Strategies during the Pandemic: Protecting Employees and managing Price & Promotions
April 04 2020Blog
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Since our update last week on How Food Retailers and Manufacturers are Serving and Protecting their Customers in the midst of the Coronavirus, food and pharmacy retailers and their suppliers continue to work tirelessly and heroically – in the face of health risks to themselves – to ensure their customers are able to feed themselves and their loved ones.
As the crisis continues to escalate, this week we look at how retailers are putting employees first and protecting them as part of a Customer First strategy, as well as determining the right way to offer value for money to customers and future considerations for pricing and promotion strategies.
Many governments around the globe have turned to formally classifying grocery, pharmacy and convenience store employees as "essential" and "emergency" workers due to the critical nature of their role in keeping stores open to feed and care for their communities. However, also understanding that these workers are exposing themselves to possible health risks, many retailers rolled out a series of safety protocols over the last week including:
Over the last week, we have also seen associations and outside industries providing resources and sharing workers with the grocery sector. The International Foodservice Distributors Association (IFDA) has partnered with The Food Industry Association (FMI) to provide excess foodservice resources to the grocery sector. In addition, foodservice distributors with unused capacity — including products, transportation and warehousing services — are connecting with food retailers seeking more supply. Some quick service restaurant franchisees have agreed to provide their staff to local grocers to both help their employees continue working and to fill manpower needs for the grocers. Some grocers have partnered with hard hit sectors in the service industry including travel, entertainment and hospitality to have their furloughed workers transition over to grocery stores and distribution centres.
Each phase of the crisis will necessitate a different level of promotional intensity by retailers. For those regions still in the early weeks of the pandemic, retailers need help in managing intense demand in order to relieve the pressure on store operations.
Here are some of the actions retailers are taking now in Phase 1 of the crisis:
1. Value for money will become a heightened driver of behaviour as consumers face a depressed global economy. We see this leading to 1) Further Private Brand differentiation and expansion; 2) Deeper investment in base prices on key lines; 3) Fewer, more efficient promotions; 4) Focus on driving cash profit over % margin.
2. A Customer First approach to pricing and promotion (and ranging) is still the right answer. The good news is that consumer-data-led frameworks such as Key Value Items (KVIs), the Balanced Matrix and Category Roles, Seven Levers of Value Perception – will continue to be appropriate for informing strategic and tactical decisions going forward.
3. Disruptive pricing and promotion models are expanding as a result of consumer behavior changes during the pandemic. We believe that the crisis will trigger a tipping point for retailers to switch from the paper flyer to more digital communication through their website and app, with a more urgent value in making this personal. In-store media will become more important and impactful as well. Subscription models are being adopted by retailers such as "Delivery Savers to help manage online demand. Online pure-players are pointing the way to opportunities for new pricing bundles and subscriptions on "destination" areas, in concert with suppliers.
In this time of unprecedented challenges for businesses, employees, and shoppers, Customer First principles should play a key role in every retailer's strategy. Not just for protecting employees and frontline workers so they can continue to serve their communities, but to prepare for the changing Customer needs as the pandemic develops.
Last March, when we realized the potential impact that COVID-19 might have on all aspects of our lives, dunnhumby launched a survey to understand how the virus would affect consumers food shopping habits. It was designed to help our clients better meet the needs of their Customers by seeing the impact of the virus through their customers eyes.
Little did we know at the time that one year later we would still be dealing with the impact Covid-19. This study presents the results of the sixth global wave of the study and the seventh wave for the United States. Other waves were conducted in March, April, May, July, September and November of 2020. This wave was conducted in February 2021.
This report focuses on just how things have changed over that year and what remains the same.
Retail leaders must objectively understand how their business currently considers Customers before trying to set a more Customer-centric direction and focus. There are some formal assessment methodologies, like dunnhumby's Retail Preference Index (RPI) and Customer Centricity Assessment (CCA), which offer detailed evaluations of a business' capabilities, strengths and weaknesses based on Customer perceptions (RPI) or global best practices (CCA).
The approach outlined below is not intended to replace these formal tools; rather, these observations are intended as a kind of 'toe in the water' to help retail leaders form early hypotheses and points of views. These are rules of thumb, heuristics culled from global experience. Later, leaders might use these observations to informally check progress from time to time as a way of assessing whether the "program in the stores matches the program in our heads".
Hence, the context and laboratory for these suggestions is the retail store, where the rubber meets the road, so to speak.
Walking around a store (or better, walking around several), can give many clues toward understanding a retailer's attitude about its Customers, as well as revealing some of the challenges ahead for installing Customer First. As Customers ourselves, we are qualified to assess an organization's 'readiness' for Customer First, simply starting by walking around.
