Case Study: ALDI Supermarkets Australia PDF

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This report looked at ALDI's positioning strategies and their introduction to the Australian Market....

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Case Study: ALDI Supermarkets Australia

University of Notre Dame Australia, Fremantle!

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Executive Summary.

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Table of Contents Introduction …………………………………………………………..……………………………4 1.0 Question One: Positioning Strategy …..…………..……………….……………………….4 1.1 Store Brand Strategy …………………………………………………………………4 1.2 Continued Success …………………………………………………………………..5 2.0 Pricing Strategy .……………………………………………………………….……………..5 2.1 Competition and Company Objective .……………………………………………..6 2.2 Competitors Pricing …………………………………………………………………..5 2.3 New Product Pricing ………………………………………………………………….6 3.0 Advertising Strategy ……………………………………………………………………..…...4 3.1 AIDA Model ………………………………………………………….….………..……4 3.1 Unique Selling Proposition …………………………………………………………..6 3.2 Appeal ………………………………………………………………………………….6 Conclusion .……………………………………………….……………………………….…….…4 References …..…………………………………………………………………….………………7!

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Introduction Aldi has been coined the “no frills airline of supermarkets” (NewComAu, 2014). What does this mean and is it a good thing? Prior to their introduction in 2001, no other foreign retailer had successfully established them selves in the Australian market (Dunford, Palmer & Benveniste, 2015). A marketing mix, also known as the four P’s, is creating the right product, sold at the right price, in the right place, with the right promotional methods (Grewal et al., 2018). ADLI’s Australian marketing mix focuses on, high quality, store brand products, at competitively low prices, strategically placed retail outlets, and promoting with very little use of paid advertising, focusing on word of mouth (Dunford, et al., 2015). This paper aims to determine how ALDI would go about pricing a new home delivery service, as well as constructing a billboard advertisement for a new store in Fremantle. It will discuss their use of store brands, pricing strategies and their approach towards advertising, and adapting it to the Australian Market.! 1.0 Question One: ALDI’s Positioning Strategy. Thrift has developed as a social trend in recent years (Grewal et al., 2018) and has influenced consumer behaviour, creating a segment in the market of price conscious shoppers (Hampson & McGoldrick, 2017). The global financial crisis in in 2007, and the decline of the Australian mining boom in 2011, has had a significant effect on Australia’s economic environment, with unemployment steadily rising (Atradius, 2015). Major economic crisis can cause permanent effects on consumer behaviour, forcing retailers to re-evaluate the products and services they provide (Hampson & McGoldrick, 2017). Companies who are quick to identify these changes, have the opportunity take advantage of the economic shift, rather than suffering from it (Hampson & McGoldrick, 2017). ALDI has not only adjusted to the movement, but has managed to profit from it, in the past 18 years the privately owned company has gained 9.9% share of the Australian supermarket Industry (Youl, 2018). ! 1.1 Store Brand Strategy Part of ALDI’s marketing mix has been the use of store brands. Store-brands, also known as private-label brands, are products designed and often manufactured by a retail company, the brand is then exclusively sold in their retail outlets (Grewal et al., 2018). Store brand strategy is a powerful tool in gaining market share. Low overhead costs, and little need to advertise, allows retailers to offer their products at significantly reduced prices than other retail companies and national brands (Calvo-Porral, & Lévy-Mangin, 2014). Store brands have become increasingly popular in Australia in recent years, accounting for roughly 25% of all super market sales (Youl, 2018). Aldi focuses on the production of high quality store brands at competitively low prices, stocking their shelves with 90% of their own products (Osegowitsch & McGabe, 2018). Their limited range of roughly 1,500 store-keeping units, is a strategic tactic which significantly reduces costs to the company (Dunford et al., 2015). Although their limited range may not encourage shoppers to do all of their shopping in ALDI stores, they have been able to convince a substantial percentage of Australian consumers to at least do part of their shopping 4

within their stores. The company took an estimated $9.4 billion revenue in 2018 alone (Youl, 2018).! 1.2 Continued Success Prior to ALDI’s introduction in 2001, the Australian supermarket industry was predominately controlled by two major companies, Coles and Woolworth, making it the worlds most concentrated grocery markets (Dunford et at., 2018). In the past five years Aldi has achieved annual growth of 2.1%, and are predicted to retain a 2.0% increase over the next five years (Youl, 2018). ALDI has placed considerable pressure on their competitors to provide a higher standard of low cost products. MORE HERE FINISH POINT! 2.0 Pricing Strategy. Pricing is said to be the most difficult and important part of the marketing mix, as it is the only element which generates revenue and profit, opposed to the others which are affiliated with costs (Indounas, 2018). An effective pricing strategy is a long term approach, built around key elements know as the five C’s; competition, company objectives, customers, costs and channel members (Grewal et al., 2018). If Aldi were to successfully introduce their own home delivery service in Australia, they would need to consider each of these components. 2.1

Competition and Company Objective

When establishing an approach to their pricing strategy, firms must consider what their company objective is, which can be one of four orientations; profit, sales, competitor and customer orientation (Grewal et al., 2018). Due to the highly competitive market in Australia, Aldi has adopted a competitor orientated objective, which focuses on measuring its self predominantly against Coles and Woolworths (REF). Both Coles and Woolworth have already established their own home delivery service, by comparing what they currently offer and taking into considering Table 1 Woolworths

Coles

ALDI (US)

Free Delivery

Over $300

First Shop* (over $100) or over $150 with Flexi Delivery (8 hour time slot)

First 3 Shops

Delivery Cost

Starting rate $12 ! (based on amount spent)

Starting rate $4 ! (location specific)

Under $35 = $9.99 Over $35, $5.99

Minimum Spend

$50

$50

$USD10 or $35 on express deliveries (under an hour)

Extra Offering

Delivery Now

-

Get $10 your first 3 purchases over $35

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ALDI’s home delivery service in America the company can attempt to find a gap in the market. Aldi has typically utilised a market penetration approach to their new product pricing. Market penetration is when a new product or service is introduced at a low price, to generate sales, build market share and increase profits quickly, typically when other similar products already exist in the market (Grewal et al., 2018).

