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    Morrisons - Fresh growth from relaunch-through-recession Sandya Piyasena and Anna Hancock

    Institute of Practitioners in Advertising

    Entrant, IPA Effectiveness Awards 2010

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    Morrisons Fresh growth from relaunch-through-recession

    Principal Authors: Sandya Piyasena DLKW; Anna Hancock MEC

    Contributing Authors: Sarah Heyworth MEC; Richard Burgess Morrisons

    INTRODUCTION

    This is the story of how a national supermarket, stereotyped as pie-eating Northerners , became an unlikely champion of fresh

    food quality and catapulted into growth. Equally surprising was their counter-intuitive commitment to fresh food quality

    throughout the recession.

    After the troubled takeover of Safeway, Morrisons fresh re-launch in September 2007 rocket-launched them into recovery

    and reversed their market share decline. Having overcome one tough test, Morrisons were about to experience another. Just

    as the sun was beginning to shine for them, the dark clouds of an economic crisis were looming from across the pond.

    As consumer confidence plummeted and the nation tightened its purse strings, brands also had to review their advertising

    spend or in the case of the grocery retail sector, the allocation of that spend. The result was an unprecedented focus on price

    and promotional activity.

    Undeniably, Morrisons were in a better position than some to weather the storm. They continued to reinforce their strong price

    and promotion perception in advertising using the new, topical language of Price Crunch .

    However, while consumers showed signs of entering a new era of frugality , Morrisons did not interpret this as an interest in

    price alone. Insight showed that canny shoppers remained as interested in value quality divided by price as ever and

    Morrisons were proud to provide it.

    Now amid the green shoots of recovery, the strategy has been vindicated, but at the time there was considerable pressure to

    follow the market leaders exclusive focus on price and promotions.

    We will show how Morrisons commitment to a share of voice in fresh food quality, in an advertising campaign more typical of

    good times not bad, paid back 12:1 and generated 295m incremental revenue.

    Not only did Morrisons sustain their re-launch growth, becoming the fastest growing big four supermarket of the recession but

    their market share grew from 11.1% to 12%.

    Title: Morrisons - Fresh growth from relaunch-through-recession Author(s): Sandya Piyasena and Anna Hancock Source: Institute of Practitioners in Advertising Issue: Entrant, IPA Effectiveness Awards 2010

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    It was clear that Morrisons did not have a problem with their price or offer perception (see Figure 4).

    The single biggest issue holding the brand back was the perception of its food quality. Even in its heartland, it was regarded

    as having the worst food of any of the big four supermarkets (see Figure 5).

    And in the South of England, Safeway s former-stronghold, Morrisons conjured up images of pies (see Figure 6).

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    Yet frustratingly, there was a massive gap between perception and reality.

    THE STRATEGY

    i. A hidden brand truth

    At the heart of Morrisons stores is Market Street which keeps its market stall roots alive to this day. Internally, it is a source of

    undeniable unity and pride and Morrisons rightly believed that it was a key point of difference.

    However, amongst customers the term Market Street was neither spontaneously recalled nor fully understood. Crucially,

    Market Street had not been explained in a coherent way nor as a customer benefit.

    Yet on investigation of what happens on Market Street , it was clear that an amazing food story was being hidden; Morrisons

    were dedicated to fresh food 1 (see figure 7).

    The most visible manifestation of this approach are the bakers, butchers, fishmongers and other trained experts, who make

    and prepare food fresh in-store every day; bread baked from scratch, meat cut fresh not pre-packed, fish prepared fresh,

    cakes topped fresh that day, salads & sandwiches made fresh (see figure 8).

    In fact, Morrisons make and prepare more food fresh in-store than any other supermarket. 2

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    While freshly prepared food would become our hero story, the key difference was the shift from the internal terminology of

    Market Street to the customer benefit of fresh :

    i. Fresh is a potent word

    The word fresh was rich in taste, health & wholesome associations. As one customer in research described, " almost like

    home-made and we all know that you can t beat that" .

    ii. Fresh was topical

    With a tidal wave of public interest in cooking, health and food provenance, it chimed with the foodie rallying cry of fresh,

    seasonal and local.

    iii. Fresh had potential to motivate both customers and non customers

    For customers it reflected what they liked best about Market Street , though none had appreciated the scale of fresh food

    preparation in-store. For rejectors and non-shoppers the challenge to their perceptions could not have been stronger.

