Discounters are on the march. And its not just a recession thing (though of course that helps!) Discounters are growing fast. How? And why? At a time when most bricks & mortar stores are struggling it is easy to assume that physical stores are dying. Yet discounters are proving that simply isn’t the case. Great prices are clearly part of the equation, but there is a lot more to it than that. They have built brilliant efficiency into their business. Also true. They understand that making money at retail is about velocity as much as it is about margin. Also true. But none of that would matter if discounters didn’t understand shoppers. And discounters are really good at understanding shoppers and giving them what they want. At the heart of their success is great shopper-centricity. Which means if we can understand why discounters are performing well, we can all learn something about shoppers and shopper marketing too.
Discounters deliver price and quality
Discounters. It’s all about price, isn’t it? Well – no. Shoppers don’t buy on price. They buy on value. Discounters understand that and have decided how to deliver this. They are delivering Quality and Price – two parts of the simple value equation that drives shopper decisions. Discounters realized that price is great, but without quality, then they aren’t able to compete.
Discounters understand and apply Shopper Economics™
Discounters understand Shopper Economics™. Shopper Economics™ is a model we created as a simple model to help understand shopper motivations. Discounters tend to understand this too. The principle is that shoppers (like all of us) make decisions based on value and cost. We do things that create value for us as shoppers and consumers: and things that are easy or low cost for us as shoppers.
Shopper Economics™ identifies two ‘cost’ elements. One is related to the economic cost – price if you will. But the other is about time. And shopping at a discounter is a lot quicker than shopping at a superstore. The store is smaller. Each product range is smaller. Even the walk from the car to the store entrance is shorter. Discounters reduce the ‘cost’ of shopping: both in terms of price AND time.
Discounters understand how to make shopping less stressful
Those smaller ranges make it quicker to navigate the store. But they also do something else. A small range makes choosing easier too. I’m sure many of you will have heard about the Choice Paradox: whereby reducing options to a shopper actually increases the perception of range, as well as driving purchases. When I shop in a large superstore the range is huge in most categories. A discounter – not so much. It’s faster to make a choice. It’s easier too. And that makes it less stressful. Yes, too many choices adds stress. It makes the shopping experience less pleasurable. It’s as simple as that.
They are also great at playing psychological tricks with stress too. If you’ve ever been to a discounter, you’ll almost certainly have experienced this. As you approach the checkout there is a bit of a queue. Quick as a flash an announcement is made, and another checkout is opened. Momentary stress, instantly relieved. That is a feel good factor for the shopper (and actually feels better than having no queue in the first place!).
Discounters understand the most important principle in marketing
OK – that’s a big statement! But hear me out. At the heart of any marketing is the principle of targeting and segmenting. If you want to mean something, you need to decide what it is you will stand for. But to do that effectively, you must also choose a target market. Who are you targeting and what it is you will offer to them. This approach lies at the heart of an meaningful differentiation, and you can’t do marketing without differentiation.
Big box retailers struggle with this. Their model is almost anti-marketing. It’s a ‘we will be all things to everyone’. We will be comprehensive. We will offer a broad range. We will offer good prices. We will offer great service. We will be convenient to shop at. We will be available everywhere, to everyone, meeting all your needs.
The problem with the everything to everyone approach, is that it ends up being generic. Big boxes might promise the best prices (see below) but they only match discounters’ prices on some products. Not quite the same. They promise a ‘great range’, but that’s not the case (depending on your perspective). They certainly offer a pretty good range. But as argued above, more isn’t always better.
And average doesn’t work for everyone. Take cheese as an example. My local Tesco superstore has a huge aisle full of cheese. But most of it is Cheddar (for those of you outside the UK – it’s a British thing – go figure!) Do they have a great range of cheese? Well that depends on your perspective. If I want eight brands of cheddar in different pack sizes and different strengths, sure. But if I want a good range of different cheeses? Maybe not. Maybe a cheese specialist or a farm shop or an online Cheese store would be better. In trying to be everything to everyone, retailers risk missing. Their range is too small for those that want to explore, and too big for those that just want a simple purchase experience. Yes it is right for some people, but it is bound to disappoint others.
The discounter however is clear. They have a simple range. You don’t go to Aldi expecting a wide range of regional cheeses. So I’m happy. When I go to Tesco I’m not sure what they will have. They might have what I’m looking for. But maybe not. Average leads to disappointment. Discounters aren’t trying to meet the needs of every shopper. They don’t need to. All they need to do is understand their target shoppers, their missions, and what is important to those shoppers on those trips.
So what can we learn from this?
Shoppers buy Value, not Price
When confronted with difficult economic times, it is easy to pull the ‘price’ lever. We need to understand that shoppers don’t buy exclusively on price. They buy on value. In simple terms (and I appreciate that this is a simplification, but in the context of this article, it’s a useful shortcut), Value can be thought of as an equation, as follows:
Value = Quality (Equity X Product Performance)/ Price
So yes, if we want to improve value perception, then we can reduce price. But we can also improve quality in terms of brand equity or product performance.
Shoppers are driven by Shopper Economics™
Taking this further, shoppers make decisions based on Shopper Economics™ This powerful tool can be used to diagnose your store, channel, brand or category and help define how to improve your performance. It is also a great predictive tool to understand how shopper behavior might change in the future. If you’d like to understand more about how Shopper Economics™ can help you win at retail, please get in touch.
Shoppers are driven by emotion as much as (if not more than) rationality
Shoppers are human beings and as such are emotional in our decision making. As an example I went to a store at the airport the other day. They were offering a meal deal (you know the thing: buy a sandwich, a snack and a drink and get a discount). As I stood at the shelf I couldn’t see the price of the deal. Turns out that detail was displayed two bays away. I eventually found it, but by then I was frustrated. So I didn’t buy.
If you aren’t thinking about shopper emotions – you’re missing a trick.
If all you are thinking about is how shopper rationalize (and post-rationalize) their decisions, you aren’t fully understanding shoppers).
Make shopping easy. Make shopping stress-free. Make shopping intuitive. Make shopping as seamless as possible.
Become shopper-centric
Discounters are successful for many reasons. Efficient operations, smart innovations, shamelessly ripping off intellectual property, all help. But the engine that makes all of this work is shopper-centricity. None of this would work if they weren’t shopper-centric.
We’ve got decades of experience helping organizations become more shopper-centric. Whether it is developing shopper insight, integrating consumer and shopper strategies, training your team to be more shopper-centric or using this insight to create better shopper communication and retail selling presentations: we’ve helped some of the biggest companies in the world. If you’d like to know more check out our training programs, or get in touch for a no-obligation chat about your situation.
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