Versus Screens Off
Off On Significance
I like to shop in this store. 6.11 6.19 .335
I would like to have more time to look around this store. 3.68 3.06 .000
I do not want to return to this shop. 1.57 1.77 .088
Today I am focused on getting things done. 5.78 5.57 .100
This is a positive place to talk to store staff. 5.29 4.80 .000
I would avoid looking around or exploring in this store. 2.28 2.51 .090
I like this store environment. 6.06 6.03 .762
Today I am forced to be in the store. 5.12 5.06 .701
I often make unplanned purchases in this store. 4.60 3.62 .000
This is a place to avoid store staff and talking to them. 2.17 2.56 .004
This is the kind of place to spend more than planned. 5.39 4.74 .000
There are many televisions in this store. 3.43 3.68 .128
Today I am in the store because I like it. 4.70 3.80 .000
Note: Items that differed significantly are presented in bold font. Source: Provided by the company.
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BAB274 DECEMBER 2014
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Exhibit 5 Customers’ Reactions to Different Content, Test 2 Inspirational Be/Price Significance
I like to shop in this store. 6.05 6.23 .065
I would like to have more time to look around this shop. 3.18 3.39 .247
I do not want to return to this shop. 1.76 1.83 .577
Today I am focused on getting things done. 5.08 5.32 .102
This is a positive place to talk to store staff. 5.19 5.40 .124
I would avoid looking around or exploring in this store. 2.09 2.32 .098
I like this shop environment. 5.69 5.93 .045
Today I am forced to be in the store. 4.50 4.84 .053
I often make unplanned purchases in this store. 4.62 4.17 .008
This is a place to avoid store staff and talking to them. 2.48 2.59 .485
This is the kind of place to spend more than planned. 4.98 4.83 .256
There are many televisions in this store. 3.64 3.20 .031
Today I am in the store because I like it. 4.63 4.54 .553
Note: Items that differed significantly are presented in bold font. Source: Provided by the company.
For the exclusive use of N. Bardawil, 2017.
This document is authorized for use only by Natalia Bardawil in Marketing Management taught by Kristin Houser, HE OTHER from August 2017 to December 2017.