Marketing Plan for Morrisons free essay sample

In 2004 Morrisons took over Safeway in order to enter the convenience store market and increase market share, although this is proving to be a success, it left the company with a ? 13 million pre tax loss in January 20006. In order to increase their profitability after their huge loss and to respond to the changes in the market Morrisons revitalised their image by promoting the freshness of their products in their recent campaign of â€Å"Fresh Choice for You. † The economic downturn is of increasing threat to key players in the industry as it has seen the rise of discount stores such as Aldi, who have developed a strategy based on cost leadership. In response to this Tesco launched their newest campaign of being â€Å"Britain’s Biggest Discounter† to deter the growing competition, however, this campaign has not been as successful as hoped. Many supermarkets have diversified into other industries such as Tesco and Sainsbury’s who have expanded into the financial sector, along with other stores such as MS and ASDA highlighting their extensive range of non-food products. We will write a custom essay sample on Marketing Plan for Morrisons or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page In these cases Morrisons seem somewhat behind in responding to these changes, as they have not expanded into either the non-food market or the financial sector, however, they are still a strong brand and with recommendations such as partnering with Universities and providing them with a lunchtime range and developing a loyalty scheme Morrisons can reach out to a newer audience whilst maintaining their old customers. Introduction This report will focus on the food retailing industry, Morrisons in particular and how the external environment is changing around them. It will look at how key players in the market are responding to these changes and what marketing strategies have been implemented to keep up with the times. In order to make effective recommendations it will be essential to evaluate the competitions competitive advantage and that of Morrisons. This will be concluded through the use of a PEST and SWOT analysis along with Porters Five Forces framework. History of Food Retailing There is an ongoing battle within the food retailing industry as multiple grocery stores aim to be the best, whether it is on price or quality. Nevertheless this industry is dominated by four key players. Tesco, ASDA, Sainsbury’s and Morrisons. Tesco is the number one food retailing outlet that currently holds a market share of 31. 4%. In terms of adapting to the environment Tesco is quick to learn and has consistently revitalised itself to maintain their market leader status. In the earlier years Tesco used aggressive marketing campaigns such as â€Å"every little helps† and launched their Tesco value range and club card scheme to overtake Sainsbury’s number one slot. (http://www. telegraph. co. uk/finance/markets/2788089/A-history-of-Tesco-The-ri e-of-Britains-biggest-supermarket. html) ASDA is the second largest store holding a market share of 17. 1%. This company has always focused its strategy on price and is aimed at the lower end of the market. In 1989 ASDA established the ‘George’ brand which enabled ASDA to expand and offer consumers something different to their food shopping experi ence. In 1999 the decision to merge with Wal-Mart has contributed drastically to ADSA’s growing success. Since then ASDA has had the opportunity to diversify into the clothing industry by opening a standalone ‘George’ store. http://www. about-asda. om/inside-asda/our-history. asp Sainsbury’s on the other hand is the third largest food retailing outlet with a share of 15. 7%. This supermarket has generally focused on the upper end of the market, the majority of shoppers being with the ABC1 category, and drawn their attention on quality. Like ASDA and Tesco, Sainsbury’s diversified its appeal with the creation of Homebase in 1981, which offered DIY and gardening products. Netto Marks and Spencer and Waitrose are the main supermarkets which focus heavily on quality, however naturally these products have a price tag, therefore these stores target the upper end of the market, generally speaking the ABC1 sector. Somerfield and Co-op are mainly recognised within the industry as our convenient stores offering a variety of food products, however have not yet established any non-food products. Aldi, Lidl and Netto are directed at the lower end of the market mainly the C2, D and E categories. These stores promote their goods solely on price, offering customers their own branded products with a cheap price tag. Often there are non-food products sold however these products have no particular relevance to the store and are promoted as WIGIG (when it’s gone, it’s gone) Each of these players have identified a strategy based on Porters (1980) generic strategy theory, which entails concepts that organisations focus on one of the three strategies to compete in the market: 1) Cost leadership – â€Å"Exercising economies of scale in a number of market sectors by investing heavily in technology to beat its rivals on price. 