ARMONK, N.Y. — Food retailers have always known that a core group of loyal shoppers generate the lion's share of a store's revenues. But a new IBM survey of 6,135 U.S. consumers conducted in the first quarter of 2007 identified just how large a percentage of shoppers are not only loyal to their local supermarket but willing to serve as “advocates” for the store, recommending it to others. According to the survey, 27% of shoppers are advocates, while at the other extreme 46% are classified as “antagonists” who harbor a poor attitude toward their supermarket and may be harming its reputation; the rest fall into the “apathetic” category. Among major retailers, the companies found to have the highest percentage of advocates were Wegmans Food Markets, Publix Super Markets, Whole Foods Market, Costco and Target, while the chains with lower percentages were Kroger, Safeway, Albertsons and Wal-Mart. The upshot of the study, called “Why Advocacy Matters to Grocers,” is that food retailers need to improve their relationship with many of their customers in order to turn more of them into advocates. Fred Balboni, global retail industry leader for IBM Global Business Services, and a contributor to the study, spoke to SN about how retailers can promote customer advocacy.
SN: Why are there so many disgruntled shoppers?
Fred Balboni: It's a statement of how well retailers are performing in regard to the key issues of product quality, customer service and product range. For example, many retailers have optimized assortments to maximize merchandise performance, but they may have edited the range too much so that the store is not as exciting to customers. Then, secondary factors, such as customer service and convenience, have also become points of antagonism.
SN: How valuable are advocates to a store?
FB: We found that 14% more advocates than antagonists spend more than $100 per week at their primary supermarket, and 19% more advocates give the majority of their business to their chosen grocer.
SN: So shouldn't retailers just concentrate on pleasing advocates?
FB: You don't want to forget about antagonists and apathetics. You want to drive them to become advocates. So it's not just about targeting advocates, it's doing things to develop more advocates, because by doing that you will capture a greater share of the market. Of course, you want to make sure advocates continue to be happy, but it's not a mutually exclusive decision. You need to understand all segments of the customers who walk into your store and make them all walk away with a great experience.
SN: If there is one primary strategy for developing more advocates, is it gaining a better understanding of your shoppers' needs and expectations?
FB: Yes. The way we're starting to attack this problem is to think about it from the customer's point of view. We're looking at the customer's experience, from the time she researches a product on the Web to the time she puts the product in her cupboard, across the top five dimensions that drive advocacy — quality, selection, convenience, employees and availability. That process unlocks little veins of gold that will drive advocacy.
SN: Do you start by getting feedback from shoppers or gathering loyalty card data?
FB: You take all of that information as an input; you need fact-based information. Then it's about having a rigorous transformation process outside business-as-usual so that you start to tap into different areas of customer improvement.
SN: What are some examples of what could be done?
FB: You could offer shoppers the ability to develop a shopping list online that sorts products by aisle in the store so that they can make just one pass through the store. You could marry sales data to the shopping experience and offer coupons at the POS. There are hundreds of things. The key is to build loyalty at every step of customer contact.
SN: So the Internet is an important component in developing advocacy?
FB: Yes. Shoppers consider a retailer's online presence as no different from the physical presence in the store. You need to make your online presence as strong as what's in the store. After all, shoppers can linger longer online than they can at the store.
SN: How much of a role does technology play overall?
FB: There's usually a technology component to any new offer or service you provide, even if it's something as simple as a sales associate training program. So while you can't avoid technology, it still needs to be augmented by people who understand the business issues behind it.
SN: What is the role of product assortment and pricing in creating advocacy?
FB: Making sure the products on offer fit the lifestyle and needs of shoppers is a really important factor. It's easy to think of high-end specialty olive oil as pleasing customers, but let's think of other segments, such as the ethnic products my family likes. And you must have price points that allow me to purchase the brands I wouldn't otherwise be able to purchase. So having the right range means product selection and pricing.
SN: Customer service is another advocacy driver. How do retailers work with their employees to deliver better service?
FB: The empowerment of store employees is proven to be an essential element of creating advocacy. We're talking about training and rewards programs, creating a culture of excellence and publicizing the values that the company wants to grow on. So it's a widespread, systematic employee program around shopper satisfaction we're talking about.
SN: How does the growth of self-service, such as self-checkout lanes, figure into the development of advocacy?
FB: Self-service is one of the possible plays that solves a need of one segment of shoppers. If you identify a segment of your shoppers for whom it makes sense, by all means offer it. But self-service should not be primarily about taking out labor cost; it needs to be foremost that this is a shopping experience the shopper wants, based on what they tell you, their age, demographics, etc. Labor cost is important too, but it shouldn't come first.
SN: Social responsibility is sixth on your list of attributes that food retailers need to emphasize to develop advocacy. How would you describe its importance?
FB: Social responsibility, which 78% of advocates said their primary grocer does well, ranked lower than we expected. But it seems to be something that is getting more and more air play, so it may feature more prominently in the future. Environmentalism, such as carbon footprint, is at the top of the list.