Studies show shoppers are becoming less willing to pay a premium price for the goods they buy in convenience stores. With supermarkets and discounters all competing on price, do PMPs offer convenience retailers the best hope of winning customers?
ALTHOUGH the UK may be emerging from the economic gloom of recession, it seems shrewd shopping habits have, for a great many, become second nature.
“As pressure builds from the competitively-priced fixed-price retailers and ever-popular discounters, the need for convenience stores to mirror this offer is increasing,” said Ruth Cousins, marketing executive at research consultant HIM, which says that half of UK adults now compare their grocery prices regularly.
“Year on year, fewer convenience shoppers expect to pay any price premium. 40% of UK adults expect a £1 product in a supermarket to cost £1 (or less) in a convenience store.
“In order to keep up with the price war occurring across the big four, convenience stores are relying increasingly on PMPs. Half of shoppers say ‘PMPs reassure me that I am not being overcharged’ and ‘they make me aware of the true price of the product.’”
For many, the argument in favour of PMPs boils down to one word: trust.
“Having a range of PMPs available in your store instils a sense of confidence and trust between you and your shopper, and creates a perception of value,” said James Cragg, head of category development, at Diageo GB. “Particularly with new products, we know that 53% of consumers are more likely to try a new product if it’s sold in a PMP.
“PMP spirits have more than tripled in value in the past year, and Diageo’s 70cl PMP SKUs have performed on average 31% ahead of the standard SKUs.”
Even in categories where PMPs are more firmly established, such as confectionery, there is little sign that manufacturers are losing faith.
Mars Chocolate UK recently extended its PMP range to include Mars, Snickers, Twix, Bounty and Maltesers singles, now permanently available with a new RRP of 50p.
In 2015, Wrigley extended its range of PMPs in July 2015 for brands Skittles and Starburst, with the introduction of four additional hanging bags with a £1 RRP price flash.
The company recently launched its £2 RRP price-marked 46-pellet bottle across Extra Peppermint and Spearmint gums – an exclusive format for the route-to-market channel.
Independent sugar confectionery business Swizzels has just expanded its ‘flashback to 10p’ range by adding its Sour Apple chew bar.
And Perfetti Van Melle has introduced a new range of £1 PMPs across its sharing bags and packs, including Mentos and Fruittella.
“Price-marked packs are still a great sales tactic,” said Ross Stanley, head of trade marketing at Big Bear Confectionery. “Figures indicate that PMPs sell more volume than their unmarked equivalents. They help create brand loyalty, as consumers feel assured they’re getting the best price on favourite products. They also boost impulse purchases, which is key to sales growth in the confectionery sector.
“It’s all about offering consumers and retailers choice, so having a good balance of consumer value supplemented with promotional mechanics, but maintaining an equitable margin for the retailer is what we always try and achieve.”
While margins may be lower, consumers can be encouraged to trade up and spend more on a price-marked multipack, according to Bev Rushbrook, commercial manager of Cloetta, which produces Chewits and Vimto multipacks with £1 price-marks.
She added: “By ensuring that full size packs of Chewits form our price-marked multipacks, we guarantee good value, whereas some chocolate and confectionery brands engineer the size of the singles to allow them to price-mark multipacks.”
If retailers were to question the general margin which PMPs offer it is worth noting that PMPs encourage faster sell-through, argues Richard Harris, sales and marketing director at Standard Brands, owner of Zip firelighters.
“As PMPs are more likely to be picked up by more customers this improves a retailer’s overall sales and cash flow which is an important dynamic within the total profit calculation,” he said.