Barrie, a supermarket industry insider and insightful contributor to my recent post: How Can Supermarkets Differentiate made a great statement: “Until retailers begin to step out of their traditional boundaries and create truly ‘customer-centric’ marketing programs, consumers will continue to do exactly what we TAUGHT them to do…switch stores for whoever has the best price on Coca-Cola that week.”
I’ve been thinking about this ever since, so Barrie, this post is for you. A recent article in Drug Store News highlighted retailers’ dilemma: “There are no easy answers to how to appeal to consumers in the current economy. Retailers are struggling to find ways to attract consumers in a marketplace where value is the new buzzword and thriftiness in top of mind.”
The article goes on to say that marketers continue to talk about “value” without considering what that really means to the customer.” A recent Hartman study (The Hartman Group is a research and consulting group in Bellevue, WA) found that price matters to consumers, but quantity may not be as important as it once was–especially when it causes waste.”
A Hartman spokeswoman stated: “We found that the new paradigm is on utility and it has displaced the notion of quantity. Consumers are mindful of wastefulness and the notion of excessive consumption.” She noted that consumers who used to purchase multi-packs in club stores only to throw out a third of the flavors they didn’t like, rationalizing it due to the low price, are now altering their behavior. In a down economy, it doesn’t feel right to customers when they throw things away.
As a result, consumers are changing their shopping habits. They’re using more coupons. They’re searching for 2 for 1 promotions. They’re increasingly purchasing store brands vs national brands to save money. Retailers and manufacturers are all catering to shrinking consumer dollars by offering these purchase incentives and more. Example: 10 items for $10.00. Supermarket guru Phil Lempert put it this way: “…an even bigger consumables trend has been the focus on the dollar as a magic number…The next phase will be what you can get for $1.00.”
But this was the most telling thing in that article, and it was buried 1/3 the way down:
Consumers are also shopping for groceries, for example, in 8-10 retail stores rather than 4 or 5.
This begs the question: what do these strategies really invite? Answer: disloyalty. And all of this goes to Barrie’s statement. In the supermarket business, consumers have been taught to either purchase in quantity or shop the circulars and end caps ad infinitum.
In essence, competition is so intense for the consumers’ food dollars that supermarkets have increased their discounts over time and by doing so, they’ve not only cut into their own profits but they’ve done nothing to instill loyalty among consumers. If anything, they’ve encouraged their customers to shop in more outlets, not fewer. Net result: fewer dollars spent at each outlet, as more supermarkets, mass merchants and drug stores take more cuts out of the same pie.
This is what happens when the entire value proposition comes down to price, isn’t it? This is not to say that manufacturers and retailers shouldn’t offer some great deals on commodity items. It’s not to say that they shouldn’t give consumers some coupons or end cap specials. It doesn’t mean there shouldn’t be quality private label brand offerings. We all know times are tough. But how much is too much?
Without offering the conveniences customers are looking for as well as killer customer service, there simply isn’t any reason for consumers to do most of their shopping in one retail outlet. The only way to build loyal customers, it seems to me, is first for retailers to be loyal to their customers. A fanatical devotion to delivering great service and attentiveness to the customer, it seems to me, would trump price as the only lure into any retail establishment. I’m willing to bet customers would pay more, and not even mind tough economy or not, if retailers offered more value to consumers than price.
Questions:
- Would you, as a consumer, shop in fewer stores if retailers truly catered to your needs and gave top-notch customer service? Or would you still prefer to shop multiple outlets to glom all the best deals in every supermarket’s weekly circular?
- Would you mind paying more for some items if a supermarket offered you other incentives and perks when you use their store card?
- What kinds of things should supermarkets or retailers in general do to secure your loyalty?
I’d love to hear from you.
[Image: Flickr]
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Ted, lots to chew on here.
Value vs. price is something that retailers should consider, but also the customer experience needs to be taken into account. Let’s take grocery stores for example. Too many grocery stores are “me-too”. Same brands, same layouts, and innovations (deli’s, floral depts, better meat counters) are quickly copied. How does a consumer know they’ve walked into one store vs another? Often times they don’t until they look at the receipt, or make their check out to the wrong retailer.
