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The Food retailing Industry is a huge and fast growing industry in UK .It is a complex and diverse market dominated by various big companies such as Tesco, ASDA, J Sainsbury's. Price and quality of goods are the two key elements which the companies keep in mind to increase their sales and defend their position in this competitive market. In the year 2009, food retailing recorded sales figures of GBP 297,478.9 million, along with providing employment to 11.6% of the workforce in UK (Euro monitor). It is forecasted, by the year 2014 the sales would cross GBP 350,000 million. (Euro monitor)
This assignment focuses on the third largest food retailer store in UK, i.e. J Sainsbury.
Sainsbury is a super market which will operates its business in retail sector from the year
1869. Sainsbury is started by James and Mary Ann Sainsbury's. Sainsbury today operates a total of 827 stores comprising 537 supermarkets and 335 convenience stores(J Sainsbury 2010) .With their presence in various other markets such as financial services and Property management, grocery retailing remains their core business. In an industry which employs over 3,335,000 people and with sales figure of GBP 137,590 million (Euro Monitor), Sainsbury enjoys a market share of 16% and serving 19 million customers weekly with a product offering of 30,000.( J Sainsbury 2010)
QUESTION-1 Using suitable models identify the customer perceived value for the customers for a product/division/company of your choice.
Difference between what aÂ customersÂ gets from aÂ product, and what he or she has to give inÂ orderÂ to get it.
Customer value proposition
AÂ businessÂ or marketing statement that summarizes why a consumer shouldÂ buy a product or use a service. This statement should convince a potential consumer thatÂ one particularÂ product or service will add moreÂ value or better solve a problem than other similar offerings.
Types of CVP
1. All Benefits- benefits that an organization brings to its target customers. It tends to suffer from a lack of credibility when the value proposition is not distinguished from competitors or focused precisely on the unique needs of the customer.
2. Favourable Points of Differentiation- it mainly emphasizes the key differences between a firm's offerings and those of competitors at the customer interface. It takes into account the notion that the buyer has substitutes. Like the all benefits value proposition it lacks specificity relative to the buyer.
3. Resonating Focus- Resonating focus highlights one or two critical differences between the firm's offerings and those of competitors with the forethought that these differences represent those areas that are most vital in the mind of the customer. While most effective, this value proposition takes considerable time to develop as it is strongly rooted in a deep understanding of customer needs.
IMPORTANCE OF CUSTOMER VALUE
Â A good customer value proposition is a technique why a customer should buy a product and also distinguish your product from competitors. Gaining a customers' attention will help in growing sales faster and more profitable, as well as increasing its market share. Understanding customer needs is important because it helps promote the product. A brand is the perception of a product or service that is designed to stay in the minds of targeted consumers. It is desirable to build a strong and positive brand association with your offering.
Three key dimensions:
Extrinsic vs. intrinsic value
Self-orientated vs. other-orientated value
Active vs. reactive value
VALUE PROPOSITION FOR SAINSBURY
Sainsbury maintain high quality of its services by keeping up high quality product at a fair price, through well-kept rooms with an attractive appearance to fast service and a friendly staff. Sainsbury ensures that all suppliers have been evaluated by Quality Attribute System (QAS) in order to provide quality product to the customer. It has different prices which are suited to different kinds of customer. Through the execution of high quality product Sainsbury has high price. However to adjust to the needs of less wealthy clients it also offers a wide selection of basic product at a low price. Sainsbury speed is moderately-high. Sainsbury team is trying to reduce queues through recent introduction of basket tills, self-checkouts as well as introduction of newest scan and pack system. Sainsbury also offers home delivery which can be obtained the very next day. Dependability is keeping a word to customers. Sainsbury provides customers' quality product at a fair prices, fulfilling customer expectation for fresh, safe, healthy and tasty food. Sainsbury respects environment by using environmentally friendly packaging. Queuing time is reasonable and deliveries are on time. Online Shopping at Sainsbury's is also a great advantage. All the above provide aÂ high level of dependabilityÂ and are the reason why the Sainsbury's brand remains on the market for 141 years, and this makes the Sainsbury differs from its competitors.
Sainsbury started a new range 'taste the difference' that aims to provide consumers desire to treat themselves at home, rather than spending money in buying expensive takeaways or eating outside.
