Loyalty Wars_International Marketing

8/14/2019 Loyalty Wars_International Marketing

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OYALTY WARS IN THE UK:resented By

( )ehul Jain 114( )aibhav Singh 146( )ikit Tekriwal 155( )shama Singhania 148( )umit Saraogi 142( )ahul Awasthy 05


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In 1995, TESCO launched Clubcard the firstLoyalty Card in the UK Supermarkets

Questions to be answered?

Should the chains, especially Sainsburys the market leader react or just wait?If they react, should it be with traditional

pricing, merchandising, promotional andservice initiatives or with a loyalty

programme of their own?

Why Case???


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During 1985 95, supermarkets were fed fromsales from new outlets

However, currently market saturation & static

salesThus, now had to increase sales from existing

stores & customers

Increased pressures on margins

UK Grocery Environment


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Store SainsburysTesco Argyll /Safeway

Asda

Sales m 10,719 10,120

6,218 5,683

OperatingProfit m

859 589 383 251

Market Share(Dec 94) 12.6% 11.7% 7.8% 6.9%

Turnover fromLoyalcustomers

66% 65% 56% 67%

Share of ownBrand

53.4% 45.2% 41.2% 38.6%

Major Players


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No. 1 grocer in the UK Market

Public company since 1973 however managedmainly by the family

Opened around 14 stores every year 355 foodstores locations

Highest operating margin 8.1%

Focus on stores rather than customers

Sainsburys


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Measures taken to improviseImproved trolleysReducing the checkout scanning speed

Warm & friendly staff behaviorFeedback systemsAnonymous questionnaires

However, these improvements were not

communicated to the customers

Sainsburys


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Second largest UK supermarket chainOpened on an average 17 stores per year 544

stores overall in UK

Lower sales per square foot per week (17.00)& operating margins (5.7%)

Introduced the campaign Every Little Helps

Innovative store format Tesco Metro,

standalone petrol forecourt

TESCO


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Differentiation measures by TESCONo sweets at check outMultiple checkout pointsNewer convenient trolleys

Baby changing facilitiesWidest choice of private labelsFood Technology Centre R&D

Tesco communicated measures to its

customers with its Quality Guarantee label

TESCO


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Safeway CultureValue added approachIn store post offices, dry cleaning servicesConsultation of customer panelsSpecialist departments- pharmacy, bakery, etcPhoto processingExtra attention to familiesSelf scanning system forerunner in

technology

Argyll / Safeway


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Market share of 6.9% - fourth largestFocus on Value for money with sharp pricing

Not much emphasis on opening new stores 203 superstore outlets

Prices 5-7% below competitors

New services initiativesDiaper changing rooms

Shopping CartsExtra checkout counters

ASDA


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After the implementation of Loyalty Club Cards byTESCO

OYALTY WARS IN THE UKart 2


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Store Sainsburys Tesco Argyll/Safeway

Asda

Sales m 12,037** 11,821 6,600 6,531

Operating profit m 803** 677 418 317

Market Share Food &ToiletriesApril 1996

12.6 % 13.6% 7.5 % NA

Turnover from LoyalCustomers*,w/e March 1996

66 % 65 % 58 % 62 %

: ,ources Company Annual Reports Institute of Grocery Distribution In, .atford AGB Superpanel* %oyal Customers are here defined as customers who spend more than 70.f their total grocery budget at one store** ainsbury s sales and profits include revenues from non grocery- - .usiness units such as do it yourself and furniture outlets

&Facts Figures of top four grocers in-UK 1995 1996


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- .Tesco s like for like sales increase in April was 8 9 . %percent whereas Sainsbury s saw an increase of only 2 6

, For the first time in 22 years Sainsbury s had to

announce a fall in profits while Tesco s rose by 14.percent - Asda s like for like sales increased even more than

Tesco s they were up 12 percent and their profits.increased 26 percent

/ . Argyll Safeway s reported 7 8 percent growth in like- .for like sales and 9 percent growth in profits

After effects of loyalty clubcards launch


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Increased its distribution and offered more own brand.products and cheap regional pricing

%Extended old saver card scheme to 50 of the stores in

.September 1995 instead of scheduled December 1995 Invested in communicating its customer service initiatives

Alliance with British Airways to offer its customer Airmiles.in addition to discounts

Reward vouchers were handed at the check out countersinstead of mail to reduce administration costs and create

.opportunity for customer contacts , %From its loyalty programme it had to raise turnover by 3

.to breakeven

Sainsbury s Response


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,Focused on cutting costs boosting productivity and attracting.more family shoppers Its own brand range of baby consumable products and Kidwear

.range

-Introduced cartoons on in store signs to send the message that.Safeway is the only superstore with human face Introduced its own loyalty Cards Various redemption measures to provide more choices to the

: , , -customers cash gifts in store services or buying promotions( ).in and outside the stores Madame Tussauds .Self Scanning for ABC card holders for quicker checkouts

/ Argyll Safeway s Response


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Emphasis on Value for money lower margins

Registered growth rate higher than TESCOitself

Effective PR initiativesPositioning as Champion of Consumers

Innovative activities Singles shopping nights,redeem competitors shopping vouchers

Not a firm believer of Loyalty cards

Best Competitor Response -ASDA


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Similar loyalty programs would perhaps attractthe me-too tag

Due to higher saturation of market, need of

increasing the sales from existing customersthrough increased loyalty

Also, after a period, when all others areproviding loyalty programs, such initiatives

become necessity for survival in the industry

Sainsburys Am I a me-too


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Loyalty programmes can be evaluated on twobasis:Cost Benefit Analysis

Monetary gains through increased sales

Cost of running loyalty programs

Intangible brand equity creation

Opportunity CostLoss of sales to the competitors

Shifting loyalties of the customersLate mover disadvantage

Is it worth the efforts???


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HANK YOU

Documents

Loyalty Wars_International Marketing