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Assessment cover sheet Exam Number: F10028
F10047 F10052 F10055 F10071
Word Count: 2498
CRANFIELD SCHOOL OF MANAGEMENT
Full Time MBA Programme 2010/11
Term: 1
Part: 1
SMS Marketing Report
Group Report
This assessment/report is all my own work and conforms to the University’s regulations on plagiarism
An identical copy of this document has been submitted to the Turnitin system
Essential
Contents 1 Executive Summary ......................................................................................................................... 4
2 Introduction .................................................................................................................................... 5
3 Pre-recession Market Position-Quality Food “Honestly” Priced .................................................... 5
3.1 Background to the problem –From elites to budget .............................................................. 6
3.1.1 The Competitors ............................................................................................................. 6
3.2 Waitrose Own Label ................................................................................................................ 7
4 Does everyone “deserve” quality food? ......................................................................................... 9
4.1.1 Flight to Value & Downtrading........................................................................................ 9
4.1.2 Competitors’ Activities .................................................................................................... 9
5 Essential Launch ............................................................................................................................ 10
5.1 Recessionary SWOT .............................................................................................................. 10
5.2 Essential Options ................................................................................................................... 10
5.3 Essential Segment ................................................................................................................. 12
5.4 The Essential 4Ps of Waitrose ............................................................................................... 12
5.4.1 Price .............................................................................................................................. 12
5.4.2 Product .......................................................................................................................... 13
5.4.3 Promotion ..................................................................................................................... 15
5.4.4 Place .............................................................................................................................. 17
6 Essential Success ........................................................................................................................... 17
7 Essential Focus and Message ........................................................................................................ 18
8 Bibliography .................................................................................................................................. 20
9 Appendices .................................................................................................................................... 21
9.1 Appendix 1 UK Own Label Performance 2007-2008 ............................................................. 21
9.2 Appendix 2 2010 Financial Statements ................................................................................. 22
9.3 Appendix 3 Customer Spending Patterns ............................................................................. 23
9.4 Appendix 4 SWOT Analysis ................................................................................................... 24
9.5 Appendix 5 The Marketing Mix ............................................................................................. 25
9.6 Appendix 6 Changing Perceptions of Waitrose Brand post Essential Launch ...................... 27
9.7 Appendix 7 “Halo Effect” ...................................................................................................... 28
9.8 Appendix 8 Porter's Generic Competitive Strategies ........................................................... 29
Essential Waitrose
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1 Executive Summary
In March 2009, Waitrose launched its essential range consisting of 1400 everyday grocery products
at low prices in an attempt to reverse its negative revenue growth as the UK recession deepened.
Over the subsequent months, Waitrose sales grew faster than all UK competitors and within a year
the essential brand was valued at half-a-billion pounds.
The launch of the essential range established a significant change in direction on Waitrose previous
policy of selling high quality products at high prices and thus posed the significant risks of brand
dilution and alienation of core customers. However, in reality the essential range created a “halo
effect” increasing the food quality and service perception of the parent brand. Hence, the real
success of the essential range marketing campaign was that it stressed the continuing high quality of
the products creating an image of “value for money” rather than purely a budget product line.
The success of the Waitrose essential line can be attributed to several key factors:
Despite a historically loyal customer base, Waitrose high prices meant that many consumers
were trading down, buying their more basic products at lower-end supermarkets. The
essential range was launched as a cheaper own brand option, packaged as a budget product
to offer an alternative to shopping elsewhere.
The essential range was launched under the slogan, “Quality you’d expect at prices you
wouldn’t”, which emphasised that Waitrose had not sacrificed its core quality values for
cost. The essential range was also priced marginally higher than other supermarket own
brands in order to maintain the perception that its products were superior to its
competitors.
The launch of the essential line was backed by a £5.4m nationwide advertising campaign
including billboards and TV advertisements to increase public awareness of the brand.
Previous customers were also sent a series of promotional offers for the new line as well as a
message from the MD assuring them that quality had not been compromised.
The launch of the essential line allowed Waitrose to reverse its fortunes and emerge from the
recession as the UK’s fastest growing supermarket. Thus, it should be considered an essential
example of a recent marketing success.
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2 Introduction
In an interview with The Grocer (15th November 2008) the Commercial Director of Waitrose stated:
“We have no intention of removing successful brands from our shelves to replace them with tertiary lines with no heritage... we are not trying to persuade our customers to switch from brands to own label in the way some supermarkets are.”1 Four months later, Waitrose launched its essential range of 1400 products, supported by a multi-million pound advertising campaign. This paper investigates the factors that led to this change in strategic direction and the ultimate success of the essential line.
3 Pre-recession Market Position-Quality Food “Honestly” Priced
Waitrose is a supermarket chain founded in 1904 and forms part of the John Lewis Partnership.
Today there are 237 branches located in England, Wales and Scotland.
Waitrose has historically been positioned in the price-premium segment of the market with a
reputation for high quality organic products and excellent customer service.
Figure 1: Price Positioning of UK Supermarkets, Source: Red Team4
Pricing policy was based on a value-oriented approach and Waitrose unashamedly targeted higher
income consumers. The data below shows that, whilst the average cost of a basket of goods at
Waitrose was 14% higher than its middle-market competitors, it ranked 31% higher in terms of
customer satisfaction. This differential between perceived value and price emphasises the
importance of quality to the brand.
1 Griffiths, J (July 2009) Market Assessment 2009, Supermarket Own Labels, 4 ed, Keynote p142
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Waitrose was also one of the first supermarkets to focus on the supply of locally sourced, organic
and free-range produce from British suppliers thus signalling the provision of more trusted products
as well as a sense of local community.
Figure 2: Supermarkets Price vs. Satisfaction, Which? magazine 2007, Grocer Magazine 2007
3.1 Background to the problem –From elites to budget
Waitrose’s market is defined by the supermarket and superstores space which had grown to £89
billion2 by the year 2009 recording an average annual growth rate of 1.3%. Waitrose outperformed
the market with its sales growing impressively from £1.85billion in 2000 to £3.8billion in 20073. In
the decade to 2009, the market as a whole was shaped by a return to price based competition
amongst large discount retailers such as Wal-Mart whilst high end luxury foods emerged as a
distinctive smaller segment. Own brands also showed clear growth accounting for 42.3% of sales by
2008 compared to 39.3% in 20044
3.1.1 The Competitors
The market was mainly composed of the major multiple supermarket chains in the UK such as Tesco,
Sainsbury’s and Marks & Spencer’s with Waitrose having a 3.9% market share as of 20085.
2 KeyNote Supermarkets & Superstores 2001, Market Assessment 2009
3 IPA Waitrose Report April 2010
4 KeyNote Supermarket Own Lables 2009” Pg. 1
5 Complied by Red 4 using Keynote Supermarkets and Superstores 2001, KeyNote Organic Food Market 2010,
Supermarkets Ratios 2008
44
45
46
47
48
49
50
51
52
53
54
0 20 40 60 80 100
Waitrose
Sainsbury
Morrisons
Tesco
Asda
£p
er a
vera
ge b
aske
t
Consumer Satisfaction Score
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Figure 3: Supermarkets market share. Source: Compiled by Red 4 using data from KeyNote market research
3.2 Waitrose Own Label
Prior to 2008, Waitrose had launched its own label products in line with other retailers. However,
unlike its competitors, “Waitrose lacked a coherent Own Label range”.6 It wasn’t that the retailer
lacked such products, but that they were scattered across a myriad of sub-ranges, all with their own
look and feel:
6 IPA Waitrose Report April 2010
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This lack of a convincing own label offering was something of an anomaly, given the proven ability of
“such ranges to build supermarket loyalty and drive switching”7. This analysis implies that Waitrose’s
own label would have been in the “Question Marks” area of the BCG Matrix and thus a query for
investment or divestment prior to 2009. However the strong growth of other supermarket’s value
own labels from 2007 to 2008 and the decline of premium own labels in the same period (appendix
1) put Waitrose in a difficult position to act on its own label range.