2) Differentiation – â€Å" The concentration of product quality to justify premium price† 3) Focus- â€Å"Focusing their efforts on servicing a narrow range of segments like a niche marketer† (Hill, 2004, p. 409) Analysis of the present Market Throughout the years there have been many up and coming issues, technologies a nd changes in attitudes which have affected the food retailing industry dramatically. A detailed PEST analysis, which can be found in the appendices, illustrates most alterations which have influenced these stores approaches. Highlights of some of the key changes which are of most significance to date are seen below. Political †¢ Trading Policies – The Food Sustainability Strategy (FISS) This strategy focuses on how the food industry can cut energy costs to help the environment, how it can improve on in its ethical trading policies and reduce its wastage. In order to address the wastage problems many supermarkets have put a price on their plastic bags, such as Marks and Spencers price their bags at 5p encouraging consumers to use their recyclable bags. Diagram 1: [pic] [pic] [pic] Economical Financial Crisis The financial downturn has meant that consumers focus is primarily drawn to price as disposable income is tight. This has seen the rise in the discount supermarkets such as Aldi and Lidl. These stores have fewer costs, due to their simple store layout, limited product lines and own branded products, which mean they can offer lower prices to customers. Diagram 2: [pic] For example: A pack o f 4 of Sainsbury’s Basic Lemons are 59p whereas a pack of 5 Lemons at Aldi cost 39p. This has resulted in the discount stores being able to attract more customers. Socio-cultural †¢ Organic and Healthy Eating ranges Consumer’s attitudes have recently demanded the need for more, healthy eating and organic products, leading supermarkets into extending their product range by offering these products. Diagram 3: [pic] [pic] Morrisons –Organic rangeAsda’s – Good For You range Technological †¢ Online Shopping The majority of our large supermarkets have now gone online to keep up with the fast pace of society. Its convenience of shopping online and being delivered is something which has captured many shoppers. The only supermarket not to have invested in this facility seems to be Morrisons. Although Aldi and Lidl have also not as yet expanded into this sector this is in order to keep operational costs down. Diagram 4: [pic] Sainsbury’s online shopping facility Morrisons Position Morrisons currently stands as the fourth largest multiple groceries after Tesco, Asda and Sainsbury’s. Their main target market according to Mintel is â€Å"skewed to older customers 59% being over 45 and 39% over 55 mainly within the C1 and C2 category. † Therefore marketing campaigns developed generally focus on this group. The recent acquisition of Safeway hit Morrisons sales hard leaving them with a ? 313 million pre tax loss in January 2006. Since then the focus has been on increasing profitability, therefore the strategy in operation was to rebrand and re-establish itself in the eyes of the consumer. In light of this Morrisons launched a new marketing campaign promoting the freshness of their products â€Å"fresh choice for you† to revitalise their brand. This advertising campaign entails famous faces such as Denise Van Oulton and Lulu accompanied with the soundtrack from ‘Take That’ to identify with a younger target market. Their revitalised image has been geared within Morrisons in store image as they have set up counters which resemble traditional market stalls. The counters of the butchers, the bakery and the delicatessen reflect the freshness of their food. Their â€Å"Lets Grow† campaign which has recently been launched, offers customers vouchers to pass onto schools, which will be provided with gardening equipment on behalf of the store. This means that Morrisons can express their green values amongst the community and constantly communicate their brand, strengthening their position in the minds of consumers. A detailed SWOT analysis, in the appendices, has highlighted the main advantages and disadvantages of Morrisons. The key factors are emphasised below: Strengths †¢ The acquisition of Safeway has meant that Morrisons has been able to expand into the convenience store market which is a booming sector at the minute. Weakness †¢ The store currently has no e-commerce facility for online shopping which has become major selling point for many of their competitors. †¢ Morrisons has only bought into a limited range of non-food product ranges but has not yet expanded this range into clothing. Opportunity †¢ Their opportunities are drawn from their weaknesses as they could develop an online shopping facility enabling them to capture the younger market and gain valuable information on their consumers buying habits through a CRM system (a Customer Relationship Management system). Threats †¢ A threat is mainly identified as Morrisons failure to compete effectively with their competitors in the market, such as Aldi and Tesco who are stressing their pricing structures. Key Competitors Positions Tesco: Tesco is the biggest supermarket in the industry and has expanded into many other areas allowing the company to appeal to a wider range of consumers. Some of these areas include Tesco Finance, Tesco Direct, Tesco Comparison Website and a Partnership with O2 allowing them to enter the telecoms market. However, Tesco has currently been experiencing a slow in sales and consumers switching to the likes of Morrisons, ASDA and Aldi, even with their recent marketing campaign promoting Tesco as being â€Å"Britain’s Biggest Discounter† and the 350 product line of the discount range. On Managementtoday. co. uk it reported on 2nd Dec-2008 that â€Å"the Times quotes new figures from TNS Worldpanel suggests that about ? 22m of customer spending was switched from Tesco to Asda last quarter, with another ? 