Marketing Strategies and Tactics of Simply Food - Case Study Example

 Analysis of marketing strategies of Simply Food Analysis of marketing strategies of Simply Food Business Summary Marks & Spencer has designed its Simply Foods brand as a supplementary business division with no clear connection between the M&S brand. Where previously the company relied on its strong, long-standing brand reputation as a selling point for new business innovation (Rose, 2010), now the Simply Foods concept is franchised or wholly-owned without the M&S marketing legacy attached. This new focus has come in the face of new senior leadership that is determined to make Simply Foods a success through expansion and recognition of new market opportunities. This concept creates a need for new marketing tactics, including positioning among other foods leaders, as a stand-alone foods provider. This report identifies the external market and consumer behaviour related to Simply Foods to determine how best to position and differentiate Simply Foods from competition. Target market and needs focus The UK consumer is growing accustomed to convenience that is being provided by Marks & Spencer, Morrison’s, and Asda. As part of their business models, new dimensions of service include pre-ordering and in some cases curbside pick-up for grocery foods. This new focus on convenience is driving competitive behaviours and changing the dimensions of buyer behaviour in multiple market groups. M&S and Simply Foods are using click and collect services where non-food items can be procured online for pickup in foods environments (Felsted 2009). This new model includes 11 Simply Food stores in the UK, focusing on the new convenience-oriented trends. In many ways, this is positioning the store on a convenience model and giving the new Simply Foods brand more national exposure. The specific target markets that Simply Foods is identifying with are unclear, which could be due to its lack of market presence and uncertainty that exists in pre-prepared food products. The Simply Foods concept is witnessed in stand-alone stores, special events locations such as raceways, and the brand is even considering expansion into hospitals for food service (igd.com 2009). The company is looking for new market opportunities wherever there is reasonable belief that pre-packaged foods will be on the consumer agenda. In the UK market, customers value pre-packaged foods, something witnessed in the success of many frozen foods product in this market environment (Baker 2009). Though Simply Foods provides fresh, pre-made food options in most stores, it does fit the generic mass market trends of avoidance of self-prepared foods and finding quality and value in these selections. These are attributes in key sales markets that do not necessarily exist in North America and can be attributed to success in sourcing, variety and innovation in product offerings (Stern 2007). What Simply Foods is doing is capitalizing on the frozen foods success and is, in many ways, piloting the concept in new locations where competition poses minimal risk. In North America, restaurant competition is immense, therefore chilled prepared foods do not necessarily fit the lifestyle and demand of buyer groups of all demographics. In many ways, identification of key target market audiences is still mass-focused and based on competitive behaviours as well as piloted sales results. It is due to the uncertainty of a relatively new brand name and the lack of market knowledge that currently exists. Consumers are successfully adopting the Simply Foods brand in the UK, as the company has witnessed 23 percent growth in foods as well as a doubling of Simply Foods locations (Braithwaite 2008). This is why target buyers should be classified by geographic and competitive identification since Simply Foods is present in takeaway counters, cafes, food halls and deli bars (Finch 2006). The company is targeting locations for new Simply Foods development based on the customers’ relationship to location and their likelihood of selecting the brand over competitive restaurants and delis. This gives the brand more opportunities to diversify, learn about customer segment preferences and foods needs, and then develop a system of integrated communications that will reinforce Simply Foods on convenience and quality. Currently, though the company is experiencing significant sales increases, it is dependent on trialling and the assumption that pre-packaged foods needs will be sustainable over the long-term. This piloting activity by Marks & Spencer is the best way to classify customer groups without complicated psychographics or demographic concerns. M&S is known to have a pricey image as carrying “posh and expensive foods and prepared dishes” (Bokaie 2008, p.4). The Marks & Spencer brand has been put into the position of defending its pricing based on consumer beliefs and the value contribution given to consumers by Waitrose, a large competitor. Separating this brand from M&S until misconceptions regarding price and value are removed from customers through promotional activity avoids opportunities for price sensitivity to enter into the Simply Foods concept stores. If the business relied on its key target groups that have brought success for fashion and home purchases, pricing would become a considerable concern for Simply Foods. The new leadership has developed a trial-and-error system with close monitoring and controls in a pilot environment to determine which stores will be high performers and which will not contribute successfully to the profit model. M&S recently experienced profit drops of 37.5 percent brand-wide (Marketing Week 2009), therefore mass targeting in ideal social and recreational environments ensures more success. The difficulties associated with regaining consumer confidence in the Marks & Spencer brand creates a situation, likely for the first time, where the company must rely on new innovation with a