DRIVING GROWTH THROUGH CUSTOMER CENTRICITY

Transcription

1 DRIVING GROWTH THROUGH CUSTOMER CENTRICITY Winning strategies of the world's top ranked retailers

2 WHAT IS THE GLOBAL CCI REPORT? The dunnhumby Customer Centricity Index (CCI) identifies the key drivers behind a customer's likelihood to buy repeatedly from a particular retailer and their desire to recommend the retailer to friends and family. It establishes a direct link between customer centricity and improved financial performance. Our Global Customer Centricity Index Report incorporates 126,000 individual retailer assessments made by customers from 13 countries around the world carried out over the last 12 months. It includes comparative performance indicators on 399 of the world s leading grocery retailers and examines the positive impact customer centricity has on market share and banner sales. It is the largest multi-market analysis of its kind undertaken into retailer performance against customer needs in grocery retail. Selected markets include some of the world's top economies by GDP (source: IMF, 2016) US, Japan, Germany, UK, France, Brazil, Italy as well as emerging markets of scale including Mexico, Colombia, Turkey, Poland and Chile. The methodology developed by dunnhumby is based on seven key pillars which have been identified by customers as what matters most to them when they shop. Each pillar represents an aspect of the customer experience. These are Communications, Range & Service, Promotions, Price, Affinity, Rewards, and Ease. A thorough understanding of these pillars and their underlying attributes enables us to analyse what drives the strengths and weaknesses of each retailer in comparison with its competitors and, above all, to identify which pillars to prioritise for improvement. Focusing efforts on the most important pillars is a strategy that is paying off for the leading customer centric retailers. Do few things but do them well. 13 COUNTRIES Pursuing a customer-centric approach is a proven strategy for retail success, with top ranked retailers seeing better financial results. 2

3 EXECUTIVE SUMMARY Improving your customer centricity score leads to sales growth: Retailers with a top quartile CCI score achieved an average sales increase of 3% and market share growth of 7%. Getting the basics right is key to developing a personal connection with customers: Positive Brand Affinity was witnessed most commonly in retailers who do well in fundamentals such as Range & Service. Price and Promotions rank consistently highly in customers minds, across the globe: Price and Promotions account for a quarter of the overall importance in driving high customer centricity. Convenience and Communications play an important role in customer perception: Rewards programs with simple and immediate benefits were highlighted as an important differentiator. There is no single path to success: Top 100 ranking retailers span discount chains to niche specialty players, but perform consistently well on Price, Range & Service and Promotions. But clear winning strategies are emerging per region: Service and Convenience (Asia), Price (LatAm), Enjoyable Shopping Experience (Europe/US) 3

4 7 PILLARS OF CUSTOMER CENTRICITY For retailers looking to elevate their customer centricity ranking, the first step is understanding what defines each of the seven pillars. These are the aspects of the customer experience that customers identified as being most important to them AFFINITY Creating an emotional connection with customers, ensuring they see themselves reflected in the values communicated by the brand, trust in it, are aware of its success and are not tempted to switch. RANGE & SERVICE Offering a good variety of quality products and presenting them in an appealing way. Providing great customer service. PROMOTIONS Offering easy-to-understand promotions on good products with a genuine financial incentive for the customer. PRICE Offering better value for money than the competition and offering deals on products of most interest to customers. COMMUNICATIONS Talking to customers in a relevant and personal way across mass and direct media and instore, inspiring customers with content that they find relevant and interesting. EASE Making the shopping experience easy for your customers, with convenient locations and speedy checkouts. REWARDS Encouraging further visits by offering customers benefits, exclusive services and a generous and inspiring customer loyalty programme. GLOBAL DRIVERS OF CONSUMER PERCEPTION This chart shows the value that customers place on each pillar, with Affinity seen to be the greatest driver of customer centricity. 10% 8% 5% 34% Range and Service Promotions 12% Price Communications 13% 18% Ease Rewards 4

