The Superior Brand Strength of Sainsburys - Case Study Example

The superior brand strength of Sainsbury’s BY YOU YOUR SCHOOL INFO HERE HERE The superior brand strength of Sainsbury’s Introduction J Sainsbury Plc is the third-largest supermarket chain in the United Kingdom, sustaining a current market share volume of 15.5 percent over major competitors such as Tesco, Asda, and Morrison’s (Thompson 2010). Tesco, the largest competitor, holds over 28 percent of market share in this industry, sustained by considerable brand loyalty in important target markets and a very diverse portfolio of brands and business concepts that contribute to higher revenue growth. Sainsbury’s ability to sustain a 15.5 percent market share in a dynamic and highly competitive market environment is a major accomplishment considering the very high costs of operations needed to sustain over 1000 hypermarkets, convenience stores and supermarkets requiring facility management and development capital allocation. With such high operating costs, lower-cost brand-building exercises become a critical component to establishing a name and reputation that is linked with quality and value. Sainsbury is able to maintain its third place market share in this industry due to the ability of the business to create positive brand attitude. Sainsbury uses its influential and vigorous focus on diversification of the business model as well as corporate social responsibility in order to gain market interest and long-term loyalty to the brand. The corporate values of Sainsbury, combined with effective promotion, continue to bring this brand top performance in this dynamic industry. This report will highlight all of the factors associated with brand development that bring Sainsbury market success with supplementary recommendations for improvement in brand conception. 2. The brand dimensions of Sainsbury Sainsbury maintains a revolutionary corporate governance model in which brand-building is a consistent theme in deliberations and strategic analyses of the Board of Directors. Other than traditional corporate governance responsibilities common in this industry among large enterprises, Sainsbury has developed a series of sub-committees that contribute to governance knowledge and focus. In 2001, Sainsbury created the Brand Governance Steering Group and the Great Place to Work Steering Group, two inter-dependent research and strategy teams chaired by board members that contribute to the branding model and corporate social responsibility model that brings Sainsbury positive market attention (Sainsbury 2011). These Steering Groups add a new dimension of focus on the governance model, whereby executives and mid-tier managers are involved in establishing policies, models and procedures to enhance brand attitude and personality in important markets. The knowledge and experience brought to the governance model by brand and CSR-related steering groups continues to provide Sainsbury with significant competitive advantages. All branding activities, then, rest on the foundation of revolutionary governance systems. According to the Board of Directors at the organisation, “We are guided by a ‘materiality’ process which allows us to focus attention on areas of greatest impact and importance. We chart all related sustainability issues against the level of potential concern and how much the issue could affect our business. (Sainsbury 2011, p.15). The corporate governance team is much more directly involved in brand-related activities critical to market competitiveness and reputation on the consumer markets. Sainsbury understands that the majority of revenues and long-term loyalty needed to sustain market share is involved with promoting internal corporate values and then applying these in a way that is transparent to the consumer in product offerings, CSR activities, and service delivery systems. Rather than allowing managers at the organisation to develop appropriate policies and systems associated with marketing and operations, they are determined by knowledge experts with considerable commercial and business experience. Therefore, it should be identified that one significant brand-related strength of Sainsbury is the methodology of governance that considers brand attitude and personality as critical success factors in this industry. Sainsbury is known in important revenue-building markets for its focus on corporate social responsibility, a comparative advantage not found in industry competition. One method by which the organisation is able to provide positive brand sentiment is by providing healthy eating options and a variety of health promotions to improve consumer lifestyle (Sainsbury 2011). “Sainsbury’s corporate values underpin its goal to provide healthy, safe, fresh and tasty food at fair prices” (Sainsbury 2011, p.4). It is not just the procurement model for health food provision that matters, it is how the company chooses to effectively promote these socially-based health improvement initiatives. In 2011, Sainsbury rolled out its promotional campaigns, “Feed your family for £50” and “Try Team”, as two strategies to illustrate Sainsbury’s focus on healthy consumption and lifestyle improvement. These integrated campaigns included a blend of free cholesterol testing in-store and a variety of informational pamphlets offering health recipes and in-store sampling conducted by food knowledgeable staff members (Sainsbury 2011). Nutrition education as part of corporate social responsibility continues to reinforce the company’s ongoing focus on improving its relationship with consumers, making the brand stand out against many competitors that position on price or convenience in their business models. Sainsbury has also effectively utilised the Internet as a forum for improving brand visibility and also to promote many more of its CSR objectives. In 2011, Sainsbury’s Diets was launched, an online campaign teaching healthy food preparation, offering realistic solutions that