AGAMagazineIssue1_InsidePages.indd

By Craig Rosenblum

Manufacturers and retailers of fast-moving consumer goods know all too well that price reigns supreme for attracting and retaining shoppers.

Today’s well-informed shopper has more purchasing options than ever before. Despite being time-starved, shoppers are willing to forgo convenience for savings, which promotes channel-hopping and threatens brand and banner loyalty. In response, retailers turn to promotions to gain a slight, albeit temporary, competitive edge. According to a recent benchmark report by Retail Systems Research, one-third of respondents report they are increasing the number of promotions and, at the same time, offering steeper discounts. This approach is something of a double- edged sword for while it’s driving increased sales, it’s accelerating the race to the bottom as razor-thin margins are being shaved even more. Ironically, in the same report, the No. 1 job for a retailer’s pricing strategy was identified as maximizing gross margin. Price as a competitive lever may be further neutralized as digital technologies increase price transparency across banners, formats and channels. Digitally-savvy shoppers – willing to shop across the spectrum of omni-retailing, will cherry-pick products “on deal,” regardless of brand. This further erodes loyalty, which can lead to a death spiral.

The brighter side of digital transformation Despite the dark introduction, digital transformation does not mean gloom and doom. Digital engagement can be poison if not managed correctly but, for companies willing to embrace the transformation, digital engagement is just what the doctor ordered. It’s the shot-in-the-arm that has eluded the industry for decades. Implementing digital engagement strategies can take many paths. Ultimately, the approach must consider the organization’s existing position in the marketplace and its ability to manage disruption. Some of the steps along the path require proper sequencing. For example, merchants must understand shopper behaviors before they can create targeted offers. However, there are no prerequisites for retailers migrating from pricing strategies based on Known Value Items (KVIs) to strategies using Personalized Known Value Items (PKVIs).In fact, implementing PKVIs is among the least disruptive solutions and delivers a rapid time-to-value return in terms of sales gains and competitive positioning. Below is a sample path for leading retailers to effective digital engagement.

Note: Sequenced items are grouped together. • Implementing Personalized Known Value Items • Understanding Shopper Behaviors and Defining Shopper Demographics • Segmenting and Weighting the Value of Each Shopper or Household • Creating Targeted Offers • Executing Influencer Marketing

Continued on page 26 ▶

25

ALABAMA GROCER |