IGD's second Big Debate discussed the evolving challenge of shopper satisfaction in grocery:
- What, exactly delivers a satisfying in-store experience?
- How can businesses guide shoppers towards their health goals?
- What role should data play in developing shopper relationships and can it ever replace creativity?
We were delighted to welcome speakers from a wide range of businesses, both new entrants and veterans, to address our debating topics.
We also used the day to launch original IGD research. The dedicated shopper research featured in Joanne’s presentation will soon be available on ShopperVista.
Some common themes:
- Price is always a vital element of shopper satisfaction but by no means the only element. If we don’t create enough space for innovation and excitement then we are not properly serving our consumers and others will seize this space
- Shoppers are evolving, becoming more demanding and disparate. Meeting their needs gets increasingly more challenging but data and technology enable new solutions
- Large parts of the shopping process will become automated in years ahead but we need to maintain a personal face and combine data and algorithms with good human judgement
- Guiding shoppers towards healthier food choices is likely to take many years and will be a journey of tiny steps. Businesses must work together on this, over a long period
- Currency fluctuation is a big concern for companies but there are various steps they can take to mitigate this and the potential inflationary impact of Brexit is still yet to be proven
|Session one: meaningful shopper relationships
||Session two: credible and consistent messaging
||Session three: data and creativity
Brexit breakfast briefing
The day began with a breakfast briefing from IGD Chief Economist James Walton on the topic of Brexit.
James shared updates on a number of key economic indicators, including currency and material import costs, and presented information regarding macro-economic uncertainties cause by Brexit, and how those relate to the food and grocery industry.
Download an edit of James' slides here.
Session one: meaningful shopper relationships
Speaker: Joanne Denney-Finch,
Joanne described the findings of IGD’s latest shopper research on emotional engagement with grocery businesses. She challenged retailers to make their stores more stimulating and engaging and manufacturers to assist with this. Stimulating positive feelings and associations is essential, since it will help retailers to differentiate and compete in areas beyond just price.
- Shoppers are not always rational; instinct and emotions are much more powerful drivers of decision-making
- The most successful grocery formats are the ones most effective in achieving positive emotional connections with shoppers and discount stores are currently scoring higher on this than supermarkets
- Over the last decade, the online world has been transformed whereas physical stores have evolved only slowly
- We are heading for a ‘chasm’ in which staple products are replenished automatically and food stores concentrate mainly on fresh and new products
- Unless brands contribute towards in-store excitement and differentiation, they will become marginalised in the stores of the future
“The gap in engaging emotions between stores and online will keep on widening unless we all do something about it”
“We don’t have to sacrifice excitement for efficiency. We need both”
“We will only unleash the passion of shoppers if we feel passionate ourselves”
- Although we can learn from various retailers around the world about in-store excitement, UK stores remain world-leaders in many other areas which is why so many retailers still come to the UK to learn
- Price is not such a big differentiating factor between retailers but emotions are. Getting pricing right is just the “ticket to play”
- Some inflationary pressures may be resurfacing as a result of the fall in Sterling but companies are used to managing much bigger challenges than this
Speaker: Mike Coupe, CEO, Sainsbury’s
Of all the major grocery retailers, Sainsbury’s has seen biggest structural change during 2016, acquiring Home Retail Group (Argos) and beginning to incorporate this into the grocery business. Mike came to the Big Debate to explain the rationale.
- The old model for success for retailers is breaking down owing to changing shopper habits, technology, new formats and economics
- Shoppers are developing higher expectations for choice, ease of access and speed of delivery; retailers have to adapt to these profound changes
- Sainsbury’s acquisition of Argos delivers in one move: new ranges, new supply chain capabilities, new retail locations and a new financial operation
- No-one can be completely sure about the future direction of our sector but if Sainsbury’s stays close to shoppers and develops a highly efficient and agile supply chain, it will always be in a strong position to adapt
“In future, many of the goods that shoppers buy will not be ordered. They will just … arrive” “
Acquiring Argos was the easy bit. Now we have to do the hard bit, which is implementing business change”
“Shoppers shouldn’t need a maths degree to ensure that they get the best value for money”
- There is a high overlap between Sainsbury’s and Argos shoppers but also potential to cross-fertilize and introduce new customers for each brand
- The Nine Elms store is an example of Sainsbury’s vision for future retail and suppliers are encouraged to visit it
- Businesses like Deliveroo and Uber Eats are a serious threat to conventional retail, since they insert themselves between retailers and their customers
Matt Hill, European President, Kraft Heinz
Brand marketing and product innovation are key tools for stimulating shopper interest in grocery shopping and home cooking. Kraft Heinz is one of the largest branded grocery businesses in the world and one with high recognition amongst British shoppers. Matt came to the Big Debate to argue the case for greater innovation.
