Marketing Communication Strategies of UK Supermarkets - Case Study Example

Marketing Communication Strategies of UK Supermarkets (A Comparative Analysis - TESCO, Asda, Sainsbury) Contents Introduction Methodology Market Overview Comparative Analysis Conclusion / Recommendations Bibliography Introduction For any business undertaking, marketing communication is a strategy and developing a strategy entails the establishment of the firm's current position - asserting what the business is offering in terms of client/customer requirements, announcing where the firm wants to be and what it wants to be doing at a specific time in the future, ascertaining priorities and working out how the company can reach and achieve that position. Though the well-known marketing mix of the 4Ps (product, price, place, promotion) is a proverbial principle in doing business, it is product-led. The 4Cs model (customer, cost, convenience, communication) has better customer focus. As it is, communication is the final component of the 4Cs model, wherein the customer comes first rather than the product. Essentially, the value of the customer must be prudently considered. Convenience substitutes place and cost (which includes time and energy) replaces price. Thus, communication replaces promotion (Ashcroft 2002, p.178). Knowing its external audience is a huge necessity for any organisation and to achieve this task, a firm must embark on an effective market research. So as to attain excellent communication, it is imperative to be conscious on which communications media the audience will respond to -- whether they read newspapers, magazines, leaflets, listen to the radio or watch television (what type or what programmes they specifically watch). In the case of supermarkets, for instance, they obtain information about their customers via loyalty card ideas, magazines and their websites. From the information gained, they target particular groups of shoppers. Methodology The process employed in the current study includes Primary Research and Secondary research. Primary research entailed the use of questionnaire survey and personal interviews. Meanwhile, with Secondary research, it included the Mintel database as well as newspapers, books, company information and internet search. Many of the information gathered are backed up by visuals like illustrations, charts and graphical representations. Likewise, in order to complete the brief report, the study also included watching television and taking notes from these commercials, getting inside the supermarkets themselves, watch how people react to the advertisements fed to them, talking with marketing agents and supermarket sales staff. Similarly, product reviews have also been read, consumer comments and blogs have been randomly considered so as to get insights and an overview of the whole chain and the entire supermarket-retailing system. Market Overview Today, supermarkets control food sales in developed countries and are swiftly escalating their international presence. At the same time, global mergers and acquisitions and cutthroat pricing schemes have focused market power in the hands of a few major retailers (see Appendix 1 for company growth) (Raworth 2004, p. 6). The late 1990s witnessed a spell of merger and acquisition activities as the supermarket segment speedily merged and strengthened to counter the 'Wal-Mart' intimidation. Currently, the UK food retailing industry is governed and strongly dictated by four key supermarkets (Tesco, Asda, Sainsburys and Morrisons) who together account for over two-thirds of retail food sales (Fearney, Duffy and Hornibrook 2004, p. 2) and such consolidation of retailers has reinforced their control over suppliers. Today, the UK supermarket segment is still ruled by Tesco, Asda, Sainsbury's and Morrisons; these are the only chains that operate full-scale superstores of 40,000 square feet (3,700m) and sometimes go beyond. These so-called "Big 4" had a combined share of 75.3% of UK's grocery market realm (TNS Report, 2008). As it is, sector analysts foresee that it is not improbable to imagine future international markets in which food retail is controlled by four to five global corporations with a handful of regional and national companies and wherein food manufacturing is controlled by some ten companies using only about 25 brand names (Tickell 2004, p. 6). However, major food retailing companies in the UK have progressively been steering away from constructing huge superstores and are now investing in convenience food stores and middle sized supermarkets (Hunt 1997). In addition, 73.2% of the customers view supermarkets as the retail channel giving the best total experience for food shopping (Orgel 1997). Supermarkets in the United Kingdom have very well taken at least three-quarters of the bread, milk, fruit and meat markets. Briefly, the supermarket model is exemplified by self-service shopping with detached departments for produce, meat, bread and other grocery articles under one roof, price discounts, large-volume acquisitions and a consolidated delivery system. However, this particular segment of the UK economy is mixed. Various supermarket firms in the UK have aimed at particular market divisions and focused on a desired arrangement -- from the convenience and 'top-up' segments lorded over by small to medium-sized stores like Somerfield and the Coops; the 