How Tesco is leading the market again with its Brand Guarantee

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Tesco had been left in the wake of its rivals’ price guarantees for too long. Now the grocer is out in front again with its Brand Guarantee.

Tesco, for so long at the forefront of the UK food retail sector, with its Clubcard loyalty scheme, non-food pushes, online growth, international expansion and the like, has had a turbulent few years for sure.

Most of that was due to a lack of care in the shops, not looking after customers, chasing vanity projects, such as Blinkbox – trying to be everything to everyone without actually running a decent supermarket business.

A direct consequence was that Tesco became a “me too” business, blindly following others in terms of price guarantees and price promises, which, due to the speed of launch (and poor offer underpinning the guarantee), meant customers were able to raid Tesco for £60+ on a certain wine deal if memory serves.

Following the market

The humiliation of then removing the scheme due to customers “taking advantage” wasn’t great PR and underlined to customers that Tesco was unable to compete. Price Promise was then relaunched with a cap on the value of vouchers, meaning it was hardly equivalent to the Asda scheme, which then extended the offer to encompass a 10% cheaper guarantee.

The Tesco initiative included fresh foods and own-label ranges alongside brands, which prompted the usual legal challenges. Comparing own label is a war that no one will ever win. There are far too many ways to skin the proverbial cat, given the differences in sourcing, weights, meat content and packaging, which mean it’s never a fair comparison across the market.

A business that had become accustomed to following the market then saw further erosion in its offer when Sainsbury’s announced it was only going to price match its branded scheme against Asda, given the grocer’s price leadership and indeed, customers telling them that Tesco was no longer competitive.

“Tesco is leading the market for the first time in a long time, offering the discount at the checkout”
Steve Dresser, Grocery Insight

What a PR masterstroke from Sainsbury’s. Right in the midst of the accountancy problems at Tesco was one of its biggest rivals publically stating it was no longer competitive on price. It worked nicely for Sainsbury’s too – comparing against two retailers, with the differing promotional cycles and price benchmarks is expensive, even on brands.

So, after a year of Dave Lewis with the product reset, with a couple of big branded campaigns and working quietly in the background reducing core prices, sees Brand Guarantee launch this morning. No more own-label comparisons – it’s all about the brands.

Powerful message

With price becoming a sea of noise as everyone compares prices, schemes, points and redemptions, Tesco is leading the market for the first time in a while, offering the discount at the checkout. No vouchers are to be had, it’s all about the at-till discount. What a powerful message: looking after the customer.

Leaving the store with “money off” at the point of purchase due to cheaper prices elsewhere shows a real level of confidence from Tesco, particularly with the comparison being across the market. Dealing with three promotional cycles at Sainsbury’s, Asda and Morrisons could be expensive.

That message, after shopping in a store where things may leave something to be desired and then getting money off at the checkout because a competitor is cheaper could easily turn an average experience into a powerful positive one, potentially driving customer loyalty.

Of course, including brands stocked by the discounters would have stretched the pledge even further and for customers, that is where the war is being lost by Tesco. That’s my Northern cynicism, though.

Credit to Tesco for being out in front with something. And the timing, in the run-up to Christmas, could be effective in capturing more spend going into the festive period.