Think about why your customers love your grocery store. Do they appreciate your great selection of high-quality products? Do your fair prices give them the best bang for their buck? Do they smile every time they interact with your friendly and helpful employees?
You certainly invest to deliver an in-store experience your customers appreciate, but even still, one factor reigns supreme in why they choose you: Your store is likely pretty close to their houses.
According to a report from Access Development, the average consumer travels only eight minutes from home to their grocery store.
How can retailers get customers outside that travel radius to choose their stores? Read on.
For their everyday purchases — things like filling up their tank, a haircut, or a ticket at the movie theater — consumers are distance-sensitive. Distance is a type of customer “friction,” the thing, perception, or circumstance that prevents shoppers from choosing a particular retailer. Grocery shopping is subject to friction, as well; this USDA report states that the average American’s preferred grocery store (defined as the store they frequent most) is about 3.8 miles from their home.
But distance isn’t everything, and there are other factors (like those noted above) that can sway a shopper to choose one store over another. And those additional factors do come into play. While Americans are about 3.8 miles from their preferred grocery store, the USDA also says that their closest grocery store is only 2.2 miles away on average.
Since there are factors at play that affect a customer’s willingness to travel, how can grocers use those factors to overcome friction for new customers? One way to incentivize the customer to break from their normal patterns is to offer them incentives to change their behavior.
The graph below, which features new data from Upside, shows that shoppers are willing to make a different decision than usual in order to receive cash back. To go to a grocery store one mile away from their primary location, the average grocery shopper in this survey would expect to receive 5.3% cash back. Generally, the right cash back offer can convince users to travel farther — in some cases, up to 10 miles away — to get their groceries.
At what point does offering these incentives become unprofitable? As their distance to your grocery store grows, customers’ expectation for the size of their incentive grows, as well.
Incentives change behavior. But when they’re not properly personalized for each individual customer, they can cannibalize retailers’ expected profit and hurt the bottom line.
Personalized incentives are what make Upside different. Upside finds the optimal offer amount that motivates new customers to transact at participating grocery stores and entices existing customers to spend more in-store. The offers are personalized to each individual customer and these transactions are net-new to the business, so retailers earn profit on these new transactions.
The average Upside user travels 4.2 miles to get their groceries, excluding outliers. Keep in mind that the typical household travels roughly 3.8 miles to their primary grocery store. That means Upside’s cash back offers motivate users to travel 12% farther for groceries than the typical American household.
This phenomenon is even more pronounced in rural areas, where Upside users are traveling an average of 5.2 miles to get their groceries.
Again, all of these cash back incentives are profitable for retailers. Upside’s offer algorithm is optimized to consider each user’s shopping history — along with dozens of other factors in real time — and generate personalized offers for them.
Today’s average customer is either not willing to go the extra mile to shop with you, or maybe even drives past your store for more value elsewhere.
Grocers with an interest in changing that behavior often look to advertising or delivery. Advertising dollars get you clicks or views that are seldomly tied back to a measurable change in shopper behavior, and delivery fees are often cost-prohibitive or don’t carry a positive return on investment.
Grocers considering cash back incentives are asking: Is it worth it to pay for customer incentives that encourage a wider radius of customers to shop with me, or will that incentive cost more than I earn?
The data shows it is worth it, and it is profitable.
Upside expands a grocer’s reach (by miles), bringing more customers in-store and incentivizing larger baskets at checkout. Many Upside users are driving past their nearest grocery store and their primary grocery store in order to choose participating retailers. New transactions or higher spend from existing customers generate incremental profit — even when the customer receives a larger cash back offer in order to motivate a visit.
In this competitive landscape, grocers need to cast a wider net to drive shoppers into their stores, and Upside helps them to expand reach in a measurable, profitable way.
Ready to explore how Upside can help your business attract new customers from all over your region? Get in touch.
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