Knowledge Bank Blog, New Product Launches, Pricing & Promotions

Avoiding Value Own Goals

How to manage shopper expectations of what a fair price is.

Last week we talked about Value Own Goals.  These are things that drive short term sales uplifts but re-set shopper expectations of what is a fair price for a brand or category.  This week we wanted to talk about what retailers and brands are doing to avoid these.

Here are 3 tactics we are currently seeing in the marketplace…

Tactic 1 – moving average price closer to base price than promoted price.  One of the big supermarkets has been reducing the base price of heavily promoted products, then running shallower promotional discounts from the new price.  Whilst this is hurting some brands in the short term, it means that shoppers can justify buying at base price more frequently.  If base price is now £8 and promoted price is £6, the shopper feels less compelled to wait for the £6 each time.  When base price was £10, they felt they had to wait.  We expect this to slowly reduce the volume sold at a promoted price and increase the volume sold at base price.

Tactic 2 – making the promoted price less visible and obvious to the shopper.  One core grocery category has moved away from a price discount promotional strategy to a volume based strategy.  This is particularly good for this category because it is expandable – the more of it you have, the more you typically consume.  By moving to a volume strategy, e.g. 2 for £4, the promoted price of £2 is less obvious to the shopper than a price cut from £3 to £2.  You give the shopper a good deal, you drive volume for the category, whilst minimising the risk of re-setting price expectations.

Tactic 3 – managing price expectations of new products.  A lot of NPD is supported by a significant price discount, which all shoppers can see.  It encourages trial at that price.  However, when the shopper next comes to buy the product they have to decide if they are prepared to pay full price.  It was good value at £1, but is it good value at £2?  One brand has recently given money off coupons (50p) for the NPD when shoppers buy a product from the current range (coupon is attached to the pack). This not only targets shoppers who are most likely to be interested in the new range, but protects the base price of the NPD.  The saving kicks in at the till not at the shelf.

These are a few of the tactics we are seeing.  However, irrespective of the tactics, one underlying principle holds.  You should always ask yourself ‘what impact is this activity going to have on expectations of my base price’?  The more aware of this you are, the more likely you are to avoid value own goals in the future.

Have a great weekend and speak to you next week.