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In the decade since Richard Thaler and Cass Sunstein's Nudge: Improving Decisions About Health, Wealth and Happiness was published, nudge theory has enjoyed unprecedented success.
Predicated on the idea that individuals respond better to indirect suggestion than outright commands, nudge theory is commonly used as a way of subtly influencing our behaviour towards positive choices. The idea has gained such traction, in fact, that many governments around the world have created "nudge units" in a bid to tackle thorny issues like obesity and the climate emergency.
Just as governments are exploring how nudge theory can be used to tackle real-world challenges, retailers have a similar opportunity with regard to their customers' dietary choices. With even a few small changes, retailers can help to nudge shoppers in the direction of healthier food decisions.
What follows are some of my favourite nudges that grocery retailers could easily implement to aid customer health.
Tackle the temptation of treats
In 2018[1], scientists published their findings from a seminal experiment in which some of the UK's leading retailers removed snacks and confectionery from the checkout. Purchases of sweets, chocolate, and crisps subsequently fell by 76% when compared to supermarkets that kept those items in place. In other words, just changing the location of products can nudge shoppers into healthier decision making.
Give healthier goods more space in-store
In 2012[2], scientists investigated whether the sale of healthy snacks next to the checkout in a hospital canteen could be influenced by the amount of shelf space they were allocated. Healthy products were given a quarter of the shelf space in the first test, and three-quarters in the second, with sales rising from just 14% to 44% as a result. Visible availability of healthier options clearly plays a big role in pushing us towards them.
Create dedicated “fruit and vegetable” partitions in trolleys
One particularly innovative nudge was discovered by a group of US scientists in 2017[3], who found that introducing an area in a trolley specifically for fruit and vegetables led to higher sales of those items. As with the previous example, the amount of space dedicated also had a role to play. In one study, increasing the size of the partition from 35% to 50% of the trolley increased customer spend on fruit and veg from $14.97 to $17.54.
Normalising fruit and veg purchases
Change4Life is a campaign run by the UK's Department of Health, aimed at nurturing healthier lifestyles. A 2015 study[4] commissioned as part of the campaign suggests that "normalising" the purchase of fruit and veg goes a long way towards influencing shoppers. When trolleys used statistics showing how many other shoppers purchased fruit and veg, spend in those categories rose by 12.4%. Social norm communications like this are a classic form of nudge that exploits our deep-seated concept of conformity (in this case in a very positive way!).
Use cartoon characters to encourage healthy eating amongst children
Obesity isn't just a problem for adults. To help tackle childhood obesity, the Food Dudes[5] programme put cartoon role models at the centre of its in-school campaigns. One London-based study found that fruit consumption amongst the poorest eaters increased from 4% to 68%, while an unexposed control group showed no change. Whilst this may not show increased consumption in a retail context, the concept of using accessible and entertaining imagery and characters to promote healthy eating out of store should be equally applicable in-store.
The new nudge on the block
Some of these techniques came together last year when the Royal Society for Public Health showcased Nudge, a pop-up at The People's Supermarket in London[6]. While the store was only open for two days, the purchase of sugary drinks was halved according to customer feedback. There are plans to make Nudge a permanent feature of the store, and to use data from every purchase to help identify further opportunities to influence customers towards healthier choices.
And new nudges are always popping up. In November 2019 a new DnaNudge shop opened in London. Combining a wristband and app, DnaNudge aims to help users make better food shopping choices based on their DNA and lifestyle. Food is scanned using the wristband, which will then flash red or green based on its suitability for the owner's biological profile. A product with high salt content will flash red for a user with high blood pressure, for instance. DnaNudge, which recently showcased at CES 2020, is collaborating with Waitrose to study the effects of this approach on pre-diabetic customers.
Keeping up with the PACE
Food labels themselves can be also used to encourage healthy eating, by translating calories into walking time to nudge people into healthier choices. This approach is often called Physical Activity Calorie Equivalent, or 'PACE' labelling, and has shown promise in reducing the number of calories and the amount of food consumed by the public[7]. Some results in the UK have been so promising that the Royal Society for Public Health has called for PACE labelling to be introduced. Despite further research needed to assess its real-world impact, this nudge is likely to receive more attention in the near future.
Nudging us towards a healthier future
It's a sad fact that non-communicable diseases (such as heart disease, cancer and diabetes) still account for around 70%[8] of global deaths. Furthermore, many of these deaths are due to factors that the victim may be able to influence, with tobacco use, alcohol abuse, diet, and inactivity all contributing to that number.
While grocery retailers might not have a direct responsibility for commanding their customers to eat better, they do have the opportunity to play a huge role. As behavioural science becomes better-known around the world and savvy customers expect retailers to make it easier for them to make healthier choices, expect a tipping point soon at which the nascent nudge becomes the new normal.