provide effective and health-conscious dieting practices (Sainsbury 2011). This takes the in-store experience into an environment that is much more convenient for the consumer, allowing them to maintain positive brand relationships with Sainsbury even when not shopping at its many hypermarkets. Marketing theory indicates that when a brand provides consumers with opportunities for self-expansion, it is more likely they will develop attachments and sustain long-term brand loyalty (Aron, Aron and Smollan 1992; Muniz and O’Guinn 2001). Sainsbury seems to recognise these factors associated with building brand loyalty, using the Internet as a viable forum for consumer self-expansion by providing dieting options and methods of sustaining family eating habits that can be enhanced by Sainsbury’s procurement strategies. These are critical dynamics of success at the organisation that continue to diversify the company’s brand personality. Sainsbury has also received many reputable and important awards for exceeding industry norms in many different areas. The business was awarded Seafood Retailer of the Year in 2010 for the company’s dedication to responsible sourcing as part of CSR objectives (Sainsbury 2011). Greenpeace has also acknowledged Sainsbury for its dedication to using MSC-certified salmon in procurement, using line-caught yellow tuna, and other seafood meeting the rigid Freedom Food Standard established by Scotland (Sainsbury 2011). All of these accomplishment that continue to reinforce the company’s commitment to corporate social responsibility give the business an edge in sustainability practices among competition. Sainsbury also utilises appropriate press releases and other multi-media sources to illustrate these awards and show consumers that the organisation is ever-flexible in assisting consumers in self-expansion and lifestyle improvements. Sourcing from responsible agents within the dynamic and diverse supply chain is a significant promotional opportunity in which Sainsbury does not hesitate to capitalise upon. Industry-generated awards for sustainability and responsible business practices continue to provide a positive brand reputation in this highly competitive market environment. Furthermore, the method by which Sainsbury expands its operations is another success factor related to the brand strength of the business. Sainsbury prefers an acquisition strategy when attempting to improve its market presence operationally. In 2008, the organisation purchased two different Curley’s supermarkets in Dungannon and Belfast (BBC News 2008). Curley’s had significant brand influence in their respective markets, therefore Sainsbury was able to retain existing loyal customers without significant expenditures in advertising and other appropriate promotions to gain market attention. Instead, Sainsbury relied on its own trusted and credible brand reputation by promoting its interest in Curley’s, illustrating to loyal customers that Sainsbury would continue to provide excellence post-acquisition. Why, though, are acquisitions to be considered a brand-related success factor? Sainsbury makes a variety of pledges when acquiring new businesses to expand the Sainsbury name, such as promising to retain staff from the recently acquired firm and then effectively promoting these socially responsible measures. For a business that relies heavily on brand reputation and using CSR objectives to differentiate from higher resource competition, the business successfully capitalises on productive use of press releases and news medium promotions. Reinforcing values and then illustrating through promotion how these values are applied throughout the dynamic business model only serves to strengthen brand recall and aid in gaining brand loyalty from markets who legitimately care about socially responsible business practices and sustainability. Also related to corporate social responsibility and brand reputation is the level of sponsorship that Sainsbury seeks out to gain more market visibility. In 2010, Sainsbury pledged considerable capital and labour support for the Paralympics organisation. In this agreement, Sainsbury will carry branded paralympic merchandise and promote the event in over 850 stores (Paralympic.org 2012). Representatives of Sainsbury will, also, be directly involved in the torch relay system, thus providing even more visibility for the corporate logo and its associated promotional literature provided in-store and during the Paralympic events. Though this particular sponsorship is only one of many different CSR-related activities occurring at Sainsbury, the business leadership recognises that any opportunity to extol its corporate values will continue to give the brand a better market reputation and gain more consumer patronage in-store. So, it cannot be stressed enough that Sainsbury is a market leader due to its strong brand reputation as it relates to corporate social responsibility. However, there are even more areas of brand-building that continue to give Sainsbury market advantages. Visual merchandising as a strategic tool is one fundamental aspect of what continues to give Sainsbury’s a positive market reputation in important consumer markets. Because Sainsbury continues to promote its objectives in sustainable and responsible procurement, product as a focus of the marketing mix becomes a strategic opportunity. Sainsbury believes that physical evidence, as well, is a positive long-term strategy for revenue growth and brand sustainability (Prifysgol Cymru University 2009). Product visibility, such as colour coordination in produce presentation, are fundamental factors for improving customer sentiment about Sainsbury’s brand relevance to their lifestyles and perceptions of acceptable quality. Sainsbury devotes considerable capital and labour resources into structuring a facilities layout that has psychological outcomes on consumer markets whilst also reinforcing the positive consequences of fresh and health