Sainsbury’s complaint to the Advertising Standards Authority over Tesco’s Price Promise was today formally rejected. Tesco UK marketing director David Wood comments on the decision.

If there’s something that a lot of disruptive innovation has in common, it’s that some people don’t get it right away. The computer, mobile phone, internet, social media – all of them encountered a bit of “It’ll never catch on”. We experienced it ourselves when we launched Clubcard in 1994; our competitors dismissed it as just “green shield stamps”, and then spent the next 19 years trying to copy it.

This week, we’ve overcome a challenge to another innovation, Price Promise. The regulator, the Advertising Standards Authority, has ruled in our favour on an attempt to block Price Promise. Their verdict on the key challenge: “While we acknowledged there would be differences in animal welfare and country of origin for the ingredients, we were satisfied that Tesco had taken those elements into account when identifying and matching products and had compared on the basis of them meeting the same need.”

We are delighted because we know how good Price Promise is for customers. Price Promise is a simple proposition. It says that however you shop, whatever food products you shop for, we’ll compare your basket of shopping to our competitors’ prices and if your comparable grocery shopping would be cheaper elsewhere we will give you a voucher instantly at the checkout, to use next time.

It is very simple, but it is very powerful. It tells customers they don’t need to worry about price because we’ve got it covered. We didn’t think it was fair that only in-store shoppers benefited either, so we introduced it for online customers too.

We and others have been comparing some grocery prices for some time. The innovation is in what Price Promise compares and how it makes it effortless for customers. Comparing brands is easy but customers don’t just shop for brands, they shop for fresh food – meat, fish, fruit and vegetables - and own-brands too. Nearly half the average customer basket is made up of own-brand products. We didn’t think comparing half the basket was good enough.

It isn’t that it can’t be done, or  can’t be done fairly (as the ASA has adjudicated), it’s just that it takes effort to go the extra mile for customers. A massive amount of work goes into making the comparisons, down to the quality of the individual ingredients, to make sure we make common-sense comparisons customers would see as fair and meaningful. The origin of a product can be important and where it is, for example Melton Mowbray pies, we compare by origin too. Where it isn’t a key factor for customers, we don’t let it stand in the way of making a common-sense comparison.

Price Promise is transformative. Crucially the group which really does “get it” straight away is customers. It takes a huge weight and worry from their shoulders: am I getting the best deal on my weekly shop? The key measure of how we compete on price is called price perception, and ours improved and kept improving ever since we started Price Promise.

That says two things: customers love it because it genuinely helps them cut through lots of competing claims, offers and promotions, and it is good for our business because helping customers builds loyalty. We have done something difficult, something which others gave up on as impossible, because that extra little effort helps customers of all kinds save money and simplify their lives. It seems obvious to us, a win-win. Think about how customers have responded to being able to compare loans, credit cards and insurance products simply, fairly and quickly. I can’t imagine going back to how it was, which is the mark of great innovation. 

David Wood is UK marketing director for Tesco