The aim of this thesis is to increase retention for Picnic by creating a habit-forming store. Currently, conversion rates are suboptimal. In areas where Picnic is active roughly half of all households downloads the app and registers. However, the conversion of this group to active customers is sub-optimal, meaning that not all users are retained. Sub-optimal retention rates hurt companies, as they miss opportunities for business growth, increasing their profitability and cost savings. This effects also holds true for Picnic where it takes three orders to break-even on that specific customer. Project context This thesis focusses on the Dutch market, as this is where Picnic as its strongest presence. In addition to that, the Dutch online grocery market is the most advanced in Europe. This thesis focusses mainly on the competition with physical supermarkets because the growth of the online groceries segment stems from consumers switching from physical supermarkets to online grocers. Increasing the retention rates has a positive impact on the users of Picnic and society as a whole: It increases the amount of free time for users, reduces food waste and emissions in inner cities. Theoretical foundation Retention Retention is driven by the perceived utility on one hand and switching costs on the other. Both these dimensions are influenced by the habits of users. Perceived utility increases as the users gain more experience with the product, leading to a faster and more pleasant experience. Switching costs are influenced by the investments a user makes in a product, and by uncertainty about whether other companies can provide similar value. Groceries Groceries are eminently a habitual consumption: They are high-frequency purchases Groceries have a limited variability over time Grocery shopping is a behaviour that is learned over a long period of time Therefore, the challenge of this thesis is to help more users successfully form a habit around using Picnic, thereby converting into active customers.
Habits
Habits are formed when both frequency and perceived utility are high enough. A habit has four elements: The trigger, action, reward and investment. Currently, most customers fail in the action element of the habit loop. This is due to either a lack of ability or a lack of motivation.
This theory on habits and its connection is visualized in the figure below.
User research
The theoretical framework was combined with extensive user research to define what type of users currently are able to form a Picnic habit.
The qualitative user research consisted of a combination of interviews, workshops, user testing sessions, surveys and concierge tests. The quantitative user research consisted of analyses of in-app user behaviour data, purchase data, demographic analysis and market size estimations.
Early market
Users that successfully form a Picnic habit, and thereby form Picnic’s early market have both high motivation and high ability to use the service.
The high motivation results from the users being time-constrained, having physical limitations, and experience going to the supermarket negatively. This group’s high ability is a result of their high ability to plan, their relatively predictable life, and the guidance in food they receive from recipes and diets. The majority of this group are families, which are also the most profitable customers for Picnic.
Product strategies
By combining the insights from user research with the theoretical framework, three product strategies were proposed that help more users form a strong Picnic habit.
First more different types of users are enabled to place orders by their increasing their motivation and ability. Once these users are enabled to order at Picnic, their frequency of interaction is increased. Finally, when these users are interacting with this app frequently, users remain engaged by an app that improves with each usage-cycle. This happens through both user- and Picnic- driven personalization.
Implementation of product strategies
These strategies must be embedded in the store team and Picnic organization in order to be effective. In order to do so, three organizational challenges must be overcome:
Challenges in aligning teams across the organization,
Challenges in creating buy-in for customer-focused projects
Challenges in autonomous decision making, due to large dependencies between teams.
Product design framework
To deal with these organization challenges, the strategies are translated into a product design framework. This framework provides the team with clear and inspirational guidance while being concise and measurable for the rest of the organization. This leads to companywide buy-in.
Validation
The framework was validated in two steps: In sessions with customers and internally. The results of these validation steps indicate that the framework is likely to be successful, but it can only truly be proven by implementing it and putting it to the test.
Implementation
To achieve successful implementation, the framework must be clearly communicated and embedded in the daily work of the team. The latter should happen in both creative activities and evaluative activities.
Conclusion
The framework helps the store team to set a course for a longer period of time. It helps the team focus on solving the right problems for its users, by providing a way to visualize these problems and the effect the solutions should have. The vision and strategies provide the team with direction and help stakeholders across the organization align. The framework is not a definitive ‘how-to guide’ on building a habit-forming store, and its implementation and the subsequent execution are crucial for its success.