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Ask a dozen retailers what they’re investing in next year, and you’ll hear a common refrain: more of the same, just better. Better loyalty programming, sharper personalization, more aggressive promotions.
Today’s best practices dictate that a stronger version of the existing playbook will win the customer for the long haul. But today’s shoppers are behaving differently than ever before. Many are shopping across five or more grocers every month, optimizing each shopping trip based on price, convenience, and their own personal preferences.
Every trip is up for grabs, and retailer strategies can evolve to better reflect that. Your opportunity is to just focus on winning that next trip, repeatedly, to build habits with customers.
Shoppers changed their behavior. Most retailers haven't caught up.
Consumer willingness to move between their various grocery options has increased materially in the last two or three years.
Upside data shows that individuals from different income bands are behaving in different ways — with a stark divide occurring at $75,000 per year. Lower-income shoppers say they’re pulling back their spending, trading down at both the item level and the trip level. Higher earners, meanwhile, are maintaining or even growing their spend year-over-year — but don’t mistake their intentions. While higher earners will selectively trade up for items they want, they still visit numerous banners every month and care considerably about making each transaction “worth it.”
Traditionally, loyalty programs have been go-to tools for retailers to win more trips and spend from their customers. But the market is now fully saturated, and it’s harder to differentiate with loyalty than it used to be.
Picture the consumer standing 200 feet away. From there, your loyalty program looks similar to every other loyalty program. The consumer doesn’t see what makes your brand unique.
Now, to be sure, loyalty programs are powerful tools. They engage members in an effective way. You almost have to have one. But at the same time, loyalty programs are at parity now.
The biggest trap is to imbue a loyalty program with powers they do not grant you. If you build a loyalty program that adds users faster than anyone else, you wind up with a box. It’s a good box; it has users in it. But when you look inside, you could find every kind of shopper:
- Non-shoppers who signed up but never returned
- Infrequent shoppers who pass through occasionally
- Frequent shoppers who visit you as one of several stores
- A small core of genuinely loyal customers
That's where you run into a problem.
That same shopper is sitting in several other boxes at several other retailers. If they belong to three or four grocery loyalty programs, are they loyal to any of them? Or, by definition, are they a free agent? Most consumers struggle to articulate the difference between any of the programs they belong to. They use all of them, but they aren’t particularly loyal to any of those brands.
Be honest about what your program does and what it does not do. Then, think about where additional strategies are needed to drive incremental trips and acquisition.
Real differentiation lives in the partnership ecosystem
Pricing, promotions, and personalization are converging. Every retailer is investing in the same tooling, hiring from the same talent pool, and reading the same trade press. Most retail tactics are replicable. True differentiation has to come from things competitors cannot access.
That’s what the right partnership ecosystem creates. The right one gives you something competitors cannot copy and cannot reach — even if they wanted to.
- Exclusive demand channels. The right partner can route consumer intent directly to your store and shut competitors out of that channel.
- Reach beyond your own ecosystem. A loyalty program reaches the people who already chose you. A partnership ecosystem reaches the people who are nowhere near you yet.
- Pull in non-shoppers. The people you most need to influence are by definition not in your file. A loyalty program is not built to reach them, but a partnership ecosystem is.
Nearly every strategy available to grocers, your competitor can eventually have. This is different.
Where I would start tomorrow
Let’s say that I am going to make six grocery trips in the next eighteen days. So is the shopper down the street, and the one across town. Those trips — every one of them — are essentially for sale on the market. Disproportionate share goes to the retailer with access to something the others can’t have, not the one with the best version of the thing everyone is already building.
Build what is yours. Partner for what isn't.
Hear me talk more about this on The Progressive Grocer Today podcast, or reach out to our team to learn more about the Upside marketplace.