'big discounters' such as Lidl and Aldi with a restricted collection of own-brand produce intended at consumers in the C2DE social classes; the full range one-stop formats of Sainsbury's, Asda, Tesco and Morrisons usually with huge, edge-of-town stores; and the up-market retailers such as Waitrose and Booths. Global-wise, Tesco has been considered the big mover as it overtook German retail giant Metro AG (Metro) and landed 4th place, the first movement among the Top 5 since 2003 (see Appendix 2). With this development, Tesco became the second biggest retailer in Europe and is gaining ground over Carrefour. Over the past ten years, Tesco has swiftly ascended on the Global Powers of Retail list (Deloitte, 2008). Analysis and Discussion (Comparative Study) Promotion Mix TESCO ASDA SAINSBURY Media Due to TV promotion's ability to convey its message to a huge throng of buyers and potential customers, the high financial outlays being shelled out is always worth the expense (Fill, 2005, p. 556). Likewise, Tesco utilized the services of famous pop stars such as the Spice Girls in 2007 (E-consultancy, 2007) On television ads, "Green arrow" represents Asda; all arrows point to the price of the products and put the organization side by side with the other players namely Safeway, Tesco and Morrisons (YouTube, 2008) One advertisement featured Victoria Wood at the bakery in the Boldon store which was meant to depict and represent various facets of the Asda brand (in addition to the genuine and very attractive customer benefit of hot bread on the hour every hour). All the commercials did not follow a specific script to communicate the culture of Asda in a natural way. Other advertisements, each highlighting diverse yet unique initiatives, ran in three to five week bursts and showcased different celebrities that included Lisa Tarbuck, Ian Wright and Julie Walters. Programmes which included regular soaps, reality TV, dramas and entertainment shows were meticulously chosen to reach the core audience of housewives with children. Catalogue Tesco Direct is Tesco's catalogue. This can be secured easily from local stores or can be ordered from the internet and through the telephone. Tesco come up against to Argos in this stage (E-consultancy, 2007). At the same time, Tesco publishes a magazine named Tesco Magazine that contains information on health, green living, lifestyle, fashion etc. It also provides significant suggestions, insightful comments and well-thought out articles directed at customers (Tesco, 2008) Asda Direct, Asda's catalogue cannot be compared with Tesco's Tesco Direct, though it is a fact that the products have been properly presented to customers by the use of suitable pictures. Nonetheless, a comment from customers made the point that the catalogue can be quite confusing and usually items cannot be found. And since many expected the products to be viewed online, Asda has provided a net search facility that inputs a six digit code found in the catalogue and presto, the item can be found online Sales Promotion An extremely familiar promotions tactic is the Tesco Club Card which can also serve as well as a discount voucher. Basically, Tesco is a global firm which is exerting effort in crafting sales promotion deals that suits well the host country it is situated. For example, in China, it sells live fish and offers promotions and deals according to the circumstances of the store. This is based on the theory of a store's adaptability to its external and direct environment (Customerthink.com, 2007), it believes that regional diversities (customer preferences and firm resources) can greatly affect the designing of market strategies that will have to be used to promote sales. Like many retail companies, Asda is aware of significant seasons like Christmas and Halloween. For instance, during the Halloween, Asda designed a sales promotion technique dubbed "Asda Family" and presented pleasurable ways like decorating the store with black curtains and utilizing other thing related to Halloween. It employs discount pricing, use promotional coupons, money vouchers and even offer free deliveries Today, Sainsbury stands as one of UK's most booming and thriving retailers. In 2002, the company reinstated its loyalty card as part and parcel of its Nectar scheme. With 11 million members, Nectar is now the country's biggest loyalty card programme. The massive quantity of customer data it provides is a priceless and an important resource - that is if such data can be analysed, understood and converted into an effective marketing strategy that can correspondingly lead to a successful promotional action. Public Relations Tesco is one firm that conducts various activities geared towards benefiting the public. There are family activities like energy and water saving, giving support to schools, charities and recycling-related endeavours. Tesco uses a recycling machine in some of its stores. In fact, it has been believed that the machine can persuade other business organizations to develop and invest in a recycling system. What's more, Tesco gives club card points to customers who use the machine to recycle aluminium cans (Rutland Times, 2008) It likewise launched one specific initiative dubbed as "Every Little Help" which was used across all advertising and communication efforts so as to put in a nutshell Tesco's consumer-oriented idea of "always doing the right thing" for the customer. Asda is one business company that strongly believes in proper waste disposal and in the "wealth" that garbage has. Based on this philosophy, it encourages people to recycle by way of packaging, carrier bags, food waste and landfill bill games, this is an entertaining game show illustrating what people can or cannot recycle (Asda, 2008) To add more "flavour" to its presence in the supermarket arena, it undertook to give a fresh definition to the term "kid's meal," and made a distinctive alliance that transformed student recipes into store-branded products. The initiative dubbed as the Hertfordshire Food Chain Challenge, is operated and managed by Sainsbury supermarket in partnership with Hertfordshire Schools. As lead business partner, Sainsbury's committed time for teachers' professional development as well as provide practical feedback to students on the products they have crafted. The feedback brief given to students is quite challenging which contained valuable information on some industry specific criteria concerning issues like fat, calorie and salt content, which in turn required students to conduct researches, perform tests and eventually obtained knowledge and understanding about nutritional values of food in order to fully develop their products. Sponsorship In 2005, Tesco sponsored the National Track Cycling Championships in order to help UK's children to become healthy and fit through the cycling sport (Britishcycling.org.uk, 2005), in this undertaking Tesco has a business partner -- Rugby League Club (PRNewsWire.co.uk, 2008). The sponsorship's objective was to boost the company's community image building, marketing leverage, hospitality opportunities, media leverage and perhaps resolve its evaluation issues (Pickton and Brederick, 2005, p. 578) Asada's sponsorships, particularly the Kwik Cricket in 2006 centres on children and exerts effort in educating then on how they can feed themselves in a healthy manner; the project is slated to be extended until 2009 Direct Marketing Tesco uses club cards for direct marketing, this has a direct effect on many customers. It also sends out club card points or coupons through mails. NA Online marketing Tesco's formal web site -- www.tesco.com is easy and fun to use. The Direct catalogue is located on the upper left part and can be used for online shopping. When one clicks on a product, all brands come surfaces on the screen and facilitates comparison of different brands with their corresponding prices Asda's official web page -- www.asda.com - looks simple yet appealing to the eyes. Though it can be used easily just like Tesco's, it has very few figures indicating the products, as a result, customers who have vision problems will have difficulty making out the writings on Asda's web page Aligned with its organizational objective of bringing a continuously enhanced quality shopping experience for its purchasers, great products at reasonable prices, Sainsbury was one of the pioneer supermarkets to invest in home shopping. As far back as 1997, the firm initiated a home shopping system that handled online food orders that consequently instigated the Sainsbury Online Groceries in 1998. Basically, Sainsbury's Online Groceries is all about making consumers and shoppers lives easy. Fundamentally, customer satisfaction is the means of support of the Sainsbury's Online Groceries service; when customers provide feedback, Sainsbury listens and uses that information to propel the business forward. Conclusions / Recommendations As the mass media have established itself and the entire system has come of age, the behavioural dynamics of perception and interaction, which were not accurately addressed and given full attention to by advertising and marketing agencies in the previous years, have turned to become crucial to the characterisation of media and its function in marketing communication. With flaccid, one way, types of advertising like media displays or television advertising, there exists a high percentage of non-response. Necessity for Product Information For a supermarket to obtain consumers' attention and patronage, it should not depend solely on 'image advertising' as this does not provide the information necessary to purchase knowledge-driven products. Also, it is a fact that, communication is an outcome that resulted from the dynamic interaction of two parties who are expected to give and take; therefore, target customers and other shoppers must be provided a channel for which to give out feedback. With this reality, media practitioners must be responsive to the information contained in the feedback and must be insightful as to the "hidden messages" contained in each feedback. Development of Effective Communication Materials The crafting of excellent communication materials is a delicate task that must be carried out not just by one or two individuals but by several divisions of the entire supermarket structure such as pilot supermarket owners, demonstration companies, food consultants and promotions firms. For instance, supermarket banners must be attractive, colorful and must convey a short but concise message; handbills must accurately feature special price promotions for products and must be distributed regularly (e,g, weekly). A supermarket must prudently decide which communication materials they should employ and