European Retail Digest
Shopper Loyalty and Store Choice: Insights from a study of Norwegian
supermarkets
By Dr. Ole Bjørn Landsverk, Consultant, Norway Group, Oslo, Norway, Professor David Hughes,
Professor of Food Marketing, Imperial College, University of London & Dr. Andrew Fearne, Director,
Centre for Food Chain Research, Department of Agricultural Science, Imperial College at Wye, UK
This article explores two key questions: what are
the key drivers of store choice amongst food
shoppers and how can supermarkets build strong
and lasting loyalty amongst their customers?1 The
authors propose a model of store choice behaviour
and present some empirical evidence to support
the model from Norway, where food retailing is
amongst the most highly concentrated in Europe
and where the traditional ‘soft discounters’ are
becoming increasingly attracted to ‘hard
discounting’, in which the clear brand values are
attractive to price-sensitive shoppers. The results
indicate that those supermarkets who wish to
resist competing purely on price can build
customer loyalty, in the face of fierce price
competition, by identifying customer segments
with distinct preferences in terms of service,
value, convenience and choice, and exceeding
customer expectations in the delivery of these
attributes within differentiated retail formats.
Introduction
Supermarkets are in the business of building
lasting relationships with their customers because
the best foundation for growth and profitability is
to have a substantial base of loyal customers. But
what makes a shopper loyal to a particular
supermarket? What are the key drivers behind
store choice and how might these vary between
shoppers across different retail formats? This
article seeks to shed some light on these questions
through an empirical study of Norwegian
supermarkets, where traditional ‘soft discounters’
are turning to shopper loyalty as a source of
sustainable competitive advantage in the face of
growing pressure from ‘hard discounters’ where
1
. The authors wish to acknowledge the generous support for
this study received from the Norway Group
price is assumed to be the dominant, if not the
sole determinant of store choice and for whom
promiscuous food shoppers represent an attractive
target market – significant in number and easy to
entice with an aggressive value proposition.
The article is split into four parts. First, we present
an overview of the Norwegian food retail sector to
establish the context in which the study was
undertaken. This is followed by a brief review of
previous research on store choice behaviour and
shopper loyalty. Empirical results from the
Norwegian study are presented in section three
and we conclude with some thoughts on the
implications of the findings for retail strategy and
areas for further research.
Norwegian Food Retail Sector
The structure of the Norwegian retail food sector
is summarised in Figure 1. Currently worth around
EUR12 billion and servicing the needs of 4.5
million consumers, the food retail sector in
Norway is small relative to its immediate
Scandinavian neighbours and significantly smaller
than the major food retail sectors within the EU
(Table 1) .
Figure 1 | Scandinavian Food Retail
Source: Nielsen Nordic Market Monitor
Notes: Scandinavian market: 100% = EUR59 billion
Norwegian market: 100% = EUR11.7 billion
1
Issue 38 | European Regional Review
Table 1 | Market Share (%) of Formats in Europe
Source: AC Nielsen Nordic Market Monitor
Despite its small size, the Norwegian food retail
sector has many features in common with food
retailing across Europe. Most notable amongst
these are: slow overall market growth, a high level
of concentration (the top four chains account for
99% of the food retail market) and a significant
shift in recent years towards price-based
competition, with the changes in market shares
(Table 2) largely reflecting the promiscuity of
Norwegian shoppers and the convergence of retail
formats, leaving price as a major differentiating
factor influencing store choice. The Norwegian
food retail sector is dominated by soft discounters,
whose market share has grown from 18% in 1989
to over 52% in 2002. In recent years the difference
between the soft discount stores and the (small to
medium sized) supermarkets has diminished, to
the detriment of the former, who have lost market
share to the big supermarkets over the last two
years.
The Norway Group (NG) is the largest food
retailer in Norway and its record in recent years
has been impressive. In the face of growing
competitive pressure and the threat of entry from
Lidl (expected by the end of 2003), NG has
resisted the European trend towards hard
discounting and has opted for a differentiated
strategy based on their specialty; premium and
2
fresh food products. This was a departure from the
established soft discount offering and one not
without risk, given the lack of experience amongst
Norwegian retailers in effectively differentiating
store formats. However, NG recognised this gap in
the market and has moved swiftly in recent years
to establish a new trend within Norway, with
much greater emphasis on building shopper loyalty
and reducing dependence on pure price-based
competition.
