ADFX AWARDS 2018 Retail and Fashion Lidl: The Basket That Grew Up To Be A Trolley Chemistry - IAPI

SILVER

                                                ADFX
Retail and Fashion                              AWARDS
                                                2018
Lidl: The Basket That Grew Up To Be A Trolley
Chemistry

Company Profile
Chemistry’s mission is to transform the commercial fortunes
of our clients.

Transformation is a big ambition, one which is never easily
achieved, but even more so in the communication sector
where the best efforts of competitors seek to prevent it.

As the most creatively-awarded agency in the Irish market,
we use creativity as a weapon, a means to achieving our
mission for our clients. And, as the work of Les Binet and
Peter Field has proven, intelligently and correctly employed,
it is the most effective weapon in the marketing
communications arsenal.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley       1

Introduction and Background
A Lidl basket with big ambitions

Lidl had historically built a shopper base with a high proportion of smaller
volume, but high frequency customers – i.e. the basket shopper.
Customers would often go instore to pick up the latest promotion, and
while there, pick up some of their daily shop. Until 2016, the vast majority
of their marketing and advertising spend focused on footfall driving
promotions which encouraged and reinforced this type of behaviour.

This approach was successful in driving penetration, resulting in nearly 7
in 10 Irish shoppers visiting Lidl, second only to Tesco in the market.
However, with no significant plans for new stores or no changes to the
line-up of products, we needed to develop new strategies to grow the
Lidl business, particularly as we were at almost saturation point in terms of
penetration given Lidl’s footprint.
In previous years, we had invested in addressing quality mis-perceptions
about Lidl which had built up good trust in the brand. However, this was
still not translating into trolley shopping.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                       2

Introduction and Background
Despite significant challenges, including increased competitor
aggression, no share of voice advantage and a trend in consumers
reducing the number of stores visited (favouring those they shopped
more heavily with), we bucked the trend and grew Lidl’s sales by almost
6 x times the market growth rate by devising an innovative and creative
approach to trolley shopping, like nothing ever seen before.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                 3

Marketing Objectives
Business Objectives

We set ourselves ambitious sales growth targets which were significantly ahead of
the overall market growth rate.

Lidl were upgrading a small number of stores but otherwise there were no significant
changes planned (ie no new store openings, no changes to product lines etc.). This
meant that all growth would have to rely on developing strategically led and
creatively impactful marketing communications.

Marketing objectives

Our marketing communications efforts had successfully increased Lidl’s penetration
in the previous 4 years, placing Lidl in second place to supermarket giant Tesco. At
almost saturation point in terms of absolute customer numbers, our efforts needed to
turn towards maximizing spend from these shoppers. We focused our efforts on the
following two objectives:

     1.    Increase Average Weight of Purchase (AWOP) – We had a lot of shoppers
           coming through our doors and needed shoppers to increase their spend
           per trip.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                              4

Marketing Objectives
     2.    Increase frequency of purchase – Not every shopper does a full trolley
           shop. In fact, our research showed that only 43% of all shoppers do a
           so-called “big shop” in one store (Spark, Feb 2016). Therefore, we
           needed to give existing shoppers more reasons to shop more often with
           Lidl.

Communications Objectives

On our journey towards achieving growth from marketing for Lidl, we had first
addressed quality perceptions as previously its cheap prices had equated to cheap
quality perceptions in the mind of the Irish shopper. We then focused our efforts on
creating more lifestyle relevance for consumers. However, to date, we had not in any
significant manner, communicated Lidl’s suitability for the big weekly shopping trip
(which we will refer to from now on as the trolley shop). Therefore, our overarching
communications objective was to position Lidl as a main shop destination. In other
words, convince people that they could get everything they need for the trolley shop
in Lidl.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                              5

The Task
Challenge 1: A more confident consumer: We were emerging from a recession and
post-recession mum was feeling buoyant. She felt less compelled to shop around
than previously. Competitors like Aldi, Tesco and Dunnes had focused on strategies
to command more main shopper share, whereas Lidl had mostly focused on footfall
driving strategies using one-off promotions that did not lead to heavier purchase
behaviour. With shoppers reducing the numbers of stores they visited, Lidl was at risk
of falling off the list altogether.

Challenge 2: Perceptual barriers to shopping in Lidl: In February 2016, we undertook
research to help understand what influenced store choice and what were the drivers
and barriers to store choice. This uncovered a significant challenge for the Lidl
in-store experience as Lidl scored lower in most criteria. Lidl was not in a position to
change its in-store operations but as these criteria were measures of perceptions, not
facts, we needed marketing communications to address these barriers.

