The impact of digitization on the customer journey in food retail

(1)

THE CUSTOMER JOURNEY IN FOOD

RETAIL

Amsterdam Business School

MSc.Business Administration – Marketing track

Author

Student number Nicky de Lange 10495274 22

th _{of June (Final)}

Drs. F.W.J. Quix

Date Supervisor

(2)

contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

(3)

3 Preface

About half a year ago, my dive into the world of retail started. To be honest, I didn’t even know what the exact definition of retail was. Well, that certainly changed.

I was glad to hear that I could study a subject I love the most, food. Not to forget, grocery shopping itself. I often find myself wondering through the aisles of the Dirk, just looking around, and now I had a legit reason to do so, named my thesis. Over the last couple of months my knowledge on retail grew exponentially, I even found myself drawing the customer journey in my head while shopping with friends. Besides sitting in front of my laptop, searching for articles about the customer journey and reading about the latest innovations, I also conducted some ‘real’ field research. I remember myself standing in front of the Dirk, all by myself, while people that were passing by did not try to make eye contact. Luckily, in the end, many were willing to talk and I had some great conversations, providing me with valuable insights. But also many of them emphasizing that everything was fine the way it was. Well, after my thesis I know one thing for sure, in food retail, change will come.

Furthermore, I would like to express my gratitude to my supervisor, Frank. Without his help I would never got the opportunity to get into contact with the directors of the supermarkets I conducted my interviews with and I would not have learned this much. Even though the process of writing a thesis for Frank was not always easy, it helped me to think further than writing an academic study only. It helped me to go beyond statistics, and think about what retailers could learn from my study, using the strengths of both worlds.

Finally, I would like to thank my family, friends and roommates. Without them, all the coffee breaks (+KitKats), lunches and sometimes even dinners, I would never made it this far. But for now I would say: 'Let's graduate and go for a beer!"

(4)

4 Abstract

Today, making use of digitization is critical for organizations. However, it is the customer that has to adapt to it, and it is their opinion that counts. This study investigates the impact of newly developed digitizations on the customer journey in the grocery sector, taking a customer-centric perspective. This study argues that digitizations that are able to solve a customer’s problem can improve the experience of particular touch points in the customer journey, resulting in a more pleasant total customer journey. The customer journey was analyzed by measuring the impact on the purchase intention, the Net Promotor Score and the Net Loyalty Score. Moreover, the moderation of several customer perceptions was also taken into account. First-hand data was collected through an online questionnaire. The results show that, according to the customers, AmazonGo should be able to improve the customer journey most, followed by, KrogerEdge, voice recorded shopping and online grocery shopping. Also, customers that thought a digitization would be easy to use were more likely to buy. At last, age played an important role in the opinion about digitizations. Customers in the younger age group were much more likely to purchase, recommend and return to a grocery store implementing newly developed digitizations than customers from the older age group.

Keywords: customer journey, grocery sector, digitization, NPS, NLS, performance

(5)

5

Introduction

“What will shopping be like in 10 years? No one knows all the details (that’s exciting!), but one thing is for sure: it will be very different than it is today.” Doug McMillon, CEO

Walmart

This was the title of a blogpost from the CEO of Walmart (biggest American grocery chain) Doug McMillon January last year, in which he talks about the food retail market which is going to change tremendously the upcoming years (McMillon, 2017). One of the things he explains is that customer satisfaction has always been the number one priority for grocery stores. However, customers nowadays have become more demanding and they have greater power driving the change the way they want. Consequently, grocery stores have to keep innovating to retain their customers. Improvements such as self-checkout services, personalized loyalty programs and home delivery are just some examples that will increase the satisfaction of customers but also change the way customers do groceries now and in the future (Inman & Nikolova, 2017).

The continuous advances in digitization enable the retail environment to digitize further and further. More specifically, the evolvement of interactive media made selling to customers really complex (Juaneda-Ayensa, Mosquera, & Murillo, 2016). New channels, such as mobile and social media are integrated in the online and offline world of retailing. The retail landscape is evolving, which leads to great changes in the behavior of customers (Verhoef, Kannan & Inman, 2015). Not only the behavior of customers is changing; the entire path to purchase is changing. Also, since customer journeys became more and more complex, customers often encounter fragmented and frustrating experiences that result in low customer satisfaction and eventually lost revenues (Meyer & Schwager, 2007). Furthermore, McKinsey (2018) stated that to optimize the customer journey, organizations need to know what the most significant pain points are to be able to prioritize these and increase the value to the customer.

(8)

8

The customer journey can be explained as all moments a customer encounters during their pre-purchase, purchase and post-purchase phase related to the product or service (Verhoef et al., 2015). The channels used during this customer journey become blurred now online and offline channels are blending together (Verhoef et al., 2015). This causes organizations to move to an omnichannel approach which means that the design, coordination and evaluation of channels is done in such a way that all channels can interchangeably and seamlessly be used. Customers will not experience the difference between channels anymore and will think in brand contact instead of think in channels (Quix, 2016).

1.1 Research Gap

Even though extensive research has been done on the topic of the customer journey, many look at it from the perspective of the organization (Lemon & Verhoef, 2016; Norton & Pine, 2013; Stein & Ramaseshan, 2016; Verhoef et al., 2015). However, it is the customer that has to adapt to the changes and it is their perception that counts (McMillon, 2017). This study will take a customer perspective. Existing research suggests that digitization that can solve the main frustrations in the customer journey will add value (Lemon & Verhoef, 2016; McKinsey, 2018; McMillon, 2017). Moreover, digitizations that customers see as a negative development will not increase the sales of the organization. On the contrary, it can cause customers to switch to the competitor leading to loss of sales (Inman & Nikolova, 2017). While several theoretical studies looked into the impact of digitizations on the customer journey, empirical studies remain rare (Lemon & Verhoef, 2016). Finally, since technological advances are occurring in increasingly rapid succession, it is important to keep investigating the impact of new digitizations hitting the market (Rabobank, 2018).

For the above mentioned reasons, this study will investigate,from a customer-centric perspective, whether newly developed digitizations can improve the experience of particular touch points in the customer journey, resulting is a more pleasant total customer journey.