    "It s a bit of an eye opener, I used to think of Morrisons as quite a cheap place to shop but not the best quality" Non

    Shopper, Out of the Box Research 2006

    iii. Fresh was competitively differentiated

    Not only had this amazing story about Morrisons never been told but it wasn t true of any of the other supermarkets. While

    others had cut out or significantly scaled down their preparation of fresh food in-store for cost reasons, Morrisons remained

    dedicated to it.

    iv. Fresh put the market back into SUPERmarket

    Fresh celebrated the heart of the grocery shop and conveyed food pride. It contrasted with the negative "corporate, soulless

    white aisle" image of supermarkets and the explosion in range, from milk to mobiles.

    v. Fresh galvanised Morrisons colleagues

    In-store colleagues, the ambassadors of fresh , believed that the brand truth captured Morrisons difference:

    "I get a lot of customers saying I want it fresh and they don t believe you when you say it is made in the store "

    Marketing, now armed with the new communications focus on fresh food, looked for even further ways to challenge thebusiness and improve Morrisons fresh food claims.

    And an important endorsement came at the end of 2006 when new CEO, Marc Bolland, was appointed. After a period of

    immersing himself in the business, talking to colleagues and customers, he gave the strategy his backing.

    CHAMPIONING FRESH FOOD QUALITY

    Communications had to challenge peoples perceptions of Morrisons food quality and give brand stature:

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    1. Media share of voice to grow market share

    Learning from the IPA databank indicated that Morrisons ambition to grow market share needed to be matched by an increase

    in share of voice. In 2007, Morrisons increased media spend by 69%, growing its share of voice from 13% to 17% (see figure

    9), predominately through TV for maximum stand-out and scale (see figure 10).

    2. Creative creating a fresh world

    To bring fresh food quality to life, we brought the great outdoors indoors to the nations TV screens. The imagery reinforced

    freshness through green countryside and lush fields, real fishing boats out on sea, blue skies and even fresh, crisp snow for

    Christmas. This was accompanied by fresh, abundant looking food, skilfully prepared by Morrisons experts. Even the anthem

    Shine , by one of Britain s best-loved bands, Take That , perfectly set the mood of sunshine and optimism.

    To tell the story of Morrisons difference and fast-track national acceptance, we chose down-to-earth celebrity shoppers

    whose demands for fresh food could only be met by Morrisons. They were people who shoppers naturally warmed to and

    believed in, not unconvincing A-listers (see figure 11).

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    iii. Fresh identity

    Naturally, advertising would not work in isolation. The focus on fresh would live or die in-store. The black and yellow M logo,

    previously criticised in research as an angry black wasp was given a fresher combination of colours. And Market Street

    fascias and packaging were revitalised, bringing them up-to-date (see figure 12).

    And last but not least it took the pride and hard work of Morrisons colleagues across the business buying, trading,

    distribution and especially the heroes on Market Street who literally brought it to life in-store.

    RE-LAUNCH RESULTS

    By shining a light on and championing their hidden brand truth of fresh , Morrisons "outperformed" both the City and consumer

    expectations.

    After years lagging behind the market, sales growth "soared" by an "astonishing" 9.5%, transforming Morrisons into the UK s

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    fastest growing supermarket.

    Morrisons went on to "victory" in the big battle for Christmas (see figure 13).

    Critically, three years of market share decline was not only reversed but showed "excellent" growth from 11.1% to 11.4%.

    TOUGH TEST NO. 2 RECESSION

    The Business Challenge 2008 2009

    i. Fresh growth or just a flash in the pan?

    While Morrisons industry beating turnaround made the City and the competition sit up and take notice, the jury was still out as

    to whether they could sustain their market beating performance:

    "They ve had a super year but now they have to prove it s not a one-off" (Nick Bubb Retail Analyst Pali

    International 23 rd January 2008)

    "Britain s supermarket industry is fiercely competitive and market leaders are not used to being beaten. They will

    launch a bitter counter-attack to win back lost customers Morrisons may find itself poised for a humiliating

    defeat" (City and Finance, Daily Mail 23 rd January 2008)

    ii. Nation facing a financial crisis

    Things were about to get even harder. In the same period as Morrisons re-launch, warning signs of the financial crisis were

    emerging. Within what seemed like a matter of months, the world turned upside down .3

    Morrisons would have to sustain its growth during the toughest economic climate since 1930s.

