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Lidl’s U.S. expansion | A case study in changing market dynamics

Peter Berger | Jan 25, 2018 Peter Berger 01/25/18

For even the most well established brands, a new concept breaking into your market can be a challenge. Today’s consumers like to have options and can be easily tempted by the newest, shiniest brand on the block—especially if it saves them money, provides high-quality products, or offers a unique service. Such is the case with Lidl, the German-based grocery giant that began expanding into select U.S. markets in June 2017. With everyone in the grocery industry anxious to see how the new concept fares, we used our market intelligence tool BrandGeek® to see what’s in store and how established brands can prepare.


To beat the competition, you have to know what you’re up against

The first step in standing your ground is getting an accurate read on who’s encroaching. While most brands have systems in place to measure their own performance, competitive intel may depend on publicly available information or one-off brand tracker studies. With BrandGeek’s unique combination of behavioral data and customer feedback from visit-detected surveys, we’re able to get a real-time read on consumer perception, shifts in shopping behaviors, and competitive visit share.

Lidl-Blog_2

For Lidl, visit share started off strong in the first three months before falling off in mid-October. To see if any one brand was particularly vulnerable, we analyzed the data with 11 competitors and discovered Lidl was capturing visits evenly across the competitive set. Also noteworthy: Lidl was over-indexing considerably on trips motivated by advertising, and 16% of its visits came from one-and-done customers who have yet to return. For brands worried about losing customers, having that respondent-level information can be the difference between just assessing a threat and actually building a data-driven defense strategy.


Listen to your customers if you want their loyalty

Knowing what matters most to your customers—and how you compare to the competition on those measures—is key to finding defensible points of difference and achieving sustainable success. By using BrandGeek to look at Lidl’s CX scores for the first 6 months in the U.S., we were able to identify the brand was under-performing in Availability of Merchandise compared to competitors. This had a direct impact on Lidl’s Overall Satisfaction and Likelihood to Recommend scores.

While they’ve since rebounded on all of those measures, identifying those gaps in the customer experience can be instrumental in helping brands craft their positioning strategies. When you’re able to look at specific key measures and link them to visit share trends, you get a clearer path to insight on which areas need your attention and which improvements will have the biggest impact.


For agile brands, changing market dynamics can be a competitive advantage

Being fluid and poised for change is vital to keep your edge in the ever-evolving world of retail. Several brands in Lidl’s market successfully prepped for Lidl’s arrival by lowering their own prices in order to compete with the brand’s value-based model. But that isn’t going to be enough.

 

Lidl’s small-store format means lower overhead costs, and its more scaled-back service (customers bag their own groceries) translates to reduced labor costs. They also stock their shelves with a limited selection of carefully curated private label products, allowing for more flexibility on discount pricing and merchandising strategies. While it may be difficult for traditional grocery retailers to compete with that kind of agility, getting to insights quickly is critical to making the right pivots at the right times.


Bottom line:

Between Amazon’s ever-expanding quest for world domination, emerging threats like subscription services, and new competitors in an increasingly global market, customer loyalty has never been more up for grabs. Winning with today’s customers requires collecting consistent feedback and being flexible enough to adapt to changing expectations. Brands that can use real-time insights to adapt to disruptive forces as they happen will be the ones that ultimately set the pace as others struggle to keep up.  

For more on BrandGeek and our Lidl research, check out our case study: 6 months in, location analytics shed light on Lidl’s U.S. expansion.

Peter Berger
VP, Customer Engagement