How do you reward loyalty in an age of disloyalty? Look beyond discounting and price smart
Today’s shoppers are a notoriously disloyal bunch. And where loyalty does exist, this is increasingly for low-cost in-store experiences. With the proof in the pudding being Aldi’s announcement yesterday that it has recorded a 65 per cent rise in pre-tax profits.
Supermarkets need to look beyond discounts, writes George Webster
Research conducted in July showed that, on average, shoppers used over five retailers across three channels each month to meet their grocery shopping needs. Conducting price comparison research before each click or lured by the discount prices offered at Lidl and Aldi, the ‘swapper shopper’ knows every trick in the book to snare the most bang for their basket’s buck.
Curiously, in spite of their overarching objective to raise basket value – be that online, in-store, or over a shopper’s lifetime – it is the supermarkets themselves that are breeding disloyalty through obsessive price matching. Everyone’s doing it. The trouble is, that’s exactly the turf that low-cost chains want you to play in – and they will always win on that count.
One solution is to play outside of the price-tag territory. Make it harder for your price-savvy customer to compare prices by offering unbeatable value during the shop. This entails being strategic about price cuts and bundling in a way that feels like fantastic value, which of course it is. Be transparent on entirely your terms. Marks & Spencer has nailed this strategy, its Dine In for Two deals now competing with restaurants to woo the commuter dining market.
The challenge, then, is to recreate this approach for lower ticket items in an equally tempting way. Bundling around events is one path, say offering premium beer with gourmet crisps for a limited time around key moments in the football calendar.
Digital is critical to offering the aforementioned unbeatable value. This begins with creating a registration process that is a joy rather than a chore. Ocado is often cited as best-in-class for personalising an otherwise arduous procedure, but the opportunity exists to go further, engaging in a way that both piques customer interest from the off and digital CRM that cements relationships.
Making smarter use of data is crucial to reward customers for their loyalty, offering regular shoppers unbeatable deals on bundles of the higher margin products you know they love. In this way, you can demonstrate unbeatable value during the shop as opposed to afterwards with the receipt.
Be thoughtful; delight and surprise customers mining data to offer choices that are genuinely personalised, not merely price-based. Take a leaf from Graze, a pioneer in this arena with its sample sets. Notice what people buy and suggest bespoke items. When delivering wine, why not offer samples of ideal complementary nibbles they can buy at next purchase?
Subscription models are another growth area to look to. With everything from toilet roll to dog food now available on subscription, how long before we start to see more supermarkets take the lead? Such niche subscriptions service specialists, whose business models rely on loyalty, may start to look attractive acquisition targets to supermarket chains looking to expand.
Today’s discount-driven shopper mindset naturally presents a new challenge for rewarding loyalty. Fortunately, digital presents us with a plethora of ways to boost basket value in the way that offers the most incremental benefit – over the customer lifetime. Using data to join the dots and delight customers is challenging. But doing so will help breed loyalty in a space that low-cost stores can’t hurt you in.
Savvy supermarkets must look beyond discounting; it’s time to price smart.
George Webster is content director at Critical Mass