J Sainsbury plc - CVM Assignment PDF

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2085256

Masters Programmes Assignment Cover Sheet Submitted by

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2085256

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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2467 (1468+999)

Number of Pages

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19

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 Contents 1.

Company Overview………………………………………….3

2.

Value Proposition…………………………………………….4

3.

Segmentation and Targeting………………………………..4

4.

Differentiation and Positioning……………………………...5

5.

Product and Services………………………………………..6

6.

Delivery Channel – Place…………………………………...7

7.

Pricing………………………………………………………...7

8.

Integrated Marketing Communications – Promotion…….7

9.

People ………………………………………………………..8

10.

Process……………………………………………………….8

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Physical Evidence…………………………………………...8

12.

Marketing – Recommendations……………………………9

13.

Sainsbury’s – Operational Structure……………………..11

14.

Responsiveness/Adaptability……………………………..12

15.

Relationship/Aligned……………………………………….13

16.

Resilience/Agility…………………………………………...13

17.

Reliability……………………………………………………14

18.

Operations – Recommendation………………………….15

19.

References…………………………………………………17

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J Sainsbury plc Company Overview: J Sainsbury plc (Sainsbury’s) is the second-largest supermarket chain in the UK with 15% of total market share. It competes with giants like Tesco(27%), Asda(14%), Morrison’s(10%), Aldi(8%) and Lidl(6%) in the marketplace (Statista,2020).

Sainsbury’s fundamental strategy is to focus on quality, provenance and sustainability which sets them apart from other supermarkets while their lower pricing strategy reassures customers that they have come to the right place which was highlighted by their strategy as “Live Well for Less”. It has a diverse portfolio of brands ranging from food, retailing, financial services, general merchandise and clothing. •

Sainsbury’s-Grocery/Banking/Homeware/Energy

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Argos-Digital Retail Merchandise

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Tu clothing-Fashion/Clothing

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Habitat-Furnishing

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Nectar-Loyalty

(Sainsbury,2020) 3

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Value Proposition: Sainsbury’s Value proposition lies in its strategy “Live Well for Less”. They have proposed their value to consumers as a quality food provider in the industry. It is also evident that they were gradually moving towards Cost Leadership strategy by reducing their prices every year.

Segmentation and Targeting: For the past years, Sainsbury’s have segmented their customers and categorised them based on geographical, demographical, psychographic and behavioural patterns and targeted the family and the working-community (Sainsbury,2021). Nectars’ data mining and analytics system helped Sainsbury identify its customers’ pool effectively (Chiefmarketer,2003). They continuously evolved to develop consumer life quality by shelving zero-sugar, gluten-free and low-fat products by manufacturing a diverse range of SKUs, focusing on health-care and wellness, from their own-label products which continuously benefits their customers(Sainsbury,2020). However, once the pandemic evolved, the demand for online orders and home deliveries increased dramatically from vulnerable and elderly people, where the UK supermarkets initially haven’t had the infrastructure to cope-up the spike in demand, which made Sainsbury’s to redesign its Segmentation and Targeting allocations, thinking of concentrating on mass-market temporarily. 4

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Sainsbury’s started focusing on customers’ pandemic behavioural buying patterns and stocked up products like consumables, health-care and food products accordingly. To serve the nation strategically, Sainsbury’s strictly followed health ministry guidelines where they gave priority delivery slots to the vulnerable population present in the UK Government database followed by allocating separate time-slots for elderly people and front-line workers(Sainsbury-AR,2020).

Differentiation and Positioning: Sainsbury’s tend to differentiate themselves as a quality goods provider in the UK market for a lower possible price. Customers are willing to pay the price that Sainsbury demands because they are getting much more than the product’s perceived value. Being a red-ocean market-leader, Sainsbury’s have positioned themselves as offering a wide range of products with high quality at reasonable price. Their position in the UK marketplace can be visualised using perceptual maps. Sainsbury has maintained this status-quo even during the pandemic, providing the nation with healthier food products and quality consumables, nurturing them to be fit physically and mentally, thereby sustaining its USP and positioning in the UK market.

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Products and Services: Due to COVID pandemic, they restricted themselves to shelve only essential products, resulting in full-online sales for Tu, Argos and Habitat brands which resulted in serving people with varied consumption and spending patterns with a broad portfolio of food and grocery products such as •

Taste the difference – Premium food products

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So Organic – Organically grown Fruits and Vegetables

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My Goodness – Ready-to-eat packaged foods

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Be good to yourself – Low-fat, easy-cook foods

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Deliciously Freedom – Vegan and allergic free food range

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Basics – Other food and non-food products (consumables, health-care etc.)

