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Price Promises Report
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Executive Summary
The following report investigates the current price promises and guarantees offered by retailers in
various industries, including supermarkets and technological retailers. In the current climate of
economic difficulty and uncertainty, many retailers are introducing seemingly attractive pricing
policies to encourage customers to frequent their stores at the expense of their rivals. However, do
price guarantees live up to these expectations? Customers often do not have the time or the
wherewithal to shop around for the lowest prices and can be swayed by the offer of a ‘lowest price
guarantee’ that gains their trust.
It is therefore important to understand the reality behind price guarantees in order to protect
consumers and prevent against misleading advertisements. It will be seen in this report the stringent
conditions of the promises which are hidden behind ambiguous and overreaching advertisements.
The report will cover some of the current deals on the market, the lack of consistency that exists
within product and price matching, and move towards concluding remarks that point to consumer
based research to provide empirical evidence about how consumers, and their behaviour, really
respond to price guarantees.
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Introduction
Retailers offering price matching policies have long existed but the evolution of competitive
intelligence and modern price automation has allowed the technique to become a more robust and
reliable measure. However, there is still much controversy surrounding the at times elusive
comparisons and highly specific small-print of some price promises that do not stand up to scrutiny.
This report aims to look into some of the current price guarantees offered by major retailers in
several industries in order to analyse their approaches to the scheme. The report will cover if they
open their policy to all competition or only match against certain competitors. In addition, it is
important to consider how the promise defines ‘matching’ products; must they be identical or will a
near equivalent still be considered as worthy of a price comparison. Within matching, the problem
posed by unbranded products must also be addressed.
The report will also look into the possibility of misusing price policies. If all retailers adopt price
matching or beating philosophies, this can have an adverse affect on competition and leave little
incentive for rival firms to drop their prices.
Having understood the current position of price promises, the report will point to further research
which may be conducted into this area to assess how far shoppers understand and are affected by
the clauses attached to a ‘low price guarantee’, as offered by a high proportion of retailers. Further
research could also try to understand the impact these guarantees have upon a consumer’s
shopping behaviour. With an appreciation of how the customer responds to pricing strategies, some
recommendations towards potential improvements to price policies and the specifics behind them
could be given.
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The Retailers
The table below shows an overview of a brief selection of retailers from various industries such as
supermarkets, technology, transport, mobile phones and clothing. As can be seen, the table provides
a simple impression of the differences in the price promises on offer in the different markets, which
shall now be discussed in further detail.
Retailer
Asda
What does
the price
promise
offer?
Which price is
compared?
Who is the
promise aimed
against?
What is the
‘matching criteria’?
Is colour
mentioned in
the matching
criteria?
Supported
by
To be 10%
lower
Includes price
promotions and
discounts e.g. half
price, within
comparable reason
Includes price
promotions and
discounts e.g. half
price, within
comparable reason
Includes price
promotions and
discounts e.g. half
price, within
comparable reason
Sale prices or
discounts included
Tesco,
Sainsbury’s,
Morrisons and
Waitrose
Identical or like-forlike, based on a set of
criteria e.g. flavour or
weight
Colour not
mentioned
mysupermark
et.com
Asda
Identical or like-forlike, based on a set of
criteria e.g. flavour or
weight
Colour not
mentioned
Asda and Tesco
Must be identical
Colour
variations not
included
Open to all
competitors
Service conditions
are considered, such
as delivery charges
and guarantee terms
Colour not
mentioned
Tesco
Will match the
price
Sainsbury’s
Will match the
price
John Lewis
Will match the
price
Currys/PC
World
To be 10%
lower
Actual price, sales
prices or discounts
not mentioned
Comet, John
Lewis, Argos,
Staples, Tesco
Must be identical
Colour not
mentioned
Comet
Will match the
price
Actual price, sales
prices or discounts
not mentioned
Evan’s
Cycles
Will match the
price
Actual price, sale
prices or discounts
not included
Currys, John
Lewis, Tesco,
Argos and PC
world but open to
others
Open to nearly all
competitors
Must be identical
Colour not
mentioned
Mothercare
Will match the
price
Open to all
competitors
Must be identical
Colour not
mentioned
Kiddicare
Will match the
price
Sale prices or
discounts not
included
Actual price, sale
prices or discounts
not included
Open to all
competitors
Like-for-like
Colour not
mentioned
Carphone
Warehouse
Will match the
price
Sale prices or
discounts included
O2, Orange, TMobile,
Vodafone, Virgin
Mobile and 3
Must be brand new,
same make, model,
design and network
Colour not
mentioned
Must be identical
Colour
variations not
included
Brandview.co
m
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The Deal
By looking at the table above it becomes clear that there are two main approaches when deciding on
the ‘deal’ offered in a price promise guarantee; to match the lowest price offered by a competitor or
to promise to pay 10% below that lowest price. However, for the consumer there are some
inconsistencies to understand and obstacles to overcome that are detailed within the small print,
tactfully hidden behind enthusiastic advertisements and displays.
