How a journey to my local grocery ended up on a big bang of insights about how brands grow, leaving more learnings than many marketing books I've read. This is a story about the power of customer acquisition, how it trumps loyalty tactics and... wine.
A quasi-random first trial
I do my groceries at a small Co-op located two blocks away from my home, shopping there once or twice a week for things like salad, fruit, chicken fillets, canned peas and an alcoholic beverage to relax after a workday. As a Brazilian, beer would be my natural go-to, but London's not always amicable weather slowly made wine a more comfortable option.
I'm far from being a wine expert. So when I started visiting the category shelfs, I just gazed around guided by things like label design, country of origin, grape type and, most importantly, price. Not too cheap that would indicate low quality, not too expensive that wouldn't sign something casual. Two other factors also played a role: my girlfriend’s opinion and the wine rating app on my phone, Vivino, which with a quick label scan tells me the 1 to 5 start rating of the product based on thousands of consumers' reviews.
I don't really remember how we got to this 3.5 stars French red from Bordeaux called Vieux Manoir, but it ended up in our home at some point and we just really liked it since our very first trial. Quickly it became a preferred option that won my basket 3 out of 4 times I shopped for wine.
With this new habit formed, it shouldn't come as a surprise that in our latest visit to the store we once again picked the Bordeaux, even after my girlfriend noticed its price had increased. It was up £1 (from £6 to £7), placing it on the top 20% most expensive wines on the shelf.
So far, no problems. I've seen several price sensitivity studies showing that shoppers can be much less sensitive to price changes than some commercially minded executives may assume, mainly on non-commoditised categories. But what started a rich thought process in my mind was the scenario that came up while we were walking towards the automatic cashier:
"What would have happen if the Marcelo of a couple months ago, which hasn't settled on any wine brand, appeared in front of that shelf right now, with this new higher price? Would he still try it? Or would it be left out of the consideration set, deemed to expensive?"
Acquisition trumps retention
I don't know what would have happened, but I know that chances of me trying that wine would have been dramatically reduced. This could have resulted on one customer less for the Maison's CRM list and minus £162 in consumers sales for a given year (based on a very raw calculation considering buying the wine at the older lower price of £6, 3 times a month, 10 months a year, minus a 10% markup for Co-op). Now multiply this by thousands of consumers that would have screened it out too and you start to see a major problem.
It's true that the £1 price increase (an amazing 17%) immediately creates new money with the current consumer base, an additional £27 per year per current customer as per my previous calculation (considering the number of customers remains the same even after the price increase). But this amount not only is lower than that of acquiring a new customer, it also is limited to the brand's current consumer base - the future of the brand is much more opaque.
Marketing acquisition costs may hurt profit margins in the short term, but if held under control they will pay-off in the form of higher absolute profit numbers driven by more new people buying the product.
That's why working on customer acquisition levers is so critical. Continuously working on product quality, innovation and portfolio options is important to keep those loyal cusomters coming back. But without bringing new ones, your brand will very soon hit a growth ceiling.
And what do I mean by customer acquisition levers? Well, it's everything that nudges someone to buy your brand for the first time or return to it after being idle for a while. It usually has to do with making the product easier to buy, or in the words of Professor Byron Sharp, building mental and physical/digital availability. In my wine story, they were things such as:
Product position on shelf (eye level, not hidden on a dark corner)
Familiar information on the label reducing perceived risks of making a bad choice (e.g. provenance: French, Bordaux)
Online ratings (reason why objective product quality can also be an acquisition lever)
Price point (not too cheap, not too expensive)
What is more exciting is that there is no reason to believe that Vieux Manoir's brand managers can't do more. Actually, if they do decide to go ahead with the price increase, a few new initiatives may become a must. If I were consulting for the brand, I would probably suggest things such as:
In-store trade marketing material clearly calling out the brand name, logo and other distinctive assets
Product tasting in stores with high footfall
Direct to consumer mailing with referral promotions
Advertising in wine apps and outdoors in the way to supermarkets where the brand is sold
Label design touches to make the product branding more distinctive. No need for a complete redesign, but a few adjustments so that it doesn't get lost among all the other "Maisons"
A watch out is that some important factors that drive purchase are less actionable, such as my girlfriend's opinion or the fact that I'm not a wine expert. Don't focus on those things. They are hard to influence and will probably cost you a lot of money.
Finally, this is an analysis of one channel (grocery), with a specific type of consumer journey. For broader opportunities, someone would have to speak to clients in other key channels that the brand sells its products and go from there (e-commerce, direct, hypermarkets, discounters, specialist clubs, restaurants, etc).
The most precious insights are hidden in on routines
That's how a more active observation of my weekly grocery shopping brought to life so many insights into the mechanisms of how brands grow. One thing is to read those on academic books, another completely different is to experience them.
It always starts in that moment when you place a bet and pick a brand for the first time from a physical or virtual shelf. Those bets may have different sizes depending on the product category, but remember: they all mean that a consumer is taking a conscious or unconscious leap of faith to invest money on something they will never know 100% if it will do the job, but are hoping for the best.
So - understand those moments and go all the way backwards, mapping opportunities to attract more attention and make your brand easier to be chosen. Keep improving product quality, but double down on tactics that will bring new people in, mainly those that haven't tried your brand before. Those Marcelos' wondering in front of Co-op wine shelfs for the first time are the future of your business.
Cover picture: Thomas Thompson, Unsplash
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