Sainsbury's continuously investing in their clothing and home decor items to accelerate the growth in non-food sector so that they can reach to more customers so as to increase its market share and sales. (Euro monitor)
Sainsbury's continued launching innovate products, 1% fat milk was launched which was consumed by 2.5 million households due to which its sales for basics were up by 60%. (Euro monitor)
Critically evaluating value proposition of Sainsbury's
Sainsbury supermarkets follow the mission of being the customer's first choice by its service and quality. Through the method of working simpler, together and faster it delivers an outstanding good service and quality. Sainsbury accelerating its growth in non-food sector so as to reach more customers. Online facility provides its customers to shop online for non-food items also. The company has a solid brand value although discriminating competitive advantage is clearly missing. From a customer point of view it is difficult to slot them in a specific category. The company is not able to create a good market which will make them distinguish from other supermarkets with concerns to price, quality, customer service and access to variety or inventory.
Sainsbury's was critized by the city for allowing Tesco in getting ahead in the market in terms of customer service, loyalty and price competitiveness. Sainsbury's was also criminated for not promoting itself up to its standards and also running the same type of initiatives which was running by Tesco. So the Sainsbury has failed to promote its products and services. In the process to reconstruct its mission, company has changed its marketing strategy and sold successfully the home based products in the chain of UK market and its business in Egypt. This changes the company to focus on food retailing and related activities.
Sainsbury maintains 100% service level as the online business is growing rapidly. Even so, there are some issue that need to be developed for example; delivering orders in full and on time. The online business is developing at a rapid speed gaining growth in overall market. During hectic periods picking large orders from stores could become an issue.
The marketing mix used by Sainsbury to gain its competitive advantage in its retailing sector -.
Sainsbury's mainly focused in developing new product and its food quality which will be healthier to the customers. It provides more than 350 variety range of foods product which is produced to protect its natural flavour and taste of the product. Currently it has achieved to developed more than 600 organic lines to provide best range of food and major growth in groceries, bakery, and frozen foods. It has also launched a product called 'Blue carrot Calf' known for the clear labelling of kid products which mention clear details of the products. The Sainsbury's continuously concentrating on development of its product by launching a new programme every year.
Price is the important component of the marketing mix for Sainsbury's. Now a day Sainsbury's is presenting its customers in UK the value for money. A lot of investment is made in improving quality and productivity in order to reduce the overall cost. For the customers in UK Sainsbury is offering, exceptional value for the money and the aim of the company is to lead the quality and become the favoured in term for the customers all through the market. If the price is cut it is not easy to get back again to the previous level without dissatisfying the customer. This is not decent for the business. Hence in short term price gain the store will be less affected where as in long term it would gain less positive. Sainsbury implemented a new strategy 'value for money' after realising its price war in the market. A lot of investment is made in improving quality and productivity what it provides and efficiency of its activity in order to reduce the overall cost. The purpose of implementing a new strategy is to achieve trust and value from the customer and continue its leadership.
Sainsbury gain to build up its solid brand image among the customers through various promotions. It mainly focuses on its own brand rather than the promoting other brands which they sell in the stores to form the greater wealth by its overall retail brand.
Sainsbury uses different media for its promotion whereas TV, radio and advertising in cinemas to grow the company image. Sales promotions, merchandising and packing are also the key element for the promotion of the Sainsbury.
Sainsbury launched 'Nectar Card' as a main weapon for its promotion. This card is free for customers and gives discount points if customer used it in store at the time of shopping. Many other retailers are also using same type of promotions by issuing the card to customers and giving them free points for their money as these free points can be used automatically for discounts.
Sainsbury store staff wears named T-shirt of the supermarket to defer as a worker to serve people.
As per the Sainsbury it has 872 stores across UK whereas 837 super markets and 335 convenience stores. Various set up of stores are established across the country according to the needs and satisfaction of the customers and area. Sum stores are opened 24 hours a day for the satisfaction of the customers.
Sainsbury is making large chain stores in different locations to create a world class distribution of groceries and work more effectively.
Here we can see that Sainsbury always use the market mix to develop and implement its strategies by using the market mix. It satisfies the customers by improving the strategies which meet the needs of the customer. It always research on the market to know the interest of a customer who is able to buy its products. It continues to implement the market segmentation to develop its business strategies which shows the development of a business. Sainsbury use the market segmentation to display large variety of products and sell to deferent groups and to achieve large amount of sales overall. It offers a large number of products in a convenient location and opens the store for long hours. It also encourages the customers by easy cash options through debit card and credit card. It also offers the cash back facility to the customers on their purchases.Â
TESCO- Competitor Company Profile
Tesco is started by Jack Cohen in 1919. Tesco is biggest food retailer in the world, having 2318 stores and giving employment to more than 470000 people who serve millions of customer around the world. Tesco has a largest market in UK, where it operates under signs of Extra, Superstore, Metro and Express. Tesco offers more than 40000 products to customers including clothing and other non-food lines.
