The Brand Perception Index

Who's winning, who's losing and what you can learn from them.

What are the most important factors in retaining shopper loyalty? How important is “selection” versus “quality” in determining store preference? How much of a perceived price difference will it take to entice someone to shop another store?

These are all questions that can and should shape the brand strategies of every retailer. It's all about managing perceptions.

Last spring, Watt International conducted a study in the Dallas and Jacksonville, Fla., markets to gain insights into the current perceptions of grocery retailers and factors that drive store choice. The study group included 1,400 shoppers who indicated that one of the following was their primary grocery source and that they had also frequented the other three grocery retailers in their market: Kroger, Target, Tom Thumb and H-E-B's Central Market in Dallas; Walmart, Publix, Winn-Dixie and Food Lion in Jacksonville.

Each retailer was measured against seven core brand switch factors (price, quality, convenience, pleasure, social conscience, selection and features), which comprised more than 40 specific attributes. By creating indices of the measured responses, we were able to discern gaps in perceptions — for example, the perception differences of a given store between “core” (regular) and “non-core” (less frequent) shoppers.

The most provocative findings came from some gaps in the perception of brand attributes, reinforcing the notion that perception is reality.

Core Versus Non-core Shopper

It stands to reason that a loyal “core” shopper would hold a retailer in higher regard across most or all switch factors, compared with non-core shoppers. Kroger and Food Lion were perfect examples of this. But Publix — the highest-rated grocery retailer in its market for all factors other than price — actually indexed higher with non-core shoppers. This suggests that positive perceptions of Publix are stronger with people who don't shop there as often as those who do.

A similar trend existed with the subfactor of “quality.” Publix and Central Market scored highest on every dimension of quality with both core and non-core shoppers, but index scores were significantly higher with non-core shoppers on every dimension (produce, meat, private label, deli, seafood and bakery). One possible cause of this is both retailers' powerful external marketing, which creates an impression of superior quality that actually exceeds the reality.

Bigger = Less Convenient?

A generally accepted fact is that the bigger the store, the less convenient it is to shop. This held true in our study when we examined Walmart's convenience scores. But in the Dallas market, Target actually scored highest with non-core shoppers, earning a 146 index score with core shoppers for being “easy to shop with children.” This would suggest that what leaves the most lasting impression is how a retailer manages factors related to convenience in the shopping experience.

Walmart's Social Conscience Ignored

Many people are surprised to know that, according to Forbes, Walmart is actually the seventh-greenest company in America. Beyond that, the company has made great strides in becoming more socially responsible on many fronts, but it still isn't getting much credit for it.

Walmart's index scores across every social conscience dimension were below 100 (the market average) with all shoppers. Particularly noteworthy were its scores in the “environmentally sensitive” dimension, which were 85 for non-core shoppers and 79 for core shoppers, suggesting that even regular shoppers aren't giving the mega-retailer any credit for acting green.

Finding the ‘Real Deal’

Many grocery retailers conduct basket analysis to quantify their price differential on a basket of goods versus competitors. But how about the shoppers' perception of price differential — does it line up with reality? The study indicated that, when it comes to prices, grocery shoppers don't have a clue whether they're getting a deal. Case in point: While Target core shoppers believe they enjoy a 25 percent savings over shopping at Central Market, H-E-B core shoppers think they save 7 percent over Target.

In Jacksonville, shoppers believe they would save money if they shopped at Walmart. But if you remove Walmart from the equation, core shoppers at Publix, Winn-Dixie and Food Lion all believe they save money shopping where they do over the other two options. Overall, the average price perception differential was 21 percent, with the closest gap being 13 percent between Winn-Dixie and Food Lion core shoppers.

Everyone's perception is their reality. But understanding perceptions is important to managing the overall value equation, particularly when you look at the perceived price differential required to make shoppers switch loyalties.

How to Make Them Switch

While each of the seven core brand switch factors influences brand loyalty, we were particularly interested in exploring price elasticity perceptions, or what it would take to make core shoppers switch to any other option in the market. Across the study, the average amount people would have to believe they would save before they would switch was 26 percent, significantly higher than our original expectations.

To see if differences existed based on where people shopped, we segmented the data by retail banner, with the thought that, for example, Walmart core shoppers would tend to be more frugal and, thus, switch based on smaller perceived price differences. The data didn't support this. In fact, the perceived discount required to switch stores was largely consistent across all retail banners, with one exception: Publix. Almost 30 percent of all Publix core shoppers would have to believe they would save 40 percent before they would switch grocery stores, suggesting very strong shopper loyalty, a fact reflected in this chain's high scores across all brand switch factors, other than price.

Understanding the perceptions of shoppers, particularly the significant differences between core and non-core shoppers, is critical to understanding overall brand health. It also helps point to whether areas of opportunity exist to create or improve brand perceptions, either in the store or via marketing, or both.

Patrick Rodmell ([email protected]) is president and CEO of Watt International, a Toronto-based integrated retail agency with more than 40 years of experience creating such landmark private brands as President's Choice, Great Value and Safeway Select, as well as more than 100 other private brands worldwide. To purchase a copy of the Brand Perception Index Report, contact Samantha Muir at [email protected] or 416-364-9384, ext. 240.