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03.03.2010

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New Value Paradigm: Theatrics of Thrift

The New Value Paradigm provides a provocative, consumer-centric explanation for what to expect from consumer and shopper behaviors as we take the slow path toward economic recovery. The report provides the new consumer understanding for “value” and its implications for CPG companies and food retailers.

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Value and Thrill

The New Normal? Questioning our self-proclaimed thrift Part 2

By Abbie Westra
Reprinted with permission of CSP Information Group
Note: This is part 2 of 2 from an original article published in February/March 2010 FARE Magazine

The one word that trumps all catchphrases is value. How you define it at your operation will determine what type of shopper comes to your store.

According to The Hartman Group, today’s value equation still includes the traditional variables of price, quantity, convenience and quality, but consumers are now transitioning to a more purposeful and emotional perspective on value to include notions of utility and consumption: Is this item really necessary? Will I actually eat this? Will it last a long time? Will I get a lot of use out of it?

But they realized something else about these value shoppers: fun trumps thrift. In a survey fielded in October 2009, 1,000 consumers responded the strongest to behaviors that connoted adventure and thrill seeking. The purely thrift behaviors ranked below thrill:

Eighty-one percent somewhat or strongly agree that a good deal or coupon will lead them to stock up;
Eighty percent somewhat or strongly agree that “the thrill of finding a great deal” drove their thrift behaviors;
Seventy percent somewhat or strongly agree that they are avoiding recreational or unnecessary shopping trips;
Sixty-seven percent somewhat or strongly agree that they have reduced overall spending.

In the same study, The Hartman Group asked consumers what promotions gave them the “best feeling” (see “Shopper’s High” below). A free product scored higher than manufacturers lowering prices and advertised sales prices combined.

“It’s the shopper’s job to find good prices; it’s the retailer’s job to make them feel better,” the report concluded, reiterating the role emotions play in the pocketbook.

Business Implications

Businesses may beg to differ with the assertion that there is no New Normal, particularly those in the foodservice industry. And it doesn’t really matter if the thriftiness is emotional or not—no sale is no sale.

But it’s all about perspective, says Paschel: “Five Guys Burgers and Fries just opened up here, and there are lines out the door. There’s something to be said that organizations that are doing good things are not suffering. … Part of me wonders if those companies that are having problems, that the economy simply exacerbated underlying problems that were already there.”

“We made that argument across all experiences, brands, products—whatever’s out there that’s really failing right now,” adds Barry.

“The economy has impacted virtually every business to some degree, but the ones that are really, really hurting, there’s probably something not quite right about their offering, their brand, their staffing—there’s something not right about the model. When people have to start thinking harder about how they spend their money, they start making choices a little bit differently.”

Marching Orders

Emotional or economical, there is no magic cure for the collective consumer anxiety. But whichever way the verdict falls, both IRI and The Hartman Group’s research reveals useful tactics for foodservice retailers to best reach today’s shopper.

IRI foresees the regularity of shopping trips continuing to change. In 2009, the amount of “quick trips” made increased by 5%, while “pantry stocking” declined by 2%. Blischok points to the number of big-box retailers moving into small-box formats as a reaction to this need for convenience, such as grocer Giant Eagle’s GetGo c-store.

Microsegmentation is another tactic Blischok recommends operators consider, such as e-convenience store Greenspot with its line of natural and organic foods and eco-friendly paper products. Health and wellness is another segment that’s “playing quite well” in the marketplace today, he said.

Creating a unique environment is vital, and that can manifest in the leather chairs and free Wi-Fi at Open Pantry in Wisconsin, or in customizable food and beverages such as Rutter’s Farm Stores’ touch-screen menu system. The ability to customize a cup of coffee is a big point of differentiation for retail stores, and Blischok says the ability to make a sandwich or even soda “my way” is ideal for capturing millennials.

The Hartman Group gives marching orders through a list of dos and don’ts:

Do: Become more than a commoditized source for products by engaging and connecting with the shopper. This occurs through your team. They should be passionate and “empowered with autonomy to express said passion.”
Don’t: Pursue an unusually aggressive pricing strategy. “Lacking any value-add, such as engaging team members or promoting emotional connections, you will simply be encouraging a cohort of multi-channel consumers (‘bottom-feeders’) who will cherry-pick your lowest margin offerings before leaving for greener pastures.”
Do: Consider creative, non-discount based promotional strategies. “The act of unilaterally giving away a featured product activates cultural norms of reciprocity, which literally compel the shopper to return the favor (by returning).”
Don’t: Remind shoppers of the recession. It only adds to their anxiety. Instead of “recession-buster specials,” reference nostalgia and promote comfort foods.
Do: Engage with consumers in a way that subtly communicates opportunities for value and thrill. California Pizza Kitchen created a scratch-off program in which customers can win anything from an appetizer to cash prizes—the catch is you have to bring the coupon in on your next visit to be scratched by the waitperson.
Don’t: Institute across-the-board price cuts. These often go unnoticed and fail to generate buzz.
Do: Maintain an unwavering focus on product quality, and investigate how your customer understands your brand from a consumption perspective. This includes menu and product mix.

Whether the sky is falling or not—and it’s not, says Paschel—“there is always room for innovation and success by those who can do things really well.”

Clip coupons to save on groceries, buy a new iPhone; remember the savings on the grocery bill and dismiss the cell phone splurge. It’s what we call the "theatrics of thrift" and consumers are engaging in shopping behaviors like this every day. Read part one of this article >>

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