Do Price Comparison Ads Work?

Discussion
Jun 26, 2013

In a RetailWire poll in January, 68 percent of respondents said consumers were somewhat (58 percent) or highly skeptical (10 percent) of the claims made in price comparison ads. Skeptical or not, it would seem that at least in the case of Walmart, price comparison ads work.

Despite posting lower-than-expected results for its first quarter, Bill Simon, president of Walmart U.S., reported the company had gained share in "food, consumables and health and wellness/OTC" for the 13-weeks ending April 27.

Complaints coming from a host of grocery chains and others who suggest Walmart’s price claims range from misleading to outright lies also suggests the campaign, being run in 70 markets across the U.S., is working. Despite the complaints, no attorney generals have launched formal investigations into the matter, according to a report by Advertising Age.

Stephen Quinn, chief marketing officer at Walmart, defended the company’s approach. He said the company does its comparison using a real consumer’s shopping list, scanning the exact items bought at a competitor.

He also told Ad Age that Walmart is now targeting consumers who are enrolled in gas reward programs as part of its comparisons. He said the programs have been effective for retailers that use them, but Walmart is out to show them the rewards don’t pay off.

"We go through the math: How big’s your gas tank? Let’s say you’ve got 20 of those gallons and you save how much — 10¢ per gallon? And then they’ve overpaid for their groceries by about $30," Mr. Quinn told Ad Age. "That’s an actual example. The look on the woman’s face — you could not pay an actor to have pulled off that look."

Do price comparison ads work in most cases or is Walmart an exception? If you’re a competitor, how do you counter what Walmart is doing?

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22 Comments on "Do Price Comparison Ads Work?"


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Carlos Arámbula
Guest
8 years 11 months ago

I’m not certain that Walmart is the exception or if they are simply very good at capturing the percentage of consumers who respond to price-comparison ads.

Consumers know that lowest price excludes selection, service, and other intangibles, so you counter price-comparison with those variables.

Dick Seesel
Guest
8 years 11 months ago

There is a lot of “fine print” (at least in the newspaper versions of the Walmart vs. Roundys ads running in this market) that would cause skepticism about the campaign. In particular, it’s hard to tell (especially in the TV spots) whether Walmart is doing an exact comparison or cherry-picking the items on both “tape totals” to slant the outcome. If you read the disclaimers, you’ll see what I mean, but there is no doubt that the campaign is working.

There are a couple of possible responses: Publix has decided to push back on the price message, while other grocery chains try to stay “above the fray” by offering better service and more specialized content. But not responding at all is a passive (and losing) tactic.

One more issue: The price comparisons may be driving share in food and consumables, but do not appear to be moving Walmart’s overall sales and margins in the right direction. The focus on the lowest-margin businesses in the store may be counterproductive in the long run.

Max Goldberg
Guest
8 years 11 months ago

Walmart built its brand on having the lowest prices, so when they do price comparison ads, they are reinforcing a brand message that has been used for decades. When other retailers try to use this tactic, they are frequently met with skepticism. Retailers, should they choose to follow WM, need to build a consistent brand message of lowest prices, and prove it on a daily basis. That said, when WM owns the mantle of “lower prices,” why would a retailer want to do the same when there are so many other tactics and brand messages that could be employed?

Paula Rosenblum
Guest
8 years 11 months ago

Boy, this is a frustrating story. Why won’t state Attorney Generals take Walmart on?

Retailers continue pulling on consumers’ price sensitivities, most of whom are not savvy enough to do their own price checks. Walmart is just the biggest and most egregious (in my opinion).

I know Citi analysts say the giant is “investing in price” so prices probably are a bit lower. But I’m finding that high quality private label (which Walmart does not have) levels the playing field.

My hope is that consumers do their own comparisons and make their own decisions.

David Livingston
Guest
8 years 11 months ago

In my opinion, they do work. Otherwise, grocery retailers would not be doing them. Walmart is careful only to pick on the higher priced conventional chain stores. Often they like to attack regional chains that are financially stressed. I doubt you will see them going after the debt free/rent free/no credit card chains like WinCo.

Basically, if a regional chain still has a lot of market share, but is up to their eyeballs in debt and new competitors, look for Walmart to play cat and mouse with the price comparisons. If Walmart has targeted your company, most likely you are hopelessly beaten anyway, and Walmart is just speeding up the inevitable.