References
- Supermarket policies on less-healthy food at checkouts, PLoS Med (2018)
- Healthy snacks at the checkout counter, BMC Public Health (2012)
- Larger partitions lead to larger sales Journal of Business Research (2017)
- Shopper marketing nutrition interventions Prev Med Rep (2015)
- 'Food Dudes': Increasing Children's Fruit and Vegetable Consumption. Cases in Public Health Communication & Marketing (2009)
- Health on the Shelf report, Royal Society for Public Health (2019)
- https://www.lboro.ac.uk/media-centre/press-releases/2019/december/labelling-foods-amount-of-physical-activity-needed/
- https://www.who.int/news-room/fact-sheets/detail/noncommunicable-diseases
A new format in grocery retail is emerging: the 50,000 square foot convenience store. Its value proposition to customers is simple: higher quality perishables and ready-to-eat items than your typical grocery store. Thousands of the same center-store products you can also find at Walmart, Target, Amazon, Costco and Sam's Club. Everything at higher prices. Added bonus: since the store is 10x to 20x bigger than your typical c-store, you can get your steps in and burn calories at the same time.
Wait, what?
The reality is that this is not a new format—rather the customer-led repurposing of a familiar one: the traditional, regional grocery store. This finding comes from a follow-up analysis of data collected for the recent 2019 Grocery Retailer Preference Index report, a report which identified winners and losers among the 56 largest retailers in the U.S. Grocery Retail Industry. In this follow-up analysis, we examined the types of trips people took (e.g. bigger vs. smaller) to each retailer, as well as the categories they bought (e.g. produce, ready-to-eat or paper products). The findings cast further light on the problems faced by traditional grocers in an evolving grocery landscape that has seen national mass, club, drug, dollar, convenience and digital players invest more in the grocery game the past few decades.
When considering trip types and categories sought by customers, five general types of retail destinations emerge:
- All-around grocery shop
- Perishable and ready-to-eat small basket
- Quick and convenient meal
- Non-perishable stock-up
- Non-perishable small basket
Certain channels lend themselves to certain destination types. Specialty grocers like Trader Joe's or Sprouts, with fewer SKUs and smaller formats than the traditional grocer, tend to fall in the "Perishable and ready-to-eat small basket" destination type. Club and mass are non-perishable stock-up destination. Drug, dollar and digital in non-perishable small basket. C-stores in quick and convenient meals. However, many traditional grocers have an identity crisis. Only 6 in ten are seen primarily as "all around grocery shop" destinations, despite all of them carrying the full complement of SKUs.
In other words, almost half of traditional grocery stores are shopped more like a convenience and specialty store than like a store with 10-20x more products than that. At best, categories beyond perishable and RTE food are typically an afterthought and only shopped in a pinch. At worst, those categories are bypassed completely by shoppers, who instead buy the same products for cheaper at widely available mass, club, digital, dollar or drug channels.
The result of being treated as a perishable c-store is a lower share of customer wallet. Traditional grocers who are all-around grocery destinations win 33% of their customer's share of wallet, versus only 20% for traditional grocers shopped like a perishable c-store.
So, what can traditional grocers who are not being viewed as an all-around grocery shop do about it?
According to an analysis of customer needs gathered from a survey sent to 7,000 shoppers in the U.S., if traditional grocers want to ensure they'll be an all-around grocery shop, they need to ensure some key ingredients are in place:
- Highly relevant assortment, which is rarely out of stock
- Prices that are consistent on inelastic and competitive on key-value items, while offering discounts on the products that are important to customers and responsive to promotions
- Decent perishable quality
For now, traditional retailers aiming to be all-around grocery shops can trade-off on having the best digital offering and the best ability to get customers in and out quickly. These things are less important to customers when picking an all-around grocery destination.
While some traditional grocers are struggling to win the title of all-around grocery shop, one non-traditional store isn't: Aldi. Aldi's consistently industry-leading prices and their ability to manage out of stocks and store cleanliness just as well as your average traditional grocery store, has made them a stock-up destination for perimeter categories, like produce and dairy, as well as center store packaged food items. As a result, despite having stores which carry less than 2,000 SKUs, Aldi's share of customer wallet is in line with that of the average traditional grocery store, which often carry more than 40,000 SKUs.
Of course, the reality is that no single non-traditional competitor is eating away at traditional grocers' hold on the all-around grocery shop. Rather, a host of non-traditional competition, each with unique value propositions, are all taking small bites, which add up. The data suggests that this is because traditional grocers took their eye off the retail basics, perhaps because they grew complacent after decades of dominance and relatively little industry disruption from non-traditional substitutes.
