marvin Consulting

Milk war lacks innovation

So Coles and Woolworths drop milk to $1 a litre here in WA. They claim it is to attract customers.

The 101 of price slashing is that it’s a slippery slide to the bottom.

The price of milk is not a draw card for my family as to which supermarket we choose to do our weekly shopping.

In the basket of shopping goods it comprises a very small proportion. What’s more, most people don’t buy milk just once a week. You want it fresh and so you grab a couple of bottles as you need them.

There’s definitely more at stake here and the dairy farmers are the ones hit first. Of course it won’t stop there. You can’t produce the same quantity and quality and get paid less. So there will be change in the industry. It will have to be in efficiencies and effectiveness for those that want to put in the greater effort and it will mean short cuts for those that don’t. There are already claims that the milk is not the same – perhaps diluted.

The price of milk also questions the exorbitant pricing strategy used for bottled water. Surely, it can’t be $3 for 600ml when milk is $1 a litre.

If Coles and Woolworths are serious about attracting customers, keeping them for life and getting them to spend more and visit their stores more often, price-cutting milk is not the answer.

It suggests a lack of imagination, innovation and entrepreneurship.

Clearly the starting point is market segmentation and targeting each of those segments better.

Let’s take families for example – as I can speak first hand. Shopping is no longer an outing or a luxury as it was possibly in the 70’s and 80’s. It’s a chore. Ask any mother with kids. It’s yet another weekly routine that is best done quickly, hassle free and hopefully, inexpensively.

Families represent the best market segment for supermarkets. We go in every week, we spend big and if you do the right thing we’ll be there for life. Very few families switch between Coles and Woolworths without good reason.

We spend between $200 and $300 a week – that’s $10,000 – $15,000 a year. That’s how much I’m worth to either of those supermarket chains. If they keep me for 10 years (assuming that’s the average time a family stays in the same house/area), that’s a $150,000 customer.

I’m sure smaller families spend less, but stay with me here.

What do you think is most important to the mother with kids (the most common grocery buyer)? Definitely not the price of milk!

It’s also not the 8 items or less register. That’s a disincentive to spending. Coles and Woolworths, if you’re listening, that concept encourages people to buy less. I know when I’m doing the after work shopping run, I count how many items in my basket and put stuff back just to make the faster queue.

It certainly does not help your best customer – families.

How about a couple of registers for families or larger spenders or those with more than 25 items? That’s a great start. It will attract a lot of mums who want to get out of there after chasing two, three, four or five kids around the aisles whilst trying to stick to a shopping list.

A crèche or kids fun corner even if it is for a fee would also help. Ikea does it very well – so you don’t have to think it through too much or reinvent the wheel – just copy them.

They are just two ideas off the top of my head. I’m sure if you had your marketing department sit down with a note pad or speak to a few mums you could come up with a lot more.

It certainly isn’t the price of milk.

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