Personalized Promotions: “Show Me You Care”

Customer holds digital phone getting personalized promotions in grocery

New digital personalization in food retail: With more U.S. shoppers embracing omni-channel, research commissioned by Precima and conducted by IDC – reveals relevance, communications and trust are fundamental to the value equation.

Personalization is evolving to become the new “standard of caring” for food retailing in the digital era. Grocery shoppers want offers and deals on products they care about and they demand redemption methods that make the entire process seamless – in the context of both in-store and digital transactions.

Shoppers responding to Precima’s “Digital personalization in food retail: U.S. Shoppers are embracing omni-channel” research survey say personalization is essential to earn and keep their loyalty. Among participants in their retailers’ loyalty programs, nearly two-thirds (65%) identified “promotions and offers that better meet my needs” as an attribute that makes their preferred retailer better.

Food retailers are embracing this trend in a major way and many are making a substantial commitment. Over the next three years, 87% say they have plans to focus on personalized promotions and offers that reflect customer shopping patterns and product preferences. To get the job done, 86% will use a customer database and analytics platform to analyze customers.

For retailers, personalization competency amounts to an expression of loyalty toward their shoppers, identifying it as a critical factor in future success. For shoppers, seamless redemption of personalized offers could even eclipse location convenience and price as criteria of store choice.

The U.S. specific surveys were conducted by IDC. In all, 1,001 food shoppers and 152 retailers in the U.S. responded. The findings shed new light on the intersection of loyalty, personalization and digital retailing in the grocery sector. Relevance, communications and trust are fundamental to the value equation.

Loyalty Shoppers Like Personalized Deals

Loyalty programs continue to be very popular with shoppers. More than nine in ten respondents (93%) say they participate in their primary grocery retailer’s loyalty program. Deals are a major reason.

When asked what they like about their primary grocery retailers, the right promotions and offers are cited most often as the feature that makes this retailer better meet their needs, with 70% rating them as significant or highly significant [Fig. 1].

Source: Precima Consumer/Shopper – Role of Digital in Food Retailing Survey, IDC, December 2018 | Base: U.S. N=1001

Underscoring this finding, nearly two-thirds (64%) agreed that promotions and offers which “reflect my shopping patterns and product preferences” are important or very important [Fig. 2].

Source: Precima Consumer/Shopper – Role of Digital in Food Retailing Survey, IDC, December 2018 | Base: U.S. N=1001

Satisfaction lags, however, when it comes to personalized promotions and offers. Just over a third of all shoppers (35%) indicated satisfaction or high satisfaction in the survey [Fig. 3]. This presents an area of vulnerability for many U.S. food retailers that have not yet mastered personalization at a high level – or alternatively, an opportunity for the highly capable to reinforce established trust and gain further share.

Personalized promotions hold high value for digital food shopping too, with 51.7% of respondents indicating they are “useful and helpful” on the website and 57.6% agreeing they are useful and helpful on smartphone shopping apps. Notably, access to the loyalty program also rates highly for smartphone shopping apps.

Taken together, these statistics indicate strong links between shoppers’ feelings of loyalty and their satisfaction with relevant personalized offers provided by their favorite food retailers, including those where they shop digitally. This presents a steep challenge for food retailers, one which many are exerting themselves to meet.

Mind the Gap: Personalized Promotions Performance Lags Expectation

Shoppers value personalized promotions highly, and retailers are well aware that top performance will benefit the bottom line. But satisfaction lags for shoppers, and retailers know they have a way to go to meet expectations.

When shoppers are asked how important personalized promotions and offers are for grocery shopping, 63% gave high or very high importance, compared with just 16% who gave them negative marks [Fig. 5]. Satisfaction scores left a bit more to be desired, with less than half of shoppers (48%) indicating they are satisfied or very satisfied with the offers they presently receive, while 14% are unsatisfied, at least relative to their high expectations.