Challenge 3: Budget: This may come as a surprise, but budget was a challenge. Lidl
has a significant advertising budget and outspends many advertisers in other
categories. However, so too do Lidl’s competitors, particularly closest rival Aldi who
typically outspent Lidl. With adspends at parity across all main competitors, we
needed to find a way to maximise the impact of Lidl’s advertising efforts.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                                  6

The Task
Challenge 4: Spend allocation: For over 10 years, most of Lidl’s advertising spend
was directed towards short term “in and out” promotions. This resulted in strong
shopper perceptions of Lidl being suitable for shopping for one-off items e.g. ski
gear or party food and had actively worked against creating any habitual shopping
behaviour.

Challenge 5: Lack of compelling reasons to change shopping behaviour: But most
significantly, we had not to date given Irish shoppers any significant compelling
reasons to do a trolley shop in Lidl so we needed to find a way to not only change
how they perceived Lidl but also change their behaviour in relation to how they
shopped with Lidl.

Challenge 6: Economic pressures: Inflation was growing, at times peaking at almost
3% on occasion. So, while value sales in the category were growing, this was in line
with inflation. Households, however, were not experiencing the same growth in
disposable income, putting pressure on wallets and making it a challenge for Lidl to
gain a greater share of these tighter wallets.

Challenge 7: Rise of the supermarket wars: The increased pressure on household
disposable income meant retailers began to trade more aggressively with price
promotions to increase volume sales.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                              7

The Task
This peaked just before our planned launch*, putting additional pressure on our
campaign – we would need to find even more ways to encourage shoppers to switch
more of their shopping into Lidl. (*Kantar Worldpanel)

Challenge 8: Volume sales lagging value sales: Furthermore, volume sales were
growing slower than value sales which indicated that consumers were spending more
for the same amount of goods and not making any significant changes to what they
bought. This coupled with the aforementioned rise in aggressive price promotions
within the category meant that we could not trade on price alone, a challenge for Lidl
with its discounter heart.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                                8

The Strategy
Habits are hard to break, and grocery shopping is no different. While the recession
forced behaviour change on many shoppers (store choice, switch to own brands,
visiting multiple stores, deal hunting), many shoppers were happy with their current
habits. This meant we would need to give people very compelling reasons to switch
more of their shopping to Lidl.

Our first task was to change the long-held perception that Lidl was only suitable for a
basket or “top up” shop.

To this end, we planned a two-phase strategy that would unfurl over 18 months.

Phase 1 – Position and Persuade:

We undertook quantitative and qualitative research to understand the triggers to
persuading shoppers and to identify the best targets. Broadly speaking, we learned
that C2D mums (20% of total market) were most likely to switch their main shop if a
compelling value message was provided. ABC1 mums tended to be more risk averse
and unwilling to completely change their behaviour immediately but were open to
ideas and trialing products. This cohort represented a larger share of Lidl’s current
top up shopper and were happy buying luxury and fresh items in Lidl but were not
buying everyday grocery.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                                9

The Strategy
We therefore decided to develop two streams of communications:

     1.    Position Lidl as a place suitable for a main shop and underpin this with a
           key financial benefit. The key message for this phase of our
           communications strategy was “Full Shop. Half Price.”

     2.    Persuade by de-risking product trial, communicate Lidl’s great own brand
           alternatives that gave you more for your money.

Phase 2 - Relevance & Range:

Research told us that the biggest barrier to main
shopping in Lidl were perceptions that Lidl did not
have a suitable range for a full shop. Research also
identified that the biggest difference in main shop and
top up shopping behaviour was the cupboard filler.

We also knew from various quantitative and qualitative
sources that shopper needs vary greatly depending
on life-stage.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                               10

The Strategy
So, we needed to plan a campaign that could flex to appeal to the different life
stages. We broadly divided them into five segments.

Our approach then was to devise a campaign that would demonstrate how Lidl was
suitable for main shopping, including ambient grocery, for each of these segments.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                            11

The Idea
Phase 1 – Position & Persuade

We firmly believed that the most efficient way to re-position Lidl from top-up only destination to
main shop destination was to do so by using a single, simple message launched with impact
across multiple media channels.

Our campaign line was “Full Shop. Half Price.” and
was fronted by a relatable mum who lived a busy life
but with good humour, much like our target cohort,
the C2D main shopper mum. In the main TV
execution, she shows how Lidl has relevant products
from multiple store categories for her varying
household needs, from hungry children to the
bathroom. For the first time, we made in-store a
critical location for our campaign to demonstrate key
categories for growth such as ambient food and
frozen.