I read this on your last post, or somewhere else on the NET, but let’s take Trader Joes where there is definitely a more “California/Hawaii cool” experience of friendly employees, different uniforms (Hawaiian shirts and khaki shorts), fresh selections, fair prices and stuff that cannot be purchased anywhere else.
You could arguably roll the customer experience discussion into “better value” category as it is likely a consideration in overall value.
Hi, Ted. In this economy, all socio-economic groups are trying to save a buck. Retail competition is fierce, so as a consumer, I shop around for specials in 3-4 stores. I have some loyalty for the major grocery chain I frequent, and that’s because of variety and price. Even when the economy was good, my habits were the same.
Thanks for weighing in, Paul. I like your insights here. Since so many retail operations are cookie cutter–yes I did state that on a recent post–nothing stands out as a value differentiator in the consumer’s mind. Great service, a more unusual product mix, a different kind of atmosphere–all add up to a better and more memorable experience. As you pointed out, Trader Joe’s is one of those retailers. Could that be why they’ve enjoyed so much success?
Elaine,
Thanks for commenting. I think you’ve just spoken for a great number of consumers with your observations. “Even when the economy was good, my habits were the same.” See, I think this statement points out that we’ve all been trained to shop in several outlets and buy all of the specials. You’ve cited “price and variety”. But how different are those from supermarket chain to supermarket chain. . .really? What other things might a retailer do to encourage you to part with most of your hard-earned food dollars in their store? Just wondering. . .thanks again, Elaine. I always appreciate your comments.
How about Whole Foods topping the EPA list of “green power purchasers”? That has great value for the WF customer base. Could that solidify more business for the chain, even in this tough economy?
http://greenbiz.com/news/2009/07/28/top-green-power-purchasers.
Thanks for weighing in, Claire. Agreed: this independent evaluation by the EPA will carry a lot of weight with Whole Foods customers. It also reinforces why they can feel good about spending more of their grocery dollars in WF stores. . .As Paul also pointed out, Trader Joe’s offers customers a clear set of differentiated values and so does Whole Foods. Thanks for commenting.
I too am guilty of shopping around, but that is mostly for generic packaged products carried by all supermarkets. In terms of specialty goods, including produce and baked goods, there is strong store loyalty. I to to one store specifically for these items.
The other thing is that store carries limited selections of other goods and doesn’t use any form of loyalty card. The store is also very active in the local community. Maybe this works since I live in a somewhat isolated area?
NWGuy, thanks for adding your perspective to this post. You’re quite right: in many small towns consumers have to shop at multiple locations to meet their needs. You’re loyal to a specialty store there and cite that this retailer “is also very active in the local community”. That’s important to many customers in small communities, isn’t it? When a business is ingrained in its community, it tends to reap the benefits with a loyal following.
Thanks for weighing in, NWGuy. I appreciate it.
Interesting. I grew up in a household where money was always tight, and coupon cutting and deal-seeking transcended the boundary from occasional to everyday. However, since then I’ve transitioned from a Western, car-based life to a NYC, car-less life, and if anything has drastically changed my shopping habits, it has been the fact that I now have to personally transport my groceries from store to home. I love the experience of picking my own produce and items (thus my dislike of fresh direct), so I now base my grocery decisions on three factors: 1-ease/access to transportation or within an acceptable walking distance (0.5 miles); 2-quality of goods, 3- the experience itself. I now find I am insanely loyal to three to four shopping locations because they fit at least two of the three requirements.
Ted, this is one of most insightful posts that I have read today.
Nice insight, Chou. Actually, we almost have the same grocery preferences:
1. Accessibility (the nearer, the better)
2. Freshness of goods (especially fruits and vegetables)
3. Customer relations (the staff should be courteous and helpful)
Thanks for your post! It is really important for business owners to know what sales presentation training are they using in their business. They must also make sure that their own staff and themselves practice their sales presentation training on a regular basis to enhance their skills.
http://www.coachingfromspiritchallenge.com/does-the-idea-of-sales-presentation-training-make-you-cringe/
Hi Chou,
You’ve articulated an important point for DF readers here. It’s amazing to see how one’s perspective changes about shopping when going from a suburban lifestyle to an urban one, isn’t it? You’ve adapted by choosing to patronize a handful of grocery stores that meet your criteria, becoming “insanely loyal” to those few in the process. Proximity to your home, quality and the experience matter most to you. The latter point, especially, goes to your perception of value, doesn’t it?