5 KEY FINDINGS 1 IMPROVING YOUR CUSTOMER-CENTRICITY LEADS TO SALES GROWTH TOP RANKING CUSTOMER-CENTRIC RETAILERS GLOBALLY ARE SEEING AN INCREASE IN MARKET SHARE AND BANNER SALES Making the shopping experience more relevant and satisfactory encourages customers to reward the retailer with their loyalty. The most customer-centric retailers are enjoying clear and present financial rewards. Retailers with a top quartile CCI score saw their banner sales increase by an average of 3% and their market share grow by 7% from However, retailers in the bottom quartile saw banner sales drop by 2% and their market share decrease by 1% over the same period. These figures show in stark relief the significant business value for retailers if they can understand and meet their customers needs. Customer centricity is good business strategy. TOTAL BANNER SALES BANNER SALES/SQ FT FOOD RETAIL FORMATS MARKET SHARE % 4% 0% 14% 3% -1% 12% 2% -2% 10% 1% -3% 8% 0% -4% 6% -1% -5% 4% -2% -6% 2% -3% -7% 0% HIGH MEDIUM LOW CCI SCORE OF RETAILERS -8% -2% -9% HIGH MEDIUM LOW CCI SCORE OF RETAILERS HIGH MEDIUM LOW CCI SCORE OF RETAILERS ENHANCED SALES PERFORMANCE OF RETAILERS WITH HIGH CCI SCORE BY REGION The return on customer centricity is more obvious in some countries than others. Retailers in Europe with high CCI scores see the greatest benefits in terms of enhanced financial performance, while Latin American retailers experience more modest returns. 5.5% EUROPE 2.8% ASIA 1.8% US 1.3% LATAM Market share data source: Planet Retail, dunnhumby analysis 5

6 KEY FINDINGS 2 AFFINITY IS IMPORTANT, BUT CANNOT BE PURSUED IN ISOLATION Brand Affinity represents the personal connection that great retailers build with their customers when they successfully reflect their values, driving long-term loyalty. The world s most customer-centric retailers deeply understand their customers, ensuring that the key elements of their offer mirror customers expectations. High Brand Affinity = high customer centricity. However, focusing solely on Affinity is difficult as it is driven by a number of factors: Having a core competency that provides differentiation Developing a personal connection with your customers Communicating and delivering what is promised to your core target group High ranking retailers seldom excel only at Affinity: almost 50% also excel on one other pillar most commonly Communications or Range and Service. A further 25% of retailers that excel on Affinity excel on two other pillars. Positive Brand Affinity is an outcome of executing successfully on the other pillars that matter most to your customers. A positive Affinity score correlates to a high customer centricity score, so what s the best way to drive Affinity and connection? By identifying your core competency, communicating that to your most important customers and delivering exactly what you promise, thereby giving customers a great shopping experience. How do you make customers care about your brand s long term success? Fulfil fundamental needs such as good quality, value for money products, coupled with an easy and enjoyable shopping experience. RETAILERS WHO EXCEL AT AFFINITY: PROPORTION WHO ALSO EXCEL IN OTHER PILLARS High ranking CCI retailers who excel in Affinity also tend to excel in other pillars, e.g. 40% also excel in Communications. This indicates that Affinity is driven by the other aspects of the shopping experience that matter most to customers. COMMUNICATIONS RANGE AND SERVICE PRICE PROMOTIONS EASE REWARDS 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 6

7 KEY FINDINGS 3 PRICE AND PROMOTIONS RANK CONSISTENTLY HIGH IN CUSTOMERS MINDS, ACROSS THE GLOBE Taking third and fourth place respectively in the drivers of customer centricity, together Price & Promotions account for exactly a quarter of overall importance, demonstrating that fairly priced products and value-for-money promotions play a key role in shaping customer perceptions. The results show surprising differences across regions and countries. For example, Brazilian shoppers who have a long legacy of Price & Promotion in their shopping expectations see these pillars as more of a hygiene factor than in the British or Japanese markets (28% and 48%), where value offers from the likes of Lidl and Aldi (UK) to Costco and Walmart Seiju (Japan) have made more recent inroads with shoppers. 4 OPTIMISING RANGE & SERVICE IS KEY TO A SUCCESSFUL CUSTOMER OFFER Range & Service encompasses customer service, product choice, availability, store layout and experience. On the surface, it seems the most obvious thing ensure you have a good range of products, backed up by good customer service. But getting the fundamentals of your in-store environment right is not easy if you don t understand customer needs and behaviours. Leveraging data and insights to develop the most effective range and service approaches that reflect different customer needs in different locations is vital, especially for those with a complex, multi-channel, multi-format offering. 7

8 KEY FINDINGS 5 CUSTOMERS FAVOUR RETAILERS THAT FOCUS ON CLEAR COMMUNICATIONS AND CONVENIENCE The pillars of Communications and Ease (of shopping) account for an average importance of 10% and 8% respectively, followed by Reward which is attributed just 5%. It s evident that customers favour retailers that focus on clear communications and the convenience experience. While Reward has scored lower than other pillars, suggesting a drop in customer engagement in this area, it s important to highlight the wider significance and benefits that well-run rewards programmes can bring the retailer, particularly the data and engagement opportunities which impact other pillars such as Communications and Affinity (personalisation and relationship). Rewards programmes with simple and immediate benefits can also be an important differentiator. 6 ONE SIZE DOES NOT FIT ALL: MULTIPLE PATHS LEAD TO HIGH CUSTOMER CENTRICITY The best customer centric retailers do not all fit the same mould. For example, our study revealed that some Warehouse and Cash & Carry clubs with low prices have ranked just as highly as some premium-priced specialty retailers. Their single-minded approach to excelling at their chosen core competency, and delivering on this for their customers, is their common link. 8

