We are in a world that looks very different from how anyone might have expected it to 12 months ago. Many of the ways in which retailers and brands would previously have sought to engage with consumers aren’t possible anymore and it is hard to understand what to focus on now.
At the start of 2020 there were already challenges to shopper’s loyalty to both brands and the main FMCG retailers. The well-documented rise of the discounters was showing no signs of slowing as they evolved their offering to include well-known brands alongside their standard own brand offering. The transparency afforded by an online world meant it was easier for shoppers to compare prices and deals, and whilst the online channel was strong, its share of the grocery market was fairly stable at around 6 percent.
Then the pandemic hit, with almost no area of our lives left untouched. Availability of stock became and is threatening again to become, a national obsession as people bought up essentials and were more concerned with what they could get than which brand it was. While the reality of panic-buying was less common than the media had us believe, it was true that most people bought a little more, a little more often, as they worried about what was going to happen.
The national lockdown that followed created even more change to shopping habits. Before COVID-19, on average people would buy 83 percent of their shopping from up to six different places. In lockdown people started to buy everything from the same place, either to limit the number of times they went out or to make the most of the coveted online delivery slots. They also bought more as all meals and snacks became consumed at home for the first time, and people tended to shop in different places, either a more local supermarket or smaller shops to avoid queues.
The hard lockdown has, at least for now, substantially eased but it isn’t back to normal for retailers and brands. New shopping habits have been forged during lockdown, many tried something different for the first time – whether that’s online delivery, a different retailer or brand – and liked it. It is also not possible to rely on the same levers as before: sales promotions have been substantially reduced to discourage bulk buying and there are still maximum basket sizes in place with some online retailers. People’s attitudes and behaviours have changed, but in a very individual way. A much more personal approach is needed to succeed in this new environment with a clearer understanding of individual needs.
One benefit of lockdown shopping is that, for the first time, it has been possible to get a whole basket view of FMCG purchasing. We can use this rich retailer data to move beyond the traditional approaches to segmentation such as age, gender, marital status etc to a much more individual understanding of consumer needs and motivations.
A detailed segmentation is the key to unlocking loyalty in the new world and there are various ways to tackle this, for example lifestage, basket type and behaviour. By looking at the shopper’s lifestage it’s possible to identify opportunities for tactical targeting such as understanding the differing needs of households with babies or teenagers. Examining shopping trends can reveal where in their loyalty journey the shopper is, this means that campaigns can be targeted to reward loyalty at one end of the spectrum or to encourage it at the others. Understanding the shopper’s basket type can help to reveal the reasons for each trip by looking at the categories present in that basket and understand opportunities to upsell. Once basket types have been looked at, it also becomes possible to identify shopper types based on what they buy, for example experimental or price savvy.
By using this data to create predictive algorithms, it makes it possible for retailers to create hyper-targeted marketing approaches that are personalised to each shopper. It is this ability to predict behaviour and not simply react to it, which is critical to building shopper loyalty and IRI has identified six different levers that can be used.
- Cross-selling: By using look-alike consumers, it is possible to reveal categories that a shopper isn’t currently buying but probably would be interested in and so make an offer that they will be responsive to.
- Up-selling: For a shopper who is buying a private-label version of a product, offering a deal on a more premium product at the same price might encourage them to try something different.
- Revenue loss management: A key indicator that a shopper might leave is when they stop buying a specific category, for example fresh meat which means other products might follow. Making the right offers at this time could halt or even reverse the decline in competitor spend.
- Churn: The old loyalty model would identify a lost shopper after a set number of weeks as defined by the retailer, but by taking a more individual approach and understanding how a particular shopper behaves makes it possible to react to this much faster.
- Reward and retention: Reward loyal shoppers and show that they are valued, for example free samples.
- Brand/Category retention: This allows us to identify people who we believe will be responsive to a new category or willing to try new products.
Social distancing continues to impact shopping, with shopper number restrictions still in place in some stores although this is far less than a few months ago. For some of us, the enjoyment of browsing in shops has gone and with concerns over safety, many shoppers are reluctant to spend too much time in store or pick up and try new products. Retailers need to take a much more personalised approach if they are to reach their target audience now.
Insight alone is not enough in a market that is moving so fast. Predicting future needs, moving with pace and showing empathy is the way to improve the shopper’s experience now and regain loyalty for the future.