Value innovation – making the discount channel work for brands
You have to hand it to the discounters. Once shunned by mainstream shoppers, the UK’s discount channel, led by the likes of Aldi and Lidl, now represents the biggest growth opportunity in the grocery market, accounting for one in every £8 spent on groceries. In Germany – whose discount channel leads the world – more than 40% of grocery shopping is now done at discounters, and the UK looks set to follow, with Aldi’s penetration overtaking that of Waitrose in 2017.
While the traditional grocery stalwarts are struggling, the discounters have gone from strength to strength. Their strategy? To spend big on advertising in all the right locations, aggressively targeting consumers’ weekly “big shop” with a clear message: breadth of range, consumer convenience and value for money.
All of this is fantastic news for the discounters themselves, but, given the brands they stock, it creates a challenge for higher-tier names.
Maintaining a presence on the shelves of the discounters means cutting prices and margins, or making some kind of compromise on the size or quality that the product offers. For many big names, this just isn’t sustainable – especially if the same brands are on sale for more elsewhere. This leads to trade strategy challenges, uncomfortable conversations with other retailers, and penetration losses as shoppers switch channels.
So how can big brands share in the success of the discounters without reducing margins, devaluing their own product ranges or jeopardising their relationships with other retailers? The Happen team have the answer: value innovation by consumer insight specialists, not accountants.
Our unique method ensures that your brand can make and sell products at a lower price while still pushing all the right buttons to win over consumers in the discount channel mindset – and remaining sufficiently differentiated from your existing higher-tier offering that you don’t risk cannibalising sales.
Our dedicated innovation methodology for the discount channel takes a similar approach, focusing on two key levers:
- Unlocking fresh insights into the discount consumer mindset to understand where they are willing to compromise in their product choice – the specific attributes they value most and least.
- Identifying how to deliver those product attributes at a price consumers want, while keeping within your current technical feasibility. To do this, we don our hi-vis vests and visit your plants and factories to see first-hand what you can produce, and at what cost.
By synthesising all this information, our unique approach enables brand owners to decode the essence of a successful new discount product.
One sector from which we’ve drawn inspiration for this is hotels. Brands such as Premier Inn and France’s HotelF1 keep costs low with smaller rooms and limited facilities. But they’ve realised there’s one area they can’t compromise on: a good night’s sleep. In other words, as long as the pillows and mattresses meet or exceed guests’ expectations, they don’t mind giving up the other frills.
Costly features that are not valued by discount shoppers go. Features that cost money, but are sufficiently valued, stay. The result? A brand new, bespoke product targeted squarely at the discount market, carefully honed to give the consumer maximum bang for their buck. All while protecting your margins and giving you a trade story you can defend.
In short, it’s a product that keeps everyone happy and drives incremental growth.
Want to know how you can maximise your product or brand within the discount channel? Get in touch with our Senior Agent, Charlotte Nicholson.