By Chris Sellers (CEO) 

Originally posted on LinkedIn:

A consumer segment has emerged in the last decade that is not defined by the usual metrics of age, race, gender or even economic class. Rather by their concern for society, the environment and their fellow humankind. 

“Today $1 in every $5 spent on fast moving consumer goods (FMCG) products come from conscious consumers” - Kantar ¹

Nearly all of the efforts towards influencing consumers and their shopping habits over the past 50 years has relied upon traditional marketing and promotional messaging, including but not limited to price reductions, BOGO, “New and Improved” products and formulations as well as traditional advertising and promotional programs, mass messaging, store flyers and of course loyalty programs.

The value and return on investment of these more traditional means has declined in the reality of channel blurring, the emergence of omni-channel, on-line shopping, buying anything, anywhere, anytime and this means retailers are struggling to win and maintain consumers, much less optimize their full potential. 

In light of all of the increased competition coming from not just across the road or down the street but as above, anywhere, anytime, how do retailers capture consumer potential and value? which Kantar have estimated being worth $382 billion.¹

Not surprisingly, by doing exactly what retailers have always done – aligning their values and demonstrating these values with those of their customers! 

In the past this value may have been defined by price consciousness, variety, convenience and brand. This is no longer enough to reap the potential of the important socially conscious consumer.

“73% of Global Consumers say they would definitely change their shopping habits to reduce their impact on their on the environment” - Nielsen ²

So if nearly ¾ of retail customers are looking to see how their stores and brands align with their personal values, how do you as a retailer communicate and effect this? In-store point of sale seems to be a key means of telling the “stories” that paint the image of social responsibility, sustainability and ethical practices. 

The question is, now that the UN has even offered up a list of goals – the Sustainable Development Goals or SDG’s as they are known, to drive global collective action, what actions are being taken and communicated in store?

Loyalty

In such a diverse retail environment, loyalty is an even more important means of capturing a share of consumer’s spending. What exactly does loyalty mean? Profit?

“In retail, around 70% of sales comes from just 30% of loyal customers – simply put, loyal customers are good for business.” - Cardlytics ³

Loyal shoppers spend a greater share of their wallet with stores and on brands that they relate to. This greater share can effectively make the difference between “fair share” – that percentage of the market or category reflected in the overall chain, even individual stores that relate to overall performance. In a marketplace where there are four competitors, let’s say each gets 25% of the All Commodity Volume (ACV) but retailer A is seeing 40% of all sales in a certain category, they are beating out the competition through some mechanism that allows better performance.

Now let’s also say that the particular category that is out-performing the market is contributing a higher margin than others, then the potential profit is also greater. I could go on to show that loyal consumers, not only spend more with a particular retailer where their loyalty lies, but also the average size of their basket also is larger and they also buy higher margin items, more often. 

These factors add significantly to retail performance. In many cases loyalty also translates to retailer own-brands and private label goods where margins are also higher. The data and math is simple and the knowledge is common in the industry – so then what is the challenge?

Earning Loyalty

It is much more important than just tracking points and offering special deals and cents off of fuel. The loyal consumer expects to be treated differently. Take the airline industry as an example. Earn status and you get a faster check in line, a free upgrade, free drinks on the plane. Different treatment. What does the airline get? Greater frequency of traveler’s business. 

In retail it can be very difficult to differentiate at the checkout. Can you imagine a line just for high-point card holders? Chaos and resentment are more likely than affirmation and alignment. 

Consumers make judgements about where and with whom to shop before they stand in the checkout line, before they even drive to the store. They decide based upon the ever-easier research on an organization’s social profile. This profile is even more important to the elusive consumer who not only looks for traditional differentiators but one that is much harder to represent – social consciousness. How does Retailer “A” align with my personal values? Can I feel good about spending my money, my time and reputation in their stores? Can I tell my family and my friends that because I shop with Retailer “A” I am helping those in need, or providing a means to clean up our environment?

“Sustainability isn't just the right thing to do, it's essential to drive business growth.” - Paul Polman, Ex-CEO of Unilever ⁴

Today’s socially conscious consumers do not define value as previous generations have done. They are less price sensitive, more likely to contribute to local and global charities and also more likely to refer their friends, both social and real and certainly family members about the pride and contribution they are making together with their favourite retailer.

Interested in learning more about Water Unite?

Feel free to reach out to our team at info@waterunite.org.

Sources:
¹Kantar, Who Cares Who Does, 2020
²Nielsen, Unpacking The Sustainability Landscape, 2018
³Raconteur, Channelling Your Customer, 2020
⁴Havard Business Review, The Future Economy Project, 2017