Be There

1. An Introduction to Virtual Shopping & Implicit KnowledgePrepared for Hillshire FarmsOctober 12, 2007 Be There M D CMarket Data Corporation

2. Overview • Sara Lee and Hillshire Farm brands are committed to growth and profit • Strong brands • Innovation • Brands and products that differentiate themselves – build strong relationships • Consumers • Retail • Underlying these goals is the need to: • Develop deep insights • Evaluate the impact and potential of product and brand efforts • More Accurately • More Efficiently • Goal: build strong brands and products • Deepen trust and relationships with consumers and retailers

3. Overview • MDC – IDentity is a marketing research and marketing planning consultancy whose mission is to provide insight through innovative research and creative thinking • We have considered the issues with which you are wrestling • We have developed innovative research and planning techniques • New twists on current procedures • New models for application of knowledge and insight • Revolutionary techniques that push the envelopein understanding consumers To deliver deep and actionable insights To better understand the impact of our efforts

4. Overview • The world of research is rapidly changing • Seeds of change started a while ago Benefits are beginning to come to fruition • Two key advances • Use of Virtual Reality • Application of Neuroscience

5. Agenda • Plan for Today • A little more about us • Introduction of Virtual Reality and a discussion of applications for Sara Lee • Going beyond – where no man has gone before to provide deep insight • The application of neuroscience to go beyond explicit (cognitive structure) knowledge  to understand Implicit Knowledge (how consumers really feel) • Next Steps

6. Market Data Corporation MDC is an amalgamation of four sister companies MDC Innovative market research Applying neuroscience to gain deeper consumer insights IDentity Applying insight for innovation and planning Synapse Planning Product, brand and advertising planning Building loyalty and increasing volume among customers Customer Share Group

7. MDC | IDentity M D CMarket Data Corporation Chicago based full-service marketing research firm established in 1982. Two managing partners • Bruce MillerPresident • Marci CohenExecutive Vice President Partnership devoted to adapting techniques based in experimental psychology to marketing research • Jeremy Bailenson Ph.D.Department of CommunicationsStanford University

8. MDC - IDentity • University of Chicago Graduate School of Business • Abel Jeuland Ph.D. Charles H. Kellstadt Professor of Marketing • Stanford University • Jeremy Bailenson Ph.D. Professor of CommunicationsDirector of Virtual Human Interaction Lab (VHIL) • Roughly 2,000 marketing research studies Strong theoretical and practical underpinnings We are students of . . . • Consumer Behavior: understanding how consumers behave, and why they behave as they do • Marketing: the dynamics of the marketplace and the strategy and tactics that impact behavior – the acceptance of products and brands • Marketing Research: research theory and its application to understanding behavior and strong marketing

9. MDC - IDentity Brand Experience . . .

10. Food Beverages Retail Apparel Auto Kids Leisure Travel MORE . . . APPAREL

11. Home HBA Restaurants Media Electronics Organizations Finance & Insurance

12. New Product Oriented Key members of new product and strategic teams • Past • Coors • Levi’s • Gap • Hyatt • Current • SCJ: air care; personal care • IHOP • Kohl’s • Kellogg’s • Carnival Key new product successes • Zima • Slates (menswear) • Gap product rebirth • Kohl’s Beauty – American Beauty, Flirt, Good Skin • Kohl's New Fashion Departments: Apartment 9; Daisy Fuentes • Smart Start cereal • Oust • Edge Men’s Personal Care

13. MDC | IDentity Consumer insights with a strong orientation toward Innovation & Brand Strategy and Design • InnovationPart of the “Air Force Team” at SCJ that developed over 300 new product ideas for a funnel. Process identified 20 ideas that pass Bases hurdles. Oust was one of them • Brand strategy and design Lead the brand repositioning team that successfully repositioned the Gap, developing the concept of basics with a twist – including an actual style paradigm for merchandise • Brand strategy and designPart of the team that developed a new identity for H&R Block as a financial services entity – including redesign of corporate logo

14. Virtual Reality Changes one’s environment – places a person in a different place and time • Ultimate Simulation Tool • Gets us closer to the real look and feel of a shopping experience as a way to establish critical measures • Brand/Package Application • Assessment of shelf presence and impact on recognition and distinction • Intrusion: do they see it on the shelf; how long does it take • Acceptance: what do they buy; how much do they buy • Output: Multiple measures • Where they looked • For how long • If they could successfully find the product • What do they want to buy

15. Create a realistic environment Purchase Consumption Benefits Efficiently place products within environment Understand how consumers shop for and buy products Identify key elements that drive purchase at retail Develop true partnering relationships with retailers Optimize retail shelf Develop and refine packaging New product discovery and screening Stronger pre-assessments of innovation potential More realistic and accurate modeling – volume predictions and interactions Deeper understanding of implicit product, brand and packaging assessment Attraction Quality Value Taste – appetite appeal Nutrition Convenience Virtual Reality

16. Key constructs Build realistic models Observe and model patterns of shopping and purchase behavior Implicit observations Implicit responses Current status Virtual retail tours Stationary location Screens Partial product investigation and purchase Partial implicit eye tracking and measurement Detailed explicit questioning MDC-IDentity Actual labs – shop the store Multiple labs (store locations) Mobile locations – qualitative (group) facilities Total shopping and buying behavior – patterns Implicit measurements in real world environment Virtual Reality

17. Virtual Reality • Kohl’s example and case studies – uses • Retail store example • Work in progress • Building the refrigerated aisle: • Current status • Shelf of the future – quick meal solutions • Can bring store to you in a month or so

