April 13, 2012
Affluent Consumers Look to Stretch Grocery Budgets
A new research study shows that consumers are focused on getting their grocery dollars to go further and the practice is not relegated to those on the lower rungs of the economic ladder.
According to MarketTools, Inc., 63 percent of consumers have made changes to make their dollars go farther. To accomplish this, 80 percent purchase items with coupons; 62 percent buy private label; 58 percent only buy certain items when they are on sale and 43 percent buy larger sizes.
Of those who use coupons, 67 percent use them for at least half of their shopping trips.
Coupon usage is particularly high among households with annual incomes of $75,000 or more. Among these households that use coupons, 49 percent say they bring them with them on every, or nearly every shopping trip for groceries. As a point of contrast, only 38 percent of households earning $25,000 or less use coupons on almost every trip to the grocery store.
Paper coupons remain the most popular, with 72 percent clipping them the old-fashioned way. Consumers also get coupons from a number of online sources, including email (37 percent), coupon sites (36 percent), manufacturer sites (22 percent), and Facebook (10 percent).
Only 36 percent of consumers subscribe to daily deal sites such as Groupon or LivingSocial. Groceries only make up about 13 percent of the offers redeemed by daily deal subscribers.
BrainTrust
Recent Discussions
Discussion Questions
Discussion Questions: Can any grocers aside from the most upscale afford to not play the price game today? What takeaways do you have from the MarketTools’ research findings?
Poll
There is a legitimate “new normal” of consumer behavior where even wealthy consumers actively seek bargains, and saving money has become a status activity. Especially where consumers cannot use hand-me-down groceries or buy them used, they expect competitive pricing. MarketTools research confirms the need for grocery retailers, even those catering to a wealthier clientele, to be aggressive and creative in pricing products to attract and retain shoppers.
I read the statistics quoted in the article and say “that is us.” We shop with coupons more than ever, buy private label when we can and only buy certain items when they are on sale. You know something, it’s not so bad to have the feeling you saved money.
The key to the Instant Poll question on this thread is “…than they were last year?” Consumers of all stripes have been focused on savings for quite a while — 2008 just turned our attention to it more acutely.
There’s a reason affluent people are affluent (and I’m not talking about the Paris Hilton variety affluence of course) and it is because they are careful with their money. Being value-conscious is just part of the DNA.
My wife has a great way of putting it. “We’re all just broke at a different level.” I’ll bet she doesn’t pay retail for 10% of the things she buys. And I’ll also bet that she is not atypical.
Yet another coupon study story? Coupons are being used more because they are so prevalent. That does not prove they are altering shopping behavior, just that people are redeeming more because it’s so easy.
Sometimes perception is reality. If grocers offer appealing coupons shoppers feel the retailer has their interest at heart … saving money. Knowing what offers are most compelling and convey a good value image is the foundation of a strategy that selects products and offers most effectively. It’s not just about offering coupons, but offering coupons that impress. Retailers have the answer MarketTools didn’t write about and that is the percentage of sales completed with coupons. Taking a close look at that number along with who cashed in and what was purchased will take grocers a long way in planning future strategies.
Shopping for food has the highest regular profile upon one’s budget. Therefore it’s natural that price increases impact more on food than on items less frequently purchased. Thus food retailers are stuck in the price game. That seems a pity.
Take away from the research: Higher income families use coupons more than lower income families for several reasons including they have easier access to them.
There is nothing new here. As long as I can remember, coupon usage has always indexed higher with higher demographics. While education is certainly a factor, it is also the items that make up the shopping list. The lower the demographic, the more basic the shopping list and less likely to find coupons on basic needs.
I am a bit perplexed by the last two paragraphs of the discussion. They seem to suggest that alternatives to paper coupons are not a big deal. If we were to graph the trends over the last 5 years of percent of participation in alternative sources, it would suggest that the alternatives are growing very, very quickly.
Many of these patterns have been in place for groups of consumers for a long time. Those consumers are finding ever increasing ways in which to seek value in their grocery and household goods purchases. Retailers have to deal with this fact.
In addition, new groups are joining “new normal” consumer habits that are being formed. That places additional pressure and focus on retailers who may have enjoyed a carriage trade business. I was listening to a close friend’s wife talk about her new-found ways of “saving” at the store the other evening. Permit me to call this person “fortunate” — homes in a couple of cities, multiple club memberships, successful businesses, etc. She was rightly proud of her daughter who recently became a young mother. She was proud of the fact that she had become thrifty, and she was encouraging her by taking up the same approach — she was using coupons for the first time ever, buying generic products, and had rediscovered the joy of home-cooked meals.
Retailers of all stripes have to pay attention to the multiple segments of the consumer marketplace. It demands flexible, decisive marketing moves — including pricing.
