Asda is the second largest supermarket chain in the UK with a
16.8% of the grocery market. Which is also offering food, drink, clothing and
general merchandise. It also provides a range of financial services, sold both
in the supermarkets and online all over the UK.
The headquarters of Asda Stores Ltd is in Leeds, West
Yorkshire and was founded in 1965 by the supermarket owning Asquith family when
they decided to merge with the Associated Dairies Company of Yorkshire (ASquith + DAiries = ASDA). In the subsequent decades ASDA expanded south and
bought rival chain of superstores Gateways Superstores amongst others.
Wal-Mart bought Asda 26 July 1999 for £6.7 billion which made
it into a subsidiary of the retail giant, it became the 2nd largest in terms of
market share of the supermarket chains and since then ASDA claimed a gain of
one million new customers.
George, its own range of clothing was launched in 1990 in the
superstore estate and replaced the 70s and 80s clothing labels of Asda after
being advertised as a premium quality clothing for fashion and reasonable
prices and in turn great value.
In order to
make a tangible comparison of how both the organisations -ASDA and Lidl- operate
I must first evaluate Asda’s marketing mix
Product: Asda stores are one of the most prominent retail chains in the world. Asda provide and offer are myriad of services
which are equally as unique as they are wide ranging. Though the supermarket
retail business is the main focus, Asda also offers a mobile phone company
based on EE network, along with financial services amongst others. According to
Kotler, (2003) you should happy to all business partners, customers, suppliers
and distributors for earning and long-time business and Asda has been do this
very successfully. Asda provide loyalty schemes to attract the customers and
customers gain benefits on their purchases. Its adaptive websites has a 24hours
online service which solves the customers’ problem online. In 2014 Asda
supermarkets began to offer a technological innovation to their customers by
trialling a three-dimensional (3-D) printing service, which uses scanning
equipment to produce scale models, a new system which had previously confined largely
to business-to-business markets.
Price: For certain retailers pricing has
become the foremost element of the marketing mix and is therefore the key
component of their brand image, Asda is a key example of this, with a low price
strategy as key to sell huge volumes of products, Asda records good growth by
playing the price strategy. ASDA pursues low cost agenda to offer lower prices
for its customers. It is committed to providing customers with outstanding
value for money across its entire range of food, general merchandise and
clothing (McKenna, 2008) .Retailers that charge consistently low prices
throughout the duration of the year, with barely any price promotions practice everyday
low pricing (EDLP). This technique has been used to great success by Asda due
to it being such a large retailer and economies of scales make low prices
feasible. The aim of EDLP is to encourage customer loyalty from price-sensitive
consumers (Goworek and McGoldrick, 2015).
Bennison et al (1995) claimed that location was
the primus inter pares (first amongst
equals) of the retail marketing mix Asda has got its presence in several
places. Market expansion can be achieved through
attraction of new users to the product or service, identifying new uses for the
product or developing new products and services to stimulate the market. New
users can be found through geographical expansion of the company’s operations-
whether that be domestically or internationally. Asda pursued new customers for
its products in its move south from the Yorkshire home base.
Promotion: ASDA marketing people are always
curious to adopt new and innovative promotional techniques. They are offering
their customers like two for £2, one for £1.99 and similarly many other
techniques. The roll back tags of ASDA are visible to every visitor. The stores
are instructed to display reduced price products in front of store so these can
catch the attention of customers immediately when they enter into store. (ASDA,
2009). There is also a trend towards
retailers like offering their own sub brands to appeal to different market
segments, in Asda’s case their supermarkets offer essential grocery items at
low prices under the ‘smart price’ label, standard products with and the more
expensive products under the ‘Extra special’ label, the logos and packaging for
each of these labels are designed to be compatible with their price levels.
COMPETITIVE RIVALRY: The retail industry in UK is highly
competitive as there are so many players involved which gives a very tough
competition to the existing players and the new entrant’s also. Asda has main
competition with Tesco, Morrison, and Sainsburys each of these are working to
differentiate itself from others in order to become the market leader and
capture a large market share. The intensity of the rivalry between competitors Asda
and Sainsburys is extremely important, Sainsbury’s returned to achieving the second
largest market share in 2012 with 35 consecutive quarters of scales growth,
overtaking Asda which had taken this position for several years (Withnall,
2013), despite Sainsbury’s selling higher-priced products on average than Asda.