Figure 4: Pre - Recession BCG Matrix
Furthermore, Waitrose’s own label sales were declining along with branded products in 2007 and
2008. This meant that Waitrose did not have any means to stop shoppers from trading out of its
stores altogether and highlighted the need for major improvements to its own label strategy.
Figure 5: Waitrose Own Label performance. Source: IPA Waitrose 2010
7 Fernie and Pierrel, ‘Own Branding in UK and French Grocery Markets’ (1996)
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4 Does everyone “deserve” quality food? The recession hit the UK economy in late 20088. Appendix 2 shows Waitrose sales growth slowed to 5.4% for the financial year 2009 (2008: 6.9%). In the 12 weeks to November 2008, Waitrose showed negative revenue growth of 0.7% with value grocers Asda and Morrisons showing positive growth of 7.8% and 10.3% respectively9. This decline was a result of the following factors.
4.1.1 Flight to Value & Downtrading
There was a movement of consumers “trading-down” from the high-end stores to the discount
retailers10. Recessionary shifts meant that loyal customers now perceived that they were losing out
by shopping at Waitrose and quality was becoming a secondary motive.
Waitrose customers were completing separate shopping trips to value stores for their lower-end
products, with appendix 3 showing a 3% decline in the average spending on a basket of goods.
Research showed that, on average, Waitrose customers were putting one less item in their baskets11
whilst some customers were trading out altogether.
The recession also meant that many consumers were now “cooking from scratch”12 rather than eating out or buying pre-prepared meals, in order to minimise their spending patterns.
4.1.2 Competitors’ Activities
Waitrose’s direct segment competitors, Marks and Spencers and Sainsburys, were launching
recessionary marketing strategies. In September 2008 Sainsbury’s launched its “Switch to Save”
campaign offering 20% savings on select products over brand leaders. Similarly, Marks and Spencer
was holding “20% off sales days” and in the process of launching its “2 dine for £10” campaign.
Waitrose’s indirect competitors were also launching campaigns targeting the middle class down
traders with Asda introducing a range of fine wines in mid-2008.
8 http://www.telegraph.co.uk/finance/financetopics/recession/4321675/UK-recession-its-official-but-will-it-
be-the-worst.html 9 http://www.retail-week.com/waitrose-growth-slows-as-discounters-gain-market-share/1945033.article
10 Mintel Oxygen, Food Retailing in the UK, Coming to terms with a consumer that is trading down, Nov 2009
11 Felstead, A (2009), Value Range Boosts Waitrose, Financial Times Companies and Markets 22/6/09 p1.
12 Dodds, A (2009) Post-Recessionary Strategies for Food and Drinks Companies The impact on NPD, price
architecture and future developments, Business Insights
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5 Essential Launch
5.1 Recessionary SWOT Towards the end of 2008, Waitrose set out to launch a new marketing strategy to counter the
movement of downtrading. The SWOT analysis below portrays the strengths, weaknesses,
opportunities and threats it was facing at the time with a more detailed narrative in appendix 4.
Figure 6: Waitrose Recession SWOT
5.2 Essential Options At this point, Waitrose had the option of moving in a number of different marketing directions.
Existing Product New Product
Existing Market
Launching “Hard
Hitting” Advertising Campaign13
Waitrose Essential
New Market
Expansion to
Europe
Diversify to other product lines
Figure 7: Adapted from Ansoff Matrix by Red Team 4
13
Essential Waitrose IPA Paper April 2010
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Areas of immediate diversification would have been unfeasible as John Lewis catered for all department store products. Similarly, expansion to foreign markets would not have presented a short-term solution at a time of global recession. The launch of a value-awareness advertising campaign was seen as the “obvious solution”14 but Waitrose felt that the problem was more fundamental and that traditional communications alone would not bridge the customer perception gap.
