Give them the value they deserve
Since the Great Recession, many Americans have seen their purchasing power severely decline, forcing them to dramatically change their lifestyle. Carol Spieckerman, president of retail consultancy newmarketbuilders points out that many of todays low-income shoppers actually are former mid- to high-income shoppers who find themselves unemployed or underemployed.
But while this groups spending power might not be very great, retailers would be remiss to ignore the opportunity to gain these shoppers loyalty – especially when it comes to private brands, Spieckerman adds.
\"Some low-income shoppers find themselves living paycheck-to-paycheck for the first time ever due to job losses, under-employment, rising food and fuel costs, and other factors,\" she states. \"That means that private brands may be in these shoppers consideration sets for the first time ever. Retailers that surprise and delight them with high-quality products at a great price have an opportunity to make a great first impression and build long-term loyalty. Once shoppers see how they can save without sacrificing quality or quantity, they see national brands as a waste of money, not an upgrade.\"
Today, 54 percent of Americans make less than $30,000 annually, which means theyre unable to afford much beyond the basics, says Thom Blischok, chief retail strategist and senior executive advisor with Booz & Co.s San Francisco-based retail practice. He also points out that 65 percent of Americans are \"survivalists,\" which means they are living from paycheck to paycheck – and have to make sure every purchase counts.
\"Theyre looking for deals every single day of the week,\" he points out. \"No dollar is spent foolishly.\"
Theyre also looking to spend less on dining out, visiting the salon and more. Susan Viamari, editor of Chicago-based IRIs Times & Trends report, notes that 60 percent of shoppers from households earning less than $35,000 per year eat out less often today than before the economic downturn began (a jump from 48 percent). Meanwhile, 55 percent go to hair salons less often today to save money (compared to 46 percent); 37 percent use more at-home beauty treatments to save money on going to the beauty salon (compared to 32 percent); and 45 percent are self-treating for simple ailments to save money on health care (compared to 35 percent).
Poke around the pantry
Looking into the pantry, its clear that Americans are changing the way they shop for groceries. Blischok says the number of unique food and beverage products in the average American household has dropped from 400 to 350 over the past three or four years.
But he says this reality offers a silver lining for retailers: More than 20 percent of those products are under a retailers brand.
\"The lower-disposable-income households are continuing to put private brands in the household because they recognize that they are a great value to them from a nutrition perspective [and] a quality perspective,\" Blischok explains.
Moreover, 39 percent of households with an annual income of less than $20,000 strongly believe store brands are a good alternative to name brands (versus 30 percent of households with a $100,000-plus income), says Todd Hale, senior vice president of consumer insights with Nielsen, New York.
Looking at areas of opportunity, Blischok notes that center store has been the classic area where low-income shoppers purchase store brands – specifically canned goods, paper products, trash bags, soaps, liquids and, in some cases, soda pop and pet food.
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But no matter what product they purchase – and no matter what category its in – low-income shoppers want to know that it is affordable and will help make their lives easier and more enjoyable, Viamari states.
\"Throughout the downturn, we have seen consumers take a more self-reliant approach to health and beauty care, but they are still looking for results,\" she points out. \"In beauty and personal care, they still want solid results. For meals and other eating occasions, they still want the opportunity to splurge – on taste, texture, etc. – [to bring] a restaurant experience into range of their budgets.\"
The urge to splurge
Exactly to what extent are low-income shoppers looking to splurge? Blischok notes that 10 to 15 percent of the private brand products shoppers buy are \"aspirational\" items.
\"People who have low incomes still like to buy some aspirational brands – a little higher-end private brand cheeses [or] breads, maybe some private brand higher-end vegetables,\" he states.
Viamari says low-income shoppers enjoy reaching for an occasional ice-cream treat, a premium coffee product that offers a coffeehouse-style experience at home, or even a \"nourishing\" hair color.
\"Keeping in mind that there is a range of needs and wants across low-income shoppers, store brand marketers must explore the feasibility and cost/return on providing tiered solutions,\" she says. \"After all, some shoppers will be looking for the lowest possible cost, while others will seek the premium-tiered solution with all the bells and whistles.\"
But a product doesnt have to have all the \"bells and whistles\" to get shoppers to trade up – it might take only one or two extras to make the sale. For example, Blischok says many low-income shoppers will purchase a basic dishwasher soap to keep under the sink. But if theyre given the option to \"trade up\" to a store brand product that costs a little more but also features an added value – such as an anti-streaking component – they might be willing to spend the extra money.