While in today’s economy some consumers “need” to save money on their groceries, every consumer “likes” to save money on most purchases. Good retailers understand their target markets and develop strategies, including pricing accordingly. However, a word of caution, anyone can give product away, it takes brains to sell it.
Will price always be important in food retailing? Absolutely. We have conditioned shoppers to expect low prices. A review of the supermarket circulars reinforces this perception. Unless we have a sustainable competitive price advantage, we need to give our customers something beyond price to make our store their store.
We still have a lot of shoppers, regardless of their low incomes, that really don’t care what they pay for food. Low income shoppers have Food Stamps and WIC so they get their groceries for free. Why would they bother with coupons? With only 62% of consumers buying private label, that tells me 38% simply don’t care about prices. I’m still amazed at the large market share the plain vanilla, sterile, publicly-held chain stores have. They routinely charge 15-20% more than Walmart and Target and yet people still shop those stores for whatever reason. The biggest takeaway I find from the research is that most consumers are not very good at math, time starved, and lazy.
When it comes to wealthier, but penny-wise grocery shoppers, I believe a high-low strategy will work best. The low price on filet mignons will pull them in, and they’ll throw other things in the basket on the way out the door. I know that Stew Leonard’s does this and it works like a charm. Then you get hooked on the freshness and can’t go back!
Intersting but not surprising that housholds with $75k or more income use coupons 21% more than households with 25K or less. (coupon usage 49% vs 38%). I thought it might be a digital divide but 72% of consumers clip ’em.
Stretching one’s dollar doesn’t go out of style.
There are plenty od values offered in the grocery channel that aren’t based on coupons. If the retailers and manufacturers would focus more on communicating smart shopper marketing programs that offer shopper value beyond a coupon, and if they would do by conversing with shoppers along the entire path to purchase, my bet is that shoppers would be happier and the discussion about how shoppers experience value while shopping might shift beyond just coupons.
Price as always been important, but retailers must adjust to the new American mental state. Since the Great Recession, all income groups have become more financially conservative. Debt levels continue to decline overall. This means evener the higher income groups have some spending considerations. Look at the increase in showrooming.
The most interesting takeaway I see is the statement: “nearly half of respondents (49%) say a coupon would not prompt them to buy an item they don’t normally buy.”
If that is the case, the incremental cost of coupons is higher than many marketers recognize. Traditional coupon accounting goes something like this:
1. Assume 30MM circ, $3 CPM, and 1% redemption
2. $3 / 1000 = $.003 per coupon circulated
3. $.003 / 1% redemption = $.30 per coupon redeemed
4. $.30 per coupon redeemed + $.10 fulfillment + $1 savings cost = $1.40 cost per unit moved
That’s assuming the sales were 100% incremental. If it were only 50% incremental, the cost per unit moved doubles to $2.80. If the category purchase were 50% incremental but the consumer chooses brand A when they normally alternate 50/50 between brand A and B, the cost per unit is still $2.10.
In any case, the cost to move incremental units is higher than conventional wisdom. And that’s excluding the costs of coupon enthusiasts who double up coupons and trade deals and find other ways to game the system.
Targeting coupons to new buyers or lapsed buyers using digital methods drives the 49% cannibalization rate down considerably.
Simple answer is; this is America, we ALL have to play the price game. Interesting going abroad (just about anywhere but especially in Asia) and getting a gauge of how discount minded we are here in the U.S. It’s actually a little disturbing how much price drives our mentality — quality always on the back burner. No wonder U.S. retailers want to grow internationally.
But it is what it is! You’d be foolish not to cater to it here in the U.S. I’m a big fan of the way Whole Foods does it; create a sub brand (365), keep the quality promise, but have that sub brand represented in every category. Then, even the ‘affluent’ can get value added buys every day. Even Europeans can get value, whether they like it or not!
It is interesting to see that 36% of the consumers in this survey subscribe to a daily deal site. Our new survey of the wealthiest 10% of U.S. households shows that 47% of them subscribe to one or more of the daily deal sites.
One of the retailers most food retailers ignore is Aldi. They have been growing at a pace most others could only hope for. A quick look at the demographics of some of the locations they are entering leads to the belief that they understand multiple levels of income and desired selections.
The numbers discussed in the piece and mentioned in some of the comments about daily deal sites and social media are actually quite amazing. Why? They weren’t even likely known of just two years ago. Most that would be considered affluent didn’t become that way by being frivolous. Most became that way by being smart. They are also of a demographic much more likely to be connected to technology, know how to use it, and know how to maximize it.
The wording of this question reveals the answer (indeed, it almost renders it a tautology): the less you differentiate yourself, the more dependent you are on (the)price(game). As for the survey itself, without a further breakdown of the “sometimes/occasionally” vs. “always” responses, the numbers don’t mean much.