Firstly, many of the promises require the customer to go online or make a phone call a day or so
after their transaction has been made before any benefit can be garnered. Typically, specific
information needs to be found and given by the customer which takes up their time and patience.
This is sometimes known as the ‘hassle cost’ to the customer. Tesco explain that the delay for their
customers is because of the large number of transactions that need to be dealt with and so it takes
time for the customer’s order to be found and compared to the other products. With more efficient
technology it would be quicker for the comparisons to be made so that customers could be saved
from this frustrating process. This would enable the retailer to offer a simpler and more attractive
price promise.
Sainsbury’s broke this trend by offering the return immediately; the difference in the price of the
basket is calculated and offered to the customer in voucher form at the till. As a result of this easy
approach to the guarantee the promise was such a success that it was extended until after the
Christmas period (The Guardian, 2012) However, as with many other retailers, Sainsbury’s requires
that in each transaction at least one of the products brought must be identical to a product offered
by Asda or Tesco. The intricacies of comparability and matching will be discussed in further detail
later in the report, but from a customer perspective this can be another exasperating aspect of the
promise which removes some of the benefit initially expected as a result of the advertising.
In a similar way, the Carphone Network’s price promise is substantiated by the claim that “we
reserve the right to withdraw this promise or change these terms and conditions at any time” which
perhaps serves to foster a customer reaction towards guarantees that the promise is ‘too good to be
true’. Particular statements in the small print can make a claim invalid and diminish some of the
savings that the customer feels they are rightfully entitled to. While this is not always the case, news
articles such as that by the Guardian called ‘why supermarket price promises aren’t all they seem’
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cause a flurry of activity on social media, such as Twitter, Facebook or through commenting on the
site, which shows some of the customer discontent and distrust when facing supermarket promises.
A further contradiction of today’s price promises is their popularity amongst retailers. It is seemingly
ironic that the three main supermarket retailers (Asda, Tesco and Sainsbury’s) each have their own
price matching, or price beating, philosophies against the others. This is a trend that is found in
other industries as well, such as with Curry’s and Comet. Such offers, were they to each be fulfilled,
would be futile; either causing prices to tumble as each tries to outdo the other or enabling stable
prices that remain high. As a result there is no incentive for any competitor to lower their prices as
doing so would only lower the profits of them all.
However, price promises still may be beneficial to the consumer. A BBC news article from the 9th
December shows that 40% purchases are made on special offers. This means that a specific basket of
goods brought at a supermarket might be cheaper than a basket of goods brought at another as the
basket will be tailored to the offers and savings in each store. For example, a customer may need to
buy milk, bread and three other items. From Store A they buy these 5 items as well as 2 unplanned
purchases which were on a special deal. If this basket of 7 items was then compared to Store B’s
prices for those items it may well be more expensive as Store B does not have the same special
offer. As such, customers may be able to save money through these price offers and promises as
each supermarket will have special savings that customers are drawn to.
Even if this is so, for companies to have a successful price promise, they need an airtight matching
philosophy as well as strong data to back it up. Asda’s recent ‘big toy rollback’ successfully rebuffed
at least 3 claims made against them due to unfaltering data. It is also important to note that Asda, as
with the other retailers, used an independent price comparison company so that the figures were
not biased in their favour. This can cause problems for retailers; for example in 2009 an advert which
formed part of a Morrisons campaign was forcibly removed by the ASA (Advertising Standards
Authority) due to misleading pricing claims that compared their discounted products against the full
prices of others. Whilst customers may find some of the refused comparisons unusual, from a
technological perspective they are necessary such as differences in ingredients or size. When
comments were made to Asda about their comparisons, Asda explained that their comparisons met
the ASA standards as over 15,000 of their products were included in the promise. This perhaps
shows that, realistically, only a certain level of comparison is possible to be offered to customers. It
is therefore important to investigate the matching philosophy which forms the price promises and
guarantees.
