As inflation increases food costs, grocers who pass the cost on to consumers too soon risk losing their least loyal customers to rivals, according to research from PYMNTS’ “Decoding Customer Affinity: The Customer Loyalty to Merchants Survey 2022.”
The research, which was produced in conjunction with Toshiba Global Commerce Solutions, included the findings of a census-balanced survey of over 2,000 US customers conducted in late autumn 2021.
It revealed that more than a third (35%) of supermarket and pharmacy buyers said that improved digital capabilities might influence their decision to switch merchants.
Consumers most inclined to switch are mostly concerned about their financial situation. 46 percent of supermarket buyers who live paycheck to paycheck and have difficulty paying their expenses said they would consider switching.
This trend makes sense since certain digital services, such as loyalty programs, provide offers and discounts, while others, such as curbside pickup, provide much-needed time savings for individuals who work multiple jobs and care for their children.
Price is the single most significant element in customers’ selections regarding which grocery shop to patronize, with 37% stating it as their primary worry, considerably ahead of the second-most-important factor, location, which is cited as the primary concern by 32%.
Major supermarkets have considerable influence over smaller chains, while independents may weather price rises.
Walmart is far and by the most visited supermarket, with three times as many people shopping at Walmart in the preceding 30 days than at the runner-up Kroger. Walmart’s grocery strategy is predicated on its ability to undercut rivals on price.
“Our unit growth in groceries is outpacing our dollar growth, and that is a position we’d want to maintain for as long as possible,” John Furner, president and CEO of Walmart United States told investors during a November conference call.
“We want to maintain costs low across the board for our clients, and we’ll be the last to raise them.”
According to the Decoding Consumer Affinity survey, 77% of grocery consumers said lower costs would increase their loyalty to their retailers.
Thus, a brand that may rank third in a shopper’s store cycle — 48% of in-store consumers visit three or more locations — may price its way to the No. 2 or No. 1 position.
Even firms that cannot reduce the sticker price may use customers’ pricing worries to increase loyalty by surfacing the appropriate messaging and incentives.
52% of supermarket buyers said that promotions and discounts would increase their loyalty to their grocer, while 42% indicated that loyalty programs with “rewards I like” would do the same.
“Loyalty programs may provide the same feeling of familiarity and engagement as if you go into one of our shops and we say, ‘Hey, Mrs. Jones, how are you?'”
In a December television interview, John Ross, president, and CEO of the Independent Grocers Alliance (IGA). “Digital technology enables the replication of a great deal of the impacts of high-quality service.”