Loyalty should be simple to engender: give people what they want, you keep ’em coming back. The supermarkets, however, have made things more complicated.
Myriad loyalty cards, price guarantees and promotional mechanics make for a dizzying range of incentives aimed at winning the hearts and minds of shoppers. Unless the supermarket is a discounter, that is.
Although Aldi and Lidl offer a handful of weekly price cuts, it’s nothing compared with the all-out promotional assault by the top five. The discounters also dismiss loyalty cards and price guarantees, despite both becoming central to the way the bigger boys operate.
Yet our second Supermarket Loyalty League suggests retailers are right to keep it simple, with Aldi coming top, Lidl rising to third and Waitrose, which until very recently also eschewed the heavy-handed loyalty tactics of the big four, finishing second. So how do they manage to inspire such loyalty among shoppers without a loyalty scheme?
The short answer is that low prices trumped quality this year in the list of shopper priorities. Shoppers were asked if they would recommend their supermarket of choice, and why. Based on their replies, they were split into ‘promoters’, ‘passives’ or ‘detractors’. The number of promoters minus the number of detractors gives the ‘net promoter’ score (NPS). Those that finished high up the table exceeded customer expectations. Those that slipped down it did the opposite.
Shoppers raved about Aldi, which came top with an NPS of 38. As well as praising Aldi’s low prices, they also championed the balance of price and quality — the Holy Grail for economically squeezed shoppers.
“Ultimately it comes down to one of the simplest things in retail, which is to give customers a transparent and consistent offer,” says Aldi joint GMD Matthew Barnes. “Ours know if it cost £80 last week it will be very close to £80 the next. Our price moves are very limited.”
Aldi runs six weekly price cuts on fruit and veg (the Super 6), two on meat and a monthly £5 off a £40 shop coupon in the Mirror. It has “no plans” to launch a loyalty card or price guarantee scheme.
“No gimmicks,” says Barnes. “We don’t have those distractions, we just invest in the price gap on our competitors.”
57% of Aldi shoppers raved about the discounter and would recommend it to friends
38% scored Aldi positively for ‘Good Price/Good Quality’ - making it the top-rated retailer in the survey
31% gave Aldi a positive ratingn for ‘Low Prices’ - again making it the top scorer
20% Only one in five were disappointed - the lowest percentage in the survey
Barnes is particularly pleased Aldi came top on the balance of quality and price. “If you were looking for our all-encompassing philosophy, that would be it,” he says. “Our quality controls are among the most stringent of all retailers, but we know when we get a product on shelf we are giving customers the best. And they are responding really positively. We keep listening, keep engaging and we continue to invest in what the customer wants.”
Waitrose scored highest for product quality, but it slipped to second place this year as ‘low price’ rocketed to the top of the most important factors determining shopper loyalty. It was perhaps always going to struggle against a discounter under such circumstances, although it claims its own internal research shows no dip in happy customers.
The other ‘premium’ retailer, M&S, also dropped one place – into last. “We’re surprised and disappointed by these results as they do not mirror what we’re seeing,” says a spokesman.
Conversely, Lidl, like Aldi, took advantage of the customer demand for low prices, leapfrogging Sainsbury’s and Asda into third. The results are “very encouraging”, says a spokeswoman. “People know us for great value, which is what motivates people to start shopping with us, but we’re very demanding of ourselves when it comes to the quality of our products. It’s that which keeps them shopping with us for life.”
Service still important
Ocado rose to fifth thanks to the top score for customer service. Karine Del Moro, VP of marketing at customer research specialists Confirmit, says good service is “vital” to securing shopper loyalty. “Positive experiences drive word of mouth recommendations,” she says. “Poor experiences can be incredibly damaging to the brand, especially with the rise of social media.”
The rise of omni-channel retailing has made the challenge for retailers even bigger, she adds. “Customers interact with retailers in-store, online, via mobile and more. Retailers need to look at the overall experience as customers look at the brand as a whole. Focusing purely on a single channel will provide an inconsistent experience and ultimately degrade the brand. Retailers need to exceed customer expectations.”
Which, suggests Conlumino analyst Neil Saunders, is arguably easier for a discounter to do than a premium retailer. This coupled with the importance of low prices makes it easier for an Aldi to hit a higher NPS, he argues. However, he adds, it has put “lots of effort into quality and it’s paying dividends. Customers get a ‘Wow, I didn’t expect that!’ experience.”
Which is exactly what keeps today’s demanding consumers coming back for more.