Brands battle over best approach to pricing

New data suggests price match schemes don’t attract much uptake from consumers, but they do have an effect on perception of value while vouchers are more likely to drive sales, so marketers must use these tactics in the right situations.

Price match schemes and guarantees get little traction when compared with discounts and vouchers – one reason supermarket Morrisons abandoned the tactic this week – but are they still effective at promoting brand trust and perceptions of value?

New research shows that only 12% of 2,000 respondents take advantage of price promises or guarantees to match other brands’ prices in-store, with their popularity slightly higher among those aged 45 to 54 (14% of whom actively price match offers) and 16 to 24-year-olds (8%).

By comparison, the report by predictive analytics firm Blue Yonder shows that half of shoppers use price comparison websites to find bargains and four in 10 use voucher codes.

The most important statistic from the report shows that 84% of shoppers are using some form of deal hunting, rising to 95% of 16-to 24-year-olds, so brands looking to give consumers value for money need to have a compelling offer. However, it’s important to consider whether it is right for the brand’s objectives, and what the effects are on brand perception.

Added value of price match

Andrew Kirkcaldy, group brand director at online retailer AO.com, defends price match schemes despite their low uptake among consumers, because they complement the brand’s positioning without creating an expectation of discounts.

“Price is not a differentiator for brands, as it’s so transparent online. Where we want to differentiate is customer service and providing the best price every day. [Our] price match promise is a way to reinforce that message because if people do find it cheaper, it’s an easy process to apply it.”

In its approach to pricing, Kirkcaldy prefers to use mechanisms that add value rather than those that are discount-led.

He says: “It’s more credible to have an everyday low price and price promise than a discount. It’s a confidence and trust element, and going forward, it’s [going to be] a massive differentiator in the market. You have to be right on the price because consumers are price savvy.”

EDF Energy is currently running a TV campaign promoting its flagship tariff, the Blue+Price Promise, which offers customers a low fixed price, the ability to check whether they could be better off elsewhere and no exit fees if they choose to leave. In the energy market, price is a source of frustration for many customers looking to get a good deal, as comparisons can be confusing.

The key issue is that it’s difficult to work out what the best deal is without going through a full price comparison on a specialist website. Even then, the calculations are generally based on a national average of regional prices at typical consumption, rather than a customer’s actual consumption, according to Martin Stead, marketing, digital and sales director at EDF Energy.

Therefore, rather than just a statement of value, the price promise EDF Energy offers includes personalised information about the best option for a consumer, as the service gives a real-time quote based on their consumption with correct prices for their region.

Stead says: “Others use the words ‘price promise’, but often there is no promise at all attached to the tariff, and even when there is, it is generally for [matching] prices against the supplier’s other tariffs, not competitor tariffs in the market.”

For travel brand Lastminute.com, it’s important to offer value deals to customers but “it’s not just about beating the competition on price”, says director of brand marketing Amanda Cumine. “It’s more about the service we can offer and continuing to reinforce the customers’ trust they have in our business and our brand.”

EDF’s Blue+Price Promise offers customers the opportunity to compare their energy tariff with other suppliers

Cumine adds that Lastminute.com’s price match guarantee allows customers to make a decision quickly and takes the hassle out of shopping around because they know if they do find a cheaper holiday, the company will refund them the difference.

Although many other travel brands offer several variations of price match schemes, Lastminute.com is not worried. “As more travel companies are offering this and promoting the concept, it does raise awareness of price promises as a whole, so customers are actually more likely to ask if you offer it,“ says Cumine.

Vouchers address different needs

The alternative to price matching is to offer explicit discounts against the full price of goods or services. The uplift for retail brands when using vouchers and discounts could be as much as an extra 25% in sales revenue per month, according to research from Vouchercloud.com.

Although the voucher provider has an obvious vested interest in the findings, the report is based on an analysis of on-site data, claiming that an average retailer offering discounts on their products can generate an additional three-figure increase in sales per month through providing discounts and vouchers. It looks at 875 retail and service businesses from around the UK that have been running for at least two years and offer discounts to customers.

