It’s been over 10 years since the financial world began to crumble in what we know as the global financial crisis (GFC). Price competition was heated in the years following the GFC with the rise of new operating models that stripped parts out of the value chain. New entrants have been gaining ground through discount business models, mass merchants and online channels. The competition has accelerated food deflation, which has been driven by aggressive pricing.

The pricing pressure for supermarket retailers is immense in all countries we interview shoppers. Price is the most crucial factor for shoppers in deciding which product to buy. Retailers would love to be 5% higher in price relative to competition and have price perception parity. Shoppers make the end decision on price and whether it is fair.

10 Key Questions to Ask Yourself on Price

  1. Is price a key differentiator to my shoppers?

Price is important to all shoppers and is a hygiene factor. The key question to ask is do we need to overinvest in it and if so where within my product portfolio?

  1. Do we focus more on price reassurance (e.g. EDLP) or specials (e.g. high-lo)?

If price is key to your shoppers, understanding if you focus more on EDLP or specials for your segments and brands is important. For example, in categories like tea certain segments like everyday black tea is expected to be on price reassurance. Other segments of tea can engage shoppers with specials such as infusions or herbal.

  1. Is the category a price beacon setting store price perceptions?

Price beacon categories help retailers with their overall store price perception and drive traffic to store. There are certain categories shoppers say if you price these well I’ll think the retailer is better priced in general. These include fresh produce, baby and alcohol categories (where alcohol is sold in the supermarket store).

  1. Do promotions in the category encourage shoppers to store?

This tells us where shoppers would most like to see promotions pre-store e.g. ATL, catalogue or mailer.  This is a measure of traffic driving, i.e. the ability of the promotion to drive shoppers into one retailer rather than a competitor store.

  1. Do I need to be in the catalogue/mailer or do I just need in-store price investment?

Australia and New Zealand are the only two markets in the world which still have a catalogues/mailers. This poses additional questions of how efficient these vehicles are? What products should in them? What should be on the front page? Some categories need to be in the catalogue or mailer as it drives store choice like baby products. Other categories need to just be on a gondola end but not as much in the catalogue/mailer such as Chocolate or Snacking categories.

  1. How deep do I cut the price on promotion?

How deep the promotion is influence by how much the shopper knows the normal price of what they buy. If price knowledge is high we need to consider deeper discounts and calling out the savings to the shopper because it’s more meaningful to them (e.g. baby formula, cat food, coffee). If price knowledge is weak we create an impression of a bargain and keep the discount shallow (e.g. herbs and spices, batteries and toilet cleaners).

  1. Is a price promotion driving incremental sales or cannibalising margin (i.e. they would have bought it anyway)?

Trade spend is one of the highest budgets for suppliers. Is it efficient spend? Some categories are truly incremental and drive people into buying on the trip or incremental units e.g. Energy drinks. Other categories we are just giving away margin when we promote e.g. packaged bread.

  1. Is the promotion likely to drive expandable consumption or stock up behaviour?

In chocolate blocks, the more a shopper buys the more they are likely to consume, it makes sense. Categories such as deodorants are less likely to drive any incremental use and drives stocking up behaviour when on promotion.

  1. Which shoppers are less focused on price and willing to pay more?

In almost all categories there are shoppers who want to pay more for better quality products. Finding who these people are and how to target the is key to offset strong pricing plays on core lines.

  1. How are pricing expectations and perceptions doing over time for my shoppers?

Markets, retailers, categories and shoppers change and with this the expectations of what is normal. Understanding trends on price perception helps to target and change investment relative to other factors e.g. product attributes, range and merchandising.

Driving price satisfaction through targeted investment can drive overall business performance. Shoppers set their expectations on price and we need to check if we are delivering to these expectations. Where is price importance and performance placed for your retailers, categories, brands and key shoppers?

Shopper Tracker interviews over 100,000 Shopper in Australian and 40,000+ shoppers in New Zealand across Supermarket, Petrol and Convenience Channels and Traditional Liquor in order to drive strategic shopper led commercial decisions at retailer, category, segment and brand level.

By Mitesh Khatri, Shopper Tracker GM ANZ

For more information please reach out to Mitesh Khatri, GM at Shopper Tracker ANZ: