Will Ending Its Double Coupon Program Hurt Kroger?
By George Anderson, RetailWire
It's no secret that price plays a significant role in consumer decision-making when it comes to buying groceries. Food store operators from Aldi to Whole Foods are in one way or another pitching savings to capture a greater share of consumer purchases.
It might come as little surprise, therefore, that some consumers are up-in-arms over Kroger's decision to end double coupons in its Mid-Atlantic region, even after the company announced it was lowering prices on thousands of items as part of its everyday low price strategy.
Consumers, according to the News & Observer, "flooded" Kroger's Facebook page this weekend to protest the end of double coupons. Several likened Kroger's action to J.C. Penney's ill-fated decision to end coupons and sales under former CEO Ron Johnson. "There's only so many customers that coupon or double coupon," Carl York, a Kroger spokesperson told the Charleston Daily Mail, "but lower prices across the store help out many more customers."
"I think customers are really going to see their bills go down," Mr. York added.
Which goes further in enhancing a retailer's price image: double coupon offers or lowering everyday retail prices? Would you have handled the shift in pricing strategy differently than Kroger?
Comments from the RetailWire BrainTrust:
Dropping double coupons is probably a good idea. Stores do their best to close the loopholes the extreme couponers exploit. Lowering everyday prices is a better move. The highest volume supermarkets in the USA rarely offer double coupons. Sure the extreme couponers might move on, but Kroger isn't making money off of them.
David Livingston, Principal, DJL Research
Consumer perception is the reality that retailers have to deal with. It appears the perception (rightly or wrongly) is that double coupons provide lower cost market baskets than across-the-board price cuts. Another possibility is the double coupon users are simply more vocal (they are losing something they know the value of) than the other shoppers who have yet to realize the savings from the broader based, lower cost items.
Steve Montgomery, President, b2b Solutions, LLC
In the past, retailers who have dropped their double coupons programs have survived the short-term fallout that it can cause. Kroger did a good thing in giving customers another program to offset the coupons. I am sure they will use their top-notch, targeted customer offers to address some of those customers who have objections to dropping the double coupons.
J. Peter Deeb, Managing Partner, Deeb MacDonald & Associates, L.L.C.
Two words: Ask Walmart.
The problem that Kroger and so many other food retailers face is that they have played pricing games with the customer for too many years. Despite the deepest insights of many marketers, folks ain't dumb!
Walmart started with price integrity which allowed it to succeed with a modified EDLP approach. Supermarkets, on the other hand, have had "loyalty card" discounts (code for if you are paying the full shelf price, you are a chump because it's inflated to offset the loyalty discount); coupons; double coupons; and—in the bad old days—even triple coupons.
So, if you've spent the last 30 or 40 years teaching the customer that slash and burn discounts are the only way to get the "best" price, you shouldn't be too surprised when they get upset when you stop double coupons.
If I had been Kroger, I would have worried a lot more about price impression and a lot less about actual prices. Lowering thousands of prices just tells the customer you've been overcharging them for years.
Ryan Mathews, Founder, ceo, Black Monk Consulting
The fact is, Walmart does quite well with EDLP and JCPenney failed miserably at it. What works for one retailer won't necessarily work for them all.
It may be a ridiculous system, but customers are now so accustomed to high-low pricing, sales circulars, loyalty discounts, gas rewards and playing games to get the biggest savings at the grocery store, I think they are very suspicious of any attempt to streamline things with lower prices across the board. After all, it's easy to quietly raise prices again, but not so easy to reinstate a discontinued policy—once it's gone, it's gone.
Before the change, the savvy shopper had the perception that they were in control; knowing they could combine sales with doubled coupons meant there was much more incentive to shop—and save—at Kroger than Walmart. But now Kroger is in control, doing away with a perk that rewards its savviest customers, to benefit the masses who don't want to work to get a deal.
Kroger is big enough to come out of this unscathed, and the vocal critics will move on, but in the end, what does Kroger have to offer? It will have the same coupon policy as Walmart, but with prices that are only "almost" as low as Walmart. So if this move is meant to better compete with Walmart, Walmart still wins.
Bill Clarke, Publisher, CouponsInTheNews.com
The key elements Kroger might have reviewed before they smacked their shoppers with this new pricing strategy:
- Fear of change. This is the general issue — we like stuff to stay the same.
- Being consulted. Shoppers like to voice thoughts before major changes to their second home, the grocery store.
- Poor communications. Did they make the change announcement the right way?
- Low trust. Hey, they changed this, what's next?
Well, change hurts and in some cases it must happen. I am confident that Kroger had solid reasons for the change to occur and has though about the shopper.
JCP is different and not a fair comparison. JCP was an, "I am cool, look at me!" kind of change. Kroger is a stable minded, "We need to lift margins or we are going to be in trouble" change.
Tom Redd, Vice President, Strategic Communications, SAP Global Retail Business Unit
As for which move enhances a retailer's price image more — coupons or EDLP — it depends entirely on the customer. But IMHO, Kroger did it right. Firing unprofitable customers is always a good move, and you can go to the bank that the double-coupon screamers were, for the most part, costing Kroger money. Let these customers go cherry-pick the competition. Kroger gets a higher percentage of profitable customers, and the competition picks up the cherry-pickers. (And I'll bet some of those competitors will lean right into that left hook and promote: "We still have double coupons!") There will be short-term fallout, but over the long haul, Kroger keeps doing things right.
Warren Thayer, Editor & Managing Partner, Frozen & Refrigerated Buyer
When double couponing slid from a short-term promotion into an everyday policy, Kroger had to know it had a problem of its own making. Training customers to game the system is not healthy for the retailer's price image. The brand marketers don't like it much either, since it confounds their efforts to establish a value level.
Switching back to a less volatile pricing structure with fewer deep deals reserved for frequent shopper cardholders may be a slightly painful transition in the short run. I think Kroger can take the hit and simplify its business for the better.
James Tenser, Principal, VSN Strategies
Been in the grocery bidness since the early 70s, and this is what I've seen: Every few years, shift marketing strategies from double coupons to EDLP, and then shift back again. This creates excitement among both customers and employees.
M. Jericho Banks PhD, President, CEO, Forensic Marketing LLC