I’ve borrowed the title of my blog this week from a piece by Robert Peston, Business Editor of the BBC, in which he highlighted that the patchy nature of the economic recovery in spending by households is shown in a fall in underlying sales at three of the UK’s biggest and most famous retailers, Tesco, Morrisons and Marks & Spencer.
It’s interesting looking at what’s behind the figures – market segmentation, customer loyalty strategies, and the rapidly growing importance of online sales. What’s also clear is that many seem to be stuck on the traditional ‘4Ps’ of marketing – price, product, place and promotion – and haven’t responded to the changing marketing landscape.
Tesco, the market leader, reported a 2.4% fall in like-for-like UK sales in the six weeks to 4 January due to a weaker grocery market, although online sales were up by 14% (£450m).
At the same time, rival Morrisons reported a 5.6% drop in like-for-like sales, which excludes new stores, citing difficult market conditions and discounts by rivals, intensified for Morrisons by the accelerating importance of the online and convenience channels, where Morrisons is currently under-represented.
Marks and Spencer suffered a worse than expected 2.1% fall in sales in its general merchandise division, which includes clothes, in the three months to the end of December. Having said that, the food division saw a 1.6% rise for the period – embarrassingly for Tesco and Morrisons better than them – and online sales rose 22.7%. M&S claimed unseasonal conditions (the weather) and higher than ever levels of discounting – but they started this with a flash sale on the Saturday before Christmas, with 40% off clothing!
Meanwhile Sainsbury’s cut its full-year sales forecast after warning that customers are likely to spend cautiously in the first few months of 2014. They had expected to see a sales rise of 1% to 1.5%, but despite seeing record transactions in the run-up to Christmas, like-for-like sales rose 0.2% excluding fuel. However, Sainsbury’s convenience stores grew nearly 18%, and online shopping notched up more than 10% growth.
These major players’ results are reflective of a market where mainstream competitors are having to sprint just to standstill, amid growing threats at both ends of the value spectrum.
At the high-end, Waitrose saw like-for-like sales for the five-week period to Christmas Eve up 3.1% compared with 2012 and a 4.1% rise in sales for the 12 days ending 31 December. Like others, Waitrose reported a huge increase in online sales, which were up by more than a third compared with 2012. Then there are the Discount supermarkets, which are also increasing their market share, in fact discounters Aldi and Lidl were the clear winners of the Christmas period with double-digit growth, although neither released sales figures.
But there is a bigger lesson, which is that a retailer without a substantial online presence, including mobile, is on a fast road to obsolescence. Morrisons, slightly plaintively perhaps, points out that the first deliveries from Morrisons.com started in the first week of January.
2013 was the year in which online sales wagged the entire retailing dog, in a revolution that is permanent. The best performing store chains – Next, John Lewis and House of Fraser – are those with huge and efficient online presences. During 2013, the share of digital in Tesco’s sales is said to have jumped several percentage points from under 5% of total sales. For a business of Tesco’s size – with its 10% share of the entire retail market – that is quite something.
As a result of digital, and the click-and-collect approach to sales, Tesco has unrivalled access to UK consumers. For example, the citizens of Stornoway and the Hebrides will shortly be able to order online and collect their groceries from a depot by the ferry port.
So how can the online revolution in food retailing inform your own marketing strategy? Regardless of your sector or business model, your need innovation in your marketing approach for today’s economy.
C20th marketing thinking was dominated by Jerome McCarthy’s 4P model – Product, Place, Price, Promotion – but its legacy created a culture that focuses on the product’s attributes, neglecting its value and appeal to customers.
In today’s markets, goods are commoditised. Product attributes have become entry-level requirements, they’re not the outstanding reason why consumers choose to buy a product, whilst a growing force of customers are resistant to promotion, looking for value beyond price. Businesses of all size are looking to find new ways to connect with their customers that don’t simply translate into increased marketing spend.
Professor Richard Ettenson has reported on a five-year research study involving more than 500 organisations and has found that the 4P model undercuts the current needs of marketers in three important ways:
– It leads their marketing and sales teams to stress product technology and quality even though these are no longer differentiators.
– It under emphasises the need to build a robust case for the superior value of their solutions.
– It distracts them from leveraging their advantage as a trusted source of service, support and advice.
Ettenson states Marketing must encourage a solutions mind-set throughout the organisation, particularly those with an engineering or a technology focus, moving beyond thinking in terms of technologically superior products and services. Ettenson’s new model is Solutions, Access, Value, Education – SAVE:
– Products to Solutions Define the offering by the needs they meet and benefits provided, not their features, functions or technological superiority.
– Place to Access Develop an integrated cross-channel presence that considers customers’ entire purchase journey, instead of individual purchase locations and channels.
– Price to Value Articulate the benefits relative to price, rather than stressing how price relates to cost, profit margins or competitor prices.
