Vouchers and incentives
Brands battle over best approach to pricing
New data suggests price match schemes don’t attract much uptake from consumers, but they do have an effect on perception of value
while vouchers are more likely to drive sales, so marketers must use these tactics in the right situations
By Mindi Chahal
Lastminute.com offers a price match guarantee, with a refund of the price difference if customers find a cheaper holiday
Price match schemes and guarantees get little traction when
compared with discounts and vouchers – one reason supermarket
Morrisons abandoned the tactic this week – but are they still
effective at promoting brand trust and perceptions of value?
New research shows that only 12% of 2,000 respondents take
advantage of price promises or guarantees to match other brands’
prices in-store, with their popularity slightly higher among those
aged 45 to 54 (14% of whom actively price match offers) and 16 to
24-year-olds (8%).
By comparison, the report by predictive analytics firm Blue Yonder
shows that half of shoppers use price comparison websites to find
bargains and four in 10 use voucher codes.
The most important statistic from the report shows that 84% of
shoppers are using some form of deal hunting, rising to 95% of
16-to 24-year-olds, so brands looking to give consumers value for
money need to have a compelling offer. However, it’s important to
consider whether it is right for the brand’s objectives, and what the
effects are on brand perception.
> Added value of price match
Andrew Kirkcaldy, group brand director at online retailer AO.com,
defends price match schemes despite their low uptake among
consumers, because they complement the brand’s positioning
without creating an expectation of discounts.
“Price is not a differentiator for brands, as it’s so transparent online.
Where we want to differentiate is customer service and providing
the best price every day. [Our] price match promise is a way to
reinforce that message because if people do find it cheaper, it’s an
easy process to apply it.”
In its approach to pricing, Kirkcaldy prefers to use mechanisms that
add value rather than those that are discount-led.
He says: “It’s more credible to have an everyday low price and price
promise than a discount. It’s a confidence and trust element, and
going forward, it’s [going to be] a massive differentiator in the
market. You have to be right on the price because consumers are
price-savvy.”
Energy provider EDF is currently running a TV campaign
promoting its flagship tariff, the Blue+Price Promise, which offers
customers a low fixed price, the ability to check whether they
could be better off elsewhere and no exit fees if they choose to
leave. In the energy market, price is a source of frustration for
many customers looking to get a good deal, as comparisons can
be confusing.
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Vouchers and incentives
Supermarket wars
Brand match and price promises at supermarkets are rife,
with the big four supermarkets in particular using these
claims to steal market share from one another in a constant
battle over price.
Sainsbury’s has put its marketing weight behind its Brand
Match scheme, which lists how much a customer has saved
on branded groceries compared to Asda, and if there is no
saving, a voucher is supplied to the customer for the price
difference off their next shop.
Speaking at Asda’s second quarter financial results for
2015 chief customer officer Barry Williams said Sainsbury’s
Brand Match comparing its prices to Asda’s was a
“huge compliment”.
He added: “What better endorsement of our price value
proposition that every time a customer walks through at
the checkout, they get a receipt and a little green thing
saying Asda. We couldn’t ask for any more.”
On price, Williams believes “you have to keep on running”,
and said Sainsbury’s that “it’s their job to catch up and if
they want to do that through vouchers then good luck”.
Asda’s president and CEO, Andy Clarke, agreed with this
sentiment, arguing that offering consumers “bargains
through deep short term promotions and vouchers” is “not
the game [Asda] are in” but rather a focus on long-term
stability and branding. Both Sainsbury’s and Asda have
struggled with falling sales over the past year, however.
Morrisons, meanwhile, dropped the price match element
of its Match & More loyalty scheme this week citing
consumers’ confusion about when points were awarded.
It is also believed to have been expensive to run.
Tesco offers a similar price promise to Sainsbury’s on
fresh, branded and own-label produce, checking baskets
against Asda, Sainsbury’s and Morrisons, and if a consumer’s
shopping could have been cheaper at those supermarkets,
it issues a voucher for the difference up to £10 in value.
The key issue is that it’s difficult to work out what the best deal
is without going through a full price comparison on a specialist
website. Even then, the calculations are generally based on a
national average of regional prices at typical consumption, rather
than a customer’s actual consumption, according to Martin Stead,
marketing, digital and sales director at EDF Energy.
Therefore, rather than just a statement of value, the price promise
EDF offers includes personalised information about the best option
for a consumer, as the service gives a real-time quote based on
their consumption with correct prices for their region.
Stead says: “Others use the words ‘price promise’, but often there
is no promise at all attached to the tariff, and even when there is,
it is generally for [matching] prices against the supplier’s other
tariffs, not competitor tariffs in the market.”
