Asda’s chief marketing officer Rick Bendel is confident the retailer’s new Price Guarantee pledge can reverse its declining market share, he tells Adam Leyland

A year ago Asda was flying: jockeying for position with Morrisons at the front of the pack. As late as 6 September it was boasting a market share of 17.4%.

But over the past six or so months, Asda has lost its way. The latest 12-week figures from Kantar confirm a significant slowdown in sales (to just 2.5%). Indeed, figures for the most recent four-week period to 18 April leaked to The Grocer show that, with sales growing by just 1.4% and food sales actually falling by 1.7%, market share had slipped to 16.7%.

As rumours of the slowdown first emerged at the start of this year, Asda appeared in denial, putting the blame, British Rail-style, on the wrong kind of weather (snow, in this case). On the marketing side, meanwhile, it also seemed at sea, at one point even borrowing Sainsbury's 'Good food costs less at' catchphrase.

But in the past few weeks, Asda CEO Andy Bond has confronted the underperformance head-on, admitting to investors, suppliers, journalists and mission control: "Bentonville, we have a problem."

And, in an exclusive interview with The Grocer, chief marketing officer Rick Bendel is similarly frank. "One reason we lost our way is because we became obsessed with finding clever ways to do deals," he admits. "When volumes declined, we introduced 2, 3, 4-fors. We became a bit too cash & carry at a time when people were saying 'I'll buy four bananas because I don't want one to go black'."

The penny dropped for Bendel last autumn. "A customer told me that Asda was the cheapest supermarket, but she couldn't afford to shop there. That was my epiphany moment."

He realised that in the rush to match its rivals in a frenzy of promotions, Asda had lost sight of its roots as an Every Day Low Pricing (EDLP) retailer. But how would Asda attract customers who were being wooed by all those eye-catching bogofs?

The solution, unveiled last week, was Asda's Price Guarantee pledge (The Grocer, 1 May, p4), which promises that Asda will "never again" be beaten on price. It is underscored by a new website that enables customers to check their Asda receipt against 'equivalent' items at its big four rivals. If the price of the total basket is cheaper, Asda will give the shopper vouchers to make up the difference plus a penny.

Bendel believes this is a game-changing innovation. "New technology has allowed us to do something we wished we could do 20 years ago. Once and for all we can end the debate about who's cheapest."

And he's clearly proud of the innovation that underscores it. "Walmart is absolutely thrilled. You've got to admit it's clever," he beams. "This is a big opportunity to put a line in the sand. It's very difficult for others to react because whatever they do, we'll match it and add a penny."

But how much is this going to cost Asda? Morrisons reacted, two days after the Price Guarantee announcement, by advertising a basket of 12 items that was £10.39 cheaper.

In matching such a basket one presumably supported by manufacturers Asda would be £10.40 worse off. This could end up costing a small fortune. But Bendel is confident that because Asda "still wins a landslide number of baskets", even with redemption rates as high as 50%, it will be a "very manageable cost".

"No retailer can be the lowest price on every single product on every single day. But [the Price Guarantee] is designed to get rid of the concept of a loss leader."

Around 96% of the time, he calculates, shoppers don't make a saving by shopping elsewhere. "And because of this technology, we can be completely transparent about savings, and make up the difference. Whether topping up or stocking up, the customer can be reassured the price is going to be at the very least the same, and most probably cheaper."

Rivals have been quick to dismiss the price pledge as a gimmick "the mother of all distractions", in one rival's memorably tart soundbite. The new strategy has also prompted concern among suppliers over who will pay. Bendel is quick to dismiss suggestions that manufacturers might be retrospectively contacted to match another retailer's prices. "We can support this strategy because our EDLP strategy is underwritten by Every Day Low Cost," he says.

Promotions will be limited to items that add incremental sales to the manufacturer, he adds. "There's not a lot of point running a bogof on shampoo. Getting a deal doesn't mean you wash your hair more often."

Points win prizes?
Industry analysts also see price as a blunt instrument in a subtle and complex war, and point to Tesco's improved performance as evidence that loyalty is engendered in other ways. But Bendel is confident the guarantee will encourage customer loyalty. "We offer your money back, not a cheap hotel on a Thursday," he says, in a swipe at Tesco's Clubcard. "If you shop at Tesco, and there's an Asda nearby and you see that Asda is £5 cheaper, you're going to change your shop. And many Sainsbury's customers have no idea what a premium they pay."

But what about quality, range, customer service? What about provenance, ethics, convenience? Bendel promises step changes in a number of these areas to create an offer he describes as "price plus".

Analysts are not entirely convinced. "Asda is trying to get to 'price plus', but in the mind of the consumer, it's very often 'price or'," says Kantar communications director Ed Garner. And it doesn't help, he adds, that while Asda has plugged value so hard, in the past six months there has been a shift away from value to quality.

"Tesco called the market right by focusing on its Finest range in the run-up to Christmas. Asda's less-is-more policy has gone too far, and it's struggling to redress the balance. There are some low-volume items like goats cheese, for example that, if you strip them out, drive away customers who buy a disproportionately high number of items every week."

Bendel acknowledges that work needs to be done to improve quality, and promises "a major move" to focus on its fresh food and own-label offers.

Last month Bond told analysts that Asda would revisit almost all of its own-label programme. Bendel confirms the plans go far beyond a rebrand. "There's nothing to suggest what we achieved on clothing can't be achieved with own label," he says. "With George we did something others said could never be done in own label creating a big volume fashion brand in a supermarket."

Bendel also promises to "change the nature of how customers are compensated for lack of availability", whether due to continuity or range, with "something as dramatic as the Asda Price Guarantee". In service, too, radical plans are afoot, involving store navigation signage and layout, as well as queue management systems.

Asda also plans to liven up the in-store experience, with more memorable event ranges and displays. "With seasonal events, people see them as family occasions and want to trade up, so there's an opportunity to create a new type of event retailing that will involve us bringing in high-quality products for a limited period only."

Bendel is clearly enthused at the prospect of delivering on the plans. "This is a really, really important time in the development of Asda, as important as the time Archie or Andy came in."

But with Bond set to leave, is he not worried the new chief executive will reject the plans, and all this effort will go to waste?

Bendel draws a deep breath. "Andy has done an amazing job putting us back on track," he says. "He's re-engineered the business incredibly effectively. The operations work well availability, pricing, service levels. And George will be another of the legacies of Andy's time at Asda I put it up there with the creation of Boots No7 and [the Boots own-label brand's] success in challenging L'Oréal and Max Factor."

But, says Bendel, whoever Walmart appoints to the top job will be delivering an Asda plan, not an Andy Bond plan.

While confirming he has not applied for the job, he hints strongly that an internal candidate will be appointed. "If the appointment is from within Walmart, it will be a ringing endorsement of the plans we've been cooking up." And if it's not? "We shall have to wait and see."

Rick Bendel snapshot
- Starts career aged 17 as a media buyer for Leo Burnett Headhunted by advertising agency Geers Gross, becomes CEO in 1986, aged 27
- Leads merger of Geers Gross with multinational Paris-based Publicis Promoted to COO of Publicis Worldwide in 2002, the first non-Frenchman in the role Joins Asda as group marketing director in November 2006
- Moves Asda's advertising account, estimated to be worth £44m, from Publicis to Fallon, after 18 years Creates first unscripted advertising campaign, showing Victoria Wood working in Asda's bakery department, and brings back pocket-tapping commercials
- Appointed Walmart's chief marketing officer for international business last year as the marketing centre moves to the UK