Marsh Guarantees Prices Won’t Go Up
Marsh Supermarkets last week announced a new program that guarantees that prices on certain popular grocery items won’t rise for at least three months. The Indiana-based supermarket noted that the prices are guaranteed even if industry grocery prices increase, as they have for four straight quarters, according to the most recent market basket survey by the Indiana Farm Bureau.
"In these inflationary times, rising food prices can contribute to the economic pressures faced by many families in our communities," said Joe Kelley, Marsh chairman, CEO and president, in a statement. "Our new Good ‘Til programs guarantee everyday low prices on thousands of items throughout our stores and offer families the opportunity to make their grocery budgets go farther."
Marsh’s program is the first such effort in Indiana and Ohio, but similar programs have been available in the northeast, the company noted. Price Chopper, where Mr. Kelley had been an executive before joining Marsh in May, ran a Good ‘Til promotion that started in July.
The programs will be offered four-times per year with each extending for about three months to adjust for seasonal preferences. Speaking to Supermarket News, Mr. Kelley said between 2,500 and 4,500 prices will be lowered in each round of the program, focusing on the most popular items.
Marsh is working with vendors with the expectation that both volume and margin dollars will improve.
"I think the Good ‘Til program can grow to 15 percent of our total [$1.2 billion] volume if we do it right," Mr. Kelley told SN. "And 15 percent of our total volume, on the items the consumer buys most, will really resonate with consumers."
Discussion Questions
Discussion Questions: What do you think of limited-time price guarantee programs? Do you see these types of programs complementing traditional weekly promotional efforts as a traffic driver and in delivering value messages?
If I were a stockholder in Marsh, I’d be worried. They have to bet that (a) the cost of those food product prices they are protecting won’t rise meaningfully and (b) the promotion will bring in more profits than the increased costs of protected products.
I’m skeptical that shoppers will switch to Marsh because of this promotion. If price is what you are shopping on, there’s always Walmart (among other discounters).
Temporary price guarantee programs are always quite vulnerable. Competition can still beat you on a temporary price reduction or sale and I’m not too sure that consumers buy into a price guarantee program anyway unless it covers all items in the store. If you are going to use price as your allure and strategy, then you are better off to go EDLP. However, I’m not a big fan of smaller regional chains using price as their differentiator. It’s a game that you probably can’t win.
It makes for a good press release. The company first makes sure that their cost is going to remain constant so they don’t end up getting hosed. When I read that, I think to myself what is the catch and what’s in the fine print? I think most consumers realize that the prices at Marsh are already so high that no matter what kind of promises the company makes, they will not be lower than Walmart, Super Target, Kroger, and Meijer.
A more meaningful consumer promise would be for Marsh to promise that their prices will always be lower than Walmart and that they will ad match any competitor, which they would never do. It’s almost insulting to the intelligence of the consumer because all Marsh has to do is jack up the prices and then promise not to raise them anymore. Well if I see Marsh running Walmart and Kroger out of Indianapolis because of this, I will march around the Indy 500 Speedway in my underwear.
Price guarantees are a great marketing tool especially with grocers because of the elasticity of pricing. This cannot replace weekly flyer sales though. People are still looking for (with passion) amazing hot deals on food and other grocery related consumables. Another question is, does this chain have a low price guarantee? Meaning, if I see a product elsewhere for cheaper, do I get it at that price or lower? Static guaranteed pricing cannot replace a low price guarantee either. These are highly competitive markets and depending who’s in your selling area, you may have to be a a lot more aggressive to maintain the flow of traffic through the doors.
Consumers feel empowered and “valued” when assured that prices won’t rise in the near future. In that state of mind they are more willing to open their pocketbooks to the assurers. That’s what Century Link (now that it has taken over Qwest) is doing with their promise of no price increases for five years.
But life and memories are short, and when prices must rise again, it’s back to the retail drawing board.
The retail industry is a game of gimmick-try which functions most successfully when led by the most creative and innovative magicians in marketingdom.
Great! Marsh and the guaranteed price freeze is in Indiana and I am in Florida.
I think this is a terrific door opener for anyone who has not shopped a particular store. many new customers will test this. It will prove successful and the new customers become continuing customers. I see this continuing to flow to other chains in other geographic areas.
This is a nice gimmick, but unless Marsh offers low prices throughout the store, and is competitively priced against other local retailers day-in, day-out, it’s hollow. And right now, consumers are growing tired of gimmicks.