The result was that, in March 2009 Waitrose boldly rebranded and extended its previous own-brand
‘Waitrose’ products to create the essential line with the slogan.
“Quality you’d expect at prices you wouldn’t”
14
Essential Waitrose IPA Paper April 2010
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5.3 Essential Segment The essential brand not only targeted current and previous customers, but was also meant to appeal
to lighter shoppers that had previously only shopped in Waitrose for discretionary purchases15.
Waitrose also took steps to reassure its customer base that the quality of its products was not being
diluted by the new range. Essential packs were sent to loyalty customers with recipes for every day
of the week containing promotional offers and a message from the MD with the tagline “Why
Everyday can be a Waitrose Day”.
5.4 The Essential 4Ps of Waitrose
We analyse the strategy and implementation of the range through the 4 P’s extended marketing mix
(outlined in appendix 5).
5.4.1 Price
The strategy behind the essential’s range was that it consisted of competitively priced everyday
products to help “customers watch their pennies”16.
However, in order to maintain the perception of quality Waitrose did not drop its price as low as
other supermarket economy ranges. Whilst the price of essential cornflakes was comparable with
Sainsbury’s cornflakes at 95p, it was not as low as the Sainsbury’s economy range “basics” of 49p.
15
Essential Waitrose IPA Paper April 2010 16
http://www.telegraph.co.uk/news/4948886/Waitrose-brings-out-budget-range-of-food-for-recession-hit-middle-classes.html
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5.4.2 Product
5.4.2.1 Essential Quality
Prior to the launch of the essential range, the bulk of the press-hype concerned the potential
dilution of its strong quality image. Thus the overarching message behind the essential’s launch was
that of customer value.
“Everything will be of the very highest quality. The eggs are free range, the pork is British” Waitrose
Commercial Director, Telegraph, March 6 2009
This strategy paid off and in late 2009, a survey of the supermarkets showed that Waitrose had a
“quality score of 74.2% against the second best 28.3% for Sainsbury and an average of 17.4%.”17 The
slogan of the essential range in itself emphasised the continued importance of quality to the
supermarket.
5.4.2.2 Essential Quantity
The previous own brand product line was expanded to 1400 products ensuring that essential items
were available across all food categories. Following the recent consumer move to home cooking,
Waitrose ensured that all basic cooking ingredients were available to cater to this market trend.
17
MarketLine Info, Profile of John Lewis Partnership, SWOT Analysis 29 Oct 2010
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5.4.2.3 Essential Packaging
“We have found some customers putting their Waitrose goods in Tesco bags, because they are
nervous that their neighbours will think they are decadent for shopping at Waitrose."18
Every essential item was given the same white, plain and basic look to enhance the perception of a
budget range and make the goods easily identifiable to shoppers. Whilst looking simple, essential
carried the same elegance of the parent brand. This allowed customers to feel more “guilt-free”
when purchasing essential products.
18
http://www.telegraph.co.uk/news/4948886/Waitrose-brings-out-budget-range-of-food-for-recession-hit-middle-classes.html
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5.4.3 Promotion
£5.4m was spent on the national advertising of the essential range19. This consisted of television
adverts, advertising billboards as well as promotions within store. While advertisements are moving
away from broadcasting to narrowcasting, Waitrose took the bold decision to spend more on
broadcasting to broaden public19.
Waitrose invested 40% of its budget in outdoor advertising allowing them to effectively dominate
this 19.
5.4.3.1 Bill boards
Waitrose took advantage of this medium to promote the brand on regular commuter routes, thus
having a profound impact on shopping decisions.
5.4.3.2 Television and Media
Television ads influenced and encouraged its existing customer to influence their “end of the week”
purchase. Media ads supported TV ads with its innovative and frequent ads in newspapers.
19
IPA Waitrose Report April 2010
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5.4.3.3 Online and Direct Marketing
Online marketing prominently displayed the essential ingredients used to create home cooked meals
such as the “essential casserole from Waitrose”
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5.4.4 Place
This new range of products was given prominent visibility right from the fixture to check out.
