Is EDLP really a valid loyalty strategy?

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By: Wise Marketer Staff |

Posted on May 29, 2012

Approximately 80% of Walmart shoppers say they are either 'extremely' or 'very' familiar with the retailer's EDLP philosophy, and 90% of those say it is either extremely or very important to them - and yet more than half still cross-shop at other retailers to get the best prices possible, according to a consumer perception study conducted by marketing research firm ClickIQ.

Of the 888 survey respondents who had shopped at Walmart for groceries and household goods in the past month, 54% stated that they would go to more than one store to get the best prices on grocery items and 48% would check out multiple stores to get the best prices on household goods.

However, within the past month, a full 61% had also shopped for groceries and household items at other grocery stores. Some 39% had shopped at Target for these items, 37% at dollar stores, 35% at drug stores, 26% at Sam's Club and 23% at Kroger. But, when asked where they purchase groceries and household goods most often, Walmart registered 46%, while the 'other grocery stores' category came second at only 26%.

The survey asked respondents to rank (on a 5-point scale of importance) various factors regarding retailers of groceries and household goods. The number one factor rated "extremely important" was "Everyday Low Prices" (EDLP) at 64%. Second was a surprising result: "Cleanliness" at 48%. Perhaps more predictably "Sales and Promotions" was third at 46%. A "Convenient Location" came fourth at 41%.

To gain a deeper understanding of the consumer's price perception of Walmart regarding having the lowest price every day, the study asked respondents the price of several common grocery and household items. Once the obvious outliers were removed, the respondents average unaided price answers were quite close to the current retail prices at Walmart. Popular items such Mott's Apple Sauce, Kraft Macaroni and Cheese, Windex Window Cleaner, Charmin Toilet Paper and Colgate Toothpaste were all within US$0.10 of the actual shelf price. Respondents were further off the mark on Milk, Frozen Pizza, Jif Peanut Butter and Glad Kitchen Trash Bags, among others.

Respondents were then asked if they thought Walmart had the lowest price on each of these items. In general, twice the number of respondents indicated they believe Walmart had the best price on each item as those who did not (amongst those who were familiar with the items).

To determine what impact a few pennies difference in price would have, shoppers were asked if they would notice if the price on their favourite cereal at Walmart changed from US$2.97 to US$2.93. Approximately one third said they would probably notice the change.

The conclusion appears to be that, although getting the best price and the EDLP philosophy are extremely important to those who shop at Walmart, the impact of a few pennies off on a single item are beneath the awareness of most shoppers. The relatively high degree of cross-shopping would seem to be at least partially a product of clean, convenient, local grocery stores and other national retailers that offer large, frequent sales and special promotions.

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