2091642 CVM Sainsbury S Assignment PDF

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CVM-SAINSBURY...

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Masters Programmes Assignment Cover Sheet Submitted by

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2091642

Date Sent

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25/01/2021

Module Title

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Customer Value Management

Module Code

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IB9FW0

Date/Year of Module

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Term 1, Sep 2020/2021

Submission Deadline

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25/01/2021

Word Count

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2453

Number of Pages

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14

Question: Q 1) Reflecting on what you have learnt in the Customer Value Management module, please describe and perform a critical analysis of the key aspects of Sainsbury’s marketing strategy and tactics in its attempts to provide customer value in this fast-moving situation. Your analysis should include key aspects related to its target market and positioning, value proposition, mix of services and products that constitute its offer, marketing communications strategy, pricing and channels it uses to deliver value. Q 2) Based on your evaluation of its marketing strategy, present your recommendations and any suggestions you may have whereby Sainsbury can improve on the value it delivers to its customers, both in the context of the immediate situation described above, as well as the longer term. Q 3) Drawing upon your knowledge of Operations management, please articulate the underlying reasons for the challenges to Sainsbury’s and assess the extent to which these were common to all food retailers or specific to Sainsbury’s. Evaluate how well Sainsbury’s were able to adjust to the new operations management challenges. Please be sure to draw upon the full range of Operations management concepts that you could apply in this situation and support your answer with appropriate rationale and evidence. Q 4) Based on your analysis of its operations challenges in this instance, present your recommendations and any suggestions you may have whereby Sainsbury can improve on its operations performance, and what it might learn from this situation which could provide enhanced customer value now and in the longer-term. “I declare that this work is entirely my own in accordance with the University’s Regulation 11 and the WBS guidelines on plagiarism and collusion. All external references and sources are clearly acknowledged and identified within the contents.

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TABLE OF CONTENT

1. PREMISE…………..…………………………………………………………………………..….3 2. VALUE PROPOSITION………………………………………………………………………….3 3. SEGMENTATION, TARGETING AND POSITIONING……………………………………….4 4. PRODUCT…………………………………………………………………………………………5 5. PRICING STRATEGY…...……………………………………………………………………….5 6. DELIVERY CHANNEL…...………………………………………………………………………5 7. IMC- PROMOTION……………………………………………………………………………….5 8. PEOPLE…………………………………………………………………………………………...6 9. PROCESS…………………………………………………………………………………………6 10. PHYSICAL EVIDENCE………………………………………………………………………….6 11. RECOMMENDATION……………………………………………………………………………7 12. OPERATIONS- CHALLENGES………………………………………………………………..7 13. RESPONSIVENESS……………………………………………………………………………..8 14. RESILLIENCE……………………………………………………………………………………9 15. RELATIONSHIP………………………………………………………………………………….9 16. RELIABILITY……………………………………………………………………………………10 17. RECOMMENDATIONS………………………………………………………………………..11 18. REFERENCES………………………………………………………………………………….12

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Premise: Sainsbury’s is a 250 Year old company that is the 2nd largest chain of super markets in the UK with a market share of 16%(Statista,2020). The following is the Operational and Marketing analysis of Sainsbury’s supermarket during Fast changing circumstance created by the Covid-19 Pandemic. The following is the analysis of Sainsbury’s decisions during the timeline from 31.01.2020 when the country had its first case followed by full lock downs in March and Tier based restriction in October to Now, amidst a lockdown when the effect of the pandemic is at its peak even after a whole year since the pandemic’s arrival (Express&Star,2021).

Q1&2. Value Proposition:

Fig 1. Value Proposition

Fig 2. Differentiation Strategy

Sainsbury’s value proposition is delivering the 4 Pillars of value: Quality, Value, Service and Choice (Sainsbury’s,2017). Sainsbury has always strived to provide a huge variety of quality products at fair price with the best possible customer support. This strategy has pushed the company to find the perfect balance between cost and differentiation leaderships.