“Everyday Recipes”, which were available free of charge and all contained at least one essential
product were placed prominently at the store entrance.
6 Essential Success
The Waitrose essential line proved an immediate success accounting for £121m20 of sales growth in
2009. In the 12 weeks to August 2009 alone, Waitrose showed 10.2% sales growth beating all other
retailers in the market21. Appendices 6 to 7 show that there have been much broader benefits from
the rebranding with a 12% increase in customers considering Waitrose an affordable shopping
option and an overall “halo effect”, where customer perceptions of quality and service have actually
improved since the launch. In March 2010 the Times claimed that Waitrose had built up a half-billion
dollar brand in the space of one year22 and Waitrose currently estimate that the essential line shows
a return on marketing investment of £3.12 to £123.
20
IPA Waitrose Report April 2010 21
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/6050360/Tesco-sees-market-share-dip-as-Waitrose-forges-ahead.html
22 The Times, 10.03.10, extracted from IPA Waitrose Report April 2010
23 IPA Waitrose Report April 2010
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Figure 8: Waitrose growth vs. total market, TNS, 29.11.09 Extracted from Essential Waitrose IPA Paper April 2010
7 Essential Focus and Message The most fascinating part of the essential range campaign is that it managed to maintain its brand equity whilst seemingly pursuing a low price marketing strategy.
To an extent, this was due to the customer loyalty that the Waitrose brand commanded, explained by Michael Porter’s focus model below.
Competitive Advantage
Lower Cost Differentiation
Co
mp
eti
tive
Sco
pe
Broad Target
Cost Leadership
e.g. Tesco
Differentiation
e.g. Sainsbury
Narrow Target
Cost Focus
e.g. Iceland
Differentiation Focus -
Waitrose
Adapted from Porter, Competitive Advantage, 1985 (appendix 8)
Waitrose targets a narrow market segment with its unique value proposition and thereby falls in differentiation focus group. The biggest advantage of being in this category is that these firms enjoy a higher level of customer loyalty which explains why Waitrose customers predominantly only down-
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traded for the lower-end products. Waitrose, with its focus on local supply chain over a broad range of products created persuasive reasons for its customers not to switch to competitors.
However, by launching such a high level campaign focused on price reduction Waitrose risked being associated with the lower cost competitors and losing its differentiation focus. Thus, the real success of the marketing campaign was the way it effectively managed the customer perception of the essential range away from the concept of a budget product line to a line that represented extremely good “value for money”.
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8 Bibliography Berwin, L. (2008, December 9). Retail Week. Retrieved November 5, 2010, from retail-week.com:
http://www.retail-week.com/waitrose-growth-slows-as-discounters-gain-market-
share/1945033.article
Dodds, A. (2009). Post-Recessionary Strategies for Food and Drinks Companies The impact on NPD,
price architecture and future developments. Business Insights .
Felstead, A. (2009, 6 22). Value Range Boosts Waitrose. Financial Times Companies and Markets , p.
1.
Food Retailing in the UK, Coming to terms with a consumer that is trading down. (2009). Mintel
Oxygen.
Griffiths, J. (2009). Market Assessment 2009, Supermarket Own Labels. Keynote.
Griffiths, J. (2010). Organic Food Market 2010. Keynote.
Hall, J. (2009, August 18). The Telegraph. Retrieved November 5, 2010, from
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/6050360/Tesco-sees-
market-share-dip-as-Waitrose-forges-ahead.html
(2010). IPA Waitrose Report. Waitrose.
IR, J. L. (n.d.). John Lewis Partnership IR. Retrieved November 12, 2010, from JLP E-Zine:
http://www.johnlewispartnership.co.uk/Display.aspx?&MasterId=b794db7d-4648-44e4-a931-
81228f1340fa&NavigationId=576
Magazine, T. G. (2007). Average Basket Cost. The Grocer Magazine .