    MARKET CONTEXT

    As food inflation rose, 4 though not to the levels reported in the press (see figure 14), consumers started to use coping

    strategies to minimise the increases in prices. The principle way of managing budgets was to trade down through product

    choice, followed by take up of promotions and reviewing choice of retailer (see figure 15).

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    Morrisons, who are renowned for the pull of their special offers, now found the Big 3 encroaching on their lead (see figure 17).

    Morrisons retained leadership in the depth of discount offered on promotion but the gap between ASDA, and in particularly,

    Sainsbury s narrowed (see figure 18).

    2. There was an increase in advert is ing sp end, most s ign if icant ly by m arket leaders Tesco & ASDA

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    As the recession took hold, Tesco and ASDA entered into a fierce spending battle (see figure 19).

    Figure 20 below demonstrates the scale of Tesco and ASDA s increases in 2008 alone, at the height of credit crunch.

    By the end of the year, the spend gap between them narrowed significantly, with ASDA s final figure of 99.9m nipping at

    Tesco s 115m heels.

    The spending frenzy was spectacularly demonstrated in national press. From September 2008, press dominations see-sawed

    between Tesco & ASDA where multiple ads showcased deal after deal. We estimate that Tesco spent 6m alone on presstakeovers alone (see figure 21) and on one day in December 2008, ran an incredible 73 ads.

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    ASDA also scaled new heights in press investment by spending a record of 8.9m in one month; more money than the entire

    competitive set had spent in one month over the last 5 years, equating to almost half of Sainsbury s annual press spend in

    2009.

    1 . B ig 3 compe t i to r s focussed sha re o f vo ice on p r i ce and p romot ions . 5

    Even more significant was the competition s main focus share of voice on price and promotions (see figures 22 and 23).

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    Tesco:

    As the downturn set in, Tesco launched several big price campaigns in a bid to excite their shoppers (see figure 24). Though

    Tesco have recently returned to their original strategy with the re-launch of Clubcard 2, even the market leader showed that it

    was vulnerable to distraction by competing with Aldi with Britain s biggest discounter .

    ASDA

    With the music to Dad s Army in the background and the return of the pocket tap, ASDA came out fighting to reinforce theirposition as Britain s lowest priced supermarket . In 2009, they also launched a major new campaign Saving you money

    everyday with a fanfare of 7000 rollbacks to 1 and the introduction of 50p offers.

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    Sainsbury s

    Sainsbury s made the significant change of using brand advertising, in addition to tactical ads, to address their poor price

    perception. To do this, Jamie Oliver now reassured shoppers that favourite family meals could be cooked for under 5 and

    promoted the Basics range, while a new, down-to-earth Sainsbury s family was introduced to push Switch and Save and the

    Switch and Save challenge (see figure 26).

    Morrisons

    Morrisons reinforced their tactical advertising during 2008 and 2009 by:

    l Using the topical language of Price Crunch as a banner for everyday offers (see figure 27).

    l Introducing the tactical loyalty scheme, the Christmas collector card.

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    l Muddying the supermarket price war waters with comparative advertising (though this ran for a relatively brief time

    versus ASDA s sustained activity).

    l Re-allocating a proportion of national press spend into digital to gain incremental cover beyond the saturated world of

    press.

    THE PRESSURE OF PRICE AND PROMOTIONS

    With a strong price and offer perception, Morrisons were better positioned than some brands as the recession took hold. Yet,

    in the middle of a spend battle between Tesco and ASDA, Morrisons total spend of 63.7m was dwarfed by comparison.

    Further still, all three competitors increased promotion-led sales and condensed brand and tactical advertising spend behind it

    (see figure 28 for a reminder of media split).

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    Now with the green shoots of recovery, it is perhaps easy to underestimate the intense pressure that Morrison s were under to

    follow suit with brand advertising featuring promotions.

    In response to the hard economic and competitive conditions, Morrisons did increase their tactical advertising spend but not at

    the expense of fresh food quality advertising. Instead of putting food quality to one side, they challenged the assumption that

    shoppers were only interested in price.

