Can you believe that the day has finally come when Walmart actually wants its shoppers to use coupons and match prices? Strategically, this is probably the right thing for them to do, but if you are a brand trying to break the hi/lo price game, it’s like the dealer feeding the addict.
The price addiction is a hard habit to break, especially for a brand trying to recover from the Great Recession. Top-line sales increases are a quick remedy, but at what expense? How do you build your brand and make your sales goals in this volatile environment?
Although the recession technically ended in June, 2009, shoppers are still feeling the effects and experiencing a spending hangover like we’ve never seen before. According to Acosta’s February 2011 Why Behind the Buy study, a full 30 percent of grocery channel shoppers and 50 percent of Walmart shoppers have had a negative change in household income in the past year. This, coupled with continued un- and under-employment fears have dramatically changed when, where, and how shoppers shop.
The economic pressures of the past few years have fundamentally changed shopper behavior. Store brands are more popular than ever and tough choices are made at the shelf, resulting in trade-offs in favor of quantity and price over brand and quality. In the above-mentioned survey, 38 percent of grocery shoppers and 53 percent of Walmart shoppers say they are buying more store brands to save money.
Not surprisingly, these shoppers are increasingly matching their primary shopping trips to their paycheck cycles and looking more carefully for sales and coupons. It’s safe to say that this cautious and savvy behavior is here to stay and that they are conditioned into making rational decisions.
So what does this mean for brands? It means that the almighty brand equity pyramid has had the peak lopped off. The benefit-driven emotional connection that all brands aspire to has become irrelevant to today’s shopper in favor of easily compared features, attributes, and, most important, price. As brands have jumped (or have been pushed) into the price and promotion game, a self-fulfilling prophecy has developed: “The only way to sell more is to lower the price … and the only way to continue lowering the price is to sell more.”
Understandably, this path-of-least-resistance approach has allowed brands to compete in the short-term, but as they concede the emotional higher ground to price and promotion, they face a long-term equity drain. Not only is the brand’s equity at risk, long-term profitability is not sustainable when brands continue living with the price and promotion addiction.
The addiction is also impacting the allocation of marketing funds within brand marketers. Brands should be concerned with the migration of “brand marketing” funds to customer marketing initiatives that focus on driving transactions, not on building brand equity. This trend will only serve to reinforce shoppers’ dependency on deals and promotions and decrease the differentiation between brands and private label.
So, what should a brand do?
Remember, shoppers are smarter and savvier than they were pre-recession and utilize a rational set of decision-making factors when making choices today, as illustrated in the rational value cycle (see chart one).
The rational value cycle is a driving force that is hard at work de-valuing your brand at retail, and consequently, needs to be broken.
Conspicuously absent from this cycle is the element of experience. Brands need to rethink their retail strategies and reintroduce brand-building experiences into their retail offerings to better engage and delight shoppers. The basics of shoppability — packaging and environmental design, navigation principles, and emotional connections — are critical factors to break through the rational and appeal to the emotional needs of shoppers.
Is this an easy accomplishment in today’s retail environment? No. But it can be done if you take a systematic approach to understanding, measuring, and manipulating in-store experiences.
Dr. Ray Burke, of the Kelly School of Business at Indiana University, laid the groundwork for understanding and managing the shopping experience in his Shoppability Report (2007-2008). Dr. Burke organized the overall shopping experience into nine manageable factors:
Transparency. Can shoppers easily and accurately interpret information regarding what the store offers?
Affordance. How well are the benefits of the products communicated by the retail environment?
Service. To what degree is the right service offered?
Relevance. Does the store offer the right products with the right prices?
Access. How much time and effort are required to get in and out of the store?
Surprise. To what degree does the environment engage our constant need to find new things, learn, and experience the unexpected?
Layout. How much time and effort are required to move through the store and to the right department?
Comfort. To what degree does the environment serve shoppers’ auxiliary needs while shopping?
Lack of Clutter. Does the store environment itself serve as a barrier to any other shoppability factor?
Utilizing Dr. Burke’s nine shoppability factors, a brand can benchmark and diagnose its performance relative to each factor and “pull levers” to develop an optimized experience for its shoppers. The fundamentals of the study not only provide a means to assess the current in-store situation, but also a proven model on how to build brand loyalty. Using his model, a brand can measure success as follows: Engagement and Conversion + Satisfaction and Loyalty = Repeat visits and realized demand (Brand Building).
Better shoppability can break the rational value cycle and build your brand at retail. For example, Safeway recently launched its “Lunchbox Winners” program, which was developed to help make fruits and vegetables more appealing to moms and kids. What makes this program unique is that it mixes fresh produce with branded products to deliver complete lunchbox solutions along with tips and recipes for the shopper. Brands such as Kraft, Kellogg’s, Kashi, and Mott’s have participated.
In a dedicated display in the produce section, Safeway has created an engaging, one-stop solution center that draws shoppers in with the message, “Make Smart Eating the Goal!,” and a call-to-action, “Pack Lunches They’ll Love.” Additionally, it is supported with a complete signage package, take-home brochures, and on-line support for participating brands, as well as endorsements from a variety of Olympic athletes who help build excitement and credibility for the message.
“Lunchbox Winners” provides a real solution to moms looking for healthier alternatives for their kids’ lunches while delivering on all nine shoppablity factors. It also promotes brand building by creating a “healthy-halo” around participating brands, without reverting to price promotion as the primary “value” driver.
Compare this program to the very common “meal solution” displays found in many retailers today. For example, a spaghetti dinner for a family of four with a display that features private-label pasta, a value-brand sauce with an instantly redeemable coupon, and parmesan cheese that is on sale and advertised in the weekly circular. The primary message is, “Feed a Family of 4 for $10.00.”
The display is providing value to its shopper in the form of an affordable meal solution for $10.00, but it is reinforcing the shopper’s rational behavior and not providing brand-building benefits. By comparison, Safeway’s program appeals to the emotional benefits the shopper experiences as a result of the purchase — feeling like a good mom who provides a healthy lunch alternative for her kids at a great value, but without promoting a price point.
How can your brand break through the rational barriers to achieve a true emotional connection with shoppers, and how can it provide value beyond price, where both the shopping and brand experience come together to form an emotional cycle of value?
Only by deconstructing the shopping experience into its primary components can we begin to understand and manage how to engage shoppers with the true emotional benefits that are the reasons that brands exist in the first place (see chart two).
It’s time to help shoppers break out of the rational value cycle by focusing communication at the ultimate point-of-decision on the emotional benefits that only brands can offer.
JOHN MEYER is svp of integrated marketing at Acosta Sales & Marketing, leading business development, retailer strategy, and account management for AMG in Bentonville.
Read more at The Hub Magazine: http://www.hubmagazine.com/html/2011/hub_43/jul_aug/2372307743/acosta-brand-identity/index.html.