Sainsbury's to Offer All Employees Qualifications - Case Study Example

Sainsbury had once been UK’s number one supermarket chain. However, in early 1990’s Sainsbury started losing its market share to Tesco and Asda. Thismade Sainsbury fight back for its number one position, however, Tesco is still giving it a tough time. To see the firm’s current market position, the marketing mix of Sainsbury has been analyzed. Product Sainsbury markets itself by claiming that it has products that are ‘different’. Which means those products that may not easily be available in other stores may be available here. Sainsbury was primarily known for its food stock. It had 60% of private brands (Food and drink Europe.com 2003). However, with the increasing competition, market saturation and a flatter growth of the population caused Sainsbury to diversify into petrol stations, Sainsbury banks, hyper markets and non food items. Such diversification was an attempt to regain its market share and to find niches within a market that was saturating (Marketing week 2009). The diversification was to attract and retain its customers by adding convenience for them. With the economic crisis, customers work longer hours and thus have less time to shop. As per Knox (2000, pp.33-45), they prefer to make purchases under one roof which is why Tesco was a great success. However, Sainsbury made attempts to do the same; it has not been able to add such variety as Tesco. Sainsbury also has an online store and about 150 of its stores have the facility (Sainsbury 2009). It also offers non food items to its customers via its online store however, the services offered are limited. It is also expanding in northern UK to gain new markets. It is also extending its offerings of clothes, toys, house ware and electronics considerably to gain edge in the market. This has been possible because of an injection of 436 m pound equity (Weir 2008). Sainsbury also offer delivery however, due to poor network and coordination it cannot match the delivery and timeliness of Tesco and Asda (The Grocer 2008). Today, customers are aware of their surroundings and competitors and firms don’t have room for mistakes and poor service. The customers have a high bargaining power and they quickly change brands. Thus with poor services, Sainsbury has lost several times against Tesco (Marketing week 2009). Sainsbury has been making initiatives to improve its packaging and becoming more organic. This is an important move to gain customers especially those who are sensitive to being environmentally friendly. It aims to replace 50% of its packaging with biodegradable material (The Grocer 2008). Such a move is aimed to gain more customers and improving the overall image of its private labeled products. Price The prices of Sainsbury are a little steeper than its competitors namely Asda and Tesco. This may be because Sainsbury claims to stock goods that are different and concentrates more on quality. Sainsbury has made efforts in recent years to reduce its prices but it has been predominantly at the high end of prices compared to Tesco (The independent 2004). By doing this, the firm diluted its core value of quality image and competed in the “lower price” war where the other giants were making gains. Sainsbury relies on promotional reduction of prices where as Tesco has adopted the ‘every day low price’ strategy (Marketing week 2009). Such a strategy is preferred over promotional strategies and customers tend to shop at a place where they get a better bargain everyday rather than wait for a promotion. However, according to a survey of the UK market, 31% of the shoppers said that they are tempted by pricing promotional offers and wait for the offers (The independent 2004). Moreover, consumers have become promotionally shrewd and know exactly which promotion is due in which store and plan their shopping accordingly. However, Weir (2008) explains that Sainsbury by comparison still has an image of catering to the richer bracket because of its higher prices and has not been able to expand its market considerably. It is primarily because of its pricing that Tesco has edged over the firm and continues to do so. Due to the economic downturn however, the price competition between the three giant firms has stiffened and Sainsbury is having a hard time coping up. The firm is primarily a food- based store whereas its competitors Tesco and Asda a basically non-food stores and get the greater share of their sales from such items. They make more profit from this sector and can compensate the price cuts in the food sector because of this. As per As per Capizzi (2005, pp. 72 – 80) firms like Sainsbury dealing mainly in food items cannot do that and that’s why they find it difficult to compete in the price wars. The food-focused firms have competition from both low end and the higher end. At the lower end are hard core discounters like Aldi and Netto. Marks and Spencer compete on quality at the upper end. Thus Sainsbury bears the brunt of the price wars from all directions. Promotion UK consumers are used to shopping on promotions. They seek for the best promotional deals and prefer spreading their shopping across different stores to maximize their benefits. Even high end consumers are doing this. Thus the competition has become even stiffer (The independent 2004). Sainsbury, following Tesco, is trying to break away from the buy one get one free offers and introducing buy one get one free later. Such offers may work better as previously, customers ended up taking home more food items than they needed in the buy one get one free offers. This created a lot of wastage. With the new promotion, the firm will help lessen such wastes and encourage the customer to come again to the store. Such promotions are also appreciated during times of recession where there is no room for wastage (Food and drink Europe.com 2003). Sainsbury also has Retail Cards competing with Tesco’s Club Cards. These give discounts to regular customer. As per Capizzi (2005, pp. 72 – 80) the downside of such cards is that the new consumers feel ignored as the