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Personalisation in supermarkets

Background

For the supermarket industry personalisation is when manufacturers and supermarkets tailor the shopping experience, including the products offered, to the shoppers’ individual requirements. This is the total opposite approach to traditional brand marketing that focused on target markets or group of shoppers.  Rashid and Matilla describe the change as:

‘It means that mass marketing is replaced by mass customization’.

(Study on the scope and opportunities of category management for aligning the supplier-retailer business strategy, S Rashid, H Matilla, South Asian Journal of Management, 2011)

Due to increasing shopper demands for personalisation thinking has evolved from focusing on a group of similar shoppers with similar demands, to now focusing on an individual shoppers’ demands. Also, the shoppers demands’ can change depending on whether they are online / in-store / different shopping mission etc. Today the supermarket industry focuses on delivering a great ‘overall experience’ irrespective of how / where / why shoppers shop.

Some suggest personalisation has occurred due to the shopping experience Amazon offers. Amazon developed technology to recommend products based on a shoppers’ browsing and buying behaviour around 2000. Over time Amazon has developed this technology, and the algorithm that drives it, to create a more personalised experience for their shoppers. In the future with artificial intelligence and machine learning algorithms many predict an increase in the number and sophistication of personalised offers. Now shoppers expect this level of service from manufacturers and supermarkets.

“Retailers and manufacturers need to have a 360-degree of consumers’ digital and physical buying habits, which enables them to deliver personalisation,”

Alistair Leathwood, Chief Commercial Officer, Asia Pacific, IRI

(Staying One Step Ahead, Retail Outlook for 2019 and Beyond, IRi)

Why does the supermarket industry offer a personalised experience?

Simply put, when implemented successfully, personalisation offers manufacturers and supermarkets the opportunity to maximise their financial returns. Different people / organisations do have different perspectives about personalisation. For some, it is part of a customer centric / obsessed strategy. For others, personalisation offers the best return from their marketing spend.

‘These customer obsessed organizations see customer experience as a source of commercial value: not just a differentiator versus competition (although it certainly is that) but a mechanism for superior profitability. The net result? Customer obsession results in a sustainable source of financial value for shareholders and owners.’

Source: KPMG

(Customer first. Customer obsessed. Global Customer Experience Excellence Report, 2019. KPMG)

As outlined by Jim Blasingame, in his book The Age of the Customer, customers now control the relationship with sellers, and they also control the product information. This change has increased the power of shoppers. For example, the success of manufacturers brands and supermarkets could now be determined by online reviews that are written by shoppers and consumers. To meet the increased power of shoppers many manufacturers and supermarkets have adopted a customer centric strategy. Simply put, a customer-centric strategy is putting the shopper demands first in the decision-making process. To implement this strategy manufacturers and supermarkets offer shoppers a personalised experience to meet their individual demands.  

“We know that at scale, personalization has proven its potential beyond revenue, it’s a marketing efficiency play. It’s a critical enabler of customer engagement, and it’s a driver of new customer acquisition.”

Sajal Kohli of McKinsey & Co,

FMI’s Midwinter Executive Conference 2021

Interestingly, technological change is driving the need for manufacturers and suppliers to offer a personalised shopping experience. For example, technological change has empowered shoppers and allows shoppers to search and find the product / service they want. Technological innovation is also driving much of the change in how manufacturers and supermarket offers a personalised experience for shoppers. Due to improvements in technology more information (data) is now available. Marketing teams can then use these insights to create a personalised experience based on the individual shoppers demands. Historically, data such as scan data, did not offer these insights. Today other data sources, such as apps, credit cards, online orders and loyalty cards, offer a greater insight into the individual shoppers personal preferences. So many businesses believe the marketing department should use changes in technology to gain a greater understanding (insights) of individual shoppers demands. These insights can then be used to create the personalised experience for shoppers. The personalised experience will then maximise shopper loyalty to that manufacturer or supermarket.  

Irrespective of whether personalisation is part of the business strategy or a marketing led paradigm the goal is the same. The long-term goal for manufacturers and supermarkets is to create one on one relationships with individual shoppers and consumers. As Maes stated:

our core objective is to generate a genuine one-to-one relationship with every single member in a program.’

Ingrid Maes, Director Loyalty, Data and Digital Media, Woolworths supermarkets Australia

Mumbrellas Marketing Retail Summit Australia, 2017

In the future personalised offers will continue to be key for manufacturers and supermarkets to build long-term relationships with shoppers and consumers. IGD research suggests that the retail store of the future will be:

‘a shopper’s personal micro store offering individualised and online-exclusive products, personalised promotions, recommendations, advertising and loyalty schemes.’