Tesco vs. Sainsbury's
'TESCO is to provide superior technical representation and to add value to a focused group of leading-edge, corporations by offering synergistic, valuable and highly innovate solutions for our customer design, procurement and manufacturing needs with continuous improvement of our quality, service and productivity to a completive advantage.
What sets TESCO apart from other distributors is our commitment to customer's success, by bringing an in-depth knowledge of their technology and the value added services needed to truly support the customer. The result is cost-efficient, rapidly delivered technical superior products that the customers take pride in.
Sainsbury's mission statement
"Our mission is to be the consumer's first choice for food, delivering products of outstanding quality and great service at a competitive cost through working 'faster, simpler and together."
Source: Sainsbury Web site
Sainsbury's company's vision for growth
"Sainsbury plc's present focus is to improve the performance of the core UK supermarket chain. Whilst doing so we will continue to explore and develop growth opportunities in other markets. Through implementing 'Managing for Value' we will stretch our ambitions and challenge the conventional wisdom within the Company, thereby unlocking our potential and delivering value." Source: Sainsbury Web site
Sainsbury aims to provide quality products and good service at a competitive price through working faster, simpler, together and aimed to be the consumer first choice for food. Through a balance in sales growth, reduction cost and on-going margin improvements, Sainsbury look forward to progress growth. The company is dedicated to achieving industry leading margins within a dynamic, competitive market and to delivering strong double digit necessary profit growth in each year of its business programme.
Tesco has made a good progress with its strategy which consists of five elements reflecting its four established areas of motivation and Tesco's long term promises on environment and community.
The ideas of the strategy are:
To be a successful international retailer
To develop the core UK business
To be as strong in non-food as in food.
To develop retailing services - such as Tesco Personal Finance, Telecoms and Tesco.com
To put community at the heart of what we do.
The market share of Tesco is 31.6% in the retail market and they also capture 50% of the grocery market share while Sainsbury has 16% and 22% of the market share respectively. Tesco sells massive products range and buy in big volume and sell it in cheap while Sainsbury buys product that are popular and their own branded product. 1/3 of the retail market is acquired by Tesco but Sainsbury is enabling to have this power.
Tesco achieved its success by selling varieties of products; it is located within UK as well as overseas, they target every people. With this strategy Sainsbury's have a difficult to keep up with Tesco. Sainsbury's generally attract the middle class people with low class prices whereas Tesco attract all kind of people from all classes. Sainsbury's is more concerned about the quality of the food they provide their customers while Tesco is concerned about reducing prices to attract their customers.
Tesco's main advertising approach is money saving 'Every little help' and Sainsbury's 'Taste the difference' however during the crisis time they are one of the same. Sainsbury's slip its second position in 2008, losing to Asda. Leader Tesco enlarged its market share in the year, moving ahead of Sainsbury's. Sainsbury's has less variety of non-food items as compared to Tesco. At the end of the evaluation period, non-food items were the reason for growth for the major supermarkets.
Sainsbury CEO Justin king has done a great job in strengthening the brand, improved turnover at a rate of 5.5% a year and profit increases by 6.7%. king main focus was on UK store expansion rather than overseas and total number of store has been increased from 583 in 2004 to 827 today.
Tesco CEO Sir Terry Leahy has different approach as compare to Sainsbury's CEO Justin King. In his fourteen year term he has heavily invested in overseas expansion. In 1999, within UK Tesco generated 90% of its turnover and now it's less than 70%.
Tesco has its setups in 14 countries but that doesn't mean Sainsbury's lack growth opportunities. Sainsbury's results in past years in the proof of this and continuing achieving high growth rate without international expansions. To exist in this competitive market Sainsbury's has done well by opening new stores across UK, adding new non-food products and banking services to existing stores.
Tesco on the other hand, have more growth opportunities in Asia and other countries. Tesco is a big player than Sainsbury's, for example: if we compare past twelve months results Tesco has £56.9 billion turnover versus Sainsbury's £19.9 billion.
