Points of Difference, Points of Parity

Maybe the Tesco strategic review will spark a little sanity back into food and drink retail in general. The implications are already filtering through with many suppliers, selling products and brands close to the retailers’ specified ‘hurdle rate’, renegotiating furiously. Truth is, it feels like a cycle of normalisation and making things simpler for shopper and retailer alike will most likely turn out to be a good thing.

But brands have got to survive in the short term, and it feels like a good time to be really looking hard at how your brand is positioned. True, it may feel like a ‘Unique Selling Proposition 101’ but the reality of shopping the supermarkets is that most (shall we settle on 90%? 95%?) products sold are ‘me-toos’, forced to differentiate on price alone, copying the livery of the leader and hoping that shoppers make rational, price based decisions alone.  For those retailers where price is their positioning, that’s fine: Asda, Aldi, Lidl – let them fight it out and may the best retailer win. But for the others, price is a reassurance, an important part of the mix but not the most important. It is a point of parity not difference.

And this seems to be where the confusion lies, particularly in food retail. Morrisons, in what has been deemed to be a disastrous Christmas trading period, bin their CEO and, in the short term at least, resort to price cuts. Sainsbury’s after a better, but still soft, Christmas trading period do the same*. Tesco hit the nuclear button and do the same**, and in the parlance of an American friend of mine, ‘execute the hell out of it’, with national TV and in-your-face point of sale in store. Even Asda, who had a better time over Christmas, have decided that it will only get worse, and bin*** the senior bods in their marketing team.

But, for all but Asda, this isn’t the winning strategy. At least, not without a fundamental restructuring of what they do, how they do it and who they are – and then, what’s the end result? You become Aldi.

Asda Price GuaranteePoints of parity can be winning strategies but they require unwavering focus and unrelenting discipline to stay on track. Asda have this. They understand that price is a point of parity and they own it with every ounce of their being. All their activity underlines the point that they are cheaper, even if this is just pricing their diesel at £106.7 vs £106.9 elsewhere. (One day I shall buy one litre and see if they force me to round up or down).   They lead on price too – being the first retailer to make a Price Promise, to roll back, to launch a price guarantee (in recent times at least). They’ll be ‘Doubling Down’ on price too – you just watch this space.

Currently, it seems that price is the only promise that matters. But other points of parity can be owned and can be used to win. Take service: Tesco proved that you can win with it, to wit, Every Little Helps. The trouble was, they confused it over time with choice and suddenly their business became riddled with ferocious complexity. Sainsbury’s for many years owned quality, another point of parity, but slowly it has been denuded by time, confused focus and competition.

Now is the time to hunt for genuine, ownable points of difference in retail: ownable by the brand, not just the category. John Lewis is a case in point. If you took their signoff line, the beautiful ‘Never knowingly undersold’ you could conclude that their positioning is price: they offer a guarantee after all. But of course, John Lewis is so much more than this as the line subtly implies. Ultimately, they offer reassurance – of quality, value, service and taste. B&Q is fascinating too: their website was clever domain buying and clever attitudinally too: / do it yourself. So whilst Wickes own a grittier, trade feel, B&Q own both the point of parity and the liberating attitude of DIY.

Perhaps food and drink retailing is tougher. But Waitrose seem to do it. In the parlance of the common man, they own posh nosh. And then they reassure that you won’t get stitched up through initiatives like their Essentials range, just in case you were wavering. And northern retailer Booths, which many refer to as ‘the northern Waitrose’ are developing a much more specific positioning around regional quality. Defensible? Well they can both be copied, but they can be owned too, and that is where the effort is focused.

Ironically, Tesco, Sainsbury’s and Morrisons have an enormous opportunity. They are in the middle of the market, and whilst that is giving them some short term pain, it also offers them the opportunity to build a differentiating position for most people most of the time. Time will tell if they have the foresight to find it and the bravery to grasp it.

* Without binning their CEO
**Nor them
**Technical term: keep up 

Slide1David Preston is founder of The Crow Flies, a research, strategy and innovation company that helps brands find a direct route to long lasting success.; +44 (0) 7885 408367;; @crowflieshigh.


