Discuss about the case study for Consumer Buying Process.
Value decisions play an important role in the consumer buying process. Additionally, in current business environment, it becomes essential to understand the customer perceived value due to increasing competition in the market (Drummond and Ensor, 2006). Concurrently, as nowadays, customers are more demanding and expect different shopping channels to be provided for the satisfaction of their needs, it also becomes difficult to identify customer-perceived value (Beamish, 2012).The main aim of this report is to identify the perceived value for the customers of Sainsbury with the use of suitable models. It also evaluates the existing value proposition for Sainsbury and also compare and contrast it with the leading competitor in its sector. In addition, it benchmarks the value propositions and also produces a new value proposition in order to match the customers’ value criteria. In last, it also develops a plan for implementing the value proposition externally and internally. The company selected for this report is J. Sainsbury Plc.
In the year 1869, Sainsbury was established and currently, it operates more than 1,200 supermarkets and convenience stores. It is found that the company employs approx 161,000 co-workers. It is also assessed that the company greatly invests in its stores, distribution channels, and employees to deliver best value and create positive shopping experience (J Sainsbury Plc, 2016). The main focal point of Sainsbury is customers and the company’s culture and values play an important role in enhancing the customer satisfaction. Sainsbury’s corporate website also reflects that the company owns 16.7% market share in the industry (J Sainsbury Plc, 2016).
The term perceived value is associated with the product benefits and it shows the importance of understanding how the value is considered by the customers of a particular product or service. There are several models, which are beneficial to understand the customer perceived value for the Sainsbury’s customers. One of the models is value hierarchy model of Woodruff (1997). Through this model, the author defined perceived value as desired product attributes or performance of the attributes, desired consequences, and the attainment of goals and purpose of customers (Aulia, Sukati, and Sulaima, 2016). The below figure summarizes this model:
Figure 1: Customer value hierarchy model
(Source: Aulia, Sukati, and Sulaima, 2016)
With the use of this model, it is recognized that Sainsbury’s customers’ perceived value is related to their satisfaction related to product attributes, consequences and goals achievement. For example, customers’ perceived benefits for Sainsbury include availability of different clothing and grocery as per their preference, benefits after using the product, and attainment of goals such as fell special after wearing the clothing offered by Sainsbury.
Another model is given by Valarie Zeithaml, which defines four diverse classes of customer-perceived value (Buttle and Maklan, 2015). These include low price value, product related value, quality value, and the values expected as a part of customer sacrifices. This model is also supported by the study of Chang and Hsu (2013). In this study, the authors suggested a customer-perceived value model (see the below figure).
Figure 2: Model of Customer-perceived Value
(Source: Chang and Hsu, 2013)
It is clear from the above figure that customers’ mainly perceived benefits such as price, quality, and value for their sacrifices including security, privacy of their information, assurance, and satisfaction. With the use of this model, it is identified that customer-perceived value for customers of Sainsbury includes:
Price: Customers perceive both financial and non-financial price benefits when purchasing products from Sainsbury stores. For example, customers want big saving offers as a part of price benefit and concurrently, they also desire to get non-price benefits such as loyalty benefits, etc. to enhance their perceived value (Day and Moorman, 2010).
Quality: Customers also expect that Sainsbury offers good quality, latest style and design and fresh products to create great customer value. Quality can be valued in different ways including product, service, system and website (Kumar and Steenkamp, 2007). For instance, as Sainsbury allows its customers to online shop, their perceived values include opening of the website with different browsers, availability and clarity of all information, and price information, etc.
Sacrifices: Customers also value what they get as a result of their sacrifices. For example, customers want that Sainsbury ensure privacy and security of their personal information, assurance about the product use, and effective service (Chang and Hsu, 2013).
In addition, customers perceived values also include fun, entertainment, pleasure, prestige benefits, convenience, etc. when purchasing products from Sainsbury stores. In contrast, from the study by Hassan (2012), it is evaluated that many customers select Sainsbury mainly due to its location, easy access to store and available car parks. Moreover, customers also perceived value from competitive prices, wide range of products and offer and promotions.
It is evaluated that Sainsbury gives importance to both price and quality in its current value proposition. In regard to this, it is assessed that the new pricing strategy of the company to continuous lower prices reassures customers that at Sainsbury’s stores they can always get a good price (J Sainsbury Plc, 2016). The company invests in getting down the prices of daily products that are demanded by customers through value chain efficiencies (Hassan, 2012). In addition, the company also regularly invests in improving the quality to strengthen its existing value propositions and get success in the increasingly competitive marketplace. It is also evaluated that quality is the main value creating factor that helps in keeping Sainsbury apart from the competition (J Sainsbury Plc, 2016). The company innovated various own-label products, the quality of which strengthen its premier-class goodwill and image.
Concurrently, it is also evaluated that the company is able to effectively differentiate itself from other rival grocers due to the main elements of value propositions including quality of the product, improved availability, and wide range of products (Cunningham and Harney, 2012). In addition, Sainsbury also operates different store formats that are effective to meet with the requirements of specific customers as well as create value for them.
