It is a classic conundrum for marketers: if your brand talks non-stop about price, what happens when your prices have to go up? And if your brand is a premium one, will talking about low prices damage your brand’s equity?
In the past month, Comet, Asda and Superdrug have been using messages that emphasise quality over price. Superdrug, which has previously focused on deals more than its upmarket rival Boots, last week launched a push towards quality in its first TV ads for ten years. Commercial director Steve Jebson says the campaign aims to establish a brand message. “The ads are very brand-focused and are not just about deals and mascaras,” he says.
At the other end of the scale, premium supermarket Waitrose last week unveiled a heavyweight price-match push (see Getting The Equation Right), and British Airways included its first-class cabin in its September sale – a first for the airline.
Ryanair, the airline known for pushing its low prices the hardest, may also start to focus on quality. Chief executive Michael O’Leary told the Observer in September that selling its seats for an average of £33 was no longer feasible, in a dramatic departure from the brand’s aggressive pricing strategy.
He said: “We have to move away, over the next number of years, from being obsessed with having the lowest fares in the market.”
O’Leary claimed that talking only about low fares might be unsustainable in the long term, and that more of a brand or quality message might emerge, saying: “It becomes more about the brand game, telling all the lies that you need to tell to get the fares up.” He also signalled that Ryanair might lessen its efforts to court controversy if and when it does move towards a more quality-focused message.
According to Wendy Lanchin, planning and strategy director at agency The Marketing Store, many brands are moving away from a price-led strategy because consumers are becoming choosier.
“People are thinking more about how they spend their money, considering factors beyond price. The kind of price offer saturation the market has had across so many categories for the past two to three years is making people look for differentiating factors,” she says.
The normally price-focused supermarket Asda relaunched its own-label food range earlier this month with a push towards quality. Chief executive Andy Clarke says: “We’re relaunching our core Asda brand, Chosen By You. We’re sending a clear message that Asda will now drive as hard on quality as it does on price.”
The retailer is quick to add the claim that its own-label range will be up to 20% cheaper than branded goods, so while talking about quality, it is also seeking to tell customers that prices will not be affected.
Asda’s George range of clothing has also had a quality refocus this year. In May, for example, the retailer introduced a 100-day returns policy. Lanchin predicts that the supermarket will continue to pick and choose how it injects quality messages into its strategy.
“Asda will always focus on EDLP (every day low prices), but it is also about having quality hotspots across the total offer,” she says.
Having a three-tier pricing structure, where there is a basic or cheaper range, a standard own-brand and a premium offering also allows brands to be flexible with the price/quality balance, says Lanchin.
In fashion, Next and Primark both warned in their results in September that the rising cost of cotton will mean an increase in store prices. While Next says it “will be able to mitigate some pricing pressure through alternative sourcing” and so hopes to be able to absorb the VAT increase starting in January 2011, the prices of its next season’s clothing might go up.
Chief executive Simon Wolfson said in Next’s annual report last month: “For 2011 we are experiencing significant product cost price pressure. The price of cotton has increased by 45% since this time last year, which is pushing up fabric prices… These input costs combined with the impending rise in VAT will make price rises inevitable in the spring of next year.”
Primark, known for its rock-bottom prices, has also warned over price hikes. The Marketing Store’s Lanchin says: “I think Primark may take a leaf out of Asda’s or H&M’s book and start to do more designer-led ranges. You don’t necessarily have to advertise that sort of thing – it can be talked about through PR or in store.”
Rupert Thomas, marketing director at Waitrose
For us, brand price match builds on the success we had with Essential Waitrose last year, which now makes up over 17% of our sales. The price match is in some ways a means of extending our appeal further.
All the research we have done suggests that customers want to do their full shop with us. Obviously a key part of that is assuring them of value for money on their favourite brands as well as on Waitrose own-label.
Our policy is to match Tesco on 1,000 branded products so in some areas perhaps the distance [in price] between own-label and brand has been narrowed. About 60% of all the branded products we sell are included.
We are a very ambitious brand and are now represented in parts of the country where we don’t have such an established track record. Part of that message is talking about the Waitrose brand, and the products.
For example, this year we have launched “Seriously from Waitrose” and “Duchy Originals from Waitrose”. So as much as we strengthen our quality credentials we think it is important to reassure on price.
Quality will always be our differentiator. Price will never be the reason to shop at Waitrose, but we don’t want it to be the reason customers don’t shop at Waitrose.
We think there is more to value than just price. We think it is about balancing quality and price and that is a formula that every retailer will treat slightly differently.
Brand price match is very much about price reassurance. Price is never going to be our sword.