Marketing mix

Report

The aim of this report is to analyse the current Marketing Mix of Sainsbury’s, and to work out how it would be adjusted to satisfy the possibilities of financial services?development as well as the steps taken when considering the launch of the financial services products. This report is based on my own research by reading Sainsbury’s annual report, its web site and the discussions among the experts and professors, along with physically going to Sainsbury’s supermarket and getting some printed materials.

The mission of Sainsbury’s Supermarkets 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.

A, The Marketing Mix

Since early in 1996, the City was criticizing Sainsbury’s for allowing Tesco to get so far ahead of the game in terms of customer service, loyalty and perceived price competitiveness. Sainsbury’s was also accused of not promoting itself sufficiently and while running many similar customer initiatives as Tesco, it has failed to take the lead or develop unique products or services. Further to this, it has showed itself to be “unresponsive?in a fast moving market. Therefore, Sainsbury’s adjusted and developed its mission. In order to achieve its new mission, which is to rebuild its UK food retailing business. The company changed its marketing strategy and has successfully sold its Homebase DIY chain in the UK and its business in Egypt. This enables the company to focus the Group on food retailing and related activities. Apart from this, the current Marketing Mix ?product, price, promotion and place is being improved to meet its new mission. Let me talk about them in details.

A.1 Product

In order to become the UK consumer’s first choice for food, Sainsbury’s Supermarkets announced its new corporate identity in February 1999, “Making life Taste Better?recognizes that food is at the heart of people’s lives. “Making life Taste Better?is more than just a slogan or campaign, it is about a real cultural change at Sainsbury’s. Sainsbury’s takes action to focus on quality and innovation as well as enhancing the range of food and developing new products. They not only maintain the company’s historic strength in fresh foods: exotic fruits, ready meals, specialty breads and reduced –fat milks, but also Sainsbury launched its new Taste the Difference range In November 2000. It was the biggest food brand launch in the UK history. There are more than 350 foods in the range and each one has been grown or produced with the extra time, care and attention needed to bring out its full natural flavours. Apart from this, at the beginning of January 2001, Sainsbury’s Supermarkets first announced the introduction of biodegradable packaging made from potatoes, Sainsbury’s own ?label organic fruit was sold in the biodegradable trays at all stores. Now, Sainsbury’s has developed over 600 organic lines with the best sellers in the dairy and produce categories and major growth in grocery, frozen foods, bakery, fresh meat and delicatessen. Moreover, Sainsbury’s Supermarkets launched Blue Parrot Caf?in March 2001 ?a range of healthier food for children. The range addresses key nutritional concerns and provides comprehensive but clear labeling to all parents to make an informed choice about the products they buy for their children. So far 150 products are on shelf and a further 75 are under development. At present, Sainsbury has continued to develop its own one of most popular ranges?Be Good to Yourself range which food is lower in fat targeting those who want to take steps towards a healthier diet.

All the above ranges, Sainsbury’s is committed to the continuous improvement and development of its products, as it understands quality is of paramount importance to customers. For example, The Food Centre plays a pivotal role in ensuring excellence and innovation in Sainsbury’s Supermarkets own-label products. A highly experienced team with extensive knowledge of the food industry provides the company with specialist quality control, creative food development, sensory appraisal and supports Sainsbury’s Supermarkets range, product quality and choice programme.

In practice, Sainsbury’s Supermarkets launch new products every year in recent years. They exactly reflect a useful technique ?Consulting Group Matrix. Taking Be Good to Yourself for example, when it entered into the market in May 1999, it experienced the test marketing. However, shortly after, it was welcome by vast customers and became most popular range, which is called “cash cow? It is able to generate funds to support other products, as they are mature products with a stable market share. After that, the new biggest range Taste the Difference was launched in 2000. So far, Taste the Difference still has its strong life force as it is continually developed and improved, while Be Good to Yourself was re-launched in January 2002, focusing on cheap price and less fat in order to prevent its decline, which we call it “Dog? What’s more? It is not denied that Sainsbury’s Supermarkets had a poor performance during the late 1980s and early 1990s, and it was caught up with Tesco. Therefore, Sainsbury looked forward to the international market to stop the decline of the marketing share. It resulted Sainsbury announced the acquisition of Star Markets in the United States in November 1998, and took a 25.1% share in Edge SAE, a chain of food retail outlets based in Cairo, Egypt.

Talking about product, we can’t miss product positioning. This allows a business to assess not only its own portfolio, but that of its rivals as well. In turn, a business can then position its product into an appropriate segment. Let us look at the following product mapping diagram in Sainsbury’s Supermarkets.

High Quality

-Taste the Difference
-Be good to yourself Blue Parrot Cafe
-Normal range Organic range
-Economy range Italian range?
-Low Price High Price

Low Quality

It is apparent that Economy range targets for price conscious customers, who might be semi-skilled and unskilled manual workers or state pensioners, widows, casual workers and lowest grade earners. Blue Parrot Caf?attracts the attention of family with children.
Sainsbury’s Supermarkets always try to provide high-quality products, value of money. So far, a large Sainsbury’s Supermarkets offers over 23,000 products ?40% of these are Sainsbury’s own brand. In addition to a wide range of quality food and grocery products, many stores offer bread braked on the premises, delicatessen, meat and fish counters, pharmacies, coffee shops, restaurants and petrol stations.

A.2 Price

Price is a sensitive component of the marketing mix in Sainsbury’s. Nowadays, Sainsbury’s aims to be the UK consumer’s first choice for food shopping by reaffirming its lead in quality and offering outstanding value for money. In other words, Sainsbury’s objectives to regain its leadership and to maintain and develop its market share. The key term of pricing strategy is “value for money? Also, the mission mentions a competitive cost. In the grocery market it would appear that you could compete on price or service but the two may be mutually exclusive. If a retailer utilizes low price to compete its rivals, the only way to win is by reducing the overall cost bases, not the profit margins. In 1996, due to Sainsbury’s poor profits performance, it consequently fell share price, since moving closer to a low price platform. The other downside is that consumers may become cynical or even smart. Once a price has been reduced it is less easy to return prices to their previous level without alienating customers. Furthermore, it will encourage consumers to become promiscuous, shopping at whichever store has the price promotion. This does not engender loyalty to the store. Therefore, there is a clear danger that price-cutting will be used for short-term share gain, even though its long-term effects would appear to be less positive. Sainsbury’s realized its failure in a price war in 1996, so it changed its mission and strategies and put forward “value for money? It means Sainsbury wishes to cultivate a “value for money?image through attraction and retention of customers, moving into the quality of products and services. Moreover, Sainsbury’s strives to invest heavily in its distribution and IT systems to improve the quality of what it delivers and the effectiveness of its activity in order to reduce the overall cost. The purpose of the strategy is to gain the trust of customers and to rebuild its leadership. On the other hand, according to the product positioning, Sainsbury’s set different price targeting on different groups.

A.3 Promotion

Sainsbury’s always fully takes advantage of above the line and below the line promotion to build up its strong brand and to draw attention to products in order to gain more customers. Sainsbury’s has learnt that its own brand identity has become more important than the products they sell and greater wealth can now be created by the communication of an overall retail brand identity. In order to achieve this aim, firstly, Sainsbury’s announced its new identity “Making life Taste Better?indicating its mission to re-establish Sainsbury’s Supermarkets as the customers?first choice. Sainsbury’s uses media such as television, radio and cinema advertising its corporate image. For example, at present, Sainsbury’s is advertising on national television –Channel 5 to reach a vast audience. At the same time, it goes to national radio 4 to make a great impact on audience—-Sainsbury’s, making life taste better. Sainsbury’s is one of top ten TV ad recall. This is about above the line promotion that Sainsbury’s has been ultilising. Additionally, below the line promotion including direct mailing, sales promotions, merchandising and packaging is also essential for Sainsbury’s. Here, a key weapon is that Sainsbury’s launched its Reward Card nationally in June 1996. With a Sainsbury’s Reward Card, for every ? you spend instore you will earn 2 Reward Points. When 500 points have been collected customers can either use them as an automatic ?.50 discount off their shopping bill or collect a Reward Voucher which can be used for a wide variety of third party offers which, in many cases, doubles their value. There are now over 16 million Reward Cards in issue. Reward Cards are as a longer term marketing tool since they enable retailers to learn more about their customers?situation and shopping habits and respond accordingly with tailored offers. Moreover, in June 1997 the first anniversary of the Sainsbury’s Reward Card, Sainsbury’s launched the Sainsbury’s Pet Club offering pet care hints, discounts on products and a regular Club magazine. The 0-5 Club was launched in January 1998, and offers discounts to young families through their Sainsbury’s Reward Card. It offers saving of over ?00 in the first year of membership and very quickly attracted over 250,000members. Due to Reward Card, Sainsbury’s can develop its direct mailing to introduce some new promotion, such as 50 buy 1 get 1 free offers this week and over 3000 prices chopped and we’re still chopping and so on. It is also worth mentioning a sense of branding in Sainsbury’s. It involves an emphasis being placed upon both the corporate and individual brand name such as Taste the Difference and Be Good to Yourself.

Last but not least, Sainsbury’s also aims to fulfill its responsibilities to the communities and environments in which it operates in order to promotion its image in public. For instance, over the past six years, Sainsbury’s Equipment for Schools programme has given away over ?8 million worth of free school equipment. This year, the scheme is running from 30 January to 24 April 2002.

