Even as the effects of the pandemic subside, many grocery retailers are still tempted to halt or cut back on marketing. At some level, the rationale behind that impulse is understandable. At the beginning of 2022, continuing supply chain challenges, harsh winter storms, and a surge of omicron infections translated into empty grocery store shelves.
Unfortunately, though, companies that pulled advertising are now beginning to see a decline in sales. Even more worrying is the possibility that non-engaged customers without a good reason to visit a store may simply change their shopping habits permanently. By the end of this article, you will:
- Understand why the best time to market is when others stop
- Learn how promoting private-label items can help you simultaneously meet the demands of price-conscious shoppers and avoid availability problems
- See how the right data can help you greatly improve targeting and boost your ability to deliver relevant messages
Over the course of his multidecade career in marketing, Dave Abbott has had to navigate every conceivable economic environment. From his recent stint as chief marketing officer for the Brookshire Grocery Co., which has 180-plus locations in Texas, Louisiana and Arkansas, to nearly a decade at The Home Depot, Abbott has designed and implemented effective marketing strategies in booming economic times, recessions and even a global pandemic.
Through all those years, Abbott said, there was only one brief period when it was reasonable for marketers to hit the pause button. “When COVID-19 hit, it actually made sense to turn marketing off, because the shelves were empty,” said Abbott, now a senior consultant at FitForCommerce, an omnichannel strategy arm of OSF Digital. “You were just wasting money then.”
While those days of hoarding toilet paper and persistently empty grocery shelves are fortunately in the rearview mirror, Abbott and other experts have noted a temptation among many grocery retail marketers to halt or cut back on marketing. At some level, the rationale behind that impulse is understandable. At the beginning of 2022, continuing supply chain challenges, harsh winter storms and a surge of omicron infections translated into empty grocery store shelves.
Even when products arrived at stores, labor shortages have challenged the capacity of companies to stock those items on shelves. In fact, the National Grocers Association said that many of its member stores were operating with less than 50% of their typical worker capacity. Adding to those challenges, a surge in inflation means that many customers have to pay considerably more for the items they do find on the shelves.
OUT OF SIGHT, OUT OF MIND, OUT OF REVENUE
Given the swirl of uncertainty about items in stock, price increases and labor shortages, a number of grocery retail marketers decided to stay quiet or drastically reduce their marketing. “For grocers, their primary advertising vehicle is their weekly circular, and we had a few that stopped advertising for a couple of months,” said Julie Companey, a director of client strategy focusing on grocery for Vericast, a marketing technology and omnichannel solutions company.
But it didn’t take long for those that pulled advertising to change course. “It turned out to not be a sound strategy, because they quickly saw a sales decline. They saw a loss of household penetration, and the end result was that they were going to lose market share if they continued,” Companey said.
Nor is this simply one anecdotal example of a misfire by a grocery retail marketer. Plenty of data backs up the assertion that pulling back or eliminating advertising during challenging economic times is counterproductive over both the short and long term. For example, data compiled by the Ehrenberg-Bass Institute for Marketing Science found that brands that stopped advertising for one year experienced a 16% drop in sales.
An even more pointed comparison of the effect of advertising on sales appeared in Marketing Week during the summer of 2021. The research looked at revenue growth for leading food and beverage marketers during the pandemic. One marketer maintained advertising throughout the uncertainty and economic difficulty of the COVID-19 lockdowns and disruptions. It saw revenue grow 5%. A competitor, by contrast, paused its advertising and experienced an 11% drop in revenue.
The equation at work that explains these starkly different outcomes is fairly straightforward. When marketers ratchet back on investments in advertising, they lose so-called share of mind among consumers. By contrast, those that maintain their advertising can typically increase their share of market because consumers keep them on their menu of purchase options.
What is potentially even more worrying for grocery retail marketers is the very realistic possibility that customers who aren’t continually engaged and given a good reason to visit a store via marketing may simply change their shopping habits permanently.
“YOU HAVE TO KEEP YOUR CUSTOMERS ACTIVE,” ABBOTT SAID.
“I’ve worked in marketing in home improvement and department stores as well as grocery. In home improvement and department stores, if you get one purchase per quarter, you’re doing pretty well. In grocery, you better get that purchase every week, because if a customer skips a week or two, you may have lost that customer.” The costs of continuously acquiring and reacquiring customers can add up fast.
THE TIME TO MARKET IS WHEN OTHERS STOP
But grocery retail marketers shouldn’t just view the uncertainty of the current economic environment with a defensive mindset. In fact, examples abound of companies that more fully embraced marketing when customers were struggling and came out better when the economy improved — as it always does.
One classic example: Kellogg’s doubled its advertising investments during the Great Depression while the category-leading company, Post, nearly eliminated its ad budget. Kellogg’s profits grew 30%, and the company is still the leader in ready-to-eat cereal. McGraw-Hill also analyzed 600 companies and found that those that advertised aggressively during the 1981-82 recession had higher sales during and after the downturn. By 1985, those that had embraced marketing during the recession had sales 256% higher than those that didn’t advertise.
