dunnhumby
Consumer Trends Tracker
Inflation continues to bite, but creates an opportunity for retailers to win with personalized rewards and loyalty programs
This report marks a full year since dunnhumby launched its Consumer Trends Tracker (CTT) in North America. The CTT has completed four waves of trended data and can reference year-over-year (YoY) numbers for the first time. The CTT has responses from over 8,000 nationally representative grocery shoppers in the U.S. The latest data was collected in April 2023, one year since the first wave in April 2022.
Since April 2022, we’ve seen notable shifts across many of the trends covered in the CTT. Shopping habits have continued to evolve as Americans fully move on from Covid, but continue to suffer at the hands of Inflation. This report focuses on how certain changes in consumer needs and behaviors have created an opportunity for retailers to win with personalized rewards and loyalty programs.
Table of Contents
Robert Hayes
Customer Strategy & Insight
SECTION 1
Executive Summary
- The perceived rate of food-at-home inflation is 22.6%, more than 15 points higher than the actual figure of 7.1%, as of April 2023
- Customers are shopping around more (+9% YoY), browsing products more (+5% YoY), and placing less importance on a speedy shop, compared to a year ago
- Over half of all customers surveyed (53%) believe social media channels have influenced their grocery purchases either in-store or online, in the last month
- Facebook (37%), YouTube (31%) and Instagram (24%) are the most influential platforms
- 80% of shoppers use at least one grocery loyalty/rewards program
- Heavy users of grocery rewards programs spend an average of $79 more in-store than non-users, each month
- The number of shoppers frequently redeeming loyalty coupons/deals rose by 6% YoY
- Customers are looking for and expect to be contacted in an omnichannel way
- Only 8% of US shoppers are not comfortable being contacted digitally by a grocery rewards/loyalty program
- Points and member pricing should be foundational benefits in a loyalty program for mass appeal. Tiers and subscriptions reward and retain heavier users.
SECTION 2
Inflation continues to bite
The perceived rate of food-at-home inflation among US shoppers surveyed is 22.6%, more than 15 points higher than the actual figure of 7.1%, as measured by the US Bureau of Labor Statistics. The perceived inflation has fallen 1.6% since November 2022, whereas the actual inflation has dropped 4.9% over the same time period.
Food-at-home Inflation (%)
Although there is a slight acknowledgement inflation is declining, customers are not yet feeling the benefit. The percentage of households that would have difficulty covering an unexpected expense of $400 has actually risen 1.3% from November 2022 to 61.8%. Less inflated prices in the supply chain take time to filter down to consumers’ wallets. The percentage of households that have skipped or cut the size of their meals for financial reasons is exactly the same as in November 2022 at 31.2%.
Over the last year, families with children at home have struggled more than the US average. As high as 72% would have difficulty covering an unexpected expense of $400, and 36% of families have skipped or cut the size of their meals for financial reasons. Those in the age group of 18-44 are the hardest hit, in terms of financial and food insecurity.
The map below shows the geographic spread for those skipping or reducing meals in the past 12 months.
Skipped or Reduced the size of a meal for Financial Reasons, by state
Source: dunnhumby Consumer Trends Tracker (CTT), April 2022 – April 2023, n = 8,012
The concentration of dark red in the central Southern states should serve as a warning for retailers operating in this region to double down on providing value to their customers. These states also have some of the highest proportions of children at home compared to other geographic regions in the US.
SECTION 3
Customers revert to shopping around more
One of the major trends that the CTT identified is that customers are starting to shop around more for their groceries. The underlying cause is likely to be multi-faceted including the need for value and availability, paired with fewer Covid-related concerns. We’ll examine some of the underlying data in the next paragraphs, but the implication is clear – competitive intensity is increasing, so retailers need to ensure they are promoting loyalty among shoppers.
Four-in-ten customers claim to shop around at different stores to find the best value most or all the time, up 5% from the previous wave and up 9% year-over-year (YoY). This is one of the fastest and most consistent growth trends. A similar number (41%) claim to shop around to get all the products they need, up 5% from the previous wave and up 6% YoY. In terms of shopping mission, there has been a 4% YoY increase in consumers taking an On-the-Go shopping trip, across any channel.
