Sainsbury’s is one of the leading supermarket chains in the United Kingdom. But there was a time when this organisation was the best there is. In recent times Sainsbury’s was overtaken by Tesco. The dominance and effectiveness of these two companies can be understood by studying principles of marketing. It is also important to understand how these supermarket chains are utilising principle of marketing to increase their market share. This study is focused on marketing principles and its application but a major part of it is also a discussion on how Sainsbury’s try to increase revenue particularly when it comes to a new product launch related to a health drink.
What is Marketing?
It is imperative not only to know something about marketing but also on some pertinent information regarding its evolution. In the old way of doing things, marketing was simply a one way street, a relic of the mass-marketing strategies of the past 20th century. According to one commentary, “Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchange and satisfy individual and organisational goals” (Hougaard & Bjerre, 2004. p.12). The basic approach in marketing used to come solely from the perspective of the merchant. Not much was done in terms of determining exactly what the customer needed.
In the old way of doing things the customers have very little means to communicate their feedback to companies providing goods and services. The salespeople responsible for driving up revenue were convinced that everything depended on the presentation and of course advertising strategies. The common belief was that “The marketing mix in terms of product, price, place and promotion is what is going to conquer the consumer and create market dominance. The consumer’s only possible response is to buy or not to buy” (Hougaard & Bjerre, 2004, p.12). But in a highly competitive world there are so many stores that are offering the same type of goods and it does not even matter if they are located a considerable distance from the customers because the items can be shipped even as these are ordered online. Thus, the customers in the 21st century have the capability to switch providers and suppliers as often as they want.
There are many reasons why companies stubbornly refuse to modify their marketing strategies in order to adapt to changing times. For one it requires a great deal of investment to make significant improvements to their business processes. When computers became a major part of doing business many were left behind because they cannot afford to make the necessary adjustments. Secondly, it is just plain hard work to change something that they believe is working for them. It may be the case but not in the long run. Finally, it is common knowledge that to diverge from the established path means risk and quite possibly costly mistakes. It is better to adhere to a proven formula rather than to experience losses.
However, the profitability of the company is still the most important thing and therefore change is inevitable. One of the major changes that transformed marketing theory is the way businessmen see their environment, the internal and external view of market forces. For instance the internal environment is composed of all the variables that are closer to the firm and to some extent it can be controlled (Ennew & Waite (2007, p.70). One way to utilise this principle is the creation of different product lines to cater to different segments of the market. Another application is to determine what type of distribution system will be used to increase the efficiency of the business.
An understanding of the external environment on the other hand allows corporate leaders to see the complexity of the market, considering the demographics as well as the different preferences of the customers. This is why the concept of segmentation was created to modify the traditional approach of creating one product for everyone. Segmentation is also a way to break down the market into groups that share similar needs, characteristics and aspirations (Weinstein, 2004, p.4). Segmentation is also the deliberate processes of understanding the target market in such a way that the company can supply the specific demand of the clients in the present and in the near future.
Although there are massive changes in the development of marketing strategies it has to be made clear that the fundamentals of marketing are still important and these are: product, price, distribution and promotion. The adjustments made on all four criteria can result in an effective market mix that would in turn create a matrix enabling the company to reach a particular target market (Pride, Hughes, & Kapoor, p. 348). It can be said that a customer can be persuaded to buy a particular product on the basis of other factors aside from quality of the goods on sale.
It is also important to note that marketing is not only about providing the best product and create the most appropriate advertisement that could attract potential customers. Even before a product is launched there is a need for reliable information that would help the manufacturers develop products and services that can satisfy the needs of consumers. This requires data management. According to advocates of a more scientific approach to marketing, “In the past, companies have struggled to make decisions because of the lack of data. But in the current environment, more and more organisations are struggling to overcome ‘information paralysis’ – there is so much data available that it is difficult to determine what is relevant” (Nemati & Barko, 2005, p.2). This clearly explains the need to learn more about information technology and how it can enhance marketing, especially when it comes to awareness and product delivery.
In the case of supermarket stores there is the added challenge of customer loyalty. It is difficult to have customer loyalty when it comes to products that are easily accessible in so many places. There is no specialisation needed to be able to supply juice drinks for example. Even a small operation can be maintained to stockpile grocery items and that store immediately becomes a competitor. In order to deal with a fickle minded market it is important use principles of relationship marketing. According to proponents of this concept there is a need to build trust, the customers must view the company as trustworthy and as a result maintain their business with the said organisation.