Fig 3. Customer Priorities But during the pandemic the customer priorities changed drastically with high level of importance to intangibles like Safety and Convenience(Sainsbury’s,2021). So the Value Proposition of Sainsbury’s adjusted quickly to adjust quickly to accommodate the intangibles as well by providing a very safe and convenient environment to the shoppers along with existing pillars of value. 3

Segmentation, Targeting and Positioning: The drastic change in the circumstances due to Covid demanded a change in the STP strategies to gain Market share. This meant the customers had to be segmented into few focussed segments: Demographic segmentation is the primary segment where the elderly vulnerable people and the frontline workers were given priorities by having allocated shopping hours every morning (Walker,2020) and special delivery privileges (Hodgkin,2020). Geographic Segmentation is necessary to find the customer requirements in various areas based of density. In Cities where density is high services like ChopChop, the cycle delivery was introduced which served nearly 50 cities (Charsley,2020). This also helps in better resource allocation in rural areas. Behavioural and Psychographic segmentation helped in improving the customer convenience and reliability through various ops like smartshop (Calnan,2020) and panic buying pattern recognition and prevention of stock out through rationing respectively (Jones,2020). The pandemic has expanded the scope of the business from the target consumer of families with focus on women consumers to every demographic with a buying capacity because of the Feed the Nation strategy which focusses on providing a safe, convenient and a reliable service to everyone in need of a product (Sainsbury’s,2020).

Fig 4&5. Variety, Quality vs Cost Perceptual Map The positioning of the company has been to provide a variety of quality products at competitive price with the market leading service. Through the pandemic this positioning got affected in all the pillars. Due to drastic increase in demand of the essential items there arose a need to re allocate resources by seizing the operation of meat, fish and pizza services. Along with constrained manufacturing and sourcing of products the variety of products went down (Butler,2020). The production concerns, the increase in the Supplier Bargain power and various import restriction has increased the cost (Bloom,2020). This in turn reduced the quality as availability took precedence. But these changes in accordance with the change in market meant there is no major deviation from their overall positioning. 4

The Marketing mix of Sainsbury’s is used to analyse the following:

Product: Sainsbury’s is the second largest retailer in the UK with a wide product variety of 30,000 consisting of products ranging from Fruits and Vegetables, Pet care, Personal care, Dairy, Frozen, Spirits, Health to House Hold products (Sainsbury’s Range,2020). Apart from this due to the impact of covid The Fish and Meat and Bakery products were stopped (Butler,2020). Also a big chunk of the product is constituted by Sainsbury’s own product lines like By Sainsbury’s, Free From, Basics, Be Good to Yourself, So organic, My Goodness and Taste the Difference. This shows that the product strategy of Sainsbury’s is on point with such a big portfolio consisting of a wide variety quality of products.

Delivery Channel- Place: Sainsbury’s has 600 supermarkets and 800 convenience store across the UK (Sainsbury’s store). During the pandemic the partnership made with WHSmith means that more than 90 Sainsbury’s products will be available at 80 WHSmith shops inside Hospitals in UK (Wright,2020). The alliance with Dobbies will take 3000 of Sainsbury’s products to the devout customer base of Dobbies in its 60+ garden centres (Jahshan,2020). Sainsbury also has a huge delivery network capable of delivering 800,000 slots a week (Sainsbury’s,2021). The reintroduction of ChopChop along with partnerships with Deliveroo and Uber Eats has drastically increased the potency of its delivery Channel in the urban areas (Nott,2020).

Pricing strategy: Sainsbury’s strategy has always been with providing quality products at a fair price but now it has been a product of the changing conditions due to Covid-19. The pricing of products remained consistent in the early stages where inventory was readily available but it rose up due to various reasons like manufacturing difficulties and import restrictions (Bloom,2020). Then to the credit of Sainsbury’s they slashed the price of nearly 300 products to remain competitive. Apart from this they’ve had year round discount structure and Nectar scheme double bonuses for the Vulnerable customers (Mason,2020).

IMC- Promotions: The IMC of Sainsbury’s is a mixture of various communication modes like: TV commercial: Through the TV commercials Sainsbury’s showed solidarity and strength to its customers effectively but also drew criticism for not being sensitive in a racial advertisement which proved detrimental to the firm (Franco,2020). Social Media: With a strong presence in the social media, Sainsbury’s has been consistently directing its customers with safety related content and encouraging positivity by posting cooking content.

