Sainsbury Marketing Mix

INTRODUCTION OF COMPANY J Sainsbury’s is the third largest grocery retailer in the UK. The company was leading grocery retailer in UK from the late 1980 to 1995. The company opened their first store in 1869. Sainsbury’s has 504 supermarkets and 319 convenience stores in UK. Company’s turnover is over ? 17. 4 billion and profit of ? 289 million. Asda and Tesco has overtaken Sainsbury’s recently. Sainsbury’s market share gradually decreased to just over 16%. Sainsbury’s growth has suddenly fallen down. In terms of local sourcing, Sainsbury’s is higher than other competitors. Sainsbury’s provides products like milk, pre-packed cheese, fresh lamb etc to the customer. Sainsbury’s is only food retailer to enter in global 100 index. Sainsbury’s sell over 4000 products. Company has been positioned under FTSE4 and Dow Jones Index. Sainsbury’s main responsibility is to provide best food and health, make relationship with community, to provide good place of work and save environment. The main objective of Sainsbury’s is to make growth in both sales and customers. Sainsbury’s continuously growing like-for-like sales by 3. %, increase the product range, improving services and operational saving. Sainsbury’s brand represents quality and value for money and customer service. Company’s brand name is ‘so organic’ related to food. The company objective is to provide high product in low fair price and provide good service to people like give information to choose product. The subsidiaries of Sainsburyâ €™s are Sainsbury’s Bank Ltd; Sainsbury’s Supermarket Ltd and Sainsbury’s Convenience Stores Ltd. (Source: www. sainsburys. co. uk) The supermarket chain operates three main store formats; regular Sainsbury's stores (‘Main Mission'), Sainsbury's Local and Sainsbury's Central (convenience stores and smaller supermarkets in urban locations – ‘Mixed Mission') and Sainsbury's ‘Main Plus' (hypermarket) stores. Unlike Tesco (Tesco Extra) and Asda (Asda Wal-Mart Supercentre), Sainsbury's does not employ a separate brand for its hypermarkets, having phased out the ‘Savacentre' fascia several years ago. At the end of its 2008/09 financial year Sainsbury's store portfolio was as follows. |Format |Number |Area (ft? |Area (m? ) |Percentage of space | |Supermarkets |502 |15,974,000 |1,484,000 |95. 6% | |Convenience stores |290 |729,000 |67,700 |4. 4% | |Total |792 |16,703,000 |1,551,700 |100. 0% | TOTAL MARKET SHARE: The total market share of Sainsbury’s is 16. 5%. Their market share has grown over last year and in current period they are serving over 18. 5 million customers each week. TRENDS AND ISSUES PREVALENT IN RETAIL INDUSTRY: The recent trends that are prevalent in Retail industry are as under: i. Fashion of creating one’s own brand: These days it has become a fashion to use own brand name by retail companies on packing of products. The companies are doing so because on order to increase consumer loyalty. Major retail giants Tesco, Sainsbury’s use their brand name on the products in order to promote their brand name and gain consumer loyalty as well. Eg: Sainsbury’s is selling organic food under the name of ‘Sainsbury’s So Fresh’. The trends of own brand name is increasing. i. Availability of all continental and regional type of food at any period of time: Earlier the foods of winter were not available in summer. But now due to improved storage systems and new trends of eating off seasonal foods as well, the consumers can have grapes in winter as well. Now any body can eat off seasonal food at any point of time. iii. Demand for convenience food: The increased competitive world has made both males and females to work in order to earn their livings. Nobody has any time to cook food. As both partners are busy in their jobs, so they don’t get much time to cook food. But the recent retail trend is of eating cereals and cooked food. The consumers can eat the ready mix food at any point of time without even cooking it. iv. More attraction towards discounted items: The consumers, these days prefer the discounted products. Discounted products are in trend nowadays. The recent trend is that more the discount, the more the customers. The sales also get increased by providing more discounts. v. Direct marketing: It is a type of retailing in which consumers are exposed to goods & services through a non-personal medium. They can order & purchase the products by mail or telephone. vi. Online technology: The technology has made it easier for retailers to sell products online. The consumers can order and purchase the products online. The company can deliver products to consumers on a single click. Online sales are a great source of income to retailers as well. Issues in Retail industry: Following are the main issues that are prevalent in retail industry: i. Rising health awareness amongst public. The UK government is spreading awareness about healthier and fresh food in UK. The customers are told to not to eat sweeteners. The government is making people aware about use of organic food and low fat food. Thus the consumers have started shifting towards fresh and healthier food. ii. Low disposable income: Due to recession, the disposable income of people have fall. This