Case Study
Face-to-Face Consumer Interviews For Havering Council
Will Tesco’s new Brand Guarantee enable Tesco to dial down promotions? Does the new cashback price promise mark a flight to EDLP?
On the evidence of Tesco’s promotional mix in the weekend running up to launch: no. While the number of promotions at Tesco fell 7% versus last year (and the average saving has reduced by 130 basis points), promotions will remain a key ingredient in Tesco’s ongoing strategy, says Assosia MD Kay Staniland.
“Shoppers still want to see promotional activity, and to be able to select the offers they want. You won’t really know how much you’re saving on the Brand Guarantee until you are at the tills, so the offers still need to be communicated at point of pick-up.”
That’s why Tesco actually increased the number of promotions it ran by 1.1% month on month to 2,585, and the average saving increased by 50 basis points to 32.5% (Assosia 4 w/e 11 October). Only Sainsbury’s has more products on offer right now. And competition is as fierce as ever.
The big four all upped the average % saving month on month – in case of Asda by as much as 4.3%. Asda also came even close to matching Tesco in the number of promotions it runs, up 1.4% to 2,494.
And Morrisons is working hard to close the gap with a 3.2% increase month on month, taking the number of promotions to 2,307. In fact, only Waitrose showed the slightest inclination to offer less money off: the average month-on-month saving was down by 130 basis points – though of course they also have Pick Your Own Offers on top.
“Tesco needed to do something different,” Staniland believes. “With market share losses, financial woes and reorganisation across the board, the instant savings will surely appeal to consumers who simply want to save money.”
However, she warned Brand Guarantee 2could prove an expensive exercise for Tesco”. “Whilst it is all good for consumers, Tesco will in effect be matching the promotions of its competitors. If Tesco has 4x330ml Coke on promotion and Sainsbury’s has 4x330ml Pepsi, both products will really be promotional prices, as Tesco will be matching that price.”
| 4 weeks to 11th October 2015 | ||||||
| Asda | Co-op | Morrisons | Sainsbury’s | Tesco | Waitrose | |
| Number of offers | 2494 | 862 | 2307 | 2870 | 2585 | 1215 |
| Number last month | 2459 | 860 | 2236 | 2883 | 2557 | 1217 |
| % change m-o-m | 1.42% | 0.23% | 3.18% | -0.45% | 1.10% | -0.16% |
| Number last year | 2196 | 888 | 2325 | 2590 | 2781 | 1216 |
| % change on last year | 13.57% | -2.93% | -0.77% | 10.81% | -7.05% | -0.08% |
| Average start price (£) | £3.50 | £4.66 | £4.69 | £4.48 | £4.93 | £5.43 |
| Typical Average TOTAL £ saving | £1.54 | £1.72 | £1.93 | £1.59 | £2.03 | £2.27 |
| Typical Average TOTAL % saving | 29.89% | 35.90% | 36.91% | 29.16% | 32.25% | 33.67% |
| Average % saving last month | 28.7% | 35.8% | 36.8% | 29.0% | 32.1% | 34.1% |
| % savings change m-o-m | 4.29% | 0.41% | 0.21% | 0.67% | 0.53% | -1.30% |
| Average % saving last year | 30.72% | 36.92% | 36.62% | 31.90% | 32.68% | 31.82% |
| % savings change on last year | -2.71% | -2.76% | 0.80% | -8.58% | -1.30% | 5.84% |
| Current Brand:own-label ratio | 90:10 | 73:27 | 89:11 | 79:21 | 85:15 | 84:16 |
| Ratio 1 year ago | 91:09 | 75:25 | 89:11 | 74:26 | 83:17 | 85:15 |
| Average % saving (branded) | 30.89% | 38.19% | 37.65% | 29.66% | 33.09% | 34.14% |
| Average % saving (o/l) | 21.29% | 29.82% | 31.18% | 27.27% | 27.59% | 31.24% |
Published in The Grocer, 16 October 2015