Tuesday, October 25, 2011

The Supermarket War

I had blogged about UK’s Tesco big price initiative on September 28, 2011 and in the three weeks following the Big Price Drop, the British supermarket claimed to have seen approximately one million additional transactions per week by customers purchasing products included in the campaign.

And Tesco is not resting on their laurels even after this price crusade. They have launched a Facebook app that allows customers to vote for the products they would like to see price reductions on. To have their say, customers have to visit the Tesco Facebook page (www.facebook.com/tesco), click on the Big Price Drop app and then choose five categories from a list of twenty-four options – that include include categories such as shampoo and conditioner, canned soup, cooked meats, pet food and chocolate – for what they would most like to see as part of the Big Price Drop. When they have registered their votes, they will then be able to see what their Facebook Friends have voted for, what others in the region have voted for as well as the entire nation.

Richard Brasher, UK CEO of Tesco, explained the reasons for this latest foray into social media: “We are committed to doing all we can to help our customers and our new Facebook application will enable them to tell us directly where they most value reduced prices”.

Meanwhile, ASDA, UK’s second-biggest supermarket have slammed Tesco’s move, insisting that their Price Guarantee – which they launched in April last year – already promised to be 10% cheaper than rivals, and this “ended price wars” – communicating this through a print campaign. They also pledged to roll back 3,000 essential products and for a limited period, launched a £5 voucher for every customer who spends more than £40 online or instore.

Morrisons also ran press ads to promote their Big Pay Day Price Crunch, which also started on September 26, 2011, and claiming to offer more than 1,000 half-price offers. Then they started another promotion – according to webpage http://www.thisismoney.co.uk/money/bills/article-2050427/Supermarket-price-war-Are-Tesco-Sainsburys-Asda-cuts-real.html?ito=feeds-newsxml, published October 18, 2011 – by giving away £100 to three customers in every store, every day. Customers are entered into a daily price draw for every £1 they spend in store. The supermarket said that it would give away £2 million during their Morrisons Millions promotion – a number is printed on customers till receipts and customers can check online or in stores to see if they’ve won.

Waitrose launched a value campaign – “1,000s of ways to great value” – and pledging to price-match more than 1,000 products against Tesco and pushing their 1,500-strong ‘Essential’ range, and the 1,000-plus products they place on special offer each week. They even had television ads supported by in-store activity as well as online display ads.

Sainsbury's introduced their Brand Match scheme to target it directly at Tesco and ASDA by matching prices of more than 12,000 branded grocery lines at the checkout. If customers find their basket of goods would have been cheaper at Tesco or ASDA, they will be given a coupon (valid for two weeks) to the value of the difference but note that the basket must be £20 or more in value to qualify.

The above is turning out to be ferocious price wars amongst supermarkets! Customers benefit, don’t they? Or is this all as ASDA claims, merely “smoke and mirrors”?


Chakie said...

In my opinion, it is indeed a smart promotional move by Tesco to reach out to its customers via social media which is a popular form of communication nowadays. It is also smart of Tesco to ask their customers to participate on voting on what product prices to have a discount on, because when the public participates in it, they will feel more like a part of the program and will be more happy and willing to support it.

As for ASDA, their insistance that their Price Guarantee program has "ended all price wars" is definitely not true as there will always be another competitor out there that will offer a lower price than ASDA.

As for the customers, they are certainly benifiting from the declining prices of everyday items. However, this will not be for long as lowering the price of goods is not a sustainable solution for the long run as supermarkets will eventually lower their prices to a point where they will start to have a loss on their sales. I feel that eventually, all the major supermarkets will eventually have to come to an agreement to sell their products at the same price and only then the price war will end.

musicgerald said...

Hmm, it seems like Tesco is now going into the modern world. They understood that most of the people in this world has a Facebook account, even homemakers. This is indeed a very creative method to promote Tesco but this actually creates a price war.

I actually agree that the price war only harms the organisations but benefits the customers - its like parasitism, we customers are parasites. But, a price war can be a good thing because it actually forces the management to look back at their pricing strategies made -whether it is still suitable to be used or not. So, a price war might be something good to organisations too, if you look at another perception.

Of all promotional moves made by the above supermarkets, I personally think that Tesco made the best move. This is because they make us customers feel that WE are the one controlling the price (since we can vote which items should be at a lower price in their FB page). So, if I were to go shopping, I will choose Tesco :D

Gerald - BAF/Mar11/T1