The Bunnings of Alcohol

You’ve guessed right!!

Dan Murphy’s stores work pretty much like the hardware store, Bunnings. Both retailers promise lowest prices and huge range of products.

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Dan Murphy’s Guarantee. Source: Dan Murphy’s Lowest Liquor Price Guarantee

Both Bunnings and Dan Murphy’s use similar tactics, the price-match guarantee. This is more or less a trick to stop competitors from discounting; has not much to do with prices in store being actually low.

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Dan Murphy’s store locations. Source: Google maps

Dan Murphy’s is a big retailer of liquor, but with few stores up and about, its always a tad bit too far off. But with their lowest price promises, you’ll definitely want to go there.

Pricing always is what is most assessed by the consumer over other Ps (Iacobucci, 2016). Hence pricing should be about the customer (marketing perspective). Setting a price will send a message to customers and competitors. This is what Dan Murphy’s is pretty much trying to do, keeping it low to attract customers also keeping competitors on a run for their money.

According to Iacobucci (2013), breakeven will help understand if a firm’s strategy should use be sales volume maximization (fixed costs higher than variable costs) or margin per unit maximization (variable costs higher than fixed costs). Dan Murphy’s adopts a low pricing strategy by maximizing volumes. Let me be more specific.

Now focusing on low prices, there are two issues to be taken into account. On one hand, determining if costs are covered. Second issue, should pricing be a constant change. One such method is the everyday low price providers (EDLPs). Needless to say, Dan Murphy adopts a typical EDLP strategy.  (Iacobucci 2013). Straight forward, consumer based pricing.

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Dan Murphy’s own brands. Source: News.com.au

Dan Murphy’s is a lot like Bunnings in terms of pricing strategy, but when it comes to brands available in-store, Dan Murphy’s adopt a more Aldi approach. Yes you’ve read right. All top brands like Jhonnie Walker to VB and rest are available, but stocks on shelves show  wide variety of their own brands. This is because most of the brands are by Pinnacle Drinks.

Now let me be clear, this is not a typical packing of Woolworths and Coles, having products with their brands plastered across the product. (Talk about Coles Smart Buy sticker across your beer, wouldn’t that be absurd). No, the private labels don’t say Dan Murphy’s on them.

Real brands often waste money via marketing. Having their own brands that look like real brands will make consumers happy and also the retailer. Hence retailers can offer low prices while still ensuring good marginal profits. This is how Dan Murphy’s ensures breakeven. A drop in variable costs due to less stores, but a further reduction in fixed costs due to ownership of brands which leads to higher variety of products and uniqueness.

Dan Murphy adopts a more simple economy pricing technique. From Iacobucci (2013), we can denounce that Dan Murphy’s a pricing segmentation technique, where the brand-loyal segments and deal-prone are targeted during seasonal times and promotional times. Also a quantity discount is also offered from time to time to target deal-prone customers and give benefits to loyal consumers. Another aspect adopted  is price promotions (Iacobucci 2013) and the offering of coupons via. woolworths shopping, this increases brand image, cheaper marketing option and targeting the more deal-prone consumers.

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Mother’s Day deals. An example of Promotion Pricing to gain Deal-prone customers. Source: Dan Murphy’s Mother’s Day gift ideas

The Woolworths-owned retailer won the Liquor Store of the Year in the 2015; Roy Morgan Customer Satisfaction Awards. According to Roy Morgan, Dan Murphy’s is now a category killer. Category killers attain the power to set prices, since they dominate the industry and tend to overthrow competition. Which means the consumer bares the hike in prices.

(Definitely a nightmare).

Price guarantee can suppress completion. This happens when the incentives for the rivals are removed, competitive advantage gained. Thus customers end up with no options to seek lower prices, explained Sheftalovich.

Now the pricing strategy which was used to gain customers, will be able to drive out competitors. Hence when the competition drops, they’ll be able to adopt a new pricing grid, due to attainment of competitive advantage.

(*Sounds vicious, I know).

If we manage to find a cheaper price at a different store, you might find the process of attaining the cheapest price from Dan Murphy’s comes with stringent of terms and conditions. One of which is the fact that the store to be beaten (price) should be within 10km radius. Other terms and conditions also apply. These can make things very.. annoying (pardon my lack in enthusiasm).

