Price vs. Quality vs. Health vs. Brand

With the economic crisis, prominent health campaigns and the recent ‘horsegate’ saga there is a lot for shoppers to consider when choosing what to buy.  Focusing on four of the biggest drivers of product choice (Price, Quality, Health and Brand) we set out to explore what is important to shoppers and how these interact with one another.  Firstly we need to understand what exactly price, quality, health and brand mean to shoppers and how this varies between different demographics. 

The best price means different things to different shoppers.  Unit price is the most popular measure of best price but some shoppers judge value by different measures, such as the biggest saving, the overall cheapest available or the cheapest from their preferred repertoire.

How shoppers judge an item to be good quality is an important driver of item choice.  The majority judge quality from previous experience, but what about items they haven’t tried before? 

What do shoppers look at when trying to decide if a product is healthy or not?  With labels containing fat, salt, sugar and calorie contents what do shoppers use to make their choices. What are shoppers’ perception of brands in relation to price, quality and health?  For example, our research shows that almost 2 in 5 shoppers are willing to pay more for branded food.

Our research has shown that price and quality are equally important to shoppers suggesting that although still aware of their tight budgets they are seeking quality as well.  This means shoppers search for items which reach a balance between affordability and good quality.  In fact, Kantar classed 14% of all shoppers (5.5 million individuals) as ‘Quality Crusaders’ compared to 16% who were classed as ‘Strategic Savers’ (for whom price and savings are crucial drivers).

Health is generally the third most important driver to product choice although this varies among different demographic groups.  Healthy food is seen as expensive by those on the tightest budgets with these shoppers also being the most reluctant to pay more for healthy food. Brand appears to be the least important driver to product choice compared to price, quality and health, suggesting that shoppers loyalty to brands is likely to be switched for better quality or prices.

But the relationship between price, quality, health and brand is not as straight forward as a simple hierarchy.  Not only do these factors differ among shoppers and their personal circumstances and needs these drivers of item choice also vary depending on what category is being shopped.  For instance health is a more important consideration when shopping for yoghurt than other categories and less important when shopping for biscuits.  This is understandable as yoghurts tend to be seen as a healthy category with plenty of probiotic and low sugar options available whereas biscuits are an unhealthy treat so shoppers are unlikely to consider ‘health’ when shopping for them.   

The relationship between price, quality, health and brand is a complex one.  Different factors are important for different shoppers and when choosing different categories.  This  goes some way to show the complexity of the decision making process of shoppers undergo when shopping for food and groceries.

What Does Value Really Mean?

Firstly I want to make a clear differentiation here between shoppers and consumers, and my constant frustration that these words are used interchangeably!  The shopper is the person buying the goods/service, and the consumer is the person (or animal!) that consumes/uses the goods or service.  Now whilst they may be the same person in some circumstances, we believe that the shopper is the consumer (or part consumer) for around 40% of items bought in food and grocery, the shopper mind-set and the consumer mind-set are distinctly different. 

Let me give you an example of a shopper buying something for their own consumption, they will consider three main elements when choosing an item, do I need the product, what is the quality of the product and what is the cost of the product.  The proportionate function of these elements creates the individual value of that product.

Now if for a moment we say that every item chosen is needed in some way (or at least the shopper thinks they need it) as they are unlikely to buy a product they know they won’t use, then we are left with a simple equation;

So if we use this equation in its simplest form a rise in the quality in a product should see an equal rise in the price of the item. If a product is perceived to be of better quality (Quality is by definition subjective), then a shopper would imagine that its cost would also be higher.  Therefore when an item is seen to be of higher quality, but at no higher price, this is seen as good value.  Value is not therefore just something that is seen to be cheap!

The question then is, does everyone buy every product based on value? Now at first glance one might hypothesise that they do, as a more affluent shopper may be more willing to spend more money on a higher quality product, but of course as quality is a perception this may not always be the case. 

Let me give an example of rice.  A shopper may consider that this item is a commodity in nature, and there is no difference between the quality of products on offer (therefore the quality element of the value equation is a constant). In this case, the cost becomes the primary deciding factor - a decision that is easier to make with only one comparative criterion. Whether the shopper is affluent or not, it has no real impact.  But, an affluent shopper may decide that buying a more expensive product will only cost them more money; there is no risk risk that they may be wrong, because in theory rice may be better quality at a higher price. They have nothing to lose (only money!), but this then represents poor value of a product if the increase in cost does not lead to an increase in quality.

For less affluent shoppers, the cost element of the product may be a constant.  For example they may set a price at £1 for a loaf of bread, they accept that this restricts the quality of the product based on the value equation, if a product that was previously out of their price range (and perceived quality range) but if this is reduced to conform to their budget, this would be seen as good value.

In the main, irrespective of affluence, shoppers make decisions based on value.  Value is not the cost alone, one must consider the quality element too!

Store Choice - Importance of Where and How

Impulse Purchases At the Supermarket

By definition, an impulse purchase is one that is spontaneous  and without pre-planning – i.e. it is ‘impulsive’. Impulse items tend to be unnecessary and indulgent. Studies have found that they tend to lift the mood of the shoppers for a while after the purchase is made.

