The UK’s big five supermarkets – Tesco, Asda, Waitrose, Morrisons and Sainsbury’s – are currently embroiled in a very public price war.
Amid falls in consumer spending and confidence, and faced with continuing economic turbulence, the major supermarkets are going head-to-head to win customers. In a highly-competitive trading environment, they are playing pricing ‘top trumps’ in the media: slashing prices, launching promotions and off ering hefty discounts.
But while their campaigns ostensibly off er value for money, are they actually delivering real value? Should pricing be their key point of difference?
The supermarkets will no doubt claim their pricing strategies are necessary to keep customers coming through the door. But it is service, not price, that drives real customer loyalty. As they struggle to hang on to customers tempted by heavy discounting, the supermarkets will need to consider how to up their service games in preparation for a ‘war for customers’.
In this competitive environment, customer service is the essential diff erentiator that will attract customers and provide real, long-term value – a factor evident in the Institute of Customer Service’s latest UK Customer Satisfaction Index (UKCSI). A biannual survey of 26,000 consumers, the Index assesses customer satisfaction levels across a range of sectors, including retail and the major supermarkets. Organisations are measured on 20 factors of customer satisfaction in five key areas: professionalism, problem solving, timeliness, quality and efficiency and ease of doing business.
Among the supermarkets, Waitrose consistently comes out top in the satisfaction stakes. While it is not the cheapest off ering in grocery, the company’s high scores are a result of its focus on creating an excellent customer experience and its unrivalled reputation for quality service.
Tesco and Sainsbury’s customers, on the other hand, were less satisfi ed with the service on offer in July this year than they had been in January. To attract and keep customers, they need to continue to strive for service excellence and understand that it is not enough to focus on pricing alone.
Clearly there is a fine balance between strategic pricing and great service. Striking that balance will be crucial as the challenging climate prevails and the mults’ race to the bottom finds its limit.
Waitrose, for example, is ahead of the competition in terms of customer loyalty and is guaranteeing to match Tesco’s prices on Essential range products. Asda and Morrisons, too, seem to be going the extra mile to give customers value for money and great service, with their scores improving over the six months to July, putting them in second and third places.
For supermarkets, focusing on price cutting is a simplistic and short-term tactic. While cost will always be a factor, in the wake of price wars and lacklustre consumer confi dence, service will remain the last bastion of diff erentiation.
By investing appropriately, innovating and striving to deliver a positive customer experience that goes beyond price, supermarkets can create loyal customer advocates and enduring relationships.
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