It's not just a kitchen-table business anymore. The $300 million sampling and demonstrations industry has become an integral part of the in-store marketing mix.
Leaders in the industry, such as David Schwartz, president of Supermarketing, Minneapolis, a national in-store demonstration and marketing company, are forecasting "explosive, almost unchecked growth" for in-store demos and related services over the next three years. "Media dollars are flowing in our direction," Schwartz told
Brand Marketing. "We have not yet seen the tip of where it is going. There is so much more money to be spent and the results are so good when it is done right that we are being integrated into how business is done."
Robert Lieberman, president of the National Association of Demonstration Companies, Bloomfield, N.J., an organization of some 130 local and national demonstration companies, told attendees at a recent conference, "In-store sampling is the promotional technique of the next decade for introducing new brands and increasing overall sales."
To meet a spiraling demand from brand marketers, demo companies and national in-store marketing firms are offering a wider range of in-store services, which may include arranging products on the shelf, building displays or placing neck tags or stickers on shelf inventory. Some companies promise prompt reporting of the results of a sampling/demo event in a form that is both readable and usable.
Supermarket chains are seizing the opportunity to turn the demo business into a profit center, levying stiff access fees. Many are forging "exclusive" or "preferred" ties with demo companies, offering prime locations within the store and assuring that sufficient inventory is available.
Numerous local demo companies still operate out of the kitchen or the garage, but many others have computerized and have grown in size and the geographic area they cover. A few have achieved super-regional or even national status by coordinating and training networks of independent demo firms that can execute in hundreds or even thousands of supermarkets at a time.
While the in-store marketing industry overall has grown from $65 million in sales in 1986 to $450 million in 1993, much of the revenue from in-store sampling programs is hidden in the books of those local demo companies, said Wayne LoCurto, president and chief executive officer of Actmedia, Norwalk, Conn. He estimated an additional $250 million to $350 million in revenues may flow to the "hidden" demo industry.
NADC's Lieberman, who is also president of All-Ways Advertising Co., a Bloomfield, N.J., provider of in-store marketing services, said demo companies and national marketing companies have replaced the old-line field force for some manufacturers in performing additional consumer sales and merchandising functions beyond handing out samples or coupons.
"Some demo companies run these additional services as part of a parallel operation; others set it up as a separate division," he explained.
The additional services have become such an important factor to the demo business that the NADC's statement of purpose was amended last year to include a phrase referring to "a range of other marketing assistance services" in addition to in-store demonstrations.
As recently as three years ago, in-store demonstrations typically accounted for 90% of the demo firms' business. Other merchandising services chipped in the remaining 10%. Today that ratio is closer to 50-50, Lieberman said.
Because the skills required for some of the merchandising tasks are different and because many demonstrators prefer to work only part time, these additional services often are performed by other individuals, Lieberman said.
"Sometimes there will be a crossover person, someone who can handle both the demonstration and the other merchandising tasks, but the added services have really required a separate labor force, separately managed and separately trained," he said.
LoCurto said Actmedia can replace or supplement a brand marketer's field force. "We can assemble people on a part-time basis to help them accomplish their goals. The manufacturer will have to do the initial sale, but we can get the product restocked, build displays, convince the store managers to order more products or inform them about new items in the line, such as a new fragrance. We can do the follow-up visits. With so many companies cutting back, that is a great service."
Actmedia has 300 full-time employees in 52 markets that supervise 15,000 highly trained part-timers, he said.
Sunflower MarketPlace Solutions, Des Plaines, Ill., may serve as an illustration of the diverse areas covered by what is known as the demo industry. The company provides in-store and off-site field marketing services nationwide, specializing in product demonstrations, sampling, couponing, policing, consulting and field merchandising, according to a company statement.
SMS coordinates the logistics and performance of a flexible network of 68 primary and 140 backup demonstration and merchandising agencies across the country through sales office locations in Atlanta; Cincinnati; Minneapolis; Overland Park, Kan.; Philadelphia; San Francisco, and White Plains, N.Y.
Actmedia trains its demonstrators so that they can educate consumers about the product being promoted, LoCurto said. Some manufacturers send samples of their products to the in-store representatives so they can tell customers they have actually used them and explain from personal experience how they work.
Training has become a very important part of the promotion mix, but it is extremely expensive, said Schwartz of Supermarketing, which relocated its home office from Irvine, Calif., to Minneapolis earlier this month.
"If you want to do the right job for the manufacturer and the consumer, you will get some information for the in-store demonstrators," Schwartz said. "Most large programs have a very strong training component. There is general agreement that if you don't do a quality job in training, you will not get the results anticipated from the program."
Various training methods are employed, from videos to manuals to phone interviews to actual training sessions. Said Lieberman of NADC, "It is extremely important that manufacturers spend some of their dollars on the training of the demonstrators, including product knowledge and objectives. Consumers today ask very sophisticated questions about content and nutrition."
He added, "The demonstrator today has to be a sophisticated salesperson. We have to arm them with information. I would rather see the manufacturer contract for fewer demo days but see that they are done on a higher quality basis, with more money spent on training."
LoCurto said Actmedia tries to give its demonstrators key phrases and put it in script form. "We might say, for example, 'Get these three key points across.' "
A demonstrator has about five seconds to reach the consumer during an in-store demo, so both the product presentation and the message conveyed have to be kept relatively simple and easy, said Caroline Nakken, vice president of Mass Connections, Anaheim, Calif., a national marketing company and in-store promotion specialist.
"The corporate brand marketers are involved with consumer promotions, but they may send information or a manual. The local salespeople are busy calling on buyers and putting deals together. Brokers and direct salespeople don't have the time to go to the demo company to hold a training session or to make sure the training is done. That is why it is really important to work with a national marketing company," she said.
The concept of the national marketing company, which coordinates the in-store promotion for the manufacturer by making arrangements with individual demo companies in the various markets, is relatively new to the demo industry, Nakken said.
"Looking back 10 or more years, there were only two such companies. In the last five to 10 years, 10 to 12 national marketing companies have been formed," she said.
The national marketing company simplifies the process for the manufacturer by presenting one bill for the total program, regardless of how many regions and how many different demo companies actually participate, she said.
Otherwise, the manufacturer may have to deal with as many as 300 separate invoices from 300 different demo companies for a major promotion, she said.
Another trend in the demo business has been the charging of an "access fee" or "chain charge" by the retailers. This charge is levied against the manufacturer.
About 60% of retailers in the United States now charge an access fee to manufacturers to rent the space for an in-store demonstration, Nakken said.
"Access fees have been around the last five years. Some retailers charged them even before that. Say for example the demo costs the manufacturer $60 for the day. The chain may charge an additional $20 fee [for example] for the space in the store, so the manufacturer is really being charged $80. There has been some controversy about this," Nakken said.
"Some companies feel they should not be charged that extra $20 [for example], but the retailer takes the position that he is providing a prime location, may be displaying signage, often provides free scan data, notifies the stores about the promotion and arranges for the product to be delivered to the stores, takes on the liability and then has to clean up the mess afterwards," she said.
Nakken was a founder of NADC in 1983. It began with a membership of four to five companies.
"When the NADC was founded in 1983, demo companies were mostly mom-and-pop operations, often run from homes. Today you see bigger companies and they have become very sophisticated. Demo companies have become a marketing arm to manufacturers and retailers," Nakken said.