Aldi and the UK price war in groceries

The UK supermarket price wars are intensifying as Tesco struggles with problems that range from hugely incorrect accounting to overambitious international growth.

Meanwhile, the discount grocer Aldi has been profiting from the latest round of price wars with the major grocery chains. Aldi's managing director says: 'The price cuts have encouraged consumers to think more about what supermarkets charge and have really shown that our everyday low prices can't be beaten'.

Everyday low prices, plus 'special buys' (announced via mobile app) that bring selected prices even lower, are helping to increase Aldi's market share week by week. Aldi is prepared to slash prices even further if necessary to attract new customers during the winter holiday shopping season.

In 2013, Aldi expanded by 42 new stores. In 2014, it is adding 54 new stores--and in 2015, more than 60 new stores. This runs counter to the current trend of retail chains slowing their store openings to focus on increasing revenues from existing stores.

However, Aldi has a definite growth strategy based on its competitive advantage of everyday low prices--and it will keep that advantage in the public eye no matter what competitors do. As its managing director says:

Whatever our competitors plan to do we know exactly what our response will be and our competitors do as well. We will not let them compete on price. We will not let them close the gap.

Marketing Metro Bank in year four

'We believe customers simply want a better experience from their bank, the kind they typically get from a great retailer and that's what we intend to give them'.

The chairman of Metro Bank said this in 2010 when opening the firm's first London 'store' (what other banks call a 'branch'). The marketing plan called for opening customer-friendly stores with convenient hours and amenities--at a time when traditional banks are closing branches to cut costs and encourage online banking. Metro Bank's long-term goal is to have more than 200 stores open by 2020--an expensive and aggressive target, but important for reaching a larger customer base and achieving economies of scale. Location, location, location is key.

By now, Metro Bank has attracted 400,000 customer accounts. It still keeps its stores open Monday through Sunday, even on bank holidays. One of its fun features is the open invitation to bring dogs into the store for fresh water and treats.

Although online banking costs less to operate, Metro Bank believes in face-to-face service and wants customers to walk into a nearby branch. Yet because so many customers like the convenience of electronic banking, Metro Bank has its own app and online banking site. Profitability remains on the horizon, perhaps by next year.

To reinforce its connection with the metro London area, the bank has reserved one of the scarce .London dot-com addresses. It has nearly 6,000 Twitter followers and its website actively invites comments and complaints from the public.

This post updates the Metro Bank example of customer service as a point of differentiation in Chapter 10 of Essential Guide to Marketing Planning.

Coffee marketing: Convenience vs status

Who prices a single cup of coffee at £11? Actually, the price is 1,998 yen, and the marketer is Starbucks in Japan. The coffee is made from special Geisha beans (really!) that are grown in Panama. Starbucks was able to buy a quantity of these specialty beans and is offering the coffee in its Tokyo-area restaurants.

Starbucks has tweeted about these specialty beans in the past. It is also promoting the expansion of installations of its special high-end brewing system, Clover, used for the expensive 'reserve' coffees it serves in selected stores.

The pricing strategy for Geisha coffee is in stark contrast to the popularity of 100-yen coffee available at the ubiquitous convenience stores all around the cities. In fact, there is a price war brewing among convenience stores that want to attract coffee buyers.

Convenience and low price are two key motivations for purchase--but status can be just as powerful in many situations, as this example of product pricing illustrates.

Update on the Ferrari Train

Nuovo Trasporto Viaggiatori launched its Italo "Ferrari Train" high-speed rail service in 2012. The company competes with Trenitalia, the Italian state-owned railway, for passengers who want speedy, comfortable transport between major Italian cities.

NTV's stylish, modern trains introduced competition into an industry unaccustomed to rivalry. The company's long-term marketing goal is to carry 9 million passengers per year and capture as much as 25% of the market for high-speed rail service inside Italy.

However, NTV's Italo has not done as well as it had hoped in the first two years of operation. First, the European economy hasn't fully recovered from recession, which means fewer passengers in general and more intense competition for those who are willing to pay for high-speed train service. Second, NTV reportedly says that Trenitalia has set its prices at an unfairly low level. Third, Trenitalia is reportedly raising its operating network fees and the new, higher costs will further erode NTV's profit margins.