CUSTOMER OUTCOME AND EXPECTATION
Brand image and relationship building in a business to company market depends on how well company satisfies its customers. Sainsbury keep high quality of its services by providing high quality products to customers at a fair price. It has different prices which are suited to different kinds of customer. It provide basic product at low price to customer with low income. Sainsbury want to make it easier for customer to shop ethically and sustainably so they making every effort to live up to their expectations. Therefore from the above model, which explains between the company service and quality Sainsbury can be placed into high quality as well as service offered by the company and received by customers.
Mission statement serves a dual purpose by helping employees to remain dedicated on jobs as well as boosting them to find innovative ways of achieving company objectives so that productivity can be increased. It is common that large companies spend years and millions of dollars developing and refining their mission statement.
NEW MISSION STATEMENT OF SAINSBURY'S
"To become the UK best retailer company and earn customer lifetime reliability."
NEW VISSION STATEMENT OF SAINSBURY'S
NEW VALUE PROPOSITION
Source: Barnes, C. et. al., 2009 Creating and Delivering your value proposition p 31
Market: Sainsbury already caters to the middle class customers by providing products at affordable prices, but since Sainsbury maintains high quality amongst its products, the cost somewhat becomes high (in a comparative sense to its competitors). Sainsbury needs to provide these products at a more reasonable price to cater to the working class as well and thereby expand its existing customer base.
Value experience: Benefits should include high quality at reasonable price. To reduce the travel costs Sainsbury needs to focus on locations of its stores so that they are effortlessly within the reach of its customers. Online sales should also be made easy. Complaints should be minimised by providing a good after sales service and monitoring customer feedback.
Offerings: Place should include a focus on central locations. Product should include highest possible quality at affordable prices, new and innovative products could also be introduced to increase sales. Since the financial downturn of 2008 had drastic effects on the economy, consumers are trying to save as much as possible hence Sainsbury needs to keep the prices of its products as low as possible. Promotion should involve promotion of sales through discount vouchers or limited offers (e.g. buy 2 get 1 free) and continuous advertising through all available media types.
Benefits: products need to be provided at the lowest possible price maintaining high quality. Constant customer feedback should be facilitated in order to keep track of its customer's satisfaction.
Alternatives and differentiation: Since Sainsbury focuses on quality more than the price of its products. The quality of Sainsbury's products is higher than most of its competitors, but this phenomenon is not the same when it comes to price. Sainsbury needs to balance between its price and quality since its competitors such as Tesco are providing products at a lower price that is offered by Sainsbury.
By using Ansoff Matrix tool for strategic marketing planning help to improve the position of J. Sainsbury. It accelerate to do best strategic direction depending upon the need/desire to penetrate existing or new markets with existing or new products. (http://www.emp.ac.uk/linspdfs/marketi2.pdf)
If Sainsbury need to reconstruct their values, strengths and beliefs they need to split up their position in the existing market. They facing extreme competition in the real market they must innovate and improvise in new markets with their existing product offering.
Partnership is a necessity in the domestic market since this is the basis of the business and its primary values. It will help the Sainsbury to rebuild its image and the connection with existing customer by confirming them the best quality, best product offers at competitive pricing.
Sainsbury's need to improve in its Information Technology system so that information can be processed faster and stocks can be reloaded at a faster pace. The shelfs are always stocked well and the customers keep getting informed about the available varieties. All these hard work make the shopping experience enjoyable and satisfying for the customers.
As the world faced recession almost globally, Sainsbury should avoid price related conflicts and must follow specific price strategy. Since customer will not be willing to pay high prices even for the best quality products hence low pricing should be planned for the quality product.
Identify problems and in time solving them as quickly as possible so that they build strong communication at every step of the channel.
To introduce some products this will give a comparative advantage over their rivals. Sainsbury should open local stores in the city rather than on the outskirts of the city. Customer generally chooses to purchase in local shop rather than supermarkets to save time and money.
Introduction of pay point or post office to the store would be a good idea to attract customers. The customer immediately after purchase can pay their bills without wasting time to reach these places elsewhere in the city.
Sainsbury's need to increase its online shopping service in non-food items, so that customer can shop online more comfortably.
I would recommend Sainsbury's to deliver every little helps to make it a healthier place for shop. Use simple processes so that shopping is better for customers, simpler for staff and cheaper for Sainsbury's.