Loyalty Live: A Q&A with dunnhumby on Personalizing the Grocery Customer Experience

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In the highly competitive grocery industry, brands look for ways to stand out from the crowd and bring more value to consumers, especially in ways that do not always focus on discounts. As a result, the pursuit of personalization has become a pivotal strategy; however, this can be challenging for marketers as the definition of personalization can vary significantly from brand to brand and consumer to consumer.

To better understand the dimensions of personalization that are driving in-store traffic, increased basket sizes, and customer loyalty, the customer data science firm dunnhumby surveyed 10,000 shoppers to learn what constitutes a personalized shopping experience in the $1T U.S. grocery industry. By combining financial results with customer perception, the results confirmed three main factors — targeted savings, localized assortment, and a frictionless shopping experience — as the most important to consumers.

To learn more, Loyalty360 spoke with Vince Tirelli, Customer Strategy Manager at dunnhumby, about the significance of personalization for grocers, the industry’s top performers, and the personalization preferences that today’s consumers value most.

Can you tell us a little bit about yourself, your current role with dunnhumby, and your background?

Tirelli: I love food, and I'm passionate about strategy, so working in customer strategy for the grocery industry is a natural fit for me. Our Customer Strategy and Insights Team helps clients better align their customer value propositions with their customers’ needs. We also provide thought leadership to the grocery industry as a whole.

For those who may not be familiar, can you give us a brief overview of dunnhumby — what you do, how you do it, and the industries dunnhumby works with?  

Tirelli: We empower clients to leverage their customer data to optimize the shopping experience. Our philosophy is that everyone wins when retailers and brands focus on customers’ needs and preferences. We work with 80 retail clients globally and 1,300 brands in grocery and pharma. Currently, dunnhumby has about 1B customers under management.

Your team recently released a special edition of the dunnhumby Retailer Preference Index (RPI), which focuses on personalization and the U.S. grocery market. Could you tell us a bit about the report and how it came to be?

Tirelli: We compile the PRI every year to determine which elements of the customer value proposition are most important to driving growth. The RPI examines both financial data and qualitative measures like emotional connection and brand equity.

The seventh annual edition of the RPI, published in January 2023, showed a threefold increase in retailer outcomes driven by personalization levers. We expected the trend to continue and were curious to learn what personalization meant to customers — what made customers feel a retailer or a brand was made for them. We created the recent special edition to answer those questions.

The report discusses personalization with regard to price sensitivity. How are these factors related?

Tirelli: The main theme of personalization is delivering targeted savings, which accounts for 45% of personalization outcomes. Consumers are searching for lower prices, and our research indicates this will be the dominant consumer trend over the next 30 years. We call it fiscal conservatism or a general concern about saving money. Personalized offers have higher perceived value to the customer than generalized ones. Therefore, retailers who focus on personalized offers have a competitive advantage. They don’t have to compete on price alone to attract price-sensitive shoppers.

Your report indicates to compete, retailers must accept that the customer decides what personalization means to them, and not the grocer. Can you tell us more about this and what brands can do to ensure they are providing the expected personalized experience?

Tirelli: The secret to any long-lasting relationship is treating people how they want to be treated. We found the three biggest drivers of personalization are targeted savings, frictionless shopping experiences, and localized assortments. These features make customers feel a retailer or brand knows them personally. The key to personalization is a holistic strategy that balances these drivers.

Can you define localized assortments and frictionless shopping experiences? How are brands leveraging them to drive personalization?

Tirelli: A localized assortment is a variety of products from local farmers and businesses sufficient to meet customers’ needs combined with a close connection to the local community. Research shows that buying local goods gives consumers a sense of identity and place.

Retailers can facilitate frictionless shopping experiences by making relevant offers and recommendations, giving customers control over how they engage with the store, and providing service that makes customers feel valued.

In our survey of 10,000 U.S. grocery shoppers, H-E-B supermarkets ranked first in localized assortments and third in frictionless experiences. Customers expressed enthusiastic loyalty to the brand, as quoted in our report.

Amazon ranked first in the personalization in the RPI. How do you think being a digital retailer has impacted Amazon’s personalization efforts? Are digital retailers able to target customers better by utilizing data?

Tirelli: Amazon is peerless when it comes to frictionless experiences, which pushed it to the top of our list. Digital retailers rely more heavily on customer data than physical stores, and Amazon uses this data to create personalized shipping aids or tools that help customers make buying decisions. These tools include product recommendations, coupons, targeted ads, and social media messaging. Beyond those basics, Amazon has learned how to engage customers with relevant content in their preferred channels.

Seventy-eight percent of consumers still do all their grocery shopping in physical stores. Even so, their shopping journeys usually begin online on an app. Many brick-and-mortar clients have leveraged the digital space to optimize personalization.

How can grocery brands with retail media networks, such as Kroger and Giant Eagle, leverage customer data to make their loyalty programs more effective? What do you see working in the grocery industry?

Tirelli: Retail media can act as a feedback loop, enabling improvements in many areas of the business, including loyalty programs. Brands with a strong retail media presence also have some of the highest-rated loyalty programs. These brands use customer data from their media operations to further refine their personalization efforts. The knowledge gained from retail media can take personalization to a whole new level in the grocery industry.

What is one piece of advice you would give to brands seeking to enhance personalization in a loyalty program?

Tirelli: Brands should view personalization within the full context of the program or the “big picture.” This picture includes the basics, such as targeted savings and program execution. Another part is teamwork — allowing all areas of the business the opportunity to share data and participate in personalization. The third and most important part is a customer-first mindset throughout the organization. How to leverage data to improve the customer experience should be considered throughout the company.

What’s next for dunnhumby as we near the end of the year and move into 2024?  

Tirelli: Our next RPI report, coming in early January, will integrate customer segmentation in our analysis. For the first time, the report will rank company performance across multiple customer segments.

Quick-fire Questions:

What is your favorite word?

Surprise.

What is your least favorite word?

Boring.

What excites you?

Good stories.

What do you find tiresome?

Repetition.

What is your favorite grocery store item?

Nutella.

As a customer, what brand engages with you the best?