Grocers not foremost known for rock-bottom prices can minimize the damage in competing against low-price leaders — and potentially strengthen bonds with customers — by keeping price gaps tight while using best practices in executing mass promotions, communications, personalization and private brand, according to recent analysis by dunnhumby.
A survey of 18,000 grocery shoppers conducted by dunnhumby found that during inflationary times, the “Save Me Money” customer driver is five times more important than the next-most important drivers, “Save Me Time” and “Make It Better.”
That offers a big tailwind for “Base Price Leaders” in the grocery space such as Grocery Outlet, Aldi and Save-a-Lot as well as budget cross-shopped competitors like Walmart and Dollar General.
However, dunnhumby identified a number of grocers — “Lead Conductors” — who, though not market leaders in price, can hold their own in an inflationary period because “they’re better than the rest at conducting the mix of ‘Save Me Money’ levers.”
Lead Conductor examples included Kroger, Food Lion, BJ’s Wholesale, Weis Market and Shop Rite.
Where Lead Conductors demonstrate the biggest advantage over Base Price Leaders are in delivering relevant promotions and savings through loyalty programs. Lead Conductors also possess a slight edge in mass promotions. Importantly, Lead Conductors outperform base price market leaders on driving awareness of messaging that supports their price savings efforts.
Finally, Lead Conductors’ private brands rival those of Base Price Leaders in their ability to save customers money.
Among the pitfalls for traditional grocers unable to establish themselves as Lead Conductors are failing to leverage enough data science to understand which products to promote or competitors to benchmark against, as well as not coordinating execution across organizational functions well enough, according to dunnhumby.
On its second-quarter analyst call last month, Kroger’s CEO Rodney McMullen cited the benefit of Kroger’s promotional approach, aggressive fuel rewards, personalized discounts and private brands in helping manage inflation. He further noted that Kroger is doing everything possible to minimize inflationary pressures on consumers while tracking price gaps across multiple competitors regularly. He said, “We feel good about the everyday price gap.”