Customer Behavior (% most or all the time)
Not all grocery categories are created equal and some drive much higher loyalty to a particular retailer than others. The categories customers are most likely to be willing to buy at only one retailer are: pharmacy (46%), baby care (25%), deli meat (23%), ready-to-eat meals, freshly prepared at the store (22%), and seafood (21%). Retailers with strengths in any of these categories should communicate their unique selling proposition (USP) and target customers with personalized offers to promote loyalty.
On the other hand, the categories customers are most willing to shop around for are: non-alcoholic beverages (60%), packaged food (55%),and frozen food (54%). Here, it is likely shoppers are seeking the best value, so these categories could be places to win customers by offering the lowest price on name brands. However, these categories are less likely to keep a customer loyal.
Considering the price versus quality trade-off customers are often forced to make, we see that the categories driving retailer exclusivity are often ones where quality is most important. Conversely, categories where customers are happy to shop around tend to be price-led.
of customers are only willing to buy pharmacy products at one retailer
Price versus Quality Importance for Grocery Categories, for Food Insecure and Food Secure Shoppers
A clear pattern emerges between the answers of those that are food insecure versus those that are not. Food insecure households prioritize price more, but particularly in certain categories. Two of the five categories with a significant difference are baby care products and ready-to-eat meals. These also appear under the categories most likely to drive exclusivity to a retailer. So, by offering great value in baby and ready-to-eat categories, retailers can meet the needs and capture the loyalty of food insecure shoppers. An example of how to do this would be by offering a really competitive low base price, own-brand offering. These two categories in particular speak to the needs of the food insecure shopper who we know from the CTT data are more likely to be families that are often time-pressured.
Since April 2022, there’s been a moderate, but steady, decline in the importance of ‘speed’ attributes. Customers requiring a fast and easy check out experience and being able to get in and out quickly have both dropped by 2% since the previous wave to 73% and 69% respectively.
Customer Needs (% very or extremely important)
At the same time, the number of shoppers taking time to browse products has increased 3% from the previous wave, and +5% YoY. There is also a 4% increase in those rating staff make me feel valued as very or extremely important.
Overall, we can conclude that many of the Covid-type behaviors – where speed became so important as a proxy for safety – are now behind us. Instead, customers are shopping around, browsing products, and looking to interact more with their grocery shopping once again.
SECTION 4
Customers are becoming more omnichannel
Almost half of US shoppers (47%), say it is very or extremely important that a retailer offers easy ways to shop online, up 5% from the previous wave and up 8% YoY.
Customer Needs (% very or extremely important)
Backing up this underlying consumer need, the frequency of eCommerce behaviors has also been steadily increasing since April 2022. Ordering online for delivery has grown by 9% YoY and ordering online for pick-up by 5% YoY.
However, it is not simply the act of shopping online that has increased. The Consumer Trends Tracker shows a clear increase in omnichannel habits. From the chart above we note that interaction with a store’s app is a growing behavior, +7% YoY. In fact, grocery store apps are now the consumer’s second most preferred method of being contacted by a retailer, after email. As of April 2023, 4 in 10 shoppers check prices online before/during a shop most or all the time, up 5% on the previous wave and up 9% YoY.
From all the “resources” available to help shoppers decide what to buy, the two that have grown consistently since April 2022 have been social media (+4% YoY) and product recommendations on retailer websites (+3% YoY).
Considering the two aforementioned trends of continued financial pressure on households and increased competitive cross-shopping, it is no surprise that today’s more digitally savvy consumers are turning to omnichannel resources to optimize their grocery shopping and save money. The next section explores how retailers and brands can support their shoppers on this journey and in return gain customer loyalty and market share.
SECTION 5
The opportunity for personalized loyalty and rewards programs
The current market dynamic has created a perfect opportunity for highly targeted loyalty, rewards, and media activity to resonate with customers. It’s important to customers to receive relevant information and offers, so they look to engage with this type of content. The percentage of shoppers that say it’s very or extremely important to them that a retailer sends information or coupons/offers relevant to them, has jumped 5% in the latest wave of data.
Relevant info or coupons/offers
Over the long term, customers are more likely to identify themselves in order to redeem rewards (in-store or online) than a year ago. And those redeeming coupons or deals from a store’s loyalty program has risen 6% YoY.
