Shopper Intelligence asks the loyalty question

Shopper Intelligence asks the loyalty question

Andrew Arnold, Country Manager – New Zealand, Shopper Intelligence, talks us through the key areas that convenience retailers should focus on in order to retain shoppers.

It’s the age-old question – how do I get more shoppers through my door, and how do I keep them coming back? This question is relevant across the whole spectrum of channels, banners and industries, but for the purposes of this article I’m going to focus on the convenience channel.

There is work to be done in convenience to drive loyalty

The starting point for this discussion is simple – is the convenience channel doing a good job at the moment in driving loyalty? We have a few metrics that can answer this question, with the first port of call being satisfaction. Overall, the satisfaction of shoppers is trending downwards. We survey almost 6,000 shoppers annually in the convenience channel and they are telling us that they are less satisfied with their shopping experience than they were 12 months ago. There are some key reasons for this – price (or perceptions around price) is always going to be an issue and is unlikely to go away anytime soon – and we will address that later on, but that is the first indication that there are improvements that need to be made to retain shoppers.

A more concerning metric is ‘Walking Away’. More than half of shoppers (55%) plan to buy what they want before they even enter the store. This is much lower than what happens in other channels like grocery (70% of shoppers in that channel plan what they are going to buy) but is still a significant number. These shoppers know what they want before they go in. They likely have a favourite brand or repertoire of brands, it’s possible they will switch between categories (for example, they planned on buying a chocolate bar but settled for chocolate biscuits) but by and large they know what they want and seek it out in the store. A question we ask shoppers is, what would you do if your first choice was not there? More than half (53%) say they would do something that constitutes what we describe as a ‘Walking Away’ action. Let’s say that figure of 53% is 53 people. Eleven of the 53 will buy a different category, which is our switching from chocolate bar to chocolate biscuits example. Five of the 53 will defer purchase to the next time they are in the buying mindset. That could be in your store, but it could easily be in someone else’s store too. Sixteen of the 53 people will buy nothing at all. That is a lost sale. But the largest chunk by far is the 21 out of 53 people who say they would go to another store entirely to make their purchase. Not only is that a lost sale for this particular item, but what if their experience in that different store is better, and they do not come back?

The role of price – focus where it is meaningful

The question of price is always going to be a factor for shoppers regardless of channel, and convenience is no different. Route to market will always be a limiting factor for price and shoppers in general will not be aware of the reasons behind it, hence it is important to ensure that value is emphasised over price competitiveness with other channels. It is also important to use specific categories to drive price messages – where promotions are key, highlight those categories but don’t worry about pushing promotional offers in categories where shoppers place less emphasis on them. For example, shoppers of natural health drinks, iced tea and energy drinks place significant importance on good deals, while shoppers of packaged bread, water, mints and gum are far less concerned with a good deal. A strong energy drink promotion will be more useful in driving a positive price message than a promotion on bottled water.

How much shoppers are aware of price in a particular category is also important in driving the right price message. Shoppers in general claim to have a reasonable level of knowledge about what they pay in any given category in convenience, but this will vary by category. Knowledge is claimed to be particularly high in categories like energy drinks, hot coffee and liquid breakfast. For categories in this bucket, any movement in price is likely to be noticed and pricing hierarchies need to be clear. At the other end of the spectrum are categories like single serve ice cream, fruit juice and chocolate bags. Shoppers here have limited price knowledge so movements will not be as obvious. It also makes less sense to use these categories to drive price perceptions as they just will not have the same impact as a price movement in hot coffee will.

Dial up non-price messages

Outside of the ever-present price question, where the channel has the most room for gain is in innovation, authenticity and premium. Shoppers want more from these areas – over the past five years of research on the convenience channel we have seen a significant increase in the level of importance shoppers give to these three factors. Put simply, five years ago these three factors were little more than background noise, but this is no longer the case. Unfortunately performance in these factors largely does not meet expectation.

What this tells us is that shoppers are looking more for an experience in convenience. Yes, there will be categories where dialling up an experience over facilitating an efficient transaction doesn’t make much sense – chocolate bars are a logical example – but there are plenty of categories where this could be done. Hot food, sandwiches/wraps and nutritious snacks are all examples of categories which have had their in-store presence significantly improved in recent years and now form the anchor of many convenience offerings. Other categories can also benefit from this kind of treatment, for example packaged bread and iced tea have a gap between expectation and delivery in innovation, while liquid breakfast and chips have a gap between expectation and delivery in premium. The recent BP launch of new format stores is a great example of taking this concept and running with it, through bringing a new premium and innovative approach to existing convenience categories while also introducing new categories to the mix.

A vital channel with a clear reason for being

While it’s clear there are some key challenges for the channel from a shopper perspective, it should not be ignored that the convenience channel plays an important role and has done so for many years. It fills a gap that traditional grocery has not focused on in the past, and even though the big supermarket players continue to experiment with convenience offers it is unlikely that the convenience channel will disappear so long as the innovation pipeline is strong, and stores evolve their offer according to shopper needs. We have already seen encouraging signs of this out in the market in recent times and hope to see more as we move through 2021.

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