9 KEY FINDINGS 7 COMMON ATTRIBUTES ARE SHARED BY TOP 25% OF RETAILERS Each retailer has different strengths and weaknesses. But when evaluating the global top ranking 25% of retailers included in the study, we found some common attributes that they all score well on with their customers. These attributes can also be used as a barometer to measure performance and track progress. Customers want trust and transparency (expectations are met and prices clearly marked), ease (make checking out easy) and value (relevant range and good value on the products). ATTRIBUTES ALL TOP RANKING RETAILERS SCORE HIGHLY ON Sells products that I want Makes checking out easy My expectations are met when I shop at this store Prices are clearly marked Offers good value on the products I like Top 100 retailers consistently perform well on Price, Range and Service and Promotions, with attributes reflecting common themes such as good value, good prices, enjoyable shopping experience, and satisfaction. OTHER ATTRIBUTES WHERE THE BEST RETAILERS OUTSHINE THE LOWEST SCORING RETAILERS ARE: Attribute Offers good value on the products I like Pillar Price Is a retailer that stands for value for money Price Prices on products that I regularly purchase are right for me Price My expectations are met when I shop at this store Range and Service I enjoy shopping at this store Range and Service Products sold here offer better value than competitors Price Sells products that I want Range and Service I find it appealing to shop here Range and Service Is a retailer I trust Range and Service Promotions offer good value Promotions 9

10 KEY FINDINGS 8 WINNING STRATEGIES PER REGION Drilling deeper into the 7 pillars, we ve identified the attributes which feature most commonly across the top ranking retailers in different regions. This helps to understand what makes up winning strategies in different parts of the world for example, Service and Convenience are key in Asia, LatAm has a clear focus on Price and in US/Europe the shopping experience must be enjoyable. TOP INDIVIDUAL ATTRIBUTES PER REGION ASIA I enjoy shopping at this store Is convenient to my work/to my home My expectations are met when I shop at this store EUROPE US LATAM I enjoy shopping at this store Is a retailer I trust Is convenient to my work/to my home I enjoy shopping at this store Is a retailer I trust Is convenient to my work/to my home Prices on products that I regularly purchase are right for me My expectations are met when I shop at this store Is a retailer I trust I find it appealing to shop here Sells products that I want Offers good value on the products I like Sells products that I want Sells products that I want Prices on products that I regularly purchase are right for me Prices on products that I regularly purchase are right for me I enjoy shopping at this store GLOBAL DRIVERS OF CUSTOMER CENTRICITY BY COUNTRY Although attributes differ per region, the relative importance of each pillar shows little variation across countries, suggesting a universal view of what customers value most from retailers. GLOBAL COLOMBIA CHILE BRAZIL ARGENTINA MEXICO JAPAN FRANCE TURKEY ITALY POLAND GERMANY US UK 0% 20% 40% 60% 80% 100% Affinity Range and Service Promotions Price Communications Ease Rewards 10

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12 KEY ROUTES FOR GLOBAL CUSTOMER-CENTRICITY SUCCESS Where should a retailer start when it comes to making investments that improve customer-centricity? PATHS TO HIGH CUSTOMER CENTRICITY As our study uncovered, there are a number of different routes to achieving a high customer centricity score. This chart shows where different types of retailers excelled in the eyes of their customers. Affinity Range and Service Promotions Price Communications Rewards EVERY DAY LOW PRICE MIDMARKET CASH & CARRY CLUBS UPMARKETY/ SPECIALTY NICHE/ INDEPENDENT DISCOUNTERS FOOD-FOCUSED HYPERMARKETS 12

13 WHAT YOU NEED TO GET THERE Our analysis focusing on the top 100 retailers (top 25%) indicates that there is no single route to success, but here are some of the most common combinations of levers that retailers can choose to focus on to enhance their customer-centricity rating. RANGE AND SERVICE + PRICE This was the most common path to a top customer centricity score, with a set of retailers that have excelled in providing a great range of products, supported by solid customer service and a positive price perception. This has helped drive affinity with their customers and achieve high centricity. PRICE + PROMOTIONS One set of retailers (Cash & Carry Clubs) outdo all others in price and promotions which helps them achieve high centricity and affinity with their customer base. COMMUNICATIONS + RANGE AND SERVICE Specialty retailers have done exceedingly well owing to high scores in communications and their superior ranges and service. REWARD + COMMUNICATIONS Top performers from Food-focused Hypermarkets have achieved high centricity by excelling at their rewards and communications strategy, creating a great connection with their customers. PROMOTIONS + RANGE AND SERVICE + REWARD Even some retailers with a low affinity score have still been able to excel at customer centricity by having a strong promotional strategy in place, coupled with a valued rewards programme, and solid fundamentals like range/service. 13