A deep-dive into loyalty programs unveiled that 80% of shoppers use at least one grocery rewards program. The population fall into four buckets when it comes to loyalty program engagement:
- Non-users: “I don’t use any grocery rewards programs” – 20%
- Light: “I may sign up to one or two, but don’t engage with them very much” – 20%
- Medium: “I actively engage with one or two grocery rewards programs” – 44%
- Heavy: “I actively engage with more than two, or pay for a premium/subscription grocery rewards program” – 16%
By far the most valuable segment is the heavy users, spending on average $79 more on groceries in-store every month compared to non-users. The medium group spend slightly less than heavy, and the light slightly less than medium, showing a clear correlation between loyalty program engagement and monthly grocery spend. (It should be noted that this correlation does not imply causation).
So who makes up the heavy segment? These shoppers are significantly more likely to be families with children at home, in the age range 35-44, with household incomes over $100k, compared to the other segments. Interestingly, light and medium users of loyalty programs share a similar profile, except for age. Light users are significantly more likely to be younger (18-34), while medium users are significantly more likely to be older (65+). The challenge then is how to inspire younger users to engage more with rewards programs, as moving them up the segments correlates to higher grocery spend. These age profiles also help to explain the pattern in the following chart. Where you might expect the medium group to rate higher than the light, we must consider their older demographic.
Influence of Social Media Platform on Grocery Purchases
of customers surveyed believe social media channels have influenced their grocery purchases either in-store or online.
Over half of all customers surveyed (53%) believe social media channels have influenced their grocery purchases either in-store or online, in the last month. Among those heavily engaged with loyalty/rewards programs, it’s as high as 68%. For families with children at home, it’s even higher at 75%. Across all age groups, Facebook (37%), YouTube (31%) and Instagram (24%) are the most influential platforms at the moment.
By considering non-users, and potentially light users as acquisition targets, and medium/heavy users as targets to reward loyalty, retailers and brands can start to customize their content. While ad profiling is already done in the market, this report encourages retailers and brands not only to think in terms of demographics, but in terms of consumer engagement with loyalty programs. Personalized content and offers can be even more effective when meeting the needs of a particular shopper loyalty segment. Consider a real-life example – drawing on the category exclusivity stats mentioned earlier: for acquisition, an effective campaign could advertise soft drinks on Instagram (a category customers are very willing to shop around for), whereas a retention strategy might emphasize the quality and emotional aspects of baby care products via Facebook (a category more likely to drive loyalty).
Only 8% of US shoppers are not comfortable being contacted digitally by a grocery rewards/loyalty program. This reinforces the point that customers look for and expect to be contacted in an omnichannel way. Email is the preferred (63%) method of contact, followed by the grocery store’s app (41%), and followed by text/WhatsApp (28%).
So how does one design a program that resonates with customers? Earning points that can be redeemed against future purchases, and exclusive member pricing, are seen as the most valuable benefits to offer. Tiered benefits and subscriptions are less valuable for the total population. However, over half of heavy users of rewards programs find tiers (55%) and subscriptions (54%) very or extremely valuable.
Loyalty Program Mechanics (% very or extremely valuable)
A successful foundational program should therefore offer customers value through points and member pricing. These save money and drive loyalty for the mass market. For heavy users of rewards programs, tiers and subscriptions can unlock higher benefits and reinforce a positive feedback loop between customer loyalty and retailer value. Retailers should consider their target consumer and the competitive dynamics in their market closely, to optimize their rewards programs.
dunnhumby is the global leader in Customer Data Science, enabling Retailers & Brands to achieve sustainable growth by recreating personal relationships, at scale.
If the topics in this report have spiked your interest, please reach out to see how our team of retail experts can help with customer strategy, research, and designing/optimization of customer loyalty programs.
Summary & Key Takeaways
While Covid-related shopping behaviors fade away, the impact of 2022’s peak inflation is very much present for consumers. The financial pressures on households, combined with a move to shopping around more and engaging in more omnichannel behaviors, has created a unique opportunity for retailers and brands to win. Those that are able to understand the different needs of consumers, in terms of their engagement with loyalty/rewards programs, as well as just their demographic profile, will have a greater impact. Making use of omnichannel resources, and delivering personalized content and offers, will equate to long-term success and drive customer loyalty in a very competitive environment.
