There are radio ads running in Gippsland promoting Newsink and newsagents selling their ink and toner product. The value proposition is that if you can find ink cheaper elsewhere they will beat it by 5%. While it is great to hear newsagents being advertised on radio, I’d rather the pitch be one of leadership – this is our unique selling proposition, come and shop with us rather than think of us if you see a good price elsewhere.
A couple of marketing specialists I have spoken with say the low price guarantee approach works as it positions you as the place to go to when price is the key determinant. If the newsagents want to sell on price it is a good strategy. However, there are other ways to pitch on price without guaranteeing to be the lowest and without cutting margin in an already slim margin category. There are plenty of examples of clever use of hero products to drive price perception without being the cheapest on all products.
For ink and toner I am happy growing sales based on competitive (but not always the lowest) prices, a good range and great service. I like this approach because it is sustainable, it better fits with the newsagency model and reflects the approach national brands prefer – the last thing they want is to turn ink and toner into a liquor or soft drink price model where massive discounts are offered on a rotation basis. This will happen is we train people to buy this way.
At Forest Hill we have been playing in the ink space for more than three years. Growth continues to be excellent. It accounted for 40% of stationery sales on the 2007/08 financial year, up from 30% for the previous financial year. While we send our flyers, this is part of a co-ordinated campaign which pursues sustainable growth.
Disclosure: I am a Director of newsXpress which offers the Hot Ink ink and toner strategy. I am also a Director of Inkfast, an online ink and toner business.
While the “loest price guarantee” strategy may work in some industry segments – think home electronics, furnishings, hardware etc – I don’t see it as an effective marketing strategy when applied to consumables.
Some consumers will shop around for the best pricing, but are many likely to take a store up on the “best price guarantee” for regular purchases?
Price warring on soft drinks has lowered standard (non-promotion) GP margins to below 10% in some instances. Special prices have also been known to run with a negative GP.
Being competative doesn’t mean offering the best prices. Pure price-based competition will only result in creating a market in which it is difficult to compete.
It’s not just price that makes a difference. I used to work in a newsagency for 8 years but now work for a large national company. our ink costs about the same as the newsagency channel but our retail price is much higher. I was really supprised to see how much ink we sell. we sell approx double the weekly amount of the newsagency yet we are only 150-200 meters away from the newsagency. I think many things are about reputation now the lowest price.