A.4 Place

Distribution is about one of the 4”ps?of the marketing mix ?place. A business must get the product to the right place, at the right time. As we already know, the mission of Sainsbury’s is to be the customer’s first choice for food shopping by providing high-quality products, value for money, excellent service and attention to detail at a competitive cost through working faster, simpler and together. Sainsbury’s is the largest food retailers in the UK. It has 59 largest stores, 273 supermarkets, 119 town and city centres stores and 8 centrals as well as 23 Sainsbury’s locals. Different formats are developing to match store offer to specific customer shopping missions and locations. In order to meet the needs of vast customers, forty-five of its stores trade 24 hours a day and other larger ones overnight on Fridays. With regard to store closures, Sainsbury’s always takes into consideration the impact on customers, its colleagues and on the centers in which it operates. Sainsbury’s is on-track with its major supply chain renewal programme in which it is aiming to create a world-class grocery distribution network and to work together more effectively. It has already secured sites for new depots and begun construction. Sainsbury is investing heavily in its distribution and IT systems. Since 1998, Sainsbury’s established its home shopping delivery service, called Orderline, which customers could place order by phone or on the internet. Its e-commerce developed very quick, including a partnership agreement with LineOne. Its e-commerce service, Sainsbury’s to you, has made rapid progress last year after a late start into the home delivery market. Sainsbury’s has now achieved over 50 per cent national coverage with customers shopping three times per month on average It will be able to bring Sanisbury’s with the first company in the world to develop food products on the internet.

In conclusion, Sainsbury’s always fully uses the marketing mix to achieve its mission. Additionally, Sainsbury’s constantly improves its strategies on the marketing mix to meet the needs of its customers. Ultimately, Sainsbury’s never forgets doing marketing research that provides a wide variety of information about the people who may be interested in buying its products. Although we all know a supermarket targets vast customers, Sainsbury’s still breaks down a market into sub-groups with similar characteristics, which is know as Market Segmentation. Sainsbury’s uses the market segmentation to promote its products to the right people and to differentiate products towards different groups and to allow it to sell more products overall. Meanwhile, it will enable it to obtain vast customers?trust and build up customer loyalty. For example, as every new range with Sainsbury’s own label is launched, Sainsbury’s targets different segments. Economy range targets for price conscious customers who might belong to D and E in IPA. Blue Parrot Caf?attracts the attention of family with children. Be good to yourself interestes in those who have a healthy life style and the old people. Based on Sainsbury’s marketing mix, it also demonstrates its excellent manner and customer service such as bringing a combination of products together in a convenient location, within a pleasant environment, open long hours as well as bag packing, credit/debit card payments and offering cash back and so on. In addition to this, Sainsbury’s constantly provides opportunities to all employees to develop their abilities and sense of customer service and well reward their contribution to the success of the business.

B Marketing development
B1.1 the possibility of finance service

Sainsbury’s has been trying hard utilizing the full range of marketing mix elements to build up a reputation for quality food and DIY products over many years, developed from the early Sainsbury’s stores that offered customers highest quality at keenest prices. Sainsbury’s has built on its high level of customer trust to transfer good value, without compromising quality, into new markets. In other words, having a loyal customer base, which trusts the Sainsbury’s brand and values the range of services it offers, Sainsbury’s can aim to serve customers in new markets and grow its business for shareholders. By applying skills and competencies learnt in one market it can improve its businesses in others. In particular, since it launched its loyalty card known as Reward Card, which millions of customers applied for, it could enable Sainsbury’s to obtain and analyse its customers?details such as individual needs, shopping habits and address and so on. Apart from this, Sainsbury’s frequently improves its information technology, online service and increases its form of formats that it is able to make Sainsbury’s reach its vast customers. All of them eventually resulted in Sainsbury’s launching its bank. It indicated Sainsbury’s started its new market ?finance service. Sainsbury’s Bank is the first bank to be opened by a British supermarket and has recently introduced a trial of manned in-store Personal Banking centers. Current products include, instant access savings accounts, fixed stepped-rate savings bonds, direct ISA. Mortgages (flexible options, fixed, variable, discounted and buy to let), three credit cards, personal loans, Drive, a car purchase scheme, home and contents insurance, travel insurance and PetCare insurance. Whatever the form of financial products is, they have much in common, which they provide competitive rates, little risk, and easy approach as well as extra benefits such as Rewards Points added for customers. Consequently, it has attracted millions people to join Sainsbury’s Bank.

B 3.2 the steps taken and consideration

On 19 February 1997, Sainsbury’s bank was announced with two savings accounts and two credit cards through direct 24-hour telephone banking.

