Focus on customer loyalty rather than customer retention
A “price war” is likely to kick off on supermarket shelves in the first half of next year, according to the IRI, as small and medium sized FMCG brands are increasingly squeezed by private labels amid the pressures of inflation.
The “squeezed middle” is already losing volume and value, IRI finds. In the year-to-date (YTD) to May 2022, medium sized manufacturers had a 25.4% share of food sales, down from 26.1% in the second half of 2021. Similarly, small brands saw their share of food sales decline from 14.1% to 13.8%.
Meanwhile, supermarkets’ private labels increased their share of food sales from 35.8% in H2 2021 to 37% over the YTD to May. Inflation has risen even further since then, and consumer concerns about the cost of living over the winter months is likely to drive an increasingly rapid move towards cheaper private label goods, IRI says.
Pressures of inflation on shoppers
Shoppers are switching to own-labels and discounters to manage inflation. They’re planning to employ three main strategies to help combat the rising cost of living. This includes monitoring the overall cost of their basket, opting for supermarket own-labels over brands and shopping at discounters more frequently. More affluent consumers can afford to switch discretionary items to cheaper alternatives, however, low-income shoppers have already been doing so prior to when inflation kicked in.
There’s been a small shift away from fresh to frozen, suggesting shoppers are spending less on fruit and vegetables and more on impulse confectionery and soft drinks. However, shoppers returning to supermarkets with in-store visits have risen in comparison to last year. Therefore, online FMCG sales have also dropped.
Taking an omnichannel approach
Worldwide we’ve seen sales rebound strongly online over the last year, with a 61% increase in-store sales as consumers returned to physical stores post pandemic. The share of online sales in the market dropped 20% to 45%. It’s evident that customers prefer to shop both online and in store averaging at around 50:50.
Businesses are focusing on the three big customer benefits enabled by omnichannel strategy. The first benefit is that stores are ‘never out of stock’, it now allows customers to make online purchases through their in-store staff. The rise of click-and-collect has enabled customers to get hold of their purchase the same day as they order online.
Loyalty schemes, credit and omnichannel approaches are some ways in which brands are planning to build a customer base that keeps coming back. Companies are focusing on building a base of valuable customer relationships ensuring that customers keep coming back. As they predict a decline in sales due to the pressures of inflation.
It’s no secret that rewarding customers for their purchases will entice them to keep coming back to your business. This traditional approach to loyalty has worked for decades, however, Loyale does more than what was done traditionally. Loyale has a fresh take on loyalty, it couples rewards with marketing and data analytics so both the customer and the brand benefit from its usage. Customers gain their rewards whilst brands benefit from their personal data including demographics, shopping habits and more. Brands can then use this data to tailor their marketing approach and personalise their messages to increase customer retention and sales. Loyale’s automations make it simple and easy to implement and use, taking away the hassle for everyone involved.
If you’re looking to implement a rewards marketing platform in the next quarter, look no further than Loyale.