Public Blog, Knowledge Bank Blog, Pricing & Promotions, Range & Portfolio, Shopper Communication

Creating A Value Halo

In 1920 Edward Thorndike, an American psychologist, conducted a test.

He asked some commanding officers in the army to evaluate their soldiers on three qualities.

He asked about their physical qualities – e.g. physique, voice, energy.  Their leadership qualities – e.g. vision, passion, courage.  Their personal qualities – e.g. loyalty, selflessness, cooperation.

His aim was to see how the ratings of one characteristic affected the ratings of other characteristics.

He found a BIG correlation in the commanding officers’ responses.

The rating of one of the qualities of a soldier (e.g. their physical qualities) were highly correlated with ratings of the other qualities (e.g. leadership, personal).  So, if a solider had high ratings, they were high for each of the characteristics.

He gave his findings a name.  The “Halo Effect”.

The halo effect has a big influence in our day-to-day lives.  We often form impressions based on a single element.  Then use that to form an overall judgement about someone or something.

It’s why you immediately have a view on the personality of the person who has just sped past you in a flash car.

Even though you know absolutely nothing about them.

Why are we talking about this?  The halo effect applies just as much in the FMCG and Grocery world.

For instance, Aldi and Lidl have a “value halo”.  It’s primarily driven by low prices.  Then reinforced by other things – limited range, simple merchandising, fewer checkouts – that signal value to shoppers.

BUT… this doesn’t mean that shoppers always buy the cheapest products.

Shoppers will often buy the premium ranges – e.g. Aldi Specially Selected or Lidl Deluxe.  They will often buy the brands that are available – e.g. Heinz, Coca Cola.  They will often buy products they weren’t planning to buy – e.g. ‘Middle of Lidl’.  They will often pick something up on impulse at the checkout – e.g. snacks, tissues.

This is important.  In our industry we often think that communicating value means that we are encouraging shoppers to trade down or buy less.

But the opposite can often happen.  If you can effectively signal value, you can encourage shoppers to trade up or buy more.

You can give shoppers confidence that what they are buying will be good value.

So, how you can create a value halo?

You could do it through PROMOTIONS.  Signature promotions that signal value for shoppers.  It could be things like Majestic Wine’s “Mix any 6” permanent promotion.  Great value for the shopper – they get a discount.  Great value for the category – shoppers are typically buying more expensive wines there.

It could be the 4 for 3 on craft beer singles.  Great value for the shopper – they get one beer for free.  Great value for the category – shoppers are still paying about £3 per can.  Three times the price per bottle of Peroni – a premium brand.

You could do it through TIERING.  Giving shoppers options at different price points.  Some shoppers will buy into the lower price tiers.  But many more will buy into one of the higher price tiers.  Coffee is a great example of this.  There are tiers within instant coffee.  Think Nescafe Original.  Think Nescafe Gold Blend.  Think Nescafe Azera.  Great value for the shopper.  Great additional value for the category.

Then you’ve got ground coffee.  Then you’ve got pods.  The price per pod is about 10x the price per cup of Nescafe Original.  A massive trade up.  But a pod is about a tenth of the price of a coffee from a coffee shop.  Great value for the shopper.  Great value for the category.

You could do it through FRAMING.  So, framing against more expensive alternatives.  “Dine in for X” deals are good examples.  “Dine in for £12” is a big trade up from the normal cost of a home cooked meal.  But it’s a big saving compared to going to a restaurant.  Great value for the shopper.  Great value for the category.

You could do it through MESSAGING.  So, building a value element into your communication.  It could be an explicit value message – e.g. Plenty Kitchen Towel “absorbs more so you can use less” or Fairy Liquid “lasts 2x longer.”  Great value for the shopper.  Great value for the category.

It could be an implicit value message.  Fever Tree is the classic example of this “if ¾ of your drink is tonic, mix with the best.”  It’s reframed the role of tonic.  It’s reset prices in the category.  Now you’ve got a (super) premium product that is the market leader.  Great value for the shopper – a better drink.  Great value for the category.

Creating a value halo is about giving shoppers confidence.

The confidence that what they are buying will be good value.  The confidence to buy more and to buy better.

If you don’t give them that confidence, someone else will.

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