Retail trends since the Great Recession have delivered a substantial shift in spending patterns. What has come to be known as the “Retail Apocalypse” is really just a shift towards value shopping channels, and even as well-known chains suffer notable closures, value chains like Dollar General and ALDI are seeing record growth. Not only that, a recent Nielsen study shows that those discount retailers are seeing a new demographic in the affluent segment, with heads of household under 25 who earn at least $100,000 a year increasing their Dollar Store purchases by 7.1 percent, nearly double all other retail stores.
This trend, together with the proliferation of smartphones and the ease with which consumers can comparison shop, has presented some unique challenges for businesses in identifying and targeting these value shoppers.
Understanding the value shopper
Retail is, above all else, data-driven, and a retail go-to-market strategy begins with gathering and understanding that data, and then leveraging it to better understand the customer and how to deliver the value they seek. Tactics like shopper discount cards, now common in major grocery outlets, gather useful information on buying trends and preferences, along with demographic information that can be used in targeting.
This type of information-gathering will only gain more steam, especially as major retailers take a page from Amazon and Kroger in implementing smart shelves and smartphone-driven checkout. The Amazon Go store for example, is a cashierless pilot store which allows shoppers to scan items with a smartphone or store-issued scanner as they put them in their shopping carts, and then simply walk out of the store. The totals are automatically tallied and taken out of the shopper’s account. Kroger has released something similar with the Scan, Bag, Go application, initially rolled out to over 400 stores. The usefulness and convenience of these apps do a lot more than just let customers avoid the checkout lane. They gather much more detailed and granular information than shopper discount cards.
Value-oriented marketing and package design
Research from Mindshare North America shows that 47 percent of millennials purposefully leave items in their shopping carts so they’ll get a promotion from the retailer; 64 percent wait to buy something until it goes on sale; and 70 percent search for promo codes online before purchasing.
When you look at today’s largest demographic of online shoppers, it becomes clear just how price sensitive they are. Millennials will go to great lengths to ensure they pay the lowest price on the market. Designing for value customers requires action on three fronts: packaging, pricing, and marketing. Packaging – often the domain of the CPG manufacturer rather than the retailer – is essential, and value retailers tend to have significant pedestrian traffic, and packages that are too large will miss out. Downsized packaging with special branding, such as P&G’s “Essentials” sub-brand. Packaging must also reflect functionality and storage benefits.
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The packaging also works with the marketing component of this triad of success, and panel communication is essential. On the retail side, traditional print and television advertising may be less important than digital advertising, and working with third-party value sites. Value shoppers will comparison shop between retailers’ websites, but they will also look deeper for value by going to third-party sites for additional discounts. Restaurant-goers may not go to the restaurant website first, they will go to Groupon to find a bargain. Shoppers looking to make a purchase from a major retailer will go to Promocodes.com first to find discount promo codes before buying on the retailer’s website. Retailers planning on a value campaign will work with these third-party sites as well as paying attention to the value being portrayed on their own websites.
Value buyers still want good customer service
The value of customer experience is more important than ever, particularly with the influence of social media, where a single poor experience can destroy a small business. This too, requires a careful balance, especially in the value category. Customer service though, does not need to be human resource intensive, and younger consumers often prefer either self-service or computer-directed options over a purely human experience – thus the attraction of the Amazon Go and Kroger Scan Bag & Go options.
Delivering that service may depend heavily on leveraging those automated options at the checkout, be it virtual or brick-and-mortar. But first, it requires a detailed segmentation of the customer base. Every customer has value – but how much value is the real question. Service, whether delivered by human or computer program, is still a limited resource, and allocating it requires a careful plan, and gaining a deeper understanding of which category of customer has the greatest potential for growth and profitability.
Beyond the numbers
Additional tactics like price matching can also be a compelling marketing tactic, although this too must be firmly rooted in data so as not to shrink margins below an acceptable level. Price matching may be difficult when competing against larger retailers which have more buying power, a more effective strategy may be to simply focus on the combination of customer service, delivering value, attention to packaging, and gathering as much data about the customer as possible.
If you want to reach comparison shoppers and consistently reel them in, you can’t take any shortcuts. In fact, it’s necessary to pull out all of the stops. At the end of the day, you have to quickly, succinctly, and effectively convey value to online shoppers who have dozens of options at their fingertips.