sales staff clearly gives more preference to the card holders. Moreover, if a regular customer forgets his card, he doesn’t get any discounts and is treated indifferently (Marketing week 2009). Personal relations and loyalty to the brand doesn’t win him discounts. Sainsbury was the first to introduce Mobile discounting where the customer could registered by SMS and get discounting by producing his membership card. Such a technology enables the firm to keep a record of the purchasing habits and preferences of the consumers. However, Sainsbury has not been able to keep up with Tesco’s ability to integrate with its consumers using its Club Cards. As per Weir (2008), Tesco has a huge database of its consumers and has records of their shopping habits. It then sends customized promotions to them via its magazine and email which make the consumers feel special. Sainsbury has not been able to use its technology so well and thus has not been able to win their loyalty like Tesco. Moreover, the Sainsbury magazine for consumers is not customized which usually fails to attract attention of its target market. Promotions have to be designed keeping the competition in perspective (Food and drink Europe.com 2003). There has to be complete knowledge about the competitors and then design a promotion that is better than theirs to attract the customers who have become very knowledgeable about the promotional activities in the market. Different promotional mediums are used together to attract customers (Marketing week 2009). TV, billboards, radio and magazines are used in conjunction along with in store sales promotion, posters and wobblers etc. promotions at Sainsbury are frequently changed and are seasonal (Harmon & Graeff 2002, pp. 302 – 318). . Promotions have become more frequent in an attempt to increase sales in times of economic downturn (The independent 2004). Place Sainsbury has its stores located in strategic places where it is easily assessable for customers. The firm has also given the customers the option for online shopping so that they get convenience and can shop from any location. However, the service is not available from every outlet (Sainsbury 2009). Process The stores are located at convenient places for the customers. As Weir (2008) explains, the customers have the option to either purchase cash, or credit cards. They also avail discounts and special customer services when they present their Retail cards. Sainsbury also has magazines which contains information regarding their products. The customers have the facility to choose from the magazine and be informed about promotions at the store (Marketing week 2009). Moreover, the firm also has an online store and the customers can shop from a convenient location and have their goods delivered at their doorstep. Such convenience adds value for customers as it saves them time and effort. People There are a total of about 150,000 employees (Sainsbury 2009). The employees of Sainsbury receive regular training to deal with customers. Every new promotion requires a short training for the employees so that they may execute the promotion well. However, many employees in store are part time and thus they are not as dedicated. The employees lack the ability to interact with the customers as well as that of Tesco’s employees. However, as Weir (2008) argues, they are friendly and cooperative. The firm takes care of its employees by offering them bonuses and employee motivation schemes. Employees who perform well are rewarded and given chances of promotion. Sainsbury gives its employees a chance to attain qualification up to GCSE standard (Sainsbury 2009). This will help in improving the communication between the employees and the customers and facilitate brand loyalty. In the prevailing economic crisis, the firm can’t keep permanent employees who are underemployed in off-season times. As per Weir (2008) the firm will be creating 20,000 temporary jobs for Christmas. Such a hiring format will help the firm save on the costs which is needed today. Physical evidence At Sainsbury’s the environment is cheerful and welcoming. The color scheming is bright and welcoming. There are posters, banners and TV screens in some outlets which display the firm’s advertisements. As Weir (2008), explains, there is also personal selling in the stores where the employees inform customers of the products and services and promote new products etc. Recommendations Brand image The firm had previously built its image on the basis of quality. They claimed to have products that had better quality than the competitors for which they charged prices that were higher. But in a bad economic scenario, customers seek better bargains and are willing to save money and care less for quality. Thus Sainsbury lost out because of this approach and saw their competitors gaining. Thus they changed their strategy to price competitiveness. The customers got confused with the lowered product quality. The firm should revamp its image as a discounted store. This according to Weir (2008) is because it needs to shed the image the customers previously had of the firm. It is still perceived as a high-priced store even though some of the products may actually be cheaper than competitors. Pricing strategy. The firm should adopt a pricing strategy that is seasonal or changes frequently. This is because when the firm has a permanent low priced mage, the customers grow to accept that and lower prices are what they ‘expect’ from the firm. Thus by offering discounts and lower prices, the firm tends to attract the customers especially in that time frame still the promotion lasts. Build strong supplier relations The firm should look for suppliers that are cheaper and perhaps seek suppliers in developing countries as it would be less costly. This as Weir (2008) explains would help lower the prices of the products and enable the firm to compete in a competitive environment. Tesco has been able to offer its customer very low prices as it has a strong supplier relation which help him to achieve discounts and thus it can sell its products below market