Sainsbury’s versus Tesco
Sainsbury’s and Tesco are two of the leading supermarket chains in the United Kingdom. The reason for their success can be attributed to the application of marketing principles and marketing strategies outlined a while ago. This means a clear focus on what to do with regards to product, price, distribution, and promotion. These two companies also exhibited their deep understanding when it comes to product segmentation and providing not just a single product for everyone but a diverse offering that can provide customers a variety of choices when it comes to things that they really need and want.
Aside from that both companies embraced information technology. Instead of relying on traditional means of manufacturing and distributing their products both Sainsbury’s and Tesco were eager to develop online stores so that their customers can order from the comfort of their homes and never have to spend a few hours driving or walking back and forth from home to the supermarket.
It is apparent that both companies are adept at using information technology not just to advertise its products but also in managing customer information and other information needed to keep track with sales and other valuable data needed to manage the business. These companies are therefore prime examples of 21st century organisations that completely embraced the use of technology to attain competitive advantage over others. This is one of the primary reasons why Sainsbury’s and Tesco are two of the largest supermarket chains in the UK.
When it comes to long term sustainability and profit margins it has to be said that Sainsbury’s and Tesco are like copies of each other. There are differences of course but there are more similarities than differences. It makes it difficult for each organisation to maintain customer loyalty. At the same time it is easy for them to sustain losses when it comes to price wars. The profit margins cannot be as good because customers can easily switch to another supermarket if the prices of goods in one are more expensive than the other.
If Tesco decides to go on a price war with Sainsbury’s then it would be a problem because the former has a more expansive reach than the latter. Sainsbury’s is at a disadvantage because of the dominant position of Tesco. In other words Tesco can use a business model similar to that of Wal-Mart and drive prices down even further. From the point of view of Sainsbury’s this problem is exacerbated by the fact that customers can buy online and therefore the products at Tesco are readily available.
Another challenge to overcome is the fact that Tesco offers more variety as compared to Sainsbury’s. In addition Tesco has ventured into different types of products and bundled it with their online grocery store. Consider for instance that if a customer opens their official website the customer is not only inundated with offers about electronic gadgets, discounted food items, home and gardening equipment but also used cars and homes for sale.
In order for Sainsbury’s to remain competitive it is crucial to choose the type of products sold. It must be superior to those that can be found in competitors shelves. At the same time the company must be mindful of the prices. It is also imperative that Sainsbury’s consider the principles of relationship marketing in order to connect with customers and they in turn finds Sainsbury’s as the better alternative.
It is important for Sainsbury’s corporate leaders to realise that it is not enough to sell quality products there is also the need to determine the correct price and the proper way to market it so that the people who are interested in a particular product are more than willing to do business with Sainsbury’s.
Market segmentation is the key. This is the same thing that Tesco did in providing a great degree of diversity when it comes to their product offering. The customer is made aware that Tesco is not just in the business of selling food products and electronic items but the online store is a virtual one-stop shop for customers who value their time and money. Consider the fact that in Tesco a customer can enter the site thinking about buying dog food but at the same time in need of a used car that he intends to give to his daughter as a gift in appreciation for earning a college degree. The link to a used car section enables the company to maximize its earning potential because the customers visiting the site are not only interested in buying a particular product but other goods and services as well.
The purpose of creating this marketing mix is to increase revenue by tapping into markets that the company knew existed but had no way of exploiting based on the old business model used in the past. The same thing can be said about those looking for a home. Surely there are other websites that offer houses for sale, but there are only a few that can compete with Tesco when it comes to their reach. Consider the fact that Tesco has hundreds of thousands of customers visiting their website as compared to other websites. Thus, the degree of exposure is incomparable.
Sainsbury’s executives must consider looking into their market segmentation as well as increasing the diversity of products offered. It must maximize the use of its website. There is a need to be more creative when it comes to product offerings, pricing, marketing and even the way they deliver the products to their customer’s doorsteps in the case of online shopping.
In order to increase their competitive advantage over rivals Sainsbury’s must reconsider how the company deals with the promotional aspect of business. It is no longer prudent to rely on traditional forms of print and TV advertising. This is the fallout of the digital age. In the past advertising content was delivered via TV, radio and print ads. But herein lies the problem because efficiency cannot be achieved considering the principle of segmentation and different needs of each potential customer. There is no generic product that can be made to cater to their specific needs.
If Sainsbury’s disregards this suggestion then it is possible for the company to spend a lot of money on the use of mass-media marketing tools such as TV ads and not be able to connect with their target audience.