At Evolution, we have looked closely at shopper behaviour in relation to planned and unplanned purchases. We believe that items purchased on a grocery shop can fall into one of three categories:

1. Fully planned items: These are items which the shopper entered the store expecting to buy.
2. Semi-planned items: These are not thought about before the shop but are purchased after the shopper notices certain stimuli in the store. E.g. remembering that you are out of milk as you walk past the fridges in the supermarket.
3. Unplanned item: An items that the shopper had no intention of buying when they entered the store. Shoppers may fancy a treat, or are taken by a certain promotion which encourages them to buy an item they otherwise had no intention to.  

There has been an abundance of research into what causes shoppers to make impulse purchases, from psychological, neurological and social perspectives. In reality there is probably an abundance of reasons why a particular shopper made the decision to buy that item they hadn't planned to – there is certainly no one theory fits all explanation. 

Recently, there has been a sharp decrease in sales of magazines in the US. Magazines are a classic category for impulse purchasing. They are placed near the tills to tempt shoppers into one final purchase before they pay for their shopping. However, the recent drop in sales has been attributed to the rise in use of smartphones. Shoppers are increasingly looking at their phones when waiting at the tills instead of looking at the items surrounding them, and are therefore not being tempted into buying them. This new phenomena has been labelled as the ‘mobile blinder’ and is being blamed for drops in sales. Cosmopolitan for example, saw sales fall 18.5% in the second half of 2012 alone. Retailers may have to find new ways of competing for shoppers attention if they want to keep up their sales of last-minute favourites such as sweets and chewing gum – and magazines of course. 

What Does Being Voted the UK’s Worst Supermarket Mean?

As we are currently conducting a large study into the UK’s supermarkets, I couldn’t help raising an eyebrow (or two) at the results of a survey carried out by ‘Which?’ (October 2012).

 

Firstly the headline is misleading from so many points of view, and to me highlights the complexity when asking shoppers (or consumers in this case) questions of this type.  It is also important to understand the differences between their shoppers and none shoppers, and how they perform to their target markets. 

 

Although Tesco has always been successful in attracting shoppers from across the demographic groups, the rise of stores that capture quality at one end, or budget at the other have  placed the big 4 in a middle ground that relies more on location that differentiation.

 

 

Our current study looks deeper into the understanding of location as a driver to stores choice, and examines in detail where shoppers go, who they drive past to go to a preferred retailer, and how this differs depending upon the shopper mission.  The data (from 5000 primary food & grocery shoppers) is being analysed to see what they are doing well (or not so well), and how well they match the desires of the shopper across those shopper missions.

 

So will we be announcing who is the best or worst? Definitely not! The complexity of need occasions and shopper missions and the impact on retailer choice is of far greater interest than a headline grabbing comment.

 

Our Retailer Series is due for release at the beginning of April. Read more here.

 

The Horsemeat Scandal - What Shoppers Really Think

Who's to Blame for the Horsemeat Scandal?

The horsemeat scandal has definitely kept the newspaper (and blog!) editors busy over the past week or so, so I felt this an opportune moment to reflect on who is to blame for all this.  Here are those currently under suspicion;

Food Manufacturers, Meat Suppliers, Criminal Gangs, Retailers and the Shoppers themselves….

Well at first glance it is easy to put the blame on the food manufacturers, they are the people who make the product and are therefore responsible for what they put in it, they are goliaths whose main purpose is to make money, obviously if they can replace an ingredient without affecting the taste then it’s all good.  But did they actually buy the ‘meat’ knowing that it was horsemeat, or did they just find a cheaper supplier of the product they normally use?  Of course all this is from the point of view that they were actually saving money, therefore were they just being conned by the second suspect the meat suppliers?  And indeed, were these just part of a conspiracy which involved the third suspect, the criminal gangs?  I’m sure we could continue this by getting further and further away from the main point, which I believe is PRICE.

Actually I didn’t mention Price before, but ultimately this seemingly innocent word is to blame, but surely price isn’t a cause, but an effect in this instance, we really need to find the cause!

So let’s look at who controls the Price.  When we study shoppers and ask them who they think fund the prices and offers in store, they more often than not cite the Retailer.  As we know, most promotional activity is actually funded by the food manufacturers in order to retain or gain market share (Yes, I know I’m simplifying this!). 

Therefore the conclusion is clear; it’s the fault of the food manufacturers with the help of the retailers, they are driving down price!  Well let’s hang on a minute, have the Shoppers themselves got off the hook? Surely they are the ones that are demanding lower prices, causing the retailers to offer the discounts that they in turn have negotiated from the manufacturers?

Well as a specialist researcher into shopper behaviour in this sector, I am loathed to attach any blame to them, yes they want value, but this doesn’t necessarily equate to price alone and although the market may consider they have free choice between retailers, retailer location is a far bigger driver to store choice.

So in the end, I believe that the retailers’ price based propositions are at the heart of the problems we are seeing.  By concentrating their attention on getting the prices down from manufacturers, they are driving down the quality, and in the end that has been compromised.  Retailers in my opinion need to do more to differentiate themselves beyond price comparisons.  Shoppers crave good quality products at a fair price (as a definition of value).  One only has to look at the growth of Waitrose to realise that price is not necessarily the key to growth.