14 CONCLUSION OWNING A NICHE - WHAT WE CAN LEARN FROM THE WORLD S MOST CUSTOMER-CENTRIC RETAILERS The world s top 100 most customer-centric retailers come in a wide variety of shapes and sizes. Some like Lidl and Aldi are value-focused, while others like Trader Joes and Picard are aimed at specialty needs. At first sight, it may seem that they share little in common. The trend is clear however: retailers that are best at driving customercentricity have a single-mindedness, a core competency that they use to differentiate and deliver value to their target group of strategic customers. They communicate their proposition and then make sure they deliver what is promised. This is why customers are happy to wait in line and have fewer SKUs if they are shopping at a value retailer. That is why customers are happy to pay the difference for choice, quality and shopping experience at a specialty retailer. Although brand affinity comes through strongly as the connecting thread between these retailers, our findings also highlight that regardless of all the talk about technology and personalisation, it is critical that retailers get the fundamentals of the in-store environment and experience right. The last decade has seen the middle-ground of grocery retail squeezed from both sides. The mass market has become a space fiercely fought over by a few major players. For those retailers that can forge and protect a niche above or below the mainstream battle-ground, the message is continue to build total clarity around your customer offer. Choose where to invest and stay focused. Larger retailers and those with a more general appeal have a different choice: harness the wealth of your data assets to better understand your customers, to ensure you are delivering on what matters most. Use your scale to tailor and personalise key elements of your proposition, or risk losing customers to highly-targeted niche retailers who are growing their influence and market share through a customer-centric approach. DUNNHUMBY SOLUTIONS TO SUPPORT CUSTOMER CENTRIC STRATEGIES To support retailers in choosing the right approach to improving their customer centricity, dunnhumby offers a range of solutions which can help your business excel in key pillars. PROMOTIONS RANGE AND SERVICE REWARD COMMUNICATIONS PRICE Promotion Analytics a promotional planning tool that analyses which promotions are profitable and drive desired customer behaviour. Category Optimisation a powerful end-to-end category management toolkit that helps you make better decisions for customers across category strategy, investment and execution. Loyalty Drivers Analysis tailored research to determine key customer needs, helping you to understand what drives their loyalty. Customer Engagement consultancy services to plan, manage, deliver and measure the impact of personalised communications across multiple touchpoints. Price Strat price optimisation tool to create logical pricing at shelf and maintain consistent and clear price policies for customers. FIND OUT MORE To learn more about dunnhumby's Global Customer Centricity Index, please contact us at dunnhumby.com/contact 14

15 STUDY METHODOLOGY The analysis was based on dunnhumby s proprietary Customer Centricity Index methodology, a unique approach that assesses individual responses to more than 60 different criteria per retailer (representing a mix of functional and emotional attributes that are important to grocery shoppers) to build up a deep understanding of the most important factors for customers when they shop and browse and how each retailer performs against these needs. Customer Survey We start with the customer Survey used to gather data Attribute Attribute Attribute We apply our extensive industry experience 60 Customer Centric Attributes that we know correlate strongly with our CCI measures are collected 7 Pillars of CCI We leverage best practices Diagnostic measurement to understand Customer Centric drivers against best practice Regression Analysis We use regression analysis to understand how pillars impact customer centricity in detail Weightings are proprietary to dunnhumby CCI Score Tabulated We provide benchmark for measurement One singular score to understand changes over time and comparison to key competitors 15

16 THE DUNNHUMBY DIFFERENCE dunnhumby is the world s leading customer science company. We analyse data and apply insights from nearly one billion shoppers across the globe to create personalised customer experiences in digital, mobile, and retail environments. Our strategic process, proprietary insights, and multichannel media capabilities build loyalty with customers to drive competitive advantage and sustained growth for clients. dunnhumby employs over 2,000 experts in offices throughout Europe, Asia, Africa, and the Americas and works with a prestigious group of companies including Tesco, Monoprix, Raley s, Macy's, Coca-Cola, Procter & Gamble, and PepsiCo. Contact us at dunnhumby.com to put the customer at the centre of your business decisions. 16