Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters.
Results of a new study by Buxton, the customer analytics company, in collaboration with Meijer, the Midwest retailer, suggest that targeting "switchers" is the right strategy to grow store brands sales.
The study identified three distinct consumer groups: shoppers who buy private label items whenever possible, those who switch back and forth between private and national brands, and those who exclusively buy national brands. Various coupon offerings in the baking and snacking nut categories were used to target each group to test for effectiveness in category acquisition, switching to private brand purchasing, and increasing the buy rate.
It turned out that identifying switchers paid off well. With their flexible attitude to try products in exchange for a good deal, they showed a higher coupon redemption rate, a greater sales lift, and a greater repeat purchase percentage. Some of the study results were as follows:
Acquisition: Moving customers from non-nut buyers to purchasing private brand baking and snack nuts at Meijer turned out to be the hardest challenge. The coupon redemption rate was much lower than that of the other two strategies, as was the lift in sales. In other words, prompting shoppers to change stores and purchasing habits (for a specific item or in general) is the hardest challenge facing food retailing marketing and merchandising professionals.
Switching: Shoppers who buy some national and some private brand items proved the most susceptible to a good deal. The campaign targeted customers who already purchase baking and/or snack nuts at Meijer to purchase private-brand baking and snack nuts, specifically. The dollars-off coupons were redeemed at a very high rate and switchers recorded a 56 percent sales lift for baking nuts. These findings underscore the importance of targeted marketing, allowing retailers to allocate their resources to those shoppers most likely to purchase private-brand items.
Buy Rate: The third strategy focused on growing sales among current buyers of private-label nuts — including private-brand loyalists and switchers. While the campaign managed to increase sales and achieve high coupon redemption rates among both groups, switchers were yet again most susceptible to the offer with a 31 percent sales lift for baking nuts and nine percent for snack nuts.
Buxton officials say the study makes the argument to change promotions from one-size-fits-all to targeting high-value customers using segmentation and household-level analytics. By focusing on switchers, retailers can generate the most bang for their marketing buck — a shared goal for retailers of all sizes.