A bigger basket. All retailers want it, and almost all of them have become adept at persuading shoppers to buy a particular item — whether it’s a new brand of pet food or a line-extension in cereal. But, turning those one-off item purchases into long-term incremental behavior is an all-together different challenge. It takes a deft understanding of shopper needs, brand loyalty and price and promotional responsiveness to win the bigger basket again and again.
Most retailers now know that this insight is attainable through analysis of shopper purchasing data, but putting it into practice is quite another matter. Retailers that analyze consumer shopping behavior can identify their most profitable shoppers, learn what motivates them and then get them to buy products they had not even considered. The key to long-term profitable behavior is to complement the understanding of what is most important to shoppers with relevant marketing and merchandising tactics that resonate and increase sales and profits.
Think Shopper not Category
Through our work with retailers, we have uncovered five proven strategies to winning shoppers by capturing the right trips and the right categories. These case studies demonstrate the true value of a shopper-centric strategy: leveraging deep shopper insights to execute more relevant marketing and merchandising tactics.
- Win the Big Planned Trip: The best way to increase sales is by identifying the most important shoppers and then understanding which items drive what type of shopping trip. A family of four will purchase different items than a couple, even if they are spending the same amount. One retailer we worked with found that while milk and large cuts of meat drove bigger baskets among larger families, larger baskets among singles and couples were more likely to contain soup, canned vegetables and wine. By using these insights, the same retailer was able to increase the percentage of bigger baskets by more than 60% during a promotion. The takeaway: When the retailer understands the drivers of each specific shopping trip by its priority shoppers, it can identify which items to promote to grow sales.
- Shoppers are Talking; Be Sure to Listen: Retailers need to pay closer attention to their shoppers than to their competitors. Shopper data will help them track what their shoppers are buying — and not buying — and retailers can stock accordingly. With our help, one retailer discovered that shoppers of one smaller format store were — because of the limited assortment — going elsewhere for their meat. Analysis revealed these shoppers tended to be college students and low-income residents. By increasing the available selection of single-serve, more convenient and lower-priced meats, the retailer was able to significantly boost sales. The lesson: Knowing what the best shoppers are not buying can lead to opportunities to win those same shoppers in new categories.
- Get the Price Right: Retailers can quickly and significantly increase profits while maintaining or growing volume through a shopper-centric pricing strategy. In other words, being price competitive on the items to which their highest-value shoppers are most price sensitive, rather than being competitive on the same items as competitors. For example, one of our retail partners identified that within the cereal category, many items positioned at everyday low prices (EDLP) did not have to be. Conversely, many items that were not at EDLP should have been. When prices are low on the items shoppers really care about, they will shift their purchases from the competition, while providing an opportunity to build margin in less price-sensitive items — all while maintaining the right price position and image.
- Understand Brand Preferences: Purchasing data can help merchants distinguish which shoppers prefer which brands, and in which product categories. Identifying the categories where key shoppers may be more likely to prefer private label is an invaluable insight to drive store brand innovation, or to inform marketing initiatives. For example, we advised one client to target private-label offers to shoppers with a proven high propensity for such store brands. The result was a significantly higher response rate via improved relevance, and, more importantly, greater sales and profit lift and overall ROI than previous initiatives focused solely on national brands. It’s important to note that the key takeaway from this initiative is not a prioritization of private label over national brands or vice-versa. Rather, the key learning is that by understanding the brand preferences of priority shoppers to develop more targeted promotions, retailers will significantly increase sales, profits and relevance.
- You are what you buy: Every time consumers shop and with every item purchased, they tell the retailer about who they are and what is important to them. The aisle is a significant tool for tracking the stages of shoppers’ lives and the information gained can be used to market to them in a more relevant and profitable way. We regularly help retailers increase their share among most important shoppers by identifying who they are, what are their needs and what are the items that matter most to that segment. If a retailer is looking to increase its sales among health-conscious families with children, for example, more effective promotions would feature not only core family grocery items such as produce, bottled water and meat, but also highly correlated items for that segment that drive bigger baskets such as yogurt, organic cereal and fruit juice. Understanding what items matter to which shopper segments can help retailers identify new ways to engage shoppers and capture a greater share of their wallets.
In each of these examples, our retail partners were able to grow the shopping cart among their best shoppers, and in a long-lasting way. In other words, these learnings didn’t simply translate to a single, bigger shopping occasion. Instead, the findings helped retailers optimize their merchandising and marketing strategies over time. Shoppers responded with a shift in behavior that translated to more consistently profitable trips. The highlight of this approach is that it is based on leveraging every retailer’s greatest asset and competitive advantage: Their shoppers.
Brian Ross is President of Precima, a shopper-driven insight and strategy firm operated by LoyaltyOne. He can be reached at firstname.lastname@example.org. For access to the case studies referenced in this article, please go to http://www.precima.com/priority_shopper_download.html.