Why do Icelandic retailers need to create brand loyalty NOW?
As far as international retailers are concerned, Iceland is (or has been) a challenge.
Iceland’s banks collapsed at the height of the 2008 credit crisis: a $10bn international aid package kept the country afloat, and the newly created special prosecutor jailed twenty banking executives. Retail giants pulled out of the country – McDonalds ceased Icelandic trading as early as 2009 – and for the best part of a decade, prices have spiralled and economic activity has been restricted.
Since 2017, however, the Icelandic market has boomed. Capital controls have been removed, the krona has become stronger, and the economy is growing at a steady, sustainable rate: so the retail big boys are back in town.
Costco, H&M and Nespresso have all arrived in a marketplace that’s keen to see prices drop and competition extend – but with only 300,000 consumers in the country, incumbent and incoming brands alike will have to work hard if they want to compete for attention and wallet share in the long term.
Building brand loyalty fast
The Icelandic market is currently in a ‘gold rush’ stage of development – everything’s up for grabs. This means incumbent brands have to build a strong market presence before every brand and their dog arrives.
The incoming brands are bringing a new approach. As high street retail has declined, pressed by squeezed incomes, changing tastes and a shift toward e-commerce, shops in the west have become a showcase for the product. Customers visit the shop to discover, test and experience something they’re more likely to buy online. Experiential marketing is an especially powerful strategy in Iceland – an import-dependent country where consumers are used to high prices and limited choice. In such a retail environment, novelty and a free gift go a long way.
The outsider brands who’ve done best in Iceland have gone above and beyond the call of retail duty. Product demos and experiences are in their DNA – Costco in particular offer enough free samples to have an acceptable (if piecemeal) lunch, and have already sold 80,000 membership cards, meaning one in every four Icelanders is a loyal customer.
This is only the beginning. If a retail innovator like Apple – which turns its stores into educational centres for its ‘Today at Apple’ events – starts to transform the Icelandic retail experience into something that doesn’t feel like shopping at all, Icelandic businesses are going to be left behind.
Icelandic brands need to up their game in order to meet this challenge, and stay viable in a marketplace that’s dramatically different. To beat the newcomers, it’s necessary to think like them. Assume every customer coming into your store is new: what are you doing that’ll make them want to come back?
How to pitch a ‘new customer experience’
Costco succeeded in Iceland partly because it adopted (and adapted) a strategy that’s succeeded elsewhere in their operations. Its product sampling and demonstration programme has worked well in the US and the UK – in the latter, it’s provided an average conversion rate of 1 in 7, and a 335% sales uplift to vendors.
Native brands are best off looking at what the newcomers have done – adopting and adapting the methods of the competition.
Dunkin’ Donuts brought a global level of variety to the limited Icelandic market. Icelandic bakeries only carry a handful of doughnut brands. Dunkin’ Donuts changed the Icelandic doughnut experience into something out of the ordinary; by opening in a select five locations, they created rarity, making an exclusive event out of their launch and ensuring they had people queuing around the block. Meanwhile, the old familiar brands were simply sitting on the shelves, waiting to be bought.
Likewise, Nespresso have positioned themselves as offering variety and quality outside the routine Icelandic experience, and that’s why they’ve succeeded. The aroma of their capsules creates an opportunity for powerful and unusual smell-and-taste experiences, and the store experience in Kringlan builds on this. They don’t just sell coffee: they help novice coffee drinkers find their preferred blend at a permanent tasting station, creating an experience that welcomes them into a new habit – and a new brand.
The question for native Icelandic brands is: how can you be more like this? To meet these newcomers head on, there are two real options. Introduce new products and meet them novelty for novelty, or introduce new experiences that bring them back to you? Product innovation isn’t easy in the Icelandic marketplace – so the solution is a change of pace in your experiential marketing.
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Image credit: (CC) Jonas Forth, via Flickr: https://www.flickr.com/photos/jforth/4840420102