Thanks for sharing your insights, Chou. They’re great and I appreciate it.
Thanks for the kind words, Strategic Growth Advisors. Your third point, customer relations is a sore point with many consumers, isn’t it? If retailers were as fanatical about competing on service as well as price, it would be a very different world. Common courtesy goes a long way. So does helpfulness. Customers appreciate those things, and they remember them. Thanks for weighing in, here.
Sharon,
Ongoing training programs are often forsaken by retailers, especially when they go into cost-cutting mode. It’s a big mistake. They see themselves as sales building businesses. In reality, they are in relationship-building businesses. If retailers put the customer first, sales and loyalty would definitely follow.
Thanks for your observation, Sharon.
Ted, Your article is exactly right. Retailers must offer a value, beyond price, to succeed.
Customer service is my primary reason for shopping at our regional grocery chain, rather than at the national chains. If I can’t find something, an employee will walk me to it. Try even finding an employee to ask at a national chain grocery store. I only have to lift my groceries once — to load the cart. The cashier removes items from the cart; the bagboy bags, loads my cart and asks me if I want to drive up to have the bags loaded into my car. Compare that to the Mega-Tar-Mart experience. I’m just as cost conscious as anyone, but the service is what makes me loyal.
And, just to remind me that I’m not overpaying for all of this great service, the cashier circles, with a red pen, the dollar savings shown at the bottom of my receipt and tells me, “You saved x-amount by shopping at Martin’s today, thank you.”
Imagine a furniture retailer who offers design or decorating service rather than no payments for 90 days. I’d probably end up buying much more than just the sofa I originally had in mind after a little inspiration from a professional. And, you bet I’m going to spread the word.
A tire dealer who offers free tire rotation for the life of your tires. Guess who I’m going to return to when it’s time to replace my tires.
I am fascinated by this discussion, and the thoughts it is provoking.
My personal grocery experience is one of cost/value relationship. I have four distinct stores from which to choose, with the differentiators being selection and price, and without exception I choose the destination based on the size of the order. The lowest prices and best selection are 10 minutes away, and the shortest distance (2 minutes) is to the most expensive and least choice.
Single item – I go to the corner store, small number – I go to the local market, big shop means I travel the extra few minutes for the selection and lower price.
In my mind my time has a value (undefined) and I make a conscious decision based on this.
In many cases this same relationship exists in the customers with which our company deals.
Initial purchases of high value components require the prerequisite tire kicking and price negotiations, and travelling for a distance is not a problem, but, comes to spare parts and crossing the road is a major issue :>
So my jaded retailer perspective is that the customer loyalty relationship includes both the customer experience, and, I think, on the perceived value to the customer of the purchase. And this factor has to be taken into account in the business model you present.
You’re so right, Sharon. Thank you for giving some great examples that demonstrate how exemplary customer service leads to loyalty. People are very pressed for time and have a great deal on their plates these days. It’s memorable and deeply appreciated when small kindnesses and service are freely given. Consumers really don’t mind paying a bit more in retail stores that offer the kinds of amenities you describe. Makes you wonder why more retailers don’t commit themselves to it, doesn’t it?
Thanks for weighing in, Sharon. Much appreciated.
Trevor,
You raised some important points that my post didn’t. Great insights; thank you. Time is one of the greatest values of all in a harried society. Consciously or unconsciously, consumers weigh the time they are expending in choosing to shop in specific retail stores. As you stated, when purchasing a couple of items, many are inclined to shop the local corner store. When purchasing a lot of groceries, you’re willing to travel further to save more money. Still, I’ll bet you go to the store that isn’t chronically out of stock on key items, has better service, more cashiers, etc. When purchasing high ticket items, most consumers are analyzing their options–more than ever now. If that means traveling further, they’ll do it. And to your point: they’ll likely pay more if parts and service are offered, not only the latest appliances, electronics, etc.