It isn’t a bad idea, especially if Marsh had good margins on the food items it chose to keep at the same price. If they go from 30% margin to only 25% with the newer costs, it looks good to the customers, while protecting the bottom line. Inflation is hurting all of us, as it is near impossible to raise prices in this horrible business climate. Last one standing WINS!
Like most things it all comes down to execution.
Decades ago, Morrie Notrica froze prices on items he knew were key to the customers of his Original 32nd Street Market in Los Angeles. Worked like a charm.
Why?
No mystery. He knew his customers; picked the right items; kept the right prices; never played games; and kept reminding the customer what he was doing.
Great move on the part of Marsh Supermarkets. They are recognizing that their customers understand marketplace conditions of food inflation. Grocery prices have increased 5% to 30% on selected items in the store, and consumers are feeling that impact.
Marsh shows that they understand that the consumer — who averages 99+ trips to the supermarket every year, wants someone to listen to them. Marsh is taking that step. The # 1 reason that consumers shop a particular grocer is Price (73% state that fact based on the Consumer Intentions & Actions (CIA) Survey.
Another key factor for choosing their grocer is “a trustworthy retailer” (21.1% called this out) according to the August, 2011 CIA. Marsh offers them a further reason to trust with this move. The kicker is the loyalty that Marsh will engender. The average number of years that consumers stick with a favorite grocer is 10.8 years.
The math of $5,000+ per year for grocers, and the numbers — consumer savings for the short term, reasons for manufacturers and retailer to work together, and long term revenue/profitability — makes great sense. Sharp move!
I would worry that this could easily backfire on Marsh in the longer term especially. When you are not the lowest price operator in the market and you call attention to pricing, it would seem to be a risky way to go. Aren’t they saying “I don’t have the best prices, but at least I won’t raise them as often”?
A local chain last year made a big advertising campaign out of how they lowered prices all over the store. Naturally, the first reaction was this is great. But the as you compared the “new lowered prices” they were still higher than Walmart and a lot higher than Aldi, the magic went away very quickly. It caused a lot of people that hadn’t taken the time to check prices before to realize just how uncompetitive that chain really was. I can’t help but wonder if this might not have the same effect on Marsh.
As a program, this is certainly a kind and responsible gesture and I applaud them for what may indeed be a socially sensitive move in the short term. As a brand position, I can’t see it being effective in the longer term.
Consumers increasingly expect definitive advantages by doing business with a particular store brand. They expect either definitively better service, product quality, store experience or prices. This is a day-in-day-out expectation — not something that is guaranteed for three months at a time.
Do you really think there was an over-the-fence conversation in the backyards of Indianapolis that went like this: “I’m really feeling the economic pressure of these inflationary times on my family”?
They know they’re broke. Telling them so again doesn’t change it or make them feel better. They’re smarter than the message. They know you won’t lose, but they know they could.
If you’re going to try to deliver a message to your market, speak it in their terms. Better yet, don’t tell them a message about which they know better. Programs like these and their message are both condescending and disingenuous to the consumer. They know better.
Price match is nothing new, but putting a guarantee on a price is smart. Marsh Supermarkets is very innovative and I applaud their efforts to differentiate vs. the competition. So long as the items aren’t heavily skewed to private label goods, it should be compelling to their loyal customer base. Logically speaking, there is no way most customers will “track” the price on a can of Bush’s Baked Beans or Campbell’s Tomato Soup, but to establish trust can’t hurt — it gives them one more lever to push/pull. If it lifts items/basket and share of spend, it works. Plus, fixing the price for 3 months cuts down on labor costs and admin for price changes — a solid internal cost savings.
The funny thing is here is that any chain could make this promise at any time without making any meaningful changes. Just pick the products you know you will not be increasing in price.
Full disclosure: I was on the Marsh executive team until this past October. I fully applaud this move in that Marsh has a long reconciliation process ahead of them with their shoppers in terms of price competitiveness. Promotions, sign programs and contests have not been sufficient to change this chain’s price image, but REAL price cuts can if they are part of a longer term strategy to get Marsh back into the value game.
On the down side, shoppers are very savvy and will be watching for other components of the Marsh value equation to diminish to “pay” for the cuts…there is a clear and present danger that if this program is being overtly subsidized by higher priced perishables, less competitive ads, et al, then this strategy could backfire and suppress margin without the needed increase in sales to offset the lower rates.