On the radio the other morning I heard one economist argue this was the start of a recession, that house prices would halve and the economy faces a three-year meltdown. Just a few minutes later another suggested we were already at the bottom of a short and shallow correction.
From Waitrose’s perspective, as petrol and food prices have fallen sales have started to build. In the first week of sale our Christmas assortments were considerably up on last year.
All food retailers have been surprised by the sharp change in customer behaviour since the poor summer. Each has reacted to it differently: discount brands, meals for£10, feed your family for a fiver – or in the case of Aldi,£7.
On the face of it, this sudden need to realign around price raises a challenge for Waitrose as the brand has a 100-year tradition of quality. So how do we reassure about price (and real value) without losing our quality credentials, as Sainsbury’s did with its John Cleese “value to shout about” campaign in the late 1990s?
Well, it’s all about balance. We have decided to invest in improving the quality of our own-label lines this year, when we knew some of our competitors would be doing the opposite to improve margin.
As a consequence, in 66 per cent of blind tastings our own-label comes first or second against all other own-label and branded lines. We are providing real value. And we have demonstrated our confidence by advertising that if you don’t enjoy your Waitrose product we will refund and replace it.
To secure that great quality in future, we have a payment structure for our British livestock farmers that recognises the cost of production notwithstanding market price fluctuations, because we know our suppliers’ long-term viability is much more important than any immediate savings.
We also invested in customer service training and there’s now a 10 percentage point gap on mystery shopping scores between Waitrose and our closest competitor.
We have invested in being more competitive, but the strong quality cues of our brand lead to a skewed price perception. 70 per cent of customers think Waitrose charges more for a pint of milk than elsewhere, but 80 per cent don’t know the price of a pint of milk.
So we have introduced subtle ticketing in-store to communicate that we are the same price; we have made promotions more attractive and prominent, but done so in the context of new graphics that talk about the provenance and quality of the food we sell.
As a consequence of all these measures, we have improved our quality, value and price perceptions over recent months and are holding on to our customers. We will continue to work these levers, reacting to the reality of what our customers need – not what the pundits forecast.