Value perception does matter very much and that perception is shaded by the experiences we have in each retail store we enter. Thanks, Trevor.
Like many here I have about 4 stores I patronize for much of the same reasons that Trevor brought forth.
Although it is far away and I don’t go nearly as often, I love going to Trader Joe’s. I look forward to the experience.
I believe it is because it reminds me of supermarkets in Japan. I love shopping in Japan because they change the labels and goods offered often! There are some oldies but goodies but those companies are always offering something new.
Trader Joe’s offers fewer brands but newer and different brands. It’s an adventurer shopping there. They also nearly always have something on try out. In Japan, a good store will often have 10 things on try out during the peak shopping hours (you might even be able to eat a whole meal there!).
Japanese grocery stores go overboard on customer service and packaging. The packaging we can do without, but the service is nice. I am American and I patronize up to 5 stores in the US but in Japan, I’m generally loyal to one, Aeon.
I couldn’t agree more that the majority of retailers see price as the only “value” consumers are looking for. So how does the consumer enlighten the average retailer, be they regional or national? I find most managers unwilling to stray from the corporate mantra of “lower prices” and that usually leads to less “value” in the other important aspects of grocery shopping (ie. customer service, clean stores, selection). Short of hand-delivering and forcing them to read a copy of your blog, what’s a consumer to do?
No one really wants to visit multiple stores for shopping. If I could find everything I needed at a reasonable price in one place, I absolutely would.
Where I live, we have a pretty decent chain of Kroger’s (grocery store). They have a loyalty card, you get coupons specific to your purchases, and they have a whole lot of everything. Where they fail is charging way over the top prices on non-food items. If you really want me to buy everything at your store, these prices need to be more reasonable.
I’m not going to lie, though. Even if they had fantastic customer service, it isn’t going to save me that extra $2-3 per item so I’ll still go to Wal-Mart for the toiletries.
So, to answer the question, yes, there are things that can be done to promote customer loyalty (like the cards and targeted coupons) but it has to be across the board or I will still shop around.
No one really wants to visit multiple stores for shopping. If I could find everything I needed at a reasonable price in one place, I absolutely would.
Where I live, we have a pretty decent chain of Kroger’s (grocery store). They have a loyalty card, you get coupons specific to your purchases, and they have a whole lot of everything. Where they fail is charging way over the top prices on non-food items. If you really want me to buy everything at your store, these prices need to be more reasonable.
I’m not going to lie, though. Even if they had fantastic customer service, it isn’t going to save me that extra $2-3 per item so I’ll still go to Wal-Mart for the toiletries.
So, to answer the question, yes, there are things that can be done to promote customer loyalty (like the cards and targeted coupons) but it has to be across the board or I will still shop around.
Terri,
You’ve said some good things here, and I thank you for weighing in. Quite right. The Trader Joe’s experience can be categorized as an adventure. There’s always something new and exciting in their stores. Products are carefully selected from around the world and well merchandised.
Whole Foods and TJ often offer great sampling and consumers love that. They also like getting pointers or recipes on how to prepare exotic new food products.
Interesting that the Japanese retailers do that, as well. Your experiences in Japan prove how much great service is worth to the consumer, Terri. Even if it does seem excessive to an American.
Thanks again for adding your POV to this post, Terri.
Great observations and question, Laurie. I think writing to the corporate office of a supermarket chain might be of value. Finding out who the CMO is, if possible, might get more or a response than sending an email to a general customer service mail box. We all know that large chains struggle with customer service issues when spread over a large geographic area. Service tends to be uneven from location to location.
Still, marketers are under more pressure than ever, and the input of consumers probably carry more weight now, as a result. It’s worth a shot, Laurie. Consider sending your favorite food retailer a short letter, expressing your concerns, and copy the store manager. If additional customers join you in this effort, you might see a positive change.
Thanks, Laurie, for weighing in here. I appreciate it.
Sarah,
You’ve raised an important point that no one has yet. The reason many consumers shop around tends to fall into a couple of categories. Either incomplete selection or higher prices in specific categories. Supermarkets work on low profit margins in many categories. Consequently, they try to make more money in non-food categories. Consumers are well aware of this but many will pick up toothpaste or shampoo while in the supermarket anyway. Those consumers consider their time to be more valuable than a few dollars. Other customers, like you, route themselves and go to additional retail outlets to save money. They prefer to give up a bit of their time to do so. On the list of perceived “value”, we consumers rank these things differently.
