Consumer Value – Reality of Myth?
Kevin Roberts once said "Consumers don't stop buying when economies go through down cycles. They look harder for value”. In the current economic climate this still apply. We are in a stage where Value is the order of the day in an economic downturn or not. Consumers are constantly evaluating their shopping habits. The major retailers and banks need to respond to this ever changing consumer.
Who is adding value?
On the banking front FNB does it very well. Their E-Bucks programme has been a constant hit with consumers. The bank simply rewards consumers with E-Bucks for just using their card to pay for goods and services. There is no additional charge or change in habit required. Consumers simply go about their business normally. Being and FNB client for the past 3 years I have acquired a certain amount of E-Bucks. Recently we needed some small electronic items for the house so we went over to Makro and spent R900. We paid the entire amount with the E-Bucks card from the points accumulated from FNB. This to me was adding real value. Sure, one may argue that we eventually pay for it via bank charges (a subject for another article) but FNB has just saved me R900 at Makro. So I am happy. I was at Engen garage the other day and after filling up the attendant asked if I wanted to pay for my petrol with an E-Bucks card so I obliged. FNB just saved me another R300. Combined I have used R1200 worth of E-Bucks which I can equate to five months worth of bank charges. FNB, you do offer customer value
On the retail side I believe Pick n Pay is moving in the right direction. The introduction of the smart shopper card is nothing short of a master stroke. Not only do I earn points on the shopper card but also continue to earn E-Bucks as I pay for my goods with my FNB card. The smart shopper card points contribute to a cash voucher which I could eventually use at a Pick n Pay store.
As a member of the WRewards programme at Woolworths you will receive lower prices on selected items. Discount vouchers by week to use at a Woolworths store. If you have a MySchool or MyPlanet card, or if you link your Woolworths Difference Card, Store Card or Credit Card to the MySchool MyVillage MyPlanet fundraising programme, they will automatically donate up to 1% of the value of your purchases on your behalf to the school or charity of your choice. This certainly makes me enjoy shopping at Woolworths knowing that a percentage of my spend is going to a good cause.
I am not a Clicks shopper and don’t have their loyalty card, I can’t ignore the fact that they offer discount vouchers to their members. This can be used in store and also at Nu Metro theatres. They also have regular discount vouchers and promotions for members. This is again a move in the right direction in offering customer value.
Occasionally I go to Dischem and I am a member of their loyalty programme. There is no direct benefit in terms of vouchers or discounts but what they do well is that the points I accumulate is sent to the Dischem Foundation. They in turn support various charities. So, when I turn on 702 and hear the Dischem foundation giving R150 000 to a needy charity it makes me feel good as I am contributing to that charity even though it is indirect. It makes me feel good about shopping at Dischem and will continue to do so.
In the same fold as Dischem is Spar (sadly not nationally). Occasionally I go to the West Rand Lifestyle Centre Superspar. Once you have paid for goods on exit there is a cabinet with a number of pigeon holes. Each Pigeon hole has a name of a school. All I have to do is put my till slip into the school of my choice and then Spar will contribute an amount to that particular school. Again it makes me feel good about shopping there even though there is no direct benefit in terms of vouchers or points. It is a strategy that Spar should look at adopting nationally. There are many schools in South Africa that could use a cash injection.
Who is not doing it very Well?
Checkers is probably one the oldest and finest retailers in the country. Their marketing has promised the consumers the lowest prices and the best products. Their entire business has been built on this promise. Its share price and profitability has increased over the last few years. But with all of its successes have Checkers lost touch with its consumers or failed to keep up with the change in times?
The reason for the question is Checkers latest marketing effort “Our Price Cuts have saved South Africa R200m since January” campaign. I have been intrigued by this campaign as it has numerous TV commercials one with a cute little girl telling the announcer how much she saved at Checkers that day and she is going to buy a bicycle with the savings. A really nice ad and it certainly gets a so cute from my household. The other ads on TV are Fact based ads as to why you should shop at Checkers and how much Checkers is saving you. One ad also has a subtle dig at the Smart Shopper Loyalty programme from Pick n Pay. There has also been various radio ads and of course the inserts in the various newspapers. This was indeed a multi million Rand campaign across various channels. The only way you could miss an element of this campaign is if you were in hibernation. So thank you Checkers for telling us how much you saved us. Is that enough when there are retailers offering both savings and value? Does Checkers indeed save me money? So armed with their latest insert that I found in the Caxton newspaper (key no. Ninety9cents GNFOCCO341/E&A) I set out to buy a selection of their products to test the savings. The insert reads offer valid from Monday 23/04/2012 until Sunday 06/05/2012. Prices apply to Checkers and Checkers Hyper stores. The store I chose was Checkers Hyper in Sandton City and for comparison I chose Pick n Pay Hyper in Woodmead. I chose products on the Checkers leaflet and bought the exact same products at both the stores.
The results are below.
1st May - Products On the Checkers Catalogue
*Dairybelle Milk not available at Pick n Pay
Pick n Pay came in at 19% more expensive on the same products. So yes Checkers does save me money. But do they offer long term value. Is paying 19% more for products and gaining loyalty points in the long term sufficient for me to shop at Pick n Pay?
Pick n Pay may argue that of course Checkers would be cheaper since I have chosen to purchase products off their catalogue and also during their promotional period. I decided to do the exercise again but this time I chose mid month and used a Pick n Pay leaflet (key no. 1170606). The reason was to see if Checkers could maintain their low prices over its major competitor outside of its promotional period. So armed with my Pick n Pay leaflet I set out to test this. I have chosen to shop at Pick n Pay Hyper in Northgate and Checkers Hyper in Fourways Mall. I must say the availability of specials during mid month is quite limited.
The results are below.
*Serena Lasgna and Provita Multigrain were not available at Checkers.
The test indicates that Checkers were 23% more expensive than Pick n Pay. Note the products were exactly the same. So what does it prove, simply that Checkers with all the will in the world will not be able to offer low prices all the time? The same can be said for Pick n Pay. It is simply not a sustainable strategy.
Consumers need to be offered value so that their loyalty can be maintained. The introduction of the Smart Shopper card by Pick n Pay is a move in the right direction in offering value. The fact that they have over 5 million shoppers using their card illustrates its success. It is time for Checkers to take a hard look at their offering and move beyond low prices.
As a retailer identifying ways to tap into loyalty to win over consumers for the long-term is critical. No longer is standing on a rooftop with a bell in one and a megaphone in the other shouting low prices sufficient to attract and maintain customer loyalty.
Launching a loyalty programme is not cheap. As Pick n Pay will tell you that whilst they showed healthy revenue growths of 8% in their last trading update (2nd April). Their operational expenses were significantly up and that was mainly attributed to the launch of Smart Shopper. However, the expected medium to long term incremental increase in revenue due to Smart Shopper programme will eventually pay for cost of the programme.
As indicated previously saving money at major retailers such as Checkers or Pick n Pay are hygiene factors consumers expect it from them. Adding value to consumers is no longer a myth but a reality. So I would expect Checkers to respond in a more meaningful way to Pick n Pay’s Smart Shopper offering rather than looking at advertising to solve what really is a business issue.
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