Updating the shopper value equation

Here’s a challenge I see: Every retailer needs to decide how they are going to deliver more value in the “new normal” marketplace, a place where shopper expectations are high, limits on disposable income are real, and technology delivers nearly limitless possibilities. A CEO I respect said not long ago, “It’s not yet clear to me which way to take our company.”  I sense many of his peers are in a similar situation. There are no maps, and without some guidance, we’re likely to wander around for a while. One way to establish direction is to go back to a familiar reference point and modify it to work better in today’s world. I suggest we update the shopper value equation. Here’s a draft set of ideas about what’s needed to deliver value to 21st century shoppers for discussion, feedback, and improvement.

The Shopper Value Equation

For many years, retailers have used the following formula, or something like it, to successfully appeal to shoppers. It was developed in the 1980s.

Value = (Price x Quality x Service x Assortment x Facility)

It worked like this: Dominate on one element that is important to your target shoppers and maintain parity on the others. In the 21st century though, I believe other sources of value need to be included. 

Where are the value Voids?

To me, the most important voids in the traditional equation relate to service. They fall into two areas – customer service and information – and I want to discuss them separately. 

Customer service + customer support

Good, old-fashioned customer service – friendly, attentive, and available when needed – is still important, and it may be even more important today as a way to stand out from the competition.  The new customer support I’m thinking about adds value when a retailer helps the shopper to do something that the shopper couldn’t do before – or if they could, the retailer helps the shopper do it faster and easier. Technology has added a lot of new ways to support shoppers, for instance: 

• Creating a shopping list. Helping the shopper to remember to buy everything they need so they don’t have to go back to the store adds value. This service can begin with past purchase information, record product use, or respond to a request like “what’s available in low sodium soups?” with a list specific options.
• Connecting to coupons. Saving the shopper the time and effort usually required to collect and manage paper coupons adds value. The good news is that electronic coupons are now plentiful, and retailers just need to help shoppers connect seamlessly to the ones they want.
• Laying out the in-store route. Saving the shopper search and travel time adds value, plus there’s an expectation that some of this time will be reinvested in browsing/buying more products. This requires some complex technology (a digital list that interfaces with location technology) but it’s already being offered today.
• Mobile scanning. Eliminating the checkout line adds value. Specific mobile scanning devices have been around for a decade now, and the capability is migrating quickly to smart phones. .  Pick it. Scan it. Pack it. Pay and you’re done. No more waiting in line to unpack items from a cart, put them on a belt, and get them scanned and repacked. 

Information

Information – when it’s readily available – can add value by delivering both intangible and tangible benefits. It’s increasingly important now that shoppers are so used to being able to access all kinds of information quickly and easilly.

Intangible benefits – There are almost unlimited possibilities for delivering intangible benefits. Here are two that have broad appeal.

• Consultation on product use. This can add value when products are unfamiliar to shoppers or require expertise to use or select (beverage planning for a party, for instance, or selecting the right shoe insert). Interactive digital screens are one effective way to deliver this information at the shelf, instead of requiring the presence of a knowledgeable staff member.
• Thrill of discovery . Isn’t this really what shopping is all about?  Most shoppers enjoy learning about something new if it’s relevant or interesting, a new flavor, meal planning idea, or meaningful product benefit that they didn’t know about.  Recommendation engines (like Amazon’s) create these opportunities, and suggestions can be delivered to shoppers in many different ways.

Tangible benefits – Here I’m mainly talking about ways to save money. 

• Enabling price comparisons . It’s easier than ever for shoppers to compare prices, and their expectations about transparency are increasing. It takes a lot of work [on the retailer’s part] to actually collect accurate price information, but there are many apps available today that can be tested and may be endorsed/harnessed to your benefit as a retailer.
• Promotions delivered in-store. Few will disagree that the closer a promotion is delivered to the actual time of purchase, the more useful and powerful it will be. Today promotions can be delivered on paper and at print stations at the entrance to the store, but technology is also making it possible to deliver them directly to the shopper via their smart phone when they’re right next to a product display.

A 21st century value equation

I propose that adding “customer support” and “information services” to the traditional value equation will better guide retailers to serving the needs of 21st century shoppers: 

Value =

(Price x Quality x Customer Service x Assortment x Facility

x Information Services x Customer Support)

What’s your reaction? 

• Do you think it’s worthwhile to redefine the shopper value equation? Why or why not?
• What else needs to be added to the equation?
• Are there parts you think are no longer relevant?