In order to counter Walmart you either have to go toe to toe with them on price or provide a compelling shopping experience. Most plain vanilla conventional chains simply do have the wherewithal to do either. The last resort is the games, gimmicks, fuel rewards, and double coupons. If you can’t run with the big dogs, stay on the porch and play your gimmick games.

Ed Rosenbaum
Guest
8 years 11 months ago

I am not as confident that the Walmart ads are as effective as they want us to believe. Could it be that these ads are attracting Walmart shoppers more than pulling from other major retail grocers? In our market, some of the ads show the person being from a local area, but shopping at a Walmart many miles away. I bet that affects the 20 gallon gas tank referred to in the article, and leads me to question the actual validity of them.

Ben Ball
Guest
8 years 11 months ago

Two points:

1. Price comparison ads work for Walmart because Walmart has spent the last umpteen years solidly reinforcing their lowest price every day image.

2. With regard to grocers responding to Walmart price ads—my grandpa used to say “when you throw a rock into the pack, the hit dog yelps”….

Joan Treistman
Guest
8 years 11 months ago

What Max Goldberg said.

Gordon Arnold
Guest
8 years 11 months ago

The anticlimactic or rather “I told you so” marketing power demonstrated in this discussion should now be known as ineffective at any price, thanks to the millions of wasted dollars Walmart has spent in vain.

Marketing’s job is to create a driving interest to visit a store or site to proceed with a regularly scheduled or planned purchase. This isn’t happening here and the sales results of the previous quarter are proving it. The ramifications of demolishing confidence in the consumers’ purchasing prowess as ineffective or poorly prepared should only serve to further illustrate the lasting effects and long range this mistake in advertising creates and maintains.

The end of an empire always starts with big mistakes being followed up with acceptance and/or denial by managing executives. Executive management failures that are perpetuated by arrogance from the aloof only serve to accelerate the timing for corporate collapse.

Tom Redd
Guest
8 years 11 months ago

Price comparision ads work when they are believable. Say what? Some price compare promo are just simple statements—”get it chaper at XXX.” Shoppers today act on reality—proof that they can get a better deal. Walmart is playing it right and being the King Shopper in our house, the ads are on the money.

Countering Walmart’s promo program takes a retailer that’s willing to get off the “soft value” marketing—the mood, health, etc. stuff and ready to step into the price area. It means knowing more about how their shoppers are different from Walmart shoppers, and in what ways. It means figuring out the shoppers real food desires and focusing price/promo action in those areas. Maybe it means leveraging the suppliers and getting them deeper into special programs that target a specific type of shopper in a select category.

In the end, it is about focus on the shopper—their wants and demands—in the best way to meet or exceed them.

Cathy Hotka
Guest
8 years 11 months ago

The implication in these ads is that Walmart’s prices are lower across the board, but skeptical consumers will want to dig a little deeper to see if that’s actually the case. I would think that state attorneys general would want to take a closer look at these claims…and consumers should act in their own self-interest.

Verlin Youd
Guest
8 years 11 months ago

Price comparison ads have been around for a very long time, particularly in grocery, and there is always going to be a segment of the consumer market that will respond to price comparisons. That said, the use of these kinds of ads has really gone to the next level, not just with Walmart, but plenty of others joining the fray.

What I believe is even more interesting is that ads focused on service comparisons are starting to emerge and when added to price comparisons, are going to challenge retailers who are either weaker operators and or weaker communicators.

In the end, consumers will be the winners, again.

Sid Raisch
Guest
Sid Raisch
8 years 11 months ago

Walmart is not the only exception. Price comparisons like this don’t work in every segment, but they are relevant to the core of consumers on the survival end of the spectrum. They are part of the DNA of both seller and shopper. Unfortunately, the money these consumers may save they also splurge with—at Walmart. It is the way it is—you can’t have all the customers.

Choose the part of the spectrum you want most. If the Walmart shopper is not your core shopper, head in the other direction and explain the value.

T FUQUA
Guest
T FUQUA
8 years 11 months ago

Price is the easiest thing to imitate. Experience matters.

Lee Kent
Guest
8 years 11 months ago

Price comparisons work when you are shopping for price! For the items that are all about price for the consumer, yes, they might be willing to drive out of their way to pick up those items.

Will this take them away from their local market? Probably not. There is still something in the assortment, services, convenience and preferred labels that will still attract them.

Robert DiPietro
Guest
8 years 11 months ago

If we define “work” as convincing consumers they are lower priced, I think they work in Walmart’s case. They are presenting a fairly compelling view of the price comparison in the TV commercials, as well as some the of print ads I’ve seen.

If we define work as a strategy to drive sales, I’m not sold. Consumers don’t make all decisions on price—convenience, speed of checkout, etc., come into the plan.

Herb Sorensen, Ph.D.
Guest
8 years 11 months ago

As a general rule, shoppers do NOT know what they pay for stuff in the store. Stop them in the parking lot and ask them how much they paid for each item. Simple. THEY DON’T KNOW!!! But Walmart’s long campaign of “Always low prices! ALWAYS!” is well settled in the typical Walmart shopper’s mind. Hence, every price comparison ad Walmart runs, buttressing that story, loudly rings the bell for “Walmart shoppers.” All this stuff isn’t about a careful cognitive process, but powerful emotional responses to a theme that can be leveraged endlessly.

And let’s be clear here, if your price comparisons are not fundamentally driven by low merchandise costs for you, and your operational efficiency, don’t expect to compete with Walmart in this arena (price.) Your single biggest advantage is the convenient location of YOUR store. Not convenient? Better review your retirement options.

Roger Saunders
Guest
8 years 11 months ago
Consumers who are loyal to most retailers are interested in price comparisons. Consumers are not necessarily interested in price comparisons in all channels. I’ve heard bankers say that “consumers will kill for an eighth of a point,” watch families who had a billion dollars at their disposal niggle over a quarter, and witnessed folks insist that a pillow be thrown in to complete the sale of a couch, and admired how the “Happy Hour through 6:30” filled seats in restaurants in what would be a dead time in Naples, Florida. Price comparisons don’t happen solely at Walmart. However, the Walmart shopper is diligent about seeking value in their day-in-day-out purchases. Based on the June, 2013 Prosper Insights & Analytics Monthly Consumer Survey, the Mindset questions asked substantiate that point. In June, 38.1% of respondents said that they had become more budget conscious in the past 6 months, while 41.5% of Walmart shoppers held that view. Walmart shoppers are more focused on NEEDS over WANTS (54.1%) compared to total population (50.4%), while they are also more… Read more »
Bill Hanifin
Guest
8 years 11 months ago

Consumers do respond to the topline message from marketers. When they hear that the grocery basket in Walmart is X% less than a grocery competitor, they tend to buy into the ploy.

Sure, skepticism abounds, but it also does as it relates to two-tier pricing programs offered by grocers. The total amount of dollars saved shown at the bottom of a receipt may be greeted with a sneer, but it still gives the consumer some level of satisfaction that they are “good shoppers.”

Grocers and others who compete with Walmart should always be cognizant that they probably can’t compete just on price with the big retailer. For that reason, they need to emphasize other aspects of their value proposition to get consumer attention.

Christopher P. Ramey
Guest
8 years 11 months ago

Consumers desire confirmation of what they hold to be ‘truths’. It is much easier to believe it when Walmart says it.

AmolRatna Srivastav
Guest
AmolRatna Srivastav
8 years 11 months ago

Walmart has shown that EDLP works and so do price comparison ads. I guess such ads work more when you have such a pricing strategy over the years. That does not mean that it won’t work in short term—but it may not be so effective.

Alexander Rink
Guest
8 years 11 months ago

As Max Goldberg said, price comparison ads can work if they reinforce your brand image, as they do for Walmart. Will it drive gains? I see it as more of a maintenance campaign for Walmart, with some potential gains from the precious few who don’t already see Walmart as a low price provider, or need to be reminded of such.

If you ARE going to run price comparison ads, it is critical from a credibility perspective that you extract and display accurate pricing information. It only takes a few “misprints” or mistakes to make consumers lose all trust in your ads. Accurate and honest price comparisons will increase consumers’ trust and, of course, minimize visits from the State Attorney.

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