    KEY INSIGHTS

    A new dawn of frugality was heralded as shoppers re-evaluated their attitudes to consumerism in response to the worsening

    economy.

    Among the warning cries was ASDA s CEO, Andy Bond. In a PR offensive, he warned that any retailer who failed to adapt to

    the new reality would not survive.

    However, it seemed from their advertising that ASDA s answer to the thrift generation was just low prices:

    "They want a good price and should get it every week. That s why we re trading well" (June 2008, The Times)

    While there was certainly evidence of consumers being more price-focussed, there was an assumption that people were only

    interested in price. Yet for Morrisons the revelation of the recession was that people were still interested in food quality, now

    more than ever:

    Evidence suggested that only a quarter of households were claiming to cut supermarket spend versus big ticket items or

    perceived luxuries like eating out (see figure 29).

    The trend towards thrifty, frugal buying didn t necessarily mean sacrificing the quality of food. Our focus on fresh was still inkeeping with the times; eating-the-seasons for better taste, buying alternative cuts of meat which are just as tasty but save

    some money.

    In comparison to Waitrose and Sainsbury s, Morrisons were more affordable and had surprisingly good fresh food. Relative to

    ASDA and Tesco, Morrisons offered more than just low price. By championing fresh food quality and great offers, Morrisons

    were proud of this genuine value for money position.

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    CHAMPIONING FRESH FOOD QUALITY DURING THE RECESSION

    Media

    i. Focus on our strength in TV it may be unfashionable to talk about TV and only TV but, as it had proved effective for

    Morrisons we continued to focus our fresh food quality story in this channel.

    ii. Exploit the gap in food quality advertising As competitors shifted to price and promotions advertising, we exploited the

    gap by ensuring a constant stream of food quality advertising. In between TV bursts, we ran lower weight bedrock ads for

    consistent presence (See figures 30 and 31).

    Creative

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    i. Broadening the meaning of fresh

    In addition to freshly prepared food, we broadened the message of fresh to include seasonal, 100% British meat and the

    ground breaking scheme, Let s Grow. In 2009, we tapped into the frugal side of fresh by emphasising the role that our

    butchers and fishmongers could play to recommend different cuts of meat/types of fish for the right price (See figure 32).

    ii. Emotional engagement in uncertain times

    In the face of competitors condensing brand advertising with tactical, we stood firm with the fresh world created in TV and our

    choice of down-to-earth celebrities like Richard Hamster Hammond.

    COMMERCIAL RESULTS

    Morrisons objective was clear: restore the business to growth and sustain growth, during tough economic conditions and

    intense competition.

    1. Sales growth

    After the spectacular leap in sales growth of 9.5% following the re-launch in 2007, Morrisons high sales growth continued well

    into the New Year.

    Far from being a flash in the pan, Morrisons sustained their market beating growth performance for two years and won the

    Christmas battle of the big four 3 years in a row (See figures 33 and 34).

    They remain the fastest growing Big 4 supermarket.

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    Ongoing tracking data shows that Morrisons commitment to fresh food is understood by shoppers and even non shoppers, for

    whom advertising plays a disproportionate role in the absence of in-store experience (see figure 39).

    2. Food quality perceptions

    Over the campaign period, Morrisons food quality perceptions have significantly increased, first displacing ASDA and then

    Tesco, to become number 2 to Sainsbury s (see figure 40).

    This has been achieved while maintaining strong price and offer brand perception 7 (see figure 41).

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    3. Econometrics

    Using the MEC Retail econometric model developed for Morrisons, we can clearly show how successful the brand campaign

    has been.

    1. The model demonstrates an additional 14.1 million visits to Morrisons driven purely by the brand campaign. The model

    shows us that these are a combination of existing and new customers, fulfilling Morrisons ambition to increase loyalty

    (shopping frequency) and at the same time attract new customers.

    2. Since 2008 the campaign has driven a staggering 295m in incremental revenue, more than justifying Morrisons decision

    to stay with the brand campaign. (See figure 42)

    This figure does not factor in the impact of the 2007 campaign?, as brand and tactical TV were not separated for the

    purposes of the model at that time. Given the step change in turnover during this period, it is fair to say that the figure

    above underplays the impact of the campaign.

