Value for money – the key driver of shopping decisions
When asked to explain why they shop at a certain retailer or why they buy a particular item, one of the first things shoppers are likely to say is that it represents good value for money. An IGD study in 2004 asked shoppers which, from a list of factors, were essential to the store that they use most often. Value for money, one of the many aspects available for selection, was by far the most common response from among 960 shoppers.
- ‘Value for money’ was mentioned by almost 2 in 3 shoppers (64%).
- ‘Convenient location’ as the second most common aspect was a long way behind, mentioned by only 8%.
This result clearly demonstrates how ‘value for money’ appears to succinctly summarise the shopper decision making process.
The shopper’s value equation
The basic premise of the value equation is essentially the same for all shoppers, in that value is a trade off between the perceived benefits and sacrifices associated with a decision.
- Benefits are those aspects recognised and considered important by the shopper that are also perceived to be relevant to the situation.
- Sacrifices include the money, time and effort the shopper needs to spend in order to achieve the perceived benefits.
Good value can mean all things to all people
While shoppers are united in their common, overarching need for good value for money, they differ markedly on their understanding of what this represents. The difficulty is in interpreting what good value for money means, as it means many different things to different shoppers. It may also mean very different things to the same shopper on different types of shopping trip. The value equation is, therefore, dependent on the shopper’s general attitudes as well as the specific shopping occasion.
Drivers of store choice
IGD’s annual Shopper Trends research tracks the aspects that are driving shoppers’ decisions about which store to mainly use for food shopping. This research highlights the broad range of elements that influence a shopper’s value equation.
Drivers of store choice
Base: All main shoppers. Source: IGD Consumer Unit, 2007
The sacrifices
Price is consistently expressed as an important factor in deciding where to shop. In the words of one shopper;
- “I mainly shop there because it is cheap”. Pre-family (aged 25-35), Working full time, BC1, Chorleywood
In the current retail climate, where food prices have increased to their highest rate in years, price perceptions will continue to be an important driver of choice. Competitiveness will be essential on core lines and categories, while retailers and manufacturers alike will seek new opportunities to drive growth through premiumisation and segmentation.
Convenience is also integral to many shopping decisions, whether this is expressed as geographic proximity, transport accessibility or suitable opening hours. For example:
- “It’s easy for me to get there and I know where everything is in that shop.” Mother, children aged 0-5, BC1, Leicester
- “The parking is great; if it is raining I don’t mind coming here because I know I am not going to get soaking wet.” Mother, children aged 0-5, C2D, Watford
Many shoppers appreciate the time and effort that can be saved once they have become familiar with a store. Maintaining consistent store layout, opening times, and minimising merchandising or packaging alterations can, therefore, help to encourage repeat visits.
The growth of the convenience store sector has been strong, outpacing the growth of mainstream grocery retailing, and looks set to continue. This is driven by a range of demographic and lifestyle factors, as well as format developments from convenience multiples, alongside the propensity of shoppers to desire greater levels of convenience within the context of a busy lifestyle.
Promotions can also have a significant influence on where people shop, with shoppers attracted by the potential monetary savings that they offer.
- “I find their offers are better. I like their Big Saver offers as it works out quite a bit cheaper for a family of four.” Mother, children aged 6-14, C2D, Chorleywood
- “We go there because of the special offers, especially on chocolate and things like that.” Retired, C2D, Leicester
Many shoppers are shopping around different retailers to obtain the best deals, and if food prices do rise further, this trend may continue to grow. This type of behaviour is somewhat encouraged by the promotional leaflets that are delivered to households by a number of grocery retailers, highlighting the latest special offers available at their local store.
The benefits
The perceived benefits that shoppers associate with different supermarkets can be very broad, although can be summarised under three themes:
- Quality – of the shopping experience and the products sold (including brands and private label).
- Service – including staff interaction as well as the services that the store provides.
- Range – whether in breadth, depth or the choice editing that the store provides.
Supermarket strategies
For retailers, creating the best possible impression of value amongst their targeted section of the shopper population is central to retail competition. This particularly applies to those catering for larger shopping trips - naturally, the more consumers spend, the more carefully they will weigh the value that they receive and this may cause them to travel further than their nearest store.
In terms of retailer strategy, many different pricing models have been adopted in the UK. While each takes a different approach, all aim to offer good value to a particular shopper segment through various combinations of “benefits” and “sacrifices”. Retailer strategies may be classified according to the following criteria:
The retailer’s overall quality proposition (including range and service)
- Average retail prices
- Promotional strategy (i.e. the number of special bargains available)
Through these criteria, four main different pricing strategies can be identified:
- Premium (i.e. superior products, service and store interiors, but at a higher price)
- Discount (i.e. emphasis on low prices, with sacrifices in other areas if necessary)
- Every Day Low Price / EDLP (i.e. reliable prices with few or no promotions)
- Hi-Lo (i.e. higher standard prices on most items but offset by special promotions)
Some overlap is possible. Thus a premium retailer can operate a Hi-Lo promotional strategy (e.g. Sainsbury’s) while an EDLP operator can also offer a premium product range (e.g. Asda).
What is clear is that all supermarkets aim to demonstrate good value for money and that their communication strategy will aim to leverage as much credit for the value of their proposition as possible.
Values for money
The IGD Shopper Trends survey also asks shoppers about the product choices that they have made over the previous month. The results from this research illustrate that more shoppers are claiming to buy products that overtly address an ethical issue than they were a few years ago.
Values impacting on shopping decisions
Thinking back over the last month, which of the following statements
apply to the choices you have made when shopping for food?
Base: All main shoppers. Source: IGD Consumer Unit, 2007
IGD’s consumer research does reflect the reported sales of ethically certified food and drink products. The Ethical Consumerism Report 2007, published by The Cooperative Bank, concludes that;
“the market share for ethical food and drink appears to have broken through the ‘green’ glass ceiling of five per cent, and factoring in the effect of consumer boycotts, the market share could be as high as seven per cent. Potentially, we could see market share hit ten per cent in the next year or two.”
The changing value equation
This trend demonstrates the increasing influence that ethical issues are having in shoppers’ decision making. The definition of a shopper benefit in the value equation is, therefore, expanding to include aspects that have a direct benefit to a third party (e.g. the producer or animal welfare) or to the common good (e.g. global environment). In this instance the primary benefit to the shopper is the perception that they have done the ethically correct thing. There may be some direct benefit for the shopper themselves in terms of improved quality, taste or health perceptions. For example, organic produce is often associated with food “tasting as it should do” as well as health benefits from avoiding potentially harmful chemicals in food production.
Over the last 12-18 months many retailers and manufacturers have announced initiatives in response to the ethical agenda, most commonly with measures to reduce their environmental impact. Moving forward, the balance is likely to shift from developing frameworks towards the implementation of these strategies across their businesses. It is likely, therefore, that ethical considerations increasingly impact shopper’s assessment of what constitutes good value for money, and hence their shopping decisions.