No surprises here. Indeed, these findings are remarkably similar to the findings and behaviors uncovered by other studies conducted during the height of the recession. Given that consumers continue to grapple with major, anxiety-inducing issues like the economy, their personal finances, rising gasoline prices and jobs, these are the behaviors that consumers have adopted and continue to adopt to find ways to be more savvy grocery shoppers.
Grocery retailers that want to compete do have some options, such as private label goods and outstanding customer service. But at the end of the day, many consumers simply want to exert greater control over their grocery tabs. And some of the simplest ways to do that are by adopting the behaviors cited in this study.
More Discussions
How Timely Is the Planned Lowe’s Website Renovation Focusing on Personalization?
Is Lowe’s being timely with its website reno, and is it right to be placed as…Should Costco Be Opening Members-Only Gas Stations?
Is this the right move for the warehouse club?As Boomers ‘Age Out of Peak Purchasing,’ How Can National Brands Retain Interest With Gen Z?
According to a recent First Insight study titled “Is Gen Z Still Choosing Your Brand,” while…
There is a legitimate “new normal” of consumer behavior where even wealthy consumers actively seek bargains, and saving money has become a status activity. Especially where consumers cannot use hand-me-down groceries or buy them used, they expect competitive pricing. MarketTools research confirms the need for grocery retailers, even those catering to a wealthier clientele, to be aggressive and creative in pricing products to attract and retain shoppers.
I read the statistics quoted in the article and say “that is us.” We shop with coupons more than ever, buy private label when we can and only buy certain items when they are on sale. You know something, it’s not so bad to have the feeling you saved money.
The key to the Instant Poll question on this thread is “…than they were last year?” Consumers of all stripes have been focused on savings for quite a while — 2008 just turned our attention to it more acutely.
There’s a reason affluent people are affluent (and I’m not talking about the Paris Hilton variety affluence of course) and it is because they are careful with their money. Being value-conscious is just part of the DNA.
My wife has a great way of putting it. “We’re all just broke at a different level.” I’ll bet she doesn’t pay retail for 10% of the things she buys. And I’ll also bet that she is not atypical.
Yet another coupon study story? Coupons are being used more because they are so prevalent. That does not prove they are altering shopping behavior, just that people are redeeming more because it’s so easy.
Sometimes perception is reality. If grocers offer appealing coupons shoppers feel the retailer has their interest at heart … saving money. Knowing what offers are most compelling and convey a good value image is the foundation of a strategy that selects products and offers most effectively. It’s not just about offering coupons, but offering coupons that impress. Retailers have the answer MarketTools didn’t write about and that is the percentage of sales completed with coupons. Taking a close look at that number along with who cashed in and what was purchased will take grocers a long way in planning future strategies.
Shopping for food has the highest regular profile upon one’s budget. Therefore it’s natural that price increases impact more on food than on items less frequently purchased. Thus food retailers are stuck in the price game. That seems a pity.
Take away from the research: Higher income families use coupons more than lower income families for several reasons including they have easier access to them.
There is nothing new here. As long as I can remember, coupon usage has always indexed higher with higher demographics. While education is certainly a factor, it is also the items that make up the shopping list. The lower the demographic, the more basic the shopping list and less likely to find coupons on basic needs.
I am a bit perplexed by the last two paragraphs of the discussion. They seem to suggest that alternatives to paper coupons are not a big deal. If we were to graph the trends over the last 5 years of percent of participation in alternative sources, it would suggest that the alternatives are growing very, very quickly.
Many of these patterns have been in place for groups of consumers for a long time. Those consumers are finding ever increasing ways in which to seek value in their grocery and household goods purchases. Retailers have to deal with this fact.
In addition, new groups are joining “new normal” consumer habits that are being formed. That places additional pressure and focus on retailers who may have enjoyed a carriage trade business. I was listening to a close friend’s wife talk about her new-found ways of “saving” at the store the other evening. Permit me to call this person “fortunate” — homes in a couple of cities, multiple club memberships, successful businesses, etc. She was rightly proud of her daughter who recently became a young mother. She was proud of the fact that she had become thrifty, and she was encouraging her by taking up the same approach — she was using coupons for the first time ever, buying generic products, and had rediscovered the joy of home-cooked meals.
Retailers of all stripes have to pay attention to the multiple segments of the consumer marketplace. It demands flexible, decisive marketing moves — including pricing.
While in today’s economy some consumers “need” to save money on their groceries, every consumer “likes” to save money on most purchases. Good retailers understand their target markets and develop strategies, including pricing accordingly. However, a word of caution, anyone can give product away, it takes brains to sell it.
Will price always be important in food retailing? Absolutely. We have conditioned shoppers to expect low prices. A review of the supermarket circulars reinforces this perception. Unless we have a sustainable competitive price advantage, we need to give our customers something beyond price to make our store their store.
