Cape Town - The picture for consumers is far from rosy. With political shenanigans bearing down heavily on our economy, South Africa’s not only achieved junk status, but MTN, Eskom, our major insurers and banks have been dragged down with it.
So when the latest South African Customer Satisfaction Index (SAcsi) for supermarkets arrived in my inbox last week, it yielded some surprising results, showing customers were largely satisfied.
Rather than shopping around for the best prices, the happiest customers were Woolworths shoppers.
Last month, Standard Bank economists Siphamandla Mkhwanazi and Kim Silberman released their own report, Consumer Trends: SA Consumer Chart Book Q4:16 - Q1:17. They expected food inflation to average at 6.9 percent this year, down from 10.8 percent from last year. “Food inflation has been sticky in recent months, with the fall in maize and wheat prices not being passed on to consumers as yet, despite weak demand. Moreover, given the impact of the drought on cattle herds, red meat prices could also be a little slower to adjust,” they noted.
“The MMI/BMR Consumer Financial Vulnerability Index (CFVI) for Q4:16 shows that consumers still feel financially vulnerable, although this is showing signs of improvement. According to the survey results, consumers spending more than what they earn, coupled with too much existing debt and poor financial planning, are the main reasons for the elevated consumer financial vulnerability levels.”
Consulta’s SAcsi study, which compared customer loyalty in 2015 and 2016, indicated that Woolies had a “substantially” higher score than the industry average of 76.2.
”Woolworths has the most satisfied customers with a score of 82.1 on the index and is the only supermarket with a marked increase compared to its 2015 average of 80.7. Checkers, with a score of 77.2, and Pick n Pay at 76.5 both remained above average while Shoprite and Spar had scores of 75.5 and 75.2 respectively.”
The study benchmarks customer satisfaction using an internationally recognised model, which looks at expectations and perceived quality and value. It provides a weighted statistical index score of various aspects of a customer’s experience with the brand, the degree to which the product or service has met - fallen short of, or exceeded their expectations - and how well it compares to the respondents’ anticipation of their experience.
“Scores for customer loyalty declined across all supermarket brands analysed in 2016 compared to scores in 2015 - from 76.4 in 2015 to 74.2 in 201.
“In tough economic times, the price of goods is likely to influence consumers’ loyalty even though they are satisfied customers,” says chief executive of Consulta, Professor Adré Schreuder. “But price-motivated ‘loyalty’ is not permanent so while customers may display less brand loyalty now, supermarkets cannot afford to stop investing in positive shopping experiences.”
Still, a little help goes a long way to entice customers.
For Pick n Pay, it entailed giving back to its loyal shoppers for its 50th anniversary. It recently cut the everyday prices of over 1 300 essential items, lowered fruit, vegetable and meat prices, and put over 1000 items on special.
Paula Disberry, group commercial executive of Pick * Pay, explained: “Today’s technology gives us tremendous insights into our customers’ shopping habits, needs and preferences. And we looked at research from thousands of customers across the board, and talked to families throughout the country. Our customers are clear: in tough times what they want most of all is value and low prices, and especially on fresh.”
I asked David North, group GM strategy and corporate affairs at PnP about how slashing prices would affect suppliers: “Our price commitment is not achieved by adding to pressure (on suppliers). It’s achieved by running a better and more efficient business. Our centralised supply chain enables us to be more cost-effective too, which gives us room to invest in customers.” Good to know.
The Concerta study puts the slight decline in loyalty down to customer demands.
“The 2016 industry average for customer expectation is 78.3. This number shows us the extent to which customers demand value from their preferred brands,” says Schreuder. “This is a tough position, as the brand must work extremely hard to maintain the standards it has established.”
A related study released at the end of last year, the Nielsen Global Retail Growth Strategy Report, showed that when selecting a supermarket, local consumers are highly influenced by convenience of location (71 percent), speed (61 percent), high-quality fresh produce (71 percent) and product availability (68 percent) more so than price (56 percent) and promotions (56 percent).
It stands to mind that when given the choice of waiting in a long queue to save a few rand or popping into a more convenient forecourt store to grab essentials, most consumers - if they can afford it - would opt for the latter.
Interestingly, the Nielson study found that if prices were to increase by 10 percent, South African respondents said they would “continue their current buying habits (same quantity at the higher price) for dairy (46 percent), meat and poultry (42 percent), bread and bakery (46 percent), fresh and frozen fruit and vegetables (39 percent) and personal care products (44 percent). However, consumers were prepared to cut back on or stop purchasing altogether on discretionary items such as alcohol (84 percent), prepared foods (87 percent), carbonated beverages (86 percent), crisps and snack foods (85 percent) and sweets and biscuits (88 percent).
“For the most part, however, consumers aren’t cutting out categories altogether. Rather, they’re simply buying less and it is clear that consumers do not want to compromise on quality, with only 5 percent of South African respondents saying they would sacrifice quality to keep the same price.”
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Customers seem to believe they receive great value from Woolworths, as is seen in its unmatched perceived quality score of 87 and perceived value score of 80.6, compared to the industry average of 80.3 and 76.5 respectively.
“Woolworths has succeeded in providing high-quality products, convenience and fast service while growing its footprint rapidly, including a growing presence in petrol station forecourts,” Schreuder adds, showing customers are willing to pay for quality products when they can afford to.
Supermarkets also continuously look for ways to diversify, with some offering premium products or fresh deli goods, while others introduce customer loyalty programmes and promotions. Some incorporate digital channels such as online shopping services.
“A shopping experience is determined by so many factors and supermarkets need to demonstrate their ability to meet their ever-changing customer needs, consistently and reliably,” says Schreuder.
Prof Schreuder, founder of Consulta, spearheaded the first SAcsi with the global licence partnership with the American Customer Satisfaction Index ACSI. The composition and international licence rules ensure the study’s independence. He is also an extraordinary professor at the University of Pretoria (in marketing).