The digital and online marketing strategies adopted by the main UK grocery supermarkets - Essay Example

Digital and Online Marketing Strategies Adopted by UK Grocery Supermarkets Contents Case Analysis 3 United Kingdom Grocery Market Structure 3 Digitaland Online Marketing Strategies 5 Tesco 6 Sainsbury 7 Morrison 8 Waitrose 8 ASDA 9 Comparative Analysis 10 Marketing Strategy Analysis 11 Summery 12 Reference List 14 Case Analysis Over time, aggregate demand generated for consumer use goods and services has substantially increased in major economies of the world. Higher demand has carved way for increased production oriented activities (Su, Li and Cui, 2009). Furthermore, higher production participation has enhanced the degree of market rivalry between profit making commercial firms (GN, 2014). At this juncture, without the essence of modern cost efficient marketing activities, a company cannot achieve success in business. The researcher in this assignment is a marketing consultant, responsible for this report that summarizes online and digital marketing strategies implemented by grocery supermarkets of the U.K. The summary will include critical analysis of the strategies, based on a comparative analysis framework. United Kingdom Grocery Market Structure In 2013, it was estimated that net worth of the U.K. grocery market was £169.7 billion. The surplus value of the industry had increased by 3.7% from 2012 to 2013. It is forecasted that by 2018, worth of the industry would be £205.9 billion, along with an annual growth rate of 21.3% (IGD, 2014). Figure 1: Growth of U.K. Grocery Market (Source: IGD, 2014) From the above graph, it can be claimed that despite recession and financial crisis from 2008 to 2010, grocery industry of the U.K. has reflected significant growth over time. Figure 2: Dominant Powers of U.K. Grocery Market (Source: IGD, 2014) From the above pie diagram, it is deduced that grocery market of the U.K. is primarily dominated by hypermarkets and superstores. Figure 3: Supermarkets Share of Industry Business (Source: EconomicsOnline, 2014) The U.K. grocery supermarket industry is marked by features of Oligopolistic markets (Solomon, et al., 2006). The most dominant players of the industry are Tesco, ASDA and Sainsbury. Digital and Online Marketing Strategies Since the U.K. grocery supermarkets operate in an Oligopolistic market, they are exposed to cut-throat competition. Each profit making company undertakes decisions regarding price and output on the basis of strategic behaviour (Rayport and Jaworski, 2003). In the current epoch, internet has helped in formulating new strategies and business models for firms across several industries (Srinivasan, Park and Chang, 2005). Online shopping or retailing approaches have substantially changed the U.K. supermarket retailing process. These changes are noted in channel coordination and development, business scope, central business model, core processes, buyers’ value creation and online partnerships related to firms (Solomon, et al., 2006). Figure 4: Business Model for a U.K. Supermarket (Source: Yousept and Li, 2004) The above figure shows major factors in the standard business model of any supermarket of the U.K. Even though all supermarket companies follow the same business model, their revenue and market share greatly differ. Figure 5: Criterion for Divergence (Source: Yousept and Li, 2004) The above chart presents basic elements on grounds of which business returns or surplus of supermarkets differ from one another. Tesco Tesco has started to conduct trade over digital marketplaces from 1994, which was named as “Tesco Direct” (Tesco PLC, 2014). Later in 2000, the company had launched its official website, Tesco.com. Tesco is considered to be the largest online U.K. based grocery retailer in the world. The company had invested large sums of money for online marketing purposes. It had conducted advertisement campaigns for internet phones it had sold. The company promoted these internet phones by providing free call facility the owners. Tesco was also the first online grocery retailer, which had initiated home delivery facilities to customers. However, all activities of the company are highly sustainable to the environment. The customers are delivered products in green boxes from the Tesco home delivery service branches and these boxes create minimal non-biodegradable wastes. Tesco was the first supermarket company within the industry to launch a special API service for customers (Tesco PLC, 2014). Tesco API is a special online programmeweb that helps buyers make their purchase decision from a diverse catalogue of Tesco products (Cunliffe, 2014). Through this software, consumers are able to search for required grocery products according to their respective barcodes. The consumers can also add, delete, amend or shelf specific products in their digital baskets. This service of the company uses smart appliances like, networked fridges. The consumers are able to place order for grocery products of the company directly through networked fridges. In 2014, the CEO of Tesco, Philip Clarke, has declared to launch a new “digital Clubcard”. The card will provide special