Background
Over recent years price has emerged as a key competitive edge for UK grocery retailers. Broadly speaking, retailer pricing strategies currently in use in the UK may be divided into two types EDLP (Every Day Low Pricing) and Hi-Lo (high background – low promotion). As highlighted in the chart below, few retailers operate a single pure pricing strategy, with most combining EDLP and Hi-Lo to form a hybrid positioning although generally tending towards one type.
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Pricing Strategies for Leading UK Retailers
Source: IGD Consumer Research 2003 |
Shoppers’ preference
Whilst there was a general acceptance amongst shoppers that low prices and promotions offer savings on their shopping, there were mixed opinions amongst shoppers as to which was considered to offer them the greatest benefit.
As highlighted in the chart below:
- 60% of shoppers preferred a store offering low prices
- 40% preferred a store to offer a variety of different promotions
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EDLP vs Promotions
Source: IGD Consumer Research 2003 |
Reasons for Preference
The key drivers influencing shoppers preference for low price includes budget restraints, lack of relevance of promotions and a belief that supermarkets focusing on promotions are likely to have higher overall trolley prices.
Those motivated by promotions appeared to be driven by the greatest ‘instant’ benefit or cost saving. There were a number of key reasons why shoppers preferred a store that focused on promotions rather than on low prices. Whilst some considered promotions to provide them with an opportunity to stock up or try new products, others believed that a store with promotions offered better all round value.
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Reasons for Preference of Low Prices or Promotions
Source: IGD Consumer Research 2003 |