Media approach: our focus was on impact channels –
high impact, longer length TV; large format outdoor,
high impact digital and press.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                                          12

The Idea
We upweighted spend towards C2D mums as they were
the target we had identified as most likely to switch first.
Lidl has its own considerable real estate and we utilized
this to a great degree, taking over store windows and
using persuasive POS at shelf.

This essentially was a large scale tactical campaign, so we
launched with impact in May 2016 and pulsed lower
weight bursts for 6 months before switching
communications to Christmas.

Phase 2 – Relevance & Range

We had identified range as a key barrier to overcome and wished to do this in a way that was
relevant to each individual segment. However, we wanted a fame campaign – one which would
generate word of mouth and talk-ability and encourage advocacy of Lidl as a main shop
destination. We decided to borrow the conventions of reality TV shows like Gogglebox as a
device to bring consumers through the different shopping options instore at Lidl – a notoriously
difficult thing for supermarkets to do.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                                          13

The Idea
We thought this was an intriguing way to potentially frame
shopping – from the chore we do ourselves, to the delight
we have in watching what others do. Through the creative
process, we combined all this to develop what became
known as Trolleycam.

We leveraged reality-TV-style voyeurism, using real
people, real shopping experiences as a device to illustrate
that – by main shopping at Lidl – these shoppers were able
to get all the quality and value they expected, with an
additional bonus of big savings. If they can do it, then you
can too.

After an extensive casting process, we identified real
families who represented the real needs of our 5 key
segments. We also identified a “bonus” couple, two
teenagers shopping for their parents, who could convey
other unexpected brand truths – that Lidl stocks a range of
well-known brands.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley      14

The Results
Commercial Results

We had set ourselves very ambitious targets to grow ahead of the market growth
rate. Not only were we successful in this, we over-achieved our ambitions by a
considerable amount, achieving growth of over 2x market growth rate in 2016 and a
staggering 6 x market growth rate in 2017. (Kantar)

How does this translate into monetary value?

Lidl does not publish its financial reports, but we can make a reasonable estimation of
improvements to turnover using Kantar data:

The following are estimated positive increases in turnover versus pre-campaign
benchmark (from campaign start to end October, before Christmas activity
commences). It is important to note that Lidl’s investment in media spend to drive
turnover (e.g. promotions, sales driving activity) did not change significantly year on
year.

2016: €6.62 million
2017: €14.48 million

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                                15

The Results
That means the total turnover attributable to the campaign was €21.1m.

Finally, Lidl achieved its highest market share ever in Ireland on the back of the
Trolleycam campaign, peaking at 12.1% (Kantar). This is all the more notable as a
typical ceiling for discounters in most markets is 11%.

Marketing results

Lidl was (and still is) second only to Tesco in terms of penetration. With no significant
store expansion plans, we set ourselves to marketing objectives to achieve growth –
to increase the average number of products per trip (Average Weight of Purchase/
AWOP) and increase purchase frequency.

Increase Average Weight of Purchase (AWOP) – Average number of packs per trip
grew by +0.2%, which gave Lidl a +1% increase in value per trip. Furthermore, on
shopping trips valued up to €40, Lidl grew its number of packs per trip by 1.4, which
was ahead of the market growth rate of 0.6 packs per trip (Kantar year on year data,
2016 to 2107).

Further proof can be found in our tracker, which showed that we increased our main
shop share (i.e. trolley shoppers) significantly.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                                  16

The Results
Previously it had hovered around the 18% mark. This peaked at 21% but sustained at
a higher level of 20% long after the campaign came off air. (Source: Spark)

Increase frequency of purchase – As only 43% of shoppers
do a trolley/ main shop, we focused on growing purchase
frequency. We did this by giving shoppers more reasons to
choose to shop with Lidl. During this period, all retailers
achieved some increase in frequency as overall penetration
dropped slightly. However, Lidl’s increase in frequency far
outweighed any of its competitors, equating to an average
of 7.7 extra trips per shopper over the period covered by
this case study (Kantar). As the average spend per trip is
approximately €20 (Kantar), this equates to an additional
€154 per shopper per year – not bad for the retailer with
the second highest penetration in Ireland.

Communications Results

Our over-arching desire was to position Lidl as suitable for
main shopping and ultimately convert top up shoppers to
main shoppers.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                            17

The Results
Despite Lidl’s considerable budgets, they were on a par with other players in the
category, so we set ourselves the goal of creating communications that would punch
far above their weight – which, as the below results (Source: Spark) will show, we did
to great effect.