Source: IGD

(Three key global markets to see – 212% combined online growth over the next five years, IGD, 2018)

Examples of how manufacturers and supermarkets offer a personalised experience

Marketing Communications

Due to improvements in technology marketing communications (marcomms) have been able to move towards personalised offers. The goal is to deliver the correct message to the shopper i.e. personalised marketing communications.

Rather than producing brochures for the ‘market’ supermarkets are using data, such as loyalty card data, to personalise the offer. Normally, an email is sent showing which items the shopper has purchased recently that are on promotion this week. Manufacturers with a D2C (direct to consumer) channel can also send personalised market communications. The supermarket industry is increasingly offering personalised offers via loyalty cards and apps today.

Due to improvements in technology manufacturers and supermarkets can deliver these messages via numerous platforms. For example, an individual that viewed a product on a website could receive a personalised communication on an external social media platform, such as Facebook. Recent reports (May 2021) suggest that Amazon is even enabling merchants to email Amazon shoppers via Amazons’ platform. The new function is currently called The Manage Your Customer Engagement tool.

Store Specific Ranges

Another emerging personalisation trend, for the supermarket industry, is store specific ranging. Simply put manufacturers and supermarkets are working together to ensure the correct range, in each store, to meet local demand. Historically this would have been a labour intensive and expensive option for manufacturers and supermarkets. With increased amounts of useful data and importantly hardware and software to ‘crunch’ the numbers this option is becoming easier and cheaper. 

Personalised Products

For some categories manufacturers and supermarkets already offer personalised product ranges. For example, in some supermarkets, shoppers can order a cake with personalised decorations. It is predicted that more personalised products shall be offered in the future. Some suggest new technology, such as 3D printing in food, will enable manufacturers and supermarkets to offer more personalised ranges.

In the future it is predicted that shoppers and consumers may be able to ‘create’ their own products. Domino’s already empowers shoppers to create their own pizza i.e. choose what base / sauce / toppings etc they desire. Many suggest that manufacturers and supermarkets will adopt similar thinking to the products offered.

Personalised Pricing

Some are already predicting personalised pricing. For example, Forbes (5 Ways Grocery Shopping Will Be Different in 5 Years, Blake Morgan, 2020) predicts ‘personal pricing with digital shelves will take personalization to the next level’. Currently, loyalty card members can receive personalised promotional offers from supermarkets.

Many in the industry (including myself) believe personalised pricing is a logical step. There has already been much research highlighting that price promotions do not create long-term category sales growth. For example, Miller (The $470M opportunity: changing the game with price and promotions, Brett Miller, Nielsen, 2018) noted that New Zealand shoppers are ‘the most promotion-driven in the world’. Miller also noted that in New Zealand ‘manufacturers and retailers are investing huge amounts of time and money executing these promotions on a weekly basis, so are they maximising their returns? The answer is emphatically ‘no’’.’ Personalised pricing offers manufacturers and supermarkets the opportunity to adopt a smarter pricing model.  

Summation

This quick blog has explained what personalisation is for manufacturers and supermarkets. Due to the increasing power of shoppers’ manufacturers and supermarkets have to offer a personalised experience. By offering a personalised experience manufacturers and supermarkets hope to maximise their long-term financial results.

Due to technological innovation, how manufacturers and supermarkets deliver the personalised experience shall change. Historically, technological innovation led to more data (insights) being available for manufacturers and supermarkets to better understand individual shopper demands. These insights were initially used to make recommendations / personalised marketing communications. Now other data sources, such as apps, loyalty cards, social media etc is exponentially increasing the amount of data available. Today personalisation has grown to include all aspects of the relationship such as product, pricing, in-store and online experience i.e. the overall experience.

IMHO (in my humble opinion) manufacturers and supermarkets have embraced personalised experiences because shopping behaviours have changed. Previous tactics, e.g. price promotion, are not delivering long-term sales growth. To maximise financial results manufacturers and supermarkets have to put the individual shopper demands first in the decision making process. As Sterneckert noted:

If you’re doing click-and-collect, the idea of endcap promotions really doesn’t mean anything because the customer isn’t walking the store anymore. The idea of a sales flyer really doesn’t mean anything because the customer isn’t shopping with a flyer. And the idea of impulse items is not really working anymore because the customer isn’t walking up and down the aisles like they were—in fact, in some environments there’s more personal shoppers for click-and-collect than there are shoppers in the store,”

Kevin Sterneckert, chief marketing officer of Symphony Retail AI

Winsight Grocery Business, Getting to Know You: Personalization Comes of Age, 2021

The information provided in this blog post was general in nature. If you require more information I offer a free initial consultation by completing a contact us form.