By Tom Hall, UK head of analytics & technology at IRI
Segmenting the market is a tried and tested approach for marketers to help them understand the different types of consumers that they want to reach and to develop approaches that suit each. However, in the current environment, retailers need a way to understand consumers in a much deeper way to personalise their experience by predicting what they might want before they even know it themselves.
A new way of shopping
The changes that have taken place in the last 12 months, which affect all our traditional ways of living and working, are unprecedented and unpredicted. One of the many things that looks and feels quite different is the shopping experience.
COVID-19 has changed what used to be a wander around the shelves to be enjoyed at leisure, weighing up promotions and checking out new products to something that almost feels like a covert military operation. Navigating the aisles at speed, following a fairly prescriptive shopping list whilst wearing a face mask and maintaining social distancing is not how anyone expected to tackle their big shop in 2020. Many of us no longer allow ourselves the time to browse and make decisions on the fly, and handling the product to decide whether to buy it or not is actively discouraged.
It is quite an adjustment for shoppers to operate in such a different way. Overlaid onto that is the very individual way in which the economic climate is impacting households. Our experiences of the recession so far are very different and this is why retailers and brands now need to work a little bit harder to understand their shoppers and help them in this new, and sometimes stressful, normal.
The challenge to loyalty
Shopper loyalty to the traditional retailers has been under attack for some time due to discounters and ecommerce. The discounters continue to expand their physical presence, shopper base and range with popular brands appearing alongside the standard own brand offering. Lidl have recently launched an app to encourage store loyalty in return for promotional discounts.
Online shopping had a fairly stable 6% share of the grocery market before the pandemic. During the height of the crisis this rose to 15%*, and greater growth was held back only by the availability of delivery or click and collect slots which were filled within minutes of being released at midnight each day. While all the main retailers apart from the discounters have an online service, the shopping experience is utterly different and of course pricing is totally transparent which brings new competitors into consideration such as Amazon.
Before lockdown, 83% of people would typically visit six or more retailers to satisfy their grocery needs** and a considerable percentage of what we ate and drank was consumed out of the home. As home became the workplace and restaurants closed, people had to adapt to preparing and consuming everything at home. One benefit of lockdown shopping is that, for the first time, it has been possible to get a whole basket view of FMCG purchasing. As a result, the retail data that is available now gives a much richer view of people’s shopping needs. We can use this to move beyond the traditional approaches to segmentation such as age, gender, marital status etc to a much more individual understanding of consumer needs and motivations.
Hyper-targeting to unlock loyalty
We work with this frequently updated data alongside our predictive algorithims to help our clients to develop hyper-targeted marketing approaches personalised to each shopper.
The segmentation is the key to unlocking loyalty in the new world and there are various ways to approach this. The shopper’s lifestage reveals opportunities for tactical targeting such as understanding the differing needs of households with babies or teenagers. Shopping trends can identify how loyal the shopper is and it also becomes possible to identify shopper types based on what they buy, for example experimental or price savvy.
What is new and exciting is being able to predict behaviour and not simply react to it. This forward looking capability is critical to building shopper loyalty and IRI has identified six different levers that can be used.
- Cross-selling: By using look-alike consumers, it is possible to reveal categories that a shopper isn’t currently buying but probably would be interested in and so make an offer that they will be responsive to.
- Up-selling: For a shopper who is buying a private-label version of a product, offering a deal on a more premium product at the same price might encourage them to try something different.
- Revenue loss management: A key indicator that a shopper might leave is when they stop buying a specific category, for example fresh meat which means other products might follow. Making the right offers at this time could halt or even reverse the decline in competitor spend.
- Churn: The old loyalty model would identify a lost shopper after a set number of weeks as defined by the retailer, but by taking a more individual approach and understanding how a particular shopper behaves makes it possible to react to this much faster.
- Reward and retention: Reward loyal shoppers and show that they are valued, for example free samples.
- Brand/Category retention: This allows us to identify people who we believe will be responsive to a new category or willing to try new products.
Hyper-targeting is the way for retailers to really connect with their shoppers and to give shoppers the confidence that they need.
For an in-depth review of a more personalised approach to loyalty, please read IRI’s paper; Changing the approach to brand and retailer loyalty. Available to download here
* IRI UK Channel Performance 2020 w/e 25th April 2020 (including Full Online and Discounter Estimates)
** Reference; 8 Polygamous Store Loyalties: An Empirical Investigation. Journal of Retailing, Vol. 93, Issue 4, Dec. 2017 pp. 477-492.
(A Retail Times’ sponsored article)