Are retailers and brands using the right tactics to get shoppers to spend, asks Danielle Pinnington, managing director, Shoppercentric.
January is always a tricky one. The festivities are over for another year, the decorations packed away, diets started, alcohol or cigarettes (or both) given up. And for the retail sector it is increasingly the month where Christmas results lead to celebration or commiseration, and sometimes even closure in the worst cases.
This year hasn’t been any different, with M&S reporting a drop in general merchandising sales, Jessops going into liquidation, and Tesco and Sainsbury’s having a public debate about appropriate financial reporting.
On top of the general feeling of gloom is the added concern that no matter what promotions or deep price cuts are thrown at them, shoppers are resisting the urge to spend like the old days.
So, are the tactics being used by retailers and brands the right ones?
The fact that the economic downturn has gone on for so long means that there has been a fundamental shift in the consumer mind-set. By the mid Noughties consumer spending seemed to be based around ‘I want it all - now’, as the UK made the most of interest free periods on loans, and their ever flexible credit cards.
But that was then. Today’s consumers are much more careful about their spending, and they are adopting a range of strategies to make sure they make their money go as far as possible. So some are avoiding the expensive shops or even what they might feel are expensive aisles in-store; some are cutting back on their spending, by trading down, switching to own label, or simply sticking to a clear budget; some are making sure they make the most of promotions; others are hopping from store to store to get the best deals or prices; and nearly all are avoiding waste.
In fact, the majority of the UK population are adopting all of these strategies at some point in their shopping trips. As a result all of these behaviours are becoming engrained and consumers are feeling increasingly confident that they can get the most out of their money.
Reacting to the downturn is not just about lowest price - otherwise we’d all be shopping in Aldi and Matalan. And it’s also not just about promotions, otherwise Waitrose and John Lewis wouldn’t have reported such stunning Christmas results.
So what does this mean for business? Well, it means that the effort required to encourage consumers to spend is going to have to continue or even increase.
The exhaustive processes developed around NPD pipelines will continue to need the additional support of marketing beyond the launch.
Designing a fabulous product to then just shove it on shelf is no longer enough. Neither is using advertising to raise awareness of a new product or an existing brand pre-store or pre-purchase enough.
Brands and manufacturers need to ensure that marketing doesn’t stop at the store door. When the default consumer mind-set has shifted to ‘do I really need it’, every product on shelf or on a website needs to proactively sell itself.
That selling can come in many forms: packaging that is designed to meet purchase needs, not just consumption needs; SRP that is designed to support a sale, not just help with shelf replenishment; promotions that upsell rather than undermine value; POS that draws attention to the brand or product benefits; or linking the product to seasonal or specific events like the Jubilee or Wimbledon.
In fact it’s worth taking a quick look at the whole area of seasonal or event specific shopper marketing. This is an area that is increasingly recognised by retailers and savvy brands as being worthy of attention.
The opportunity to give a product, aisle or store a new look, even for a short period of time, is increasingly valuable as it snaps shoppers out of their blinkered mode.
Remember Marmite and their Jubilee Jar, last seen selling on eBay for way over RSP? And ASDA gets rave reviews from shoppers for its Halloween effort.
Even if the economy turns the corner in 2013, after such a sustained downturn it is hard to believe that consumers will quickly return to the prolific spending levels of the past.
So it is for the brands and retailers to react to the changing situation, and to catch up with changing consumer needs:
- It is about understanding shoppers needs as well as consumer needs.
- It is about exploring what value means beyond price point or promotion.
- And it is about generating interest in-store through more creative retail environments - or even more interactive transactional sites online.
Finally, it is about seeing the point of purchase as an opportunity to change behaviour, and working that opportunity as hard as possible, rather than just seeing it as a space for a product to fit into the planogram.