The Big Price Drop
Dr Steve Smith, head of thought leadership at Starcom MediaVest Group, looks at the consequence of Tesco focusing on price cuts alone…
Tesco has announced that it is continuing its Big Price Drop campaign into 2012 with another wave of price cuts in stores across the UK.
The UK’s biggest supermarket has already cut the price of over 350 new products spread across basic items including bread, meat, fish, fruit and vegetables.
Tesco claims that a trolley shop containing a selection of 50 of these reduced staples will reduce in price from £64 to £56 – a saving of £8. This represents an overall cost to Tesco of more than £500 million.
UK CEO Richard Brasher says in Tesco’s press release: “As we look ahead to 2012 people across the country are saying they need more help with the cost of living… Big Price Drop is not a one-hit wonder. It is a rolling campaign to help customers save more money every day at Tesco on the essentials they need the most.”
Tesco isn’t alone in stressing its price competitiveness. Sainsbury has decided to continue its Price Match scheme into 2012, even though it expected to run this scheme only until the end of 2011.
Clearly, with squeezes on incomes and rising utility and sky high petrol prices, people want lower food prices, especially when food has increased in price by 35% since 2005.
One consequence of Tesco focusing on price alone in its marketing is that there will be less to distinguish the supermarket from the likes of Asda, Aldi and Lidl in the minds of many of its customers
On the one hand, this is good for Tesco because it will help to shore up its more cash strapped customer base as well as appeal to shoppers of these competitors. However, our research using our proprietary tool spaceID shows that values around community and pleasure are particularly important to Tesco’s middle and more upmarket customers.
By neglecting or at best underplaying the importance of these values to these customers, Tesco is vulnerable to having some of these customers leave the supermarket to join Sainsbury and Waitrose.
Of course, a significant proportion of regular Tesco customers find that the supermarket’s loyalty programme is a reason to remain at Tesco. But with Sainsbury and Waitrose promoting competitive pricing andquality, community and (especially for Waitrose) pleasurable experiences in-store and at home, their loyalty will stretch only so far.