Postscript to : “The Rise of Everyday Low Pricing – A Slippery Slope”

Postscript to  “The Rise of Everyday Low Pricing – A Slippery Slope”

1/2 Price Promotions Contradict Everyday Low Price Perception 

In our recent article (26/04/2017), we commented on Coles rationale for its EDLP strategy: “to give customers trusted (fair) pricing, they know is not going to change.”

We also expressed a view, that the increased level of 1/2 price promotions, sends a contradictory message to customers.

So, why would Coles buyers disregard the Coles marketing strategy to strengthen customer perception of fair pricing? Quite simply, buyers are doing what they are told.

Rather than fund another advertising campaign, it’s expedient for Coles to attract non-regular Coles shoppers, using 1/2 price supplier funded promotions.

Once in store, Coles hopes they become regular customers, attracted to 4000 EDLP products and a more appealing total value proposition, (price, range, quality, store proximity/presentation, shopper trolleys/baskets, staff, checkout efficiency).

Our view was confirmed in comments by Wesfarmers MD, following release of Coles sales results, for the March 2017 quarter.

Coles Comments on Deep Discount Promotions

Wesfarmers MD, Richard Goyder :

“I think Coles is in pretty good shape at the moment in terms of customer perception, the investment in our stores, in pricing and in service.

The strategy to move more products across to every-day low prices was about cementing trust in Coles pricing, according to Mr Goyder who said the business was as “promotionally heavy” as it had ever been.

We Would Like to ……..

“There are more [deep discount promotions] than we would like … because it ultimately breeds distrust,” Mr Goyder said.

“We can’t move the entire range to every-day low prices … but there are some products that move around dramatically (on 1/2 Price Promotions) and we would like to move away from that.”

Quite clearly, Coles recognises the contradiction with the EDLP perception.  However, the alternative to cutting supplier funded deep discount promotions, is to self fund a further EDLP advertising campaign.

The choice of words “We would like to move away from that” (1/2 Price Promotions) is hardly convincing of intention to cut deep discount promotions. We interpret this as “when Woolworths cuts 1/2 Price promotions, we will follow”.

We don’t see any sign of the war to win more regular customers ending for some time.

The challenge both Coles and Woolworths are wrestling with, is how to attract and keep, both price conscious and higher value, brand loyal shoppers, with consistent appealing overall offers.