Opportunities abound: The market share of private
label products is increasing but still under 10%
and dominated by, at best, average quality
substitutes for the leading brands. In addition, the
fresh food sector has been dominated by farmer-
owned co-operatives with little awareness of
differentiation and the scope for added value in
this sector. Thus, fresh produce is heavily
discounted and almost completely commoditised,
leaving plenty of scope for retailers with vision and
strong, strategic links with their supply base to
develop this market in support of a store branding
strategy akin to that adopted by Tesco and
Sainsbury’s in the UK. The lower levels of
population density in Norway make it more
difficult for the hypermarkets to become
established and facilitate a strategy based around
geographical segmentation of the market. Yet this
is likely to change, as the population continue to
migrate South around the Oslo area and lifestyles
change accordingly: It is predicted that by 2010
half of the population in Norway will be living
within a 250 Km radius of Oslo, one of Europe’s
most modern cities, with the smallest sized
families (1.5 members per family) and the highest
number of one person households.
Table 2 | Retail Formats and Market Shares within Norway (1997-2002)
Source: AC Nielsen Nordic Market Monitor
NG recognised the need for change several years
ago and embarked on a strategy designed to build
a solid base of loyal shoppers and attract new
shoppers from the competition – soft discounters
offering nothing special, indeed nothing other
than cheap products. The remaining parts of this
article looks at the theory behind their strategy
and provides some empirical evidence behind its
apparent success.
Theoretical Insights into Store Choice
Behaviour and Shopper Loyalty
The retail brand is a complex concept, comprising
multiple attributes that mean different things to
different people at different times and shopping
occasions. The store choice literature suggests
there are seven key elements in the retail brand
(Aaker, 1996, Corstjens, 1995, Foxall et al,1994,
Koskinen, 1999):
- the physical store (store design: furniture,
shelves, light and colours, store layout);
- service products (people, their skills, the
innovation culture, their friendliness, the
atmosphere, service standards of the store);
- fresh food concepts/products (bread/bakery,
meat, deli, prepared foods/meal solutions and
fruit/vegetable);
- own label products (range/quality/price) and
their perceived role within the store offer;
- communication (in-store mechanical
communication, promotional activities, mass
communication, data mining and database
marketing)
- price positioning and quality standards in
different product areas;
- access attributes (distance to the store, traffic,
parking, etc)
Retail is detail; indeed, it is an obsession with
details! In many cases, unplanned details in the
stores (e.g. ‘wrong’ people, out of stock items,
queues at checkouts) are more important to the
customer than the planned store concept
developed by senior management. Wileman & Jary
(1997) argue that both senior management at
headquarters and the operational staff require an
understanding of and the capacity to manage
details in-depth. The implication is that building
retail brands is a combination of implementing
planned store concepts and the every day
management of products, people and their
interaction with customers. Thus, everybody in
the retail organisation has to understand and live
out the core brand values(Gilmore, 1999).
Clearly, the retail strategist must identify what
kind of relationship the shopper wants with a
store. A ‘hard discount’ store will have a ‘weak’
relationship with the shopper based on mainly
“value for money” benefits. A big, fresh food
oriented supermarket may have a ‘richer’
relationship, reflecting benefits such as friendly
atmosphere, strong local connection to the
community, helping shoppers with meal solutions,
providing excitement and new experiences etc.
Therefore , the relationships between the store
brand and the shopper should be carefully
designed according to the benefits the store brand
wants to deliver to their customers. This is not a
simple task, not least because store choice
determinants are highly contextual, varying
considerably both between store concepts,
between regional, national and international
markets and over time (McGoldrick,1990).
Our review of the research on store choice
behaviour, in search of a conceptual model with
the potential for practical application in the
Norwegian context, led us through involvement
theory and multi-attribute models to expectancy
theory, which Porter et al (1975) classify as “
process theory, in contrast to a content theory,
primarily because it attempts to identify
relationships between variables in a dynamic state
as they affect individual behaviour”.
Of the many expectancy theory-based models that
we found, most are used almost exclusively to
explain motivation in routine job contexts.
Researchers have found a causal relationship
between effort, performance and outcome, which
can be strengthened or weakened by different
factors. The theory assumes that the higher the E-
>P expectancy (effort leads to performance) and
the more closely performance is seen to be related
to positively outcomes (P->O expectancy), the
greater will be the motivation. In addition, some
factors will have a greater impact on motivation
than others, so the different combinations of effort,
performance and outcome need to be weighted.
The general idea is that both E->P and P->O and
their respective weights must have high values for
a strong motivational drive to occur, which means
that
- if the E->P is low (high effort does not lead to
high performance)
- or if the P->O is low (high performance does not
lead to high outcome)
- or, if the outcomes are lowly valued (or even
negative), then, the motivational force will
disappear.
