The New Rules Of Retailing
The recession may, or may not be ending, but one thing is certain: it has led Americans to rethink the way they make purchase decisions. Understanding the new mindset of consumers is critical to developing an effective growth strategy.
Although loyalty plans have been around for over two decades, the recent recession has made them even more important to consumers.
As America takes the first tentative steps toward economic recovery, it's become apparent to many marketing experts that the recession of 2008 has changed some of the time-honored rules of retailing. If you have any doubts, consider the following:
- A Morgan Stanley survey conducted in mid-2011 found that about 60% of shoppers believed Wal-Mart no longer had lower prices than its competition. Yet a few months later, the nation's largest retailer surprised many analysts when it saw its first quarterly sales increase in over two years on the strength of its revised "everyday low price" strategy.
- Store brands have always been seen as a cheaper alternative to their national counterparts. Early in the recession, these brands did well because of their relatively low prices. However in 2011, store brands rose almost three times faster in price than national brands without any adverse impact on sales. Sam's Club diapers now cost more than Procter & Gamble's Luvs, and Target's Archer Farms roasted almonds cost more per ounce than the Planter's brand product.
How can a retailer increase sales as a "low price leader" when the majority of consumers believe it doesn't have the lowest prices?
Why are some store brands able to maintain or increase market share when they're priced higher than the products of national brand competitors?
The answers lie in the changing way consumers view their shopping experience after more than three years of dealing with an often difficult and uncertain economy. Understanding these changes and adjusting your marketing strategy accordingly can be critical to the future growth of your carwash.
Price Rules, But Not By Itself
Price is still very important to recession weary consumers - Wal-Mart's rebound was, after all, due to replacing special sales with "everyday low prices." In today's market, however, the price tag on a product or service (whether it's a jar of almonds or a trip to the carwash), is only part of a larger value equation that includes convenience, time-savings, reliability and the overall purchase experience.
In a survey published in The Wall Street Journal, 28% of the consumers polled told Clarkston Consulting that "price" was not a factor at all in their decision to buy store brands; instead their product choice was driven by a "positive experience" and "loyalty."
Loyalty Gains Momentum
There's a valuable lesson in the Clarkston Consulting survey for carwash operators. Creating a positive experience at your site with great service and a locking in loyalty with a club plan run with the SiteWatch Loyalty Promotion Module is an effective way to reach customers who emphasize "value" and "experience" over price.
Although loyalty plans have been around for over two decades, the recent recession has made them even more important to consumers. Research conducted by COLLOQUY, found that participation in loyalty programs rose 17% from the pre-recession year of 2007 to the post-recession year 2008. This trend continues to gain momentum; over 8 in 10 Americans (84%) belonged to at least one loyalty plan in 2011, compared to 74% in 2010, according to ACI Worldwide.
Few would argue that consumers who have been battered by tough times are flocking to loyalty plans to save money. However there also seems to be another factor at work; with all of the turmoil and uncertainty that surrounds them in today's market, many consumers view loyalty plans as a means of forging a stable and enduring relationship with brands and businesses they trust.
According to the highly-respected Times & Trends Report from the SymphonyIRI Group, "brand loyalty" increased in 45 of the top 100 Consumer Packaged Goods categories during the first three years of the recession (2008-11), even though leaders in these categories sometimes raised prices.
"Shoppers are looking for value, and recognize that value and low price are not always the same," wrote the authors of the Times & Trends Report. For these shoppers, "value" doesn't take the form of a special discount sale, but instead is the expectation that a trusted business will provide them with the most rewarding shopping experience over the long haul.”
The Wal-Mart rebound and store brand boom cited earlier in this article reflect how recession weary consumers are seeking trusted safe havens when they shop. These consumers may not believe Wal-Mart has lower prices than every competitor all the time, but they're confident that the chain's "everyday low price" policy offers them the best chance to save money in the long run. They aren't concerned if Sam's Club's diapers or Target's almonds cost a few pennies more than the national brands, because they trust these iconic stores to offer them a long term value.
