Perhaps the most crucial task for any retailer is to convince consumers that they offer good value.
The standard tactic is to broadcast a constant stream of low prices or special offers. Supermarkets alone spend hundreds of millions to position themselves as offering the best value.
But is this the most effective approach? Our research suggests that broadcasting the same deal to everyone is wasteful and that a more tailored approach should be used instead.
ZenithOptimedia surveyed 1,004 nationally representative consumers. We showed the respondents the cost of three keenly priced items – avocados, chillies and crumpets – and asked them to rate these items from very good to very poor value.
The results and implications
When we split the data by regularity of purchase we saw an interesting pattern. Consumers can only recognise a bargain if they have bought that item, or one like it, before. 53% of category buyers thought the products were good value compared to 22% of non-buyers.
This wasn’t a binary division, there were shades of grey. The more regularly a shopper buys a particular category the more attuned they are to bargains. 58% of regular buyers thought the prices were a good deal.
This suggests that broadcast offers are ineffective. If you never buy chillies it’s hard to know if £1 or £10 a kilo is a fair price. A message about cheap chillies therefore can’t persuade non-buyers that the brand generally offers great value.
Yet brands persist in broadcasting messages to all and sundry. It would be better for them to use the wealth of digital data at their disposal to segment their audience by behaviour and serve tailored messages to each group.
Many retailers already personalise their direct communications. The opportunity is to extend this type of tailoring to all digital messages aimed at creating a perception of good value.
However, the experience of brands that have precisely targeted their direct mail offers is instructive.
Target, the US retailer, has been held up as an example of the dangers of personalising messages. Famously, as featured in Charles Duhigg's The Power of Habit, Target angered a father when they sent offers for pregnancy related products to his teenage daughter before she’d even admitted she was pregnant.
What’s less well known, and more interesting, is how Target reacted. After the incident they began including highly tailored and broadcast offers together in their mailings to avoid looking creepy.
This realisation, that too much of a good thing can be damaging is a lesson many brands could profit from.
Richard Shotton is head of insight at ZenithOptimedia