The YouGov Take: Retail Pricing

TOUGH TIMES.
Tim Britton, Chief Executive, UK, YouGov
SMARTER PRICING.

Today many retailers, and their suppliers, are wasting millions on poorly targeted price offers; giving value away unnecessarily and squandering resources when it has never been more important to make sure each bullet counts.

Research conducted by YouGov’s retail consulting team shows that targeted price reductions aimed at specific customer segments in particular categories (and sub-categories) can help retailers achieve much the same overall effect, but with significantly less investment. Take grocery retailing as an example – YouGov surveyed 2,000 British adults across a range of typical supermarket categories. This confirmed three often overlooked shopper insights:

Frequency dictates price awareness far more than value. Shoppers are more likely to notice a price change on lower value, higher frequency items (such as milk and fresh fruit) than a price change on slightly higher value, lower frequency items (such as alcohol).

Categories have unique price tipping points. The shift from a 10% to a 20% discount on cleaning products generates twice the upswing in category price awareness (+9%) than on meat and poultry (+4%).

Some category shoppers are easier to poach than others. Younger life-stage groups, for example, notice price less in general. They are, however, more likely to try a different shop to get a better deal on specific categories like alcohol and toiletries. In both of these categories, two-thirds of under 35s are willing to shop elsewhere to find a better deal.

For Sun Tzu, exploiting subtle nuances is critical to gaining the upper hand – for retailers this means deploying price investment into categories and subcategories where it will have the greatest impact and hoarding it where it doesn’t count.

So if the art of price warfare is about the careful calibration of price at the sub-category level, then many retailers, not just those in the grocery sector, need to ask themselves three fundamental questions about their current pricing strategy and tactics:

1. Which categories and sub-categories measurably drive overall customer price perception?

2. Do we know what variances exist in price sensitivity by sub-category and customer segments, and are we using this insight fully within the business?

3. How do we determine the right mix of defensive and offensive pricing by category vs. our competitors?

In short, be smart, be targeted and pick the right price battles.