Analysis of the Aldi Marketing Environment - Case Study Example

Aldi Supermarket Stores in Australia of the of the Introduction Aldi is a discount supermarket chain located across theglobe. This retail chain was founded in 1946 by Theo and Karl Albrecht. Aldi possesses 9000 stores, distributed across 18 countries. The firm has an annual turnover of approximately €50bn. Aldi has its headquarters based in Germany and serves areas like United States, Europe and Australia. Albrecht brothers initially sold food products in small retail outlets. In 1960 this company was split by the two brothers and Aldi was formed. In this study, a thorough analysis shall be conducted on Aldi Australia. The mission of this supermarket chain is to provide superior quality products to customers at considerably low prices. In 1990s the company has expanded its operations in Australia through opening few retail stores. Woolworths and Coles have dominated Australian retail market over the years. Aldi has posed a threat for these retail firms by offering wide array of products at low market price. However there are challenges witnessed by Aldi since 60% of grocery market share is owned by Woolworths and Coles. Australians prefer to shop from Aldi but the company would require time to gain competitive advantage in retail sector. In this study, micro and macro environmental factors affecting business operations of Aldi Australia shall be identified, followed by an evaluation on their current marketing strategies. Marketing mix elements would also be redesigned in later part of the study, so as to add value to Aldi’s operations. 1. Marketing Environment Analysis Micro Trends 1.1 Trend One The first most important micro environment trend is competitors. Strategic advantage could be gained by firms only through positioning their products or services well against that of competitors. Aldi Stores, Australia needs to be proactive by nature rather than reactive. Competitors are an important micro-environmental trend because it decides upon effectiveness of business strategies. For instance, Australian retail industry is dominated by two large players – Woolworths and Coles. Aldi Australia can be successful over longer period of time if the company is able to analyze strategies of its competitors and undertake proactive measures (ALDI, 2015). The competitive trend is a threat for the firm. This is because any innovative strategy designed by competitors can acquire market share of Aldi Stores in Australia. Competitors as a micro trend is important compared to other trends since it cannot be controlled efficiently by the firm. 1.2 Trend Two Customers can be considered as the second micro-environmental trend. In case of Aldi Australia, consumer markets provide an opportunity for the company. Alternative brands and low prices are able to attract customers. This micro trend is an opportunity for the firm because addressing hidden demand shall help in gaining higher profit margins. Long term sustainability of a company depends on their ability to build up a large base of loyal customers. Word of mouth publicity is a cost effective marketing strategy which can be explored when a company identifies different taste or preferences of customers. Consumer market is an important micro trend for Aldi Stores because it is a key driver of competition. 2. Marketing Environment Analysis Macro Trends 2.1 Macro Trend One Demographics have greatly affected retail sector. Generation Y has an influence on overall retail segment. This particular generation usually comprises of individuals belonging to age group of 30 to 35 years. Generation Y demands for different products and has different attitudes towards shopping (KPMG, 2015). Population growth can be stated as one of the demographic trends. Figure 1 outlines the population change in Australia. Figure 1: Population Growth (Source: KPMG, 2015) As per figure 1, middle age population has witnessed a growth percentage of 37.3%. This aspect would enhance market opportunities for Aldi Stores, Australia. Figure 2: Population for selected age range (Source: Australian Government, 2014) Figure 2 clearly indicates that Australian population mainly comprises of people belonging to age group 16 to 64 years. Retail sector acquires high profit margins particularly from this age segment. Demographic is an important macro trend because it portrays the actual scenario of consumer market segment of a particular region. 