A small supermarket chain Nosh threw a good marketing move on its competition this week by announcing a cut in its price on milk for this month – down to $2 from $4 on a two-litre bottle. Nosh claimed as motivation a concern about spiralling milk prices and the result that milk was being consumed less.
The Nosh move is a common ploy by retailers. Known in the trade as a "lost leader" the retailer reduces the price, and therefore their margin, to a point where it may even be producing no margin or even a loss for the retailer.
Why does it work? Because in retail places like a grocery store, people are attracted by price reductions, but while there, they snap up other items which – you guessed it – carry a healthy margin. Better still, it causes shoppers who might have robotically shopped elsewhere to try a new shop and perhaps become hooked for the longer term.
In this case it was a winner because of an old adage in communications – get the right message to the right people at the right time. Milk prices are a hot issue at the moment and so a bold move to dramatically reduce the cost of milk hit the news big time – press, radio and television coverage that money cannot buy.
But here's the clanger. The two big supermarket players in New Zealand, Progressive Enterprises and Foodstuffs rightly pointed out that their own prices were cheaper over all... and that Nosh were pulling a stunt!
The first bit was a fair call, but the big guys should have shut up on the second. It simply handed Nosh more brownie points for their public service and left the public looking sideways at Progressive and Foodstuffs.
View the TV3 News clip here.