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The Matching Philosophy
The concept of having an unquestionable matching philosophy came about due to the accusations
and complaints made by the competition about their rival’s guarantee. In order to ensure the
promises stand up to the ASA, don’t impact their own profitability in a negative way and are not
taken for granted by opportunistic consumers, each retailer writes their specific standards and
clauses attached to the price promise. However, the consumer must be proactive in order to find the
standards, which are often published on the retailer’s website. These are often based upon how two
products, and their individual features, can be matched as identical or similar and therefore
comparable on price.
A case in 2006 against Curry’s saw the technology retailer taken to the High Court. The retailer was
backed when it became clear that their product, a tumble dryer, came with an air vent that was not
included in the cheaper, rival product. As they were not identical, the prices could not be compared
and the difference was not paid out to the consumer. As a result of these tests, price promises need
to be backed by specific terms that ensure customers do not exploit a loophole or weak aspect of
the promise.
Asda explicates their promise by saying that “branded products are compared with each other and
own label products are only compared where mySupermarket validates the products as being
comparable”. This means the branded products can be compared directly but unbranded products
can only be compared on a ‘like-for-like’ basis where the products meet the same needs or are
intended for the same purpose. Some retailers will match based on sales prices, such as half price
but would not include store wide promotions like multi-buy deals, 3 for 2, or buy strawberries get
cream free etc as they would be too complicated to match effectively.
mySupermarket, who provide the data for Asda, express that they match products based on the
following characteristics:
Flavour
If it’s organic
If it’s gluten free
If its Fair-trade
If it’s free range
If it’s low fat
If it’s eco-friendly
Weight/volume, where there is not more than 10% difference
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They argue that this is done in a way that gives no retailer an artificial advantage. As such, not all
products are available to be matched and, as sometimes this is a requirement for the promise to be
valid, this can lead to customer dissatisfaction. These specifications can appear to be a way of
conning the customer out of their money rather than a necessity for the comparisons to be fair and
achievable with the technology available.
Tesco use the exact same matching criteria than Asda and so between these two stores Asda should
always be 10% cheaper than Tesco when comparing the same basket of goods. Sainsbury’s on the
other hand will only compare products that are identical to one another; therefore, the promise
does not include their own label brands which would need to be compared ‘like-for-like’. According
to their website, the differences in the branded products can include (but are not limited to) pack
size, colour, flavour or variety which would mean that products are non-comparable.
Here, Sainsbury’s have explicitly mentioned colour in their philosophy. When colour is mentioned in
the conditions it is often not included in the price promise as it counts as a ‘variation’ and thus
makes the products not identical. Other retailers, such as Curry’s, Comet and Mothercare, do not
reveal their actions in regards to colour. This is an interesting point to note as, without a published
matching philosophy, colour could be utilised only when it is beneficial to the company. Only
expressing that the products must be ‘identical’ leaves room for confusion. Indeed, one definition of
‘identical’ is that two things are “similar or alike in every way” (dictionary.com) which would indicate
that colour variations make two products dissimilar and therefore would not allow for price
comparisons.
Retailers such as Asda and Sainsbury’s have disclosed their philosophies as well as which
independent company gathers their data for them and therefore customers would be aware of
when their claim is invalid. Asda, Tesco and Sainsbury’s have the most clear and understandable
philosophies as their websites dedicate a lot of space to explaining how their products are matched.
When Mothercare and Kiddicare, for example, do not specify their like-for-like matching schema it
means that colour and other variations could be utilised to enable or disable matches depending on
which is most beneficial to them.
In order to prevent such activity, it may be to the benefit of the consumer and for the ease of the
ASA to introduce the concept of a ‘standard matching philosophy’. This could include all, or a large
proportion, of products that are sold by retailers in a variety of industries to define what is a fair
price match. For retailers, this would mean that if they promised to be 10% lower than their
competition it would be difficult for them to defend their actions through a gray area in their
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conditions in order to evade responsibility. For consumers, they would only need to become familiar
with one price matching philosophy, which could remove some of the angst and confusion
surrounding the specifics of each retailer’s conditions. Such a matching philosophy could perhaps be
created in cooperation with the ASA to ensure that it is to no retailers benefit or detriment.
Retailers in the technology sector have a simpler task as products such as laptops or phone will have
a MFPN (manufacturer’s part number) that allow products that are identical to be matched more
easily. Given this, Curry’s, PC World and Comet stipulate that “the product offered by the
competitor's website is exactly the same as the one we sell, and is offered on the same terms”,
which would include aspects such as delivery. All three also specify that they must have the product
in stock and that they can check and confirm the cheaper price offered by the competitor.