I do believe most of us shop in multiple retail stores. Many commenters here have proven that and explained their reasons for doing so. Thanks, Sarah. You’ve added to this discussion.
In Los Angeles we have so many different kinds of supermarkets that I’d feel silly only going to Ralph’s. The produce at ethnic markets is always fresher and lower in price. Whole Foods is pretty but I feel like a sucker paying those prices. Trader Joes has unique snacks but I hate how they wrap veggies in multiple layers of plastic.
So the answer? Data mine me and figure out what I want and then be really, really convenient and don’t charge too much.
Hmmm…gotta think about this..
Fascinating discussion, but certainly not a new one. Some care about customer service a lot, some none at all. Some will travel for a few cents, some would like not to bother. IS there another dimension we’re not tapping that would lock our customers in more tightly?
Me? I’m in between. A few things (expensive ones) that I buy a LOT of, like cat litter (old cat, nuff said), I look for that week’s best price. Ditto dog treats, and that bed-sheet-like bath tissue my wife prefers.
Chicken breasts? I wouldn’t know how the price compares. Produce? Whatever. But this just affirms the grocery store’s dilemma. How would I capture the loyalty of a shopper like me? Easy — just have the best price every week on cat litter, dog treats, and bath tissue…and put little TVs carrying ESPN in the shopping cart.. and maybe a putting green in the parking lot. But of course, those things would capture about 12 of us, and not pay back.
Good thing almost nothing really works — keeps us marketers thinking, and keeps those chains ever changing marketers in hopes of finding something that DOES! As Jack Benny used to say, “I’m thinking, I’m thinking…”
Ellie,
Convenience is a bigger and bigger factor for consumers now. As with every customer, you must draw your own conclusions about where to shop based on your own value set.
BTW: I liked your observation about excessive packaging. Just published an article in Shelf Impact, an online packaging publication. In it, I discuss a recent experiment by British supermarket giant Tesco. The retailer encouraged consumers to remove excessive packaging after check out to learn how they could partner with their suppliers to eliminate it. Great idea or what? Hopefully, we can launch similar experiments in our country.
Thanks for weighing in, Ellie.
You’re absolutely right, Mike. This isn’t a new discussion; it’s an ongoing and very important one. Love your sense of humor! When assessing customer needs, retailers have to find those values that appeal to a large cross section of their customers, don’t they? For most people, convenience and service are at the top of their lists. Selection, freshness (if a food retailer), good merchandising, strong pricing and easily accessible locations with plenty of parking are also key considerations. Not sure about a putting green outside. . .
As a marketer, Mike, you know all of this very well. Keep on thinking. But also keep on asking your customers what they like, don’t like and would like to see in your stores. That may generate some of your best ideas ever.
Thanks for weighing in, Mike. I appreciate it.
There are at least two behaviors at play: saving money, and not compromising.
I hate shopping at Walmart and Sam’s but the prices on some things are just too damn hard to pass up when they’re 50% cheaper! I hate the experience but love the prices (on staples in particular).
On the other hand, there are some brands I won’t compromise on. And if I could get what I wanted in my preferred store, I would buy them there. But I prefer some brands (eg Dunkin Donuts coffee, or honey smoked turkey deli meat) that I can’t get at my standard store, so I HAVE to run around. I hate it. If my regular store would add my preferred brands, I wouldn’t have to shop around. The store that figures out how to cost-effectively break the paradigm that special orders cost too much will keep me spending more money on them.
A good many consumers feel as you do, Rice. Thanks for commenting. Just curious: have you ever asked your favorite food store to stock DD ground and/or whole bean basic coffee and honey smoked deli turkey? I’ll bet those items might do very well for the store in general; quite a few customers enjoy both these products. Special orders are problematic for large chains and usually end up frustrating customers unless there’s a strong system in place. . .You might want to request the store stock these, if you haven’t already, Rice.
Thanks for adding your thoughts to this conversation. Much appreciated.