loyalty benefits to customers on occasions of iterative purchases. The customers would be able to use the digital Clubcards on their smartphones. Furthermore, it was claimed by the CEO that digital Clubcard would help customers to perform customized activities such as, purchasing baby products or food products with low calories (Tesco PLC, 2014). The brick and mortar traditional business performance of Tesco is estimated through the primary business curve, while returns of online business are estimated from its second curve. The firm has declared that at present, it is trying to lessen the gap between first and second curve; hence, seeking higher integration between online and offline business (Tesco PLC, 2014). Sainsbury Sainsbury is considered to be the second largest supermarket chain in the U.K. after Tesco. In 1995, the company had initiated online trade of wine products through the business branch named “Wine Direct” (Sainsbury, 2014). However, in 1996, Sainsbury collaborated with Hewlett-Packard for facilitate complete online trading of all grocery items. The company traded an exhaustive variety of food or grocery products by way of launching a business branch, “Orderline” (Sainsbury, 2014). The Orderline service allowed customers to place orders from telephone, faxes or internet. In 1999, Sainsbury merged its e-business activities with LineOne (Sainsbury, 2014). Sainsbury provides both business-to-business and business-to consumer e-commerce services to customers. Since 2000, household shopping branch of the company was rebranded as “Sainsbury to You” (Sainsbury, 2014). Even so, home delivery services were provided by the company under brand name of “Sainsbury Online”. Due to incurring loss in digital business in 2007, the company started to provide only core grocery products to buyers. Food, drink, toys and other products were again sold by its online trading branches after 2010. While marketing online grocery products and services, Sainsbury had claimed that apart from selling high quality products, it also offers detailed information to the customers regarding quality of products sold. Tesco adhered to store based delivery system, but Sainsbury was the first to initiate a dedicated picking centres for offering online delivery services to customers (Sainsbury, 2014). Morrison Morrison has recently launched its online retailing services in the year 2010. The firm had commenced its digital business by purchasing 10% stakes of a U.S. based online grocer named FreshDirect (Waller, 2013). The company had sent its marketing employees in the U.S. in order for them to learn about various e-business strategies. Finally, 2013 onwards, Morrison began providing home delivery services through company-owned vans. All delivery related activities had begun in entirety only from the beginning of 2014. Nonetheless, in January 2014, the CEO of Morrison, Dalton Phillips, had claimed to sell off 10% FreshDirect stakes (Butler, 2014). This is because; the firm is facing severe financial crunches. Presently, the company has established its own online selling website and is no longer dependent on FreshDirect. Senior officials of Morrison claimed that company severely lacks behind in conducting commercial operations online (Morrison, 2014). Morrison has introduced the recent doorstep check facility whereby customers can refuse the purchased products, if they are unhappy with the same. In order to improve sales, Morrison provides special discount offers to customers on occasions of bulk purchases (Butler, 2014). Waitrose Waitrose has started conducting its online grocery trade from 2009. Nevertheless, it is noted that home delivery services of the company are available in limited locations. Individuals often confuse online trading activities of Waitrose with that of Ocado (Waitrose, 2014). Waitrose.com was the first online grocery retailer that completely abolished home delivery charges for customers. The company is found to incorporate a search engine marketing tool for enhancing annual revenue in a multiplicative manner. Waitrose had appointed a U.K. digital marketing service providing firm, Jellyfish, in order to frame online marketing strategies. Jellyfish had introduced desktop and mobile marketing campaigns on behalf of Waitrose (Waitrose, 2014). As a special digital marketing instrument, Waitrose attempts to encourage sales of organic products, thereby claiming to help customers practice healthy living habits. The company provides customized services to consumers and estimates recent trends in their tastes and preferences by maintaining an appropriately skilled in-house data analytics team (Waitrose, 2014). Advertisements and price discounts are common marketing instruments of Waitrose. ASDA ASDA had incorporated online services back in 1998 (ASDA, 2014). ASDA openly claims to follow the digital business model of Tesco. The company’s advertisement and price discounting strategies are also similar to that of Tesco. Even so, the company has admitted to face difficulties in acquiring brand loyalty from customers’ base in the U.K. (Spremić, 2003). The company encourages customers to purchase its products by circulating