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Whole Foods, which sells premium grocery items, has suffered from a nickname that mocks its high prices: Whole Paycheck. As shoppers switch to less expensive options for their grocery purchases—up to one-fifth of them, according to one survey—Whole Foods is pursuing some innovative tactics to change consumer perceptions of its prices.

To begin with, new stores employ a smaller format—at 23,000 square feet rather than existing stores’ average of 60,000 square feet. These smaller stores are less labor intensive, which reduces the costs to the company.

Beyond cutting costs, Whole Foods has decided to offer promotions and coupons to encourage customers to feel as though they are getting good value. The selected markdowns and promotions focus on specific products on which Whole Foods can offer good prices. In addition, “value tour guides” in stores will take customers on a tour of the store to point out good deals, competitive across the grocery industry: Organic lemonade for $1.99 per bottle costs less than it would 7-Eleven. Value tour guides also make sure to highlight the store’s private-label products.

The tactics appear to be working: Consumers’ stated perceptions of Whole Foods prices have improved, such that only 10 percent of those surveyed mention a negative perception of the prices, compared with 20 percent just a few months ago. As long as Whole Foods can get customers to visit the store, it can induce them to make purchases through both price and other value propositions. Some consumers may choose to trade down to less expensive options once they are inside, but this situation still means that they have perceived Whole Foods as valuable in some way.

Discussion Questions:

  1. What is Whole Foods doing to combat negative price perceptions that customers may have? 
  2. Can Whole Foods succeed in changing consumer’s perceptions and avoid the moniker “Whole Paycheck”?

Caitlin McDevitt, “Whole Paycheck? Not Anymore,” The Big Money, July 29, 2009.