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Canned goods–not canned prices with personalized pricing

How grocers can implement a personalized pricing strategy in four steps

It’s tough to put a price on a well-stocked grocery store.

Merchandisers have long used the insights derived from customer data to ensure adequate inventory levels that meet customer demand–from the desired brands to an appropriate selection to size and quantity. But the data can be pushed even further.

By using information collected through loyalty programs, grocers can deliver the kinds of products consumers want at the right price as well, in a strategy known as personalized pricing.

Personalized pricing, or the practice of tailoring prices in conjunction with demand, consumer behavior and competition, is already winding its way through the grocery store aisles. By investing in targeted, individualized prices, savvy grocers are ensuring wise investment decisions while simultaneously providing highly relevant offers to customers that satisfy their specific needs. And they’re reaping the benefits.

The world’s largest online retailer, Amazon, is a leader in the personalization space because of the data it collects on an individual customer’s buying and browsing behaviour and the web-based nature of its business.

According to the American Customer Satisfaction Index, Amazon ranks highest in customer satisfaction among Internet, department, discount and specialty retailers. Simply put, its customers are happy.

In the grocery sector, Tesco, Kroger and Safeway are leaders in the use of loyalty program data to identify products in which customers are most interested in receiving discounts.

As a starting point, these personalized offers are determined at the customer segment level, meaning all customers in the segment receive offers for the same products. Then, as a best practice, each offer is optimized to the individual customer.  Every customer receives a customized list of the items that matter most to them at the right price.

“There’s going to come a point where our shelf pricing is pretty irrelevant because we can be so personalized in what we offer people,” said former Safeway CEO Steven Burd earlier this year, according to the AP.

For instance, as outlined in The Loyalty Leap – Turning Customer Information into Customer Intimacy, LoyaltyOne used loyalty program data to help Sobeys, Canada’s second-largest supermarket chain, appeal to its customers at a personalized level.

With these loyalty insights, Sobeys was able to create one-to-one direct-mail pieces for its loyalty card members, each of which was based on a member’s specific purchasing behavior. Of the one million pieces created and mailed, each of them were unique, with a dozen customized product offers and coupons in each.

Then, to be sure they reached consumers wherever they were, the offers were distributed through all channels–direct mail, e-mail and the web.

The results? Sobeys saw double-digit consumer response rates, a 66% increase in promotional recalls, a 37% unique open rate for emails, and a 26% click-through rate.

Such campaign results are not only desirable by today’s grocers, they are attainable. More grocery retailers can ensure they are appropriately rewarding their customers by delivering highly relevant promotions, and personalized prices, on items that are of greatest importance to customers through:

Leveraging digital delivery mechanisms. Using their loyalty program data as a guide, retailers can provide tailored prices to individual customers in the form of electronic coupons delivered via email or by asking customers to sign in to their account on the retailer’s website. These coupons can be loaded onto the customer’s loyalty card for redemption at the register.

Incorporating mobile or smartphone technology.Further leveraging their loyalty program, retailers can send electronic coupons via text message or apps to a customer’s mobile phone, incorporating time of day or location into their delivery. These offers can then be redeemed by scanning barcodes or QR codes at the register.

Rewarding loyal customer segments with specific promotional prices. Individual in-store promotions can be designed to target specific customer segments with prices that are tailored to reward those consumers for their brand loyalty. Consumers who tend to shop during off-peak hours, for example, can receive invitations to a limited shopping event that would be taking place in a specific, two-hour period.

Partnering with leading manufacturers. Since manufacturers already fund many digital coupons, they represent a partnership opportunity for retailers. By overlaying their insights, retailers and manufacturers can increase the relevance of these coupons to specific customers based on individual buying behavior.

Personalized or tailored pricing is a powerful tool for achieving grocery success. The best part: Customers, as well as retailers, benefit from more targeted and relevant offers.

While it may be tough to put a price on a well-stocked grocery store, customer data can allow grocers to put a well-thought price to the right products.

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