2.2 Macro Trend Two Economic trend helps to determine actual market environment of a business organization. The rate of customer spending in Australia has been highlighted in figure 3. Figure 3: Australian consumer spending (Source: Trading Economics, 2015) Consumer spending in this geographical region has increased over the years. This shall positively affect business operations since customers would spend more on products offered by supermarket chains like Aldi. Australian government has implemented a tax structure which is inclined towards distributing income equally between rich and weaker sections of the society. Figure 4: Household income, consumption and saving (Source: Reserve Bank of Australia, 2015) On the basis of figure 4, it can be stated that disposable income of Australian customers has increased. This is well aligned with market opportunity of addressing hidden demands of customers. Australian customers are more focused on quality and brand rather than competitive price range. This shall create a positive impact on business operations of Aldi. Economic trend always has a greater significance in comparison to other macro trends since it denotes household income level, disposable income, tax rate, consumer spending, etc., of a geographical region. All these factors combined together are responsible for revenue margins gained by a company. 3. Marketing Mix Evaluation and Critique Current Approach Evaluation Product Products offered by Aldi satisfy need of customers. It is a discount store offering wide array of daily products along with groceries. Product quality is the major area of concern; hence long term relationship is developed with suppliers. The company is not focused on narrow product range as stated by marketing myopia approach. Variety, brand name and quality aspects are taken into consideration by Aldi Stores. Price Target customers of this discount store are individuals belonging to middle or lower income segment. Competitive pricing strategy is adopted by Aldi Stores. Low priced products are purchased from suppliers in bulk amount and savings are transferred to customers. Value proposition is an important marketing concept and it is been addressed efficiently by Aldi Australia through its low priced product range (Assael, 2005). The retail firm offer benefits to customers in the form of competitive prices. Place Supplier base is selected by the firm on the basis of meeting quality and time demand. Stores designed by Aldi are simple and cost effective. New store locations are evaluated in terms of area population, store positioning, accessibility and larger parking space. Demand chain management is not observed in Aldi stores. There are high inventory costs. Distribution channels are designed properly in order to reduce lead time. Promotion Aldi stores encompass a brand message – low price and high quality. Below and above-the-line promotional methods are followed by the firm. Leaflets and advertisements are above the line promotional techniques. “Like brand only cheaper”, is a common advertisement message of Aldi broadcasted in radio and television. Below the line promotion comprises of third party endorsements, social media sites and public relations. Directs e-mails are also send to customers. As per marketing management theory, customer equity is not developed by the firm. This is due to lack of loyalty programs (Keller, 2006). Advertisement and direct marketing techniques incorporated by Aldi helps in acquiring new customers but there are no strategies for customer retention. Physical Evidence Reflected through design of supermarket chains. Aldi stores are small but products can be easily located. Stores are opened across multiple locations in Australia. Woolworths and Coles possess spacious retail outlets. Product categories are less due to lack of space. Process Waiting time in queue is reduced by inaugurating four to five pay centers. Each product category includes full details and is placed at higher position to attract customer attention. Staffs are well trained as per their job roles, so as to deliver required information to customers. The service delivery is not technology driven at Aldi stores. This in turn reduces customer satisfaction level. Customer feedback is not acquired to improve upon service delivery design People Training sessions are organized by the company so that staff can resolve customer queries. On the other hand, additional benefits are also offered to employees of Aldi. Internal relationship management is observed in this firm (Batey, 2012). Relationship is developed across cross-functional teams. 4. Marketing Mix Redesign 4.1 Product Aldi stores offers wide array of products to its customers. This supermarket chain can form strategic partnerships with other firms in order to provide branded items to Australian customers. Clothing sector can be targeted by the firm. Australian customers are brand-conscious and this can be regarded as a market opportunity for further growth (ABC, 2015). Product packaging can be redesigned by incorporating Aldi brand name on product categories such as fruits, vegetables, etc. 4.2 Price Competitive pricing or low pricing strategies would not be appropriate for long term growth. This strategy can be substituted with cost plus pricing strategy. In cost plus pricing strategy, Aldi Australia, can take into consideration daily operational costs along with required profit margins. It shall enable the company to expand over larger geographical base and gain higher profit margins. 