The research also lists the motivations these retailers have in providing voucher codes and discounts. The top five are: attracting new customers (cited by 74% of respondents), meeting sales targets on a particular product or service (61%), rewarding existing customers (58%), increasing brand awareness (50%) and boosting a new product launch (32%).

Respondents were also asked whether some discounts drive more sales than others and the most popular deals were discounts of 20% or more off the full price followed by ‘freebie’ vouchers and offers.

Vouchers also offer an opportunity to track a customer’s journey across channels, whether it’s in-store, online or on a mobile. Paul Lewis, senior director of marketing at VoucherCodes.co.uk, says: “A price promise is very much on a single channel level and it doesn’t really help much in building a profile of the customer – it only works on a transaction by transaction basis.”

However, a code can be used to decipher how consumers shop as they span multiple devices, according to Lewis. He says: “A consumer can receive a voucher in an email, for example, open it on their phone but redeem it online or in-store. As a result, single-use codes are one of the simplest ways of tracing the customer journey across channels.”

Vouchercloud believes it shouldn’t be a case of choosing either vouchers or price matching but it should come down to what influences consumers to shop with a brand.

Chris Johnson, head of operations at Vouchercloud.com says: “It’s a case of appealing to the end consumer. Whether you look at it from a price matching scheme or through offering vouchers, savvy consumers now expect to be able to receive both and will go out of their way to source discounts; it’s the way consumer behaviour has changed over the years and businesses are increasingly adapting to work with it.”

Johnson believes that trust in a brand shouldn’t differ according to whether the consumer has come armed with a voucher or a lower price from elsewhere. What is important is that the brand feels content and confident that they have a loyal customer who wants to shop with them.

He says: “Consumers will go out of their way to make sure they are getting the best value from their purchases. It’s important that a consumer can be heavily influenced through both a voucher and price match.”

Although it is clear that vouchers and discounts are popular with consumers, the motivations behind using them and why brands offer them differs from price match schemes, which is about instilling trust and therefore brand loyalty, rather than one-off rewards.

Brands therefore need to match the mechanism they use as an offer, whether it’s price match or vouchers, to what they want to achieve.

Supermarket wars

Brand match and price promises at supermarkets are rife, with the big four supermarkets in particular using these claims to steal market share from one another in a constant battle over price.

Sainsbury’s has put its marketing weight behind its Brand Match scheme, which lists how much a customer has saved on branded groceries compared to Asda, and if there is no saving, a voucher is supplied to the customer for the price difference off their next shop.

Speaking at Asda’s second quarter financial results for 2015 chief customer officer Barry Williams said Sainsbury’s Brand Match comparing its prices to Asda’s was a  “huge compliment”.

He added: “What better endorsement of our price value proposition that every time a customer walks through at the checkout, they get a receipt and a little green thing saying Asda. We couldn’t ask for any more.”

On price, Williams believes “you have to keep on running”, and said Sainsbury’s that “it’s their job to catch up and if they want to do that through vouchers then good luck”.

Asda’s president and chief executive, Andy Clarke, agreed with this sentiment, arguing that offering consumers “bargains through deep short term promotions and vouchers” is “not the game [Asda] are in” but rather a focus on long-term stability and branding. Both Sainsbury’s and Asda have struggled with falling sales over the past year, however.

Morrisons, meanwhile, got into hot water over its Match and More loyalty scheme this week citing consumers’ confusion about when points were awarded. It is also believed to have been expensive to run.

Tesco offers a similar price promise to Sainsbury’s on fresh, branded and own-label produce, checking baskets against Asda, Sainsbury’s and Morrisons, and if a consumer’s shopping could have been cheaper at those supermarkets, it issues a voucher for the difference up to £10 in value.

A retailer that is arguably following a different path is Waitrose, and it could be paying off for the brand. Figures from Kantar Worldpanel for the 12 weeks ending 19 July show that Waitrose saw sales accelerate to 3%, which was credited to customers taking advantage of the  launch of the Pick Your Own Offers initiative. The scheme started in June, featuring personalised offers, including customers getting 20% off the top 10 items they buy the most.

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