As consumer wallets continue to tighten amid increased financial uncertainty, grocery retailers face a challenging outlook.
In the UK, 76% of consumers report that rising food prices are a significant future concern, according to a recent study by Deloitte. Alongside this concern, consumer trust in brands is also decreasing, with 63% of UK consumers believing that companies are taking advantage of their consumers as they increase their prices, writes Becki Francis, Director of Retail Strategy at Movable Ink.
As a result, many shoppers are flocking to discount chains. In fact, Lidl was reported as the fastest-growing retailer between March and May this year, with sales up 6%, marginally ahead of Aldi, which increased sales by 5.8%. Inflation is creating more value-conscious and fickle shoppers, making them more prone to shop around to get the best value for their money.
In the face of challenging macroeconomic conditions and changing consumer behaviours, grocers are reinvigorating loyalty programmes in order to demonstrate value to their customers and maintain market share. Here are three learnings that brands should consider as they adapt their loyalty schemes to address the ongoing market volatility.
1) Accruing points is not a strong-enough incentive, as basket sizes decrease
Not only are grocery shoppers trading down for cheaper products, with 23% of UK shoppers trading down for cheaper products from the same retailer, according to a recent survey by GlobalData – they are also shopping more often for fewer products.
In line with this trend, grocery retailers should look to engage price-conscious consumers and counteract declining basket sizes by offering real, immediate value from their loyalty programme.
Loyalty programmes, like the Tesco Clubcard, granting members more affordable prices from the moment they join, are good examples of what moves the needle and represents an immediate win for customers.
In addition, enabling shoppers to pre-plan by giving them the tools to do so is equally important. Shoppers are less likely to shop spontaneously, which is why tactics like highlighting valuable offers ahead of time can be helpful – on their app, via email or SMS notifications. Offering shoppers the option to select delivery as well as collection slots also allows shoppers to plan ahead for the week.
There are plenty of other ways retailers can immediately alleviate the effects of inflation through loyalty programmes, like offering members ‘price locked’ offers, digital coupons or cash-back offers.
2) Recognising convenience as a primary driver of online grocery shopping preference
It’s not just about basic safety with COVID precautions anymore – not surprisingly, convenience is now the primary driver of online grocery shopping preference. Digital allows consumers to shop on their schedule, save time and energy instead of having to go to the store, see a greater assortment of products, compare, and find better prices/promotions.
These conveniences will be key for shoppers as they continue to feel the squeeze of tightening economic conditions. In fact we may already be seeing another shift in behaviour: with pickup growth outpacing that of delivery in May, price-sensitive shoppers may begin to opt for pickup over delivery as a way to cut costs.
Brands should also prioritise reducing friction in the purchase journey by serving information upfront and offering the consumer flexibility in payment options (especially when it comes to opting in for offers, cashback, or using points as payment). Faced with plenty of options by competing brands, there is a growing impatience for time-consuming payment options or confusing member benefits. For this reason, retailers must provide a seamless experience if they want to succeed or risk driving their customers elsewhere.
It is therefore also key for loyalty programmes to tailor their offering to offer optimal convenience for the customer. Waitrose, for instance, enables their members to save on their most-bought/favourite items through their myWaitrose personalised vouchers. This not only fosters a better immediate and convenient shopping experience (making their decision-making process easier), but drives lifetime value for customers – a win-win for both the customer and brand.
3) How relevance is key, and personalisation is not just a ‘nice to have’
According to Movable Ink’s Audience of One 2022 survey, ~40% of consumers hit the unsubscribe button in response to receiving irrelevant content. It is, therefore, crucial to curate a personalised experience for shoppers or brands risk disappointing their customers and ultimately losing them to competitors – especially when personalisation is not doing well.
The correlation between personalisation and loyalty expands to consumer trust. In the same survey, nearly half (44%) of UK/Ireland consumers reported they would be more likely to trust the brand that sent them personalised communications. Over two-thirds (68%) of consumers said they are likely to be a loyal customer and purchase more of a brand’s products if they’re engaging and building personal relationships with them.
Online shopping isn’t just a transactional convenience. Large numbers of households, for instance, have been feeling burnt out by cooking at home following the height of the pandemic. This is why shoppable recipes have become more popular as people look for inspiration to mix things up. These can be personalised not only according to shopper dietary requirements and preferences, but also according to the season.
Recipes, educational, and inspirational content are critical to delight customers and give them some respite from the doom and gloom of current affairs. As consumers dine out less due to looming economic fears, consumers will look for, and expect, this type of content.
To achieve the next level in personalised promotions, grocers should take a true “customer lifetime value” approach: where customers are notified of the right offer at the right time, with the right message and the right discount, through the right channel.
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