[column] Losing clients? Look at the bright side!

Yes. We’re all in the same boat. 2020 has been an unforgettable year, full of challenges that we couldn’t hope to have been prepared for. But 2021 will be different, in that arguably the biggest challenge of 2021 is DEFINITELY something we can prepare for. We are heading for a significant economic downturn. And in that downturn, every brand owner, marketer and retailer has the same concern. Am I going to lose consumers and shoppers, and if so, what should I do about it?

Let’s get this over with: you are definitely going to lose shoppers and consumers!

So let’s get the first, painful bit out of the way. Will you lose consumers and shoppers during the upcoming economic downturn? The simple answer is yes. And that isn’t such a bad thing.

What? I know! Really? Losing consumers and shoppers isn’t a bad thing? Yes. Why? Let me explain. Sure – in theory –  you don’t want to lose consumers and shoppers, right? They pay good money for our brand, and that helps pay for important things like, well, like your salary for one thing! So why on earth do we want to lose some?

Keeping all your shoppers is more painful than losing some shoppers

See, its not that we actively want to lose consumers and shoppers necessarily (though we might – because not all shoppers are of equal value!). It’s just that during an economic downturn the alternative (i.e. keeping all our consumers and shoppers), is even more painful. And here is why!

Shopper Economics™ – how shoppers make decisions changes in an economic downturn

During an economic downturn shoppers’ value equation changes. We use Shopper Economics™, a simple model, to explain how shoppers make decisions. In simple terms shoppers balance a number of value factors and cost factors in every decision they make. Shopper Economics explains that shopping decisions are a trade off between ‘value’ and ‘cost’. Value, for a shopper, is itself made up of two broad factors: shopper value (what the shopping experience is like) and consumer value (what the perceived consumption occasion is worth). Likewise ‘cost’ for a shopper, is made up of two components: time and money.

The high cost of keeping every shopper during an economic downturn

During an economic downturn, many things happen to a shopper’s Shopper Economics™ (for more on this, please check out this recent post).  And different shoppers will react differently. But for many, the financial cost component of their decisions will become a lot more important. The only way to keep all of these shoppers is to move your Brand Economics to match. In other words – you need to promote or drop prices to a point where these shoppers are prepared to buy.

But the cost of promotions is typically high – higher than you think! That great price or promotional deal gets offered to every shopper: including those that didn’t need a deal to keep. The danger of trying to keep every shopper is that brands and retailers risk the entire profitability of their brand, category or business in pursuit of a segment of shoppers.

Any proponents of a ‘market share is king’ philosophy of marketing often miss the concept that not all consumers and shoppers are of equal value. And those that seek deals are often of lowest value. In fact, we’ve analyzed many brands and found that a significant proportion of their shoppers are actually loss making in that they only buy the brand at a price where the brand is unprofitable. Why are we chasing these shoppers?

As shoppers shift, there are opportunities as well as challenges

At the same time there are opportunities. There are shoppers who might be persuaded to trade IN to our brand, segment or category as well as shoppers who are trading down. If you have a mainstream brand it is tempting to focus on stopping shoppers trading down to economy brands. But we do this at the expense of potentially winning those that are trading down from premium. Or those that are trading into the category (the coffee capsule user who now wants regular coffee beans, or the ready-meal shopper who is now prepared to do a little more home preparation). In a downturn, shoppers are often shifting in more ways than we think.

So which shoppers should we focus on? Should we try to hold onto shoppers, or build strategies to win new shoppers? Most businesses will focus on the former, when in reality we should be doing both. But doing both in a more refined way.

Choose which shoppers you want to keep, which you want to win, and which you are prepared to lose

Marketing isn’t about all or nothing. It is about focus and targeting. It is about working out which shoppers we want to keep and building strategies to keep them. It is about working out which shoppers we could win and building strategies to win them. And it means being honest about the shoppers that we are prepared to lose. That means we need to be more discriminating about the value of each shopper segment, and the cost of keeping or winning them. This is where Shopper Economics™ really delivers.

Dit blog is geschreven door Mike Anthony, Shopper Marketing Experts.

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