How knowing your shopper types can be good for business

An article in the New York Times last month revealed that Wal-Mart’s new marketing strategy includes categorising each of its customers (estimated at 200 million) into one of three types:

• “brand aspirational”
• “price-sensitive affluent”
• “value-price shopper”

Brand aspirationals are people on low incomes but to whom brand names are important, price-sensitive affluents are those who are wealthy but who like bargains and offers, and value-price shoppers are those who like low prices and cannot afford much more.

In addition, the company, which is the largest retailer in the world, is creating special marketing teams for its five “power” product categories (one of which is pharmacy), that will base their work on these shopper types.

The big retailers have been collecting information about customers for years (facilitated by the advent of loyalty cards) because if they do not understand consumers and keep pace with their needs their businesses will suffer. And for some, part of understanding customers is to categorise them.

According to the Coca-Cola Retailing Research Council, “understanding the needs that drive shopper choice is enabling supermarkets to identify new opportunities for growth and ways to avoid dedicating time, money, and other resources to efforts that have little meaning to shoppers”. In 2004 it published a study entitled “The world according to shoppers” (PDF 500K), which describes nine shopper states of mind:

• budget
• discovery
• immediate consumption
• efficient stock-up
• care for the family
• bargain
• grab and go
• reluctant
• specific item

For each mind state, the study details what the shopper wants, the reward he seeks, his attitudes to shopping, his most frequently purchased products and reasons for choosing a particular store.

For example, discovery shoppers want new ideas and products (their reward is to find something new) and they choose a store for its atmosphere and product selection. In contrast, immediate consumption shoppers want to satisfy their hunger and get in and out of a store quickly. They choose a shop for convenience.

The same marketing strategy is used in pharmacy. Boots The Chemists, for example, has also invested in understanding its customers. “We track their behaviour and target them to build their loyalty and trust in Boots,” says Colin Innes, customer insight manager at Boots. Using data from its loyalty card, Boots initially put its customers into eight product-based segments and then conducted qualitative and quantitative research to look at their attitudes and behaviours.

However, this proved too complicated and, like Wal-Mart, the company eventually identified three main shopper types, which it named “Betty”, “Tina” and “Charlotte”.

Using the information

Betty is an older customer, who is concerned about her health. Over 70 per cent of what she spends in stores is on health care products. Tina is a mother who buys for the family. Toiletries account for almost 50 per cent of what she spends. Charlotte is a young customer who loves to shop and a third of what she spends is on beauty products alone.

Boots is using this information to develop its customer service. For example, it recently launched “Healthclub”, a service aimed at Bettys and “Parenting Club”, a service for Tinas.

However, “there are various ways to segment customers. It is not one size fits all,” says Raj Nutan, pharmacy business manager at the National Pharmacy Association. Basic categories include age and disposable income and Mr Nutan suggests that pharmacies use websites, such as www.upmystreet.com, to look at the demographics in their area. A straightforward way of segmentation is to use times of day: “Pharmacies could look at their main type of customer between 9am and noon, noon and 3pm, and 3pm and 6pm.”

Mr Nutan also recommends asking the customers themselves. “Pharmacies in England and Wales are going to have to do patient surveys for the NHS and there is no reason why they can’t kill two birds with one stone and ask extra questions like ‘why do you come to our pharmacy’ and ‘what services do you want to see’.”

Mr Nutan says there are two basic ways that shopper information can be used. The first is to tailor stock. For example, if a pharmacy finds that 34 per cent of its customers are young mothers, it should review how much space it gives to baby products. It could look at how many vitamins for children it stocks or even consider having a separate section for children’s vitamins.

The second is to tailor customer service. For example, if a pharmacy finds that lunchtime customers are in a rush, it could train its staff to spot these signs. “If you need to give information to these customers, you could give a leaflet and ask them to come back at their convenience, instead of trying to have a 10-minute chat,” he says. Shopper information can also be used to match staffing profile to footfall and types of customer queries.

According to Mr Nutan, a thorough knowledge of the customer is a key requisite to being successful in any business, regardless of size, and those with fewer resources can still pay attention to this area.