(9)

9 1.2 Research Question

To the best of my knowledge, this study is the first to systematically examine the reaction of the customer to different kinds of digitizations, within the grocery sector, taking into account the moderating role of several customer perceptions. Resulting in the following research question:

‘What is the impact of digitization of touch points in the customer journey on customer’s purchase intention within the grocery industry?

Will the implementation impact the NPS and NLS? And how is this relationship moderated by customer perceptions of performance expectancy, privacy concerns,

effort expectancy and personal innovativeness?’

1.3 Outline

This study is structured as follows. It will begin by reviewing current literature about the customer journey and the change due to digitization, thereafter this study will provide supporting literature about the variables and present the conceptual model. In the next section the method will be explained as well as the insights of the customer and retailer interviews, followed by the analysis of the findings of this study. In the final part a discussion of the theoretical and managerial implications is provided, along with the limitations of this study and suggestions for further research. Finally finishing up with a summary of the findings.

(10)

10

Literature review

2.1.1 The digital era in retail

To introduce the subject of digitization in retail, this study would like to start with an article that describes the digitations of retail in a general sense. This illustration will help to understand the broader context of the subject. Where most studies look into one small subject in great detail, Hagberg, Sundstrom and Egels-Zandén (2016) looked at the transformations of digitization in retail more generally by discussing the changes in the retailer-customer relationship. The authors distinguish four different changed elements. The first element they discuss is exchanges, this element explains the changes in communication channels, transactions and new ways of distribution due to digitization. The exchange of information changes because more channels are used to collect information, new channels appear, and customers do not only receive information from the organization but also from third parties. This increases the transparency in the information exchange. Furthermore, new forms of distribution appear as with mobile phones and new solutions for delivery services arise that enable customers to become part of the co-creation process.

Secondly, the authors argue digitization of actors, this means that there is an increase in the intermixing of humans and digitizations. New forms of connection between humans and digitizations ask for a reconsideration of this relationship. Digitizations can often be seen as a part of the extended self (i.e. wristwatch, smartphone). Not only does this change the individual but also the relationship between the retailer and the customer, namely customers can become co-creators and co-producers.

Furthermore digitization changes the retailing settings. In the past there were fixed settings such as the customer’s home and the store. Nowadays however, time and place are not fixed anymore especially with the introduction of smartphones. Online shops are available 24/7 and can be entered while waiting for the bus or traveling elsewhere. Moreover,

(11)

11

since the emergence of omnichannel retailing new settings appear such as secure lockers and collection points. These so-called click-and-collect settings are new and change the setting of the traditional fixed store. The click-and-drive option is the latest innovation and this also changes the time setting.

Finally, digitization also impacts the offerings as products and services change. Many products get a new functionality and utility because they are connected to a network. As an example, think about movies, people do not buy movies anymore but customers pay a subscriptionfee to enter a library such as Netflix. All in all, the transformation in exchanges, actors, settings and offerings will change the way customers and organizations interact. Keeping in mind these transformed elements will help while reading this study as these elements are all influencing the customer journey.

2.1.2 The customer journey

As introduced above, nowadays customers interact with organizations through multiple touch points via several media and channels, resulting in more complex customer journeys (Lemon & Verhoef, 2016). This paragraph will cover previous research about what is known about the customer journey.

The concept of the customer journey arose when a more detailed path-to-purchase became necessary for organizations (Wolny & Charoensuksai, 2014). Prior to this stage decision making models were key, which followed a linear structure. The most influential decision making model is Howard and Sheth's (1969) model. This model explains the rational way of product choice of the customer, thereby addressing the fact that customers are never in a state of complete information and full ability to process. This model is developed based on the insight that learning is a very important aspect when experiencing a certain situation, such as buying a product, for the probability of buying that product again another time. Also, in the same period the AIDA model is developed which explains that advertisement works

(12)

12

through getting Attention, Interest, Desire and Action (Strong, 1925). By reviewing extensive literature about decision making models, Häubl and Trifts (2000) identified general stages customers go through to reach to purchase, getting closer to the concept of the customer journey used nowadays.

Norton and Pine (2013) describe the customer journey as follows: "The strategic document that explains how an organization systemizes the key touch points to maximize

customers and organizational success". By this, looking at the customer journey merely from

the organizations point of view. Contrary to this, Wolny and Charoensuksai (2014) define the customer journey as a description of the experience a customer has during all touch points with the brand, product or service, hereby taking a more customer perspective. Lemon and Verhoef (2016) take a more all-embracing approach, explaining the customer journey as being a dynamic process which incorporates different phases: the pre-purchase phase, the purchase phase and the post-purchase phase. The authors also state that customer journeys include external factors such as influences from third parties, as well as past experiences such as prior purchases. Thereby seeing the customer journey as having a non-linear structure contrary to the previous decision making models.

As described above the customer journey consists of three phases. The first phase, the pre-purchase phase corresponds to the characterized behavior awareness, interest and consideration of the traditional marketing funnel (Mooney & Rollins, 2008). However, in theory this phase could be described as the entire experience of the customer related to the brand before his or her purchase (Lemon & Verhoef, 2016). The second phase, the purchase phase, covers most steps of the of the customer journey although this phase is the shortest in time (Lemon & Verhoef, 2016; Quix, 2016). This phase incorporates behaviors as choice, product testing, purchasing and check-out. Since this phase is characterized by many touch points and a lot of information, customers can experience an information overload, such as choice overload (Iyengar & Lepper 2000). Iyengar and Lepper (2000) explain that this

(13)

13

information overload is relevant for organizations to take into account since this may encourage customers to stop searching and purchase or differently, stop searching and not purchase. The last phase, the post-purchase phase, encompasses all touch point with the organization after the actual purchase, this includes behaviors such as product usage, receiving after sales service and post-purchase engagement (Lemon & Verhoef, 2016; Quix, 2016). In this phase, the functionality and usability of the product itself becomes important now the product will be used by the customer (Holbrook & Hirschman 1982). Most research in this phase of the customer journey considers the consumption experience. However, behavior such as recommendations and other ways of customer engagement are also very important (Van Doorn et al., 2010). Recently the process of the loyalty loop was conceptualized, proposing that in the post-purchase phase, something could happen that either leads to customer loyalty (through repurchase and further engagement) or to a new customer journey, again starting in the search phase (McKinsey, 2015). This stresses the conviction that, as an organization, you need loyal customers since competitors give customers reasons to leave. Proposing that when your customers are not loyal enough they will begin their customer journey at your competitor, starting a new loyalty loop.

