Inflation and loyalty: how can retailers stay connected to their customers during tougher times?
Corrosive. There are few better words to describe the impact of inflation on customer loyalty; the more expensive things become, the more likely it is that shoppers tend to re-evaluate their spending, leading them not just to cut back on unnecessary purchases, but to look further afield in their search for value too.
Consumer packaged goods (CPG) brands tend to feel this particularly acutely. In the results of the latest study in dunnhumby’s Consumer Pulse research programme, for example, one third of French shoppers told us that they now try to buy own-label products whenever they are available. In their quest to save money, national brands are one of the first sacrifices that many shoppers seem prepared to make.
Much as CPGs may be among the first to feel inflation’s bite, however, that isn’t to say that retailers are immune to its effects. In the same study, we found that the number of people shopping with the same banner has also fallen over the past year. While 54% of customers said that they remained loyal to a single store in September 2021, that had fallen to 48% by the time of our most recent poll.
It isn’t difficult to see who is “winning” as a result of that transition, either. Over the same time period, the percentage of weekly trips to traditional grocery stores has dwindled from 42% to just 38%. Traffic to the discounters, on the other hand, has risen from 17% to 21% – a finding supported by the news of Lidl’s market-leading performance this past October.
Clearly, this trend represents a not insignificant threat to traditional stores, and one that is unlikely to ease in the near future. How, then, can France’s grocery retailers defend their relationship with customers and boost loyalty over the coming months?
- Trust and transparency
It goes without saying that one of the major factors at play here is price. 96% of French shoppers believe that groceries cost more than they did one year ago, and 36% say that they now search online in order to find the best prices when shopping. Cost has become the defining issue for many, and particularly so for low budget customers. One of the key issues we’ve seen in recent months, though, is that there is more to price than just the cost at shelf.
Take the very public scrutiny that Groupe Casino recently found itself under when it was revealed that prices in its hypermarkets were higher on Sundays than on other days of the week. While dynamic pricing may be understandable from a business perspective, it remains an incredibly difficult concept to communicate to customers – the vast majority of whom are already intensely focused on rising costs.
Communication is the key factor here. Just as Casino suffered from having its pricing practices revealed via an in-depth exposé, there is a clear opportunity for other retailers to showcase their commitment to value. With shoppers becoming increasingly pessimistic about the rising cost of their baskets, transparency – and a proactive approach to communication – can go a long way.
Strong examples of this philosophy at work can be found at both Tesco in the UK, and in the actions of France’s own E. Leclerc.
For Tesco, a three-tiered approach to value has paid dividends. In addition to price matching certain items against Aldi stores, the company has also introduced “Clubcard Prices” – a range of exclusive discounts that are automatically applied at checkout for holders of the retailer’s loyalty card. Clubcard Prices have become a core part of Tesco’s marketing over the past year, helping to drive significant improvements in its net promoter score, particularly in terms of value and quality perception.
Leclerc has been similarly vocal about its commitment to its customers. January last year saw it freeze the price of baguettes while, later in the year, the company launched its "Anti-Inflation Shield" – a scheme that offers compensation vouchers at the till for price increases across 120 of the retailer’s most frequently purchased items. CEO Michel-Edouard Leclerc also writes regularly about the company’s efforts to keep prices down on his blog.
- Different angles, same goal
While Clubcard Prices and the Anti-Inflation Shield address the issue of value from slightly different perspectives, they are united by a common mechanism: loyalty cards. Both schemes require shoppers to use their store’s respective reward card, a factor that has major implications for loyalty as a whole.
On the surface, loyalty programmes enable retailers to offer attractive incentives such as those discussed above. Behind the scenes, however, those programmes also empower much deeper customer understanding, offering retailers in-depth insight into the needs and behaviours of individual shoppers. When analysed and actioned effectively, that insight can be used to deliver significant improvements to long term loyalty.
That’s true in terms of individual shoppers, where it becomes possible to identify those customers that are most susceptible to inflation, and design a personalised activation plan to keep them engaged. It’s equally true at category level, where better insights can help retailers to understand the threshold at which shoppers might be “priced out” if costs were to rise.
More than anything, though, a better informed view of their customers ensures that retailers can bring loyalty back under their own control – giving them the intelligence they need to adapt their strategies no matter how shopper needs might continue to evolve.
 dunnhumby Consumer Pulse – September 2022
 Lidl Sees Strongest Share Growth In France In October – European Supermarket Magazine, 22nd November 2022
 Pricing : Casino ose… le tarif (majoré) du dimanche! – Grande Conso, 8th February 2023
 Tesco CEO: Marketing is ‘more important than ever’ amid cost of living crisis – Marketing Week, 13th April 2022
 French retailer Leclerc freezes price of baguette in inflation fight – Reuters, 11th January 2022
 E.Leclerc Launches ‘Anti-Inflation Shield’ – European Supermarket Magazine, 6th May 2022
 Hausse des prix : stop… ou encore? – De Quoi je me M.E.L, 16th February 2023
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