    3. Including the cost of production into the cost of the campaign, we can see that the campaign still stands up to scrutiny,

    delivering a return on investment of 12.6 (See figure 43).

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    Isolating all other factors: The following factors have been eliminated via the econometric model:

    l Morrisons own media activity (including value-led communications that ran at the same time, and brand TV activity that

    ran immediately before and after the Let s Grow campaign)

    l Store openings

    l Competitor openings

    l Store refurbishments

    l Hours of sun

    l Rainfall

    l Seasonality

    l Competitor promotions

    l Morrisons own promotions, including Christmas Collector Card

    l Individual store dynamics

    l Relative price position

    l Market Growth

    l Bank Holidays

    l School holidays

    l PR

    l Store Events

    l Competitor media activity

    l Pay day effects

    Does the brand campaign payback?

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    To calculate the net payback to Morrisons from the brand campaign, we have used the industry standard for the grocery retail

    category at 25% as we are unable to disclose Morrisons own payback figures. So, the net payback to Morrisons is 50.35m

    and the return on marketing investment is 215%. (See figure 44)

    SUMMARY

    This paper demonstrates how advertising provided the catalyst for growth for a business, with enormous pride but who found

    themselves on the back foot. After creating a significant step change in 2007, Morrisons sustained growth in both sales and

    market share for two years, during one of the toughest economic times in living memory.

    They are remain the fastest growing big four supermarket and have reversed their market share decline from 11.1% to 12%

    This remarkable performance was achieved in-spite of a fierce competitor battle to win the crown of credit crunch champion,

    resulting in an intense focus on price and promotions.

    Morrisons flew the flag for fresh food quality and challenged the assumption that customers were only interested in price.

    Despite having the lowest share of voice, this commitment to fresh food quality advertising impressively added 295m

    incremental sales, with 12 for every 1 spent.

    CONCLUSIONS AND LEARNING

    1. Consistency in allocation of advertising spend

    IPA case studies have proven the case for continuing to advertise through a downturn, when businesses are pressured to cut

    costs in this area. However, this paper reinforces the equal importance of being consistent about where spend is allocated. In

    Morrisons case it was fresh food quality.

    2. Invest in quality perceptions as much as price perceptions

    Coming out of the recession a key competitor has now conceded that it went "too promotional"9. With hindsight it seems

    obvious that recession-fatigued shoppers would begin to expect promotions and start asking if price is roughly the same, what

    else do I get for my money? However, in uncertain times, it becomes all too easy for brands to forget this. Therefore, it is

    critical for brands to invest in quality perceptions just as much as price perceptions during a recession.

    4, 474 WORDS excluding headings (Joint paper creative/media entry)

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    1. Morrisons is vertically integrated: uniquely among Britain s food retailers it sources, manufactures, packs and transports

    much of the food it sells.

    2. Confirmed in a competitor fact finding mission including submissions to the Clearcast

    3. Tesco PLC 2008 Sir Terry Leahy speech to the British Retail Consortium

    4. In 2008 food price inflation peaked at 9.3% in October

    5. To calculate share of voice split between price and promotions vs. food quality advertising we looked at a combination of

    media choice e.g. magazine adverts, TV sponsorship were assumed to be food quality and assessment of creative. Then

    weight behind activity was verified against NMR. Any food quality advertising was subtracted from the competitors overall

    spend.

    6. TNS April 2009 12 w/e- Tesco s share dropped from 31.1% to 30.6%. ASDA share 12w/e Jan 2010 dipped from 17% to

    16.9%

    7. ASDA rank no. 1 for both low prices and offers now. The lead position on the latter was held by Morrisons. Though

    Morrisons have slipped to no. 2, price and offer perceptions remain strong

    8. Market Street featuring Denise Van Outen launched on July 23 rd for two weeks. Due to an unsubstantiated food scare,

    Morrisons decided to stop the campaign until w/c 17 th September

    9. Andy Bond of ASDA The Guardian Battle of the BOGOFs Feb 2010

    Copyright IPA, Institute of Practitioners in Advertising, London 2010 Institute of Practitioners in Advertising44 Belgrave Square, London SW1X 8QS, UKTel: +44 (0)207 235 7020, Fax: +44 (0)207 245 9904

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