Quix (2016) remodeled this 3-phase model of the customer journey into a model that has a more future focus. Millenials were asked how they thought the future of shopping would look like and therefore this model is more explorative. Based on this information, similar to the non-linear model of Lemon and Verhoef (2016), a circular model was built in which also three phases are distinguished (Appendix A1). The customer can enter the model everywhere, depending on the product the customer is buying or the phase the customer is in. In the search phase customers orient before they will make the actual purchase, they get discount offers, gather opinions, compare products and plan their journey and route. In the shop phase, the customer comes to the actual purchase. In this phase, customers can

(14)

14

feel. In the third phase, the share phase, customers share their opinion with other customers or organizations, becoming a new source of information for future customers. Moreover, this phase becomes more important since the possibilities to share information is much more elaborate today.

All in all, the customer journey entails all touch points a customer encounters during pre-purchase, purchase and post-purchase phase related to the product that is bought (Lemon & Verhoef, 2016). This concept will be the guide for the rest of this study.

2.1.3 Customer journey mapping

With the introduction of new digitizations, shopping has become a journey in which customers decide which route they want to take. To be able to understand this journey decided by the customer, organizations should map it (Wolny & Charoensuksai, 2014).

Service blueprinting, designed by G. Lynn Shostack in 1984, has been recognized as a valuable approach for mapping the organizations service delivery, including the customer’s process (Bitner, Ostrom, & Morgan, 2008). Halvorsrud, Kvale and Følstad, (2016) see this as an initial attempt to map the customer journey. This method called service blueprinting uses flowcharts that visually show the touch points that are part of the service delivery process. The touch points the customers comes across and the backstage processes of the organization, of which the customer might not be aware, are visually separated (Halvorud et al., 2016). Although service blueprinting evolved towards a more customer centric method, the customer journey approach has been developed as a complementary customer centric perspective on service delivery (Zomerdijk & Voss, 2010). The customer journey approach is a ‘walk in the customer’s shoes’. Moreover, since customer experiences are unique and mostly personal it is essential to map individual customer journeys too.

Many existent models are made before the use of internet and remain hard to use in the current digital age (Halvorud et al., 2016). Therefore, Halvorsrud et al., (2016) developed

(15)

15

an approach called the customer journey framework, which compares the planned customer journey, as the organization would see it, with the actual customer journey and the deviations between those two. This visualization of the deviations could help the organization to get better insights in the actual customer journey and look at it more from a customer perspective.

Previous studies researched the subject of customer journey mapping in the grocery industry (Rosenbaum, Otalora, & Ramírez, 2017; Teller, Kotzab & Grant, 2006). Before the digital era, this customer journey looked as follows: Need for food – go to the grocery store - enter the grocery store - shop through aisles - check out - go home - usage of groceries. Nowadays, with the arrival of internet, many other customer journeys are possible since customers do not have to go to the grocery store per se. They can order online and choose home delivery, or order online and choose to pick it up in store. As earlier explained, customers can also use their mobile phones while grocery shopping which could influence their shopping behavior. Although this study will not perform actual customer journey mapping, it is important to understand how it is done so the outcomes of this study can provide possibilities about how the customer journey will be effected.

2.1.4 Omnichannel

The customer interacts with an organization through multiple channels in the customer journey (Lemon & Verhoef, 2016). The evolution of usage of channels transformed tremendously the last 25 years; from single channel usage, to multi-channel, to cross channel and now omnichannel usage (Quix, 2016). Single channel usage implies a retailer having only one channel to reach the customer. Multichannel usage follows the principle that there are several channels such as an offline store, a web page and catalogue. However, customers will purchase via only one of the channels (Quix, 2016). As cross channel retailing suggests that there is a distinction between the online and offline retail shop, this does not hold for

(16)

16

omnichannel retailing (Juaneda-Ayensa et al., 2016). This means that in a cross channel environment customers will be served through integrated channels, but they will still think in channel usage. This is different for the omnichannel environment. While moving from the web, to your mobile phone or into a physical store, this will all occur within one single transaction process (Verhoef et al., 2015). In this omnichannel environment, the customer does not experience the channels, but solely the brand the customer is in contact with (Quix, 2016). Every channel should fluently move over in one another. This omnichannel environment has an enormous impact on the path-to-purchase (Fulgoni, 2014).

2.1.5 The grocery industry in the Netherlands

To get an understanding of the industry that will be investigated in this study, a short overview of the grocery industry will be provided. However, first three important trends in the Netherlands will be discussed that also influence the grocery sector. First of all, the population in the Netherlands is aging causing more people being immobile (Centraal Bureau voor Statistiek, 2018). Second, the number of single-person households is growing and third, the urbanization trend will further continue, whereby the four biggest cities (Amsterdam, Rotterdam, Utrecht and The Hague) will grow 15 percent till 2030 compared to 2015. Also as shows in figure 1 (on the next page), the amount of people living in the peripheral region of the Netherlands will decrease, while there will be a strong growth in the Randstad.

(17)

17

Figure 1: Urbanization in the Netherlands (source: CBS, 2018)

The grocery industry did not take much advantage from the growing economy since this sector is not really sensitive to market conditions (Rabobank, 2018). Yet, the turnover of the total industry increased with 2% since 2016 due to different customer choices (more upscale) in the grocery industry (Centraal Bureau Levensmiddelen, 2017). The Netherlands counts around 4.300 grocery stores which gives an unique situation in which customers live generally close by a grocery store (CBL, 2017; Rabobank, 2017).