We still have a lot of shoppers, regardless of their low incomes, that really don’t care what they pay for food. Low income shoppers have Food Stamps and WIC so they get their groceries for free. Why would they bother with coupons? With only 62% of consumers buying private label, that tells me 38% simply don’t care about prices. I’m still amazed at the large market share the plain vanilla, sterile, publicly-held chain stores have. They routinely charge 15-20% more than Walmart and Target and yet people still shop those stores for whatever reason. The biggest takeaway I find from the research is that most consumers are not very good at math, time starved, and lazy.
When it comes to wealthier, but penny-wise grocery shoppers, I believe a high-low strategy will work best. The low price on filet mignons will pull them in, and they’ll throw other things in the basket on the way out the door. I know that Stew Leonard’s does this and it works like a charm. Then you get hooked on the freshness and can’t go back!
Intersting but not surprising that housholds with $75k or more income use coupons 21% more than households with 25K or less. (coupon usage 49% vs 38%). I thought it might be a digital divide but 72% of consumers clip ’em.
Stretching one’s dollar doesn’t go out of style.
There are plenty od values offered in the grocery channel that aren’t based on coupons. If the retailers and manufacturers would focus more on communicating smart shopper marketing programs that offer shopper value beyond a coupon, and if they would do by conversing with shoppers along the entire path to purchase, my bet is that shoppers would be happier and the discussion about how shoppers experience value while shopping might shift beyond just coupons.
Price as always been important, but retailers must adjust to the new American mental state. Since the Great Recession, all income groups have become more financially conservative. Debt levels continue to decline overall. This means evener the higher income groups have some spending considerations. Look at the increase in showrooming.
The most interesting takeaway I see is the statement: “nearly half of respondents (49%) say a coupon would not prompt them to buy an item they don’t normally buy.”
If that is the case, the incremental cost of coupons is higher than many marketers recognize. Traditional coupon accounting goes something like this:
1. Assume 30MM circ, $3 CPM, and 1% redemption
2. $3 / 1000 = $.003 per coupon circulated
3. $.003 / 1% redemption = $.30 per coupon redeemed
4. $.30 per coupon redeemed + $.10 fulfillment + $1 savings cost = $1.40 cost per unit moved
That’s assuming the sales were 100% incremental. If it were only 50% incremental, the cost per unit moved doubles to $2.80. If the category purchase were 50% incremental but the consumer chooses brand A when they normally alternate 50/50 between brand A and B, the cost per unit is still $2.10.
In any case, the cost to move incremental units is higher than conventional wisdom. And that’s excluding the costs of coupon enthusiasts who double up coupons and trade deals and find other ways to game the system.
Targeting coupons to new buyers or lapsed buyers using digital methods drives the 49% cannibalization rate down considerably.
Simple answer is; this is America, we ALL have to play the price game. Interesting going abroad (just about anywhere but especially in Asia) and getting a gauge of how discount minded we are here in the U.S. It’s actually a little disturbing how much price drives our mentality — quality always on the back burner. No wonder U.S. retailers want to grow internationally.
But it is what it is! You’d be foolish not to cater to it here in the U.S. I’m a big fan of the way Whole Foods does it; create a sub brand (365), keep the quality promise, but have that sub brand represented in every category. Then, even the ‘affluent’ can get value added buys every day. Even Europeans can get value, whether they like it or not!
It is interesting to see that 36% of the consumers in this survey subscribe to a daily deal site. Our new survey of the wealthiest 10% of U.S. households shows that 47% of them subscribe to one or more of the daily deal sites.
One of the retailers most food retailers ignore is Aldi. They have been growing at a pace most others could only hope for. A quick look at the demographics of some of the locations they are entering leads to the belief that they understand multiple levels of income and desired selections.
The numbers discussed in the piece and mentioned in some of the comments about daily deal sites and social media are actually quite amazing. Why? They weren’t even likely known of just two years ago. Most that would be considered affluent didn’t become that way by being frivolous. Most became that way by being smart. They are also of a demographic much more likely to be connected to technology, know how to use it, and know how to maximize it.
The wording of this question reveals the answer (indeed, it almost renders it a tautology): the less you differentiate yourself, the more dependent you are on (the)price(game). As for the survey itself, without a further breakdown of the “sometimes/occasionally” vs. “always” responses, the numbers don’t mean much.
No surprises here. Indeed, these findings are remarkably similar to the findings and behaviors uncovered by other studies conducted during the height of the recession. Given that consumers continue to grapple with major, anxiety-inducing issues like the economy, their personal finances, rising gasoline prices and jobs, these are the behaviors that consumers have adopted and continue to adopt to find ways to be more savvy grocery shoppers.
Grocery retailers that want to compete do have some options, such as private label goods and outstanding customer service. But at the end of the day, many consumers simply want to exert greater control over their grocery tabs. And some of the simplest ways to do that are by adopting the behaviors cited in this study.