Knowledge Bank Blog, Pricing & Promotions, Shopper Communication

Best Value or Lowest Price?

How are you framing the choice to shoppers?

How many of you have taken a short haul economy flight with BA recently?

If you have, you will have probably noticed a small, but significant, change in the service.

The drinks trolley comes round.  You select something and prepare to sit back and relax for the rest of the flight.  Your drink is put on your table and then a card machine appears.  Maybe you had a small cup of tea – that will be £2.30.  Or maybe you went for a G&T – in which case you are £6 lighter.  You quickly look around to check you are on a BA flight not  Easy Jet one.

BA say this is all about offering passengers a better food and drink experience (M&S are now providing the food).  But we all know this is about reducing costs.  Trying to get ticket prices down to compete more effectively with budget airlines.

But, is this the right thing to do?  By stripping back the experience (this is one of a number of service cut backs they have made over time), BA are essentially saying to customers… the choice is now about price.  Choose based on who has the lowest price, not who gives the best value.  And when you do this, there can only be one winner.  Whoever is the cheapest.

Why is this important? Well, in recent years a lot of established FMCG brands have faced battles with lower priced challengers – other brands, private label, Discounter brands.   There are two ways to fight this battle.

The first is to fight it on price.  Either by reducing your base price or by promoting regularly and deep – so reducing your average price.  However, the more that you do this, the more you train shoppers to make a choice based on price.  “I’ll buy whichever product is the cheapest or on deal”.  This is bad for brand leaders.  It is also bad for category value.

The second way is to fight it on value.  Value is about the benefits the shopper gets, for the price you are asking them to pay.  It is about quality and price.  Not just price.  Value is good for brand leaders.  Value is good for categories.

We think too many brands have allowed themselves to be drawn into a battle on price.   When they should be fighting a battle on value.

So, how do you make the battle about value and give yourself a good chance of winning it?

Be benefit led.  This can be done at a category level – e.g. why buy fruit juice instead of water?  Fruit juice gives you 1 of your 5 a day.  It can be done at a brand level – e.g. why Tropicana or Innocent is a better choice than private label.  The key here is to be crystal clear.  Prioritise one lead benefit.  Say it clearly.  Say it consistently.  The more you do this, the more you define the battleground.  A choice based on value not just price.

Of course you need to be really clear on what the main benefit you want to communicate is.  It is amazing how many brands aren’t.  If you aren’t clear, then there is no way shoppers are going to be clear.  Heinz Ketchup is a great example of getting this right.  Everything they do is designed to support the ‘Grown not Made’ proposition – their message, the design of their SRP, the activation they do (e.g. free tomato seeds).  This invites the shopper to think about value not price.

Frame value effectively.  This can be particularly important for brands that are at a significant price premium in a category.  Pampers is a good example.  They are more expensive than some of their competitors.  But they re-frame value for the shopper.  They often talk about price per nappy.  Is £10+ a lot to pay for a pack of Pampers?  Yes.  Is 15p a nappy a lot to pay?  Probably not.

Fairy liquid does this in another way.  They talk about how long the product lasts.  They consistently talk – on pack, on SRP, on TV – about lasting 50% longer.  If the choice the shopper makes is on absolute price, Fairy loses.  If the choice is on value – how long it lasts – Fairy is much more likely to win.

Protect base price.  The easiest thing to do is price promote heavily.  Yes, in the short term, it can work.  But, it can be the worst thing to do in the medium term.  You re-set shopper expectations of what a fair price for your brand is.  You make it harder to sell at full price in the future.

You can’t just switch off promotions, but you can promote smarter.  You can promote infrequently, so that shoppers don’t fall into sync with your cycle.  You can vary discounts, so you don’t train shoppers, for instance, that £1 is the price to pay not £2.  You can prioritise visibility over depth of discount (where possible).  You can do more added value promotions – e.g. Walkers Do Me a Flavour.  Most importantly, you can make sure that promotions are a bonus reason to buy NOT the reason to buy.

Exactly the same choice presented in different ways can lead to very different outcomes.

If you don’t define the choice, somebody else will.  And define it on their terms.

We are going to take a short break from blogging over Easter but will be back, chocolate fuelled, on 21st April.  Enjoy the bank holidays and have a Happy Easter!