Moreover, since recently the influence of the hybrid customer becomes apparent (CBL, 2017; Rabobank, 2018). This is a customer that does not fit into any particular market segment as described in the traditional literature (Ehrnrooth & Gronroos, 2013). This hybrid customer purchases cheap products in some occasions but will easily pay for premium products another moment (Ehrnrooth & Gronroos, 2013). This results in more customers choosing for a strong price/quality ratio and therefore grocery stores have to be cheap, or provide premium value. This trend can also be seen in the growth equation in figure 2, in a mature stage of development the mid-market segment (i.e. Jumbo/ AH) decreases while the discounters (i.e. Lidl) take advantage. Only when a grocery store provides real added value, customers are willing to pay more (i.e. Marqt/ Jumbo Foodmarkt). Therefore, it is even more

(18)

18

important for retailers (especially in the mid-market) to be able to provide added value. Moreover, since digitization mainly removes the easy tasks, there is more room for employees to focus on what really matter, namely providing service to the customer (McKinsey, 2018). Furthermore, customers more often chose to go out for dinner or order ready-to-eat meals via organizations such as Foodora and Deliveroo (Rabobank, 2018). This leads to more competition from outside the original grocery industry. Due to this development, grocery stores started offering more ready-to-eat meals which blurred the lines between food retail and foodservice.

Figure 2: Market growth equation (source: Sloot, 2016)

Due to the increased competition and the appearance of the hybrid customer, grocery stores need to create advantages over their competitors to stay in the game (Rabobank, 2018). However, to be able to create advantage, organizations need to know what improves the satisfaction of customers and more importantly, what decreases the satisfaction (Garaus, Wagner & Manzinger, 2016; Inman & Nikolova, 2017). Previous research shows that digitization can improve the satisfaction, especially when it reduces frustrations in certain touch points (Inman & Nikolova, 2017; McKinsey, 2018)

(19)

19

Some research has been done about the impact of digitization in food retail (Garaus et al., 2016; Inman & Nikolova, 2017; Juaneda-Ayensa et al., 2016; Melis, Campo, Breugelmans & Lamey, 2015). However, looking at the impact of digitization on the customer journey from the perspective of the customer remains an unexplored area. Moreover, most research that examines digitization, chooses to focus on one new digitization, such as online grocery shopping and therefore only dives into one customer journey, the online version (Melis et al., 2015). A study that focused on more than one digitization is the study of Inman & Nikolova (2017). This study looked at several digitizations and the impact of these digitizations on the shoppers reaction, eventually looking at the changes in the shoppers-focused decision calculus and the impact of these changes on the Return On Investment. This paper is a relevant starting point for this study. However, where Inman and Nikolova (2017) focused on the benefits compared to the cost of the technology, this study is interested in the impact of the digitizations on the evaluation of the customer journey by the customer. Besides, different digitizations will be taken into account. The digitizations chosen for this research will be explained after discussing the dependent variables.

2.1.6 Customer reactions

Even though there is an increase in research about the impact of digitization, it is very important to keep investigating this fast changing field (Verhoef et al., 2015). Particularly to learn how the customer’s perception towards digitizations influence the purchase decision process in a digital era (Juaneda-Ayensa et al., 2016). Eventually organizations need sales to subsist, and therefore purchase intention is chosen as the dependent variable in this study (Grewal, Krishnan, Baker & Borin, 1998). Purchase intention can be explained as the decision of the customer to purchase a product, and is frequently used to predict subsequent buying behavior (Grewal et al., 1998). The study of Inman and Nikolova (2017) showed that the purchase intention differed among different digitizations implemented in a grocery store.

(20)

20

Furthermore, the study of Parasuraman (2000) showed a difference between digitizations and customers desirability to use a particular technology.

Moreover, a more digitized customer journey could trigger customers to engage in positive or negative Worth of Mouth (Inman & Nikolova, 2017). Worth of Mouth (WoM) can be described as the degree to which customers pass on information to others about a certain product or service they used (Ku Wu, & Deng, 2009). The study of Inman and Nikolova (2017) shows that WoM plays a key role in determining customers purchase decisions. Another study stated that WoM is more convincing than any other media channel (Villanueva, Yoo and Hanssens, 2008). The authors found that customers that were advised by others devote more than twice as much value than customers that choose a brand based on any other channel. Since the great importance of WoM for the performance of an organization, particularly on the long-term, retailers that consider implementing digitizations should take into account the effects on customers recommendations (Inman & Nikolova, 2017). Therefore this study will measure the Net Promotor Score (NPS) which is an alternative measurement for WoM which is used a lot in the business world (Quix, 2016). This study assumes that the NPS will improve as the digitizations improve the customer journey.

Furthermore, repurchase intention is the process of a customer buying products or services from the same organization again, often based on prior purchase experiences (Ku et al., 2009). When comparing the costs of attracting new customers against retaining current customers, organizations spend a lot less money on retaining current customers (Inman & Nikolova, 2017). Therefore it is important for organizations to increase the amount of customers that repurchase. Previous research shows that repurchase intention can be a behavioral outcome of the implementation of digitizations in the customer journey (Rose, Clark, Samouel & Hair, 2012). This study will measure the Net Loyalty Score (NLS), which

(21)

21

is an alternative for measuring repurchase intention (Q&A, 2014). This study assumes that the NLS will improve as the digitizations improve the customer journey.

2.1.8 Newly developed digitizations

As mentioned before, this study will investigate the digitization of certain touch points and the impact on customer’s purchase intention in the grocery industry. Many newly developed digitizations hit the market every day, however also many will never make it to the store. Therefore it is important to investigate the current and upcoming digitizations thoroughly and pick the most promising ones for this study. Besides, it is important to understand what the main frustrations of customers are during their shopping process, merely because the improvement of pain points in the customer journey will be most valuable. These results were found in the customer and retailer interviews (which will be explained in chapter 3.2). Based on the customer interviews, the retailer interviews and desk research the following digitizations were chosen: 1. AmazonGo, 2. KrogerEdge, 3. Voice recorded shopping, 4. Predictive grocery shopping.

