How the poundshops are getting serious about marketing

Long seen as the destination of choice for giant multipacks of toilet roll and afternoon Cadbury’ Freddo binges, the rise of Poundland is now impossible to ignore. However, its cut price marketing strategy is likely to evolve to focus on brand building as much as price.

Having just toasted record Christmas numbers (sales grew 9.8% to £328.4m) and now embarking on an aggressive expansion strategy to hit 1,000 UK stores in ten years, the spotlight is now on the single price retailer’s marketing team.  Described by chief executive Jim McCarthy as “lean” – surely things are starting to evolve?

“Offering a simple business model is key for a cost-efficient discounter,” answers a stern McCarthy, talking to Marketing Week following its results announcement last week. He admits that the retailer, which floated for £800m last year, will continue to rely on word-of-mouth buzz through social media rather than big budget campaigns.

“I don’t want to change things too much, yet, although we will have to look soon at whether doing our first TV ad is profitable.”  Poundland’s marketing department, if you can call it that, is currently led by ex-Morrisons head of customer insight Gill Stewart-Clarke, with ‘minimal spend and a handful of staff,’ according to McCarthy.

Poundland, as shown by YouGov’s BrandIndex, which measures retail brands index score by looking at consumer perception of quality, value, reputation and satisfaction, currently has an index score of just 2.0. This represents a fall from the 4.3 it recorded six months ago, a statistically significant drop according to BrandIndex putting it just 32nd in a list of 41 retailers although ahead of rivals 99p Stores and Poundworld.

“The marketing strategy has to step up a gear if Poundland wants to go up a level like Aldi and Lidl have done, it can’t risk standing still,” reckons high-street retail expert Graham Soult, who expects a television campaign to follow the push in new store openings.

He believes the current low-key strategy is risky in such a mature market, with smaller rivals 99p Stores and Poundworld also continuing to grow.

The boardrooms of at least two big-four supermarkets are “deeply concerned” by the rise of Poundland, adds Kantar analyst Bryan Roberts, who believes the retailer will also continue to grow its food share – which currently accounts for 16% of sales – to grab a slice of the convenience market.

“Many supermarket boardrooms are just as concerned by Poundland as the two German discounters,” he believes. “They are making massive gains in categories such as confectionary, soft drinks and health and beauty.”

He predicts a TV sponsorship deal will happen soon to increase engagement. “If Iceland has them what’s stopping Poundland?”

Intriguingly, this is backed up by Poundland’s biggest rival 99p Stores. Although admitting the TV route doesn’t make sense currently, 99p Stores’ COO Tony Brown says it is the natural next step.

“I reckon within two years all the major pound shops will have a major TV sponsorship deal in place as we’re becoming just as big on the high-street as a Dixons,” he says. “We have to be sponsoring cleaning shows or soaps as those audiences represent the majority of our shoppers and key categories.”

Brown says 99p Stores will beef up its marketing strategy once it hits its long-term store target of 400 stores.

With Poundland continuing to push its multiprice format Dealz into Ireland and Spain, Brown believes multiprice will be a long term transition for the single price market.

“You’re already starting to see all of the pound stores introduce multiprice ‘Managerial Deal’ offers and that will intensify and evolve like the US single price market has,” he adds.

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