The Relevance of Segmentation to Waitrose Supermarket - Essay Example

The Relevance of Segmentation to Waitrose How Business utilizes segmentation Segmentation of a market is a process with an objective of reaching thetarget market and is done by segregating customers on various factors such as, age, demographics, locations as well as behavioural characteristics. The objective is to create marketing programs, which are targeted at unique needs of the target customers and achieve maximum sales. Market segmentation helps in identification of groups and sub-groups, which can be further used for closely approximating and making offers that are accepted largely by the target groups. Businesses firstly define their market or region of interest. This broad market is then subdivided into smaller markets according to specific products sold by a firm. It is important to define the segment type of multiple customer categories from the entire market. Even though Waitrose is one of the oldest grocery chains therein, It is important for the grocery chain to successfully adapt to the market changes through innovative offerings and differentiated features in market segmentation. The next stage involves two or three major segmentation variables such as, geographic, demographic or psychographic, with the highest influence on target customers (MacMillan and Selden, 2008). Relevance of segmentation to Waitrose Super Market Market segmentation is a critical success factor in the food retail industry. The major motivating factors for customers are drinks, meals and snacks, which according to the survey, scored highest in terms of demand. Segmentation is also critical during customer retention. For instance, students and music enthusiasts are regular customers for Waitrose Super Market. So, Waitrose can segregate customer segments and plan unique offering in order to retain their loyalty. Consumers are shifting towards low cost and affordable restaurants for food and beverage options. At the same time, there has been an increasing demand for healthier food products. Waitrose Super Market can utilize this opportunity by adding healthier menus such as, low calorie breakfast and salads (McGoldrick, 2002). Market segmentation is one of the basic, yet critical strategies for business to achieve desired goals and objectives. Market segmentation can be of many types. Geographic segmentation is the process of segmentation through segregating customers or markets based on their geographical locations. This segregation can be based on nation, state, localities, climate and numerous other climatic factors. Similarly, demographic segmentation is the segregation of customers according to wide factors such as, income, education, family size, gender, age, socioeconomic status, language, religion, culture as well as nationality. Psychographic segmentation is very similar to behavioural segmentation, where the customers are divided according to their unique lifestyle, behaviours and perceptions. It includes various features that can potentially influence the strategies and activities of a marketer. These can be buying behaviour, expectations, activities and attitudes of the customers. Once the marketer is accustomed with these activities of the consumer; it is extremely easy to target them with the right marketing approach. Psychographic segmentation is often used during focused differentiation or while targeting niche customers (Marieke, 2004). Waitrose has been chosen in this issue for evaluation of the segmentation process and its influence on marketing strategy of the retail grocery chain. As majority of companies are adopting diversification as an integral strategy for the growth and development, it is imperative that they have shifted their major focus on making their services and products in more than one market. Even smaller companies need a distinct customer segment so that influence of their communication strategies is highest. Being a grocery chain, the store caters to various segments of customers. The target customers of the grocery chain can be segregated on the basis of three major segments (Ferrell and Hartline, 2010). History of Waitrose Super Market Waitrose Super Market is the food retail subsidiary of John Lewis Partnership, the largest employee-owned retailer in Britain. The head office is situated in Berkshire, England. At present, Waitrose has around 317 branches spread across England (Waitrose, 2014). Of them, 30 are Waitrose convenience stores and the rest are super markets (Waitrose, 2014). The overall share of market by Waitrose is around 5 percent, making it 6th largest retailer of groceries across the UK. While newspapers have argued that Waitrose has an up-market reputation, top managers from the retail chain have said that Waitrose’s prices are comparable to its competitor, Tesco (Waitrose, 2014). Waitrose was founded in 1904 as a small grocery outlet. At present, the company employs 91,000 employees across England, South Scotland and Wales (Waitrose, 2014). The retail giant offers through super markets, convenience stores, food halls, food and home stores as well as franchisee with motorway servicing stations (David, 2011). Majority of Waitrose Super Market customers visit on a weekly and fortnightly basis. The Waitrose Super Market also consists of other channel members such as, suppliers of raw materials, merchandisers and associated agencies for advertising and branding. Waitrose Super Market can target its retail customers on the basis of their demography, location and lifestyle. Geographic Segmentation The retail store prefers strategic use of income factor to target geographic location that will provide with highest sale and consistent revenue (Kotler, 2001). Typical Waitrose stores are located at centre of the towns and adjacent to big shopping malls and outlets. With average space of only 1500 square meter, Waitrose stores are smaller compared to other retail grocery stores (Marketing Week, 2006). This also explains the smaller quantity of customers visiting the grocery chain. However, the retail chain has opened