Designing the Value Gap into your physical store experience.
With the uncertain days and weeks ahead, there is no doubt that people’s habits will change, and some of the short-term habits adopted will develop into long-term behaviours that will have a significant impact on retail and the expectations of physical stores.
Brands will need to work hard to understand the new priorities of consumers, as what they value changes, and what they need and want from their physical retail experiences shifts.
What is important to customers matters. If brands can fulfil the customer’s expectations and deliver the value that customers demand, then brands will continue to be successful. Those brands that exceed their customer’s expectations by delivering more value than expected will leave the customers with a huge feelgood factor. Getting value when it is unexpected builds unprecedented levels of loyalty, trust and brand advocacy. The physical store experience offers one of the best opportunities to design in and create that feeling for your customers.
What is a Value Gap?
All consumers desire great value, but value is a perception. It’s a feeling measured subjectively. However, what is recognisable to all consumers is experiencing great value unexpectedly; when they feel like they’ve won the lottery. At Quinine we call this the ‘Value Gap’.
The Value Gap is a feeling you have when you perceive that you have got more value than you expected from a transaction. It’s the gap between shoppers’ expectations and reality. This feeling is the Holy Grail of the Smart Shopper mindset.
A smart shopper is traditionally defined as a consumer that does a significant amount of research before making a purchase. In reality, this isn’t a special type of consumer. We are all smart shoppers. This behaviour is motivated by an innate human desire to obtain the best value possible. It transcends all shopper profiles and all price points, as a person buying a luxury car from a dealership wants value just like someone buying shampoo from a discount store.
Most would associate the Value Gap feeling with price -the feeling you get when you believe you've got greater value for your money than expected. This is intrinsically connected to price; however, the Value Gap can be achieved by using many more factors than just price itself.
The packaging and presentation of products illustrates how our perception of value extends beyond mere product and price. Let’s consider smartphone packaging. You’re a customer buying Apple’s latest iPhone. It’s a product at the luxury end of the market and you have high expectations. As you excitedly open your new device the packaging aligns with those high expectations, it may even slightly exceed them. Whatever your motivations to purchase at the luxury end of the market, you are satisfied as your expectations have been met; this is the best device from the best brand on the market.
Now let’s imagine you purchase a much cheaper alternative. It’s from an emerging brand on the market and you’ve read that they’re great value. Naturally, given the lower price-point, your expectations are not as high as they were when buying the Apple device. Nevertheless, as you open the box, the packaging surprisingly has the same high-quality finish and presentation as delivered by Apple. Your expectations have been blown away and you feel great about your purchase! This sense of delight is the Value Gap; that feeling you get at that moment when you believe you have got more than you paid for.
The Value Gap and the physical retail store
Retail transactions have evolved beyond the simple exchange of goods and services for money. A shopper’s ‘currency’ is no longer just about money. They now consider the amount of time, their level of engagement, trust and loyalty as a transaction. Furthermore, a retailer doesn’t just deal in products, they can also provide experiences. A shopper can enter a store and perceive the experience to hold great value and by doing so experience the Value Gap despite not purchasing a thing.
Just as described with packaging, the physical store experience can deliver value in so many ways. In visiting an Apple store, a shopper has the same high expectations of the retail experience that they have of the Apple device and packaging. Naturally, shoppers have lower expectations of the stores belonging to competing brands of lower market standing. This is where huge opportunities exist. Once a customer is inside the four walls of the physical store, a retailer has their greatest opportunity to create a Value Gap.
Designing the Value Gap
The key to designing the Value Gap into the physical retail experience is understanding who is coming into a retailer’s store and what expectations they bring with them. What is important to each of the shopper segments you are targeting and what drives their values? Once this is clear, look to understand the factors that can help realise these shopper expectations, as well as those that can also provide unexpected value.
Please scroll through the 15 ‘general’ factors below. We have identified both Business Factors and Store Factors that are mechanisms for creating the perception of great value. Driven by multiple variances (sector, size, customer base), the use and priority of these factors will vary for each retailer, and we recognise that some specialist retailers will have additional factors.
Not all Value Gaps are equal
Given that value is determined by a shopper’s own expectations, there is no one Value Gap that fits all and when a shopper has high expectations of one of these factors there is less opportunity to create a Value Gap around that factor.
A customer who has an existing relationship with a brand will have certain expectations of the store’s look and feel. If these expectations are high, then this would not be the best factor to create value around for that customer. It is when a customer has low expectations that there is a greater opportunity to create a Value Gap. For example, a customer shopping in a budget retailer might have low expectations of the customer service. In this scenario, they feel a sense of great value when quality customer service unexpectedly accompanies their transaction or in-store experience.
In order to maintain a customer loyalty and patronage a brand needs to firstly meet the expectations that align with what a customer values. A customer, who is constantly on the road, may choose their mobile provider because they are known for industry leading network coverage and reliability. These would be ‘established expectations’ and would be difficult avenues to create a sense of great value for the brand.
Designing a Value Gap requires a brand to provide experiences of importance to the customer that exceed their expectations. There is great opportunity in focusing on the in-store factors that the customer considers less important (values less) or may not even be consciously aware of. A customer may not value a highly efficient store journey until they’ve experienced it. Likewise, the benefits of integrating smartphone use into the store experience might not be valued until a customer has been shown the benefit. It may be a case of simply teaching customers how to apply technology that already sits in their pocket.
Some customers have higher expectations than others. Premium brands often have to deliver value on many factors to satisfy their customers. Their customers are required to invest more and subsequently want more in return. Yet some customers have lower expectations. For these customers brand satisfaction is concentrated into fewer factors. This is where great opportunity lies as customers with a smaller spectrum of brand expectations allow the greatest opportunity to design a Value Gap. A customer may be largely preoccupied with price and product selection. While these are non-negotiable there remain many other ways for a brand to provide value that wows their customers and far exceeds their competitors.
A blueprint for providing value
If you’re a retailer looking to improve your store experience, how is this important to you? This is a blueprint for providing valuable experiences for your customers. It’s an insight into the complexity of providing value for all of your customers by accounting for their different expectations.
Every store experience should strive to create a Value Gap for the customers that enter their store. Too often, retail’s solution to value perception is through price. Using the stores look and feel, materials and product presentation just scratches the surface of ways to provide value to customers within the walls of a retail store. We believe it is possible to design value into a retail experience, using the various value factors, to create multiple Value Gap moments on a pathway to purchase. When we stabilise into a new normal and customers reprioritise what’s important to them, the value spectrum will shift, and brands will need to realign the in-store experiences with the engagement that customers value the most.
What customers value from their physical retail experiences will surely be altered as we arrive on the other side of the pandemic into a new normal. Will there be more focus on human interactions, community and learning rather than price and convenience? We will need to wait and see, but today we can examine how we can enhance the customer value in those stores when they re-open to create experiences that exceed expectations and deliver valuable interactions that develop greater customer loyalty and brand advocacy.