- Kraft Heinz has focused heavily on efficiency in recent years and this has released funds for investment in innovation
- There are five key areas where Kraft Heinz is innovating, all in response to emerging shopper needs: better health, scratch cooking, indulgence, snacking on-the-go and adventurous flavours
- Retailers could benefit by getting behind such innovation and making the store environment more stimulating. The recent emphasis on simplification, range reduction and reducing clutter is understandable but needs to be kept in balance with promoting innovation for the future prosperity of our sector
“Retailers must not lose focus on innovation – innovation and efficiency really can co-exist”
“Talk-ability is essential to brand communication – shopper engagement must be earned”
“In difficult times, suppliers and retailers must play a long game and they must play it together”
- Innovation is the life blood of categories; brand leaders must take the initiative to ensure that categories go on meeting shopper needs
- It is essential to put new products where shoppers can find them. Innovation shouldn’t only be accessible to six foot shoppers!
- Suppliers must involve retailers in the innovation process early to get their input and engage their enthusiasm
Michael Fletcher, Commercial Director, The Co-operative
The Co-operative has both small store formats and a clear set of corporate values; it is therefore well-positioned to establish a clear emotional territory amongst shoppers. However, operating a large and varied store portfolio creates special challenges for a retailer, as Michael described.
- Most convenience shoppers live extremely close to stores, so demographics and shopping needs vary widely
- Complexity is inevitable and should be embraced by store operators; the Co-op has introduced 5 basic store executions, but these are capable of wide variation
- Suppliers are invited to work with the Co-op in order to optimise ranging and marketing programmes for each type of store
- Shoppers have strong affection for the Co-op brand, hence the recent brand re-launch. Involvement with communities is very much part of the brand identity
“If you want to grow in convenience retail, you have to cope with complexity”
“We are bringing complexity back, but in a manageable way”
“In a large store, shoppers can edit your range for you. In a small store, you must employ people to do it”
- If communities don’t appear to care about the values or causes that your business supports, it means that your values or causes are poorly chosen
- Retail complexity is not just a problem for Head Office staff. It is also an issue for store staff who have to deliver a complex and varied offer, day-to-day. From 2017, they will have new IT to help them
Matt Davies, CEO, UK and ROI, Tesco
Matt’s origins are outside the grocery industry, with previous roles at Pets At Home and Halfords. Since joining Tesco, Matt has helped deliver a turnaround of the business, focusing on ranging and pricing whilst also offering fresh leadership for employees.
- Prices are now 6% lower than two years ago and Tesco has seen 3Q of LFL sales growth. Volumes and penetration are up. Group margin is expected to stabilise at 3.5-4.0%
- Serving shoppers better is not just a responsibility for store staff. It must saturate every level and every function in the business
- Most Tesco staff understand the business mission and feel empowered to deliver it. Considerable flexibility is available and staff are encouraged to take the initiative in satisfying shoppers
- Tesco is passionate about reducing food waste across the supply chain. By the end of 2017, no food fit for consumption will be discarded by a Tesco store
“Just how long will it take before people think I am a PROPER grocery industry professional?”
“We need to make people proud of the businesses that they work for”
“Don’t write off the big store – big stores that were previously written off are now back in growth”
“Wasting good food is obscene – it offends every person in this room”
- Food price inflation is bad for businesses and household alike. Tesco will do everything possible to limit the effects
- Retailers need to focus differentiation on the issues that have greatest resonance with shoppers. It is unrealistic to try to differentiate everywhere
Session two: credible and consistent messaging
Dr Dimitrios Tsivkrikos, Consumer and Business Psychologist, University College London
Dr Tsivrikos attended the Big Debate to discuss what shopper engagement means in the modern world, drawing from an extensive range of studies…including the scanning of shopper brains!
