Marketing Strategy / Opinion

Tesco’s Big Price Drop becomes Big Sales Drop. Here’s why.

Customers are fickle beasts.

I know, because I am one. So it comes as no surprise at all that Tesco’s bid to lure footfall and wallets has slumped over Christmas.

I’m going to share with you why I think – why I know – that this has happened and what the company need to do to get back on track.

Let me be brief, and let me be honest.

Tesco’s problem is not in providing a low price service to their loyal customers.

Their problem is that they’ve created a low value service with their Big Price Drop.

As a loyal – and loyalty card waving – multichannel Tesco customer, their Big Price Drop campaign has moved them into the realms of Lidl, Morrison or Aldi as far as I’m concerned.

Their own campaign has redefined their market positioning – downwards.

Before Christmas, as they rolled out the Big Price Drop, they ceased to compete on value and started to compete on price.

Competing on price is a race to the bottom.

If I want an overtly price sensitive shop and am not too worried about buying anything special or particularly tasty, I’ll go to Asda or Morrison’s (branded alcohol, branded frozen produce etc is generally cheap by volume).

If I’m feeling flush and want something terribly posh, I’ll head over to Waitrose or Sainsbury’s. But I won’t shop there regularly. I’m not made of money…

Before the Big Price Drop campaign, Tesco filled the middle ground nicely. Now, they’re competing for the cheapest basket.

And because I shop at Tescos, a firm competing for the cheapest basket, I feel cheap myself.

I’m looking at the cheap graphics that are obviously competing only on price, and wondering where the corners have been cut (see this shelf-front image – cheap and nasty or what?)

I’m looking at my bill and wondering why my prices haven’t dropped that much (Big Price Drop is obviously on everything that I don’t buy).

I’m looking at the competition and wondering if I should give them a go. Because they’re just as cheap, if not ever so slightly more so. And if there’s little difference in price, there probably isn’t a difference in quality. If there’s little perceived difference in quality, then I am more likely to take a risk and try something different.

So here’s a simple suggestion to stop slumping sales.

Tesco should stop competing in a race to the bottom and start concentrating on value once again.

Don’t Drop Prices.

Show me how much more I can get in my basket for the money.

This is a subtle, subtle difference, which needs to be reinforced with messaging about the quality of their low-rate goods (i.e. ‘value’ product ranges still taste good even if they’re a 10th of the price of the branded product).

Competing on value is a race to the top.

How can we give our customers more value? How can we make a £1 own-brand frozen dessert taste like a £5 frozen dessert from a competitor?

How can we give our customer something special back? How can we engineer the prices so that they can afford a bottle of something nice to drink with their meal, for the same price as the starter and main course alone in a competitor’s store?

How can we give more to make more?

How can we race up, not down.

I guarantee that if Tesco are willing to ditch the Big Price Drop and focus on value (of which price is a function), they’ll see their sales slump cease.

Whether they will or not is another question entirely…

The images used in the body of this post were discovered on an excellent entry on the UK Retailers Blog – a great source of insight into current goings-on in retail-land.


4 thoughts on “Tesco’s Big Price Drop becomes Big Sales Drop. Here’s why.

  1. You NAILED it. Great piece.

    I’d be even harsher about Tesco.

    The problem was that they treated their customers like idiots.

    They said Big Price Drop. But only one problem … it wasn’t. The prices didn’t drop!

    Not enough to use the words Big and Drop.

    I guess, ‘marketing campaign that reduces some prices but focuses on ensuring maximum margins by careful targeting of loss-leaders from squeezing manufacturers margins’ doesn’t have the same ring to it. Oh, and they were caught increasing prices before the promotion so that they could reduce them later.

    Tesco – you were caught red handed and this is the result.

    Lesson … if you are going to play a game, play to win. Don’t say you are the cheapest when you are not. I know that and so do most shoppers.

    Along with lots of the population I shop at several supermarkets, and as the economic conditions continue to erode my spending power I am becoming savvy at finding bargains and from my personal experiences … Tesco is not the cheapest!

    Aldi, Lidl, Morrisons and Asda are cheaper. Asda totally outplayed Tesco on promotions.

    Sainsbury is similar priced to Tesco, but own foods are better quality, and as a shopper who cares about ingredients, much healthier. On that point, Tesco will not use traffic lights and use ingredients that others have since committed to stop using. I for one, never buy Tesco own brands, but buy lots of Sainsbury own brands. I am not alone, there are millions like me. You call Tesco. You are alienating lots of health conscious shoppers.

    Tesco ‘had’ a better points scheme, but is changing this to reduce the value to me whatever you say. I don’t like that either. Sainsbury’s scheme is not as good, but they send me cash off vouchers. Hard cash discounts; that gets my attention and my visit.

    Neil is right. Win with value. Don’t race to the bottom, despite your size you will lose. Aldi and Lidl are better at this (and their own brand food is better too). I don’t particularly like shopping there, but I dislike overpaying at Tesco even more. So Aldi wins. Aldi and Sainsburys.

    Tesco needs to go back and get the basics right.

    *** 3 Actions ***

    1) Start focusing on your customers and less on micro-margins. Look at your value proposition and decide what you want this to be. Get own brands fixed.

    – Fix the quality
    – Fix the ingredients
    – Fix the labelling

    Cutting corners to save micro-pennies is costing you whole baskets and customer loyalty. Kick the bean-counters out of the product design process.

    2) Restart promotions. As a savvy shopper, this gives me the chance to save some money. Give me the chance to do that, empower me. Not micro-pennies, but big savings.

    3) Give the Tesco card a shot in the arm. You have data that competitors can only dream of, so use it. Be intelligent and show me you deserve my hard earned cash. Neil said the savings didn’t apply to him. Same here. Use the data to make sure that the savings do apply to me.

    What I would like to see is some innovation in food and home retailing. Lets see someone changing the game, changing the shopping experience. Tesco is one of the few that can do this as it has the resources and scale to experiment and the size to negotiate change. This is not about minor incremental changes; show some original thinking in retail.

    Tesco used to lead the way in pushing the boundaries in retail, but no more. Time to fix this and get the mojo back.

  2. Pingback: Price is not a viable option to increase value perception. Period. « interacter

  3. Pingback: Price is not a viable option to increase value perception. Period. | interacter

  4. Pingback: Christmas is coming. Adland’s getting fat. And it’s not good. | interacter

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