Shifting Consumer Choices and Preferences

Food is something that is bought on a regular basis by consumers. Each shopping trip is an opportunity to present a mix of products to the consumer.

Target and Walmart have a goal to increase visit frequency per year . Another way of stating this is they want there to be fewer days between visits. It’s a lot easier to close a sale with a customer when they are in your store and already making purchases.

The statement below from the CEO of Target is a good example of what many retailers selling food are trying to do.

"We continue to invest in our food offering in recognition of its importance in driving greater frequency, increasing guest loyalty, and making Target a preferred shopping destination," company CEO Gregg Steinhafel

Three Points

• Frequency
• Loyalty
• Preferred

Frequency is driven by having more items that people frequently purchase. Food and consumer products are excellent examples of items bought frequently. Selling these items at attractive prices gets consumers in the door where higher margin and dollar profit items an be presented to the shopper.

Loyalty is the trust that a retailer earns and maintains with consumers. What is the value proposition and does the retailer consistently deliver on its promise? Retailers that do, build trust and are chosen over competition if their proposition is more compelling than competitors.

Preferred is where there are two or more equally compelling choices and the consumer constantly chooses one retailer over another. There are many different factors that drive being preferred. These factors can shift very rapidly. For a time, style and value pricing was a powerful consumer preference that resonated with shoppers and drove them to Target. At some point, shoppers shifted their preferences to low price. It is in this instance, where the impression of “Every Day Low Prices” drove consumers to shift their buying behavior and choose Walmart.

Takeaway

What will be interesting is to see if there are other preferences that retailers and merchants can deliver a compelling message to consumers. Those that are able to effectively do so will see increasing visit frequency, loyalty and consumer preferences.

 

What are your thoughts on consumer preferences?

Business Week: Inflation Gnaws at Pet Food Companies

Inflationary Pressure

Inflation has been in the news a lot lately. Most of the talk has centered on gasoline and food prices. Pets eat too and feeding them is going to cost more even if prices stay the same.

You say 'How is THAT possible'?

The folks that sell pet food to your local supermarket will soon be selling less product for the same price. You will have to buy more packages in a given year. Continue reading and see Math Analysis below.

You may have to make extra trips if the food doesn't last as long as before. In the past you might have been able to go two weeks between purchases. With the smaller packages you might run out a few days early and have to drive to the store to purchase more.

What Might Consumers Do?

• They may buy an extra bag when purchasing. This may lead to increased out-of-stocks. [lost sales to the brand?] [store reputation is damaged by out-of-stocks leading to channel, chain or store switching]
• They may buy a bag of store brand as a hedge against running out. [Big Brand sales decline] [Store brand and retailer gain margin points and dollar profits]
  
• They may switch to the next size up [Big Brand volume, market share and dollar share increase] [Store gets bigger basket size / register ring].
  
• They may move category purchases to Wal-Mart, Costco or specialty pet stores to take advantage of larger package sizes and lower cost per unit. [Big Brands lose pricing power as buyers gain more market share] [Supermarkets lose as high dollar item purchases move to other sales channels]
  
• They may try another brand [Big Brand A loses sales to Big Brand B,C, D, E or F]

There are certainly other consumer behavior possibilities.

Math Analysis

If the consumer makes no changes in purchase behavior and buys the Big Brand they will buy a few extra packages per year. An example is as follows. Before the cost/size changes the customer buys a 4lb bag at $5.89, lets call that $6. We will also assume that this amount lasts two weeks [14 days]. In a year they will buy 26 packages at $6. Total yearly spending is $156.
With the package size reduction perhaps the consumer can only get 13 days out of it. With a 13 cycle per package the consumer will need to buy 28 packages in the same 52 weeks. This means this consumer will be spending about $12 more per year for pet food.

What Are Your Thoughts?