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[16 comments]

Giant Eagle Locks In Prices for the Holidays

October 12, 2012

Prize freezes are not a new tactic at retail, but one that merchants go back to time and again to establish a positive price image with current customers and reach out to those shopping elsewhere. Sixty-one percent of respondents to a 2011 poll on a Wegmans price freeze program thought it would be most effective in helping the chain keep existing customers while 36 percent said it would be equally effective in bringing new consumers.

Giant Eagle, the largest grocery chain in the Pittsburgh market, has launched its own "Low Price Lock" campaign, first reducing and then promising to hold the prices on 300 plus items until Jan. 2.

"These are uncertain times for us in terms of the costs we see from suppliers and uncertain times for customers in terms of the prices they see," Rob Borella, senior director, marketing for Giant Eagle, told the Pittsburgh Post-Gazette. "This is an effort to take away that uncertainty."

According to paper's reporting, Giant Eagle takes this step during a year when it has been subject to direct price comparison advertising from Walmart. The grocery store operator is also expanding its test of its Valu King limited assortment concept in the Pittsburgh area.

Discussion Questions:

How effective do you think price freeze programs are in growing retail market share? What do you think Giant Eagle should do as an encore when the current program expires right after the new year?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How effective are price freeze programs in growing retail sales?

Comments:

As long as customers feel Giant Eagle has given them a value with security, I believe shoppers will show their appreciation...with their grocery dollars. Why does the program have to expire? Perhaps they will select other products and keep their prices secure for another period of time. Doesn't that encourage customers to keep checking what Giant Eagle is doing for them?

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Joan Treistman, President, The Treistman Group LLC

I think these programs are good if (a) you are trying to project a low-price image and (b) your prices really are very low relative to competition. Not clear that this is the case here. If you read the Post-Gazette article, only some of the prices are first being reduced and at least one of their competitors will not be undersold, nor is it clear whether they will raise prices in January. A lot of potential for this to backfire, especially if Walmart's prices remain lower.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

Price lock programs have low effectiveness in growing retail market share. This is a promotional gimmick. Nothing more. Unless Giant Eagle consistently prices their merchandise at or below Walmart, they will be subject to Walmart's price comparison media campaigns. They have to find better points of differentiation with Walmart: customer service, better quality produce and meats, more prepared foods, etc. In a race to the lowest prices, most supermarkets lose to Walmart.

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Max Goldberg, President, Max Goldberg & Associates

While holding down prices during uncertain times is a favorable tactic, one's reputation is a strategic ingredient in whether or not it will succeed as it is assaulted by competition.

Giant Eagle's locked-in price program will invite competition, particularly Walmart, to undercut them. If that happens, an encore doesn't seem appropriate.

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Gene Hoffman, President/CEO, Corporate Strategies International

I will be anxious to see Giant Eagle's numbers at the end of the period to see if they are up or down vs. a year ago, and how they compare to competition during the same period. However, in my opinion, consumers don't react as well to price freezes as they do promotions. Oddly enough, consumers do not actually "expect" prices to inflate, so in my opinion, they are less motivated by the proposition, because actually they "feel" that prices are already too high. That's why they respond better to "promotion" and perceived "deals."

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

My read: This is a pure promo program. It should help their ability to lift some eyebrows across the non-Giant Eagle consumer base in Pittsburgh. New business may be attracted to Giant Eagle, but I would not expect a stampede. Good creative at the right time of the year. Addicted couponers will love this program!

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Tom Redd, Vice President, Strategic Communications, SAP Global Retail Business Unit

Hello Publix! Can you take a look at this? I would be more than willing to purchase "price freeze" items if you are willing to do your part.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

Programs like these are gimmicks...but they can be very effective, particularly among shoppers who are pretty shocked at the price of certain items these days (shopped for beef lately?) I'll bet that Giant Eagle's competitors will watch this carefully.