The assumption of this study is that by taking away the most influential frustrations, the overall customer journey will be improved which will be shown in a higher purchase intention, NPS and NLS. To remove the frustrations of the check-out process, Amazon Go will be tested (Amazon.com). This is a new kind of store were no check-out is required. As a customer you enter the store with the Amazon Go app and grab the products you want putting them in your own bag. When you are done shopping you just walk out the store and Amazon will automatically send you a receipt and charge you on your Amazon account. While you were shopping, Amazon’s technology and camera’s detected the products that you took from the shelve and kept track of them in a virtual shopping cart so it exactly knows what you are taking out of the store. AmazonGo removes the entire check-out process by introducing a

(22)

22

check-in. By removing the main pain point (the check-out process) in the customer journey, this study assumes that AmazonGo will improve the customer journey.

Moreover, customers can get frustrated when they are not able to find the products they are looking for or when products they are looking for are out of stock. KrogerEdge could solve both of these problems (Kroger.com). Customers can download an application in which they insert their grocery list, when arrived in the grocery store the digital price tags of the products on their shopping list will lit up as they walk down the aisles. The shopping list will be in the right order based on the route the customer is taking and therefore customers will never have to search for products again. Besides this, the shelves are digital and are connected to the technology. KrogerEdge will automatically send a message to an employee when products are low on shelve, and moreover will automatically sent an buying order to the warehouse which solves the entire out of stock problem. As this digitization takes away two of the main frustrations of the customer, namely the customers’ frustration of not being able to find a product or a product being OOS.

The third digitization this study will investigate is voice recorded shopping. Lately, the use of voice search is rising tremendously and is expected the grow further (Bentahar, 2018; Olenski, 2018). Organizations as Amazon and Google are committed to selling digital assistants such as Echo and Alexa since they provide the organizations with a lot of information about the customer. Also, the organizations understand that the more devices there are in the homes of the customer, the more they will be used for shopping. Furthermore, customers are discovering the benefits and convenience of voice search, now also being able to use voice search on their mobile phones. If voice search will grow big, organizations need to adapt their web presence from SEO to optimizing voice search. This study wants to investigate if voice search will improve the customer journey according to the customer. This study expects that voice recorded shopping will improve the customer journey as it provides more convenience for the customer (Bentahar, 2018: Olenski, 2018).

(23)

23

Lastly, organizations are working on the development of predictive grocery shopping. For example Paul Clarke, Chief Technology Officer of Ocado, thinks that over time, they will streamline the ordering process as far as they can (Condliffe, 2016). Which will, in the future, result in organizations that could acquire consumption data from customers smart fridges, digital assistants, social media and calendars. These devices will provide information such as the amount of products in the fridge, the recipes customers are discussing at home, customers (food) preferences on social media and their activities during the week. This resulting in the right groceries delivered at the right time, without a customer having ordered them. This may sound like magic, but more and more analysts believe that this will become the future (Condliffe, 2016). This will probably cause privacy concern among customers. However, it offers something valuable in return, namely totally removing the burden of having to do groceries. As this digitization is not yet used nowadays, this study expects customers to be cautious about this futuristic possibility of grocery shopping. This might decrease the purchase intention and therefore the total experience of the customer journey. Therefore this digitization will cause an opposing effect in the later explained hypotheses. All in all, together with the findings on the variable purchase intention the following hypothesis is formulated:

H1: The purchase intention will differ significantly among the digitizations AmazonGo,

KrogerEdge, voice recorded shopping and predictive grocery shopping.

Furthermore, prior research shows that age has a strong influence on the degree of technology acceptance (Arning & Ziefle, 2007; Marangunić & Granić, 2015). The authors found that the cognitive ability of a person is a great predictor for the degree of technology acceptance. As older customers have lower cognitive ability such as spatial and reasoning abilities, processing speed and memory abilities, they are less likely to accept digitizations. This study assumes that age will influence the opinion about digitizations while doing groceries, resulting in the following hypotheses:

(24)

24

H2: There is a significant interaction effect between the age of the respondents and the

digitization used in terms of the purchase intention.

2.1.9 Customer perceptions

Multiples studies state that the impact of digitizations on purchase intention, retention and the likelihood of recommendation is influenced by customers perceptions (Inman & Nikolova, 2017; Juaneda-Ayens et al., 2016; Ku et al., 2009). The study of Juaneda-Ayens et al. (2016) examined the influence of several different factors on purchase intention in an omnichannel environment, which can be considered as a digitized environment as in this study. The authors found evidence for three factors, two of them being customer perceptions. The first perception is performance expectancy, which is explained as the degree to which customers are provided with benefits when using digitizations during the customer journey. Similar to Juaneda-Ayens et al. (2016), Ku et al. (2009) also found that performance expectancy had a positive influence on the purchase intention. Therefore, this study expects that performance expectancy will have a positive influence on the relationship between the digitizations and purchase intention resulting in the following hypothesis:

H3:Performance expectancy moderates the relationship between digitizations and purchase

intention, so that this relationship is stronger with high levels of performance expectancy

Many recent studies have added the customer perception privacy concerns to their research (Bauman & Bachmann, 2017; Inman & Nikolova, 2017; Juaneda-Ayens et al., 2016). As explained by Inman and Nikolova (2017), the fast growth in digitization has been a double-edged sword for organizations. On the one hand, it gives the organizations more insights and abilities to improve the experience for customers. However, on the other hand the growth of digitization also increased the concerns of customers about how well organizations handle their private information. In fact, the authors state that digitizations seen as too intrusive in the privacy of the customer cause reactions that do not outweigh the

(25)

25

benefits. Customer’s privacy concerns cause major implications for organizations and therefore need to be considered (Inman & Nikolova, 2017). However, current studies show opposing results. The study of Juaneda-Ayens et al. (2016) did not find any evidence for the influence of privacy concerns, whereas Inman and Nikolova (2017) did find that privacy concerns influenced the purchase intention and likelihood to recommend, especially when retailers used proximity marketing. This contrast might be because customers privacy concerns can be diminished when customers value the benefits of providing their information more than giving away their privacy. Thus, when a digitization is intrusive but provides enough benefits to the customer, the customer will have less privacy concerns. Although the results are differing, this study expects privacy concerns having a significant impact on the experience of the customer journey since all digitizations require a lot of private information. Based on this information the following hypothesis is composed:

H4:Privacy concerns moderate the relationship between digitizations and purchase intention,

so that this relationship is weaker with high levels of privacy concerns.

