Promo-FOMO in supermarket land: good for the customer, risky for the rest

How far should you go for your brand promise?

Hardly anyone bats an eye at ‘buy 1 get 1 free’ these days. Albert Heijn clearly understands this. The supermarket chain, originally from the Netherlands, doesn’t seem to mind an extra discount or two, with their recent ‘buy 2 get 5 free’ promotion serving as the ultimate stunt.

Colruyt had to decide quickly. Did they stay true to their brand promise, at the risk of hurting their own margins? Or did they allow one of their major competitors to dominate their home turf? They responded immediately with an equally bold promotion, including a clear nod to Albert Heijn.

Necessary according to Colruyt, but with a bitter aftertaste, according to Michon van Door, their own Head of Pricing & Promotions. How sustainable is this? A promotion where you give away more than 70% of the value? (…) ‘Free doesn’t exist’ is also about sustainable business. Yes, economic sustainability: looking at the long term and beyond just your own perspective as a retailer.

Loosely translated: there is always a losing party in this story. It’s certainly not the customer, who wins big. But for a player like Colruyt, which has seen its earnings before interest and taxes (EBIT) drop from 6.2% to 4.1% over the last ten years, such developments are more precarious. At such a moment, should you stick to your brand promise or is it better to take your foot off the gas?

Is the 'A' in A-brand under threat?

It’s not just the supermarkets that risk bearing the consequences of the price war, but also the many A-brands being given away for free in bulk. Because ultimately, everything comes down to value perception:

• In several Albert Heijn branches, the ‘buy 2 get 5 free’ promotion led to confrontations between customers. What does that do to the shopping experience and, consequently, the image of the chain itself?
• The more the consumer receives for free, the more painful it will feel when they are presented with a normal bill. As a result, cheaper private labels might more easily win the battle against A-brands in the future.
• And what will A-brands even be worth in the eyes of the consumer if they are constantly associated with extreme promotions? Their premium image risks fading—the very factor that justifies their higher price.

Our opinion? Your brand promise to the end, but...

Nothing is concept-neutral; that is something we firmly believe in at Expliciet. The brand promise is your identity as a company or organization, and you must remain as loyal to it as possible. However, you must be able to continue fulfilling that promise in an economically and sustainably responsible way. And that also means taking sufficient account of the impact of your marketing actions.

The question is whether that is still the case for Colruyt. And whether Albert Heijn isn’t straying too far from its own positioning—namely that of a supermarket chain with a broader and slightly more exotic product range than its competitors. The fact remains that Albert Heijn gained great national exposure with this ‘buy 2 get 5 free’ promotion and is putting even more pressure on one of its major competitors. It remains to be seen whether this is a one-off or if boundaries will be pushed further.

At Expliciet, we always make the final assessment by weighing the following questions:

• What is the expected economic impact?
• How is your brand perceived? What does your value perception say?
• What positioning do you embody for your target audience?
• How stable is the market in which you operate?

Is the balance positive? Then we believe you should go all the way with your brand promise to achieve success with your positioning and campaigns.

Is your company still looking for that one clear brand promise?

Is your company or organization still struggling with the right brand positioning? At Expliciet, we help you dig for what makes you special and unique in the market. Be sure to drop by soon for an informal chat.