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Cathy Hotka, Principal, Cathy Hotka & Associates

Perception is reality. If this program helps shoppers believe that Giant Eagle is favorable on pricing (and is backed up when the shopper compares to others) and they can indeed not be undercut by the competition, this could be a good program. On the other hand, it may indeed invite competition to beat their prices which may make the program less successful.

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Brian Numainville, Principal, The Retail Feedback Group

Not sure this makes a difference on the path to purchase. Will such a pledge mean that people no longer check the circulars? Hardly.

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Joel Rubinson, President, Rubinson Partners, Inc.

It may be a gimmick and invite specific price comparison from Walmart, but the determination of its effectiveness will be determined by the lift or lack thereof it achieves. At the outset it should help current customers to stay and encourage trial for some that are yet Giant Eagle devotees.

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Steve Montgomery, President, b2b Solutions, LLC

Notice "...to establish a positive price image." So far, so good. Pricing is usually more about image than reality. But it is VERY costly to "pay the customer to buy," which is essentially what price promotions are. And THEN we are going to get you in January when the bills come due for all that holiday shopping.

The strategy is the essence of HI-LO pricing, which is economically irrational. However, that doesn't mean you shouldn't do it. Las Vegas is not rational, either, but can be highly profitable for the casino operators. Stores ARE casinos.

And shoppers LOVE the prospect of winning in the gamble -- low probability -- and will accept their nearly guaranteed losses -- IF they perceive an interesting possibility of winning. That's why EDLP has NOT totally wiped out HI-LO. Always just remember that the store is not a highly rational place; certainly not for the shopper, but not for the retailer, either.

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Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Adjunct Senior Fellow, Ehrenberg-Bass Institute

Giant Eagle is a premium priced grocer, so they are basically locking in high prices. Bottom Dollar's entry into their markets now offers ad match minus a penny. So I don't see this as being very effective. Competitors like Walmart, Target, and Bottom Dollar will do more to hold down prices at Giant Eagle rather than some price freeze promotion. Your are darn right Giant Eagle will freeze prices, or they will look foolish if they don't when having to compete with Walmart, Target, and Bottom Dollar. Overall, this is a silly gimmick.

David Livingston, Principal, DJL Research

Trust has always been an important component for consumers in selecting and buying in retail stores. The retail food industry has always had a high trust factor when compared to other retail channels. Remember, trust was a major factor that online sales had to establish.

A price hold program comes out on both sides of the trust factor. First it says the retailer has been charging too much and now wants to be competitive. This erodes consumer trust. Second, it says you can trust us for prices on these hundred items, but we are not guaranteeing the other thousands of items in the store. This does add to trust in a limited way. The price hold does influence the consumer in selecting stores as they know what to expect. The fact is price holding is just another form of promotion, and too much of any promotion loses its appeal.

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W. Frank Dell II, CMC, President, Dellmart & Company

A price freeze program suggests an "everyday low prices" approach, which doesn't necessarily mesh with Giant Eagle's pricing strategy -- it has higher regular prices but lots of sales, a generous coupon policy, a loyalty card, Catalina coupons, a fuel rewards program, etc. Grafting everyday low prices on top of that would seem to muddle the message.

And it's hard to spin a positive out of a "negative." In this case, saying "we won't raise prices" is only an admission that "we won't be lowering prices on these items either." So no point in holding out for a sale -- this is as good as it's gonna get. And among those who follow Giant Eagle closely, some shoppers say they're not all that impressed with many of the "locked in" prices.

BI-LO has a price lock program in which they lock in SALE prices for an extended period. Promising long-term low prices would seem to be a more effective and attention-getting strategy than simply promising not to make your high prices even higher.

Bill Clarke, Publisher, CouponsInTheNews.com

The key behind this promotion is to make sure the customers know about it. Awareness is the first step. Locking in prices over the next few months probably doesn't impact the bottom line much, but the message is one of good will. If that helps get new or existing customers through the doors, then the promotion did it's job. However the follow up to the promotion is key. That's where customer service and customer experience kicks in. If the employees fail to take advantage of the results of this (or any) promotion, then it is just a waste of time and money.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

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