Furthermore, Juaneda-Ayens et al. (2016) found evidence for the perception effort expectancy similar to Catherine and Geofrey (2018). According to the authors effort

expectancy can be explained as the degree of ease associated with customers’ use of different touchpoints during the customer journey. Other studies name the variable effort expectancy ease of use, having the same meaning (Cho & Sagynov, 2015; Rose et al., 2012). The study of Juaneda-Ayens et al. (2016) found that effort expectancy positively influences purchase intention when shopping in an omnichannel environment. Therefore, this study will examine the following hypothesis:

H5: Effort expectancy moderates the relationship between digitizations and purchase

intention, so that this relationship is stronger with high levels of effort expectancy

Moreover, for every newly developed digitalization on the market, customers can chose to adopt or refuse. The third factor of which the study of Juaneda-Ayens et al. (2016)

(26)

26

found evidence was the driver personal innovativeness. Personal innovativeness can be explained as “the degree to which a customer prefers to try new and different products and channels and seeks out new experiences” (Midgley and Dowling 1978; as cited in Konuş, Verhoef, & Neslin, 2008). Customers can be categorized in five adopter categories, namely the innovators, early adopters, early majority, late majority and the laggards, based on their degree of innovativeness. Corresponding with prior research this study assumes that customers with a high level of personal innovativeness will experience the digitalized customer journey more positively than customer with low levels of personal innovativeness. This results in the following hypothesis:

H6: Personal innovativeness moderates the relationship between digitizations and purchase

intention, so that this relationship is stronger with high levels of effort expectancy

2.2 Conceptual model

Digitization

AmazonGo +/ KrogerEdge +/ Voice recorded shopping + / Predictive grocery shopping(-)

Purchase intention

Net Promotor Score

Net Loyalty Score

Performance expectancy + Privacy concerns -

Effort expectancy + Personal innovativeness +

(27)

-27

Method

This chapter will outlay the research method that has been chosen to answer the research question and hypotheses that were found in the literature review. This study conducted a quantitative research using a correlational research design. An online survey was used to collect the data.

3.1 Research design

The aim of this research was explanatory as it explains the relationship between the independent and dependent variables in the research question. Furthermore, it demonstrates the influence of several moderators influencing this relationship. This study used a quantitative method using a correlational design. Primary data was collected by means of an online questionnaire. All constructs measured were existing and validated scales using a 7-point likert scale from completely disagree to completely agree. The NPS and the NLS were measured and rated on a 11-point scale, ranging from very unlikely to very likely. All items were translated to Dutch, and verified by employees of Q&A to make sure the translation is correct. The questionnaire consists of 14 questions per digitization. All respondents were confronted with all four digitizations. The digitization was explained using an introductory text which incorporated enough information for the respondent to understand what the digitization entails. The survey can be found in appendix D.

3.2 Research process

This study can be divided into different stages. First, a preliminary study was performed in which customers and retailers were interviewed. The results from the interviews were used to choose the right variables, which were thereafter tested in the survey. Moreover, the interviews provided background information which enables to give a broader context to the results and moreover it was able to enrich the managerial implications in the discussion chapter with linkages to real life examples of the grocery sector.

(28)

28

3.2.1 Preliminary research

The preliminary study started with an elaborate literature review to create a better understanding of the existing literature about the customer journey, with a special focus towards food retail. This provided information about the customer's and organizational point of view regarding the customer journey. Moreover, the (future) digitizations used in food retail were found (see paragraph 2.1.8).

3.2.2 Customer interviews

After an extensive literature review was done, twenty orientating customer interviews were conducted. These were set up to understand how customers think about their customer journey (Appendix B2) when doing groceries and to find out what should be improved to provide a more satisfying customer journey. A semi-structured interview guide was used (see Appendix B1). The interviews helped to identify the three main customer frustrations while doing groceries, all of which were in the purchase phase. The most mentioned frustration was the check-out process, which entails standing in line for the cashier, taking out your wallet, pay, and packing your groceries. This process often takes a lot of time and is therefore considered dissatisfying by the customer. Secondly, products that are out of stock (OOS) are considered dissatisfying by customers as this could lead to another grocery visit which again cost more time, or could lead to finding another similar product or a change of plans. All causing frustrations because the extra steps taken cost physical and/or cognitive energy which could have been prevented when the product was on stock. Lastly, not being able to find the right product was found annoying by customers. This mainly happened when customers were visiting a grocery store they normally did not visit. Although customers provided subjects that could be improved, most customers liked doing groceries and therefore improvements were not extremely important to them.

(29)

29

3.2.3 Retailer interviews

Also, interviews with two retailers were conducted. A semi-structured interview guide was used (see Appendix C). The first interview was with a director of a smaller grocery chain in the Netherlands via the telephone and lasted around 50 minutes. This interview was recorded to be able to analyze afterwards. Several insights were generated from this interview. First of all, it made me realize that the size of the retailer and the store formula are of great influence on what digitizations will be implemented in a store in the future. This retailer is a small player in the Netherlands that has its focus on the unplanned purchase. Therefore this grocery store mainly focusses on impulses and convenience. They do this serving different customer groups (the residents, the customers and the passers-by) using different store formats that fit best to that particular group. First city stores, these are small stores in the city center which mainly focus on the unplanned purchase, such as a bottle of water, a coffee or a take away lunch. Second, the neighborhood stores, these are bigger regarding size and are situated in small villages and quarters, these stores focus on fresh offer and quality of products. Third, the enjoy stores, which are placed on bungalow parks and focus on the convenience of having a grocery store close by while celebrating your holiday. Fourth, University stores which are placed on campuses and finally Express stores at gas stations. As you can see these store formats are all different and therefore customers shopping at these stores have different needs. For example, the director explained that Amazon Go would be great for the stores that focus on passers-by since it will speed up the process and will improve the convenience for the shopper. However, the neighborhood stores have more conservative customers who go there for convenience and the friendly interaction with the staff and innovations such as Amazon Go would probably not add to their shopping experience.