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The Promotions involve other IMCs through providing double bonuses for the vulnerable, special discounts for the Frontline workers etc. These promotions provide with indirect PR and a positive brand image (Wright,2020).

People: Sainsbury’s employ about 110,000 Colleagues. Sainsbury’s has been supporting the colleagues by providing 12 week full pay for self-isolating colleagues along with a bonus in the latter part of the year (Jahansan,2020). But there were problems with the way they handled colleagues as well. Argo’s employees were threatened with pay cut to work in Sainsbury’s (Twomey,2020). The delivery drivers went on a strike as a result of the company refusing to enter negotiations about their salary (Nazir,2020). Over 3500 will lose their jobs as a result of 400 Argo’s shutting down (Butler,2020).

Process: Sainsbury’s has evolved well to the changing market conditions with the introduction of various models like the click & collect, virtual queuing system, innovative delivery modes that helped quadruple the online delivery capacity within months (Calnan,2020). All these innovation shows how the process is designed to taper the customer needs.

Physical Evidence:

Fig 6. Customer Satisfaction Index

As there is a change in the market space is observed the company responded promptly by understanding the importance of safety measures by pioneering in the implementation of checkout screens, one way flow system, Floor marking for queuing, clear social distance guidance etc, making sure the customers are safe. As a result the customer satisfaction is highest among core competitors (Sainsbury’s,2021).

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Recommendations: The positioning strategy of Sainsbury’s has been both its boon and bane. Though the firm strongly believes that they’ve found a sweet spot between price, quality and variety, the pandemic shows that there is still scope for the company to gain market share by moving toward cost leadership even if they were to lose some quality and variety. The integrated Marketing Communication of the firm has been very inconsistent as it delivered a show of solidarity to the already dreadful customers and helped them safely back into Sainsbury’s eco system. They failed to do the same in the most impactful advertisement segments like TV as the advertisement spending has gone down during the pandemic and the TV commercial started a racial conflict. So, being very specific about the communication sent through to the people by understanding the general mindset of the customers and steering clear of the topics which might prove detrimental for both the society and the PR of the company is absolute must. Sainsbury’s own products must be put in limelight to their target market and also the product line should increase to accommodate every type of customer coming into Sainsbury’s as this product line has the head room to be used as a faux loss leader to lure in more customers to the Sainsbury ecosystem. The untimely resignation of the CEO amidst the pandemic has worked against the company’s solidarity goal and this situation could’ve been avoided or could’ve postponed to a less important time when the spotlight is not on the company as this projects a weak showing that over shadows all the revolutionary changes the company has achieved in a small span of time.

Q 3&4. Operations: Challenges: 1. 2. 3. 4. 5. 6. 7.

Responding to the Rapidly increasing Market Demand. Adapting to the Evolving Market space. Working around the Covid restrictions. Protecting and Maximising the potential of the supplier relationship. Understanding the customer panic psyche. Taking care of the Customer and Colleague safety and morale. Handling the pressure to feed the Nation as its 2nd largest supermarket.

The challenges 1 to 6 are common for all super markets as they are facing the same situation whereas 7 is a product of the combination of Sainsbury’s position in the market and its choice of strategy.

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Fig 7. Pre-Covid 4v

Fig 8. Covid 4v

Fig 9. Customer Priority. Sainsbury’s pre covid and covid 4V comparison shows that the challenges faced are an effect of change in market pattern as the demand of product has grown drastically due to the fear and panic among the people because of the virus and the national lock down as the sales of essential items soared (Sainsbury’s,2020). The variety of products reduced as a result of resource allocation and also because it got harder to source products from outside the country. Initially The announcements to lock down created a hysteria among the buyers sending them into a frenzy of panic buying essentials like toilet paper and after a while this frenzy stops, This resulted in a drastic fluctuation in the demand (Mao,2020). Finally there is an increasing awareness among the buyers about safety so, the maximum visibility of the company’s operation is absolutely necessary (Sainsbury’s,2021).