new stores with bigger selling spaces. While Food and Home store formats are present across out-of-town and faraway locations, their numbers is low indicating lesser traffic or footfalls. The distribution of Waitrose stores can also be evaluated using the income segment across England. For instance, some of the England’s poor regions such as, Liverpool, Middlesbrough, Bradford and Newcastle, do not have any Waitrose stores, implying that the stores would not be profitable in these areas. Even the perception of general customers is that Waitrose is an up-market grocery chain catering to upper-middle, upper and luxury customers. Thus, it can be seen that geographic segmentation of Waitrose customers is closely related to their income (Marketing Week, 2006). Geographic segmentation has been mainly on the basis of income distribution across England. In order to cater to a niche but high return segment, Waitrose has directed its market to only upper class grocery products, which comprise food, drinks and other products for everyday use. Nonetheless, looking at changes in the market, especially the increasing income, spending capacity as well as demand among the consumers, Waitrose is planning to establish more stores across the UK (Innovation Reactor, 2008). Demographic Segmentation Of the above demographic elements, Waitrose majorly uses income factor while targeting different customers. The website of the retail store is another indication of its demographic segmentation. For instance, the retail stores caters to target customers through items such as, food and groceries for housewives, pet products for customers with pets, exclusive products for babies and decoration items. The entertaining section of the company stores readymade food products, which are targeted for special occasions such as, parties, birthdays or other celebrations (Haberberg and Rieple, 2008). Other motivating factors included the Waitrose Super Market’s environment. The current segmentation is beneficial when forecasting sales for different food categories as well as offerings (Innovation Reactor, 2008). Another demographic segmentation that is served by Waitrose is the up-market working women. In England, around 70 percent of total women work as well as their work timings are longer compared to other European countries. At the same time, these women are major shoppers for their families (Marketing Week, 2006). For these working women, Waitrose has a range of organic, ready to eat and packaged food products, which can be cooked with minimum time and effort. Also, Waitrose maintains high quality in these categories and as a result, it is highly favoured by working women across upmarket England. Understanding that online shopping has become one of the key trends among professionals and busy housewives, Waitrose has opened an online shopping website (Campbell, 2002). Psychographic Segmentation While most of the retail chains across England are competing on the basis of pricing, Waitrose is trying to build brand loyalty by directly hitting at the motivation level of consumers. For instance, majority retail chains provide loyalty schemes or reward cards. Contrarily, the account cards provided by Waitrose do not offer any discounts or monetary benefits to its customers (David, 2011). Instead, these account cards offer customers opportunities such as, tickets to classic concerts or shows at reduced prices, free expert consultation on food illustrations and diets, thereby emphasizing upon the grocery chain’s upmarket and high-end target segment (Kang, 2006). To target its niche segment group such as, upper socioeconomic classes, Waitrose mainly focuses on establishing stores within town and offers wide range of food and other grocery products (David, 2011). Another common characteristic among upper segment customers is their preference for greener and organic products. Waitrose successfully researched this perception and has undertaken many activities for maintaining a greener image. The brand has also been sponsoring numerous social programs. The grocery chain actively promotes British products as well as distributes unique and high quality products by partnering with dairies and farms (Innovation Reactor, 2008). By introducing its own range of organic food products, Waitrose has been able to increase market share. A general perception of Waitrose is that it is a qualitatively superior grocery retail chain. This perception has been utilised by the brand by offering unique, ethnic and exotic food products, both in terms of ready means and convenient foods (Marketing Week, 2006). Majority of the upmarket customers are more aware of the environment and prefer brands that are engage in organic and greener food products. For this market segment, Waitrose’s segmentation strategy fits well. Conclusion The ultimate objective of segmenting customers is to target them on the basis of their unique needs and preferences. For instance, needs and demands of a five year old boy will be different from a 25 year old working professional. Similarly, the necessities of a 15 year old student will be different from a 35 year old professor. Hence, it is important for marketers to identify these segments as well as make proper strategies so that maximum revenue can be generated from these target segments. Marketers have observed that consumers pick up those brands whose characteristics are similar to their attitudes and perceptions. For instance, sports fans will connect more with brands advertised by the favourite sports celebrities. Therefore, by segmenting customers according to their like and dislikes, marketers can create a unique niche segment for their products, services and other offerings. Reference List Campbell, D., 2002. Business Strategy. Oxford: Butterworth-Heinemann. David, F., 2011. Strategic management: Cases and concepts (13th ed.). Florence, South Carolina: Pearson. Ferrell, O. C., and Hartline, M. D., 2010. Marketing strategy. 5th ed. Connecticut: Cengage Learning. Haberberg, A. and Rieple, A., 2008. 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