Sources: Precima Consumer/Shopper – Role of Digital in Food Retailing Survey, IDC, December 2018 | Base: U.S. Respondents. N=1001
Precima Retailer – Role of Digital in Food Retailing Survey, IDC, December 2018 | Base: U.S. Respondents. N=152

Surveyed food retailers seem to have a fair grasp of the trends around personalized promotions and offers, although they may be underestimating the pace at which they are gaining in importance for shoppers. When asked to rate how important this activity was to reaching their financial goals, 72% of food retailers said it contributed positively, compared with 25% who indicated a negative impact [Fig. 5].

Retailers are less self-assured, however, when asked to self-rate how well they are performing in this activity relative to their competitors. Just 57% said they compared favorably, while 18% admitted they are underperforming.

Seamless Redemption: Expectations from Digital Experience

Even the most highly relevant personalized offers fall short of shopper desire if they are not easy to receive and redeem within the store or digital shopping encounter. Shoppers expect these offers to be integrated within their online and mobile loyalty apps for convenience and assure that all their deals are automatically redeemed without extra steps at the digital checkout. Access to the loyalty program from the retailer’s mobile app was cited as useful or extremely useful by 63% of shoppers.

This expectation resembles the familiar experience shoppers already count on when they present loyalty cards to access and redeem stored-value offers at store checkouts. They expect offer redemption at the digital checkout to be just as seamless, if not more-so.

Personalized Assortment is Crucial on the “Endless Aisle”

Personalization has another important facet in food shopping related to product assortment. Here again, there is linkage to loyalty data. Retailers have been learning to tailor regional and store-level assortments based on shopper data for many years, but the growth of online food shopping has added a new impetus in the form of personalized digital assortments.

The much-touted “endless aisle,” made possible by digital presentation of product, presents a challenge within the format of computer and mobile phone screens, which only have sufficient real estate to display a few products at a time. Showing an endless assortment is not a customer-centric way to think about online merchandising. Scrolling through long lists of items can be clumsy and time-consuming for shoppers. Considering that the typical grocer carries 35,000 items, and the typical shopper only buys a few hundred SKUs per year, the power to personalize the assortment based on relevance is a huge opportunity to deliver value and convenience to shoppers to drive loyalty.

Presenting a personally-curated assortment with the most-likely items appearing first can help streamline the ordering process. Personalized digital assortments may be enabled by the same underlying shopper analytics technology that enables personalized offers.

Show Me You Care: Personalization Builds Trust

There is a notable convergence in food retailing where loyalty programs activities intersect with digital retailing. Reliable and consistent presentation of offers and products have the potential to enhance shopper trust and cement loyal behavior.

U.S. food shoppers expect to be taken care of in increasingly relevant and personalized ways:

  • 93% belong to a shopper loyalty program at their preferred food retailer, which means they expect to be recognized;
  • 30% consider personalized coupons and offers an extremely important part of their ecommerce experience;
  • 36% consider product recommendations important or extremely important when interacting with their preferred food retailer’s web or mobile site.

U.S. food retailers are aware, and many are taking steps:

  • 95% operate a shopper loyalty program;
  • 87% said personalized promotions and offers would be important or very important to their success in 3 years; 47% said their budgets would increase in this area;
  • 72% report that personalized promotions and offers (that reflect customer shopping patterns and product preferences) contribute positively to their financial goals;
  • 80% said personalized product recommendations would be important or very important to their success in 3 years; 42% said their budgets in this area would increase;
  • 86% will use a customer database and analytics platform to analyze customers and enable personalization.

These and other findings from the research indicate that retailers are tracking what’s important to shoppers in the area of personalization and many are taking initiative to provide the experience their shoppers want. Trust must be earned through repeated satisfying and consistent encounters. Loyalty and personalization are intricately connected. Communication is key.

Download the Digital personalization in food retail: U.S. Shoppers are embracing omni-channel Research InfoBrief.

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Precima is a global retail strategy and analytics company that provides tailored, data-driven solutions to drive sales, boost profitability, and build customer loyalty.