- Shoppers used to take about 1.5s to make a purchase decision but this time has now been almost halved
- Purchase decisions are therefore instinctive and habitual. There is no time to consider any rational set of cues
- Think of the dating app Tinder as a metaphor for how people choose: an instant acceptance or rejection based on the first impression
- Business should not have an over romantic view of how shoppers think about their brands; even the very best brand relationships last only a few minutes before the consumer thinks about something else
- Shoppers may feel threatened by businesses that pursue them too closely – they call it the “Stalker Syndrome”. Occasional, well-targeted communication is best
“Statistics are the best way to tell a compelling lie”
“Romance is dead – long live the one night stand”
“We have enough products, no one is asking for more. What they want is personalised services”
Mike Stagg, Senior Vice President, Disney
Disney is the biggest entertainment company in the world, with huge reach and impact on children in particular. Mike – a grocery industry veteran – joined Disney in 2008. He came to the Big Debate to discuss how Disney can work with grocery partners to promote healthy living.
- Disney has made a huge investment in research and segments people by lifestage, rather than demographics
- Given the influence that Disney has on children it has taken a strategic decision to use this a force for good and especially to encourage healthier diets and lifestyles
- Use of licensed characters is especially powerful – it can even cause young children to prefer a rock over a banana…as a breakfast accompaniment!
- Disney is reviewing all of its licencing agreements, applying new heath stipulations. Finsbury Foods was praised for reformulating its celebrations cakes to meet the new criteria. Mike offered to work with others in the industry who shared the same vision
“In the pursuit of better health for children, Disney can be an ally to parents…and to governments”
Roger Whiteside, CEO, Greggs
Roger took over the Greggs business in 2013, at which point it was struggling, due to mounting competition from elsewhere. Having listened to his customers, it was clear they needed to modernised their food-to-go offer, with healthier options to the fore. Given the company’s historic associations, this is a challenge for marketing as well as range development.
- Healthy food must be accessible and affordable for everyone, not just affluent urbanites. Accessibility means that more sites are needed, well beyond the High St
- Greggs has used a five step programme to redevelop the product range:
- Optimise existing products for quality and health
- Create a sub-brand to draw attention to the new mission (ie: Balanced Choice)
- Expand ranges, to create new reasons to visit (eg: soups, salads, porridge)
- Improve information (e.g.: calories on menus)
- Develop a media campaign to present to new business position to the media
- Engage shoppers on health issues
“We have worked really hard to engage with children on health. Now Mike has told me all I needed to do was put Disney characters on everything!”
“It’s surprisingly easy to take sugar out of doughnuts. You just need to put a hole in the middle!”
“We worried that people wouldn’t buy a sausage roll if they saw how many calories were in it, but they do. It turns out they had a good idea about the calories already so why not be open and honest about it?”
Blas Maquivar, President, UK Chocolate and Global Retail, Mars
As a confectionery company, Mars is not an obvious choice to discuss healthy eating issues. Blas came to the Big Debate to explain how businesses like Mars can behave responsibly and help shoppers to use their products as part of a healthy diet.
- There have been huge shifts in the consumer culture of the UK and shoppers are increasingly focused on their own health and wellbeing
- Within this, there is still room for treats, to refresh, reward, celebrate or connect with others. Treats must be healthier, however
- All Mars snacks are now less than 250 calories per portion and some will shrink further, with two thirds down to 200 calories per portion soon
- Although companies can make some difference working alone, if we want to solve obesity we have to work together
“No country in the world has solved the obesity problem yet”
“If we remain in silos and address health individually, the UK will be just another country that has failed”
“The right aim for a modern food business is not just growth – it is growth we can be proud of”
From Q&A (all session two speakers)
- Consumers will take advice from many sources but they increasingly reject authority figures. So we can influence, demonstrate but should not presume to lecture
- Shoppers are less prepared to experiment when money is tight. In hard times, they stick with what they know. Unless healthy eating is affordable, widespread behavioural change is unlikely
Session three: data and creativity
Martijn Bertisen, UK Sales Director, Google
Google is only 18 years old but has achieved a massive global presence. It has accumulated a vast database of shopper interactions, giving it unprecedented insight into how shoppers behave. Martijn discussed how data-enabled businesses must keep innovating if they want to stay ahead.
