With so much disruption in the supermarket industry, it's easy to just focus on keeping pace with the competition. Yet a recent Fortune article on Costco reminded me of the benefits of focusing on your own brand instead.
Costco is driving growth through its ability to attract loyal customers. Its membership is at an all time high of 81m, with renewals running at an impressive 91%, despite its $55 fee. The same can be said for Amazon, where its Prime program, complete with $99 fee, is also driving growth through loyal customers.
Neither Membership nor Prime are the reason why these customers become loyal, although they certainly help. Both make shopping the brands easier (in Costco's case it's a necessity), and once customers have invested in the fees, they're much more likely to keep shopping with them.
Rather, these companies attract loyalty because they have built distinct and attractive brands:
1. It's clear what they stand for. In both cases, providing savings to customers through reducing costs. Their shopping trips, whether Costco's store or Amazon's website, then communicate this. Such brand clarity is also true of Aldi, Trader Joe's or Whole Foods.
2. They're storydoers, not storytellers. Rather than spending large sums on advertising to persuade customers of what they offer, they instead just demonstrate through their actions that they're on their customers’ side. The Costco rule of thumb is to give 80% to 90% of any savings back to customers, (and that's a quote from their CFO!), while Jeff Bezos is legendary for reinvesting in Amazon's customers. Similarly, Aldi, Trader Joe's or Whole Foods prioritize actions over advertising to tell their stories.
3. Their workforce is engaged in the brand. Costco famously have always paid well, and the commitment of their employees shines through instore. Amazon has built an enviable reputation for customer service, while Trader Joe's employees are walking manifestations of the brand.
Rather than being distracted by competition, these companies focus on developing and living their own distinct brands. And attracting loyal customers is the result.
So in facing up to the challenges of disruption, it's worth asking yourself: what makes our brand distinct?
A version of this post first appeared in Supermarket News