has effected the spending capacity of people. Now people have decreased their buying ability. iii. Recession gave rise to unemployment and inflation which affect the market directly or indirectly. iv. Consumers have perception that recession is long term so they are spending less and saving more. The consumers believe that due to recession they are unable to save more and are having only expenses. COMPETITORS: †¢ In the supermarket business Sainsbury's main competitors are Tesco, Asda and Safeway. †¢ In retail banking the main competition comes from Tesco Financial Services, M & S Financial Services, the traditional high street banks, Egg, Halifax and Abbey National mortgages. PRODUCTS: The major products of Sainsbury’s are as follows: †¢ Supermarket/Grocery goods; †¢ Retail banking services; †¢ Retail property development services In Sainsbury’s, a large store typically stocks around 50,000 lines of which round 20% are â€Å"own-label† goods. These own-brand lines include: †¢ Basics: mainly food, toiletries and stationery. †¢ Taste the Difference (TTD): around 1100 premium food lines i. e. processed foods such as ready made meals and premium bakery lines. †¢ Freefrom: It was launched in February 2010, it has over 7 5 product lines. These products are suitable for those allergic to dairy products. †¢ Sainsbury's Organic (SO Organic): Around 500 lines of food / drink which is not derived from food stuffs treated with fertilizer or pesticides. †¢ Different by Design: a smaller range of premium non-food lines, including flowers. Kids: these lines are for children. †¢ Be Good To Yourself (BGTY): products with reduced calorific and/or fat content. All BGTY packaging was relaunched in January 2010. †¢ Fair Trade: Over 100 fair trade products. All bananas sold at Sainsbury's are now fair trade. †¢ Super Naturals: A range of ready meals with healthy ingredients. †¢ TU – own brand clothing range. †¢ TU Home – a range of home products, such as lighting, rugs, and kitchen products. PORTER'S FIVE FORCE ANALYSIS 1. Competitive rivalry †¢ The retail market is extremely competitive with a very crowded market. More companies are trying to get into non food sectors which leads to increase in competition. 2. Barriers for entry in food category Firstly, organised retail is amongst the most sophisticated sectors within the UK and needs a lot of investment. Secondly, retail is also at an advanced stage within the UK and most of the western world. 3. Threats of Substitutes †¢ The threat of substitutes in the food category is a low one because consumers view it as a necessity, especially in the developed world and increasingly in the emerging markets. The only major threat of substitute is an internal industry threat whereby one supermarket can lap up the business of other supermarkets. 4. Buyer power †¢ Buyer power is high due to the presence of so many competitors selling the same products. †¢ As the economy goes further towards recession, consumers' needs are likely to be given more weight, increasing their power considerably. 5. Supplier power †¢ Supplier power is usually more complicated as it is difficult to categorise it. Supplier power of smaller suppliers will not be considerable because of their sales volumes on dependence on these supermarkets. PEST ANALYSIS Political factors †¢Increasing globalization, presents a challenge as well as an opportunity to Sainsbury's. Sainsbury's can enter the markets of emerging companies through joint ventures or partnerships to explore these new markets, although it does not have any plans on the horizon to do so. †¢ The ongoing investigation of price fixing amongst the big four retailers within the UK can have some negative impact to the industry in general and Sainsbury's in particular. In the UK, the Government is to decrease the rate of corporation tax from 30% to 28%, which will save big companies like Sainsbury's significant sums of money (HM Treasury 2008). Economic factors †¢ The rapidly increasing global food crisis has increased food prices all over the world, which will result in risi ng purchasing costs for Sainsbury's. †¢ The credit crunch might decrease the purchasing power of consumers and though they will still buy the essentials they may be more cautious. Social factors: Nowadays there seems to be more emphasis on fresh, easy style cooking. This serves an opportunity for Sainsbury's to encourage new recipes and unfussy eating. †¢ There has been a huge emphasis by the government to promote healthy eating, primarily due to the increasing level of obesity within the UK. This has lead to many consumers to shift towards healthier food. This presents an opportunity to Sainsbury's to stock up with more healthy food or create healthier foods at a cheaper price than other manufacturers so as to benefit from this new trend. Technological †¢ The Internet phenomenon seems to be ever growing within western countries. †¢ One of the downsides of supermarket shopping is the queuing system customers often find themselves in at the checkout. †¢ RFID (Radio Frequency Identification Device) technology can be used for significant benefits to the supply chain of Sainsbury's. If adopted, this technology will lead to less inventory for