This morning the Competition and Markets Authority released its findings into promotional pricing techniques.
It’s time for the supermarkets, and the brands that they sell, to have a firm look at how and why they rely so heavily on price promotion mechanics
To absolutely no-one’s surprise, the CMA did find some evidence of "pricing and promotional practices that have the potential to confuse or mislead consumers". The CMA didn’t go quite as far as the Which? report that triggered the investigation.
Apparently, these pricing techniques are not deemed to be "systematic", and perhaps used in quite as Machiavellian way as the Daily Mail would have you believe.
However, whatever the intricacies of the report, it’s time for the supermarkets, and the brands that they sell, to have a firm look at how and why they rely so heavily on price promotion mechanics.
Lambrini on cornflakes
Price promotions have become the dirty little vice of grocery marketing. Starting as a lever to drive a bit of product trial or shift a bit of stock, over the years it has got to the point that almost all product categories in a supermarket are overwhelmingly sold on deal.
Like people who used to have a glass of wine once in a while at the end of a tough day in the office, but now put Lambrini on their cornflakes. Sometimes you need to be sat down and told you have a problem.
This is an intervention. Grocery retailers and brands, you are addicted to price promotions in all forms. Of course, there are now entire divisions of brand owning companies that plan promotional scheduling and pricing plans with intricate detail.
Promotional pricing negotiations are at the core of the negotiations between brand owners and retailers – distribution and merchandising support almost entirely dependent on deep discounting. Brand owners respond by creating a vast range of variants and formats, one for each price point.
The rise of the discount retailers
The retailers themselves overlay all of this with price-match mechanics and loyalty schemes, all of which have complicated back-ends to deliver and require expensive marketing to promote. All the way through the value chain, organisations are spending huge amounts of money to keep prices down…how ironic. Now consider the real trend in shopper behaviour in grocery; the rise and rise of the discount retailers, specifically Aldi and Lidl.
At the cornerstone of their success is a simple commitment and clarity for the shopper – an understanding of the value of their products through a commitment to EDLP (Everyday Low Prices). No X% off, no multibuy, no points to be earned, just a simple and clear price that is competitive and compelling.
Because they have removed all of the organisational cost of appearing to have low prices, they can put products on their shelves for less.
Research shows that promotions can now mean it takes longer for shoppers to make decisions at fixture as they are overwhelmed by different deals
A more simple business model and one where margin is easier to control. And are shoppers feeling short-changed by a lack of price promotion? Absolutely not.
In line the findings of both the Which? and CMA investigations, shoppers are frustrated by how complicated it has become to complete simple grocery missions. Talking to shoppers has suggested they don’t like the feeling of being ‘mislead’ over value.
But regardless of the rational response, in-store research shows that promotions can now mean it takes longer for shoppers to make decisions at fixture as they are overwhelmed by different deals – shopping has become more difficult and time consuming. They have become deal blind.
Need for change
This undermines some of the fundamentals of shopper marketing and stops retailers and brands being shopper-centric. No wonder they are going elsewhere.
So after the intervention? What next? Can brands go cold turkey? Like any addiction, I’m afraid it’s not going to be as easy as that. This is deeply ingrained organisational behaviour and it will take very brave marketers to be the first movers away from the cul-de-sac of price promotions.
But the great news is it refocuses both opportunity and budget on engaging shoppers in more creative and innovative ways. Give people a reason to shop at your store or choose your brand for more than just a few pennies saved.
Help them experience your brand; connect with them on a more fundamental and emotional level. The results will be sustainable and far more commercially rewarding.