With millions shopping in their stores, retailers sometimes struggle to understand who their customers are and what products they prefer. Are their customers the health-conscious type, choosing their fresh ingredients with a keen enthusiasm for scratch cooking? Or are they the more impulsive type, looking for something to satisfy that sweet tooth or sudden craving? This article reviews recent analysis performed using our newly enhanced insight platform, which has uncovered changing shopping habits and sheds light on how retailers can take advantage of this.
It’s perfectly normal for a retailer to expect a certain amount of behavioural change from their customers. However, now more than ever we’re noticing dramatic shifts in purchasing behaviours which retailers have been struggling to track and adapt to. Those who have adapted more quickly to satisfy these new behaviours are in more favourable positions than their competitors. The lengths to which retailers have gone to meet these new demands have been dramatic. For example, Aldi chartered special trains to bring pasta from Italy to Germany, and Walmart opened 150,000 new positions to keep up with demand. Changes to shopper behaviour has undoubtedly been caused by the altering of work/life ‘norms’ and therefore identifying the impact this has had on different types of customers is where the value to segmentation lies.
Retailers who put time and effort into segmenting customers into their lifestyles and tracking change throughout the Covid era will undoubtedly be at the head of the pack – allowing them to grab a greater portion of the shoppers’ wallets.
Retailers should be asking if they’ve made real efforts to segment their customers accurately. One thing to consider would be how retailers are accounting for new behaviours within segments, such as individuals’ increased disposable income spending on groceries as a result of less spending on recreational activities, and those with reduced incomes or looming economic uncertainty forcing these shoppers to make cuts at the grocery store. Whatever the case, accurately segmenting these new shopper ‘types’ is vital to ensuring that brands and customer experiences are positive and that each shopping trip adequately fulfils their needs. The example below only goes to show how crucial segmentation really is.
On behalf of a retail partner, we investigated their customers’ behaviour changes to understand where to focus resources in the short to medium terms. Firstly, it was interesting to note that the rate of spending change was minimal. Covid-induced spending was almost the same as their normal sales period with only a 2% increase. However, the type of behaviours adopted is where the differences were apparent, showing how people were putting more thought into the way they shopped.
There was an overwhelming shift toward value seeking. Even customers who were previously considered premium purchasers changed their behaviour to ‘value seeking’ at 50% above the expected rate. We discovered these were customers typically looking for own-brand products due to their cheaper price point than their national brand counterparts. The other major behaviour shift was towards family convenience and instant eating. Not only does this include customers tight for time, it also represents those customers stocking up, potentially for weeks. Therefore, customers made a shift from fresh ingredients to long-lasting canned and packaged products which naturally changed the classification from premium and healthy to convenience-focused, regardless of the intention. As a result, the retailer can focus their resources on streamlining their own-brand range within canned and packaged department modelling on similar successful products from the fresh categories.
You could argue that this type of insight can simply be understood by looking at sales change by product, which is true. However, the advantages of classifying customers into 7 to 9 unique behaviours means you can see the trends more quickly and easily than analysing tens of thousands of products. There are other clear benefits from this type of insight above and beyond regular category reporting. Before, all the retailer could see was customers emptying the shelves of quick foods and rice. Now we know which customers made this transition and as a result can be more relevant to them in future and put in place more effective strategies. With that in mind, there are clear opportunities for the retailer to tailor their assortment to its new consumer segments. Those modelling new own-brand products to fill the gaps in the range will thrive in this situation. Creating new appealing promotions to capture the imagination of their customers and provide value at the time it’s needed most could improve the uptake of these new products. In the future, setting the right price point could likely be a more integral part of the operation than it already is today, meaning an increased focus on delivering the same quality at a reduced price as opposed to improving the products themselves.
Clearly the biggest challenges for retailers right now is keeping the shelves stocked and their customers and staff safe. When the dust settles, will customers simply switch back to their normal behaviours or will this set them up for a new type of lifestyle? Retailers can rapidly discover the core motivations for customers shopping and refresh these on an on-going basis to informatively tailor their offering with our Advanced Segmentation platform.
If you would like to find out more about how we can help you with segmentation, please use the link below.