Marketing's impact on pricing

This article is part of a series of articles from the WARC Guide on marketing's impact on pricing. Read more

Acuity Pricing ran an insight piece on the prevalence of discounts over the Easter period and were shocked to see the sheer percentage of brand ranges which were being heavily discounted.

There may be an argument to say that confectionary brands are more vulnerable than most categories to the effects of the cost of living crisis, as consumers forgo impulse goods to save money.

However, we routinely see this isn’t the case. In the UK, supermarkets were braced for a poor Christmas trading period as they believed consumers would be trading down tiers or foregoing luxury in the name of cost saving, however in 2023 it was the busiest since 2019, over the four weeks to 24 December, consumers spent a record £13.7bn.

One has to assume that Easter eggs fall within products with the so-called ‘lipstick effect’, that is to say, even during periods of economic hardship, a relatively low-cost Easter egg is seen as something that will remain in a shopper's basket as they’re unwilling to forgo an Easter staple. So why all the discounting?

Retailers and brands seem to be in a pattern of discounting brinkmanship where brands will sign up to match others' promotions in order to not miss out.

In the weeks leading up to Easter over 54% of Cadbury’s total range was on promotion and more alarmingly, 71% of Lindt’s and 74% of Mars’ Malteasers range. Of these promotions, over two-thirds were either on a Multibuy or a direct price cut.

Multibuys are a particular issue when the mechanic doesn’t apply solely to one brand or manufacturer, meaning shoppers can pick and choose between a variety of competing brands, cannibalising an otherwise healthy brand offering.

All this means that sales volumes will rise but margins fall. Many brands use rising sales volumes as a demonstration of brand health but neglect to analyse the relationship between sales and margins.

We know investing in strong branding leads to higher brand sentiment and lower price sensitivity allowing brands to charge higher and more consistently for their products. Brands need to be consistent in this strategy and have confidence in their brand value, or risk undermining the most valuable thing they hold, their brand equity.