Guidance for 2015: How to strengthen connections with today's shoppers

Guidance for 2015

How to strengthen connections with today’s shoppers It’s time to rethink price, assortment and service.

March 2015 By Bill Bishop, Chief Architect Brick Meets Click

GUIDANCE FOR 2015 2

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www.brickmeetsclick.com © 2015 Brick Meets Click

Connecting with today’s shoppers is not a technology problem – it’s a leadership challenge.

There’s been so much focus on ecommerce and the latest technology in the media

and in retail that it’s easy to think that’s the key to future success – but a far more

important change is taking place in the background, and this change is driving all the

others: Shoppers have significantly changed the way they engage with retailers. If

we don’t understand and respond to THIS, no amount of digital tech will save us.

Retailers often react to this message by explaining they have no extra capacity

available to handle this challenge. “We were all struggling to keep up even before this

arrived on the scene, now we have to rethink our talent, our facilities and our plans –

that’s a lot to take on.” True perhaps, but now more than ever, we need to think

through how the entire business needs to change to serve today’s shoppers as they

redefine value in three key areas of retailing: price, assortment and service.

If you don’t ask the right questions, the answers won’t mean much.

This guidance points to three of the “right” questions. They will focus your thinking on

the changes in shoppers instead of the changes in technology.

“Management is

dealing with

complexity.

Leadership is dealing

with change.”

Chris Butler

Chief Operating Officer

Newfangled.com

GUIDANCE FOR 2015 3

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Contents

PRICING > PAGE 4

Traditional pricing rules no longer apply.

How do you differentiate when you can’t depend on price? ASSORTMENT > PAGE 7

Personal supply chains are disrupting mass market models.

How will you become part of your customer’s personal supply chain?

SERVICE > PAGE 10

Demand for difference beyond product and price is growing.

What meaningful service choices will you offer your customers?

GUIDANCE FOR 2015 4

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VALUE REDEFINED > PRICING Traditional pricing rules no longer apply.

TODAY’S SHOPPER IS EMPOWERED

“I can look across a nearly unlimited selection of

retailer/vendors to decide what price I want to pay

for an item before I ever look at an a

d or step into a physical or virtual store to make the

purchase.”

> WHAT THIS MEANS FOR RETAIL

Retailers can no longer depend so heavily on

just price as a way to signal value to customers.

They must find other ways.

GUIDANCE FOR 2015 5

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VALUE REDEFINED > PRICING

QUESTION #1

How do you differentiate when you can’t depend on price?

Today, price setting is more like making an offer than setting a firm price, since low

price has become a relative term. Price transparency has made it harder to identify all

the players that now make up “the competition.” A more complete and balanced

customer value proposition will deliver prices that are “not that different” from other

retailers, but also superior service, quality, assortment and/or shopping environment

to customers.

Does this work?

Recent Nielsen research supports the effectiveness of this approach with hard

numbers: Retailers with higher brand equity scores captured a greater share of

customer spending than those with lower scores. In other words, fair prices, plus

other types of value, produced measurably greater shopper loyalty and correlated to

greater share of wallet.

QUESTION #1

How do you differentiate when you can’t depend on price?

http://www.nielsen.com/us/en/insights/news/2014/in-us-retail-brand-equity-drives-where-consumers-fill-their-baskets.html

GUIDANCE FOR 2015 6

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VALUE REDEFINED > PRICING

POTENTIAL RESPONSES AND STRATEGIES

Shift the focus from item price to purchase incentive. For example, buy this

product and save X amount on a gallon of gas.

Create subscriptions with fees that reflect savings for long-term purchase

commitments like quarterly or annual contracts.

Highlight the savings opportunity of “own brand” products. Boldly compare

price per ounce on products with comparable quality to promote “best

value.”

Limit the “best price” offer to high value customers. Use loyalty programs to

reward high value shoppers, and only high value shoppers, with the best

price.

Offer unique products that can’t be easily compared on price.

GUIDANCE FOR 2015 7

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VALUE REDEFINED > ASSORTMENT

Personal supply chains are disrupting mass market models.

TODAY’S SHOPPER IS INTENTIONAL

“I don’t have to settle for what’s on the shelf. I’m

going to find a solution that fits my individual

needs better. If you can’t help me, I’ll get help

elsewhere.”


Intentional shoppers are combining physical and

virtual stores to create personal supply chains

that are disrupting mass market retail models.

GUIDANCE FOR 2015 8

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Intentional shoppers are causing greater market fragmentation, but the opportunity here is that

they are opening the way for retailers to engage in hyper-segmentation.

