CPGmatters: Analysis of Data Underscores Importance of Best Shoppers
Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters.
Analysis of over two million grocery shoppers by Concept Shopping shows that the top 10 percent of a store's customers visit the store more than twice a week, spend over $39 per visit, and represent nearly 40 percent of the store's total sales.
The study also found that these most valuable shoppers tend to remain very loyal to the store, with 95 percent continuing to shop there throughout the year. Conversely, only 34 percent of the store's worst shoppers - those who visit the store less than once a month and spend only $9 per visit - remain customers.
Concept Shopping's analysis of the two million shoppers divided them into ten equal deciles based on their spending levels during a 12-week period. Only 11 percent of the dollars spent by the best shoppers were on markdowns, making these heaviest shoppers the most profitable as well. In contrast, over 35 percent of the dollars spent by the worst shoppers were on sales items, making them unprofitable, assuming a 33 percent profit margin.
Most retailers have some form of segmentation or deciling, according to Michael Schiff, managing partner of Partners in Loyalty Marketing.
"CVS does the deciles and they are probably the savviest," he said. "Kroger does some other segmentation. Wegmans is another good example of a retailer that's segmenting and trying to make stores more about the experience than necessarily about shopping."
"Other retailers know about segmentation, but whether or not they really act on it is completely different. I think most of them don't. If you look at any of the promotions or anything that goes out to consumers, the vast majority of it is talking in the voice of that average shopper," he said.
William Young, vice president of sales and marketing for Concept Shopping, explained that it wouldn't be so bad if the lowest-spending customer shopped elsewhere because they tend to "cherry pick" and largely buy items on sale. But it would be a major concern when the best shoppers begin leaving.
"We help retailers look at their loyalty card data, identify top shoppers who are in decline, and more importantly identify what are the key categories that signal they are heading to the doors. What do you need to do to promote those key categories better to those shoppers," he said.
Discussion Questions: In what ways can retailers do a better job reaching their best customers? Can vendors help?