March 13, 2009
Supervalu Out to Grab Tax Dollars
Last year about this time, retailers began
falling over each other offering special deals for consumers that would
bring their tax refunds and/or stimulus checks to the store in exchange
for various add-on types of credits. Among the most popular types of promotions
included exchanging the government check for a gift card plus some additional
dollars, usually around 10 percent of the refund, that could be spent in
the retailer’s store.
Many, looking back, were dubious about how
much business these types of promotions would bring retailers. But, based
on the announcement that Supervalu is running a similar program this year,
it must have worked for at least one chain operator.
Supervalu, according to a Minneapolis
Star-Tribune report, is giving
consumers additional "refund rewards" of $20 or $30 when they
purchase a $250 or $300 gift card from the company’s Acme, Albertsons, bigg’s,
Cub Foods, Farm Fresh, Hornbacher’s, Jewel-Osco
and Shaw’s/Star Market chains. The program will run through April 15.
"We know that consumers’
budgets are strained like never before, so we’re looking for ways to help
our shoppers find value at the grocery store," said Jeff Noddle,
chairman and CEO of Supervalu, in a press release. "This program will help our shoppers
put more in their carts, whether they’re looking to stock up on the staples
or purchase items for a special meal."
Mr. Noddle has
been at the forefront of grocery execs calling on consumer packaged goods
companies to lower prices.
Discussion Questions: Will the bonus of an
extra 10 percent be enough for large numbers of consumers to bring their
tax refunds to chains owned by Supervalu this year? Are consumers more
likely to participate in this type of promotion vs. last year when
the government issued one-time stimulus checks?
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Short Term Thinking versus Long Term Strategy. In my opinion, how this gimmick will hurt is that it puts Supervalu in a very bad strategic position and hurts the brand. To answer your questions about PR, during these economic times, Local News channels and Newspapers are doing price comparisons. Many times they show how much a family of four will save in a year by shopping at Wal-Mart. The savings they show are dramatic and consumers now have this information to make buying decisions. The Supervalu bonus gimmick will only reinforce the perception that Supervalu is overpriced on their products.
A recent study on consumer perceptions puts this in perspective: “Dollars & Consumer Sense 2009 study, released today, finds that consumers often have a negative reaction when they see the price slashed for their favorite product or service. In fact, 70 percent of respondents to the Yankelovich poll said such cuts probably mean the brand was overpriced in the first place” brandweek.com March 11, 2009. While some customers will take advantage of the Supervalu bonus over the next month, the long term effects could be disastrous. As consumers see Supervalu as being overpriced they will cherry pick their stores and only shop there during big promotions, otherwise they will be seen as much more expensive than Wal-Mart and Super Target. One only has to look at the results in the last year. Wal-Mart and Super Target are gaining Grocery revenue and market share, while Supervalu is losing big time.
And in the short run, how many discounts is Supervalu giving to customers that would have done their shopping in their stores without the discounts? If a retailer is going to take a short-term hit on earnings, don’t you want a long-term payoff?
Very bad strategy. This will hurt Supervalu’s brands: Acme, Albertsons, Bigg’s, Cub Foods, Farm Fresh, Hornbacher’s, Jewel-Osco and Shaw’s/Star Market chains.
Customers are too smart for this gimmick. Even with the Gift Card “bonus,” customers know that they can get much lower prices on the same products at Wal-Mart and Super Target. Also, customers will see this as Supervalu charging too much on their products, thereby adding to the impression that Supervalu is over-charging all year round.
I don’t see how it can hurt. Consumers get a bit of a bonus for buying a gift card; they don’t have to bring in their tax forms or refund checks; and Supervalu gets some PR out of giving their customers a little something extra when times are tough.
These are days when all food retailers are doing everything conceivable to try to increase sales. It’s like a fight to the finish when there only two finishes: sailing or sinking.
Supervalu doesn’t want to lose any–or any more–customers to Wal-Mart, Sam’s or Costco, so they are offering the 10% reward for buying a gift card by April 15. That offering will help Supervalu some…and every little “some” helps. On balance, SVU is doing a good and smart thing.
If it works, copy it. Consumers are looking for value. If they can save an additional 10% by cashing their IRS refund checks at Supervalu, they might just do it. After all, everyone has to eat.
No, in answer to the question, but that’s OK. There’s no real cost associated with customers NOT showing up, and the promotional message may resonate and “stick” with shoppers if Noddle & The Miracles continue to promote in this vein. It’s not about a one-time shot. Consistency is paramount in marketing. Trust me, I have a t-shirt that says so.
But contrary to what another commentator wrote, “all food retailers are [NOT] doing everything conceivable to try to increase sales.” It simply isn’t true. For instance, I’ve yet to see a modern version of a promotion we offered in the early 80s for Supervalu in Pittsburgh. We hired a nutritionist to design and publish recipes for various sizes of families for the entire week using our sale items. Generics were popular at the time and helped in the cost calculations, and eventually the nutritionist began suggesting ad items to prepare better meal recommendations. The program worked great, and I’m assuming that it falls into the “all” and “everything” qualifiers in the comment. (The law of absolutes will bite you [almost] every time.)
In short, retailers are definitely NOT trying everything.
In my opinion, I don’t get the No Cost bit. If you have existing customers take advantage of a 10% discount on goods they would have purchased anyway, aren’t you going to take a hit on earnings? And what about the marketing costs associated with putting on a promotion of this type? Advertising and operation costs add up on these one-time promotions. And if new customers do not show up you have no gain in market share, no gain in revenue, no gain. And aren’t you reinforcing the perception that you are NOT an everyday low price leader?