Sainsbury’s and Product Offerings
The use of segmentation is very much evident when it comes to Sainsbury’s Taste the Difference range of products. An overview of this particular product range reveals that there are hundreds of different food items that are available to cater to consumers discriminating taste. At the same time much thought had been given on the fact that there are different buyers when it comes to the quantity of the food that can be served per meal.
As a result there is a roast dinner for the family. There is also a range of products that caters to couples. There are tag lines that say: delicious meals for two. In addition the company knew that there those who live alone, these maybe young professionals living in condominium or apartment and may not have the time to cook their meals from scratch. There are product offerings for one person and it is a way to save money. At the same time there are products being offered that can be great tasting snacks during the week.
The products mentioned above are good examples of segmentation. There are different types of consumers that can be covered using this approach. If the company simply designed a product range that caters to the family then there is no way to tap into the market of young professionals that have no time to cook their meals and when they do prefer ready-to-eat meals, it must be in a serving size that is enough for one person to consume.
SWOT and PESTLE
Studental is a new product being marketed by Sainsbury’s. This is a clever use of segmentation marketing because it aims to address the need for a health drink that caters to teenagers between the age of 16 and 19. The sales pitch for this product is that it is not only a health drink made from natural ingredients but it is also a beverage that can help strengthen gums.
The strength of the new product offering is explained by its uniqueness when it comes to developing a drink that can help strengthen the gums of consumers. It is also a product designed to attract health conscious teenagers that are very mindful of their image. Those who are looking for a healthy alternative to soft drinks can find this product appealing.
However, there are drawbacks. For one it is not clear if the tag line regarding strengthening the gums is enough to convince consumers to switch to another brand. There is also the confusion when it comes to the idea that Studental seems to be marketed not only as a health drink but also as beverage that can be used by athletes or at least those who are active in terms of physical fitness. In this regard the bitter taste of the drink can send the wrong signals. It is imperative that Sainsbury’s decide if Studental is just a vitamin fortified drink or a sports drink like Gatorade.
Opportunities abound for this health drink because it is marketed under the umbrella of Sainsbury’s. In other words it has a distinct advantage over other health drinks because Sainsbury’s already have thousands of loyal customers. Using Sainsbury’s loyalty cards and other incentives the company can easily persuade customers to consider Studental as opposed to other health drinks available in the market.
When it comes to threats, the product can be easily copied. It is fairly easy to develop a health drink with the same attributes. It is difficult to ascertain which product is better. It all boils down to the price of the product. In this case Studental should not only be marketed with aggressive pricing in mind but also a much better packaging in order for it to stand out in the crowd so to speak.
With regards to the macro environment the first thing that has to be considered is the political aspect. In this regard there is no problem when it comes to marketing a health drink. The problems that are often associated with cigarettes and liquor wherein higher taxes are imposed and restrictions are made to persuade consumers to use their hard-earned money on something else.
UK’s economic aspect is much better as compared to the previous years when it was also affected by the economic depression of the past few years. During this time people have a more optimistic view of the economy. As a result potential customers are willing to spend and it would not be difficult to persuade them to try this new product.
The social aspect of marketing centres on the idea that Studental is a health drink. This is good news because more and more people in the UK are becoming more health conscious particularly the younger generation who are more knowledgeable when it comes to the risk of drinking high-calorie content drinks as well as food products that contain preservatives. It is therefore not difficult to sell this product to the aforementioned target market.
Technology in terms of developing vitamin fortified drink is available and has been perfected. At the same time the technology to develop the appropriate packaging when it comes to health drinks is also available. There is therefore no problem when it comes creating the correct design in order to package the health drink correctly.
When it comes to the environment packaging of Studental must adhere to environmental standards in the UK. In addition, part of the packaging must include information regarding recycling. At the same time it must be highlighted that the company has a system in place that can take care of recycling issues. In other words there is a way to recycle the plastic bottles so that it can be reused in the production process.
When it comes to the legal aspect of manufacturing and marketing Studental the company must carefully study laws and other statutes that may become a problem in the future for Studental. It is doubtful however if there are restrictions that may make it difficult to market the product. As long as Studental satisfies government standards there is nothing that can be considered as a major source of problem in the future.
Sainsbury must continue to find ways to delineate their products to be able to take a bigger slice of the online supermarket industry. Tesco is a prime example of how to maximise the use of their website. The company must leverage the number of loyal customers who frequently visit their site. There must be continuous effort to make in-roads into the market share of Tesco and other supermarket chains in UK.