average. Integrated marketing communication Sainsbury should incorporate technology into its system as well as the competitors. They have the Retail Card however; they should also have the RFID technology which will enable them to trace consumer purchasing habits. This will help them in customized marketing thereby cutting costs of expensive advertising and marketing. The marketing will be focused and more effective. Such efficiency is essential in today’s times. Products should have variants and a wide range Sainsbury is known to have less variety as compared to others. This is because it has always concentrated on quality and thus the cost is more thereby the range of products that it offers its customers is less. Moreover, the firm should also concentrate on non food products which would be more profitable for the firm as they have more profit margins. Customized product line, niche marketing Sainsbury should find niches for itself instead of targeting the mass market. The mass market is already targeted by other giants and it is difficult to compete with them. However, if the firm targets niches like ethical groups, or certain age brackets then marketing to them will be easier. Sainsbury for example can target Asians that are concentrated in certain areas and stock goods that are culture related like their clothing or food items. In-store regional promotion can be conducted on their festive occasions etc. with RFID technology such marketing will be a lot easier. Innovative promotions The promotions should be in line with what the competition is doing. For this, the firm should be proactive and know what the competition is up to. Their moves should be predicted and the firm should offer promotions that are better than the competing firms. The promotions should be innovative unlike what Sainsbury is currently doing by copying the innovations of Tesco “buy one now get one later”. Promotions should be done in every media however; it should be in accordance to the target market’s media exposure which will curtail promotional costs. Hiring of employees, training The employees should be hired after a vigorous test and assessment. This is because the employees play a crucial role in helping build customer loyalty. Thus the employees have to be serious about their work and their dedication should be reflected when they are working. This can only be there if they are serious about their work and don’t consider their jobs as a part time fun venture. Physical evidence The firm should also improve the physical evidence within the stores. All stores should have TV screens for advertisements, proper guidance for customers should be provided to find what they need and the packaging should be more organic to represent the environmentally friendly approach of the firm. Personal reflection Sainsbury has lost its market share to its competitors Tesco and Asda. The firm’s brand image was that of quality products however with the economic downturn the customers have changed their shopping habits and preferences. Sainsbury was not quick to pick up the changing needs of the consumers as the consumer became more price conscious and smart shoppers. The competitors on the other hand started to be proactive and even introduced integrated marketing which made the consumers more loyal. Sainsbury on the other hand relied more on copying the innovative marketing tactics and promotions of Tesco and thus couldn’t get ahead of the firm. In today’s time, the customers have become computer savvy and are up to date about the promotions and discount offers by all superstores thus the marketing has to be swift and continuous which Sainsbury is not doing. The consumers are seeking for price cuts and for that they are willing to spread their shopping through different stores instead of just one. Thus the supermarkets need to be more vigilant and closer to Sainsbury is the consumers to understand their changing needs. With the pace Sainsbury is going, the prospects of the firm don’t look bright. It should plan expansion in other European countries and developing countries as the current market is saturated. It also has to improve its marketing efforts to gain customer loyalty. Moreover the firm needs to be innovative in its marketing to attract more customers in an economic downtrend. The firm has already gone down from first to their position and chances are that it will lower further if the efforts remain the same. References Food and drink Europe.com 2003, Flexible pricing strategy keeps shoppers happy Accessed on 10th Dec 2009, available at: http://www.foodanddrinkeurope.com/Retail/Flexible-pricing-strategy-keeps-shoppers-happy The independent 2004, Food retail players set for all-out price war. Accessed on 10th Dec 2009, available at: http://www.independent.co.uk/money/spend-save/food-retail-players-set-for-allout-price-war-567717.html The Grocer 2008, Light in the Tunnel, Accessed on 10th Dec 2009, available at: http://www.thegrocer.co.uk/articles.aspx?page=articles&ID=126106 Marketing week 2009, Sainsbury’s joins Tesco in “buy one, get one later” deals, Accessed on 9th Dec 2009, available at http://brandstrategy.wordpress.com/2009/11/17/sainsburys-joins-tesco-in-buy-one-get-one-later-deals/ Weir, L 2008, Sainsburys to offer all employees qualifications, Accessed on 9th Dec 2009, available at, http://www.drapersonline.com/news/sainsburys-to-offer-all-employees-qualifications/1917025.article supermarket.co.uk 2009, Sainsbury’s To Recruit 20000 Staff For Xmas Trading, Accessed on 9th Dec 2009, available at: http://www.supermarket.co.uk/news/2009/Aug/sainsburys-to-recruit-20000-staff-for-xmas-trading.html Capizzi, R2005, Loyalty trends for the twenty-first century, Journal of Consumer Marketing, Vol. 22 , no. 2, pp. 72 - 80 Knox, S 2000, Store loyalty: its impact on retail revenue. An empirical study of purchasing behavior in the UK Journal of Retailing and Consumer Services Vol. 7, no. 1, pp.33-45 Harmon, S & Graeff, T 2002, Collecting and using personal data: consumers’ awareness and concerns, Journal Of Consumer Marketing, Vol. 19, no. 4, pp. 302 – 318. Read More