The processes and systems grocers use to both win and retain customer loyalty are not working effectively and may be damaging the brand image, says Robin Coles, Managing Director EMEA XCCommerce.
Grocery and convenience store retailers appreciate loyal customers because it is well established that they spend more, spend more often and cost less to sell to than new customers. However, winning and retaining that loyalty is getting harder and costing more because, particularly post-pandemic, customers expect more in return and are much smarter about how they respond to promotions.
They expect higher quality offers, which deliver more competitive prices, and added value items such as free delivery, membership of a cooking or diet club, donations to charity, all with faster and faster service. Promotions can no longer be simple discounts, an environment purely focused on price only based promotions will be a race to the bottom, in profit terms.
This added value is key to earning customer loyalty, the promotions must be more varied but also be changed regularly; they must be meaningful for customers, add value to their lifestyle and crucially be consistently available on whatever channels their customer journey has taken.
And crucially customers expect the communications around promotion to be personalised to them, all of which adds up to management complexity that seems way beyond the capabilities of current processes and systems.
This complexity of managing these promotions is often not properly considered, difficulties in implementing seem to be regarded as ‘just the way things are’, as are the associated costs, the disappointing return on investment, and the challenges of design and build for new and emerging channels.
The knock-on effect of poorly managed promotions is significant both in terms of execution, as the processing of vouchers and coupons in store is difficult and time-intensive for staff, and customer experience, because the perception is that they are not receiving a good service, across the whole process, or consistently from channel to channel.
These realities may now start to hit home as retailers fight to win back customers and boost average spend post pandemic, particularly as margins are under attack from the growing presence of new entrants, including Amazon which owns Wholefoods but also sells a growing range of groceries online, the continued rise of independent food companies that deliver door to door, and wholesale food companies that shifted from selling to schools and businesses that were closed in 2020, to selling direct to consumer.
Fortunately, while consumers are more demanding, they clearly want promotions, as our most recent report, showed 72% want more promotions. In addition, promotions are also a major influencing factor for why they bought from a retailer (69%) and 62% say they are loyal to retailers who offer promotions.
However, they do expect promotions to be targeted (62%) and there is evidence that generic, cross-the-board promotions are not currently performing. Poor targeting, slow speed of response, the high cost of implementation and a lack of focus on customer needs are making them less relevant to the market, as it currently stands.
There is help at hand though, with the new world of promotion management solutions being integrated, automated and rules based, underpinned by data sourced from currently disconnected repositories.
All channels can be supported from a single system uniformly, which today should be seen as a baseline, enabling retailers to reach out to connected consumers through new and emerging media.
At the same time, a single system enables improved management, spotting and resolving any overlaps, as well as ensuring consistency of message, item description, promotional offer, prices and so on. giving significant insights to both user and beneficiary stakeholders
In his new world, throughput is fast, manual and processing errors eliminated, with no need for manual intervention and a positive impact on queues at the point of sale, with all promotions, rewards, coupons and vouchers being automatically triggered.
The benefits of speed also come to the business stakeholders, namely the customer and marketing teams, who are able to respond quickly to emerging market conditions and the behaviours of increasingly promotion savvy consumers, enabling the business to be more creative and responsive. In addition, new promotions and offers can be added without incremental cost or risk.
Ultimately, this becomes about having a strategic promotion management capability that is independent of each trading system and in tune with the rhythm of the market.
Data is used to reveals customer preferences, generating new segments that demand new promotion types and groupings.
Variances by channel, location and customer segments can be managed, even while the offer remains consistent, with a faster response to competitive activity, when rivals also explore new ways to win and retain customers.
This is the new way.