product procurement. Unlike other companies in this industry that are more concerned about pricing imperatives to position the company, Sainsbury uses multiple positioning tactics to reach several key markets each with differing values and needs from supermarket and hypermarket shopping. In essence, Sainsbury is more diversified in how the marketing mix is handled and promoted than other competition, giving them a brand advantage in this dynamic market. What else provides Sainsbury with brand advantages? Sainsbury is beginning to diversify its product offerings, expanding from simply food services to other consumer-based merchandising imperatives. Sainsbury recently rolled out its Tu clothing line, stylish and light outwear garments targeted largely at youthful, adult female markets (Sainsbury 2011). The company developed a 40 second advertising spot to illustrate the fashion-forward clothing designs, using the Sainsbury brand to back up the credibility of quality expected by clothing buyers. Offers Sainsbury leadership, “Many customers think of Tu simply as clothing made by Sainsbury. So, we’re showing that it’s a strong, stand-alone brand” (Sainsbury 2011, p.3). Figure 1: Tu fashion line and desired market characteristics illustration Source: Sainsbury. (2011). Sainsbury Journal. http://www.veterans.jspensions.com/Sites/Sainsburys%20Veteran/library/files/The%20Journal%20May-June%202011.pdf Sainsbury is a market leader in identifying opportunities for using well-earned brand equity to expand the company’s business model to include non-food offerings that are relevant to consumer lifestyles and needs. Under the psychographic segmentation model of marketing, Sainsbury conducts market research on consumer lifestyles and attitudes and then applies these to a new strategic model to expand the brand or provide more product lines in this diverse business model. Tesco, one competitor, continues to perform similar brand extension strategies, but not all meet with expected successes as they are not always founded on solid quantitative market research. Sainsbury, however, explores new product-related opportunities founded on legitimate consumer knowledge and then seeks out non-food partnerships and expansion strategies that are aligned with consumer values in the psychographic model. One of the fundamental brand conceptions at Sainsbury is “making a positive community difference” (Akter 2012, p.317). This does not always indicate corporate social responsibility, but illustrates that Sainsbury continues to provide opportunities for consumer lifestyle self-expansion, critical dynamics to ensure that brand loyalty is achieved and more market interest peaked in important target consumer markets. Piloting various non-food offerings allows the company to focus on product-related elements of the marketing mix to illustrate the diversity and credibility of Sainsbury’s as an innovative and customer-centric leader in retailing. Sainsbury has also found recent brand success by extending its own product line, a generic line that outperforms major food brands in terms of pricing and quality. Tesco, Sainsbury’s main competitor, began rolling out private label brands in the 1980s and has experienced a 35 percent increase in sales revenues through promotion of these private food brands (Coriolis Research 2004). In fact, over 50 percent of all products offered by Tesco are private label brands (Tidd and Bessant 2009). How is this relevant to Sainsbury when assessing its brand-related successes and performance? Sainsbury conducts regular competitive analyses necessary to come up with rival strategies and identifies opportunities that can be benchmarked from industry leaders. It is not always innovation that will provide revenue successes and brand-related successes, it is about mimicking proven business models that can bring better consumer sentiment and reinforce the brand personality that Sainsbury is attempting to project. By rolling out its own private label food products, Sainsbury is capitalising on a confirmed revenue-producing system that meets with favourable market interest, especially for price-sensitive buyers. Private label brands that outperform major food brands give consumers perceptions of total brand value when they are quality products guaranteed by the Sainsbury brand name and set at competitive prices that fit strained consumer budgets. The ability to swallow down innovation periodically to imitate successful competitive strategies gives Sainsbury a positive reputation as a practical and sensible strategic leader. This has significant implications for shareholders of the firm that closely monitor competitive and brand-related strategies as well as consumers who benefit from private label branding. Associated promotion of private label products continue to express quality comparisons to major food brands, thus relying on brand trust that has long been established by Sainsbury’s business model. Finally, it is the stewardship model of governance that continues to give the business more competitive advantage. In governance theory, stewardship philosophy dictates that managers in an organisation are competent and psychologically-fit to successfully manage the business without direct, rigid oversight mechanisms (Sanchez 2004). Elements of leadership conceptions are available throughout the Sainsbury business model, such as transactional or transformational leadership, whereby employees are considered valuable capital resources. Rather than having a system of strict controls to drive compliance, managers are given freedom to express creative solutions and develop strategic direction to expand business presence in important markets. By decentralising the organisation, it provides opportunities for better talent management which provides a much larger basket of ideas for identifying potential business solutions. By removing thick layers of bureaucracy in the organisation, more emphasis can legitimately be placed on the relationship function of cultural development internally, thereby outperforming competition in human capital advantages. This impacts the company brand through innovation as an outcome of cultural unity philosophy, a critical success dynamic for this organisation. It cannot be emphasised enough that Sainsbury maintains a governance and management system that provides for talent development with a dedicated and motivated focus on achieving long-term goals both related to strategic positioning and brand establishment/improvement. 