Food Retailers Leveraging 'Economics Of Experience'
Given the frequency and share-of-wallet owned by grocery retailers, this retail segment is on the front lines when it comes to the impacts of changing consumer behavior and expectations.
And grocery retailers, facing commoditization and intense cross-channel competition, early on grasped that delivering the right experiences to their shoppers is a critical differentiator and highly effective strategy for growing their top lines and maintaining margins, according to a new PwC report, “Experience Radar 2013: Lessons from the U.S. Grocery Industry.”
Grocery is the testing ground or learning place “for all industries to figure out how to use meaningful experiences to create a path to loyalty and price premiums,” says Paul D’Alessandro, U.S. customer impact leader for PwC. “Smart grocery retailers are exploiting the hard economics of experience.”
Specifically, leaders in this retail sector are investing in experience initiatives that produce immediate returns, but also in initiatives that yield financial returns over time by ensuring positive, accumulative experiences that build loyalty, differentiation and willingness to pay more for that retail experience, D’Alessandro tells Marketing Daily.
The key to successfully leveraging experience, says PwC, is understanding what really matters to specific consumer segments -- segments defined not just in traditional demographic and geographic terms, but by the experience features that they most value, their social demographics and their behavioral profiles.
That’s the premise of PwC’s Experience Radar offering, based on a series of studies that measure the experiences of U.S. consumers (about 6,000, this year) across multiple industries. In basic terms, the service identifies and ranks what experiential elements are valued most by specific segments within a given industry, which elements they’re willing to pay for, and which trigger loyalty or its reverse, “churn.”
Different consumer segments have different “recipes” for experience, and one of the biggest mistakes a retailer can make is “over-investment in areas not part of the ‘recipes’ of their customer bases,” maintains D’Alessandro. “Investment must be focused on what your customers want, need and truly value.”
In the grocery sector, PwC identifies four distinct consumer experience profiles: experiential, traditional, mindful and frugal. But other retailers, and consumer
product makers, stand to benefit from understanding two sets of core learnings from the grocery industry, PwC says.
First, the five core attributes of the grocery customer experience are quality (performance and value received); support (friendliness and ease of obtaining help); convenience (including ready, anytime access); presentation (aesthetics, arrangement of offer); and community (customer’s personal brand and connections with others).
Second, the report defines the five areas of focus that have been shown to enhance customer experience and create value in the grocery environment:
*Make it fast: Convenience matters – in fact, it’s the second most important influencer of purchase among
grocery shoppers (28% of grocery customers report that they purchase based on convenience, while 37% report purchasing based on price). And in grocery stores, convenience first and foremost mean short
checkout times. Fast checkout times account for 30% of “memorable great experiences,” according to PwC.
In addition to ensuring adequate checkout staffing, retailers need to inform customers about checkout times and wait times, and enhance convenience with mobile checkouts and coupons that let shoppers check out on their own via smartphone apps and staff handheld devices, says PwC.
*‘Emotionalize’ shopping: Creating relationships with customers by evoking positive emotions based on what they care about. Consumers
embrace brands that reinforce their lifestyles, says PwC. For example, retailers that offer expanded organic and sustainable products are attracting the rapidly growing number of consumers willing to
pay a premium for such products.
Also, with 10% of premium customers willing to pay for a storewide discount loyalty program, investing in robust loyalty programs is essential. But there’s a critical codicil: Reward programs must be targeted and carefully designed. “These programs and the customer data they yield should be used to understand exactly what the experience ‘recipes’ of a retailer’s core customer segments are,” in order to maximize spending and retention among loyal customers, and to attract new customers or increase the shopping frequency of infrequent shoppers at a specific retailer, says D’Alessandro.
Loyalty programs that indiscriminately offer loyal customers coupons or promotions on items that those shoppers likely would have purchased at the store anyway can end up “giving money away,” adds John Greener, managing director of PwC’s U.S. Retail and Consumer Sector.
*Balance high-tech with high touch: Promotions and tech draw customers, but staff quality is the most important factor in determining grocery retailer preference (as opposed to “purchasing influencers”). Staff quality influences where customers shop one-third of the time, reports PwC. Grocery shoppers highly value employees who are polite, helpful and efficient and deliver “engaging experiences.” While high-tech self-checkouts are essential, some customers feel more at ease with conventional methods, and will pay a premium for attendant checkout to avoid technology difficulties.
*Avoid ‘spoil’ (bad customer experiences): More than two-thirds of shoppers report having had bad experiences of some kind at a grocery retailer (disappointing service, products, cleanliness of store, etc.) – and two in five never return after a bad experience. Many don’t provide feedback to their grocers, but are quick to warn their social networks. PwC stresses the importance of incentivizing customers to provide direct feedback, as well as creating a vigorous social media strategy to “listen hard” to customers, and implementing systems to quickly resolve issues. Retailers should have a thorough, well-promoted “service recovery strategy” that includes a “catch-all” returns policy.
*Empower customers to make satisfying choices: While 20%
of shoppers rank product selection as a top purchasing driver, consumers are also confused by extensive assortments, inundated with product information, and seeking ways to make easier shopping
decisions. For instance, growing numbers are willing to invest in ‘green’ products, but frustrated by how to determine the true sustainability value of products making such claims, notes
Retailer solutions: Investing in labeling programs that help customers cut through the clutter of conflicting information; establishing your retail brand as a trusted, go-to resource by offering recipes, nutrition tips and advice to create stronger relationships; and offering new-product samples in-store to let customers try them with no risk, as well as making it easy for customers to return new products if they’re dissatisfied.
The full report can be downloaded from PwC’s U.S. retail site.