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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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ABOUT THE AUTHOR

Ted Mininni is president of Design Force, Inc. (www.designforceinc.com), a leading brand-design consultancy to consumer product companies (phone: 856-810-2277). Ted is also a regular contributor to the MarketingProfs blog, the Daily Fix.