attractive promotional messages on mobile networks (ASDA, 2014). Internet applications of ASDA generate numerous push messages whereby households are encouraged to purchase its products. The company also introduced special games online such as, Halloween Treasure Hunts and offers money-off vouchers to winning customers. These activities act as marketing instruments of ASDA through which online sales are boosted. Factors Tesco Sainsbury Morrison Waitrose ASDA Online Business Inception 1994 1995 2010 2011 1998 Mode of Online Entry Own website launch Joint Venture Joint Venture Own website launch Own website launch Marketing Strategy Customer value creation and differentiation Customer value creation and differentiation Customers value creation Customers value creation Customers value creation Efficiency One dominant market player with effective marketing strategies Becomes one of the dominant market players with effective marketing strategies Low efficiency because of commencing online business later than others One dominant market player with effective marketing strategies One dominant market player with effective marketing strategies Marketing Instruments Advertisement campaigns, discounts, home delivery services, API service and digital Clubcards. Discounts, home delivery services, advertisements and customer loyalty cards Discounts, doorstep check facility and advertisements Discounts, free home delivery services and several advertisements campaigns Advertisement and promotional campaigns, discounts, home delivery services Market Share Growth 2013 29.9% 16.8% 11.6% 4.7% 16.9% Own customized digital business model In-store In-store and dedicated Dedicated centre In-store In-store Coupons and loyalty cards Clubcard, Sainsbury’s vouchers and e-vouchers e-vouchers and Tesco’s vouchers e-vouchers Coupons and e-vouchers No Comparative Analysis Considering the above context, it would be correct to state that within Oligopolistic market of the U.K. grocery industry, Tesco, Sainsbury and ADSA are the most dominant organizations. The other companies such as, Morrison and Waitrose, have started to conduct online trade in immediate past and still have long way to go, so as to effectively compete with the primary market rivals. However, from this aspect, it can be claimed that digital trading experience of a firm is directly related to success of online retailing. By the time Morrison and Waitrose entered the digital marketplace, ASDA and Tesco had already proven to be experienced players in this field. Longer learning curve in business has helped Sainsbury, Tesco and ASDA enjoy greater market demand compared to Waitrose and Morrison. Nonetheless, marketing strategies of grocery supermarket firms are largely similar (Defra, 2006). Marketing Strategy Analysis All companies in the U.K. grocery market attempt to enhance value or utility thresholds of its customers, but the two most successful companies are Tesco and Sainsbury. This is because; both these firms have extensively tried to implement the strategy of differentiation in business. Through non-standardized digital marketing strategies, Tesco and Sainsbury have tried to deliver product, price, place and promotional services in effectively different manners than that of other grocery retailing firms within the industry. ASDA’s annual business returns and loyal customers’ strength are less than Tesco. This is because, the company openly claims to imitate Tesco’s self-customized business model for online trading. It is found that all online grocery retailers of the U.K. attract customers through price discount offers. Online selling has one major drawback against conventional selling process. The consumers are not able to practically scrutinize the products while making purchase (Singh and Waddell, 2003). Hence, word-of-mouth promotional strategy becomes less effective in online business compared to price discounting strategies. Traditionally consumers of the U.K. used to conduct home shopping activities over telephone and fax. Such means of shopping were expensive and less affordable for most consumers. While conducting online business, the U.K. grocery companies claims that e-commerce is a cheaper alternative to traditional online shopping means. As a result, customers are encouraged to make grocery purchases online owing to cheaper costs. Internet can be accessed by households through their smartphones, desktops, laptops or tablets (Wright and Dyer, 2000). Grocery supermarket companies of the U.K. have expanded scale and scope of their commercial operations across foreign countries such as, the United States and China, through online selling means. These companies use a different online trading website for each country. In addition, marketing mix strategies of firms are formulated as per adaptive theories, which augment intellectual capital of commercial firms (Verisign, 2013). For instance, Tesco provides special discounts during Christmas only in the western countries. Consequently, marketing activities of grocery firms are modified in accordance with external business environment in each market. Strategic innovation is a vital marketing tool for grocery companies of the