Sainsbury Style - Service Innovation at the Multinational Grocery Retailer - Essay Example

? Sainsbury Style: A Service Innovation at the Multinational Grocery Retailer BY YOU YOUR SCHOOL INFO HERE HERE TABLE OF CONTENTS Executive Summary 1.0 Introduction.......................................................................................................... . 2.0 Methodology.......................................................................................................... 3.0 Situation and Market Analyses................................................................................ 3.1 PEST and SWOT Analyses........................................................................ 4.0 The Sainsbury Style Service Model......................................................................... 5.0 Entry Strategy, Targeting Strategies and Critical Dimensions of Marketing Mix. 6.0 Marketing Objectives............................................................................................... 7.0 Conclusion References EXECUTIVE SUMMARY Sainsbury, a renowned UK grocery retailer, is currently seeking diversification strategies to sustain its revenue growth in a highly competitive environment where competitive rivalry often dictates business strategy direction. Sainsbury will be expanding into personal grooming services targeted primarily at young male adult consumers between the ages of 18 and 34. This service model will be positioning under premiumisation strategies justified by years of brand loyalty achieved by the business through consistent and socially responsible marketing efforts. To achieve objectives of improving revenue by 18 percent, the new service, Sainsbury Style, must align the most critical dimension of business strategy, the promotion function in the marketing mix, with key lifestyle and attitudinal factors for this target segment. Sainsbury Style 1.0 Introduction Sainsbury’s is one of the largest grocery retailers in the United Kingdom, maintaining approximately a 16 percent market share over such competitors as Morrison’s and Tesco. In recent years, in this oligopolistic market structure, major competition to Sainsbury has begun diversification strategies in order to gain a market share and improve its revenue position through new market engagement. An oligopoly is a market environment with very few large competitors and where competitive rivalry is important external threats (Boyes and Melvin, 2005). In order to compete successfully, Sainsbury must begin providing supplementary services unrelated to grocery procurement with a private label brand focus. Tesco, its largest competitor, witnessed a 100 percent growth in private label brands from 1982 to 2004 (Coriolis Research, 2004). To effectively diversify, Sainsbury will be launching the Sainsbury Style service, a hair styling, sculpting and consultation service targeted primarily at young male consumers, a private brand benchmarking existing promotional success for private label food promotions. 2.0 Methodology Examination of trade-related publications, corporate annual reports, and research literature on psychographic segmentation and targeting was conducted to gain a richer perspective on the opportunities of diversification for Sainsbury. In order to successfully launch this new service concept at the organisation, trends in consumer purchasing of personal beauty products and services were necessary to predict revenue growth and demand in the desired male target market group. 3.0 Situation and Market Analyses Sainsbury has had difficulty in gaining a market share over major competition such as Tesco as it is becoming commonplace for these major grocery competitors to select diversification strategies to maximise revenue growth in a rapidly maturing industry. Sainsbury has managed, through years of effective integrated marketing strategies, to establish a well-recognised and favoured brand in diverse market segments. The business must capitalise on its brand personality to realise an effective launch of Sainsbury Style. 3.1 PEST and SWOT Analyses Research did not uncover any imperative political factors impacting business. The business operates in a market environment in the UK that is well-supported by government and where there is considerable regulatory autonomy. The economic conditions domestically have been, moderately, hindered by lingering effects of the 2008/2009 recession; however, there is evidence that the UK economy is recovering, especially in the services sector, representing a viable market opportunity (Forex, 2012; Reuters, 2011). Furthermore, the Consumer Price Index has remained stable in the UK since October 2013, representing more stability and no further evidence that inflation is currently outpacing individual or household consumer income growth (ONS, 2013). Growth in the service sector is a foundational motivation for launching Sainsbury Style, a personal grooming and beauty enhancement service with a moderate pricing structure. Social conditions are highly favourable for launching the new service concept. In 1998, 42 billion USD was spent in hair salons domestically and internationally (Hairstyles-7.com, 2004). Men, the most desired target market for Sainsbury Style, are becoming more sensitive to the importance of personal beauty and grooming for advancing social and professional standing in society. In 2010, the multinational conglomerate L’Oreal witnessed a 30 percent increase in male beauty product spending (CBS Chicago, 2011). Furthermore, a recent survey targeted at younger adult markets, with participants between the ages of 25 and 34, indicated that a primary motivational need is self-expansion in which personal identity is often found through attraction to premium products (Executive Digest, 2008). Muniz and O’Guinn (2001) describe the importance of brands that are able to extend perceptions of enhancing consumer self-expansion to achieve brand attachment and loyalty. Therefore, Sainsbury Style represents a viable market opportunity as it provides grounds for personal growth through beauty enhancement, a form of self-expansion that can, theoretically, improve the social and professional position. These elements must be included in promotional development to gain market attention, using psychographic methodology, as linked with lifestyle, attitude and social trends in this industry. The technological market is favourable for launch of this product, with adequate supporting technologies in this low-investment start-up venture. Research uncovered no issues associated with technology that would hinder business growth or impact service delivery. This business start-up requires basic accounting and inventory management software and other supporting payment/ERP systems easily procured through domestic distribution channels online and physically. SWOT Analysis for Sainsbury Style Strengths Considerable brand loyalty pre-existing Much executive-level and operational experience in private label brand promotions Quality credit rating and cash position for new service development Weaknesses No experience in recruiting and retaining personal grooming talent No established HR model for a service concept of this variety Intensive small and large competition throughout the UK – a saturated market Opportunities Social media to engage target consumers in lifestyle activities Strategic alliance development with industry organisations (i.e. L’Oreal, Clinique). Guerrilla marketing as an innovative, interactive marketing concept to engage consumers in their real-life social and professional environments. Threats Competitive cost structures and discounting practices Low start-up costs pose considerable risks of new entrants attempting to emulate Sainsbury’s service model Further inflation in the UK (the country recently lost its AAA rating by Moody’s) impacting consumer disposable income Increases in the unemployment rate domestically. 