Purchase Influences at Kroger and Safeway

The rising cost of gas and other commodities has consumers even more likely to abandon their favorite retailers to save money elsewhere, according to data from BIGresearch, Worthington, OH.Retailers should be mindful that even their most loyal customers "will leave you on a dime if you don't give them what they want," according to BIGresearch senior vice president Kim Rayburn, while discussing the results of a recent consumer study at the Promotion Marketing Association's Shopper Marketing Summit in May 2008.And as the nation's economic woes continue, what consumers want increasingly boils down to low prices, according to Rayburn. A survey conducted among the research firm's 7,500-member panel in April found that consumers plan to spend less for products in every category, from apparel and electronics to groceries and dining out. It was the first time in years that purchase intent was down in every category, Rayburn noted.That has more consumers migrating away from their stores of choice to seek bargains elsewhere, said Rayburn, who used data from panel members that are frequent shoppers of the Kroger and Safeway chains to illustrate the current economy's effect on purchase plans in the supermarket channel.More than 75% of Kroger and Safeway shoppers indicated that rising gas prices are affecting their spending habits elsewhere, and nearly 30% of shoppers at both chains said they planned to spend less on groceries. (The average Safeway shopper in the panel has a household income of about $62,000 and the average Kroger shopper is at approximately $59,000; both figures are above the national average of $55,000.)Both chains have a relatively strong base of long-time, loyal shoppers: the average shopper has been going to Kroger for 11.3 years and Safeway for 12.6; Kroger is the first choice for grocery purchases for 54.3% of its customer base, while Safeway gets named as top choice by 48.5% of its shoppers.Despite these facts, both chains have lost customer trips to discount and drugstores over the last 12 months, according to the study. Asked why they switched, shoppers from both chains most often cited high prices (21.9% at Kroger and 23.5% at Safeway) and inconvenient locations (27.3% at Kroger and 26.0% at Safeway). Both factors, Rayburn theorized, could be sparked largely by the current economic downturn.Safeway was also criticized for long checkout lines (by 17.5% of shoppers), Kroger for long lines (12.4%) and poor product selection (11.9%).Another change in behavior sparked by the gas crunch that could provide a benefit to the chains is that a significant number of shoppers say they are buying more "store brand" or "generic" products: 36% of Kroger shoppers (versus 30% in BIGresearch's April 2007 survey) and 31% of Safeway customers (vs. 23% in April 2007). Both chains have been aggressively stepping up their private-label activity in the last 12 months.Furthermore, more than half of shoppers at both chains say they are taking fewer shopping trips, and nearly half are shopping closer to home than they have in the past.Purchase influencesWhile discussing potential methods of effectively reaching these economy-conscious consumers, Rayburn presented data on the purchase influences among Kroger and Safeway shoppers.Among survey respondents, coupons were far and away the most influential media vehicles among shoppers at both chains, with Kroger customers showing a decidedly higher preference for the tactic than Safeway shoppers. (See "Media Influence" chart at right.) The disparity in customer preference (about 72% of Kroger shoppers vs. 59% of Safeway shoppers) is likely a reflection of Kroger's more strategic work with coupons -- or a direct result of those efforts. The company's work with dunnhumby in recent years to mine frequent-shopper data has produced a program of targeted direct-mail offers to top customers. (See "Marketing at Kroger" in Related Articles.) By all reports, these campaigns deliver strong results -- including high coupon redemption rates. In 2008, Kroger has been working to modernize the traditional coupon model by using AOL's ShortCuts service to let frequent-shopper cardholders select e-coupons online for automatic redemption at checkout, and by working with Cellfire to have coupon offers delivered to cell phones. Also, a joint effort with Procter & Gamble leverages the CPG's ongoing brandSaver FSI drop to offer the same functionality (and other benefits) in a program operated by SoftCoin Inc.Among other media, newspaper inserts were cited as being the second biggest influence, followed by in-store promotion -- both at relatively consistent levels for shoppers at both chains. At 45.9% among Kroger shoppers and 43.5% among Safeway shoppers, in-store promotion was cited as having a significantly greater influence on purchases than TV, print, radio or any mass medium.Among in-store tactics, product sampling is the only type cited by more than 50% of shoppers at both chains as having an influence on purchases. From there, opinions differed slightly, with Kroger shoppers listing (in order) store loyalty cards, shelf coupons, product labels and special displays as affecting decisions, and Safeway shoppers putting product labels ahead of (in order) loyalty cards, coupons and displays. (See charts at right.)

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