In our recently published 2018 Canadian holiday outlook, we paint a picture of a holiday season that’s shaping up to be rewarding for both consumers and retailers — and how retailers need to reimagine their shopping experiences to satisfy customer needs.
In a market where consumers are presented with a growing range of channels, retailers face the challenge of building stronger, more relevant connections with consumers. In-store and online retailers are locked in an arms race to gather, understand and respond to insights about consumers and their needs.
It’s a race to meet and exceed customer expectations, which drives consideration and retention. If, as a consumer, you provide me with what I want, the way I want it and when I want it, then I’ll likely reward you with my repeat business. This speaks to the issue of relevance and begs the question, “What does it mean to be relevant to a consumer?” Our Canadian holiday outlook presents us with a window into what motivates and is relevant to holiday shoppers.
Our report validated some of our thinking about consumer needs and gave us food for thought.
An important learning was that relevance is a multi-dimensional problem, and most importantly, it can cut across “traditional” approaches to segmenting and serving customers.
When we talked to consumers about how they choose what to buy, a complex web of decision drivers emerged.
How important is it for you to make holiday purchases from a retailer that:
Understanding why people make certain decisions helps retailers target what matters most to a consumer. Successful retailers, both online and in store, organize themselves around the unique needs of their customers. They create a consistent and coherent retail experience when it comes to the variety of products (what they sell); the price and promotional mix they project (how they show value); and the design, organization and choreography of the customer experience (service levels, scripting and flows) to be the most relevant to their customers.
Creating coherence among all these elements requires real choices and trade-offs, which recognizes how it’s difficult to be all things to all people. As a result, retailers need to make deliberate choices about what they sell and how they sell it to hone in on what matters to their customers.
The question faced by many of our retail clients is, “How can I maximize the number of customers I can serve without compromising on the quality, consistency and coherence of the experience I deliver?” Our review of decision drivers helped us better understand the boundaries of this problem.
When we looked at what drives consumer decision making, we found a mix of attributes that tended to cluster in different ways: some by age, stage of life and level of affluence, and others by their attitude (i.e. they’re a segment that cuts across traditional measures of income and affluence).
Understanding how different drivers of relevance can manifest themselves in people presents retailers with strategic choices around how best to organize. These include where they set up stores, how they design and deliver marketing campaigns, the range of products they carry and the way they interact with customers.
Targeting customers based on their age or affluence leads to a well-established path. While reasonably straightforward to conceptualize and bring to life in store and online, it invites “me too” strategies and can often end in commoditization or a competitive arms race.
Focusing on other attributes, such as ones that hold stronger emotional connections to consumers (e.g. a social/environmental focus, a drive around artisanal provenance or wellness products), pose a higher risk and hold the promise of higher reward. For example, building a wellness-focused range of products that caters to consumers across age segments and affluence levels could be challenging, but there are benefits to building a deep connection to an attribute that matters to those consumers.
Organizations that build enduring brands and deep emotional connections with consumers are ones that, unsurprisingly, have real conviction around their strategic choices. They understand — and welcome — the trade-offs they need to make in the pursuit of the consumer segments they aspire to serve.
In our experience, the organizations that do this well follow a handful of core principles:
Canadians plan to spend more this holiday season than they did last year — and millennial and Gen Z consumers have greater expectations than ever before when it comes to how and where they shop. With an explosion of choice and increasing competition for consumer mind share, the race for relevance is on.
Do the work to understand your customers’ decision drivers and motivations, rally the organization around segment-focused view of the world (with targets and measures to complement it) and build experiences that set you apart to the customers you’ve chosen to serve. This season, give the biggest gifts to the ones you love the most.