Sainsburys success in this respect may have been as a result of its differentiation
strategy and stronger brand image, whereas Asda had adopted a cost leadership
strategy, in line with Walmart- Asda’s parent company. The different marketers
of these organizations are launching new strategies different from others in
order to beat the competition. Each organization in the retail industry
differentiates itself from others by product differentiation, different
strategies, lower priced products, different offers and schemes, attracting
promotional activities and satisfying the customers in the best and most
efficient manner so that the customers don’t switch to the rivals and be brand
loyal to the organization only, and this was evident in this case.
THREAT OF NEW ENTRANTS: The threat of new entrants isn’t as
high as it is in other sectors due to Asda, Tesco, Sainsburys and Morrisons
already being established players in the retail industry, dominating a large
share of the market which makes it difficult for new entrants. To enter the
industry a newcomer would likely need a huge capital investment firstly and
also enough knowledge of the market to survive.
POWER OF BUYERS: Customers are the integral part of
every business. Customers or the buyers in retail industry while purchasing
goods from different supermarket stores use their buying power decision from
which supermarket they should buy goods from, which provide them with the best
services and which gives them maximum satisfaction. Asda provide their
customers with low priced products, good quality, variety of products, good
customer services for which the buyer uses it power in shop from Asda in order
to satisfy their needs.
POWER OF SUPPLIERS: Every organization should have a
fruitful relationship with the suppliers in order to survive and beat the
competition. The retailer should have suppliers supporting them in order to
have the goods on time and can have the demand and supply cycle working for the
consumers. Asda has more than 500 suppliers working for them which is providing
different goods to Asda and then making it possible to satisfy the customers’ demands
at Asda stores. The supplier has the power whether to provide the goods to the
retailer or not and they can switch to the rivals if an better price is given
THREAT OF SUBSTITUTE PRODUCTS: In the grocery market there are same
products offered by different supermarkets what differentiates one from the
other is price, quality, services and the brand so for a single product there
are so many substitutes available in the market. In the other context we can
also look at the increasing competition from the convenience stores and off
license shops which act as a substitute to Asda if a consumer want to purchase
few things give is also giving a tough completion to them.
is an established brand name with strong social image.
known for its memorable marketing campaigns
a strong online presence and use this to be in constant contact with its
customers via social networking, they consistently engage with consumers via
questionnaires, competitions and things of that nature
employer in UK markets thus it has a major pool of talented and experienced
work force. Has over
140,000 employees working at over 500 stores.
comparison to its competitors ASDA has low market penetration.
global presence as compared to few other competitors
rivals such as Tesco have smaller versions of their superstores (Tesco express,
metro etc.) Asda haven’t got something to compete with this.
can widen its product range especially non-food retail.
into markets that are growing such as India and China.
Major threat to Asda is from its competitors especially Tesco mainly being the threat
of substitute products available through the competitor stores at lower prices.
main market remains in the UK so a drastic change in the UK economy could be
is a pressure to maintain low prices, which can be difficult to maintain for a
retailer the size of Asda
Stiftung & Co. KG is a German global discount supermarket chain, based in
Neckarsulm, Germany. Lidl’s history begins in the 1930s, when their first store
was created in Germany acting as a grocery wholesaler. Lidl first opened in the
UK in 1994 and has grown rapidly in the 23 years since, they now have over 650
stores and 10 distribution centres across Great Britain. The fact that Lidl
only expanded out of Germany 23 years ago makes the amount of stores they have
in operation even more astounding. The sheer speed of their expansion has made
Lidl one of the most feared competitors in the market.
sold in Lidl aren’t dissimilar to the products sold in leading supermarkets
like Asda, however they are sold under different brand names in Lidl stores.
brand name from being one of the cheapest supermarket retailers in the
industry. Their main competition as a value supermarket is Aldi (Bosshart,
could have a negative perception of the quality of Lidl’s products as they are
sold for such a cheap price (Siro, et al., 2008).
The term ‘value’
often associated with low prices, as illustrated by the description of lowe
priced clothing stores such as Lidl as ‘value retainers’. However value is
dependent on other elements of the marketing mix, rather than pricing alone. A
product with a relatively high price can therefore still be considered good
value by a consumer if it serves its purpose well and possesses attributes
which are not present in cheaper products in the same category. As a result of
this consumers do not always perceive the lowest-priced product as being the
best value. Products with expensive prices may be viewed by consumers as
high-quality products, whereas lower prices can be viewed as indicators of poor
quality, but this is not necessarily the case at all.
One of the
key competitive advantages for Lidl is their clever pricing strategies. Lidl
entered the market on the basis of being one of the most value-driven
supermarkets in the industry (Dolgui & Proth, 2010).
numerous stores across the UK and Europe. However, depending on the country,
they operate in different segments of the supermarket industry, ranging from
value to high-end goods (Butler, 2014).
