Knowledge Bank Blog, Pricing & Promotions

Value Own Goals

Are you re-setting expectations of what a fair price is?

The World Cup bandwagon is rolling, so we thought we’d jump aboard with a football reference, as we turn our attention to something we call ‘value own goals’.

These are things that drive short term sales uplifts, but make it harder to sell at full price in the longer term.  They are things that re-set shopper expectations of what is a fair price for a brand or a category.

What do we specifically mean?

Well, there is the big, deep deal in one of the supermarkets or the eye catching price in a non-core channel.  A shopper only needs to be hit by this once and it fundamentally alters their perception of what a fair price is.  They saw, or bought, the brand last time for £3, but now it is £6.  That’s expensive. At best they can’t justify the higher price to themselves, at worst they feel like they are being ripped off.  So, they don’t buy again until they see it back at £3.   Everyone reading this will have at least a couple of products that they refuse to pay full price for.  Finish Dishwasher Tablets anyone…?

Alternatively, there are brands that are making promotions, and the promoted price, the norm.  The more regular the promotional cycle the easier it is for a shopper to adjust their purchase behaviour, and fall into line with that cycle.  Why buy this week, when I know it is going to be on deal next week? This is particularly acute for categories that are dominated by two brands.  When Brand A is not on deal, Brand B is and vice versa.  As long as the two brands are of acceptable quality, and they usually are, you never need buy at full price again.  In a category where £3 was a fair price, £2 is the new norm. If your last 5 purchases were at £2, why would you think any differently?

So, what are the red flags to be aware of, the things that could lead to value own goals…?

Watch out for the big, deep discount.  Ironically, the bigger and bolder you make it, the higher the sales uplift in the short term and the bigger the risk of re-setting value expectations in the long term.  Win today, lose tomorrow.

Watch out for the eye catching price precedent in non-core channels.  Are they affecting your ability to sell at full price in the supermarkets?

Watch out for a predictable promotional cycle.  The more predictable the cycle, the more you encourage shoppers to fall into line with it.

And watch out when your average price is closer to your promoted price than your base price.  The average price is the ‘real’ price in shopper’s heads, not the price on the shelf edge label.

Next week we will talk about what some brands and retailers are doing to try to avoid this.