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By Sainsbury’s – Other Essentials

(Sainsbury,2020)

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Delivery Channel – Place: Sainsbury has 1215 stores across the UK with 807 convenience stores within the heart of UK cities and 608 supermarkets in city-outskirts. They also had 340,000 onlinedelivery slots contributing to 7% of sales before COVID(Sainsbury,2020). Owing to national lockdown, demand for online delivery increased manifold and Sainsbury planned to deliver its customers via multiple delivery channels. They introduced click&collect model where customers can order online and collect their orders near the stores during an allocated 30minute window, Chop-Chop, Deliveroo and Uber-Eats home delivery service, and upgraded in-store aisle allocations with increased safety and fast shopping experience(Grocer,2020). They redesigned distribution centres to deliver more online orders aiming 800,000 weekly slot-capacity and 100,000 click&collect slots by December- 2020(Reuters,2020). All these multi-channel options were made available one week prior for booking in SmartShop app, which made easy for the customers to shop.

Pricing: Sainsbury pre-COVID pricing strategy was a fusion of Competitive and Economic pricing to maintain competitiveness by serving customers at best possible value. Once the lockdown initiated, they changed their pricing strategy to psychological pricing, where they reduced and locked the price of 2300 products for at least 3 months(Sainsbury,2020), which positively boosted shopper confidence and enhanced customer experience.

Integrated Marketing Communication – Promotion: Over the years, Sainsbury followed traditional marketing models like TV, media, Newspaper, POS, Sales Promotion and Social Media Marketing to communicate its values to its customers. They also effectively utilised “Nectar (UK’s largest loyalty scheme)” to increase customer loyalty and sales, by providing discounts and promo codes (Marketingweek,2020)(Sainsbury,2020). During COVID, on top of their existing promotional strategies, they also messaged customers and subscribers to communicate their pandemic offerings, safety measures and multi-delivery options via E-mail, Newsletters, push notifications via Smartshop and Nectar apps(Sainsbury,2020) so that customer can feel confident to shop at Sainsbury.

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People: Sainsbury has prioritised customer satisfaction above everything to achieve marketleadership. Sainsbury invests heavily in training and development programs to enhance retailing skills among its 172,000 colleagues(Sainsbury,2020). Their training programmes have helped them efficiently redeploy Argos, Habitat, and Tu’s employees to cope with the human workforce need during the COVID pandemic. They offered 12 weeks paid leave to vulnerable colleagues and 10% thankyou bonus to its managers and workforce, increasing employee morale and better customer service(Sainsbury,2020).

Process: Sainsbury’s have made significant changes in their delivery modes owing to pandemic demand fluctuations. They induced lean manufacturing methods with agile models to reinvent the easy of processing at their supermarkets and DCs(Grocer,2020). They also introduced various process changes in product delivery such as Click&Collect, Scan-as-youGo and priority slots which positively influenced the customers to shop at Sainsbury’s.

Physical Evidence: Sainsbury modified its Supermarkets and convenience stores in order to meet the UK government’s COVID safety guidelines. They have made sufficient changes in their layouts like One-way flow, Sanitation bay, Floor markings etc. to ensure customers feel safe and confident to shop without any fear of infection(Shepper,2020) .

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Marketing Recommendation: 1) As customers started focusing more on safety and quality of food products, Sainsbury can start tracking its quality throughout the supply chain, especially for Fruits, Vegetables and Perishables. They can streamline food traceability by integrating RFID, QRcode and Bar-code technologies to trace from its source, at least for own-label products. Customers can fetch traceability data like Perishability, Origin, supplier-rating etc. by scanning QR-code from the packaging cover/box. However, this transparency initiative is a substantial one-time capital investment with supply chain re-invention, incurring more time and effort. This will increase customer confidence and brand image to a greater extent, resulting in effective customer retention for a longer-term. 2) Even though Sainsbury leads the market as a quality food provider, Customer Satisfaction ratio is still average(Statista,2021). One possible reason is that their ability to track the skill level of resources regularly.

So, Sainsbury can integrate its E-learning training programme for employees(SHP,2020) with some inbuilt assessments and sessional questionnaires to test their retailing skills. This will help recruiters and managers hire the right workforce, increasing customer satisfaction and in-store experience. As the retail industry has been exposed to rapid changes due to market conditions, Sainsbury can conduct yearly training programmes to its colleagues to stay up-to-date on their skillset, maintaining good customer delight and satisfaction ratio.