4.3 Place Distribution channel for any business needs to be strong enough so as to access wider consumer market. Online platform can prove to be an effective measure for Aldi stores, Australia. This is because, customers prefer to shop at convenience and online shopping stores provide this form of leisure. The company can design an online portal whereby it can deliver ordered products to specified residential address in least time possible. 4.4 Promotion Promotion is a way to spread brand message across target audience. Sponsorship activities are less visible in context of Aldi stores, Australia. The firm can actively indulge into event sponsorship to gain customer attention. Sports event, musical events, etc., can be sponsored by Aldi stores. On the other hand, sales promotion activities can be encouraged by the firm. This would denote offering high discounts on bulk purchase to customers. 4.5 Physical Evidence The retail stores designed by the firm are satisfactory but some innovative or technology based techniques should be incorporated. Self-service in the form of product selection or technology based pay systems would be an innovative mechanism for Aldi stores, Australia. RFID technology can be utilized in these stores in order to locate specific product category. 4.6 Processes The process aspect is associated with effective communication channels between staff and employees, reduced waiting time and rapid information accessibility by customers. There are two large retail companies located in Australia – Coles and Woolworths. Aldi stores, Australia can sustain its market share only when it offers value added services to its customer base (News Limited, 2015). 24/7 service should be provided by the company. This would facilitate customer loyalty and initiate word of mouth promotion. 4.7 People Employee productivity level can be enhanced only through implementing performance appraisal system. This mechanism would help in evaluating employee performance on a continuous basis. Rewards shall be given to those team members who deliver outstanding performance. Employee motivation level will be high on receiving rewards and this shall reflect upon quality of customer service. Customer feedback can be monitored by staff so as to convey opinions to upper level management. 5. Recommendations 5.1 Recommendation One Economic macro-trend clearly portrays that disposable income of Australian customers are comparatively high. This consumer market is inclined towards quality products rather than cheap products. Aldi stores, Australia, can explore this factor through implementing cost plus pricing strategy. Return on investment shall be high in this strategic implementation because overall operational costs are covered in cost plus pricing technique along with a small percentage of profit margins. Customer perceived value is closely knitted with pricing strategies adopted by a firm. Low prices might be perceived as low product quality by Australian customers. 5.2 Recommendation Two The second recommended approach is analyzing hidden demands and wants of customers. Customer as a micro-environmental trend can affect business operations positively or negatively. Aldi Stores, Australia, should shift from its traditional product line to gain customer attention. This would be possible through introducing branded apparels, accessories, shoes, etc. These stores already offer cheese and gourmet as per taste or preferences of Australian customers. 5.3 Recommendation Three Promotion can be considered as an integral component of marketing mix. To be more precise, promotional techniques help in acquiring and retaining customer attention. Event sponsorship and sales promotional activities are recommended approaches for Aldi stores, Australia. The company can invest funds in sponsorship activities and reduce frequency of TV commercials. References ABC. (2015). Aldi threat growing for Coles, Woolworths: Moodys. Retrieved from: http://www.abc.net.au/news/2015-03-05/aldi-threat-growing-for-coles2c-woolworths/6282558 . ALDI. (2015). About ALDI. Retrieved from: https://www.aldi.com.au/en/about-aldi/ . Assael, H. (2005). Consumer behaviour. New Delhi: Dreamtech Press. Australian Government. (2014). The economic impact of Australia’s ageing population. Retrieved from: http://archive.treasury.gov.au/documents/1273/HTML/docshell.asp?URL=IGR_CEDA_Presentation.asp. Batey, M. (2012). Brand meaning. USA: Psychology Press. Keller, K. L. (2006). Marketing management. UK: Pearson Prentice Hall. KPMG. (2015). How will demographic trends affect the retail sector? Retrieved from: http://www.kpmg.com/uk/en/issuesandinsights/articlespublications/newsreleases/pages/how-will-demographic-trends-in-the-uk-affect-the-retail-sector.aspx. News Limited. (2015). Why do Australians love Aldi? The secrets to the supermarket’s phenomenal success. Retrieved from: http://www.news.com.au/lifestyle/food/why-do-australians-love-aldi-the-secrets-to-the-supermarkets-phenomenal-success/story-fneuz8wn-1227131533124 . Reserve Bank of Australia. (2015). The distribution of household spending in Australia. Retrieved from: http://www.rba.gov.au/publications/bulletin/2014/mar/2.html. Trading Economics. (2015). Australia consumer spending. Retrieved from: http://www.tradingeconomics.com/australia/consumer-spending. Read More