A quality driven carwash is in an ideal position to make a similar connection to customers by selling monthly passes with the SiteWatch® Automatic Recharge Module® (ARM®). Customers value monthly passes because they introduce an element of stability and long term value to the routine of maintaining a clean car.
Monthly passes mean customers no longer have to be concerned about where they're going to get their cars cleaned or whether or not they should clean their cars if the weather is uncertain. This predictability is far more important than a special discount offer to many customers in today's post-recession environment.
Trading Cash For Convenience
Internet shopping also appears to encourage customers to buy more by combining 24/7 convenience with the comfort of being able to buy from the home or office.
Monthly passes offer something else that many customers value more than a low price - convenience. With 76% of Americans saying they feel rushed some of the time or all of the time, according to Pew Research, many consumers are willing to trade cash (in the form of a higher price) for time-savings. The carwash that offers customers the time-savings convenience of monthly passes or wireless transactions with SiteWatch FastPass® is more likely to win their loyalty.
Other industries provide plenty of examples of this cash for convenience trade-off. Coffee pods are turning the worldwide coffee market on its head, despite their hefty price, because of their speed and convenience. At an average of 55 cents for a 4-gram capsule, the price of Nestlé's Nespresso coffee works out to $62 a pound, yet it leads a category (single serve pods) that is growing at a rate of 28.6% a year during the recession, compared with 5.9% for less expensive drip coffee.
A Manhattan pod fan explained the cash for convenience trade to Time magazine this way: "The price of the pods is ridiculous, but it's still the best contraption I've ever bought... Fifteen seconds, and you've got as close to a barista espresso as you can get at home."
Whether it's a quick cup of espresso or a fast exterior carwash, products and services that save time are likely to gain market share despite any economic downturn.
Interestingly, the customers these products and services are winning over aren't interested merely in saving time because they're busy; they also want to spend less time shopping. Many marketing experts believe that after years of coping with the recession, consumers have developed "shopping fatigue." Put another way: shopping has become less fun for these consumers, so they want to minimize the amount of time, thought and energy they put into buying things.
Retailers that make the purchase process faster and more effortless with offers like monthly carwash pass programs increase their value to these weary shoppers. In a recent survey conducted by WSL Strategic Retail, 63% of consumers said they are no longer interested in shopping as often as they did before the recession, even if spending money was not an issue.
"While the recession is ending and shopper panic is over, shopping apathy is now a way of life," said Candace Corlett, president of WSL. "In spite of that, there is an opportunity to be had if companies understand the new shopper rules..."
Creating an environment that is comfortable as well as convenient is essential to winning business from consumers under these new shopper rules. Research conducted in 2011 by the Columbia University Business School found that customers were willing to spend an average of 12% more on purchases when they were in a relaxed frame of mind. If this is true, the convenient "strike zone" and logical transaction flow of the SiteWatch Xpress Pay Terminal® (XPT®) should increase sales by making the self-pay process easier and less stressful for customers.
Internet shopping also appears to encourage customers to buy more by combining 24/7 convenience with the comfort of being able to buy from the home or office. According to a Wall Street Journal report, consumers spend 10-20% more when they buy online using an iPad.
Your customers won't be able to have their cars washed online, but offering them the convenience of buying washes from their computers using SiteWatch Website Connect™ should make your carwash more attractive to them. Research in a variety of industries has shown that multi-channel customers who patronize a business online as well as in the brick and mortar world tend to spend more and have a higher level of loyalty to a retailer.
Macy's, which saw its online business increase 40% in 2011, has found that every dollar spent on its website influences $5.77 at its department stores within 10 days of the Internet purchase.
Whether it involves reaching out to customers online as Macy's has done, or taking other steps to make their shopping experience less stressful and more convenient, carwash operators who look beyond discounting will find there are many ways to grow their business in 2012, without sacrificing margins.
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