4.0 The Sainsbury Style Service Model Sainsbury Style will provide affordable and premium-priced hairstyling and grooming services supplemented with a consulting model for male and female youth consumers between 18 and 34 years of age. Brand loyalty, when established, allows for premium pricing models and improves word-of-mouth (Chaudhuri and Holbrook, 2001). Sainsbury has achieved significant revenue targets for its Tu clothing line, a stand-alone brand targeted at the same female and male youth markets. Therefore, Sainsbury Style will construct a premium quality positioning model whereby competence, sophistication, and sincerity will justify premiumisation strategies, necessary elements to achieve a positive brand personality (Aaker, 1997). Services include the ?18 Sainsbury Cut, the ?23 Expert Cut, and the full-service “Here Comes the Groom” package at ?50, including cut, style, highlights and grooming consulting service. 5.0 Entry Strategy, Targeting Strategies and Critical Dimensions of Marketing Mix The most cost effective method of launching Sainsbury Style is to develop in-store services in existing Sainsbury stores, thus negating the initial capital expenditures and long-term financing required for new facility development. Sainsbury will also offer franchising opportunities for appropriate entrepreneurs with practical experience in male (and female) grooming and those maintaining adequate investment resources to become part of the Sainsbury family. Sainsbury excels in promoting its internal focus on corporate social responsibility. The foremost of these is the company’s dedicated and unified organisational culture focused on service provision excellence (Sainsbury, 2011). Licensing will allow Sainsbury to maintain unilateral control over advertising and merchandising in-store whilst also maintaining little governance over individual Sainsbury Style salons. Targeting will rely on existing knowledge of the desired 18 to 34 year old male target audience, founded on established data mining that occurs with the current grocery loyalty program and individual sign-up for a variety of services related to the grocery product lines. The company will also conduct focus groups with the 18 to 34 year old target segment, moderated by knowledge experts in psychology, to gain practical real-time knowledge of the lifestyles and consumer preferences of this target group. Direct mailing literature will be sent to loyal consumer segments fitting this demographic profile offering a one-time incentive discount for utilising Sainsbury Style. A low-cost style guide and service catalogue will also be published and distributed to all existing Sainsbury grocery stores to gain further market attention. Sainsbury has maintained a brand personality that focuses on responsible business as well as sophisticated service development that has been sustained for nearly a decade. Promotion is the most critical element of the marketing plan in which all advertising and associated integrated marketing communications must be aligned with consumer lifestyle, such as using local celebrity endorsers that share common values and lifestyles of the target market. In an environment where replication of Sainsbury service models can be relatively easily replicated by competition, the only non-replicable asset to avoid competitive risks is the brand identity. 6.0 Marketing Objectives Improving service-based revenues by 18 percent at year’s end 2013. Establishing service brand recognition in non-target consumer segments by December 2013. Issuing a minimum of 10 franchise agreements by November 2013. 7.0 Conclusion If Sainsbury follows the premiumisation strategy recommended in this marketing plan, the company will be aligned with existing perceptions of sophistication and social awareness that have driven Sainsbury successes whilst also gaining new market attention. Relevant promotions should be geared with content and actors with characteristics found in the male youth target audience, and remain consistent with these messages associated with quality positioning. References Aaker, D.A. (1996). Measuring brand equity across products and markets, California Management Review, 38(Spring), pp.102-120. Boyes, W. and Melvin, M. (2005). Economics, 5th ed. Cengage Learning. CBS Chicago. (2011). Men’s grooming industry growing. [online] Available at: http://chicago.cbslocal.com/2011/01/03/mens-grooming-industry-growing/ (accessed 18 February 2013). Chaudhuri, A. and Holbrook, M. (2001). The chain of effects from brand trust and brand affect to brand performance: the role of brand loyalty, Journal of Marketing, 65(2), pp.81-92. Coriolis Research. (2004). Tesco: A Case Study in Supermarket Excellence. [online] Available at:http://www.coriolisresearch.com/pdfs/coriolis_tesco_study_in_excellence.pdf (accessed 16 February 2013). Executive Digest. (2008). How to market to the overlooked 25 to 34 year old age segments. [online] Available at: http://www.marketing-execs.com/news/11-08/2.asp (accessed 18 February 2013). Forex. (2012). Is the UK economy recovering? ActionForex.com. [online] Available at: http://www.actionforex.com/analysis/daily-forex-fundamentals/is-the-uk-economy-recovering%3f--20120404162844/ (accessed 16 February 2013). Hairstyles-7.com. (2004). Statistics from the hair industry. [online] Available at: http://www.hairstyles-7.com/hairarticles/hair_industry_statistics.php (accessed 17 February 2013). ONS. (2013). Consumer Price Indices, January 2013, Office for National Statistics. [online] Available at: http://www.reuters.com/article/2011/06/15/britain-osborne-economy-idUSLAK00280720110615 (accessed 17 February 2013). Reuters. (2011). UK’s Osbourne says economy recovering, still risks. [online] Available at: http://www.reuters.com/article/2011/06/15/britain-osborne-economy-idUSLAK00280720110615 (accessed 17 February 2013). Sainsbury. (2011). Annual Report and Financial Statements 2011. [online] Available at: http://www.j-sainsbury.co.uk/media/171813/ar2011_report.pdf (accessed 17 February 2013). Read More