Moreover, the director explained that most stores are relatively small with a limited assortment, therefore a digitization such as Kroger Edge that would help the customer navigate through the store would not be likely to be implemented in small stores since

(30)

30

customers do not need it. However, the digital pricing and the ability to give customers nutritional information that are also possible with Kroger Edge would be a great addition to all stores; online and offline. Although smaller formulas are interested in these innovations they always have to make a trade-off, their financial abilities are limited and therefore have to choose carefully what they want to implement.

Lately, one of the things this retailer choose to invest in was their (third) online platform, creating a very innovative and enhanced platform for such as small player. They made this decision because of the vision that online ordering and delivery is also convenience. Maybe today their customers are not heavy online grocery shoppers, however this may be totally different five years from now with an ageing population and if you don’t invest in online now, you will be too late and lose the game. Moreover, the director explained their believe in learning by doing, putting the platform live, learn from the mistakes and improve it further.

Another insight I want to discuss is the loyalty program. More than ever are people buying products online and the choices for customers are tremendous, so as a retailer you have to bind the customers to your brand. This can be done with a loyalty app, as this retailer does for the city and university stores. In this app customers can save up points for a free coffee. This way they hope that customers will choose their formula over other retailers since it will give the customer a benefit.

Furthermore, I asked what will be different in the stores five years from now. The director explained that there will be better, more personalized promotions and presentation will be improved. Moreover, data analytics will help to come to a more tailored offer for specific shopper missions and there will probably not be any cash in the stores. Besides, online grocery shopping will have grown bigger, improving the click and collect points.

All in all, this interview gave me the learning's that different store formats, have different needs, also regarding digitizations. Moreover, that trade-offs have to be made,

(31)

31

especially when you are a small player but that you have to keep up with the bigger retailers on essential aspects (i.e. the online platform) to stay in the game and finally that creating convenience and loyalty are the main focus points the upcoming years, to have a distinctive sustainable position in food retail.

The second interview was conducted with the Head of Strategy of a larger grocery chain in the Netherlands. This contrasts with the prior interview and it is therefore interesting to notice the differences between these two grocery stores. This interview was conducted in person at the head office and lasted 45 minutes. The interview was recorded to be able to analyze afterwards. I will shortly discuss the insides I got from this interview. Firstly we discussed the customer journey, arguing the idea of a retailer having one customer journey or several different ones. The head of Strategy explains that this depends on how holistic your view is. However he says that today we live in an era where customers want one seamless customer journey in an omnichannel environment, instead of having different channels that do not work together. This supports the idea that we are moving to only one customer journey in the future. Furthermore, customers want extreme convenience, so as a retailer you have to remove all possible bottlenecks. In the past this was not always possible. However, today digitizations often bring the solution. One of the focus points is to improve the check-out process since this is one of the main frustrations of customers and because this process can be done way more efficient. As an example, this year this grocery chain will open its first store with a new check-out system, which is somewhat similar to Amazon Go where you do not have to pay at the cashier anymore. It works as follows: you walk in the grocery store and take the product you need from the shelve, thereafter you put your card against the digital price tag after which you are automatically charged. This will speed up the process and make it more convenient for the customer. Obviously this is not the most ideal process since you will need a card to be able to buy something. However, as a retailer, you can do two things, you can wait until the best solution is there, or you can start with one version, learn from your

(32)

32

mistakes and improve the system. The latter, similarly to the prior interview, has the preference because in this fast changing environment we don’t know what will happen or what will be the winning system. However, this does not mean that external developments such as Amazon Go are not important to watch closely.

Moreover, the Head of Strategy believes that digital pricing and digitizations like Kroger Edge will gain foothold. Till now, digital price tags were very costly, but this is changing and therefore it will start growing in the near future. Moreover, the ability to give personal nutritional information via a customer’s smartphone or digital price tags is great for retailers. This can help them to bring products under the attention of customers which also could help up trading.

Online grocery shopping, it is not a question about if it will grow, as it will, but how to make online a profitable model. Till now this model is very expensive due to the complexity in logistics and its high costs. However, pick-up points will not be the real solution since this will not bring the customer real convenience. It will just be a matter of time till home delivery reaches the total convenience (not necessary to be at home anymore), by having something like an Amazon lock for instance.

Another very interesting development according to the Head of Strategy is voice recorded shopping. However, the big question is ‘Where does the digital assistant place your order?’ Will every retailer create their own device, or will they buy ‘ads’ on devices such as Amazon Echo and Google Home? This will become a fight of who will be the closest to the customer. As a retailer, you want to be as close to the customer as possible. Although this newly developed digitization has major potential, the Head of Strategy does not think it will grow real big the upcoming years.

The last take away of this interview is, as mentioned earlier, that with the rise of online grocery shopping, loyalty programs will become even more important than today as people can easily switch from one online retailer to another. Subscription based shopping will

(33)

33

rise and will help retailers to lock-in customers. Amazon Prime is a great example, but also AH Bezorgbundel, where you pay a certain amount per month for the delivery of your groceries. This will stimulate customers to order at the retailer where the customer has a subscription. However, this still means you need to build true loyalty. So the question is, how to earn this. The only way to do this is by solving the problem of the customer and create extreme convenience.

Both interviews show that newly developed digitizations are implemented faster than ever before. Digitizations as Amazon Go, Kroger Edge, voice recorded shopping and maybe even predictive grocery shopping will become the future. But the question is, what will become the winning platform and when? Both the smaller and larger retailer state that you should not wait for that winning platform, since we cannot predict the future but start now and learn from your mistakes. Furthermore, retailers should try to create one seamless customer journey using one platform on which everything comes together. However, every store format will need different focus points. City stores need fast journeys, where larger stores should focus on creating an experience for the customer. All in all, it is the retailers job to make it the customer as simple and effortless as possible, and this will help them to bind the customer to their brand. However, they always have to keep in mind that customers are humans, and that some digitization can also decrease the customer satisfaction because the customer is just not ready yet.