It is also important for the company to determine how to promote their products using non-traditional advertising strategies. It is no longer effective to pay TV ads because their target market may not be watching the kinds of shows wherein the ads are being broadcasted. For instance the target market for Studental is those belonging to the 16-19 age bracket. These teenagers frequent social networking sites. It is imperative that Sainsbury’s learn how to make their presence known through these social networking sites.
The use of loyalty cards has become a standard strategy in shopping stores and supermarket chains. Sainsbury’s must find more creative ways not only for the customers to increase their reward points, it is also crucial that they enjoy participating in any rewards program offered by Sainsbury’s. In other words it is not enough to simply encourage them to rack up points it is also important to create a way to reward them with non-monetary means. For instance, it can be arranged that part of the rewards program is to use a percentage of revenue to give to charitable institutions.
Aside from developing better products and improving their service, customer loyalty can be achieved by developing trust. According to Buttle (2004) trust is generally understood as having the sense of confidence and security with regards to a product or service that is achieved through a series of interactions between Sainsbury’s and the customers. The company must demonstrate benevolence and perform with the interest of the customers in mind. There must be honesty – the belief that the other party has necessary expertise (Buttle, 2004). This is easier said than done because it requires commitment.
When it comes to the Studental health drink there are still many things areas that require improvements. The customer may be confused when it comes to the real purpose of the product. If it is a sports drink then why does it have a sweet-bitter taste? A sports drink is something that is not only a vitamin fortified drink, it must also be a refreshing beverage.
In addition, a sports drink must be packaged correctly. A traditional plastic bottled health drink will not suffice because athletes may need to carry it with them and drink from the bottle while running or riding a bike. It is important to pay careful attention to the design of the bottle to prevent slippage. An athlete or a sports enthusiast must be able to hold it with one hand and not slip through and fall.
If it is a health drink and not a sports drink then it is important to highlight this fact. The sweet-bitter taste is justified because it contains no preservatives and made from natural ingredients. However, the packaging must also conform to this idea. If this is a health drink then it must not be packaged as a beverage for athletes. In order to further strengthen its capability to cater to a particular group then the company must not only market it as a health drink but also as way to strengthen the gums of consumers.
In this case it would be wise to reconsider the target market. The target market can also be children that needed a healthier alternative to sweet juices that lack nutrients. So there must be two types of packaging one for children from 6 years old to twelve years old. And the other one is designed to attract teenagers.
These are some of the things that the company must consider when it comes to Studental. There is also a need to find out the connotation of the name Studental. If the purpose of the name or label is to make the consumer think about dental problems then there is a logic to it. But if this is not the intention then it would be best to consider an alternative name for the new product.
The pricing must also be competitive because there many similar products available in the market. It is important to find out how much parents are willing to pay in order for them to buy this drink in bulk during the weekends and then use the same as part of the diet of their children for the duration of the week. There must be discount offers for buying in bulk.
The company must develop tools to connect them to their customers. Their Active Kids campaign is a good start. This endears them to the parents. This is a prime example of corporate social responsibility and shows that the company is willing to give back to the community. But aside from exposure there must be a way to receive feedback from the customers.
In the case of Studental there seems to be a large part of the product launch that was designed and created only from the point of view of the company. As mentioned earlier the traditional way of marketing no longer works. The company cannot simply develop a product that they believe the consumers need. The input must come from the customers and not only from research and development department.
Sainsbury’s is not far behind Tesco when it comes to market share. It uses a similar strategy as Tesco when it comes to online sales of goods and services. But there is a need for Sainsbury’s to expand its product ranges. This is a more practical application of segmentation. This will result in the ability of the company to tap into new markets. The delineation of products ensures that every type of demographic, people groups, social class can find a product that suits their needs.
Buttle, F. (2004). Customer Relationship Management. Oxford: Butterworth-Heinemann.
Ennew, C. & Waite, N. (2007). Financial Services Marketing: An International Guide to Principles and Practice. Oxford: Butterworth-Heinemann.
Gamble, P. et al. (2006). Up Close and Personal. UK: Kogan Page.
Hougaard, S. & M. Bjerre. (2004). Strategic Relationship Marketing. New York: Springer- Verlag.
Nemati, H., & Barko, C. (2004). Organizational Data Mining. PA: Idea Group Publishing.
Pride, W., Hughes, R., & Kapoor, J. (2010). Business. Mason, OH: South-Western Cengage Learning
Weinstein, A. (2004). Handbook of Market Segmentation: Strategic Targeting for Business. New York: The Haworth Press.