U.K. Under this process, companies strategically modify business model in ways, which distinguish its services from that of market rivals (Velmurugan, 2009). The firms also use web strategy for estimating customized preferences of buyers. By implementing the web strategy, supermarket companies make rigorous analysis about “customer web”, elaborating on features of their demand trends. Figure 6: Online Service Delivery Model (Source: Yousept and Li, 2004) The above figure shows the basic service delivery model for a U.K. online grocery company. The shopping infrastructure is created with assistance of suppliers, web partners, commercial coalitions and strategic partners (Keller, 2001). Summery The above context suggests that marketing and strategic management are two crucial success determining factors for any organization within the U.K. supermarket industry. Since companies experience Oligopolistic market structure, strategic innovation and web strategy are two most influential online marketing strategies. The role of sales executives becomes almost negligible in online business because there is no direct relationship between consumers and sellers (Day and Wensley, 1988). Even so, price discounts, sales promotions and digital trading experience substantially influence revenue and profits of online grocery retailing companies. The online product, pricing, place and promotional strategies of grocery supermarkets are formulated based on differentiation. Through increased differentiation, companies try to improve quality of its products and services. From report analysis, it is proved that Tesco, followed by Sainsbury and ASDA, are three most popular multinational online grocery retailing firms of the U.K. Supermarket companies, such as, Morrison and Waitrose, lack adequate experience and monetary resources for investing in differentiated marketing activities. Nevertheless, flexibility, cost reduction, business internationalization and non-imitable market initiatives are primary aspects that determine long-term success of online business of any U.K. grocery supermarket company (Piercy, Cravens and Lane, 2010). Reference List ASDA, 2014. ASDA. [online] Available at: [Accessed 13 June 2014]. Butler, S., 2014. Morrisons launches price-cuts campaign and online grocery service. The guardian, 10 January. Cunliffe, P., 2014. Tesco lifted by surge in online sales over Christmas. Express, 10 January. Day, G. S. and Wensley, R., 1988. Assessing Advantage: A Framework for Diagnosing Competitive Superiority. Journal of Marketing, 52, pp. 1–20. Defra, 2006. Economic note on UK grocery retailing. [pdf] GOV. Available at: [Accessed 13 June 2014]. EconomicsOnline, 2014. Supermarkets. [online] Available at: [Accessed 13 June 2014]. GN, 2014. U.K supermarkets. [online] Available at: [Accessed 13 June 2014]. IGD, 2014. UK grocery retailing. [online] Available at: [Accessed 13 June 2014]. Keller, K., 2001. Mastering the marketing communications mix: Micro and macro perspectives on IMC programs. Journal of Marketing Management, 17(1), pp. 819-847. Morrison, 2014. Morrison. [online] Available at: [Accessed 13 June 2014]. Piercy, N. F., Cravens, D. W. and Lane, N., 2010. Marketing out of the recession: Recovery is coming but things will never be the same again. The Marketing Review, 10, (1), pp. 3–23. Rayport, J. F. and Jaworski, B. J., 2003. Introduction to e-commerce. New York: McGraw-Hill. Sainsbury, 2014. Sainsbury. [online] Available at: [Accessed 13 June 2014]. Singh, M. and Waddell, D., 2003. E-business innovation and change management. Hershey: Idea Group Publishing. Solomon, M., Bamossy, G., Askegaard, S. and Hogg, M.K., 2006. Consumer behavior: A European perspective. Essex: Pearson Education Limited. Spremić, M., 2003. Moving to e-business: Exploratory study on e-business readiness in Croatian large companies. Zagreb International Review of Economics & Business, 1(2), pp. 103-119. Srinivasan, V., Park, C. S. and Chang, D. R., 2005. An approach to the measurement, analysis and prediction of brand equity and its sources. Management Science, 51(9), pp. 1433-1448. Su, Q., Li, L. and Cui, Y., 2009. Analysing relational benefits in e-business environment from behavioural perspective. Systems Research and Behavioral Science, 26(2), pp. 129-142. Tesco PLC, 2014. Tesco PLC. [online] Available at: [Accessed 13 June 2014]. Velmurugan, M. S., 2009. Security and trust in e-business: problems and prospects. International Journal of Electronic Business Management, 7(3), pp. 151-158. Verisign, 2013. Benefits and barriers of bringing a small business online: perspectives from global small businesses. [pdf] Available at: [Accessed 13 June 2014]. Waitrose, 2014. Waitrose. [online] Available at: [Accessed 13 June 2014]. Waller, P., 2013. Morrisons delivers groceries online with Ocado. Express, 21 December. Wright, P. M. and Dyer, L., 2000. People in the e-business: New challenges, new solutions. [pdf] Cornell University. E-commerce Available at: [Accessed 13 June 2014]. Yousept, I. and Li, F., 2004. Online supermarkets: Emerging strategies and business models in the UK. [pdf] University of Newcastle. Available at: [Accessed 13 June 2014]. Read More