Unlocking the secrets of value: lessons from some of Europe’s best-perceived retailers

For many customers, value is everything. Even in the best of times, shoppers want to know that they’re getting a fair deal from retailers, with the prices they pay well balanced against what they receive in return. In the current economic climate of course, which even the most optimistic of us would struggle to describe as anything like the “best”, value is more important to grocery customers than ever.

Take the results of one of our latest research studies, for instance. In a survey of grocery shoppers conducted towards the end of 2022¹, well over half (57%) told us that they felt their personal finances are weak, and the vast majority (93%) that food prices are higher than they were one year before. As a result, significant numbers are taking extra steps to try and find greater value in their shop.

Just what is value, though? Tempting though it might be to focus on the dynamics of price and quality, particularly now, the truth is that the concept speaks to something much broader and more complex. To today’s shoppers, value comes from the combined impact of a retailer’s overall offering, something that is just as likely to touch on store experience as it is on price.

In our own experience, value perception is influenced by seven key factors, with base pricing being just one of them. Critically, it’s not just low prices that have an impact on perceptions here, either. To really win with shoppers on price, retailers also need to keep things stable.

The priority here should be on maintaining a “logical” pricing structure. Every customer has their favourite products, after all, and they’re usually quick to notice if the cost of those items starts to feel wrong. To prevent that from happening, retailers need to embrace a variety of pricing rules, such as “Bigger Pack, Better Value” or a tiered, “Good/Better/Best” approach. And to do that at scale, of course, retailers will require an effective rules-based pricing solution.

Beyond pricing: value’s other dimensions

Of the remaining six factors that can have an impact on value perception, four are primarily related to “quality” – assortment, store experience, communications, and personalised offers – while private brand covers both price and quality at once. And, while the specific importance of each of these factors may vary from retailer to retailer, value is clearly a varied theme.

Proof of that can be found in other dunnhumby studies, this time in our RPI Series. The RPI, or Retailer Preference Index, explores the drivers of shopper choice, with a specific focus on which factors have the greatest impact on where customers decide to buy their groceries. It’s in the results of our RPIs for France and Italy that we can see exactly how different perceptions of value can be.

Let’s begin by looking at France. Of the 20 retailers included within our French study, two in particular stand out for value perception: Lidl and Picard. In spite of their very different propositions, each sitting at opposite ends of the quality to price spectrum, respondents hold them in similarly high regard when it comes to value perception. Moreover, both score very well when it comes to overall shopper preference, too.

How have these banners achieved this strong value perception, then? And more importantly, what can other retailers learn from their approach?

For Lidl, the focus is on a “traditional” approach to value, achieved primarily via a strong line of low cost private label products, regular discounts, and special offers. Picard, on the other hand, has typically presented itself as a premium destination for food and a banner that prioritises high-quality ingredients and unique flavours. In terms of market positioning, the two have distinct and seemingly rigid propositions.

A closer look, however, reveals that these banners have been working hard to broaden their value beyond their core.

While Lidl’s offering may start with price, for instance, that is no longer where it ends. The launch of Lidl Plus, the banner’s loyalty scheme, has brought personalised offers and rewards to Lidl’s French customers for the very first time. Picard, too, has relaunched its loyalty programme², introduced a new mix-and-match line of products³, and kept price rises under the 15% increase seen across the wider frozen foods market⁴.

For both, the focus here is clearly on creating an improved experience for customers. What else is clear that, while both banners have great strength when it comes to their value perception, neither is standing still. Whether to protect or enhance their proposition, Lidl and Picard alike are working proactively to enhance the value that they offer.

A similar situation exists in Italy. Lidl, again, enjoys strong value perception based primarily on low prices. For RPI winner Esselunga, however, its focus on own brand goods is key. Private Brand (or, “Marca del Distributore”) has become the critical issue for Italian shoppers over the past year, and Esselunga’s leading position here helps to cement its reputation for value. As the mood of the market has changed, Esselunga has worked hard to move with it.

Finding the difference

For other retailers in these markets – and, indeed, around the world – we see two important themes here. The first is that “value” is a fluid concept; there is no universal formula that can be used to create it, nor a blueprint to follow to deliver it. Instead, value is the combination of everything that you have to offer, correlated against the price that shoppers are expected to pay. Vitally, they are the ones that will judge whether that equation balances out.

Secondly, and as a direct result of the above, any retailer wishing to improve its value perception needs to ensure that its proposition is in a state of continual evolution. Much as it might once have been possible to craft a market-leading offering based on one strength alone, that is no longer the case. Excellence in one area needs to be underpinned by an adequate level of quality across a broader spectrum too.

The greatest priority here, of course, is developing a true understanding of customers and their needs. Knowing what your most important customers want, and being able to adapt your proposition in line with that is crucial. While keeping pace with other retailers may be a priority, nothing matters more than finding out what your best customers care most about – and delivering on their expectations.

1 dunnhumby Consumer Pulse – September 2022
2 Comment Picard a bâti son nouveau programme de fidélité – Republik Retail, 10 June 2022
3 Avec Mix & Miam, Picard enrichit (encore) l’expérience clients – Le Monde du Surgelé, 20 December 2022
4 Malgré l'inflation, Picard reste optimiste pour les dépenses de ses clients à Noël – Le Figaro, 16 November 2022