How a Customer experiences the store shapes their perception of the brand, and there are dozens (even hundreds) of 'moments of truth' for Customers in each shopping trip – opportunities for the retailer to win more loyalty, or indeed to lose it. And it only takes one 'bad' experience to erase all the good.
Leaders can form an opinion about the Customers' true shopping experience by observing 'Who really runs the store?' – a way to put on a Customer lens to assess if the Customer, the retailer, the supplier, or no one is driving shopping experience decisions, like range and presentation. For example:
Of course, analysing any available loyalty data will later tell us how Customers shop the category and that might well be by brand (or flavour or size, etc., and will certainly vary by section). But this first assessment helps us begin to form our perspective on how tuned-in the business is around its Customers, and about where within the business leaders might need to begin to install insights and the Customer language.
Store signage not only delivers a written message, but also a type of 'body language' that Customers tune in to, albeit not always consciously. Look around the store to see both the written and hidden messages, and hear the tone being communicated: ask, do messages speak respectfully to Customers? For example:
While walking the store, traveling through stock rooms and the employee break room, note the signage and messaging aimed at staff. What seems to be valued more – numbers or people?
What policies and rules guide employee behaviour?
How are they expected to interact with Customers?
Are the messages respectful of staff? Of Customers?
What do signs say about the culture around Customers?
dunnhumby's Loyalty Drivers analysis suggests that Customers exhibit four 'mindsets' in their shopping journey – Discover, Shop, Buy, and Reflect. One element of the 'Reflect' mind-set includes the decision to return, exchange, or to request a refund when the product or service does not quite suit.
On your store walk, observe who has the power to satisfy Customers making a return or wanting a refund: is the front-line employee empowered to satisfy the Customer, or must the Manager be called? Is there one 'service' desk where Customers must queue to get their money back, or can the helpful cashier make it good on the spot?
Examine the return policy to assess its sensibility and ease from a Customer viewpoint. For example, must a Customer act within 7 or 30 days, and is a receipt required and signature under penalty of perjury? Is the taking of an oath necessary, or perhaps a drop of blood? The store's practice says volumes about who deserves trust in the eyes of the business. Requiring levels of approvals and higher management involvement (or some other form of hoop-jumping) is neither trusting of employees nor Customers.
The return / refund policies and practices are strong indicators of a company's readiness for, or progress along the Customer-centric journey. Customer First organizations give front-line employees broader authority to resolve Customer needs, and extend the power to satisfy Customers to most members of staff, in some form. For best practices in this area, please see the policies from Nordstrom in the U.S. and Ritz-Carlton globally.
Senior leaders set the tone for how Customers are regarded and treated in the business both by their words and their actions, of course. And the C.E.O.S – Customers, Employees, Owners, and Suppliers – all take notice. It's widely documented that leaders who walk the walk are more effective than those who only talk the talk.
One simple yet powerful way to assess readiness and progress is seeing how leadership's walk and talk align. A word cloud, like the one illustrated below, makes the point very clear. In this example, recent shareholder statements (same quarter) were compared for two companies on a Customer-centric journey. We can see different progress in a form of 'walking the walk' at Retailer X and Retailer Y. The C.E.O.S are hearing what really matters to the leaders, and are forming the Customer culture accordingly, all the way down to store level.
The store shapes Customers' perception of the brand; there are hundreds of opportunities for the retailer to win or lose loyalty in each shopping trip. Customers take clues, consciously and unconsciously, throughout their entire shopping experience, and draw conclusions about retailer warmth and attitude toward shoppers. And it only takes one disappointing experience to erase all the good.
Retail leaders must take an objective assessment of the shopping experience using a Customer lens to understand their current state and readiness for customer centricity. Pay close attention to the body language and tone of your policies. Store signage, employee empowerment and communications, and practices around assortment and presentation are clear indicators of the organization's attitude about the Customer.
This is the first in a series of LinkedIn articles from David Ciancio, advocating the voice of the customer in the highly competitive food-retail industry.
In order to reflect on how the grocery world changed in 2020, we have changed how we calculate our overall Grocery RPI score. Given the historically unique metrics we've witnessed in the economy, the restaurant industry and the grocery industry, along with the rare influence a global pandemic has brought to consumer behavior, we're viewing grocery success in 2020 through a different lens than we viewed grocery success in prior years.
In the first episode of Customer First Radio, Dave Clements, Global Head of Retail for dunnhumbyand David Ciancio, Global Head of Grocery for dunnhumby kick off the series by discussing what it means to be a truly Customer First business, share which retailers and brands today embody a Customer First mindset, and examine how Customer First materialized during the pandemic with retailers.
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In this series, dunnhumby tours the globe and speaks with some of the world's greatest brands, exploring their biggest challenges and how they are using customer data science to meet those challenges.