Although NTV is attracting passengers, it has lost about €156m in its initial two years of operation, and is looking at layoffs to cut costs. Achieving its market-share goal and becoming profitable will be extremely difficult unless NTV can overcome these challenges.

This post updates the case study about NTV Italo in chapter 7 of my Essential Guide to Marketing Planning.

The Most Social Byte Night Ever

It's back! Byte Night takes place on Friday, 3 October this year. IT professionals around the UK will be sleeping rough to raise money for the charity Action for Children.

This year, Byte Night is taking social media marketing to new levels. Understanding how important it is to engage participants and donors, Byte Night's marketers are offering 5 different Facebook banners (one shown above), 5 graphics for Twitter profiles/pages, 2 Twibbons and a banner each for LinkedIn, Google+ and Tumblr.

For other media, Byte Night provides adverts, business card templates and more. Of course Byte Night has an app and its own hashtag #bytenight.

Byte Night has a page devoted to explaining how to write your marketing plan for fundraising during the weeks leading up to Byte Night. The organisation itself has a detailed plan and specific metrics for its fundraising activities.

Last year, Byte Night exceeded its fundraising goal. What about in 2014?

This post updates the Marketing Byte Night opening example in Chapter 11 of The Essential Guide to Marketing Planning.

Electrolux increases its brand portfolio for global share

Electrolux, based in Sweden, is buying General Electric's home appliance business, at a price of £2 billion. GE's division markets refrigerators, air conditioners, water heaters and cookers under two main brands, GE and Hotpoint, throughout North America. Electrolux's brands, shown above left, include Frigidaire, Westinghouse, Electrolux, Eureka and Zanussi (graphic from Electrolux's pdf presentation on the deal).

In particular, GE has forged connections with North American construction firms to sell home appliances for new houses. GE has wanted to exit the consumer appliance business for some time so it can concentrate on its B2B marketing, including industrial power products, aviation products and other expensive products sold to businesses, governments and health-care providers. 

Marketing to the construction industry is a marketing channel opportunity that Electrolux would like to exploit as the economy continues to improve. The deal also gives Electrolux more strength in North America, to complement its strength in the European region.

As discussed in Chapter 6 of my Essential Guide to Marketing Planning, products are often marketed with a company brand and a product line brand--as GE does with its GE Profile Series and GE Monogram appliances. In contrast, Electrolux traditionally uses an individual brand for each product line. Whether Electrolux will append its company name to the GE brands is not yet known. I can imagine a change that would create brands like "GE Monogram by Electrolux" but these decisions won't be made for some time.

The combination of Electrolux and GE appliances gives Electrolux a slim lead over Whirlpool in market share. It also adds to Electrolux's pricing complexity, given the number of brands and lines within each brand. 

 

Movie helps LEGO build profits and brand momentum

LEGO, known for its ubiquitous plastic bricks, has just reported a 12% rise in profits, thanks to the popularity of merchandise related to the animated hit The LEGO Movie. The movie's appealed not just to young fans but also to adults who accompanied youngsters to the theater (often more than once)--noting that the plot and characters were engaging and not just an extended advert for the brand.

On the strength of the rise in revenue and profits, LEGO is now at the top of the toy industry, surpassing long-time leader Mattel by a small margin. LEGO and Mattel will both be using their marketing plans to build brand momentum for the all-important year-end holiday shopping period. Mattel has even purchased Mega Brands, a rival plastic brick company, to enhance its presence in that part of the market.

Can LEGO repeat its move tie-in success with a sequel? Disney/Pixar's Cars multi-movie franchise has been bringing shoppers into stores to buy billions of pounds worth of movie-related products for years. No wonder LEGO is looking ahead to 2017, when Warner Bros. plans to debut the second in the LEGO movie franchise.

Starting your marketing plan?

Are you starting to prepare a new marketing plan? Here's a brief list of resources to consult for ideas, advice and structure:

• Chartered Institute of Marketing's marketing planning tool takes you from mission statement to resource requirements and budgets, step by step.
• Marketing theory articles and case studies to give you ideas and inspiration.
• What is a SWOT analysis? Find out here.
• Developing brand values is a key aspect of marketing.
• Brand problems? Read about these turnarounds.
• How to forecast sales for your marketing plan.

For a more comprehensive listing of online resources, click to my page of useful marketing planning links.