the supermarket firms leading to a leaner, more profitable organisation. SWOT ANALYSIS Strengths Weakness some implications as people are gravitating towards British companies and the prospect of Sainsbury's being governed by a foreign firm can lead to consumers switching loyalties. †¢ Alternative business presents a great opportunity to Sainsbury for future growth. †¢ Online sales are a great opportunity as well, since online margins are higher and investments are not huge. Threats †¢ There needs to be continuous heavy investment in environmental and green issues without immediate benefits. Sainsbury's operations are subject to a broad spectrum of regulatory requirements particularly in relation to planning, competition and environmental issues, employment, pensions and tax laws and in terms of regulations over the group's products and services WHERE DO WE WANT TO BE? Ansoff Matrix To portray alternative corporate growth strategies, Igor Ansoff presented a matrix that focused on the firm's present and potential products and markets (customers). By considering way s to grow via existing products and new products, and in existing markets and new markets, there are four possible product-market combinations. Ansoff's matrix is shown below: Ansoff Matrix |   |Existing Products |New Products | |Existing | | | |Markets | | | | |Market Penetration |  Ã‚  Ã‚  Ã‚  Product Development  Ã‚  Ã‚  Ã‚   | |New | | |Markets | | | | |  Ã‚  Ã‚  Ã‚  Market Development  Ã‚  Ã‚  Ã‚   |Diversification | Ansoff's matrix provides four different growth strategies: †¢ Market Penetration – the firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share. †¢ Market Development – the firm seeks growth by targeting its existing products to new market segments. †¢ Product Development – the firms develops new products targeted to its existing market segments. Diversification – the firm grows by diversifying into new businesses by developing new products for new markets. Selecting a Product-Market Growth Strategy The market penetration strategy is the least risky since it leverages many of the firm's e xisting resources and capabilities. In a growing market, simply maintaining market share will result in growth, and there may exist opportunities to increase market share if competitors reach capacity limits. However, market penetration has limits, and once the market approaches saturation another strategy must be pursued if the firm is to continue to grow. Market development: The development of new markets for the product may be a good strategy if the firm's core competencies are related more to the specific product than to its experience with a specific market segment. Because the firm is expanding into a new market, a market development strategy typically has more risk than a market penetration strategy. A product development strategy may be appropriate if the firm's strengths are related to its specific customers rather than to the specific product itself. New product development carries more risk than simply attempting to increase market share. Diversification is the most risky of the four growth strategies since it requires both product and market development and may be outside the core competencies of the firm. Diversification may be a reasonable choice if the high risk is compensated by the chance of a high rate of return. Sainsbury’s has also diversified into banking, financial services, petrol pumps etc. HOW DO WE GET THERE? MARKETING OBJECTIVES: To be consumer’s first choice for food delivering products of outstanding quality and great service at a competitive cost through working faster, simpler and together. Positioning: This means process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization. Sainsbury’s has increased its private brand product portfolio. Under food category, company offers organic food under name ‘Sainsbury’s SO organic’ range and it comprises of 450 products. (www. sainsburys. co. uk) Competitive advantage: According to its chief executive Justin King Fairtrade gives Sainsbury’s the edge over its competitors, as well as being an ethical way to trade. MARKETING MIX: It is referred to as the set of controllable tools that the firm blends to produce the response it wants in the target market, so it consists of everything the firm can do to influence the demand for its product (Kotler and Armstrong, 2004). The major function of marketing mix strategy of any company is the strategic communication of the organization with its customers (Proctor, 2000). Marketing Mix is also referred to as â€Å"4 Ps of Marketing†. The classification of four Ps of marketing was first introduced and suggested by McCarthy (1960), and includes marketing strategies of product, price, placement and promotion. According to Borden (1964), the elements of the marketing mix includes product planning; pricing; branding; distribution channels; promotions; product packaging; advertisements; services; packaging handling; and re-order, etc. The purpose of using a marketing mix is to target the market in order to increase sales and profits. [pic] (Source: www. marketingteacher. com) The 4 Ps of Marketing Mix can be explained as below: 1. Product: A product includes all features and