10m going to Aldi and a similar amount to Morrisons. † Aldi: Cost leadership within this market is something which Aldi thrives upon and due to the economic recession, the rise of discount stores has enabled Aldi to achieve 3% in the market share. Aldis recent advertising campaign has raised the profile of their store amongst their consumers. The campaign â€Å"Spend a little, Live a lot† promotes value products which are depicted as good quality. The partnership of Phil Vickers has allowed Aldi to identify with its target market which has been recorded a 50% rise of shoppers within the ABC1 category. http://www. retail-week. com/News/2008/09/aldi_signs_celebrity_chef. html Aldi has also linked up with Travelodge, which means that an agreement has been set for Travelodge to build their hotels above Aldi’s store. This has been emphasised by Paul Harvey, the Managing Director of Travelodge that in developing this site they are communicating positively to the budget sector and will take full advantage of it. http://www. retail-week. com/Property/2008/10/aldi_tie_up_with_travelodge. html Sainsbury’s: Sainsbury’s are the third biggest supermarket retailer and have distinguished themselves through their differentiation approach, as they promote good quality through their extensive product range of ‘Taste the Difference’ which offers their consumers a premium own branded product. Their partnership with Jamie Oliver has enabled Sainsbury’s to communicate with the younger market and has also been able to depict his respected image and relate it to their stores. In March 2008 Sainsbury’s used Jamie Oliver to promote a â€Å"feed your family for a fiver† in response to the financial problems, however they don’t focus too heavily on this cost leadership approach. http://blogit. webitpr. com/? ReleaseID=8105 Porters Five Forces Michael Porter (1980) identified five forces which influence an industry. This model helps to understand the competition in the market and how the market itself operates. Threat of new entrants The increasing presence of discount stores such as Aldi and Lidl has become a more noticeable to the market. Although these stores are far from being new, their now combined market share of 6% demonstrates that they are growing. Garages are also creeping up from behind as they offer consumers a range of necessity products which are easily accessible to the consumer. Barriers of entry are typically high due to the financial sector at the minute and anyone who may enter would be combated off through aggressive marketing campaigns produced by the dominant players. Bargaining power of suppliers Supply and demand is a key factor, as suppliers whose resources rise in prices means that they pass on the inflation to buyers, who may have no choice but to buy the products because of high demand. This has led to many supermarkets such as Morrisions sourcing their own supply outlets such as ‘Farmers Boy’ in order to cut costs. Bargaining power of buyers The buyers within this market have a high level of bargaining power as they demand such volume bringing much business to their suppliers. Therefore they can force prices down whilst maintaining the standard of quality in exchange for their business. These stores could also restrict who the supplier sells to as part of their conditions to be their client. Threat of substitute products Current issues on the market are own branded products which are extremely similar to branded ones at half the price. For example in Aldi everything is own branded such as their cereal which is Harvest Morn as opposed to Kellogg’s. These brands look almost identical to that of Kellogg’s but are cheaper at 75p compared to Kellogg’s at Sainsbury’s for ? 1. 69. Rivalry among competing firms in the industry The competition on price is a current issue as competitors are fiercely battling for cost leadership in order to gain new customers and maintain old ones. The slump in the market has led to a market struggle in competing to win business, as a slow growth in the market â€Å"causes firms to fight for market share. † http://www. quickmba. com/strategy/porter. shtml From this model we can identify that although Morrisons are in a sturdy position in the market, the growing competition, threat of substitutes and the economic crisis is causing a strain on the industry which Morrisons needs to be aware of and respond to by developing innovative strategic plans to overcome these obstacles. Recommendations Over the next three years the company could look at the following suggestions, which are detailed in an action plan in the appendices, as a way to increase market share. A point which should be reinforced is that of marketing. Marketing is crucial to differentiate a company amongst their competition and to raise awareness of their brand to consumers. These can be developed through promotional direct mail, emails, radio, TV, sponsorship and more. Recommendations: The development of the ecommerce facility offering online shopping to consumers would enable Morrisons to gain valuable information on consumers shopping habits, which could be stored on CRM system (Customer Relationship Management) allowing them to target their market more effectively with promotional offers and information. †¢ Creating a loyalty scheme is something which is powerful within this industry as it rewards consumer’s loyalty to their store. This builds a precious relationship with thei r consumers, which is important to encourage repeat business. Although Morrisons has their own line of petrol stations in establishing a partnership with garages such as, BP or Shell it would make it possible for their products to be constantly available 24 hours and be more accessible for consumer’s consequently strengthen their brand in the minds of consumers. A partnership with Colleges and Universities whereby a range of lunchtime products would be available in their canteens along with promotional vouchers, would reach out to a younger target market Constructing creche facilities or children’s play areas within the stores grounds would promote hassle free shopping for parents which would encourage more families to the store. Conclusions Through the analysis of the food retailing industry it can be depicted that although the four dominant players in the market are still firmly the market leaders threats from the financial crisis have established the discount stores which are creeping up quickly behind. Nevertheless Morrisons position seems strong within the market and although they haven’t responded as quickly to the changes in the market this could be a positive aspect for the minute.