18. Implicit Knowledge Two Types of Knowledge (Memory) Implicit More emotional . . . information which is less accessible to us Explicit Rational, cognitive thought process Influence Behavior Differently Experimental psychology has proven that a consumer’s Implicit Memory affects behavior Most art is processed implicitly

19. Implicit Knowledge • Not the Same as Explicit Knowledge • There is a range of correlation between Implicit and Explicit knowledge • Sometimes the correlation is quite high • E.g., entrenched attitudes about pro-choice/pro-life • Other times it is quite low • E.g., stereotypes surrounding Asians • The emotionally laden areas are often the ones that have the lowest correlation

20. What is Implicit Research? • A Way to Predict the Impact of a Marketing Action • How it will impact consumer perceptions • How it will impact consumer behavior • Implemented Alongside Standard (Explicit) Research • An add-on to (not a replacement for) Explicit/self-reported measures • Strong Complement to Research Learning • Addresses limitations of Explicit research • Suppresses reactions that are too deep into non-conscious thought • Creates an environment of over-deliberation – which is not present in the “real world” • Requires articulation of a feeling on a formal measurement scale – which may not be relevant to the emotional connectionsbetween consumers and brands • Does not allow for consumers’ inherent unwillingness to express negative or embarrassing-to-admit thoughts • Difficult to assess pure feelings and associations • Not always known • Not subject to processing • Especially the case with imagery-laden constructs • Brand identities • Graphics

21. Three Ways to Establish Implicit Measurements • Change Blindness • Lexical Decision Task (LDT) • Implicit Association Test (IAT)

22. Change Blindness What Experiments Show • The perceptual system cannot possibly process all visual details from any given scene • Consequently, the visual cortex picks and chooses information to process that it deems relevant by making predictions about what is important in a scene • People don't notice changes to information that they decide in advance to be not relevant • The goal of Change Blindness experiments is to decide what features are important when people process a complex visual scene • And later impact decision making because they have not “made it to the brain”

23. Change Blindness • Package Application • Any or all components of a package can affect perceptions (Implicit and Explicit). Change Blindness can be used to explain the importance of these elements during the shopping experience • Two Approaches • Micro • Focus on one package • Macro • Putting package alternatives on shelves in a competitive retail environment • Output: Measure how long it takes respondents to notice a change • How much time before they notice the change • Number of “shifts” • Noticing it faster = more important during the in-store experience

24. Lexical Decision Task (LDT) • What Experiments Show • We process perceptual imagery in part by what we see and explicitly notice . . . and in part by using Implicit (non-conscious) memory • LDT is a Word Recognition Test • In two steps; each respondent completes both steps • We develop Implicit Imagery first (using LDT) • Followed by Explicit Imagery (standard agree/disagree scale) • Output • Reaction time in milliseconds • Less time = greater association • Discussion Points • The proper wordlist is critical • Aim for 100-125 words

25. LDT Case Study:Robotix Package Test Old Box New Box A New Box B • Explicit Results • Two new boxes are improvements – fun, adventure, brand personality • A especially strong in communicating escape, fantasy and mystery • B more childish and dull • Logos in isolation – no differences between the two new logos (both better than old) • Implicit Results • Confirmed Explicit results + highlighted associations that drive emotional reactions to the boxes • A captures exploration, discipline and developmental nature of a space oriented toy: NASA, technology, organized, disciplined, complicated, clever, individual, attractive, energy • B communicates the developmental and teaching nature of the toy… but also sad, angry, scary • Logos in isolation: significant differences • Green Logo (on Box B): implicit results highlight its attraction: NASA, adventure, daring, rugged, energy… irresistible, beautiful, original, sophisticated • Red Logo (on Box A): had positives… but was also somewhat threatening: violent, dangerous, scary Marketing Decision • Box A with Green Logo 80% increase in sales for the first 9 months after relaunch (with no advertising)

26. Goal: understand consumer impressions of the brand, in order to inform creation of a new brand identity for H&R Block LDT Case Study:H&R Block • Explicit Results • Consistent with strong satisfaction and retention rate among customers • Fast, thorough, experienced • Dependable, capable, alert, helper, fair, honest • Friendly, convenient, open, welcome, ready • Implicit Results • Showed category concerns: scary, uncertain, careless, incompetent, cheater • Validated as consumer emotions and NOT brand impressions in a separate follow-up study • Showed H&R Block’s potential role: empower, solution, advocate • Showed hopes: longshot, billion, grow, ambitious • Difference between Loyal Customers and Favorable Noncustomers • Loyals were insecure • Favorable Noncustomers were secure but interested in financial benefits • Marketing Decision • In advertising, leverage consumers’ need for an advocate in H&R Block – someone who can bring them money Resulting ad campaign was highly successful

27. Implicit Association Task (IAT) • What Experiments Show • Attitudes and perceptions can be defined as associations between concepts • Positives link with positives • Negatives link with negatives • An IAT Test • An associative procedure designed to tease apart implicit divisions of stimuli along binary categories • Good/Bad • Involved/Dissociated • Exciting/Boring • Allows us to understand Implicit depth and intensity of involvement and appeal

28. Next Steps • Build retail shelf – example • Develop partner relationship with Sara Lee • Conduct research: • New products • Package refinements • Retail shelf optimization

29. Thank You • Chicago Market Data Corporation | IDentity 311 W. Superior Street, Suite 300 Chicago, IL 60610 Bruce Miller 312-988-1333 Marci Cohen 312-988-1331 mdc-identity.com • Palo Alto Virtual Human Interaction Lab Stanford University http://vhil.stanford.edu M D CMarket Data Corporation