The rapidly changing supermarket landscape in the UK is the source of much industry debate at the moment. This dramatic shift in grocery shopper behaviour is driven by a number of macro factors such as a more volatile global economy.

The response by some of the major grocery retailers has been arguably to place too much emphasis on a tactical rather than a strategic marketing approach. This has been driven by heavy shopper analysis of past behaviour and supporting purchasing data with less attention being given to recognising the evolving shopper opportunities on the road ahead.

Creating a gap

Major supermarkets are now seeing shoppers starting to drift in large numbers to do more of their shopping in the ‘discounters’. These retailers tend to be smaller and leaner UK operations that offer a smaller range of products with less well-defined, developed categories compared to the big supermarkets.

By offering lower prices on a range of key items the grocery discounters have gained the perception of being cheaper places to shop.

The discounters are not actually doing something new but doing what supermarkets set out to do during the last century  - provide lower-cost food shopping on core items for the masses.

Did the big supermarkets get it wrong? 

It is generally agreed that the major supermarkets did everything right in terms of focusing on their loyal customers yet clearly something was missing because of the shift in shopper behaviour taking place now.

The big supermarkets continued to strive to maximise performance in an increasingly difficult and competitive business environment. They understood their core shoppers’ needs and the outcome included investing heavily in ‘the theatre of the shopping experience’ and the expansion of different-sized property portfolios. 

Investments along with an increasing need to improve operating margins caused prices to slowly increase as the big retailers continued to focus on each other and so created a gap in the market tailormade for the expanding discounters to steal market share.

Filling the gap

What practical steps can the big grocery retailers now take? An increasingly important methodology to help marketeers better understand their shopper behaviour is adopting and applying the understanding of ‘Customer Value’. This measures the value consumers or shoppers place on non-tangible factors that affect customer thinking and if managed and interpreted effectively, can help predict and map out changing customer preferences and behaviour allowing businesses to meet the changing needs. 

Customer Values are intangible and forever changing and therefore need to be continually monitored because they are highly dynamic. The desired outcome is to produce a map of future demand that places the emphasis on foresight that is informed by insight.

“Whilst historical customer insight informs, it is the focus on marketing foresight that really needs to be at the heart of your thinking”

Tools such as Voice Of the Customer (VOC) can provide continuous feedback showing if customer value is changing but this is only relevant if the VOC programme is tuned in to catch customer values rather than  the customer experience or customer engagement.

The VOC programme must be set up to capture customer sensitivities that affect behaviour. A programme geared to the popular Net Promotion Score metric may not pick up these important shifts in customer values. The essential point is to know where you are focusing your programme.

For all businesses, what is needed is greater adoption of effective processes tracking changing customer values to enhance future strategy and company vision with less emphasis on tactical marketing that has seen increased levels of price matching across the big grocery retailers and deeper volume-based promotions on high value brands.

Implementing ‘Customer Value’ initiatives is a great starting point to bring about this new approach. Whilst historical customer insight informs, it is the focus on marketing foresight and the understanding of evolving consumer needs that really needs to be at the heart of your thinking in shaping a new marketing strategy.

Euan Kilpatrick is the head of food & drink at iQube Marketing Ltd

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