– Promotion to Education Provide information relevant to customer’s specific needs at each point in the purchase cycle, rather than relying on general advertising, PR and selling activities.
Marketers who continue to embrace the 4P model and mind-set risk getting locked into a repetitive and increasingly unproductive technological arms race. The SAVE framework is the centerpiece of a new solution-selling strategy claims Ettenson.
However, the transition from the traditional 4P model is incremental. For example, Kimberly Kadlec, VP of global marketing at Johnson & Johnson, recently advocated a fresh definition of 4P, which she called Purpose, Presence, Proximity and Partnerships:
– Purpose Consumers are looking for brands that have relevance and add value to their lives. This means they’re looking to do business with companies that share their values and believe in the same things they do.
– Presence Brands used to be able to buy presence, hoping to capture enough attention, but today’s consumers spread their attention across many screens and many different channels. A brand needs a multiplicity of presence, in different formats, or it will fail to capture the attention it needs.
– Proximity Big-data analytics and real-time technologies like Google Hangouts enable marketeers to gain insights in the way their customers interact with them far more than ever before. Brands that fail to take advantage are losing at the first hurdle of the information age.
– Partnerships Collaboration enables companies to find new ways of working together that create win-win strategies – for example, petrol stations with express supermarket and fast food outlets on site. This is a radical re-think of how business is done, evidencing the transition to a social business model. Marketing means evolving a collaborative partnership ecosystem for co-created success.
An intelligent and different marketing strategy incorporating some of the above thinking has been introduced by Waitrose, whereby shoppers holding a myWaitrose loyalty card can choose from a selection of free hot drinks in the store. Last week it was revealed that the popularity of the myWaitrose card offer has made the retailer the second largest provider of coffee in the UK, with its stores shifting one million cups a week. Only McDonald’s sells more coffee in the UK.
But despite this focus on customer loyalty, Waitrose is facing a middle class revolt from shoppers who claim that its free coffee and tea are attracting the wrong type of customers. Angry shoppers used Facebook and Twitter to vent their frustration, arguing that handing out free drinks is turning Waitrose into a soup kitchen and the stores are packed with less affluent customers, and too many children, which is putting some customers off.
Mark Price, managing director of Waitrose, cast doubt on the future of Tesco’s Clubcard by saying that using loyalty cards to offer customers points had become meaningless to shoppers.
He said: Giving free coffee or free newspapers is disruptive to the market, but I think that is what customers want, I don’t think they want points or vouchers, they don’t have the richness or the affinity you can gauge if you engage with your customers in a different way.
So whether your business can identify with the new 4P models from Richard Ettenson or Kimberley Kadlec outlined earlier, your marketing initiatives can’t account for snobby shoppers no matter how hard you work on building a relationship!
Another strand of thought suggests the 4P model could be redefined as the 4C model, reflecting a customer-oriented marketing philosophy – the 4C explicitly requires you to think like a customer. I came across this Google+ Hangout by Wade Harman, focused on relationship marketing, social media, and building connections online. https://plus.google.com/+WadeHarman/posts
Below are the three C’s he identified as critical to using relationship marketing effectively within your business: conversation, communication and community – and I’ve added fourth – convenience:
– Create Meaningful Conversations Relationship marketing strives to put the relationship between business and consumer at the forefront. It’s no longer valid to simply push out a marketing message, businesses need to create a conversation and establish rapport through their social channels, but it requires work to create meaningful, intelligent and worthwhile relationship building conversations that go beyond a ‘Like’, ‘Share’ or ‘Comment’.
– Communicate Value Instead of looking at your product or service and saying what, look at it and ask who? Who can I serve, help, give a little bit more to? as opposed to what can I sell them today? It is the who that will inspire engagement and ultimately, the action to purchase your product or service.
– Embrace Your Community Relationship marketing isn’t necessarily just about building relationships, but also about nurturing and improving them. Step outside your usual market audience to embrace and build your online community. Identify who they are and how you can raise the bar when it comes to customer service. Determine who are your supporters and promoters, and build an online fan club.
– Place becomes Convenience Throughout my research on the evolution of the 4P model, Place is no longer a valid entity in the mix as regards a physical market place, shown by the recent results and analysis of major food retailers – is now all about Convenience.
For example, it’s not when the store opens, but when the customer wants to shop; it’s not when the store has the item in stock, it’s when the customer wants it; it’s not where the store is located, but where the customer wants it delivered. It’s all about convenience to the customer.
In every business, not just the massive food retailers, it’s no longer about winning market share, but about engaging the individual customer – the concept of ‘mass markets of one’ – and that’s the theme of my blog next week. In the meantime, examine your current 4P strategy and either juggle the Ps or play marketing scrabble with the Cs.
Ian Brookes is a external advisor, non executive director and investor working with exceptional entrepreneurs to create high growth businesses. You can read more insights, advice and brilliant thoughts from Ian at www.dnapeople.co.uk
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