Marketing Teacher. (n.d.). Retrieved October 30, 2010, from marketingteacher.com:
http://marketingteacher.com/lesson-store/lesson-marketing-mix.html
Monaghan, A. (2009, January 23). The Telegraph. Retrieved November 5, 2010, from
http://www.telegraph.co.uk/finance/financetopics/recession/4321675/UK-recession-its-official-but-
will-it-be-the-worst.html
Pierrel, F. a. (1996). Own Branding in UK and French Grocery Markets.
Porter, M. (1985). Competitive Advantage. Extracted from
http://www.ifm.eng.cam.ac.uk/dstools/paradigm/genstrat.html) and Porter, Michael E.,
"Competitive Advantage". 1985, Ch. 1, pp 11-15. The Free Press. New York.
Wallop, H. (2009, March 06). The Telegraph. Retrieved November 5, 2010, from
http://www.telegraph.co.uk/news/4948886/Waitrose-brings-out-budget-range-of-food-for-
recession-hit-middle-classes.html
Wiggin, E. (2001). Supermarkets & Superstores 2001.
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9 Appendices
9.1 Appendix 1 UK Own Label Performance 2007-2008
Source: IPA Waitrose 2010
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9.2 Appendix 2 2010 Financial Statements Extracted from John Lewis Annual Accounts 31st Jan 2010
Publicly available at:
http://www.johnlewispartnership.co.uk/Display.aspx?&MasterId=b794db7d-4648-44e4-a931-81228f1340fa&NavigationId=576
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9.3 Appendix 3 Customer Spending Patterns
Customer Perceived Supermarket Spending Trends Nov 2008
TNS WorldPanel Nov 2008, Extracted from Essential Waitrose IPA Paper April 2010
Average Waitrose Spend 2008 vs 2007
TNS Nov 2008, Extracted from Essential Waitrose IPA Paper April 2010
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9.4 Appendix 4 SWOT Analysis
Strengths
Waitrose has a strong historic brand within in the UK with a reputation for local organic and ethically
sourced produce. The importance of local produce as well as charity schemes such as “Community
Matters” have allowed the brand to establish a strong local following. Its reputation for high quality
foods as well as its partnership with John Lewis, which enjoys a similar quality reputation, means
that it has a loyal middle class customer base. Whilst the store has no loyalty card, the company
credit card “partnership card” is used by its core customer base due to its point benefits, which
allows the company to monitor customer trends.
All company employees are treated as “partners” of the business and thus receive the right to the
annual bonus which results in a highly motivated workforce.
Weaknesses
The high prices act as a barrier to many potential consumers which contributes towards Waitrose
low market share. The previous Waitrose own label brand was only available on a select group of
products and thus had minimal market presence.
Opportunities
Despite a decrease in consumer purchasing power, the market demand for food stayed relatively
constant in the recession compared to other goods (Positioning: Getting the Equation Right,
Marketing Week, 7th October 2010). Consumers were moving to home-cooked meals rather than
more expensive prepared items or eating out in restaurants.
The previous decade had also seen increased awareness and market promotion for organic, ethical
and fair-trade goods.
Threats
Although food demand was relatively inelastic, reduced purchasing power meant that consumers
were migrating to cheaper goods with lower margins. This meant there was increased promotional
activity and competition amongst both high and low end supermarkets to protect their market
share.
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9.5 Appendix 5 The Marketing Mix
The marketing mix is probably the most famous marketing term. Its elements are the basic, tactical components of a marketing plan. Also known as the Four P's, the marketing mix elements are price, place, product, and promotion24.”