All in all, Dan Murphy’s seem to know what they are doing.

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Dan Murphy’s Loyalty Membership Card. Exclusive to member price fluctuation.

REFERENCES

Bunnings Warehouse, 2016, Price Guarantee, Bunnings Warehouse, retrieved 1 May 2016,<http://www.bunnings.com.au/price-guarantee>

Dan Murphy’s 2016, Dan Murphy’s, Dan Murphy’s, retrieved 13 May 2016, <https://www.danmurphys.com.au/dm/home.jsp>

Dan Murphy’s 2015, Lowest Liquor Price Guarantee, Dan Murphy’s, retrieved 1 May 2016,<https://www.danmurphys.com.au/help/price-guarantee-content>

Dan Murphy’s 2016, Mother’s Day Gift Ideas, Dan Murphy’s, retrieved 13 May 2016, <https://www.danmurphys.com.au/list/mothersdaygiftideas#>

Dan Murphy’s 2015, My Dan Murphy’s, Dan Murphy’s, retrieved 13 May 2016,<https://www.danmurphys.com.au/dm/mydanmurphys/home.jsp>

Google 2016, Dan Murphy’s stores, Photo, Google, retrieved 2 May 2016, <https://www.google.com/maps/d/u/0/viewer?hl=en_US&mid=1xJ6TZWo-MdQBO1Ejo5aGgfKxc3w>

Iacobucci, D 2013, MM4, Mason, Ohio : South-Western ; Andover : Cengage Learning [distributor], [2013].

Murphy, J 2015, What wine is really a ‘Smart Buy’ and which one should you not ‘Select’, News Limited Copyright, retrieved 1 may 2016, <http://www.news.com.au/finance/business/retail/what-wine-is-really-a-smart-buy-and-which-one-should-you-not-select/news-story/24f22206364213b2df87cc2a6e344b1a>

Murphy, J 2015, What wine is really a ‘Smart Buy’ and which one should you not ‘Select’, News Limited Copyright, photo, retrieved 1 may 2016, <http://www.news.com.au/finance/business/retail/what-wine-is-really-a-smart-buy-and-which-one-should-you-not-select/news-story/24f22206364213b2df87cc2a6e344b1a>

Woolworths Limited, 2015, Homebrand, Woolworths Limited, photo, retrieved 2 May 2016, <https://www.woolworths.com.au/Shop/Discover/our-brands/homebrand>

Pinnacle Drinks 2015, Our Story, Pinnacle Drinks, retrieved 2 May 2016 <http://www.pinnacledrinks.com.au/>

Pryor, P 2012, Where the brands have no names,  The Sydney Morning Herald, photo, retrieved 2 May 2016, <http://www.smh.com.au/money/where-the-brands-have-no-names-20120728-2329r.html>

Ray Morgan, 2016, Ray Morgan Customer Satisfaction Awards January 2016, Ray Morgan Research, retrieved 1 May 2016<http://www.roymorgan.com/findings/6674-roy-morgan-announces-customer-satisfaction-winners-2015-201602170234>

Sheftalovich, Z 2014, How low do they go, Choice, retrieved 1 May 2016, <https://www.choice.com.au/shopping/packaging-labelling-and-advertising/advertising/articles/lowest-price-and-price-match-guarantees>

 

The Real Review 2016, Who makes My Wine, Corkscore Pty, retrieved 2 May 2016, <http://www.therealreview.com/who-makes-my-wine/>

Woolworths Limited 2016, Dan Murphy’s, Woolworths Limited, retrieved 1 May 2016, <http://www.woolworthslimited.com.au/page/Who_We_Are/Our_Brands/Liquor/Dan_Murphys/>

Yip, S 2016, Booze Wars: 1st Choice Liquor v Dan Murphy’s, Hlved Pty Ltd, photo, retrieved 2 May 2016, <http://www.finder.com.au/44-1st-choice-liquor-v-dan-murphys>

 

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One thought on “The Bunnings of Alcohol

  1. Pingback: Dan Murphy’s distribution battle plan | T1 2016 MPK732 Marketing Management (Cluster B)

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