Lidl tend to
build in deprived areas where cheap food is more necessary. They sell
reasonable food that appeal to all incomes.
faith in their pricing model and believe that their low prices alone are enough
to attract customers and for this reason they don’t have any loyalty schemes
similar to the likes of Asda. For this same reason they don’t offer discounts
as highly as some of the other major retailers due to their prices being so low
Lidl have a
formidle structure which allows them to sell their products so cheaply
plenty of stores amassed in a very short time across the UK and Europe which
gives them a great amount of exposure.
Lidl have a
strong online presence that keeps consumers in the loop about products and any
deals they have.
give more of a ‘For the people’ feel to the brand.
the likes of Asda and Tesco they have a low market share.
products being so cheap can hinder them at times due to the stigma amongst
consumers of low-priced products being seen as low quality.
expand in the UK and acquire a higher share of the UK grocery market.
expanding abroad can provide more funds to invest in the UK.
becoming the dominant discount grocery retailer. The rise of Aldi is a serious
threat, as Aldi follows a similar model to Lidl.
If Lidl were
to engage with a price war with other major grocery retailers then they could
force competitor’s prices down.
expansion of other global brands would cause more competition.
segmentation is when a customer base is divided into groups or segments that
are similar in certain ways, e.g. gender age, how they spend their money and
interests. During segmentation it is important to specify the specific wants or
needs of each individual segment. Companies that use customer segmentation
recognise every customer is different and that it would be much more useful to
target specific groups with messages that are relevant specifically to them
their marketing efforts would be better served if they target specific, smaller
groups with messages that those consumers would find relevant and lead them to
buy something, by doing this companies intend on increasing market efficiency.
They also hope to grasp a more detailed understanding of their customer’s
preferences and needs.
needs to identify the type of consumers at which it targets its merchandise. This
enables the company to establish the target costomers’ needs and wants and to
offer merchandise at suitable prices and locations to meet these needs needs. Retailers
can adopt a mass marketing approach, aiming at a broad range of customer
categories, or target a smaller niche of customers. The main type of customer
targeted by a retailer is referred to as the ‘core customer’ and they form the
largest proportion, if not most of the
company’s clientele. They can be specified in market segments by demographic
characteristics such as age group or by aspects of their lifestyle. The
retailer will also probably attract customers in other categories, e.g. those
who are older or younger than the core customer’s age. After identifying the
most suitable market segments to target, retailers can then decide on how they
would like their market position in comparison to competitors, a process known
as Segmentation, Targeting, Positioning (STP)
Low service strategies have been particularly
successful in some sectors during the economic downturn and recession of the
late 2000’s. In Lidl’s case, they have made significant inroads into Tesco’s
market leadership during the toughest of the economic conditions. While high
service strategies at Sainsbury’s and Waitrose have enhanced their competitive
position, low service and very low strategies at Lidl have also been effective
(Piercy et al.,2010)
The four main methods used to segment markets
are : demographic, geographic, psychographic and behavioural.
positioning aims to provide competitive advantage by differentiating the
retailer from its competitors through a retail offering that appeals to and is
readily identifiable by its specific target markets ( see target market ). This
process involves identifying potential customers by breaking the consumer
population down into groups by such characteristics as gender, age, income,
geographic location, and lifestyle ( see lifestyles ; market segmentation ).
However, each group must be sufficiently large and within broad categories for
each characteristic so that the retailer targets meaningful customer groups.
positioning has been defined in the following terms:
is the act of designing the company’s offering and image so that they occupy a
meaningful and distinct competitive position in the target customers’ minds.
principle of competitive positioning is that is is concerned with how customers
in different parts of the market perceive the competing companies ,
products/services or brands.
can reduce he competition it faces by positioning its products for sale to
market segments which other firms cannot attract so successfully (Sheaff,
STRATEGY TWO PRICE GUARANTEE OFFER
In the retail industry each of the
supermarket claims to be the cheapest as a promotional strategy but now Asda
launched the price guarantee offer for its customers in which Asda will pay
back the amount with a pence extra if it fails to claim the cheapest all around
supermarket. Asda employees has teamed up and launched mysupermarket.co.uk
where consumers shopping from Asda can type their receipt and can easily
compare their difference in prices with Tesco, Sainsbury and Morrison’s and if
Asda fails to be the cheapest then consumers will get a printable voucher and
plus a pence and voucher can be redeemed at Asda stores.