Bigger Carts Mean Better Shoppers

Posted on by Chief Marketer Staff

Most retailers are adept at persuading shoppers to buy a particular item. Increasing the lifetime value of customers by turning those one-off item purchases into long-term incremental behavior is a different challenge.

Retailers who analyze transaction behavior can identify their most profitable shoppers, learn what motivates them and get them to buy products they had not even considered. The key is to complement knowledge of what is most important to shoppers with relevant marketing and merchandising tactics that resonate and increase sales and profits.

There are five strategies to winning shoppers. All are triggered off being able to collect shopping-cart data and measurement capabilities that allow basket analysis, whether or not the contents of the basket are linked to shopper demographics (although the ability to do so is absolutely preferred).

  1. Win the big planned trip.

    The best way to increase sales is to identify the most important shoppers and understand which items drive what type of shopping trip. A family of four will purchase different items than a couple, even if they are spending the same amount. One retailer we worked with found that while milk and large cuts of meat were common elements within bigger shopping carts among larger families, larger baskets among singles and couples were more likely to contain soup, canned vegetables and wine.

    By understanding the drivers of each specific shopping trip by its priority shoppers, a retailer can identify which items to promote and how to position them in marketing collateral. Through these insights, our retailer client was able to increase the percentage of larger sales by more than 60% during a promotion.

  2. Shoppers are talking.

    Be sure to listen. Retailers need to pay even closer attention to their shoppers than they do to their competitors. One retailer discovered that shoppers of one smaller format store were going elsewhere for their meat. Analysis revealed that these valuable customers tended to be college students and low-income residents. By increasing the selection of single-serve, more convenient and lower priced meats, the retailer significantly boosted sales. Knowing what the best shoppers are not buying can lead to opportunities to win those same customers in new categories.

  3. Get the price right.

    Retailers can increase profits while maintaining or growing volume through a shopper-centric pricing strategy. In other words, being price competitive on items their highest-value shoppers are most price sensitive to, rather than being competitive on the same items as other chains.

    For example, one of our retail partners identified that within the cereal category, many items positioned at everyday low prices (EDLP) did not have to be. Conversely, many items that were not at EDLP should have been. When prices are low on the items shoppers really care about, they will shift their purchases from the competition, providing an opportunity to build margin in less price-sensitive items — all while maintaining the right price position and image.

  4. Understand brand preferences.

    Purchase data can help merchants distinguish which shoppers prefer which brands, and in which product categories. Identifying the categories where key shoppers tend to prefer private label goods provides invaluable insight to drive store brand innovation, or to inform marketing initiatives. It’s important to note that it is not about a prioritization of private label over national brands or vice-versa. By understanding the brand preferences of priority shoppers, retailers will increase sales, profits and relevance from targeted promotions.

  5. You are what you buy.

    Every time consumers shop, they tell the retailer about who they are and what is important to them. If a retailer is looking to increase sales among health-conscious families with children, for example, more effective promotions would feature not only core family grocery items such as produce, bottled water and meat, but also highly correlated items for that segment that drive bigger carts, such as yogurt, organic cereal and fruit juice. Understanding what items matter to which shopper segments helps retailers identify new ways to engage shoppers and capture a greater share of their wallets.

In each of these cases, our retail partners were able to grow the shopping cart among their best customers in a long-lasting way by analyzing their purchases for margin and correlated goods bought. Shoppers responded with a shift in behavior that translated to more consistently profitable trips.

Brian Ross ([email protected]) is president of Precima.

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