combination of goods and related services that a company offers to its customers. The product or service offer needs to be able to meet a specific, existing market demand. The companies that are operating in service sector and provide intangible products are very much criticized by the customers. The companies can use the terminology of â€Å"service products† under marketing mix strategy making (Kotler & Armstrong, 2004). Sainsbury’s is applying this strategy according to consumer preferences and changes in the market. i. Positioning: This means process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization. Sainsbury’s has increased its private brand product portfolio. Under food category, company offers organic food under name ‘Sainsbury’s SO organic’ range and it comprises of 450 products. (www. sainsburys. co. uk) ii. Quality: The products offered by Sainsbury’s are quality products. There is a wide range of great quality products at fair prices. The main emphasis of quality is on fresh food, organic food and private label brands. The company’s commitment of offering quality products has increased the brand image of the company. iii. Product Packaging: Sainsbury’s has improved its packaging. The company offers the products in self branded packages. The various discounts and slogans are mentioned on the packaging. The company is using eco-friendly bags for packaging and carrier bags called ‘Bags for life’. (Source: www. sainsburys. co. uk). iv. Branding : Sainsbury’s uses self labelled branded products. The company offers nearly 20% out of its 50,000 product range, which uses self label brands. v. Varieties. vi. Taste the different: Also known as ‘Ttd’, it is the company’s biggest sub brand which comprises of 1300 products. It was Sainsbury’s first own brand range to be free of artificial colors, flavors and hydrogenated fats. 2. Pricing: It is setting up a price for a product or service offered. According to Kotler and Armstrong (2004) price is the amount of money that customers have to pay to obtain the product. It is not simple to set a price. The customers not only view the lower price of product, but they respond to value so a lower price does not necessarily mean expanded sales if the product is not fulfilling the expectation of the customers (Lazer, 1971). Pricing strategy is divided into two parts: price determination and price administration. The different types of price are Market led pricing (Competitive pricing), Cost based pricing, penetration pricing, destruction pricing, price wards, EDLP (Every day low price). The pricing strategy of Sainsbury’s is that it should be able to provide profits. The pricing strategy of Sainsbury’s is as follows: a. Lower pricing strategy: Sainsbury’s use lower price or economy pricing strategy at the time of launching or selling a new product. The marketing and manufacturing costs are kept at minimum. Sainsbury’s offer economy prices for its products like soups, beans, tomato puree, etc. which can be compared very easily with its competitor TESCO (Source: http://www. sainsburys. co. uk & http://www. tesco. com). b. Discount price: Sainsbury’s offer discounts to the consumers. This is done in order to increase the bucket size. The discount offered by Sainsbury’s has resulted in increase in sales volume. c. Meal Deals: Sainsbury’s offer meal deals for families. It offers a meal, a soft drink in just ? 5 to family of 3 members. This kind of meal deals are making it popular among the food sections in retail market. . Credit terms. 3. Place: It involves all activities used by company in order to make the product available to the targeted customer (Kotler and Armstrong, 2004). It refers to different ways by which a customer can obtain a product or receive a service. A product or a service can be received through a number of distribution channels, such as in a retail store, through the mail, via downloadable files, on a cruise ship, in a hair salon, etc. The products can be made available to customers depending upon different factors like sales, communications and contractual considerations (Lazer, 1971). The ease with which the products or services are made available to customers has a significant effect on sales volume. Sainsbury’s has been using the perfect blend of the time, quantity and place concept in order to serve its customers. a. Website: Sainsbury’s has its corporate website i. e. www. sainsburys. co. uk. The company has made quite a good use of technology and the customers can purchase the products and services at just one go through internet or online. Sainsbury’s has its online section showing groceries online at internet. The consumers can easily choose among various products available online. This saves a lot much time of the customer and also home delivery by Sainsbury’s made it more convenient for the consumers to buy a product. b. Convenience Stores: These are the stores which are opened upon locally in smaller area. The consumers can have fresh food and other quality products close to their home. Sainsbury’s has also introduced a series of operational changes to improve cost efficiency, such as night-shift improvements and introducing further shelf-ready packaging. . Supermarkets: Sainsbury’s has increased its no. of stores to 792 out of which 164 stores are more than 4000 square ft. area. The supermarkets are large and big stores that are open for 24 hours a day and offer full range of products and services to the customers. d. Banks: Sainsbury’s Bank provides insurance, credit cards, loans and travel money. The consumers can access it online as well on its corporate website www. sainsburysbank. co. uk. It can also be accessed in convenience stores. e. Home Delivery: The Company is also having 169 stores that provide home delivery service to customers. f. Filling Stations. g. Cafe. 4. Promotion: Promotional strategies means the different means through which a company communicates the benefits and values of its products and encourages customers to buy them (Kotler and Armstrong, 2004). It is the process by which the businesses informs the customers about their products and encourage them to buy their products. The best way to understand promotion is through the concept of the marketing communication process. Promotion is the company strategy to cater for the marketing communication process that requires interaction between two or more people or groups, encompassing senders, messages, media and receivers (Lazer, 1971). For example, if Nokia wants to promote its product then, Nokia is sender and an advertising agency as well; the media used in the process can be salesmen, newspapers, magazines, radio, billboards, television etc and the message will be the advertisement or sales presentation and the final destination is the potential consumer or customer which will be mobile phone users. . Nectar Card: offers customers to gain points through shopping. They can earn money to exchange point. The company offer loyalty cards to its customers which has points based system. It can be collected on every purchase made in Sainsbury’s. (Source: http://www. nectar. com) b. Active Kids: promises to donate sporting equipment and coaching to primary and secondary schools in exchange for vouchers c ollected by customers. c. TV Ads: Jamie Oliver is the representative of Sainsbury’s. d. Advertising: Sainsbury’s uses media as an effective tool for promoting the products. The company is making use of television and radio for promoting its brand. e. Sales promotion: The company also offer schemes like buy 1 get 1 free. RECOMMENDATIONS FOR CHANGES IN THE MARKETING MIX STRATEGY: In today’s competitive world consumer’s shopping behaviour changes significantly with fluctuations in the macroeconomic environment. Retailers can maximize the returns by effectively altering the marketing mix strategies. Consumer goods manufacturers and retailers have to make regular critical decisions around the pricing, product, distribution, and promotion that best communicates their firm’s value to consumers. Thus Sainsbury’s in order to be at a top position in the food retailer’s market needs to apply some changes to its marketing mix strategy. Product: †¢ Sainsbury’s should diversify its product line to even more variety of products like petrol. †¢ It should concentrate more on its own-brand products as now the customers are getting more attracted towards own-label products of the retailers as they offer quality products at cheap prices. †¢ Sainsbury’s should also try to products in smaller quantities or in small packets. That will bring an edge to Sainsbury’s. Price: †¢ Sainsbury’s should try to increase production of their own brand products can help them reduce cost and offer better prices. †¢ Sainsbury’s should keep its price in competition to its competitors like Tesco. †¢ It should use the penetrating pricing strategy for its new products along with the on going economy pricing strategy which will reduce the profit margin of the company a bit but will give them opportunity to gain economies of scale. Place: Sainsbury’s should concentrate more on internet sales by offering its customers schemes like vouchers when they spend online. †¢ Instead of opening up new stores, Sainsbury’s should concentrate on its existing stores. It should try to bring all its stores in profit. †¢ The Internet is a new marketing tool which means that the aim should be innovation, developing new programs and features that will attract the clientele so as to capit alize on this tool and stand out among the rest. Promotion: †¢ New schemes for collective buying and online buying, online vouchers should be introduced. As today is the price war but due to its brand image it can also advertising which not just concentrates on the price but on the main aim of the company like healthy food and life style to attract the customers or with the emotional connection of the particular brand with the consumers. Internet malls i. e. e-malls can be created to increase the sales and to reach more customers than by personal selling. CONCLUSION The retailer industry is very competitive. Although SAINSBURY’S retailing position is still very strong, TESCO and ASDA are strong competitors. Sainsbury’s strategic marketing mix needs to be improved. It needs carefully designed. Hence, more market researches are needed to develop an effective strategic marketing mix. 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