3. Conclusion Though Sainsbury is involved in many additional strategic activities related to the brand, the most important dimensions of marketing strategies have been identified. Sainsbury is one of the only competitors in this industry that is so highly dedicated to expressing its corporate values for responsible business management, thus it gives Sainsbury a much better brand reputation with critical revenue-producing consumers. If Sainsbury were socially responsible as part of corporate policy but did not promote these accomplishments and directions, the organisation would not have the brand equity and certain market loyalties that currently drive its third place market share in this industry. The company understands how to diversify its brand focus and product offerings, but also blend effective promotional strategy to give the brand more visibility domestically and internationally. Sainsbury should be considered an industry standard of best practice as it pertains to governance, cultural development, business diversification, and promotional function with emphasis always on what elements of the marketing mix will bring more market favourability. In-store merchandising and the use of convenient and lifestyle relevant online marketing continue to bring this business a positive brand reputation that, in turn, equates to the ability to expand the brand (equity) through non-food offerings of multiple varieties. Sainsbury is a market leader in brand-building, having evolved far beyond just brand recall and brand recognition to an industry mover that now has considerable consumer loyalty that equates to better profitability. Other competitors in this industry could model many dynamics of their existing business models against Sainsbury’s, even though the company is not number one in terms of market share volume. Tesco is a difficult competitor to outperform, sustaining many capital resources and considerable market favourability with loyal market customers. Sainsbury, however, manages to do this effectively using a smaller and more streamlined operational model, which should be applauded for brand consistency as well as consistency in market-based communications targeted at appropriate and profitable consumer markets. All activities associated with corporate social responsibility and diversification of promotion and merchandising, both food and non-food, make Sainsbury’s a distinguished brand leader that fully understands how the market thrives and influences profitability and then adjusting business practices to best fit consumer needs and lifestyles. References Akter, S. (2012). Employee satisfaction of Sainsbury’s – An exploratory study, International Journal of Academic Research in Business and Social Sciences, 2(8). Aron, A., Aron, E. and Smollan, D. (1992). Inclusion of other in the self-scale and the structure of interpersonal closeness, Journal of Personality and Social Psychology, 63(4), pp.596-612. BBC News. (2008). Retail giant buys family business. [online] Available at: http://news.bbc.co.uk/2/hi/uk_news/northern_ireland/7190661.stm (accessed 19 November 2012). 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 18 November 2012). Muniz, A. and O’Guinn, T. (2001). Brand community, Journal of Consumer Research, 27(4), pp.412-432. Paralympic.org. (2012). BPA signs Sainsbury’s as partner through Rio 2016, Official website of the paralympic games. [online] Available at: http://www.paralympic.org/news/bpa-signs-sainsbury-s-partner-through-rio-2016 (accessed 17 November 2012). Prifysgol Cymru University. (2009). Sainsbury Case Study. [online] Available at: http://www.scribd.com/doc/52511118/Marketing (accessed 18 November 2012). Sainsbury. (2011). Sainsbury’s Journal – Here comes the summer. [online] Available at: http://www.veterans.jspensions.com/Sites/Sainsburys%20Veteran/library/files/The%20Journal%20May-June%202011.pdf (accessed 19 November 2012). Sainsbury. (2011). Annual report and financial statements 2011. [online] Available at: http://www.j-sainsbury.co.uk/media/171813/ar2011_report.pdf (accessed 20 November 2012). Sainsbury. (2011). Director’s Report – Annual Report and Financial Statements 2011. [online] Available at: http://annualreport2011.j-sainsbury.co.uk/governance/directorsreport.shtml (accessed 19 November 2012). Sainsbury. (2011). Corporate social responsibility report. [online] Available at: http://www.j-sainsbury.co.uk/media/171822/cr2011_report.pdf (accessed 21 November 2012). Sanchez, A.V. (2004). Development of corporate governance systems: Agency theory versus stewardship theory in Welsh agrarian cooperative societies, University of Huelva and CENTRA. [online] Available at: http://www.uhu.es/alfonso_vargas/archivos/EURAM%202004.pdf (accessed 19 November 2012). Thompson, A. (2010). Sainsbury plc and the UK food retail industry. [online] Available at: http://cws.cengage.co.uk/thompson5/students/sainscase.pdf (accessed 20 November 2012). Tidd, J. and Bessant, J. (2009). Managing innovation – Case studies: Challenges in retail innovation aspects of innovation in Tesco plc’s market entry into the USA. [online] Available at: http://www.managing-innovation.com/case_studies/Tesco.pdf (accessed 18 November 2012). Bibliography Kotler, P., Armstrong, G., Harris, L.C. and Piercy, N.F. (2012). Principles of Marketing, 6th European ed. Prentice-Hall. Tricker, Adrian, Essentials for Board Directors: An A-Z Guide, Bloomberg Press, New York, 2009 Read More