Improving Value and Price Image by Jose Carlos Gonzalez Hurtado

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Diving deep into retail pricing data, Jose Carlos Gonzalez Hurtado unearths key insights into how retailers can improve value and price imaging.

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Improving Value and Price Image by Jose Carlos Gonzalez Hurtado

  1. 1. Improving Value and Price Image
  2. 2. Conclusions 1 Preferred retailer correlates with value for money (not price image only) 2 Real pricing and price image only partially correlates 3 Existing measures to compare retailers pricing are not reliable / sufficient 4 There are activities proven to improve price image a) Aggressive pricing on sensitive products b) Increase advertising / communication and visibility of MDD products c) Increase visibility of entry prices 5 On the other hand, some activities seem ineffective to improve price image a) Increase promotional weight b) Widespread and limited depth price decreases
  3. 3. Preferred retailer correlates with value for money (not price image only) There is a high correlation between value for money and preferred chain (R2 = 0,774) Iprefered banner index 80 2 R = 0.7738 ESSELUNGA MERCADONA 60 COLRUYT LECLERC 40 DELHAIZE INTERMARCHE SUPER U IPERCOOP CARREFOUR CRF MARKET AUCHAN ALCAMPO AUCHAN CRF MARKET 20 CARREFOUR LIDL ED 0 0% -20 CRK MARKET 10% CARREFOUR 20% 30% 40% 50% Value image weighted 60% 70% CARREFOUR ALDI GEANT DIA % -40 LIDL -60 Spain France Italy Belgium -80 Value image= % preferred value/ penetraton ( PT) Prefered banner index= ((% answers preferred banner - % answers less preferred) / PT ) × 100 80%
  4. 4. 1 Preferred retailer correlates with value for money (not price image only) “Value for money” is a more attractive promise than “low prices” for customers What is the everyday promise that would convince you most to come to a XXX store ?
  5. 5. Preferred retailer correlates with value for money (not price image only) Other research has consistently shown same conclusion Picard is France’s preferred retailer Source: OC&C
  6. 6. 2 Real pricing and price image only partially correlates There is low correlation between measured basket price and consumer price image (R2 = 0,14) Example : A and B hypermarkets, both delivering almost 60% of total measured consumer baskets cheaper than respective competitors, but with significant differences in price image Price image score by store 160 B 140 R2 = 0,14 120 100 80 60 20% A 30% 40% 50% 60% 70% 80% 90% % of baskets that are cheaper at Carrefour (than relevant competition) Score paniers Mapping of price and price image of all hypermarkets in France, October 2009 100%
  7. 7. Conclusions 1 Preferred retailer correlates with value for money (not price image only) in Western Europe 2 Real pricing and price image only partially correlates 3 Existing measures to compare retailers pricing are not reliable / sufficient 4 There are activities proven to improve price image a) Aggressive pricing on sensitive products b) Increase advertising / communication and visibility of MDD products c) Increase visibility of entry prices 5 On the other hand, some activities seem ineffective to improve price image a) Increase promotional weight b) Widespread and limited depth price decreases
  8. 8. Conclusions 1 Preferred retailer correlates with value for money (not price image only) in Western Europe 2 Real pricing and price image only partially correlates 3 Existing measures to compare retailers pricing are not reliable / sufficient 4 There are activities proven to improve price image a) Aggressive pricing on sensitive products b) Increase advertising / communication and visibility of Own Brand products c) Increase visibility of entry prices 5 On the other hand, some activities seem ineffective to improve price image a) Increase promotional weight b) Widespread and limited depth price decreases
  9. 9. Conclusions 1 Preferred retailer correlates with value for money (not price image only) in Western Europe 2 Real pricing and price image only partially correlates 3 Existing measures to compare retailers pricing are not reliable / sufficient 4 There are activities proven to improve price image a) Aggressive pricing on sensitive products b) Increase advertising / communication and visibility of MDD products c) Increase visibility of entry prices 5 On the other hand, some activities seem ineffective to improve price image a) Increase promotional weight b) Widespread and limited depth price decreases
  10. 10. Some activities seem ineffective to improve price image - Increase in promotional weight - (Actually evidence shows a negative correlation. More promos = lower value perception) - Widespread and limited depth price decreases
  11. 11. Five main possibilities to communicate price superiority beyond indices 1 The Tesco way • Compare baskets from your customers to what they would have cost elsewhere • 2 The Leclerc way • 3 Compare a short list of products, to reflect a real basket The Colruyt way • 5 Compare a long list of products, to get credibility The Carrefour way • 4 Tested by Carrefour in France in 2009 Make customers compare for you Les Prix Rouges The 5th way • Compare cost of best sellers, after promotions & loyalty

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