In the context of store choice behaviour there are
many similar aspects between the job motivation
expectancy model and the choice of mainstream
grocery stores for main/weekly shopping. Consider
these three aspects:
Objectivity
Through a series of experiences we form attitudes
very close to the ‘objective’ situation by measuring
the performance of the stores on their objective
attribute values. Learning forms the basis for
attitudes, based on experimental behaviour. The
shopper repeats the shopping experience as much
as 100 times a year in their primary grocery store.
As a result, it is no surprise that the shopper
knows the store, staff and services intimately. The
parallel to the work situation is interesting. We
talk about ‘routine work tasks’ but we could just as
easily talk about routine grocery purchases. Non-
routine work tasks are associated with different
motives, just as non-routine food purchases are
invariably influenced by different motives –
contrast shopping for the dinner party with the
routine re-stocking of staple foods.
Situational variables
In job situations, we carefully consider situational
variables in forming expectancies: factors such as
complexity and difficulty of task, organisational
climate (support from work mates, managerial
style) influence future expectancies heavily. So
also in shopping, we have quite objective pictures
of the store, the atmosphere and the support from
the store people, all based on previous shopping
experiences. We react negatively to stores with
unpredictable performances and shopping
complexity (queues in the checkouts and heavy
traffic for example). This is a good lesson for the
people designing store concepts.
Risk reduction strategies
Any unexpected variation in store performances,
such as a ‘bad day in the fresh food department’
and ‘out-of-stock on critical/advertised products’,
when they occur, will influence attitudes deeply
and weaken future expectancies. It is expected
that stores with moderate but highly predictable
and stable performances, will score higher on
future expectancies. The McDonald brand is a
good example of this – it delivers the brand
promise, no surprises!
This is a critical part of the shopping process:
Consumers hate insecurity and the unpredictable
and we love to be positively surprised and even
delighted (Bowen et al,1999). Expectancy theory
states that we react subjectively (not objectively)
to insecurity. Typically, we overstate any risk of
being disappointed if we get experiences of deep
dissatisfactions. It is critical to keep the brand
promise and it is much better to promise less but
to give your customers a trustworthy promise they
can expect you to keep. If we are faced with
problems, they are easy to handle if we expect
them to be much more difficult than they are in
reality. We are positively surprised. However, if we
expect to get a good experience, like good service
in the fresh food department, but get
disappointments and even a negative response
from the store staff, the impact on our future
expectations can be dramatic. It is akin to a friend
betraying us. Lindgreen (2000) suggests that some
brand owners “manage customer expectations
downward so that customer expectations can be
exceeded…”. This is what the Norwegian
discounter REMA is doing when they only
promise low prices and ‘warn’ the shopper that the
store has very limited service. But the shoppers
actual experience is that REMA stores offer fairly
good service, relative to the competitors.
In the context of this study, expectancy theory
would suggest that in selecting among grocery
stores in a local market, shoppers evaluate
competing stores on the basis of key attributes
(such as fresh foods, range, store layout/design,
own-label products, service, location/
convenience, and price image), the importance of
which will differ by store and by type of shopper.
The hypothesis is that the shopper then selects a
store for main shopping on the basis of a
summation of the store’s score on each attribute
multiplied by their relative importance to the
shopper.
Empirical Insights
The results reported here are drawn from the first
of two major pieces of market research undertaken
by the SPAR/EUROSPAR group in Norway, in
support of the strategic decision to compete (more
effectively) on the basis of a differentiation offer to
Norwegian food shoppers – a strategy that appears
to have served them well thus far.
The study was undertaken in two stages:
qualitative and quantitative. Initially, in the first
quarter of 2000, eight focus groups were
conducted across Norway in order to identify the
most relevant store attributes and gain insights to
their relative importance. The second stage
comprised a survey of 62,500 shoppers in 125
stores from the SPAR/EUROSPAR Group.
Questionnaires were distributed by hand within
the stores, completed at home and returned by
mail. In total, 21,048 usable questionnaires were
completed, representing a response rate of one in
three.
Table 3 shows the sample profile in terms of where
respondents do their primary food shopping. In the
sample, 75% are primary (loyal) SPAR/
EUROSPAR shoppers, the remaining 25% being
occasional (less loyal) patrons of these stores.
Table 3 | Sample of Shoppers
To test the hypothesis that a shopper selects a
store for main shopping on the basis of a
summation of the store’s score on each attribute
multiplied by their relative importance to the
shopper we selected the most important attributes
according to the rankings from the questionnaires
(respondents were asked to rank the attributes
from 1 to 10).The attribute scores (performance of
stores on each attribute, on a scale of 1 to 6) were
calculated based on 40 questions covering various
aspects of the core attributes identified in stage 1.
