Matthew Heath: chairman and chief strategy officer at Lida
Matthew Heath: chairman and chief strategy officer at Lida
A view from Matthew Heath

Retailers reeling from falls in price promotions need to get to know their customers again

Lida's chairman and chief strategy officer explains how retailers can encourage customer loyalty.

With supermarkets slashing their spend to levels not seen since the heady days of 2006 (incidentally the same year Groupon founder Andrew Mason found inspiration for his company after becoming frustrated by trying to cancel his mobile phone contract) the ways retailers can inculcate loyalty have changed forever.

The "deals, deals, deals" message of Groupon, where price promotions could drive significant action, is long gone and with them that garish starburst marketing promotion material.

Now just over a quarter of supermarket spend goes on temporary price cuts or on multi-buyer offers. Customers now expect to see the cost of their entire basket go down, rather than pick up screaming "door buster" offers on products, which previously lured them in store.

It also helps explain the success of Aldi and Lidl, which offer – or at least claim to offer – more basket value than their competitors and whose ascendancy continues.

In the same week that Nielsen released the figures on declining spend on product promotions, it was revealed that these two supermarkets' year-on-year sales increased by 12.6 per cent and 10.5 per cent respectively.

In comparison, Morrisons was the only one of the big four supermarkets to experience a (very modest) sales rise, with Asda dropping by 3% over the period.

You could argue that this is a result of consumers having a better understanding of the value exchange. With trusts in brands at an all time low and the big four rocked by scandals, including the provenance, quality (and sometimes) species of what they are actually selling, consumers are increasingly sceptical of one-off offers.

Nothing comes for free, and anyway, consumers don’t want to feel conned into going in store for a promotion if they think they will end up paying more for other products.

Likewise, the inexorable rise of ecommerce means a quick price comparison is always just a tap away. Whether the price promotion ia available in-store or advertised via DM, it probably won't compare with a deal on Amazon.

With Amazon’s delivery windows ever shrinking, the choice between schlepping to the store on the off-chance that the deal is still available versus ordering on your smartphone becomes more and more obvious to many.

In Europe, price is the top driver of people in-store (as it is globally – not surprising in a price-driven world). Quality, and selection and assortment, follow in second and third places. Promotions, which customers have begun to see through, are much lower down the list of priorities.

Maintaining loyalty has therefore become much more complicated and sophisticated. Customers have come to expect everyday low prices but quality and range remains important. Retailers need to show that they are delivering on all these to come up with a competitive edge.

Get to know your customers better and talk to them in a language that it is appropriate and that they have come to expect.

Online and offline should work in harmony rather than in isolation. A holistic approach will help provide a brand experience that some of the cut-price rivals will never be able to provide. And don’t pin your hopes on price promotions – they are looking increasingly like a bust flush.

Matthew Heath is chairman and chief strategy officer at Lida.