3.2.4 Conclusion preliminary research

All in all, both the customer interviews and the retailer interviews provided information about the frustrations customers encounter, and also helped to choose the right digitizations for this study. This was important because research shows that digitizations that remove frustrations have a greater impact on the customer satisfaction. Moreover the retailer interviews gave real

(34)

34

life insights from the industry and provided more background information which was valuable to use in the discussion and conclusion of this study.

3.3 Research sample

After conducting and analyzing the interviews, this study performed a survey which was conducted in cooperation with Q&A, a consultancy organization in retail. Q&A is an organization with a lot of expertise in customer insights research and a great help for acquiring representative respondents for the Dutch society, as well as creating a valuable questionnaire. A panel consisting of 120.000 respondents was used to send out the survey. Around 280 questionnaires per digitization was used to ensure the data was analyzable and adequate. The panel used in this study is representative for the Dutch society, however the younger generation might be slightly underrepresented. To solve this problem, the survey was also distributed via social media outside of Q&A to add more younger respondents to the sample (convenience sample). Moreover, family and friends were asked to distribute the survey under their friends and family, creating a snowball effect. The population of this study entails all inhabitants above 18 living in the Netherlands responsible for doing their own grocery shopping. This is a non-probability convenience sample since this population will not all will be asked to fill out the survey (Fan & Yan, 2010). All in all, the sample used in this study is very valuable and is representing the Dutch society since respondents of all age groups, locations and educational backgrounds were asked to fill in the survey.

3.4 Pilot test

A pilot test was performed between the 20th and the 22nd of April. A random group of respondents out of the database of Q&A was selected. The respondents, around 50 people, filled in the entire survey. Afterwards the respondents were asked if everything was clear to them. Most respondents replied that everything worked correctly and was clear to them. A few stated that they found it difficult to imagine such a situation would occur to them. This

(35)

35

answer was suspected since futuristic high tech solutions were covered in the survey. Moreover, all results were checked for abnormalities. Everything worked well and therefore no changes in the survey were required besides a few typos.

3.5 Measurements of variables

This paragraph explains the chosen measurements for the variables used. The research question incorporates one independent variable and three dependent variables. The independent variable is the digitization and the dependent variables are purchase intention, the NPS (Net Promotor Score) and the NLS (Net Loyalty Score). The measurements for the four moderators will also be explained. All measurements had reliable scales with a Cronbach’s alpha of .70 or higher in prior research.

3.5.1 Independent variable

The independent variable of this study was a categorical variable and entailed the four different digitizations (AmazonGo, KrogerEdge, voice recorded shopping and predictive grocery shopping) as discussed earlier.

3.5.2 Dependent variables

The dependent variables of this study were purchase intention, NPS and NLS. To measure purchase intention an adapted version of Bian and Forsythe (2012) 7-points scale was used

consisting of 3 items, having a Cronbach's Alpha of 0.90 (E.g. If I were going to purchase a product, I would consider buying at this store)

The NPS was measured on a 11-point scale, consisting of one item: ‘Can you indicate how likely it is that you would recommend this store to a friend or colleague?’ This scale introduced by Reichfeld (2006) is an alternative for measuring the customers satisfaction. The scores are divided into three groups. First the promoters which include respondents with a score of nine or ten, secondly the neutrals (called fence sitters) which include respondents

(36)

36

with a score of seven and eight, and lastly the detractors, which are the respondents that rated a six or lower. The NPS score was calculated as follows:

NPS= % promoters - % detractors.

The NLS was also measured on a 11-point scale, consisting of the following item: ‘How high do you estimate the chance that you will return to this organization ?’ This scale developed by Q&A consultancy measures the loyalty of the customer with an organization or product, which explains the likelihood a customer returns to the organization in question. The NLS was calculated the same way as the NPS. The percentage detractors are subtracted from the percentage promoters.

3.5.3 Moderators

To measure performance expectancyJuaneda-Ayensa, Mosquara and Murillo (2016) adapted from Venkatesh et al., (2003) 7-points scale was used consisting of 3 items, having a Cronbach's Alpha of 0.92 (E.g. Being able to use this technology throughout the customer journey allows me to purchase quickly).

Effort expectancy was measured using Juaneda-Ayensa, Mosquara and Murillo (2016)

scale adapted from Venkatesh et al., (2003). This scale consisted of 2 item, having a Cronbach’s Alpha of 0.93 (E.g. I find this technology easy to use).

To measure privacy concerns Inman and Nikolova (2017) scale adapted from Van Doorn & Hoekstra (2013) and Xu et al. (2011) was used. This scale consisted of 4 items, having a Cronbach’s Alpha of 0.73 (E.g. I think the risks of my information disclosure will be greater than the benefits gained from the use of this technology).

Finally personal innovativeness was measured using the scale of Lu, Yoa and Yu (2005), consisting of 4 items and having a Cronbach’s Alpha of 0.86 (E.g. When I hear about a new technology, I search for a way to try it).

(37)

37 3.6 Participants

The data was collected between the 23th of April and the 6th of May and 473 respondents started the survey. Of the total amount of respondents, 284 finished the entire survey. This resulted in a completion rate of 60 percent. This high completion rate (on average it is 33%) can be the result of the database used namely, people sign up to participate in the surveys of Q&A and are therefore probably more willing to finish the survey. The survey took around 7 to 10 minutes to fill in.

The respondents in this study are representative for the Dutch society. All respondents who filled in the survey were Dutch and living in the Netherlands. 56.7 percent of the respondents were male and 43.3 percent were female which is an almost even distribution. The average age in this study was 54,1 years old which is representative since all inhabitants below 18 are not taken into account. This group, with an age below 18, represents around 22% of the Dutch society (CBS, 2018). In this study the respondents in the age group till 30 covered 14.8 percent of the sample. Most people living in the Netherlands are found in the age group 31-60 years old (see figure 3), which is similar in this study (44.7 percent). Furthermore, 40.5 percent of the respondents were 60 years or older which lays a bit above the average of the Dutch society (CBS, 2018).