Why Quality Remains a Revenue Growth Driver

There’s a lot of talk about price-sensitive shoppers in today’s inflationary environment, but a new study underscores the importance of quality in purchase decisions. According to new research from Symphony RetailAI, nearly two-thirds of grocery revenue growth stems from quality-minded shoppers.

Based on an analysis of 2.2 billion shopper transactions in the United States and Europe conducted between July 2020 and June 2021 (albeit before some of the recent price hikes), shoppers were nearly 1.5 times more likely to move up to quality-driven segments than down to price-focused segments. For those migrating more to quality items, their average unit spend increased by 9%; only 28% of that increase was attributed to inflation.

Delving into the catalysts for these behaviors and sentiments, Symphony RetailAI’s researchers found that consumers are willing to buy high quality, premium products based on factors like a desire for healthier choices or simply the exact mix of products the retailer and CPG chose to offer on the shelf.

The study also revealed areas of opportunities for grocers. High-potential categories for quality-focused shoppers include baby, soda, juice and spirits, while meat and poultry, baking goods, canned goods and soups present opportunities for price-conscious buyers.  

“It’s critical for grocers today to know precisely which customer segment is driving performance, and that requires a customer-centric approach to the business,” explained Chris Koziol, CEO of Dallas-based Symphony RetailAI. “Retailers need the ability to segment customers to understand their behavior in relation to price, determining how the distribution of quality-focused or price-focused customers fluctuates over time. It’s not static; it’s a continuum – a more price-sensitive customer may move toward quality for a particular category or product. When grocers have a better understanding of consumers’ motivations, they can optimize their assortments and re-balance corresponding price and promotional strategies to be sure they see valuable return on those investments for their business.”