     •      Greater cut through for Trolleycam versus communications from any other
            retailer: 50% of closest rival Aldi (despite Aldi having a greater Share of
            Voice) and 6 x ahead of market leader SuperValu.
     •      Very high understanding of key messages such as get a big family shop
            for less money, suitable for all types of people, wide range in-store, lots of
            options, positive instore experience.
     •      Our segmented approach was proven to be on the money with a
            balanced level of engagement across all families and segments. We
            achieved our intention of showing that ‘people like me’ can get what they
            want at Lidl.
     •      The combined effect of the engagement and incentivize advertising was
            proven to be very successful in encouraging shopping at Lidl and
            changing perceptions. Savings, suitability for the whole family and
            relevance to the lives of Irish shoppers all came through very strongly.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                                    18

The Results
Switching from Tesco into Lidl for cupboard fill

We had identified cupboard fill as the primary category to
focus on to fulfil shopper needs. During this period, Tesco
invested heavily in updating and upgrading their own
brand range, predominantly made up of cupboard fill.
Despite the excellent job Tesco have done on their own
brand range, we were managing to convert an average of
€60,000 per week to Lidl on cupboard fill spend. (Kantar)

Reactions from competitors

We are always thrilled to see a competitor react to a
campaign – it means our campaign must be working and
also must be hurting them. Within a couple of weeks of
launching our Phase 1 campaign, SuperValu reacted with a
defensive strategy (which our results show, had little
effect). They ran this for a sustained period over 2016.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley    19

The Impact
Improved perception of range positively affected Christmas performance:

Christmas is a great indicator of how effective the pipeline set up during the year is.
Marketing activity switches from the day to day business of increasing share of trolley
for everyday items towards tempting in new shoppers with indulgent treats. The
8-week run-up to Christmas is a mini-microcosm where shopper activity, and
consequently retailer activity, changes completely versus the remaining 44 weeks of
the year. The traditional supermarkets tend to run aggressive tactics to retain
shopper loyalty in the run up to Christmas e.g. vouchers to save towards a turkey,
vouchers with short spending windows, sometimes offering money off particular
products that households need at a particular time. The discounters tend to lose
market share during this period as they are not seen as offering the full range of
Christmas fare. However, Lidl’s improved range perceptions helped to drive a better
Christmas performance than previously experienced, showing strong switching gains
in the 12 weeks up to 28th Jan 2018.

Lidl not only held its market share but managed to grow it by +0.1% - a significant
achievement for the discounter. Furthermore, Lidl managed to grow ahead of market
growth again at +4.6% yoy growth, versus a Christmas market growth rate of +3.5%.
The significance goes beyond commercial success as it also indicates a greater
acceptability of Lidl having the range and products shoppers needed at this more

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                                 20

The Impact
heightened time of year, as well as during more everyday occasions throughout the
rest of the year. (Market data: Kantar Worldpanel)

Fame & Digital Engagement

Lidl's Trolleycam activity managed to successfully capture a particular zeitgeist – with
levels of conversation that were unusually high for a summertime retail campaign.
Trolleycam received coverage globally (including US, UK, Europe) from media
including Campaign, The Drum, and David Reviews. It has already picked up a
Kinsale Shark in 2017.

In a cynical online environment, it is easy for brands to be left out of real
conversations or to be dismissed as "corporate" entities. However, with this Lidl
activity, we were able to see tangible and largely unprompted engagements from
members of the public online. A physical example of that is in the creation of
parodies, which we saw to hilarious effect across social media (with the funniest being
the Fuppin’Eegits take on Trolleycam). This is behaviour usually seen only by ultra
cool media publishers or celebs, so it was a validation of our approach.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                                  21

The Impact

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley   22

New Learnings
We developed a motivating insight about everyday lives but did something
extraordinary with it to great effect, achieving growth at 6 x market growth rate.
Chores, like shopping, can be boring… but not other peoples’. By showing the
ordinary lives of “people like me”, we helped Lidl baskets grow to trolleys.

A carefully designed communications strategy designed around the purchase
decision journeys of each unique segment ensure that awareness was converted into
behaviour change.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                            23

Summary
After several years of footfall driving activity, Lidl had built up a very large shopper
base, second only to Tesco in penetration. However, these shoppers were low
volume basket shoppers. In order to achieve growth from the existing large
customer base, Chemistry devised an innovative strategy and creative approach
which borrowed from the conventions of reality TV to create something
extraordinary out of a very ordinary, everyday chore – grocery shopping. This was to
great effect, achieving a growth rate that was 6 x times faster than the market growth
rate and an estimated €21.4 million positive impact on sales.

Chemistry | Lidl: The Basket That Grew Up To Be A Trolley                                  24