Let’s start with two scenarios…
Scenario 1: Which do you choose?
Get £900 for sure OR have a 90% chance to get £1,000 (10% chance you get nothing).
Scenario 2: Which do you choose?
Lose £900 for sure OR have a 90% chance to lose £1,000 (10% chance you lose nothing).
In Scenario 1 most people choose the first option. They go safety first. £1,000 is better than £900 but there is a small chance you end up with nothing. So, they take the £900.
In Scenario 2 most people choose the second option. They choose to gamble. Faced with the prospect of losing £900 you take a risk to try to avoid the loss. Even if it might cost you another £100.
This is an example of “loss aversion”. It’s a psychological concept developed by Daniel Kahneman and Amos Tversky – the Godfathers of Behavioural Economics.
It says that the pain we get from losing is much more powerful than the pleasure we get from gaining.
So, we are more willing to take risks to avoid a loss than to make a gain.
Why are we talking about this? Competition is intensifying. Between retailers. Between brands. Between retailers and brands (e.g. Morrisons Compare & Save). Most of this competition is based on price.
But just talking about price is a risk. It risks shoppers trading down.
It’s a risk for retailers. To total sales value. It’s a risk for categories. To total category value. It’s a risk to brands. To brand share.
It’s also a risk to shoppers. Trading down can lead to riskier choices. What if they buy something the kids refuse to eat? What if they buy a product that doesn’t perform as well? What if they buy a product that runs out quicker?
A choice based purely on price is one in which everyone loses. Retailers. Categories. Brands. Shoppers.
To prevent this, you need to help shoppers make choices based on value not just price. Then give them confidence in those choices.
So, how can you do this?
Reinforce the importance of the choice. There is a tendency for shoppers to think that the products they use the most matter the least. Whilst the ones they use the least matter the most. They spend much more time considering which skincare product to buy than which toilet paper to buy. But should they?
Choosing the right skincare product is important. Yet choosing the right toilet paper might be even more important. It’s used multiple times a day by multiple members of a household. Buy a thinner, scratchier toilet paper and people will soon notice.
So, maybe it’s the products that shoppers buy and use the most that should matter the most. Waitrose hit the nail on the head a couple of years ago with their Essentials range communication “why compromise on the food you eat most often?”
Give shoppers certainty. The more you can give shoppers certainty in a choice, the more likely they are to choose you. This could be about familiarity. Heinz - “it has to be Heinz.” It could be about heritage. Vaseline – “helping to heal dry skin for 150 years.” It could be about social proof. Nivea – “UK’s No 1 Men’s Brand.”
Do shoppers buy the lower priced product and hope that it will be good enough? Or do they buy the higher priced product knowing that it will be good? Knowing is always better than hoping.
Say something only you can say. The Morrisons “Compare & Save” campaign is going head-to-head with brands. For instance, there are aisle fins showing Tropicana at £2.75 and Morrisons orange juice at £1.30 saying “both 1 of your 5 a day.” That is pretty powerful. Shoppers will think again about buying Tropicana.
To defend against this a brand needs to be able to say something that is ownable. Something that they can say that a competitor can’t say. In Nappies, the Morrisons brand is taking on Pampers. The aisle fin says, “both have up to 12 hours protection.” But at shelf Pampers say “the only newborn nappy approved by the British Skin Foundation.” Something only they can say.
Build a value angle into your messaging. You could show shoppers that they are getting a lot for their money. Fairy Liquid “lasts 2x longer.” Nescafe “166 mugs of Coffee per jar.” You could show them that you are worth paying for. Nescafe Azera use a quote from an Asda shopper “Lovely tasting coffee. Worth every penny.”
You could talk about cost per usage. Something that is particularly relevant for purchases where you’re buying multiple products (e.g. nappies, case of beer) or have multiple servings (e.g. tea, coffee). Only X pence per nappy. Only Y pence per cup of tea. Paying £2 more for the more premium tea sounds a lot. Paying 2p more per cup not so much.
A warning. Don’t get over excited. Don’t try to say everything you can possibly say. Decide on just one thing to say. Then say it clearly and consistently.
It’s a risk. But it’s a risk worth taking.
Feel free to forward. Have a great weekend. Speak to you in fortnight.