So, the call to action is clear: before overinvesting on any shiny new toys, like eCommerce or technology to speed up checkout, get back to your roots and make sure you're offering the right prices on the right products.
Continuing our regular series exploring Grocery Retail's response to the Coronavirus pandemic, this week we analyse the results from dunnhumby's latest piece of consumer research, the increasing importance of Category Management, and the actions that Retailers need to be taking now to ready themselves for an eventual recovery.
Checking in on Customer concerns
In our last post in this series, we unveiled the dunnhumby Customer Pulse, a survey of consumers from 19 global markets conducted at the end of March. Keen to develop our understanding of how Coronavirus continues to shape Customer demands, we moved ahead with a new wave of surveys using the same geographic and demographic framework.
Once again, three key issues came through loud and clear from our respondents.
- As worry declines, Customer perceptions are changing The 'worry score' – the number of respondents in each country who self-identify as concerned about Coronavirus – went down for more countries than up. While this may not be surprising in isolation, where worry scores decrease, so too does interest in the preventative measures being taken by Retailers. As worries ease, many Retailers may find themselves pressured to loosen restrictions faster than originally planned.
- Customer satisfaction is on a knife edge Across all markets, we found little evidence to suggest any correlation between preventative measures and Customer satisfaction. Instead, satisfaction is dictated primarily by one defining issue: stock levels. Where customers acknowledge having noticed out-of-stock items, their satisfaction levels are likely to be much lower than those who have not. Raising prices on, and limiting availability of, virus-related items can have a similarly corrosive effect on Customer satisfaction.
- Simple actions can have a big impact While Retailers may continue to find stock levels difficult to control over the coming weeks and months, other avenues may help them to mitigate dwindling levels of Customer satisfaction. Actions that are seen to have a major positive impact on perceptions include removing delivery charges for certain Customers, discounting virus-related products, and increasing the frequency of store cleaning.
A third wave of the dunnhumby Customer Pulse will be available soon.
Keeping pace means clever use of Category Management
As is apparent from the results above, one of the only constants for Grocery Retail during the Coronavirus pandemic is the speed at which Customer demands continue to change. While it might not be possible to prepare for every eventuality, adapting or refining your approach to Category Management can be a smart and effective way to keep pace with those shifting need states.
We believe that Retailers should funnel Category Management activity towards three areas.
- Aim for nimble management of product assortment As product shortages and changing demands continue to impact Customer experience, agility is vital. Customer decision trees and need states should be used as a guide when managing supply levels, emphasising higher-order needs in each category. Breadth – not depth – is one of the most pressing factors here, and Retailers can best serve Customers by ensuring that the most important need states are addressed above all else.
- Ensure your Private Brand is fit for the future Customers are looking to find increasing value in every shop as household budgets come under intense pressure. Private (Store/Own) Brand labels can provide shoppers with just that kind of reassurance, and we believe that now is the time for Retailers to shore up those lines. Reassessing the relevance of Private Brands on a category-by-category basis is a good starting point, as it is likely to reveal prominent gaps or areas that would benefit from further investment.
- Maintain your investment into essential online channels Soaring demand for online grocery has become one of the defining trends of the past few months, and there are no signs that this will change post-pandemic. Loyalty data can be a major differentiator here, providing an opportunity to create a frictionless experience by surfacing in-store favourites and relevant recommendations in a similar manner online. Retailers will also be well served by ensuring the accuracy of substitutions (particularly by arming packers with good suitability metrics) and emphasising issues of hygiene and quality around fresh produce.
The journey towards Recovery
Much of the work we're doing to help Retailers through these unprecedented times revolves around anticipating changing Customer needs at three distinct stages of the crisis: Insecurity, Transition, and Recovery. As we move through Transition, we believe that Grocery Retailers must take action now to ensure their business is ready for the new challenges ahead.
- Reset your categories to focus on what Customers care most about The product assortment you have today may not be right for tomorrow. With economic challenges almost certain to trail the Coronavirus pandemic, Retailers need to begin looking at wholesale category resets that will make assortments leaner, fitter, and more relevant for cost-conscious Customers. Prepare to maximise shelf space for categories where variety is essential and scale down categories where it is not.
- Bring a Customer First approach to assortment and space planning Reviewing your latest customer data sets will identify changing category roles and importance of key marketing levers such as price, variety, and channels. There are already new adjacency and layout opportunities to implement by looking at the changing mix and frequency of purchase in the Customers shopping basket, especially in categories like personal hygiene and cleaning, fresh food and cooking from scratch missions. As Customer behaviours continue to change, understanding and monitoring these changes by different customer groups and different shopping missions will be critical in order to make the most informed and best retail decisions.