On 26 January 2011, Coles fired the first shot in what would soon be dubbed the "supermarket price wars" by reducing the price of its own-brand milk to A$1 per litre. Woolworths fired back, triggering seven years of intense price competition.
But now Coles has waved the white flag, indicating a move away from price-based marketing, to a focus on other attributes, such as sustainability, local produce and community.
Other retailers also get caught in the crossfire of price cutting. Case in point is Aussie Farmers Direct, which fell into administration recently saying they were: "…no longer able to compete against the domination of the major two supermarkets."
While it may be overly simplistic to blame the two big supermarkets for the downfall of Aussie Farmers Direct, price-conscious consumers and thin grocery margins certainly contributed.
The major chains are looking to target aspirational shoppers with better service and local produce. Image credit: Julian Smith/AAP
How this strategy came about
Supermarkets are now looking beyond price to stand out.
Both Coles and Woolworths are very similar in the brands they offer, prices, layouts, weekly specials and online channels. The move away from price gets shoppers thinking about what is unique to each chain.
These techniques are used in advertising to convey positive feelings and emotions associated with a particular experience. A simple way to achieve this in advertising is to feature people telling their own stories – as seen in the new Coles advert launched this week.
With the Commonwealth Games near, both supermarkets are also featuring sports stars in their marketing. Woolworths new campaign features athletes and their connection with fresh food, positions the company, once again, as “Australia’s Fresh Food People”.
Meanwhile, Coles have partnered with Uncle Toby’s for their Sports for Schools campaign. Their advertisements feature an array of young, fit, attractive and successful athletes linking the athletic success with the purchase of products from Coles.
By moving away from price and focusing on a storytelling strategy, both supermarkets can engage consumers with a process called “internalisation”. This is where people accept the endorser’s position on an issue as their own.
Internalisation is a powerful psychological mechanism because even if the source used in the campaign is forgotten, the internalised attitude usually remains. Price doesn’t create this effect.
While food prices won’t necessarily go up anytime soon, consumers shouldn’t expect to see any further significant price drops. Instead, Coles and Woolworths will draw attention to other important attributes.
The Conversation Africa The Conversation Africa is an independent source of news and views from the academic and research community. Its aim is to promote better understanding of current affairs and complex issues, and allow for a better quality of public discourse and conversation. Go to: https://theconversation.com/africa
About the author
Gary Mortimer is the associate professor in marketing and international business at Queensland University of Technology Louise Grimmer is a lecturer in marketing at Tasmanian School of Business and Economics, University of Tasmania.
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Eveyrbody knows that cheap and fast is good but that doesn't mean that you have quality. I choose to believe that customers will always value that last attribute more highly than everything else and I hope I'm not wrong in doing so. If people will choose to compromise then I think that would be the end of business.
I personally do not shop based solely on prices alone. I do look out for quality products as well and the origin of the products. If the products are of a superior quality, I bet shoppers would still buy them despite the little higher price tags.