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IBM Survey Finds Grocery Industry Falls Short in Building Loyalty With Customers

Report Recommends Grocers "Get to Know" Customers Better

ARMONK, NY - 05 Nov 2007: In a new IBM (NYSE: IBM) survey, consumers revealed widespread dissatisfaction with their primary grocer. IBM's research found 73 percent of the 6,000 consumers in the United States surveyed feel either antagonistic towards or have no loyalty to their local supermarket. The study also reveals that this dissatisfaction is creating legions of disloyal customers sharing their negative experiences and shopping around for a better alternative.

This overwhelming dissatisfaction is directly impacting the choices consumers make. Only 27 percent of grocery customers are acting as "advocates." These shoppers are loyal customers who recommend their grocer to others, buy more from their grocer and stay with their grocer instead of going to the competition. IBM's analysis reveals these advocates place a high value on quality, selection, employees, product availability and the emerging category of social responsibility.

According to the IBM study, almost half (46 percent) of consumers were identified in the survey as "antagonists." These customers have a poor attitude towards their grocer and may be actively causing damage to the business' reputation through their vocal displeasure. These antagonists, according to IBM's analysis, place a high value on the same attributes advocates do but feel their primary grocer falls short in delivering on them.

"Clearly the customer loyalty card efforts across the grocery industry have fallen short of their goals as grocers sacrifice customer experience to focus on lower prices," said Fred Balboni, IBM Global Retail Industry Leader, IBM Global Business Services. "Building differentiation with today's savvy and vocal consumer requires a whole new approach for businesses. Grocers that emphasize using deep customer insights throughout their business operations, applying them in a personalized and tailored way, will build strong advocates and loyal customers."

These survey results are part of a new study, available today from the IBM Institute for Business Value, titled, "Why Advocacy Matter to Grocers." The study analyzes the factors driving customer advocacy and recommends grocers place a greater emphasis on understanding and catering to their most loyal customers.

"The IBM survey results indicate that traditional grocery retailers are facing a whole new set of challenges brought on by today's sophisticated shoppers," said Raymond R. Burke, E.W Kelley Professor of Business Administration, Kelley School of Business, Indiana University. "Grocers need to improve their ability to sense and respond to the needs of individual customers. This requires capturing customer feedback, putting an emphasis on personalized messages and promotions and training associates to focus on building stronger relationships with customers."

IBM's analysis points to specialty stores' focus on customer service and product selection, and quality giving it the edge over other grocers. The survey found that 46 percent of customers who shop at these stores act as advocates. "Specialty stores fine-tune their operations to the specific needs of the community, offer local assortments and are better equipped to develop truly personal relationship," said IBM's Balboni.

IBM works with the grocery industry providing market leading point-of-sale and self-service technologies. The company also provides consulting, software and information technology services to clients. Together with its extensive network of Business Partners, IBM is focused on helping grocery clients better understand their customers through the use of sophisticated software technology and consultative services.

As part of its ongoing consumer research efforts, IBM is making the full report "Why Advocacy Matter to Grocers" available to customers at the following website: www.ibm.com/IIBV.

IBM Survey Methodology
The online survey conducted by Zoomerang was fielded among a representative sample of 6,000 adult Americans in the first quarter of 2007. The results can be considered statistically significant at the 95% confidence level and have a margin of error of +/- 1.16%.

About IBM
www.ibm.com/retail

Contact(s) information

Michael Rowinski
IBM Media Relations
917-472-3324
rowinski@us.ibm.com

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