The question for grocery retail marketers, then, is how to maximize the effectiveness of their advertising and use it in a way that bolsters short-term sales and long-term loyalty. How to actually achieve those goals will obviously vary from marketer to marketer, but the economic moment we are in has very defined trends that need to be incorporated into any marketing strategy.
Start with the effect of inflation, which rose at an annual rate of 7.5% in January, the largest gain since 1982. The rise in prices has also been exacerbated by the evaporation of government payments meant to support people during the pandemic. “All the emergency pandemic stimulus money is gone,” said Beth Johnson, senior manager of client strategy at Vericast, a marketing solutions company. “It’s costing the average family an extra $250 per month. So people are going to have to cut back everywhere and need some help on how they can afford to feed their families.”
The focus on not busting limited budgets is reflected in customer surveys. For example, 57% of consumers reported visiting multiple retailers to keep their grocery bills as low as possible, according to the Consumer Connect Report. Additionally, 86% of shoppers said they tried to buy groceries when retailers put them on sale or offered a good deal. A willingness to jump from one grocery store to another to find the items they want at the right price is also reflected in how much shoppers spread their purchases. According to FMI’s U.S. Shopper Report, the typical shoppers’ share of wallet is spread across 4.9 retailers.
For grocery retail marketers, this thirst for value needs to be addressed. Obviously, it begins by understanding the local marketplace and ensuring competitors aren’t offering significantly lower prices.
“YOU HAVE TO BENCHMARK YOURSELVES AGAINST THE COMPETITION,” ABBOTT SAID. “YOU BETTER BE SURE YOUR PRICES ARE COMPETITIVE.”
But competitive prices are just a start. It’s the role of marketers to both identify value-focused shoppers and continually remind them that a store has solutions that help navigate the challenge of rising prices. In some instances, that means using a traditional circular (as well as digital and other channels, which we will discuss later) to highlight buy one, get one free offers or product bundles that provide low-cost meal options for families.
Another benefit of leveraging marketing to promote products that help families make ends meet is that grocery retail marketers can also single out items they have in abundance — thereby avoiding some of the supply chain frustrations consumers have had.
Another way grocery retail marketers can simultaneously meet the demands of price-conscious shoppers and avoid availability problems is to promote private-label items. A range of grocery retail operators, including H-E-B and Kroger, have invested heavily in their private labels. “This is important for grocery retailers because it’s a way for them to price-promote items they know they will have in stock and lean on their private brands because they are generally lower in price but still very good quality,” Johnson said.
EFFECTIVE MARKETING IS DATA-DRIVEN AND OMNICHANNEL
A commitment to maintain marketing should also be accompanied by a pledge to approach these important investments as strategically and intelligently as possible. To do that means fully leveraging data and an omnichannel approach to target and deliver relevant messages.
For example, an omnichannel approach is arguably more important than ever today because print and digital have such unique and complementary strengths. “While print can be perceived as old and traditional, the benefit of it is that it stays in the home, delivers many impressions and is actually better retained in the brain,” Companey said. “That’s one of the reasons why you even see online retailers such as Wayfair and Amazon starting to leverage print.”
While it’s essential, print alone is not enough. For instance, Vericast’s 2021 Deals & Coupons Report found that 36% of people want both paper and digital coupons. To be truly effective, though, digital advertising needs to be informed by a depth of data that truly personalizes marketing.
For example, a holistic understanding of a customer comes from analyzing a range of data — everything from where they live to their online and offline shopping activity as well as the loyalty data a grocery retail marketer can access. “That combination of the consumer’s address, their online behavior, the other stores they shop at as well as loyalty data brings that full picture of the consumer to the retailer. It’s like loyalty data on steroids,” Johnson said.
It’s information that leads to improved targeting and the ability to deliver relevant messages. For example, grocery retail marketers can deliver print and digital messages about their in-stock privatelabel items to a segment of consumers who have been searching online for discounts and bargains. Good data also gives grocery retail marketers the ability to measure the effectiveness of their initiatives.
“ONE WAY RETAILERS CAN UNDERSTAND THEIR ROI IS BY TAKING THEIR SALES DATA AND MATCHING IT BACK TO WHERE MEDIA WAS DELIVERED,” COMPANEY SAID. “THAT ALLOWS FOR A CALCULATION OF THE PAYOUT BASED ON THE HOUSEHOLDS MEDIA WAS DELIVERED TO AND WHAT HOUSEHOLDS RESPONDED.”
Data can also play another important role: It can help grocery retail marketers push back against the notion that pausing marketing is a good business strategy. “If you’re a CFO or CEO and you look at the P&L (profit and loss statement) and you see that big marketing expense and you don’t know what you’re getting from it, it goes on the chopping block,” Abbott said. “If you use data to measure and test what you’re doing, you can show the incremental value of a dollar spent on marketing and show whether it’s more effective than spending a dollar on labor. That’s the kind of investment decisions companies need to make.”