Do shoppers care?

A thought piece on increasing customer spend

Introduction
Delivering a superior transactional experience is a key (but not the only) strategy to create competitive advantage and increased revenue from higher rates of basket conversion and higher spend per customer.

However the dynamics that drive customer choice between retailers include not just the experience: price and promotions, range and availability will be equally or more important. The relative importance of these will vary across customer segments (however these segments are defined) and shopper missions. In the future these will be delivered in a highly personalised way.

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Five Core Needs
Customers differentiate their on-line experience across five core needs:

  • Easy to find ‘my’ products
  • Minimise check-out time
  • Easy for me to find bargains
  • Inspire me to buy outside my everyday repertoire
  • The delivery experience (time slot, punctuality and substitutions)

Within grocery, Tesco has a superior customer experience versus competition (Source: Radical and Tesco) and this leads to increased spend per customer (Source: Kantar World Panel 2011). For example annual on-line spend per shopper in Tesco is £1190 versus £764 for Sainsbury’s.

The Holy Grail is a differential experience that is highly personalised to the individual. Behavioural targeting is predictive: different ads/content/promotions/even pricing are served depending on an individual’s profile in order to increase relevance and thus click-through and/or stickiness.

In the retail sector, how are customer journeys changing and evolving?
Within the retail sector, customer journeys are evolving significantly but differently according to category but fundamentally, we are not seeing new behaviours but the facilitation and enhancement of deep-rooted actions.

In a category such as electronics, the starting point for customer journeys is still invariably natural and product search, the consumer seeking a route along three paths: recommendations and reviews, price comparison and, to a lesser extent, direct to retailer. In grocery, the bulk of entry points are now direct albeit with a low but increasing intervention of price comparison sites such as mysupermarket.com. However that direct route may have other touch points further back including digital campaigns, social media, blogs and forums, digital couponing and offers (via e-mail, mobile and social) and other marketing activity.

In the home there will be more devices and screens that will allow the shopper to collate and order with the minimum of fuss.

However, shoppers continue to use the same decision trees in their path to purchase of brands whether off-line or on-line.

We are seeing the emergence of social/group buying through mechanisms such as groupon.  Brands will have to understand how to sell to groups. They might need to start creating niche products. Group buying though is unlikely to be a major player in grocery.

A significant change is the use of the smart phone, apps and tablet as the pre-eminent device to search, understand, check and buy. This allows these activities to take place not just at home or on the move but in the bricks and mortar environment too (where information and price-checking can be done via QR codes for example.) And the best retailers and brands will have a symbiotic relationship where both ‘pull’ and ‘push’ mechanisms will be in equilibrium; where geo-retailing will be personalised and relevant.

But the fundamental change and evolution is that individuals will start to create, formalise and personalise their own ecosystem where their journeys take place. For brands and retailers will have to offer real value to ensure they become part of that ecosystem. In short this means that relevant added value will be critical; they will have to be seen to be useful; they will need to be active.

This will mean that retailers will have to come to the customer and not the customer come to the retailer.

Our penultimate point is the importance of gaming and entertainment within this eco-sphere to a group that is maturing. Not for all shopper missions but ones that are complementary to the activity.

The journey is not becoming more complex. All that the consumer is demanding are two things: I want to be more informed and I want the experience to be as simple and as painless as possible.

Graham Thomas, Digital Economy Director, IORMA 

For a FREE copy of this report, please e-mail: info@iorma.com