Alternatively, Evans Cycles and Mothercare take a slightly different approach. Rather than specifying
a few specific competitors against which to price match and remain competitive with, these two
retailers (although this practise is not limited to just these two) have a much broader scope and offer
the price guarantee against all, or nearly all, of the industry. Mothercare offer to match any price of
branded items for all UK retailers including physical stores, catalogues and online retailers as long as
the product is branded and sold as new.
Similarly, Evan’s Cycles and John Lewis match against nearly all of their competition, citing that the
competition need to offer a ‘comparable level of sales and after sales backup to ourselves’, perhaps
because of their commitment to offering high quality products and long term guarantees. Evan’s
Cycles have one of the widest ranging price promises including a wide range of their main
competitors, as well as matching against local specialist competitors in store.
Requirements
including delivery and support are subjective and could be frustrating to consumers who feel their
purchase is accountable under the price promise but are refused due to a judgement that the after
sales support is not equal. John Lewis recently came under fire for changing their policy in light of
this. It might then be wise to look into the possibility of quantifying after-sales service and other
qualitative features rather than discounting their inclusion in price matching. Integrating guarantees
or quality of service into the like-for-like process could enable more products to be matched and
thus lead to improved customer satisfaction in relation to price promises.
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Closing Remarks
This report aims to show the current lack of lucidity of price promises offered by various retailers
across industries, especially in the supermarket industry where price wars and competition for
customers is fierce. By briefly over-viewing the current deal offered in the guarantees as well as the
methodology that backs them, it is possible to see how and why customers feel the promises are
disingenuous. Improvements in the data techniques to power price promises could allow for clearer
schemes with understandable and clear matching policies that customers could relate to and feel
are fair.
Additionally, the hassle time of price promises can be frustrating and unnecessary for customers.
The efficient utilisation of competitive pricing technology could assist with this time scale. At
present, there is often a delay between the purchase and the reward during which time the
customer must be proactive in order to receive any benefit. Following suit of retailers like
Sainsbury’s in offering an immediate reward has been shown to be successful and appreciated by
customers.
However, through this technique retailers are able to appear to be actively lowering prices and
remaining competitive by introducing a price promise while losing very little in the process. If their
rival companies also have price matching schemes in place it enables the industry to charge high
prices and provides no incentive to introduce a sale as everyone’s price would decrease (as long as
customers were proactive). Research would need to be conducted into the industry to ensure
retailers are not implementing unofficial cartels that engender high prices for consumers.
Further research into this topic would also be necessary in order to substantiate the ideas put
forward in this report. Current findings are based largely upon media output and so real interaction
and feedback with customers would be vital in order to find out how consumers truly respond when
facing price promises and guarantees. Analysis into this data could reveal if customers change their
shopping behaviour as a result of advertised guarantees, such as shopping elsewhere or chasing up
retailers when they’ve found the same product for a lower price. Such research could perhaps
enable retailers to tailor their price promises to fall in line with popular opinion and thus influence
customer behaviour in their favour.
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References
BBC News (2011)’ Supermarket Price War: Can they all be the cheapest?’ Available at
[http://www.bbc.co.uk/news/business-16002303]
BBC
News
(2011)
Revealed:
The
truth
about
supermarket
‘bargains’.
Available
at:
[http://news.bbc.co.uk/panorama/hi/front_page/newsid_9652000/9652944.stm]
The Register (2006) Curry’s Price Promise Refusal Backed by High Court.
Available at:
[http://www.theregister.co.uk/2006/12/19/high_court_backs_currys/ ]
The Guardian (2011) Why supermarket price promises aren’t all they seem. Available at:
[http://www.guardian.co.uk/money/2011/oct/25/supermarket-price-promises-offers?CMP=twt_gu]
The
Guardian
(2012)
Sainsbury’s
to
extend
price
scheme.
Available
at:
[http://www.guardian.co.uk/uk/feedarticle/10035713]
Mail Online (2011) Four largest supermarkets could face prosecution for 'misleading shoppers with
grocery price war lies.' Available at: [http://www.dailymail.co.uk/news/article-2069932/Four-largestsupermarkets-face-prosecution-misleading-shoppers-grocery-price-war-lies.html]
Which?
(2011)
Which
tests
Asda’s
price
guarantee.
Available
[http://www.which.co.uk/news/2011/04/which-tests-asda-price-guarantee-251810/]
Dictionary.com (2012) Identical Available at: [http://dictionary.reference.com/browse/identical]
at: