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Major retailers dabble in comparative advertising

  • News
  • July 21, 2015
  • Damien Venuto
Major retailers dabble in comparative advertising

Most often comparative advertising involves price comparisons, and this was the case in a Warehouse campaign run in late June. The print ad, which featured in the red retailer's toy catalogue, openly juxtaposed Farmers' price for a Lego set with the much cheaper alternative offered at the Warehouse. And in addition to naming and shaming Farmers, the ad was also presented in the purple and green that typifies the company's catalogue advertising.  


(Image credit: Stuff.co.nz)    

In a market where 59 percent of all sales revenue is earned from products on discount, it comes as little surprise that supermarket retailers are involved in some of the most intense comparative marketing in the industry.

Last year, this again to came to the fore as Countdown and Foodstuffs became involved in tit-for-tat discount banter, dubbed the 'bread wars', that eventually led Countdown to lock down the price of its Homebrand bread to only $1.

  

In a study released earlier this year, Nielsen's managing director for New Zealand Rob Clark questioned the long-term benefits of brands placing so much emphasis on deep discounts and referred directly to the example of the bread price last year.

"While there are benefits to consumers, there are also downsides," Clark said in his report. "Price discounting can be effective at building short-term share, but the impact on brands long-term is questionable. If more funds are being allocated to price discounting, less is available for brand building and more importantly R&D. Without strong innovation pipelines, many suppliers will struggle to find a way out of the downward spiral. Take the bread category for example. Recent price reductions ($1 bread) have taken an estimated $30 million out of the category. Without strong innovation plans, it will be very difficult for suppliers to drive category growth."

In an interview published in the latest edition of NZ Marketing, Countdown's general manager of marketing Bridget Lamont veered away from calling the company's competition with Foodstuffs a 'price war'. 

"We don’t use that phrase," Lamont said. "We don’t believe in the concept of a price war. However, what we do believe in is that if you ask New Zealand consumers about what is important to them in choosing where they buy their groceries, most of the top twenty reasons have some element of price or value. We are an extremely price-sensitive market, and the global financial crisis and all of the other tough times we’ve been through have honed this price sensitivity almost to an art form. And I do not see this changing, even though we might be rock star economy. It has become so ingrained in us that whether you’re a low-income consumer or have the luxury of high income everybody is looking for the best price on the products that they want to buy. We don’t believe that we have a right to charge more for a can of beans than anyone else." 

She also said that consumers hold Countdown accountable to the promises it makes through its marketing.

"We’re in market with campaigns saying things like ‘We are committed to bringing you cheaper groceries’. That’s a really overt statement. They are very clear articulations of our intent. We’ve been on that journey since October 2013, and it really started to hit its stride in February or March last year followed up by the $1 bread. It is very clear that we are looking at the products that matter to Kiwis and bringing our prices down, and where we can, we lock them down indefinitely at that price. Does this kick off the words I don’t believe in? We haven’t seen a price war. We’ve seen responses. We’ve seen reaction. I have no doubt that the other guys look at what we do and take it very seriously, as we do with them."

At its core, advertising aims to direct consumer behaviour. And, in the case of New Zealand, the ongoing price battles between Kiwis has led to a generation very adept at hunting out the best prices—and CAANZ general manager Paul Head believes this might be why there has been a seeming increase in comparative advertising. 

"Anecdotally at least, there does appear to be an uptick in direct comparative advertising," Head says. "I think it’s a sign of the times and increased competitive pressure particularly at retail. It may also be that in many categories consumers are now much more used to comparing price as a result of the product and price comparison websites that can be found in many categories. So to some degree it’s a case of advertising reflecting consumer practice."

But price isn't the only that Kiwi advertisers have been comparing in recent months. Vodafone and Spark have also been involved in a public stoush regarding which telco has the largest 4G network. Having invested millions of dollars in their respective networks, both companies claimed supremacy—and the stoush became so heated that it eventually spilled over into the Commerce Commission.

So why is it that Kiwi companies have been so eager to skirmish through their marketing over the last year? And will it intensify as the various industries evolve?

ANZA chief executive Lindsay Mouat says that comparative advertising tends to "ebb and flow but is rarely sustained since it often leads to price-matching." However, he points out that changes in some industries have led to the recent emergence of comparative advertising not necessarily reliant on price.   

"Lately, there seems to have been an increase in category disruption, which allows comparatives to be made in different ways rather than a simplistic dollar-for-dollar comparison of the same product or service," says Mouat. 

The squabbles featuring State Insurance against Youi and Vodafone against Spark are clear examples of disruption leading to competitive bickering and, as new technology is released and new competitors enter the market, this looks likely to continue. And while he concedes that it will likely always be part of the industry, Mouat urges brands to be cautious when it comes to employing comparative advertising as a strategy. 

"Comparative advertising is effective in some situations but won’t be in others," Mouat says. "Whether brands should make direct comparisons is an individual choice for advertisers. But if they do we urge them to ensure that the claims made are substantiated and not likely to mislead or deceive – there have been a number of rulings by the ASA that help clarify what is acceptable. Personally, I would also urge advise advertisers to carefully consider comparative advertising in the long-term context of positioning rather than making a one-off claim."

Mouat also points out that just because Kiwis like discounts doesn't necessarily mean that comparative advertising will resonate with them. 

"New Zealanders have demonstrated a liking for bargains. But they also have a good antennae for ‘BS’. I think consumers recognise when competitive claims resonate with a brand’s proposition and when they don’t. If the claims being made are inconsistent with their own experience they are likely to reject that proposition and that won’t be good for brand image."

Another risk with comparative advertising in its crudest form is that it can give airtime to an advertisers' competitor, detracting from what is supposed to be the focal point of the promotion. And the last thing an advertiser wants is for viewers to learn about a competitor during a 30-second slot of bought media space. 

Head also points out that comparative advertising does very little in terms of developing an emotional connection between brands and consumers.    

"From an industry perspective I’m sure it [comparative advertising] has its place, but I doubt that rational comparison advertising builds great brands," he says. "That’s best done through great communications that build emotional engagement with consumers, and it’s what this industry does best. It’s also where we add the greatest strategic value to clients businesses."

As evidenced by Mouat's observation that comparative advertising ebbs and flows, Kiwi brands understand that comparative advertising is best used sporadically when the need arises. And given that the Kiwi hunger for discount seems insatiable, that need will no doubt emerge again in the near future, leading to a fresh batch of comparative ads.   

This article originally appeared on StopPress.co.nz.

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