The evaluation of Sainsbury’s adjustments to the new challenges is as follows: Responsiveness:

Fig 10. Safety Measures As soon as the Covid situation seemed in evitable in early march Sainsbury’s issued a statement requesting the people to stop panic buying. 8

As the situation worsened, on Mach 19th Sainsbury’s pioneered The Vulnerale and Front line workers exclusive shopping hour with multiple safety pre cautions in store (Walker,2020). As the demand grew higher resources were reallocated by stoping fish, meat and bakery ops and assigning colleagues from this and Argos to essential items (Butler,2020). As the essentials were hoarded by some customers Rationing(a limit on number of items) was introduced to ensure everyone avails the benefits of the products (Jones,2020). As the in shop experience was getting tedious with regulations and stenuous ques a virtual queing system was introduced along with one person/ household rule to make the shopping experience more convenient for the customers (Calnan,2020).

Resillience: With the market continuously moving towards out of shop delivery channel the increase of online delivery infrastructure from 150,000 order/week to 800,000 orders/week (Sainsbury’s,2020). Through the understanding of markets through segmentation, the reintroduction of chopchop bi-cycle delivery service in 50 urban areas to avail a goal of net 3.2 million orders served (Butler,2020). Forging partnerships with rapid food delivery apps like deliveroo and uber eats ensure a delivery turn around time of under an hour (Nott,2020). Introduction of the click and collect service where customers can order online and collect the orders from the parking lot of the shop. This is serving 100,000 orders a week (Sainsbury’s,2020). Forging alliances with WHSmith and Dobbies to elevate the availability of Sainsbury’s products in specific markets where the partner’s strength lies increases the brand value and recognition of Sainsbury’s (Jahshan,2020). Further the integration of AI into the supply chain in response to rapidly changing demand and the introduction of smart shop to directly bill through phone shows the agility of Sainsbury’s (Devlin,2020).

Relationship: Over the pandemic Sainsbury’s relationship with the suppliers has gone from strength to strength as Sainsbury showed solidarity with small suppliers with cash flow infusion and concession interms of rent waiver for tenants (Jahshan,2020). Also as soon as the internal suppliers couldn’t cope with the demand, Sainsbury’s started importing essentials like eggs from Spain and Italy in no time (White,2020). The show of support and solidarity helped Sainsbury’s raise 4 million with the help of its suppliers for Covid (Nazir,2020).

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Reliability: Eventhough the customer satisfaction is at a high the consistent food recalls along with the orders not reaching the vulnerable. The non existent service centres and consistently crashing online infrastructure (Smithers,2020). The more than 4 week waiting period to avail a refund has affected the reputation and reliability of the company (Frodsham,2020).

Fig 11. Polar diagram for performance metrics Though the challenges were tackled by Sainsbury’s as mentioned above, it still wasn’t as good as pre-covid. With the exception of flexibility every other aspect in the polar diagram is under performing than before so, here are some recommendations to improve the performances: The forecast system of the company has to be better with the integration of AI into the every day workings of the company monitoring and allocating resources to all delivery channels based on the expected demand. The Dependability is a key factor which has to be improved drastically by improving the support structure for the operations new load. The customer service structure of the firm has to be improved drastically especially when 1/4th of Sainsbury’s Value proposition is service (Sainsbury’s,2017). With the rapid move toward digitalisation of the shopping sector there is a need to improve the online platform of the company. Even after introducing a very potent on field infrastructure the online platforms keeps crashing and hence losing out on 1000s of customers. The rural delivery structure of Sainsbury’s needs to be improved as it is not as efficient or as diversified as the urban sector and thereby a weakness any of the competitors take advantage of. The dependability of the supply chain on the local and EU suppliers is too high and hence when the entire region fails there is no fail safe. So, diversification of portfolio by developing a good relationship with suppliers from other parts of globe is necessary as well. 10

References:

Statista,2021. Market share of grocery stores in Great Britain from January 2017 to December 2020. [Online] Available From: https://www.statista.com/statistics/280208/grocery-market-share-in-the-united-kingdom-uk/ (Accessed on: 13.01.2021) Express&Star,2021. A timeline of UK lockdown measures since the pandemic began. [Online] Available From: https://www.expressandstar.com/news/uk-news/2021/01/04/atimeline-of-uk-lockdown-measures-since-the-pandemic-began/ (Accessed on: 13.01.2021) Sainsbury’s,2017. Business Model and Value proposition. [Online] Available From: https://www.about.sainsbu...