Using competitive data and customer insights, retailers, like Publix, can transfer their strong brand equity into new markets to gain faster traction
CINCINNATI, Aug. 22, 2024 /PRNewswire-PRWeb/ -- dunnhumby, the global leader in customer data science, today released "Maximizing Brand Equity in New Markets," a special report that found that several years after a retailer enters a new geography, they are still leaving tens or even hundreds of millions a year on the table. For retailers with approximately 25 locations in a mid-sized city, this number could be as high as $800 million a year in opportunity costs, in just that single market. This is because as grocery retailers expand into new markets, they do so with diluted brand equity and a reduced share of the grocery wallet.
This report also takes a deep dive into Publix, one of the fastest growing retailers in the U.S., to examine how the retailer has fared with its expansion strategy.
"With a decreasing population base to draw from and an abundance of store types battling it out for customers, retailers need to find more customers to accelerate growth," said Matt O'Grady, President of the Americas for dunnhumby. "For some grocers, one pathway to finding new customers is through building new stores and expanding into new markets. Unfortunately, without careful planning this pathway often results in jeopardizing the bottom line."
From 2018 to 2023, the top 20 U.S. grocery retailers added 7516 new stores. Dollar General has added the most stores (4,500), followed by Dollar Tree (1,250), Aldi (510), Target (310) and Publix (120), according to Edge by Ascential.
Key findings and recommendations from the study:
- The average share of grocery wallet captured from a shopper falls by 20% for a retailer when it pushes into new geography. For example, a retailer that gets 25% share of their customer's grocery budget in an existing market, can expect the average share of grocery budget captured in the retailer's new market to be 20%. Likely this share gap will remain even for years after entering the new market. Publix is an illustration of this phenomenon of brand equity not translating as well as it could in newer markets.
- Publix's brand equity in Florida ranks 11th nationally in dunnhumby Retailer Preference Index (RPI) but falls to 23 nationally in its newer markets. Customer perception of local community connection declined the most for Publix from its Florida markets to its newer markets.
- Publix's private brand perception and promotion relevance perception also declined in newer markets. All three of these share in newer markets a lack of familiarity between the retailer and the customer. Retailers moving to new markets need to prioritize getting in front of dilution of these three core areas.
- The biggest competitive threat to Publix, is Publix itself according to dunnhumby's Competitive Threat Evaluator. Ninety-eight percent of Publix locations in Florida have on average six other Publix locations in its trade area with at least 10% customer cross shop.
- Retailers looking to increase their market share through expansion should follow these five best practices: 1) Determine desired competitive positioning, 2) After entering a new market, encourage trial and retrial through strong promotions, 3) Remember it may take years for a retailer to reach the maturity phase of customer relations in expansion markets, 4) Diligently adhere to optimizing the customer experience down to the individual level, 5) Adhere to the retailer's competitive strategy for pricing, assortment and store experience.
"Retailers need to be fully dialed in when going into a new market. They need to understand what their brand represents, understand what their customer responds to with personalized offers, and have a tight plan on how they will respond to competitive threats," said O'Grady.
Methodology
As part of this special report, dunnhumby used demographic data from governmental agencies, geolocation data Placer.ai for our analysis in addition to dunnhumby's RPI database. The RPI database contains 80,000 grocery consumer interviews conducted from 2017 through 2023. Sixty-nine of the largest U.S. grocery retailers in conventional, mass, club, specialty, discounter, drug, and dollar channels were included in the RPI.
About dunnhumby
dunnhumby is the global leader in Customer Data Science, empowering businesses everywhere to compete and thrive in the modern data-driven economy. We always put the Customer First.
Our mission: to enable businesses to grow and reimagine themselves by becoming advocates and champions for their Customers. With deep heritage and expertise in retail – one of the world's most competitive markets, with a deluge of multi-dimensional data – dunnhumby today enables businesses all over the world, across industries, to be Customer First.
The dunnhumby Customer Data Science Platform is our unique mix of AI-powered data science, software, and consulting services, enabling businesses to increase revenue and profits by delivering exceptional experiences for their Customers – in-store, offline and online. dunnhumby employs over 2,500 experts in offices throughout Europe, Asia, Africa, and the Americas working for transformative, iconic brands such as Tesco, Coca-Cola, Meijer, Procter & Gamble and Raley's.
Media Contact
Theresa Smith, dunnhumby, 1 818-704-8481, [email protected], https://www.dunnhumby.com/
SOURCE dunnhumby
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