distinct image on the market in order to gain success and avoid price misconceptions. As a wholly new brand with a focus on 25 percent product line innovation yearly (annualreport.marksandspencer.com 2010), none of these (or other) consumer misconceptions are present and the foods do not have to be linked with M&S grocery or brand name. PEST analysis of Simply Foods Political – The concept stores in the UK bringing measurable sales success face no problems with new market entry based on the progressive regulatory environment that supports new business development in the UK. Research did not identify any Simply Foods stores in global markets that reported trade, supply or consumer-related problems imposed by the political environment. M&S is familiar and adaptable to regionalized tax structures and business operations regulations in health and foods safety, therefore using a reliable HR and compliance focus used with Marks & Spencer retail outlets. Until Simply Foods expands beyond the UK into multiple international markets, risks associated with the concept are marginalized. Economic – Consumer discretionary income is affected in most market groups due to challenges with the UK economy and higher jobless rates. This is a contributing factor to Marks & Spencer’s nearly 40 percent drops in profit during the 2009 fiscal year. The tight economy creates a new need in consumers to find value-added products with lower costs that fit their lifestyle needs (Casatelli 2008). The value found in frozen grocery products due to these economic concerns drives a value demand that did not exist previously. Marks & Spencer has relied heavily on promotional materials in order to gain key sales market attention. Thirty percent of their merchandise is sold on promotion (annualreport.marksandspencer.com). This has led to recent cost-cutting efforts on behalf of M&S in areas of marketing. These costs were reduced by 8.6 percent in 2009. The economic environment and the key value drivers for target consumers have new opportunities to extend this value perception to customers and satisfy their need for value-added product purchases. Unlike many elements of M&S that might be considered stale or pricey to buyer groups familiar with the brand, the innovative quality of Simply Foods and its brand distinction is value-focused without concentrated promotional costs. The new brand added 1700 new product lines to its menu of fresh foods in 2010, thus never allowing value and quality issues to become major buying concerns with a price-conscious foods buyer. Social – Growth in confectionary and bakery markets categorizes the new consumer attitude in a time where budgets are tightly-controlled. Self-indulgent consumer trends are apparent in the UK market again (annualreport.marksandspencer.com). The driver for this current social trend is uncertain, however M&S makes note of this change that is making internal changes to its business model as a means to capitalize on current choice preferences. This could be a human behavioural by-product of several years of self-control and budgeting in terms of discretionary spending or is associated with the new retro buying behaviours of key market groups (annualreport.marksandspencer.com). In any event, Simply Foods operates in key market environments that support confectionary product purchases and would be favoured in coffee establishments or other takeaway counters. Social trends related to foods purchases are not a major risk for Simply Foods as the business is able to adjust and diversify the menu to include multiple varieties of products. If social trends shift toward leaner and more nutritious meals, adjustments can be made accordingly to fit temporary buyer needs. Technological – The Internet and its broad availability in multiple UK market segments is a key attribute for improving Simply Foods visibility. As mentioned previously, click and collect services between M&S and its distinct business industry divisions drive a new level of convenience that is preferred by many demographics. Improvements in click and collect services is an outcome created by social trends and lifestyle, however also a competitive tool as other supermarkets and food competitors look for ways to seize market share during an economic period of modest recession. There are no other technological issues associated with service and product delivery worth consideration since M&S systems support Simply Foods along with the resources to procure new technologies, in a highly industrialized market environment, should the need arise. The most important factor in the external environment is the ever-changing value systems and price sensitivity found in key market groups. “One of the most effective things you can do is participate in established events…you don’t need big duges or expensive promotions to get corporate publicity” (Bluestein, Buchanan, Chafkin, Del Rey & Joyner 2009, p.75). Simply Foods works in key environments without concentrated promotional need as well as the ability to get connected with events, such as raceway scenarios or other localized functions where Simply Foods has been established. The goal is to remove the influence of M&S brand and create a wholly-different foods service appeal that considers restaurants its main customer rather than foods producers in the grocery environment. There are experts who argue that Simply Foods is cannibalising its own sales in larger food halls (Braithwaite, Rigby & Thomas 2009). However, this will likely erode over time as they become familiar with their key target groups and streamline product and location that meets with value-added buying behaviours and the ability to close under-performing locations. Marketing mix change recommendations Unlike the M&S brand that relies on rich history and brand recognition with key buyer groups, product is the key selling point for Simply Foods; it is the nature of operations and sales strategies. However, competition in