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2085256 3) COVID have significantly changed the consumption pattern and basket size of customers. Sainsbury’s Category Managers can track this trend via Data Analytics from Nectar’s Database, where they can identify the right proportion of SKU mix based on target customer pool, especially for Fresh Goods. They can then offer a bundle of SKU varieties (typically 3-4 fast-moving) to different sets of targeted customer pools, reducing time and effort either way. This kind of segmentation will become popular among customers if they offer promo-codes for bundle purchases. 4) With its robust Supply chain and agile functioning, Sainsbury somehow managed to deal with soaring online demands, doubling its capacity in 8 months(Reuters,2020). However, considering the E-commerce marketplace, Sainsbury needs to consider global leaders like Amazon, E-Bay and pure-online players like Ocado Group as their competitors. They need to start rigorously building their multi-channel online presence (Google Ads, Social media like Instagram, Tiktok, Facebook, Twitter, Youtube) and the capacity to deal with Post-COVID forecasted online demands to a foreseeable future. As customers become more health-conscious, they can start creating virtual awareness campaigns for its customers and subscribers as a token of loyalty. Also, CEO activity on professional social media sites like LinkedIn, Quora is a hot marketing chapter, where Sainsbury need to concentrate and increase CXO’s online presence, to increase Public relations.

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Sainsbury – Operation Structure: Sainsbury designed its operations process to serve its customers with various products, with increased efficiency and speed. They followed Functional/Process layout model to cater to its customer demands. Due to National Lockdown, Sainsbury (along with other Supermarkets) faced a sudden spike in Essentials demand, particularly for health-care, personal-care and food products.

Online demands tripled within a week(BBC,2020), where supermarkets struggled to deliver due to insufficient capacity and operation readiness. This made Sainsbury rethink their product shelving and slot allocation strategy and redesign its demand-forecast methods and operation and delivery models to sustain the heavy fluctuations in demand due to panic-buying.

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2085256 They shelved only the essential items such as staples, groceries, cleaning products and consumables, Beer-Wine-Spirits (BWS), health-care and personal-care products and then introduced variety in these product ranges (as explained in 7Ps) to ensure it’s affordable to everyone, and altered their layout designs to maintain maximum safety. They also provided customers with greater visibility on SKU stock availability, precaution measures and order-tracking facilities.

Responsiveness/Adaptability: Sainsbury changed its store layout and customer flow system to reduce face-to-face contacts by introducing one-way flow systems, Scan&bag-go self-shopping devices and selfcheckout kiosks with protective screens to prevent infections and reduced queuing time.

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2085256 They also installed COVID-ready safety measures such as signage, guidance on hygiene, Sanitation stalls, disinfection measures, floor markings for social-distancing and helpers to support vulnerable and elderly people. They initiated online priority slots and volunteer cards to support self-isolating people and COVID-vulnerable people. They also allocated separate shopping timings for NHS and other front-line workers(Sainsbury,2020).

Relationships/Alignment: Sainsbury maintained its Supplier Relationship (SMEs, Farmers, Dairymanufacturers etc.) by changing its payment terms, and financed suppliers with immediate payables to manage production and maintain cash flow to run their business. They also offered one-month rent holiday to their partners and tenants(Sainsbury,2020) . All these Responsiveness and Relationship measures pictured Sainsbury’s ability to deliver value to the customers with greater flexibility, which eventually increased trust and credibility among the customers, especially family-sector. Suppliers in-turn assisted Sainsbury, delivering food and groceries with prolonged quality, maintaining Sainsbury’s brand-image among customers.

Resilience/Agility: With its healthy cash-flow balance (£994million) and retained earnings from FY-2020, Sainsbury initiated multiple operational and logistic changes to meet pandemic demand. Increasing weekly online slot capacity from 340,000 to 800,000 within 8 months (Reuters,2020), Sainsbury partnered with Deliveroo and Uber-eats for home-delivery, resulting in increased online sales from 7% to 15% in H1(Sainsbury,2020). They also introduced the Chop-Chop delivery model by converting closed megastores in major cities to temporary warehouses, storing packaged foods which helped serve more than 5% of customers(Grocer,2020). The model of “On-the-Go convenience stores” in Sainsbury’s Local shops, consisting of chilled and packaged foods, BWS, Tobacco products and packaged goods(Chargedretail,2020), was a massive success among the busy dailyworking community. Sainsbury almost doubled the capacity by including 1000 new vans and 200 locations for the Click&Collect model, which helped many customers avoid the queue. They hired 12,000 temporary colleagues, trained them via E-learning(SHP,2020), and redeployed employees from Argos, Habitat and TU shops to manage online demands, click&collect orders and warehouse operations(Sainsbury,2020).

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2085256 Above mentioned actions, resulted in a uniform increase in the speed of delivery, and reduced dependability for customers. However, everything incurred a colossal cost in Sainsbury’s administrative expenses summing up to £500million(Retailanalysis,2020).

Reliability: Initial days of lockdown with panic-buying resulted in stock-outs for key SKUs, where customers faced dissatisfaction even after waiting for long hours and exposing themselves to vulnerable scenarios. Due to immediate process modifications, some customers also faced online delivery issues with long waiting hours and refund issues during the first two months of lockdown, bringing down customers’ reliability on Sainsbury considerably.

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2085256 However, Sainsbury bounced back immediately to these issues and streamlined their whole Supply chain process within a month(Sainsbury,2020) and...