For travel brand Lastminute.com, it’s important to offer value deals
to customers but “it’s not just about beating the competition on
price”, says director of brand marketing Amanda Cumine. “It’s
more about the service we can offer and continuing to reinforce
the customers’ trust they have in our business and our brand.”
Cumine adds that Lastminute.com’s price match guarantee
allows customers to make a decision quickly and takes the
hassle out of shopping around because they know if they do find
a cheaper holiday, the company will refund them the difference.
Although many other travel brands offer several variations of price
match schemes, Lastminute.com is not worried. “As more travel
companies are offering this and promoting the concept, it does
raise awareness of price promises as a whole, so customers are
actually more likely to ask if you offer it,“ says Cumine.
> Vouchers address different needs
The alternative to price matching is to offer explicit discounts
against the full price of goods or services. The uplift for retail
brands when using vouchers and discounts could be as much as
an extra 25% in sales revenue per month, according to research
from Vouchercloud.com.
Although the voucher provider has an obvious vested interest in
the findings, the report is based on an analysis of on-site data,
A retailer that is arguably following a different path is
Waitrose, and it could be paying off for the brand. Figures
from Kantar Worldpanel for the 12 weeks ending 19 July
show that Waitrose saw sales accelerate to 3%, which
was credited to customers taking advantage of the
launch of the Pick Your Own Offers initiative. The scheme
started in June, featuring personalised offers, including
customers getting 20% off the top 10 items they buy
the most.
EDF’s Blue+Price Promise offers customers the opportunity to compare their energy tariff with other suppliers
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Vouchers and incentives
claiming that an average retailer offering discounts on their
products can generate an additional three-figure increase in sales
per month through providing discounts and vouchers. It looks at
875 retail and service businesses from around the UK that
have been running for at least two years and offer discounts
to customers.
The research also lists the motivations these retailers have in
providing voucher codes and discounts. The top five are: attracting
new customers (cited by 74% of respondents), meeting sales
targets on a particular product or service (61%), rewarding existing
customers (58%), increasing brand awareness (50%) and boosting
a new product launch (32%).
Respondents were also asked whether some discounts drive
more sales than others and the most popular deals were
discounts of 20% or more off the full price followed by ‘freebie’
vouchers and offers.
Vouchers also offer an opportunity to track a customer’s journey
across channels, whether it’s in-store, online or on a mobile. Paul
Lewis, senior director of marketing at VoucherCodes.co.uk, says:
“A price promise is very much on a single channel level and it
doesn’t really help much in building a profile of the customer
– it only works on a transaction by transaction basis.”
However, a code can be used to decipher how consumers
shop as they span multiple devices, according to Lewis. He says:
“A consumer can receive a voucher in an email, for example,
open it on their phone but redeem it online or in-store. As a
result, single-use codes are one of the simplest ways of tracing
the customer journey across channels.”
Vouchercloud believes it shouldn’t be a case of choosing either
vouchers or price matching but it should come down to what
influences consumers to shop with a brand.
Chris Johnson, head of operations at Vouchercloud.com says:
“It’s a case of appealing to the end consumer. Whether you look
at it from a price matching scheme or through offering vouchers,
savvy consumers now expect to be able to receive both and will
go out of their way to source discounts; it’s the way consumer
behaviour has changed over the years and businesses are
increasingly adapting to work with it.”
Johnson believes that trust in a brand shouldn’t differ according
to whether the consumer has come armed with a voucher or a
lower price from elsewhere. What is important is that the brand
feels content and confident that they have a loyal customer who
wants to shop with them.
He says: “Consumers will go out of their way to make sure they
are getting the best value from their purchases. It’s important that
a consumer can be heavily influenced through both a voucher
and price match.”
Although it is clear that vouchers and discounts are popular
with consumers, the motivations behind using them and why
brands offer them differs from price match schemes, which is
about instilling trust and therefore brand loyalty, rather than
one-off rewards.
Brands therefore need to match the mechanism they use
as an offer, whether it’s price match or vouchers, to what
they want to achieve.
At a glance
> Retailers’ top reasons to use vouchers
> Price match uptake
84
%
of shoppers are using
some form of deal
hunting, rising to 95%
of 16- to 24-year-olds
Attracting new
customers
74%
Meeting sales targets
on a particular product
or service
61%
Rewarding existing
customers
58%
Increasing brand
awareness
50%
Boosting a new
product launch
32%
12
%
of respondents use price promises
or guarantees in-store, with their
popularity increasing slightly among
those aged 45 to 54 (14%) and
falling to 8% for 16- to 24-year-olds
Source: Blue Yonder
Source: Vouchercloud
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