I agree with your point if this was a part of a consistent marketing strategy. But it hasn’t been. And since it hasn’t been, Wal-Mart is sure to take advantage. Wal-Mart is consistent and has shown they can take advantage of these situations.
When has Supervalu CEO and staff “Noddle & The Miracles” shown any consistency? It seems when Supervalu’s former CEO Mike Wright left with the Sr. VP of Strategic Planning and Director of Strategic Planning, there has been no consistency in Strategic Planning, Marketing, Branding, Advertising, Operations, and Accounting.
I like “Consistency is paramount in marketing. Trust me, I have a t-shirt that says so.” I need to get me one of those t-shirts.
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Short Term Thinking versus Long Term Strategy. In my opinion, how this gimmick will hurt is that it puts Supervalu in a very bad strategic position and hurts the brand. To answer your questions about PR, during these economic times, Local News channels and Newspapers are doing price comparisons. Many times they show how much a family of four will save in a year by shopping at Wal-Mart. The savings they show are dramatic and consumers now have this information to make buying decisions. The Supervalu bonus gimmick will only reinforce the perception that Supervalu is overpriced on their products.
A recent study on consumer perceptions puts this in perspective: “Dollars & Consumer Sense 2009 study, released today, finds that consumers often have a negative reaction when they see the price slashed for their favorite product or service. In fact, 70 percent of respondents to the Yankelovich poll said such cuts probably mean the brand was overpriced in the first place” brandweek.com March 11, 2009. While some customers will take advantage of the Supervalu bonus over the next month, the long term effects could be disastrous. As consumers see Supervalu as being overpriced they will cherry pick their stores and only shop there during big promotions, otherwise they will be seen as much more expensive than Wal-Mart and Super Target. One only has to look at the results in the last year. Wal-Mart and Super Target are gaining Grocery revenue and market share, while Supervalu is losing big time.
And in the short run, how many discounts is Supervalu giving to customers that would have done their shopping in their stores without the discounts? If a retailer is going to take a short-term hit on earnings, don’t you want a long-term payoff?
Very bad strategy. This will hurt Supervalu’s brands: Acme, Albertsons, Bigg’s, Cub Foods, Farm Fresh, Hornbacher’s, Jewel-Osco and Shaw’s/Star Market chains.
Customers are too smart for this gimmick. Even with the Gift Card “bonus,” customers know that they can get much lower prices on the same products at Wal-Mart and Super Target. Also, customers will see this as Supervalu charging too much on their products, thereby adding to the impression that Supervalu is over-charging all year round.
I don’t see how it can hurt. Consumers get a bit of a bonus for buying a gift card; they don’t have to bring in their tax forms or refund checks; and Supervalu gets some PR out of giving their customers a little something extra when times are tough.
These are days when all food retailers are doing everything conceivable to try to increase sales. It’s like a fight to the finish when there only two finishes: sailing or sinking.
Supervalu doesn’t want to lose any–or any more–customers to Wal-Mart, Sam’s or Costco, so they are offering the 10% reward for buying a gift card by April 15. That offering will help Supervalu some…and every little “some” helps. On balance, SVU is doing a good and smart thing.
If it works, copy it. Consumers are looking for value. If they can save an additional 10% by cashing their IRS refund checks at Supervalu, they might just do it. After all, everyone has to eat.
No, in answer to the question, but that’s OK. There’s no real cost associated with customers NOT showing up, and the promotional message may resonate and “stick” with shoppers if Noddle & The Miracles continue to promote in this vein. It’s not about a one-time shot. Consistency is paramount in marketing. Trust me, I have a t-shirt that says so.
But contrary to what another commentator wrote, “all food retailers are [NOT] doing everything conceivable to try to increase sales.” It simply isn’t true. For instance, I’ve yet to see a modern version of a promotion we offered in the early 80s for Supervalu in Pittsburgh. We hired a nutritionist to design and publish recipes for various sizes of families for the entire week using our sale items. Generics were popular at the time and helped in the cost calculations, and eventually the nutritionist began suggesting ad items to prepare better meal recommendations. The program worked great, and I’m assuming that it falls into the “all” and “everything” qualifiers in the comment. (The law of absolutes will bite you [almost] every time.)
In short, retailers are definitely NOT trying everything.
In my opinion, I don’t get the No Cost bit. If you have existing customers take advantage of a 10% discount on goods they would have purchased anyway, aren’t you going to take a hit on earnings? And what about the marketing costs associated with putting on a promotion of this type? Advertising and operation costs add up on these one-time promotions. And if new customers do not show up you have no gain in market share, no gain in revenue, no gain. And aren’t you reinforcing the perception that you are NOT an everyday low price leader?
I agree with your point if this was a part of a consistent marketing strategy. But it hasn’t been. And since it hasn’t been, Wal-Mart is sure to take advantage. Wal-Mart is consistent and has shown they can take advantage of these situations.
When has Supervalu CEO and staff “Noddle & The Miracles” shown any consistency? It seems when Supervalu’s former CEO Mike Wright left with the Sr. VP of Strategic Planning and Director of Strategic Planning, there has been no consistency in Strategic Planning, Marketing, Branding, Advertising, Operations, and Accounting.
I like “Consistency is paramount in marketing. Trust me, I have a t-shirt that says so.” I need to get me one of those t-shirts.