Disputes Over Price (Guarantees)
According to an announcement
in just-food.com, Wal-Mart’s UK subsidiary,
Asda, “has extended its ‘price guarantee’ to refund the difference
to consumers if it is not 10 percent cheaper than its main rivals.” That
story was published January 6, with the promotion due to launch officially the
following day.
An earlier guarantee was launched in April 2010 and promised vouchers
for an eight percent difference. But former Asda CEO, Andy Bond, upgraded the
offer to a “copper-bottomed guarantee — if the basket of food you buy
in our stores is not at least 10 percent cheaper than each of our major rivals,
we’ll put our hand in our pocket and give you back the difference.”
On
its website, Asda notes that its price guarantee “is powered by independent
price checker mysupermarket.co.uk, which compare the prices of 15,000 like-for-like
branded and own label products at Asda, Tesco, Sainsbury’s, Morrisons
and Waitrose.”
Customers entering their receipt details then are shown
how much money they’ve saved versus Adsa’s competitors. It has also created
an interactive app with a money back guarantee.
But, The Grocer magazine checked out the promise and published its
assessment just a few days later and found that figures from its regular Grocer
33 survey revealed, “Asda is a long way off its pledge to offer baskets
10 percent cheaper than its rivals.”
Over the previous eight weeks, The
Grocer said Asda only once offered
a basket at least eight percent cheaper than all its rivals. “On average,
it was just 1.3 percent cheaper than the nearest rival and occasionally it
was ‘more
expensive than at least one rival.’”
The Grocer 33 is “a weekly mystery shopping survey, tracking price, service
and availability at the five leading grocery retailers,” compiled by BrandView.co.uk,
described as “the UK’s largest online market intelligence tool for price
and promotional tracking and analysis.”
Charts on The Grocer’s website (www.thegrocer.co.uk)
show the scores from each week’s survey along with details of products, prices,
promotions, stores visited by the week’s mystery shoppers and products that
were out of stock. Price and promotion history can also be tracked “by product,
category and retailer.”
Verdict analyst Matt Piner’s opinion was “very few customers have
actually taken the time to check Asda’s price promise. This will rise now the
company has increased its promise to 10 percent, and the scheme will obviously
become more expensive to enforce. Asda is no doubt gambling the majority will
be reassured their shopping is cheaper without actually taking the time and
effort to check and -Â reclaim any savings.”
[Author’s commentary] The Grocer is not the only one
to dispute Asda’s sincerity. Tesco has gone so far as to make a complaint to
the Advertising Standards Authority, saying “It’s a cynical ploy to mislead
customers using a flawed comparison that excludes about half of Tesco’s range,
including lots of products that customers buy every day, such as fruit, veg
and meat.”
Discussion Questions
Discussion questions: What do you think of price guarantees as a marketing tactic? Do most consumers accept them at face value? Does today’s readily-available data and technology make the practice a different type of game?
Not withstanding the “extreme” price guarantee noted in the article above, low-price guarantees are brilliant for value priced retailers. Let’s face it, how many customers keep shopping for an item that they just bought? The expression of confidence in your prices is usually all it takes to get most consumers to believe you are a price leader.
To an experienced consumer this is an annoying gimmick. First the consumer must purchase only the items that Walmart will make eligible. Then I agree that few consumers will take the time actually compare their receipts just to save a small amount of money. It really would not be worth the time of most consumers, however, there are a few fanatics that will do it and they will be happy.
Just like Walmart’s ad match program, a few people do it however since most grocers require a loyalty card to get sale prices, Walmart uses that as an “out” so they don’t have to match prices. There are always a few extremists that will exploit a retailer’s gimmick policy, but Walmart seems to have put up some safety guards.
Asda wants shoppers to think they are lowest-priced and are willing to back it up financially. Either they are at least 10% lower, or they are not and will have shoppers looking for refunds. At that point, it’s a financial question–do they get more shoppers because of the lowest price perception and does that overcome the refunds?