The model and the respective expectancy values
were calculated for every individual shopper in the
sample. Average scores were calculated for SPAR
main shoppers and other shopper groups sorted by
their preferred primary store. The results are
presented in Table 4.
A number of points emerge from this preliminary
analysis:
- Overall, SPAR primary shoppers gave SPAR
higher expectancy values compared to shoppers
using other stores for primary shopping.
- SPAR is ranked fifth in terms of price
expectancy, narrowly beaten by its majpr
competitor, REMA, but achieves substantially
higher scores for the other key attributes
- SPAR was clearly rated worst in terms of its
prices (2.66) but its expectancy score amongst
the primary SPAR shoppers (22.5) is only
slightly below the competition because SPAR
primary shoppers ranked price as being of
significantly lesser importance (8.21) than those
surveyed who shop primarily elsewhere. This
means that ‘loyal’ SPAR shoppers are less likely
to be disappointed by SPAR prices than those
who shop at SPAR less frequently, whose price
expectations are based on their experiences
from their primary store
Conclusions
These results providing support for SPAR’s
differentiation strategy away from pure price-based
competition and indicate that SPAR primary
shoppers choose SPAR because they are generally
satisfied with the performance of the store, and,
more particularly, because their priorities and
expectations differ significantly and are more
favourable than those of other stores and their
primary shoppers.
In the context of competitive strategy and store
choice within Norway, one might also conclude
that if one segment of shoppers focuses on one
dominant attribute, they are likely to be very
difficult to move or to attract if their own store is
well-positioned on that attribute. For REMA
shoppers, this means that the most obsessive
Table 4 | Attribute Scores and Expectancies Given to SPAR Stores.
‘price shoppers’ are almost impossible to attract by
a competitive supermarket unless, of course, one
can establish and communicate unequivocally that
REMA has been ‘taken on and beaten’ on price. In
addition, the less the dominance of one (or two)
attribute among shoppers, the more attractive
these shopper are for competing stores to target.
Further research will need to focus on individual
attributes in greater detail. For example, whilst
there is significant variation in the importance
rankings and performance ratings between stores
and their respective customers, supporting the
hypothesis that different people seek (and expect)
different things from different stores, there is also
likely to be significant variation within stores,
particularly in the case of SPAR, which is
developing a wider range of products, services and
retail formats to appeal to a broad cross-section of
the market. Effective targeting of distinct shopper
segments with a differentiated retail offer is
particularly difficult, particularly in a market
where the shopper is notoriously promiscuous. A
more detailed understanding of how different
shoppers rank and rate specific store attributes
should assist this process.
In this study the focus has been on the strategic
attributes (price, range/quality of fresh foods,
service, location and offers). For some segments of
shoppers, store choice may be determined by a
subset of these (e.g. price and location) whilst
others attributes (e.g. range of non-food items, dry
food and hygiene standards) are considered of
lesser importance and are likely to have limited
impact on store choice. These latter attributes may
be regarded as dissatisfaction factors in that they
do not motivate the shopper to come to the store
but to leave the store if the attribute scores fall
below certain minimum threshold levels. These
may also differ between stores. Thus, for example,
price may be strategic for REMA shoppers and
may be considered a dissatisfaction factor for some
segments of SPAR/ MENY shoppers. Future
research should establish whether the individual
dissatisfaction factors have different threshold
values and ‘zones of indifference’.
This research is about the mainstream grocery
sector but the approach can be easily adapted to
other store concepts. Therefore, the authors see
the potential for further developments in the
research area:
– measuring positioning on strategic attributes
among store brands in a local market;
– measuring and describing groups of shoppers
who are in a ‘high risk group’ for changing
stores; and
– analysing the consequences of any change in
retail strategy through running appropriate
simulation models.
Finally, a word of caution. Previous research (e.g.
Howell, 1981) has indicated that in consumer
research of this kind “… subjects have been found
to overstate (when compared with regression
derived estimates) the importance attached to
minor dimensions and understate the importance
attached to a few major dimensions…” Thus, the
formulation of questions and execution of the
survey is critical as shoppers, in practice, may limit
the time they give to complex attribute evaluations.
They may seek to shorten the evaluation process
and ‘sum up’ individual attribute values into
composite values such as price, fresh foods, range,
location/convenience and service for the different
stores in their ‘choice set’. The rigorous discussion
about attribute values and their importance is not
simply an academic research problem, it is a highly
critical issue for retail management. In fact, a weak,
or worse, a totally wrong conception of attributes
and their importance can lead to inappropriate
focus on important brand identities, value
propositions and positioning strategies among retail
management.

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