Also worthy of additional spending to many low-income shoppers are foods that address various health conditions – which are especially valuable to those participating in the Supplemental Nutrition Assistance Program (SNAP) or the Supplemental Nutrition Assistance Program for Women, Infants and Children (WIC) programs, says Darren Seifer, food and beverage analyst with The NPD Group, Port Washington, N.Y. One reason he points to is the higher incidence of gastrointestinal health issues – such as hypertension and cholesterol – among low-income shoppers.
Children also encourage shoppers to splurge a little, Seifer adds, noting that they have a strong influence on the foods and beverages being served in low-income households.
Tom Johnson, principal with the retail and consumer practice of New York-headquartered PricewaterhouseCoopers, agrees, noting that parents are particularly willing to pay more when it comes to soft-line goods for their kids.
\"Some of our data shows that kids tend to get spoiled,\" he states, noting that parents often will purchase national brand or exclusive products cobranded with designers for their kids, but buy own-brand products for themselves to save money. New parents, in particular, tend to purchase national brand items for their first-born child – wanting only the best for their little one.
Package, promote to please
In terms of packaging, retailers always want to make sure design is fresh and captures shoppers attention. But low-income shoppers can be quite mistrustful of \"overdone\" packaging, Spieckerman says, as they often assume that a snazzy package design equals a higher cost for the end product.
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\"Ive seen this dynamic firsthand in multiple qualitative research studies,\" she explains. \"Developing packaging that features more vibrant color schemes is one of the safer ways to drive visual impact without messaging excess, and many retailers – including Walmart, Kmart, Family Dollar and others – have executed against this quite well in their private brand program upgrades.\"
Packaging also should communicate the banners promise to deliver to low-income shoppers the value they seek, Blischok states.
\"The more you can get a single image of what the banner strategy is and make that private brand sing with that banner strategy, the better off you are as a retailer,\" he says.
For health-conscious low-income shoppers – especially considering the high incidence of cholesterol- and hypertension-related conditions among this shopper group – retailers should consider calling out the healthful benefits of a food or beverage item, Seifer notes.
And it doesnt hurt to offer bilingual verbiage on packaging, especially in areas with multicultural demographics, Johnson says.
\"I live in a neighborhood thats very diverse – a lot of Spanish-speaking people,\" he states. \"And a lot of the packaging is bilingual, which is nice.\"
After theyre packaged, products should be merchandised and marketed together as a solution to help low-income shoppers live better for less, Blischok says.
For example, on the front page of its circular, a retailer could communicate that it built a strong portfolio of private brand products intended to help shoppers stretch every dollar in their grocery budget.
\"Clearly articulate in the flyers how Were going to bring you additional value with quality focused on the basics of eating – not focused necessarily on everything in the store, but the basics,\" Blischok explains.
Products also could be marketed as a solution on special in-store displays. Johnson notes that when it comes to events and holidays – whether its a national holiday such as Labor Day or something more personal such as a birthday or a graduation – low-income shoppers often trade up tiers for higher-quality own-brand goods.
\"Bundle for events, a Labor Day picnic, a birthday kit, and use your store brands or own brands to offer entire event [solutions],\" he offers.
But dont just lump the products together on shelves. Blischok says store brand products should be blended with the national brands to give shoppers \"clear, articulated value choices in the store\" – and be organized in a way that displays all tiers.
\"Make sure ... that youre not just playing at the low end, but that youre also playing at the aspirational end for the shopper,\" he states. \"Private brand strategies need to meet the basic needs of the low-income shopper, as well as the aspirational needs.\"
Promotions also could be timed according to pay cycles, Spieckerman says. With many low-income shoppers having less spending power at the end of a pay cycle than they did at the beginning, promotions that take place toward the end of pay cycles can help these shoppers better stretch their dollars.
And dont forget to help low-income shoppers learn how to eat better through marketing materials and educational programs. Seifer notes that SNAP/WIC program participants are of limited means and often need better nutrition – and more information on healthful eating habits.
\"Any nutritional information retailers can integrate into merchandising would appeal to low-income shoppers,\" he points out.