Yes, most people will probably not look for refunds (just as most people do not redeem coupons). As long as this doesn’t become a PR nightmare, where the press repeatedly shows that Asda is being cynical and is not really lowest priced, it’s a great tactic if it pays out.
Tesco calling Asda on this will probably not be a good thing for Tesco–refuting propaganda never works.
Bad idea not to keep such a promise in this day of social media spreading word so quickly among consumers. Consumers may initially accept the promise at face value, but word will get out quickly and the whole thing could easily become a PR nightmare. My bet is that this offer will disappear within a month or two.
I seem to remember when supermarkets would give you double your money back for dissatisfaction with meat or produce purchases. I also seem to remember our scores for customer satisfaction and perception of our meat and produce departments improving. I also seem to remember do very few refunds.
The issue is perception more than fact. I don’t think we did major changes in our meat departments. Still at the end of the day a dead cow business. But customers see claims and perceive some basis for if not the claim, the relief if the claim is not met for them.
Low pricing guarantee’s can only be really shot down when a consumer spends the time shopping for themselves for their own items in both stores. More than likely, they choose one of them, and it’s the one they perceive being lower…and with a guarantee makes it all the better.
On a recent trip to an office supply super store to purchase a wireless router, I noticed that the price it was displayed for was not what I had seen online in an office supply super store’s ad. I asked the clerk. He checked the ad. It was marked correctly in the store. Silly me, I had gone to the wrong store. I mentioned in passing that might be the case that I was in the wrong store. The clerk quickly said, “Let me check their ad for you”. I was instantly given the competitors price and my purchase was made there.
As a result, they won me as a customer. Not just because of the price, but how it was handled and how helpful they were. They don’t blow their horn about it he said, but they always match or beat their competitors’ ad price.
Maybe doing it quietly and executing it effectively at store level is better than blowing a horn. In this case a sonic boom. Sonic booms can sometimes hurt.
I have been told that “Perception is reality” which means that what an individual thinks is for him/her real, is real regardless of the actual truth. Pricing claims have been a part of marketing since the beginning of time. Walmart in the USA has a perception of being a very reasonable place to shop. I can only assume that the same is true in England. When a price match guarantee is advertised, the public extends the condition of the contract to the retailers’–if they say they will match, then they know the retailer is already there.
In this case ASDA offered a match knowing that it would translate into “ASDA is 8% cheaper” in the mind of the consumer. I would guess that the cost of the match will be far less than actually matching competition and will additionally increase goodwill because they will do what they said they would do. I don’t think they can lose!
I agree that Asda’s program seems overly complicated–use of the phrase “scheme” is telling–which tends to make moot whether their prices are actually cheaper or not; but ultimately the question of EDLP comes down to this: either you’re truly interested in having the lowest prices, or you’re only interested in having people THINK you have the lowest prices; in the happy world of Notcomland the latter will always be found out…that the real world works the same way we can only hope.
As many have noted, price guarantees are great to create a perception of a company’s price position. However, the issue is that almost every one I have ever seen had an out.
When a customer goes to check and finds the lower price and then finds that for some reason it falls outside of the rules and they cannot collect, they become upset. In the “old” days they might have told ten people, today with all the social media available they might tell thousands of people. Is it worth the risk? Apparently so because this type of promotion continues to be utilized by retailers.
mysupermarket.co.uk is a very compelling website. I imagine it has great credibility. It is easy to use and in the end shows you which retailer near you will have the lowest price on your shopping cart. With my fictional shopping basket, ASDA always came up less than the competitors. As I juggled various items, ASDA was lower from about 3% to 18%.
If ASDA understands the shoppers’ product mix, they can quite confidently make their claim with minimal risk. Further, the cost isn’t all that much. Consider…how much would a retailer pay a customer to do all his/her shopping at their store? It is a whole lot cheaper than a loyalty card discount.