NACDS: Retailers must emphasize value to customers

March 16, 2009

Leaders in food and drug retailing are learning how to market to customers in the new economy, said the keynote speaker at the National Association of Chain Drug Stores conference in Orlando on Monday.

Leaders in food and drug retailing are learning how to market to customers in the new economy, said the keynote speaker at the National Association of Chain Drug Stores conference in Orlando on Monday.

Already, many chains have learned ways to tell customers the exact dollars they are saving by shopping in their stores, said Neil Stern, senior partner at retail consulting firm McMillanDooLittle in Chicago. Wal-Mart, Walgreens, CVS, Safeway, Hy-Vee, and Publix Super Markets are among the chains that are explaining value propositions to customers. “Wal-Mart has done a masterful job in this economy. They are cleaning up their stores and speaking to customers in a very powerful way,” Stern said.

In addition to its slogan, “Save Money, Live Better,” Wal-Mart demonstrates how its customers can live this slogan by providing specific savings numbers. In one television campaign, Wal-Mart compares the value it provides, compared to other chains, telling customers they can save $2,300 a year by shopping at Wal-Mart. Because consumers are now evaluating each purchase they make, they “need to have that math done for them,” according to Stern. In addition to value, a Wal-Mart print ad campaign featuring mature adults explains its “$4 generic program,” along with the reasons that it is important for customers to continue taking their medications, even in tough economic times.

As prescription drug sales have declined over the past year, retailers need to find ways to stress not only value but the importance of medication to health, Stern added. In addition, retailers need to explain their value in messages to shoppers. Nationwide housing and economic problems have led to a change in shoppers’ behavior. More consumers are using shopping lists and 75 percent of people are making their purchasing decisions at home, instead of making impulsive buying decisions in stores.

In addition, consumers are stocking up less and using more of what they already have at home in their pantries, according to Stern. As a result, shoppers are using more coupons and ads, switching from brand-name to private-label products, and reducing the number of stores they patronize. Retailers can address this trend by stressing their private-label products and their overall value to customers.

Many drugstore chains are already placing emphasis on helping their shoppers buy necessary products. Recognizing that customers are having trouble affording the basic items, Walgreens markets products deemed “affordable essentials.” A recent ad campaign from Publix Super Markets in Lakeland, Fla., states, “Affording the Essentials is Essential” and announces low prices for bread, milk, water, and other products.

A campaign from Safeway, in Pleasanton, Calif., offers customers “low prices where you need them the most.” CVS, meanwhile, is advertising thousands of items for under $4 each. The circular for Hy-Vee, in Grand Rapids, Mich., now features numerous products for $1 along with coupons for those items.

In the near future, retailers who address green issues and products, and target their offerings to aging baby boomers will also be successful, according to Stern. “Aging boomers is still the largest spending group by far in America,” Stern said. Recognizing that the aging population has vision problems, manufacturers should make packaging more readable and offer smaller sizes for shrinking households.

“Publix understands aging consumers with their gondola heights, the size of fonts on their price tags, and selling pies, for example, in smaller sizes,” Stern said.

The growing interest in green products should not be ignored by retailers, who can not only improve sales of these products but also make their operations more efficient. More than 70 percent of the U.S. population considers green products, according to McMillenDoolittle’s research, and 15 percent of the population purchases green products.

The cost of these products must stay reasonable. Most shoppers surveyed said they would only be willing to spend about five percent more to buy green products. “Build green into the mission of your companies and sell green to your customers,” Stern said.

In addition, retailers need to learn how to convey the green message to customers, according to Stern. Many companies that are making green measures and improving the efficiency of their operations are not letting customers know what they are doing. “Consumers are giving few companies credit for this,” Stern said.