Sainsbury’s Bank is a joint venture with the Bank of Scotland, which owns a minority interest of 45%. This bank took advantage of the trust quality of Sainbury’s, coupled with Bank of Scotland’s experience and infrastructure. It developed new forms of remote organizations and service delivery, via call centers, and it operated for a fraction of the cost of conventional financial services organizations. In particular, the new banking jobs are in call centers, and require few of the traditional banking skills or qualifications. Sainsbury’s therefore could offer more attractive rates to consumers to shop around. What’s more? Sainsbury’s could make use of the information about its customers that Sainsbury’s obtained from Reward Card issued and sent application forms of its finance service to its customers.

By March 1998, Sainsbury’s Bank had 700,000 customer accounts with ?
1.5 billion on deposit, so Sainsbury’s could make the most use of the deposit to extend its range of financial products such as Personal loans and an Options Mortgage, which Sainsbury’s targets the smaller group comparing savings accounts.

?Since Sainsbury’s launched its general financial produces like its food products, Sainsbury’s started to differentiate its products and approach to different segments. For example, after the launch of the Sainsbury’s Pet Club offering pet care hints, discounts on products and a regular Club Magazine in June 1997, Sainsbury’s gained great opportunities to know the certain customers?lifestyle which they love pets and to predict how many customers?might be interested in Petcare Insurance so that Siansbury’s was able to set up this new finance product. Apart from this, customers can apply for this insurance through the Internet. It improves the process efficiently and at the same time it can reduce the cost of operation.

B 3.3 Detailed description of financial products and customer portfolio

Sainsbury’s financial products mainly comprise savings account, credit card, loan, mortgage and insurance. All compete heavily on price with cheaper loans and more attractive savings rate than the clearing banks. It utilities new technology and a greater willingness among consumers to shop around and changes the structure of banking. In particular, before every product is announced, Sainsbury’s always analyses prospective customer portfolio so that it could reasonably evaluate a new financial product and could be succeed in every product launched. For example, Savings account.

This is a basic financial product. In order to develop other products and ensure Sainsbury’s Bank to be successful, Sainsbury’s needs to accumulate funds depending on customer deposit. Savings account therefore targets customers as much as it can like Reward Card and it offers irresistible advantages to attract vast customers. Sainsbury’s Bank instant access savings account is just like every other aspect its service ?straightforward, convenient and reassuring. It’s also competitive, with an interest rate of up to 4.10% gross pa. It can start saving with as little as ? and withdraw up to ?50 per day. Furthermore, it has no penalties of withdrawals and provides 24-hour telephone banking service.
?Mortgage
After launching savings account and credit card, Sainsbury’s could develop its new financial products. Mortgage is one of new products. There are a few different mortgages running in Sainsbury’s Bank such as discount mortgage, fixed rate mortgage and buy–to–let mortgage and so on. For example, regarding buy-to-let mortgage, it gives people chance to buy up to five properties for rental and repay over 5 to 25 years and choose between interest only or capital and interest repayments with a variable rate of 5.5%. Comparing savings account, mortgage targets at specific ?target groups?based on life-cycle stages. Sainsbury’s is very interested in those who are young married couple without child or with youngest children. Here, it is worth mentioning about the 0-5 Club that offers discounts to young families through their Sainsbury’s Reward Card. It enables Sainsbury’s to appeal to this group and obtain their loyalty. It equally helps Sainsbury’s to gain this group information to launch Mortgage.

Insurance

Insurance was launched after Sainsbury’s has had savings account, credit cards, mortgage and loan, such as travel insurance, pet insurance and home insurance. For instance, per insurance is one of only a few insurers who cover the costs of longer term conditions such as diabetes, heart disease or arthritis for more than 12 months and 500 Reward Points of each pet covered. It very clearly shows that Sainsbury’s concentrates on the certain groups according to their lifestyle. After launching Pet Club, it is easy to make Sainsbury’s target the members of Sainsbury’s Pet Club to launch pet insurance.

To sum up, Sainsbury’s as one top of retailers in the UK makes the most use of a marketing mix to improve its performance. Sainsbury’s set new mission to regain market share back from Tesco since 1995 and to be the first choice of 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. At the same time, Sainsbury’s utilities its brand values: excellent quality, range, service and value, competencies, knowledge and experience to leverage Sainsbury’s Bank. It ensures the possibility of development of financial service that will continue to explore and develop growth opportunities. Additionally, Sainsbury’s well designs every financial product with clear segmentation, advanced analysis, reasonable preparation and rational steps, especially its outstanding return and competitive rates as well as little risk. Last but not least, Sainsbury’s continuously strengthens its information technology system and distribution network to make Sainsbury’s products easy to reach customers. All engender the success of Sainsbury’s finance service. Sainsbury’s still endeavors to lead this field in the research and delivery of new products to meet the needs of its customers.

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