Last week, one of Britain’s largest supermarket chains, Asda, called time on its price guarantee programme after nearly a decade. Here, we speak to pricing expert Simon Hulme about his pivotal role in the programme’s creation.
Simon Hulme is founder and principal consultant at Minos Consulting, specialising in pricing, value creation and commercial transformation. From 2007 to 2011, Simon was Head of Pricing and Customer Insight at Asda where he developed and delivered the world’s first supermarket price guarantee programme.
Q. What was the Asda Price Guarantee?
The idea of the price guarantee was simple. If a customer’s total at checkout was not 10% cheaper at Asda than it would have been at the other major supermarkets, they’d receive a voucher for the difference.
Q. How did the guarantee come about?
The guarantee was an attempt to kill off Tesco’s claims that they were cheaper than Asda. We had been embroiled in this tit for tat campaign with them for ages (see examples below). We would run an advert one week claiming we were cheaper, then next week they would run one saying they were cheaper.
It was just childish really. They knew we were cheaper, but they were just trying to confuse the public. We had won the Grocer 33 price basket for 13 years running, it was a no contest. So, we decided to kill it once and for all with the guarantee– “If they really are cheaper then we will give you a refund, so in the end we are cheaper – end of discussion!”
Rival Price Claim Ads Prior to the Guarantee
Q. What were the biggest challenges in the roll out?
Getting the technology ready in time was the biggest challenge. We decided to do it in January 2010 with a launch date of Easter weekend which was early April – just 4 months. We had press and TV planned so delaying it wasn’t an option. It was quite possibly the most manic I have ever worked: 16-hour days, 6 days a week for 4 months.
There were other challenges too. We had to convince Wal-Mart (Asda’s parent company) to allow 3rd parties access to the transactional data which was all stored in Bentonville, Arkansas, and get the 3rd party to build the website which could pull in all the data and perform the price comparison in under a second. Then, we had to work out how to get the vouchers scanned at the tills and prevent fraud from photocopied vouchers.
Finally, we had to work with Advertising Standards to get the TV ads approved, and we still had Tesco’s lawyers contact us as soon as we launched. I had to spend the best part of a week down in Cheshunt at Tesco HQ, trying to convince them there weren’t any holes in what we had done. In the end their case was thrown out, so we were proved right.
Q. What was the response to the guarantee?
Customers loved it. I left Asda at the end of the year after we launched but it had been a great success; millions of people had used it and we had given millions of pounds back to our customers.
They say imitation is the sincerest form of flattery – Tesco launched their own version later that year so they must have thought it was a great idea too.
There were other benefits too, for example the buyers used it to help with supplier negotiations. We knew which lines we were getting beaten on price on that our customers were buying, so we could negotiate better cost prices and then pass the value back to the customer
Q. What do you think the next big thing in supermarket pricing will be?
The focus for supermarkets like Asda and Tesco will be on stopping the discounters like Aldi and Lidl. If the Asda/Sainsbury’s merger goes ahead it wouldn’t surprise me to see Asda start a price war against Aldi, using their increased purchasing power through higher volume to drive costs lower. It then depends on who has the deepest pockets and holds their nerve the longest. We are seeing just this week Tesco launching a new discount format called Jacks to try and combat them.
If Asda do start to close the gap a little on price, there is a tipping point at which customers stop trading off price benefits for getting frustrated by the long queues at the discounters and people will start to switch back.
I also think as technology gets cheaper we will start to see electronic SELs (Shelf Edge Labels) that allow supermarkets to change prices quicker and more cost effectively, but that is still a few years away I think.
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