grocery and foods services have similar innovative models and the ability to upgrade or improve menu offerings. If Simply Foods is going to position based on product and quality, there should be a key differentiated feature among competition. One of the largest problems for Simply Foods is the current large price increases found in the supply chain. Suppliers are pushing up prices at a time where pricing is a considerable concern for the business due to cost increases in dairy, wheat and fuel (Braithwaite 2008). Over time, this will make pricing issues more transparent to customers unless economic conditions improve and discretionary income is more available to mass market buyers. There should be much less price transparency in marketing communications with innovation and convenience as target selling points. Those customers who are aware of the brand linkage with M&S already hold misconceptions about poshier pricing over competition. Changes to the marketing mix in terms of product include identifying lower-cost suppliers or making across the board pricing increases that are modest on all products. Product is the main selling point and it is reflected on consumer perception of taste, however is being victimized by the supply environment at a time that is not convenient for M&S as a whole. As identified, businesses do not necessarily have to rely on intensive promotion where 30 percent of products are sold through this activity. Simply Foods has expanded into locations where demand for pre-made, chilled foods is available and sales will occur generically, such as in hospitals. In this environment, sales losses on external or stand alone Simply Foods stores can be recovered with modest price increases in these environments where there is much less buyer control or leverage. Pricing and promotion are major issues for Simply Foods both in terms of budget allowance and with consumer attitudes about M&S pricing structure. It is recommended that Simply Foods identify with geographical or event-related activities occurring in their diverse operating environments. Raceways have considerable opportunities for partnered marketing or sponsorships whilst more social, regionalized consumer behaviours can be exploited in social environments. Simply Foods, in some cases, is acting as a full-service restaurant, thus a new focus on promotion is necessary without necessarily being concerned over pricing problems. What Simply Foods requires is more visibility throughout the UK. There are fundamental realities associated with word-of-mouth advertising especially when it comes to pre-made food varieties. Simply Foods’ largest concern in its expansion strategy is how to promote effectively at a time where internal cost-cutting is necessary with large-scale drops in sales volume. Gaining localized sponsorship activity for Simply Foods promotions might be more easily accomplished without the aggressive brand identity of M&S among local business leaders. It is further recommended that Simply Foods does not rely completely on foods innovations when market characteristics are changing. Last year it was a hoarding mentality due to market uncertainty, and now it is more self-involved with more push toward personal spending at the needs level. Differentiation through convenience and quality are effective when market characteristics are predictable. It is likely Simply Foods will understand its key target markets after more experience and growth and through ongoing research programmes to identify key attitudes in buyer markets. Conclusion Simply Foods is taking advantage of sales growth through knowledgeable location set-up and geographic convenience. The business understands customer needs that fit the business model in relation to quality, price and convenience trends that are present in multiple demographic groups. The business offers a solid product packed with innovative options and has found success by separating Simply Foods from the Marks & Spencer brand. The political environment is stable and systems exist whereby customers are finding their value-added needs filled. The main problem is avoiding price comparisons in already price-sensitive markets that are linked with M&S misconceptions. In terms of the marketing mix and understanding how to position, Simply Foods is geared for success and the ability to expand effectively and satisfy current buyer needs. References Felsted, A. (2009). M&S in further push online, Financial Times. October 12, p.1. Annualreport.marksandspencer.com. (2010). [internet] Your M&S Annual report and financial statements 2010. [accessed 20.11.2010] [available at http://annualreport.marksandspencer.com/downloads/M&S_AR10.pdf] Baker, R. (2009). Brand sector report: love in a cold climate, In-Store London. January, p.29. Bluestein, A., Buchanan, L., Chafkin, M., Del Rey, J. & Joyner, A. (2009). The ultimate business tune-up for times like these, INC. 31, 1, p.75. Bokaie, J. (2008). A thorn in the side of negativity, Marketing London. July 23, p.4. Braithwaite, T. (2008). M&S eyes better food supplier terms, Financial Times London. February 6, p.22. Braithwaite, T., Rigby, E. & Thomas, D. (2009). M&S supply chain and cannibalized sales in the company’s bigger food halls, Financial Times. London. January 7, p.17. Marketing Week. (2009). M&S should return to core values after profits tumble, May 21, p.6. Casatelli, L.M. (2008). Adding value, Frozen Food Age. 57, 3, pp.18-21. Finch, J. (2006). [internet] Simply Food to triple in size with restaurant plan [accessed 20.11.2010] [available at www.guardian.co.uk/business/2006/nov/08/marksspencer.supermarkets] Igd.com. (2009). [internet] M&S Simply Foods plans hospital outlets, IGD Retail Analysis. [accessed 19.11.2010] [available at http://www.igd.com/analysis/hub.aspx?id=23&tid=3&nid=6335&app=10] Rose, A. (2010). M&S brand value, Financial Times. November 10, p.18. Stern, N. (2007). Convenience reborn, Chain Store Age. 83, 5, pp.34-39. Read More