Is a price message the answer to the rise of the discounters?

Over the past week, most of the supermarkets have shown their hand over how they are combatting the big changes going on in grocery retail, namely the rise of the discounters and the capricious behaviour of shoppers.

There are two clear camps. Those who think the answer lies in being more like the discounters and communicating that to customers and those who think it lies in being less like them and using their marketing to highlight their points of difference.

In camp one we have Morrisons and Tesco.

Morrisons has announced price cuts across 1,200 products, supported by a “I’m Cheaper” marketing campaign that hammers home that message to shoppers. Over at Tesco we’ve seen the introduction of “pound zones”, as well as its £200m investment in price cuts and “Down and staying down” marketing message.

In camp two we have Waitrose and Sainsbury’s. Both believe that in order to counter the rise of the discounters they need to differentiate.

Outgoing Sainsbury’s chief executive said yesterday that Sainsbury’s needs to be a “better version of itself” rather than a “poorer version of the discounters” if it wants to maintain its recent outperformance of the market. So it will continue to communicate its values and “Live well for less” strapline and invest in in-store skills.

His comments echo some of those made by Waitrose managing director Mark Price last week. His supermarket’s strategy is to do the opposite of everyone else: continue investing in promotions and focusing its brand campaigns on its ideas such as its partnership structure and community work, rather than shouting about prices.

It’s hard to say which strategy will win out because in many ways the comparison isn’t fair. Tesco and Morrisons are trying to turn around declining sales and market share, in many ways a harder job than Sainsbury’s has in maintaining its performance and Waitrose has in building on its momentum.

It is also the case that different supermarkets have been affected differently. Morrisons claims it hasn’t lost many customers but has seen a reduction in how much they spend. Waitrose, meanwhile, says it has lost no custom from its most important shoppers, but has lost out among those that are less loyal.

It is important that supermarkets are not burying their heads in the sand ignoring the rise of Aldi and Lidl and hoping they go away. That hasn’t’ worked in any other industry and it certainly won’t work here.

However, Morrisons and Tesco’s marketing strategy look a little desperate, reducing the message to the lowest common denominator – price. That is important but so too are other things and that is what Sainsbury’s and Waitrose are relying on.

Walking around Sainsbury’s it’s easy to spot that their prices have come down and customers have no doubt noticed it in their shops. Why they realise is there isn’t a need to shout about it through expensive TV campaigns and billboards, that just invites comparisons with the Aldi and Lidl and leaves shoppers questioning why they were so expensive before.

As highlighted by the latest brand reputation survey by the Reputation Institute, it is not just about the price and what products retailers sell but what the brand stands for and its message. The supermarkets that remember that will win out in the long term.



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