The capability to identify more finely detailed market segments (and often over wider geographic

areas) is becoming increasingly accessible thanks to new data tools, and that’s making it possible to

focus on narrow sets of shopper needs and aggregate enough business around them to make them

profitable.

Seeking success in niches will probably feel foreign at first. Many retailer processes are organized

around the mass market thinking that was so successful in the 70s, 80s and 90s. At that time, the

strategy was to look across all of your stores and develop a solution that worked pretty well in most

of them. Average doesn’t have the same appeal to today’s intentional shoppers.

Moving forward, retailers need to build their competitive strategy with an explicit recognition that

customers have and will continue to select and deselect different stores/vendors for certain

shopping missions and for the purchase of certain classes of products.

QUESTION #2

How will you become part of your customer’s personal supply chain?

GUIDANCE FOR 2015 9

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Develop “destination categories.” Identify a proven portfolio of product categories that serve

as a “destination” for your target shoppers. Sometimes this means a broader category

assortment, at other times it may mean bringing in unique or hard-to-find products.

Upgrade to category management 2.0. Make sure you align your category and merchandising

tactics with the needs of your targeted intentional shoppers.

Opportunity gaps need to reflect total spending patterns – not just those traditionally

measured in the conventional geographic trade area.

Base pricing and assortment decisions on the importance of the category to your target

customers

Focus more on HOW you sell. Authenticity is often important to intentional shoppers, and they

seek out retailers/vendors who reflect the way they want to look at their choices.

Showcase your products online by telling stories about how they are made and where

they come from. Offer customer reviews and ideas for how to use them.

Make the product content appealing and easily accessible by using food photography

and other visuals to convey messages that can’t be easily communicated in words.

GUIDANCE FOR 2015 10

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VALUE REDEFINED > SERVICE

Demand for difference beyond product and price is growing.

TODAY’S SHOPPER IS DEMANDING

“I expect you to offer me a range of choices so I can control the

experience each time I interact with you, like I do in other areas

of my life.”


Now that shoppers have such abundant access

to products and prices, many are shifting attention

to HOW they want to be served.


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VALUE REDEFINED > SERVICE QUESTION #3


For many retailers, service was a standard that could be defined, promoted and delivered. (“We carry out

your groceries every time!”) Today, shoppers’ service choices have expanded enormously. For instance:

Do you want delivery service in an hour? Two? Tomorrow? Want to pick up the order instead? Or

subscribe for regular, automatic delivery?

To order pizza via an app so you can take as much time as you need to make your selections?

To have a fee-paid delivery membership that includes extra perks like unlimited TV and video

streaming?

Experiences like these are raising shopper expectations everywhere. Millennials especially seem to expect

this array of choices, but other age groups enjoy access to the benefits as well.

In the past, retailers defined themselves primarily with a product/price strategy. Now, however, they can

and should add service choices for two reasons: 1) To help insulate themselves from margin pressure

generated by increasing price transparency, and 2) To expand the richness of their customer value

proposition beyond just price.

The key is to identify where costs can be added that customers will perceive as adding value that’s “worth it.”

QUESTION #3



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VALUE REDEFINED > SERVICE


Research which service choices are appealing to your target shoppers.

Quickly deliver those additional service choices by leveraging mobile devices.

Generate value by adding service options, such as cooking classes, that customers

can purchase when desired.

Promote both new and underutilized existing service choices (like the expertise of

in-store dieticians, for example).

Build both service and product preferences into loyalty/CRM programs.

The main threat will come from competitors who have the ability to expand service options

and begin to steal market share “under the radar.” Some of this is already happening, as

online retailers like Amazon us their extensive understanding of product attributes to

segment and personalize offers, which is an important service enhancement.


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At Brick Meet Click, our roots in retail run deep, especially in grocery. We

combine a lifetime of experience in food retailing with a tight focus on how

today’s shoppers are changing. Our clients include a wide variety of

retailers, suppliers and technology providers.

Leverage our professional offerings, insight and guidance to:

> Achieve faster growth. Ask the right questions so you’ll find the right answers.

> Deliver improved shopping experiences. Shoppers have significantly

changed the way they engage with retailers. You need to understand

and respond – we can help you gain clarity about what to do.

> Evaluate online dollar opportunity. Be smarter - identify sales gaps

and outline a sales strategy so you realize the full growth potential of

the channel.

To learn more, contact: Steve Bishop at 773.832.1658, or

[email protected]

We’re here to

help you find

new growth

opportunities

in today’s

changing retail

environment.

Business

Guidance for 2015: How to strengthen connections with today's shoppers