Kroger Says AI Boosted Digital Coupon Redemption by 180 Million in Q1

Kroger is using artificial intelligence (AI) to drive spending among inflation-concerned shoppers, utilizing consumer data to be more effective with its digital couponing efforts.

On a call with analysts Thursday (June 15) discussing the grocery giant’s first-quarter FY 2023 financial results, Chairman and CEO Rodney McMullen spoke to the grocer’s success at keeping consumers engaged with targeted coupons.

“By applying our data and AI-based personalization, we can better understand what truly matters to our customers and deliver more targeted and effective experiences,” McMullen said. “As customers digital engagement increases, we have new and more efficient channels to present the most relevant products and the right promotions at the right time. No matter where and how customers choose to shop with us.”

McMullen added that, in the quarter, digital coupon redemption grew by 180 million, a rise that came alongside a 13% increase in digitally engaged households — households that, McMullen noted, spend close to three times as much as those that are not digitally engaged. Overall, the grocer saw an 11% increase in digital pickup sales and a 30% rise in delivery.

Certainly, there is high demand for coupons as consumers’ inflationary concerns continue to affect their shopping behaviors, as indicated by data from PYMNTS’ study “The 2023 Global Digital Shopping Index: U.S. Edition,” which draws from a survey of more than 2,800 U.S. consumers.

The study reveals that the ability to use coupons is a high priority for many shoppers. The report revealed that 39% of consumers considered coupon usage to be very or extremely important when choosing merchants, and an additional 3% cited this as the single most important concern when deciding where to make purchases.

Data from PYMNTS’ study “Big Retail’s Innovation Mandate: Convenience and Personalization,” created in collaboration with ACI Worldwide, which draws from a survey of 300 retailers across the United States and the United Kingdom, reveals that 74% of grocers think consumers would be very or extremely likely to switch merchants if not offered the ability to use digital coupons and rewards.

The CEO also shared that, as Kroger develops its AI data analytics and personalization capabilities, the grocer is also “already piloting several large language models” in an effort to make sense of more quickly and efficiently, and act on, customer behavior and feedback.

Additionally, as part of consumers’ inflation-related shifts in shopper behavior, Kroger has observed higher-income shoppers trading down from more premium grocery brands.

“We … grew our higher income customer households as they migrate from specialty retailers to Kroger,” McMullen said. “These customers are extremely valuable, because they’re building larger baskets and spending more per item.”

Data from the May edition of the Consumer Inflation Sentiment series, “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down,” for which PYMNTS surveyed more than 2,000 U.S. consumers, reveals that 47% of grocery shoppers have traded down to merchants with lower prices. The study also revealed that 56% of consumers who make more than $100K annually have cut down on nonessential grocery spending due to inflation.