Product The first element is the product. This is fairly straight forward as is the tangible or physical item you are selling but there are three levels of a product; the core product offering, the actual product and the augmented product. It's important to understand the differences. The core product - This is not the actual tangible product but the benefit the product provides to the customer to satisfy their need. In reality this is the sole purpose of offering your product or service in the first place - to satisfy needs of the consumer. The actual product - This is the tangible item people purchase and is defined by such things as the color, the style, branding, fashion and how many are purchased. The augmented product - This is the non tangible elements that are perhaps provided in addition to the physical parts. These may include warranties and guarantees, customer service excellence, finance options for purchasing delivery options, installation services and post sale customer care. All of the above are included in the overall product but have different benefits for the end customer.
24
Adapted from http://marketingteacher.com/lesson-store/lesson-marketing-mix.html
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Place The place element of the marketing mix is defining how and where the product is being sold. In these days of online purchasing the place covers both the website and the physical distribution and delivery of the product once purchased. When developing your marketing plan you should cover all areas from the wholesaler, retailer and any storage or intermediaries along the way. Dropshipping comes into this context if you are selling but not distributing the final product to the end customer. Price The pricing of products has been written about many times and whether to price highly which may indicate quality or low to offer the lowest market price for commodity products will greatly influence the profits your company makes. Some companies have doubled their prices and still sold more units so it's worth experimenting with the pricing levels. You can bundle products so customers pay and all-inclusive price or unbundle so each element needs to be purchased separately. Look at price closely - you can develop all types of offers or go into new markets entirely. Some pricing headings include: premium pricing, penetration pricing, product line pricing, psychological pricing, price skimming, economy pricing, promotional pricing and value pricing. Promotion Promotion is the part of the marketing mix that many people consider to be "marketing" but this is really the end result of all your hard work in defining products to satisfy needs and pricing it accordingly. Once you are at the promotions stage you have a lot of areas you could work in. The main areas are direct marketing (or direct mail), direct advertising (such as television or radio - called "above the line advertising" by marketing directors), personal sales, public relations (PR not press releases) and sponsorship. Not all may be right for your products but certainly a mix of these promotional activities is essential to get your message across. Note: Process, Physical Evidence and People are not included in this report as Waitrose were already strong on these points. Moreover, these 3Ps were not the significant factors in Waitrose Essential success. Source: http://www.smallbusinesspro.co.uk/marketing/marketing-mix.html
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9.6 Appendix 6 Changing Perceptions of Waitrose Brand post Essential
Launch
Source: Consumer Insight, Extracted from Essential Waitrose IPA Paper April 2010
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9.7 Appendix 7 “Halo Effect”
The below show that the essential range had a positive impact on the parent brand with perceptions
of food quality, service and sourcing all increasing.
Source: Consumer Insight, Extracted from Essential Waitrose IPA Paper April 2010
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9.8 Appendix 8 Porter's Generic Competitive Strategies
A firm's relative position within its industry determines whether a firm's profitability is above or
below the industry average. The fundamental basis of above average profitability in the long run is
sustainable competitive advantage. There are two basic types of competitive advantage a firm can
possess: low cost or differentiation. The two basic types of competitive advantage combined with
the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for
achieving above average performance in an industry: cost leadership, differentiation, and focus. The
focus strategy has two variants, cost focus and differentiation focus.
1. Cost Leadership
In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of
cost advantage are varied and depend on the structure of the industry. They may include the pursuit
of economies of scale, proprietary technology, preferential access to raw materials and other
factors. A low cost producer must find and exploit all sources of cost advantage. if a firm can achieve
and sustain overall cost leadership, then it will be an above average performer in its industry,
provided it can command prices at or near the industry average.
2. Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are
widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive
as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness
with a premium price.
3. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry.
The focuser selects a segment or group of segments in the industry and tailors its strategy to serving
them to the exclusion of others.
The focus strategy has two variants.
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(a) In cost focus a firm seeks a cost advantage in its target segment, while in
(b) differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus
strategy rest on differences between a focuser's target segment and other segments in the industry.
The target segments must either have buyers with unusual needs or else the production and delivery
system that best serves the target segment must differ from that of other industry segments. Cost
focus exploits differences in cost behaviour in some segments, while differentiation focus exploits
the special needs of buyers in certain segments.