German Discounter discovers brand image advertising

October 20, 2008 at 1:38 pm Leave a comment

One of the largest German discount retailers, Lidl, recently started airing a brand campaign. The campaign itself, well, nothing special: the campaign is strongly reminiscent of Mastercard’s “Priceless” campaign, using people situations and using price tags for those situations. Also, the scenes look like they were selected out of stock film reels. Furthermore, it has a brand promise (“A trip to Lidl can be anything but expensive”) that, still reminds everyone: it’s about cheap prices, for which, if you’re honest, you don’t need a brand image campaign, cuz, duh, everyone knows that Lidl is a discounter, not Harrod’s. As a result, it probably tested really well in the pre-tests because it’s not saying anything (that can offend anyone).

What’s really more interesting is the fact that a German discounter actually started thinking about a brand image campaign in the first place. This is highly uncommon. The only “brand” communication we’re used to from discounters is inserts with pork loin offers, at EUR 2.99 for 500 grams for which discounters like Lidl and Aldi shell out a good 200-300 million Euro a year making sure we all have kilos of dead trees in our mailboxes. But a brand film? That’s new. So, what’s going on here?

I basically see it as a discounter’s desperate attempt to stop some trends in the making as far as the market situation is concerned. In Germany, there is a fight over market share going on among the different supermarket retail business models. Like elsewhere, we have three competing models:

  1. Discounters (Lidl, Aldi, Penny…)
  2. Hypermarkets (Real, Globus, Toom, Kaufland…)
  3. Supermarkets (Edeka, Rewe…)

In the past, discounters really ate away the huge amounts of market share of Hypermarkets and supermarkets because of a couple of people behaviors: a) while in the past, discounters where frowned upon for having bad quality, they now established that you can even drive to a discounter in a Porsche if you don’t mind a stripped-down shopping experience: the quality is right, and it is cheaper than local supermarkets b) People’s lives and their shopping behavior has changed: people (especially the younger demographic) don’t shop for the whole week anymore, quick trips to the supermarket around the corner become more common, so hypermarkets with their huge assortment of goods are too far away, less convenient and, frankly, too huge for daily shopping convenience.

However, there are also 3 other trends that might force discount brands to rethink their strategy: a) discounters are everywhere now and have reached maximum proliferation, competing with supermarkets for local relevance which still own local convencience and quality of products, so you can’t grow more by building more outlets b) local supermarkets themselves have responded to discount pricing by increasing their share of private labels, allowing to approximate the price of discounters in a shopping environment that is more tasteful c) Organic foods are everywhere, and expected by people, and while discounters now also carry great organic food, the ambiance of organic food is still more trustworthy and personal in a more upmarket supermarket brand than picking it up from crates stored on pallets and high-fluctuation staffing structure.

So, with discounters having a hard time to grow beyond their proliferation, pure price communication not being sustainable (ever!), and shopping experience becoming a more and more important asset, discounters seem to have discovered brand advertising as a necessity, in order to mitigate the shopping experience strategies of supermarkets, such as REWE and Edeka.

However, I am not sure advertising can really help discounters here (especially if the promise is still just about price). At the very least it can’t help if discounters don’t also rethink their shopping experience strategy. Ads, after all, are just ads. Reformulating your reason for being and providing people with acts that improve their lives, in the context of their shopping needs should prove more successful in building trust than running some ads.

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Entry filed under: Experience, humankind, Insights & Strategy, opinion. Tags: , , , .

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