utilise. In-store Food Demonstrations/Product Special Exhibitions Supermarkets should avail of the services of companies that can provide cooking demonstrations for several hours each week and training for the demonstrators must be conducted by an economist and presumably a project manager. Such demonstration, especially for food products, must not ignore data on nutrition, the product itself and its features, key selling messages and the opportunity to practice the recipes. So as not to bore customers who have found time to observe these demonstrations, a fresh recipe needs to be featured each week and leaflets must be available to observers/watchers at the time of the actual demonstration. In the case of non-food items, supermarket strategists must see to it that non-food items must also have demonstrations so that potential buyers will know what exactly does a specific product do for them; knowing what a product can do for buyers will help them decide to buy or not and will influence their decision on whether to buy now or later. Training of Supermarket Staff A needs assessment of training requisites and dedication to training must be conducted by way of surveys and one-on-one interviews with supermarket managers, the entire retail industry training council and the supermarket staff training coordinator and modules based on industry competencies must be arranged and put in order. Generate Trust A supermarket firm must be prepared to listen; this charms consumers and creates a sense of trust and in so doing an emotional commitment to the corporation is being generated and to its products which cannot be produced any other manner. Such emotional commitment develops and increases the more rational understanding of the company or brand values and ascertains an unparalleled, personal relationship with the manufacturer/brand/retailer - even among those who may have had no previous experience with the supermarket. Facilitate Customer Feedback Allowing purchasers to intermingle with the brand by giving out their opinions and views does so much more than create an emotional commitment; it facilitates huge numbers of real people to articulate and communicate ideas in a manner they have not had the capability to do previously to a firm which is apparently prepared and equipped to listen and act in order to satisfy consumers and shoppers. Appendix 1 Source: Tesco Annual Report and Financial Statements 2008 Source: J Sainsbury Plc, Annual Report and Financial Statements 2008 Appendix 2 Top 10 retailers: Company Country of Origin Rank 2006 Retail Sales (US$mil) CAGR 2001-2006 Wal-Mart US 1 345.0 11.1 percent Carrefour France 2 97.9 2.3 percent The Home Depot, Inc US 3 90.8 11.1 percent Tesco UK 4 80.0 12.5 percent Metro Germany 5 74.9 4 percent The Kroger Co. US 6 66.1 5.7 percent Target Corporation US 7 59.5 8.3 percent Costco Wholesale Corporation US 8 59.0 11.6 percent Sears Holdings Corporation US 9 53.0 8 percent Schwarz Unternehmens Treuhand KG Germany 10 52.4 12 percent Appendix 3 (Company Images) Appendix 4 - Questionnaire Form Name _____________________ Occupation/Profession________________ Locality ____________________ Date Surveyed _______________________ AGE 15-25 26-31 32-40 More than 40 PREFERRED PLACE FOR SHOPPING Tesco Asda Sainsbury's What influences you when you go shopping Promo campaigns / TV Ads Follow other people's choices Price Location Which of these places you consider the most ideal supermarket to go to and the least you like Tesco Asda M&S Other, please specify ________ Which of these companies have reasonable prices and the best customer service Tesco Asda M&S None of them When a company uses celebrity endorsements, does it affect your purchasing decisions Yes No Do you like online shopping for grocery items Yes No Sometimes Never Bibliography Ashcroft, L. 2002, "The Marketing and Management of Electronic Journals in Academic Libraries: A Need for Change," in Savard, J. ed. 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Mintel (2008) "Asda boosts Wal-Marts annual Profit" http://academic.mintel.com/sinatra/oxygen_academic/news/view=company&levels=599449,4816234&page=1/display/id=10767/list/id=10767&type=NSItem&class=FinancialNews/display/id=324092&anchor=324092 (Mintel Database) Youtube (2008) ASDA: Why pay more http://uk.youtube.com/watchv=UiGm5pH5kFg&feature=related (Asda Advert) Youtube (2007) "Spice Girls Tesco Add" http://uk.youtube.com/watchv=WRGZ30-KfIs&feature=related ( Tesco Advert) E-consultancy (2007) "Tesco takes on Argos with home shopping service" http://www.e-consultancy.com/news-blog/361608/tesco-takes-on-argos-with-home-shopping-service.html Tesco catalogue 2008 http://www.tesco.com/todayattesco/index.shtml Customerthink.com (2007) "Approaching the U.S. Market, Global Retail Giant Tesco Will Continue to Build Loyalty Through Research" http://www.customerthink.com/article/tesco_does_research Rutland Times (2008) Improving recycling at Tesco's http://www.rutland-times.co.uk/news/Recycling-improvements-at-Tesco.4650454.jp Asda (2008) Asda Recycling and Waste http://www.about-asda.com/sustainability/recycling-waste.asp#recycling Britishcycling.org.uk (2005) Tesco Sponsorship http://www.britishcycling.org.uk/web/site/BC/bcf/News2005/20051010_tesco_backs_go_ride.asp Prnewswire.co.uk (2008) Tesco's first sports Sponsorship http://www.prnewswire.co.uk/cgi/news/releaseid=56284 Read More