© The Crow Flies, 2015

Expectation Gap

Sainsbury’s results last week seem to be more evidence that the food retailing bigwigs are feeling the pressure to change their paradigm. Netto entering into a joint venture with Sainsbury’s themselves; the continued growth of Aldi and Lidl, both through expansion and new sites and organic growth – attracting those ‘middle ground’ shoppers who traditionally would go to solely one of the big 4. The day after their results, Sainsbury’s announce that because it’s getting tough out there, they will invest a further £150m in price discounts: £150m lost in the fight to defend their distinctiveness, their differentiation.

Of course the price we pay for our food is a major concern. But moving retail strategies towards a price orientation demonstrates the lack of confidence leaders have in their brands – and shines a light on the real problem that needs fixing.

The experience a retailer offers is part of their customer’s value equation, even if research reports say otherwise. Take dairy: this is a category full of rich and evocative pastoral images. In a recent project, we built a mental collage with consumers of what dairy meant to them. Here was the picture that was constructed: standing at the top of a verdant green hill, the leaves of an oak tree overhanging, you look down into the gentle ‘V’ of interlocking hills and there, nestled in the distance is a farmhouse, with smoke gently drifting up from its log fire. A farmer slowly chugs across a field into a vintage tractor, and cows, ready for milking, amble through the farmyard. The farmer’s wife calls to her children who are catching butterflies in a nearby field.

Utter fantasy of course, yet…not. Consumers think of dairy as full of goodness, heavenly food in fact, enjoyable eating, reminding them of good times and nutritious. Yes, they are aware of the high fat content and equally aware they shouldn’t over indulge, but these concerns are not sufficient to impact negatively on their positive dairy world-view.

Look at dairy in retail though: it couldn’t be more different. White packs, plastic and shrink wrap packaging everywhere, glaring red POS pronouncing BOGOFs and price slashes, all cheddar beiges, and goats-milk whites. This is a shopping experience that, rather than being full of warmth and happiness, is emotionally and physically cold. This is a shopping experience where the potential of premium pricing through premium experience is lost.

In fact, this is a shopping experience typical of where food retail is heading; it’s happening throughout the major supermarkets as they wrestle with the no frills approach of the discounters. In turn, the retailers pressure their suppliers for a category growth agenda because they don’t know what to do. The truth is, to not understand how the brand or category exists in the consumers minds is a major risk – commoditising the shopping experience puts you at peril. It is no surprise that at the premium end of the market the retailers are more confident in their approach. Waitrose is the oft cited example, but another, smaller retailer embodies this consumer understanding more than most. Up in the north, with stores in places like Milnthorpe and Garstang, you possibly wouldn’t expect a retailer to be thriving with this approach, but Booths is.

Booths storeI recently went to their Windermere store in the old railway station and it was a delight. This isn’t just a retailer who operates the hackneyed old stereotypes like ‘get fresh near the front’ or wafting the smells of fresh bread throughout. It does these things of course, but with thought and panache. Artisan breads were laid out on a table, with short descriptions of what they contained, how they were baked, what they’re good with. The delicatessen didn’t just feature bowls of olives but also great northern standards – a pie range to die for, more sausages you could shake a pig at, it catered for everyone not just middle class Mediterranean-diet wannabes. Beer wasn’t laid out by type, but by region, with a big focus on local. Local suppliers were the hero everywhere in fact – Goosnargh Ducks, Mrs Kirkham’s Lancashire Cheese and inevitably crafty crisps featured with point of sale showing, who made them, where, when and why.   This was a food retail experience much closer to being romanced like in a luxury car showroom, the Apple Store or a great bookstore. This was a retail experience where more clearly than any other there seemed to be a partnership between supplier and store. And oh, look, they’re doing very nicely thank you.

Commoditising price is one thing, but commoditising experience? Well, that’s a trap you’ll never get out of.

Slide1David Preston is founder of The Crow Flies, a research, strategy and innovation company that works with shoppers and consumers to help brands find a direct route to long lasting success.; +44 (0) 7885 408367;; @crowflieshigh.

© The Crow Flies, 2014