Tesco’s Big Price Drop is a change in direction

Tesco’s decision to end the Double Points promotion to fund £500m worth of cost cutting signals a shift from Tesco’s previously loyalty focused strategy towards the kind of everyday low price approach that Asda has been pushing for a while.

While the price cuts will be welcomed by shoppers, withdrawing Double Points won’t go down too well.

Ever since the Double Points initiative was introduced two years ago with the relaunch of Clubcard, observers and analysts talked about the risk Tesco faced if it ever withdrew the offer.

In effect, by introducing such a generous offer, Tesco made a rod for its own back.

Tesco never said that it would be a permanent fixture, but when shoppers get used to getting something for nothing, taking it away is like a slap in the face for those customers that have been wooed with loyalty promises.

It’s the saving that Tesco makes from revoking Double Points that is funding the £500m price cutting drive so while it is giving shoppers lower prices and a more tangible way to make savings, it’s doing so by taking away a valuable added value reward.

While a simplified promotional strategy and lower prices all round will be welcomed by shoppers who are looking for more tangible ways to save money, and see exactly where they can save money, it is a change of tack for the supermarket.

Throughout the recession Tesco’s message has been focussed on the role that its Clubcard scheme plays in helping shoppers get more bang for their buck and drive traffic to stores.

When it launched, Tesco’s marketing director Carolyn Bradley told Marketing Week that Double Points was an investment “where [shoppers] want it” and it managed to add 500,000 more Clubcard members in the first few months after the relaunch, but now two years on, it doesn’t seem to have had the desired impact, and Tesco is changing tactics.

Tesco’s market share has been stagnant overall in the past 18 months, and it will be hoping that the Big Price Drop can address this and attract new shoppers through the door, but Asda has been following the every day low price path throughout the recession, and hasn’t seen it’s share improving either.

Despite the noise about the worsening economy and the biggest squeeze on household budgets since the 1920s, it is Waitrose, Morrisons and Sainsbury’s – none of which have an overtly price led message – that have been gaining share.

The discounters, Lidl and Aldi have also been growing way ahead of the market, but Tesco’s price cuts still can’t compete with their strong price message.

It will be interesting to see whether the Big Price Drop will kick start Tesco’s share growth.