Beyond cost-cutting: Developing a strategic approach during a supermarket price war
Global health and beauty brand
Challenge
Is cost-cutting the right response to a price war? When a health and beauty brand faced such as challenge in Norwegian supermarkets, we investigated consumer purchase behaviour and price sensitivity to identify what really matters to shoppers. Are natural products better? Those that work for the whole family? That are good value and look appealing? These factors and many more were tested with the aim to fuel a new pricing strategy for everyday hygiene items which would avoid a race to the bottom.
Research
We carried out an exploratory study into Norwegian consumers’ perceptions around price and discount retailers. Our aim was to gain an understanding of what influences consumers in the hygiene products category and identify the factors most likely to increase purchase intent and so maximise sales, as well as find insights to inspire new product development, design, and merchandising strategies.
Research included a raft of implicit tests including:
Attribute Importance Measuring the importance of attributes in comparison to one another.
Brand Associations Measuring participants intuitive perceptions of brands.
Product Associations Measuring participants intuitive perceptions at a product level to create product clusters enabling a review of the product category.
We also asked explicit questions to measure participants’ considered opinions, providing extra depth and context to the implicit findings.
Findings
Cost isn’t king. Everyday items need to communicate a sense of providing value for money but consumers care more about other factors–such as benefits (like being moisturising or suitable for the whole family), brand and versatility.
Shoppers are savvy and sensible. Shoppers are more accurate in their price awareness than predicted but are often willing to pay more than retailers might assume. Price-matching to the lowest common denominator is not necessary or expected. Grocery shoppers are looking for more from their retailer than the lowest prices.
Shoppers will shop around. Higher cost items (such as fabric softener or fancier toothpastes) and items with a big price difference between regular and discount retailers are more likely to prompt customers to shop around for better deals. Larger volume packs are assumed to already be good value and changing prices is unlikely to prompt shoppers to visit multiple stores for a better deal.
Based on these findings, we also supported the brand by:
- Identifying an acceptable price range for each product–not too cheap to look bad quality or too expensive that people might shop around.
- Matching this with the implicit tipping point for a range of prices to help formulate a pricing strategy on key products.
- Highlighting which products were communicating clearly to consumers, which could be improved and how to do that effectively within different segments of consumers.
- Highlighting new segments of customers and what products and messaging would most appeal.
- Developing an in-depth shopper decision journey, competitor clusters and potential differentiators.
Result
The research empowered the brand to adopt a successful pricing approach, refine its product offerings to better resonate with customers, and enhance point-of-purchase presentation, resulting in increased market share and expanded market reach.