- Some businesses still have separate online and offline functions but this is not how shoppers live. People do not separate their online and offline activities in their minds
- Continuously-online lifestyles are potentially disruptive for businesses, including Google itself. Challengers will use technology to attack established businesses
- Technology allows businesses to create more predictive, conversational relationships with shoppers but speed is essential. The faster a website or app can react, the better the outcomes are
- Machine learning and AI will raise the bar for shopper satisfaction even further in the future and this technology is available now
“Today, shoppers don’t go online - they live online”
“Show up, wise up, speed up”
“WWW now means – what they want, when they want, where they want it”
Rob Collins, MD, Waitrose
Waitrose has a loyal following and prospered for years by word of mouth before it had a marketing department. In 2011, it launched its first loyalty card, My Waitrose, with the aim of offering shoppers something new. Rob explained exactly how the card works, for Waitrose, its shoppers and its suppliers.
- Waitrose has developed a very clear set of corporate values and any loyalty activity had to fit with this identity – it had to “feel authentically Waitrose”
- The aim of the My Waitrose card was to deepen the company’s relationship with shoppers, to deliver instant rewards and to create excitement in a way distinctive from other loyalty programmes
- My Waitrose allows shoppers to choose their own deals and promotions because people value what they choose more highly than what is chosen for them
“MyWaitrose is not about loyalty as such, it is really about meaningful relationships and conversation”
“Targeted messaging is not the same thing as personalised messaging”
“Data is great but you have to earn the right to use it”
- The high level of shopper adoption shows they genuinely value what the My Waitrose car offers, even though it is not a conventional loyalty scheme
- Two thirds of brand building is the part of the iceberg that sits under the waterline: i.e. operating with integrity and with a strict set of values. Waitrose is good at this but had to work on the third above the waterline, i.e. using marketing to convey these values more effectively
- In future, investment in Waitrose’s new store opening will slow down but investment in existing stores will be accelerated
Tom Moody, VP and MD Northern Europe, P&G
In an age of Big Data it is easy to succumb to “analysis paralysis”. Tom hit the IGD stage to remind us that communication is, ultimately, a human process. Data can support it but there is not yet anything to beat human insight and intuition.
- Shoppers are flexing their muscles in a new way: they are more demanding, more discerning and more punishing than ever before
- Businesses like to think that they are in control but in reality they are dealing with massive volatility and uncertainty and can only expect to get it right a proportion of the time
- To increase their success rate, businesses need to “put shoppers in the Boardroom”
- Businesses should dig deeper to understand what really matters most about their products. In case of sanitary products, P&G recognised that they are really about delivering confidence and use this to build the inspirational “Like A Girl” campaign for Always
“You can always find a data point to support what you were planning to do anyway”
“The last five years may prove to have been a picnic, compared with what the next five may have in store”
“The world is no longer just VUCA .. it’s V-VUCA”
- The “Like A Girl” campaign delivered significant sales improvements for P&G and for the sanpro category as a whole – but with any clever campaign, the product has to match the content
- P&G is shrinking its breakthrough innovation lead times from five to three years
John Kennedy, President Europe, Russia and Turkey, Diageo
Today’s marketers benefit from a vast amount of detailed, timely data on shoppers but converting this into commercial gain is often extremely difficult, at least with conventional procedures. John Kennedy explained how Diageo has learned to short-circuit the process, delivering activity in hours, not weeks.
- Shoppers not only want brand communication to be fun and exciting, they also want it to be fast - and the definition of “fast” is changing, due to technology
- Brand owners need to move almost instantaneously to the news agenda, e.g. sports events
- Diageo has used What’s App groups and social media to create advertising much faster (e.g. to celebrate sporting victories) with the turnaround time for ads sometimes as little as 2 hours
- If the necessary technology is not available, brand owners may need to create it. In India, Diageo provided online restaurant booking software for its customers
“Data has been more revolutionary for brands than it has been for retailers – but the journey is incomplete”
- Today, FMCG businesses need a 1-to-1 relationship with every shoppers. Fortunately, modern technology means that they can have it
The big finish: Q&A with Andy Clarke, Chief Executive, Asda
- So far, groceries have been largely unaffected by currency depreciation. Inflationary effects should be expected from Q1 2017 onwards. There is still lots of deflation to “take up”, however.
- If we do not make more progress on health and nutrition, progress will be imposed on businesses through legislation. Businesses need to be more proactive.
- Overall, we have room for optimism about the future … a nervous sort of optimism. But the ability to move fast will be what determines winners and losers.
Related information on IGD.com