by Cindy Waxer

Pepsi Reveals Secret to Selling More Corn Chips

Feb 20, 20123 mins
CIOIT StrategyRetail Industry

3D store-simulation technology can predict customer behavior and increase sales. Companies like Pepsi Co. are cashing in.

There’s nothing coincidental about the way grocery stores display and price their merchandise. Focus groups used to be the go-to resource for such market research, but today manufacturers like beverage behemoth PepsiCo find virtual simulation technology to be the cheaper, faster option.

When Pepsi was trying to decide whether it was more profitable to offer one sale price for several bags of Frito-Lay chips (a practice called multiple pricing) or individually priced bags at a discount, the company used Decision Insight’s SimuShop, a 3D store-simulation technology, to allow a select group of consumers to “shop” the aisles of a virtual grocery store. The research showed that grocery retailers sell 23 to 30 percent more merchandise using multiple pricing.

“It seems like a simple idea, but it has huge implications for the business,” says Michelle Adams, vice president of shopper insights at Pepsi.

Store simulators from vendors such as Decision Insight, InContext Solutions and VR Intelligence are now relied on to increase sales and better target consumers because they’ve become easier to use. For years, these tools were a secret weapon sequestered in market research labs. “The technology was so sophisticated you needed powerful computers in order to load the software,” says Adams.

Today consumers can run simulations right from their home computers via a secure virtual shopping site. Each click of the mouse is recorded, charting respondents’ product selection process for future analysis. This data can also be combined with survey responses or general comments for greater insight into consumers’ behavior.

As a predictive tool, store-simulation technology is considerably less expensive and time-consuming than focus groups and telemarketing, thereby cutting the time to market of new product lines. But mimicking the emotions and experience of bricks-and-mortar shopping isn’t foolproof.

“The biggest challenge is keeping the [virtual] store as current as possible,” says Adams. “Pricing changes, competitors come and go, new products are launched. Yet the store must represent reality.”

Security is also a concern. Adams says participants are provided a unique link that cannot be passed on to another user. “This prevents them from entering a survey after the fact or referring it to someone else,” she says. “Even if a competitor were to get a hold of a survey, they wouldn’t know what we are actually going to do [with the information],” says Adams.

Jerry Sheldon, an analyst with retail research firm IHL Consulting, also points out that while it’s convenient to have participants use their home computers to test shopping scenarios, “you’re assuming the respondent is who [they] told you they are, not [someone] from a different demographic.”

And there’s no telling what other distractions–television, quarreling kids–might be competing for the respondent’s attention. So Adams says SimuShop tracks average completion time and outlier behavior. If something unusual is detected, that respondent’s survey is dropped from the data set.

Cindy Waxer is a freelance writer based in Canada.