3.0 Question three: Advertising strategy. A marketers aim is to communicate a message to the consumer, about the value of their product or service. How a consumer perceives the marketing communications can vary, they may not interpret the message the way the firm has intended them to do so. It is however the aim of the marketer to estimate the potential interpretations (Grewal et al., 2018). 3.1 AIDA Model The AIDA model also know as ‘think, feel, do’ model, is an acronym for a series of steps the consumer goes through when purchasing a product, which can be influenced through strategic marketing communications (Niu & Wang, 2016). The model suggests awareness leads to interest, which leads to desire, resulting in action (Grewal et al., 2018). Although, depending on the type of purchase made, the consumer may not follow the same order, an impulse purchase for example may feel or do, before he or she thinks (Grewal et al., 2018). The billboard below has been designed to capture the interest of the consumers. By making use of a bold text and a plain white background with minimal images in the design, the ad is quite eye catching. The short and humorous wording adds an element of intrigue, by not over explaining its self. By maintaining an element of mystery, feelings of curiosity are evoked. ALDI’s current slogan “good different” (aldi.com.au, 2019) is referenced in this billboard, to capture those who have yet to have shopped at ALDI and to “find out what good different really is”. 3.1 Company Objective When designing promotional material, a firm must decide their objective, and to whom they are targeting the message. An advertising objective can be either to inform, persuade or act as a reminder to the consumer (Grewal et al., 2018). The draft billboard above in figure 1, has been designed to persuade consumers who have not yet shopped at an ALDI to do so. This billboard aims to motivate the discovery of “Good Different” and what is meant by the declaration. With the use of the statement “Better products, at better prices” the ad targets a growing segmenting of the market, price conscious consumers, who value product quality over additional service “frills” (NewComAu, 2014).

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Figure 1. Billboard advertising draft, Fremantle train station.

3.2 Unique Selling Proposition Good advertising should make a proposition of value to consumers, if they purchase the product or service, they will receive certain benefits. Brands who incorporate clever unique selling propositions into their advertising are far more likely to be successful (Niu & Wang, 2016). A unique selling proposition, also referred to as a USP, is a feature of their product or service that differentiates them from their competitors (Grewal et al., 2018). It is a crucial aspect of a companies branding, and is often embedded in their slogan. Aldi’s USP “Good Different” insinuates that although the shopping experience they offer is different, it is indeed superior to what the other competitors offer. ALDI manage to maintain high profit margins, and are able to pass these saving onto their customers, whilst still offering high quality products, and their USP clearly communicates this. 3.3 Appeal Advertising is categorise into two different sorts of appeal, emotional and informational. Emotional appeal aims to satisfy a consumers emotional desires, rather than their functional needs (Grewal et al., 2018). Informational appeal focuses on providing consumers with factual information about a product, providing evidence as to why the product is superior to another (Grewal et al., 2018). The draft billboard add in figure 1 creates an emotional appeal, utilising humour and building curiosity. It doesn’t go into 7

detail, the information is short and simple and engages the viewer to discover for themselves why Aldi is worth trying out. Conclusion

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Reference List

Aldi.com.au. (n.d.). Good Different - ALDI Australia. [online] Available at: https:// www.aldi.com.au/en/about-aldi/good-different/ [Accessed 4 May 2019].

Atradius. (2015). Country Report Australia. Retrieved from https://atradius.com.au/ reports/country-report-australia.html Calvo-Porral, C., & Lévy-Mangin, J. (2014). Determinants of store brands’ success: A cross-store format comparative analysis.!International Journal of Retail & Distribution Management,!42(7), 595-612. doi:10.1108/IJRDM-04-2013-0085" Dunford, R., Palmer, I. C., & Benveniste, J. (2005). Strategy for successful entry into a concentrated and highly competitive market. In Australian and New Zealand Academy of Management Conference. ANZAM. Grewal, D., Levy, M., Matherws, S., Harrigan, P., Bucic, T., & Kopanidis, F. (2018) Marketing (2nd ed.). Sydney, Australia: McGraw Hill Hampson, D. P., & McGoldrick, P. J. (2017). Antecedents of consumer price consciousness in a turbulent economy.!International Journal of Consumer Studies,!41(4), 404-414. doi:10.1111/ijcs.12344" Indounas, K. (2018). Market structure and pricing objectives in the services sector. Journal of Services Marketing, 32(7), 792-804. doi:10.1108/JSM-03-2018-0087 NewsComAu. (2014, November 23). The secrets to Aldi’s phenomenal success in Australia. [online] Available at: http://www.news.com.au/lifestyle/food/why-do-australianslove-aldi-the-secrets-to-the-supermarkets-phenomenal-success/storyfneuz8wn-1227131533124 [Accessed 12 May. 2019]. Niu, Y., & Wang, C. L. (2016). Revised unique selling proposition: Scale development, validation, and application.!Journal of Promotion Management,!22(6), 874-896. doi: 10.1080/10496491.2016.1214209" Osegowitsch, T., & McGabe, A., (2018, August 2). The secret to Aldi’s success is choosing what not to do. Available at: https://theconversation.com/the-secret-to-aldis-success-ischoosing-what-not-to-do-100671 [Accessed 15 May. 2019]. Youl, T. (2018).#IBISWorld Industry Report G4111 . Supermarkets and Grocery Stores in Australia.#Retrieved May 3, 2018 from IBISWorld database.

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