It is also assessed that labelling is also an effective part of Sainsbury’s value proposition and account for about total sale’s 60%. It helps the company to transfer the value that customers relate with the retailer of the product (Gbadamosi, Bathgate, and Nwankwo, 2013). At the same time, consideration of ethical value of consumers are also an essential part of its value proposition that significantly contributes in the company’s success. It is because some ethical consumers may boycott purchasing of products from retailers, which do not comply with ethical standards (Buttle and Maklan, 2015).
In contrary, it is evaluated that Nectar reward scheme that is provided by Sainsbury to its customers is a negative aspect of its value proposition. It is because the company does not invest in this program largely as a result the customers are not very loyal towards this brand. At the same time, it is found that Tesco club card scheme is an important part of value proposition of Tesco. In this, it is found that many customers of Tesco believe that Tesco club card is a main source of value for them that motivate them to keep shopping with that supermarket chain (Hassan, 2012). In addition, it is also assessed that better quality, local store, and availability of wide range of products are some important value elements for Tesco. Thus, it can be stated that there are some similarities in the value propositions that are offered by both Tesco and Sainsbury. For example, both companies focus on improving quality, maintaining price and offering wide product range to create value for customers.
But, concurrently, it can also be discussed that availability of effective loyalty card scheme makes the value proposition of Tesco more effective in comparison of Sainsbury. For the reason, Tesco runs its own loyalty program, while Nectar is not Sainsbury’s own program (West, Ford, and Ibrahim, 2010). Moreover, it is also measured that Tesco also believes that an effective way to add value for customers is through a major cost-cutting program. In this, the company’s loyalty program supported greatly as many products’ prices cut in half when customers use their points. Thus, it can be concluded that Sainsbury needs to improve its current value proposition to strengthen it as compared to other competitors as well as ensure long-term business survival.
In order to benchmark the two value propositions, first, it is essential to understand the main strengths of the competitors’ value propositions. Secondly, it is important to know company’s own differentiation towards consumers.
In relation to the strength of Tesco’s value propositions, it is evaluated that Tesco has developed a successful online business in the UK that now is extended to different product categories. Tesco is able to offer a profitable internet shopping experience by leveraging the strength of its traditional mortar and bricks grocery business (Murray, 2013). Tesco’s online business caught more than 40% of the total online grocery shopping market. Additionally, its website is the world’s most successful online grocery retail business and creates significant value for online customers.
Additionally, it is also evaluated that the another strength of Tesco’s value propositions is related to its loyalty card scheme, which is valued by customers. The biggest benefit of loyalty cards for Tesco is that these support the retailer to know about what customers prefer to buy (Seth and Randall , 1999). Additionally, on the basis of the customers’ previous history, Tesco gives vouchers to customers and also designs offers to deliver the products to customer they receive.
In contrary to Tesco analysis, it is assessed from the value proposition analysis of Sainsbury that the continuous focus on products’ quality, prices, and supply of safe, fresh, and healthy products supports the company to get ahead from the competition. It is also evaluated that the consideration of ethics in the business as well as commitment towards delivering value to customers positively supported the company to differentiate itself in the eyes’ of customers in today’s dynamic and competitive business environment (Barnes, Blake, and Pinder, 2009). Moreover, it is also appraised that the focus on five organizational values also ensures the success of the company in current competitive business situation. These values include best food and health, environment respect, integrity, building a good place to work, and contribute a positive difference to the company. It is also evaluated that all these values positively supported the company to deliver value to both customers and employees as well as strength its brand image worldwide.
In contrast, in relation to the two retailers it is also found that both give importance to socially responsible activities as well as promote environmental safety that also set both Tesco and Sainsbury apart from the competition (Hassan, 2012). It is also evaluated that these elements of value proposition are important for today’s organizations, particularly supermarkets to attain competitive advantage. It is because attractive price and advertising are some factors that are adopted by most firms in this sector, but contribution to the community development is not followed by all firms. In this way, it can be one of the most valuable aspects of value proposition.
Thus, it is clear that both Tesco and Sainsbury focus on delivering value to customers by offering good quality of various products at fair price to customers. It can also be concluded that Tesco has business strengths such as online retail business and loyalty card schemes that provide its competitive advantage over other retailers in the industry. In contrast, ethics, location, and fresh and good quality of various products are the main aspects of Sainsbury’s value proposition that can be benchmarked to ensure its long-term success.
It can also be summarized that Tesco has more than one factor in its value proposition that support it to maintain its leading position in the industry. These factors include effective access to stores, online shopping, loyalty cards, wide product ranges, and quality. Additionally, it can also be stated that Tesco’s loyalty card scheme can be used as a benchmark in this industry to deliver continuous value to customers. For the reason, nowadays due to increased competition, it becomes essential to make customers loyal towards a particular brand so that their retention rate can be enhanced. Moreover, it can also be stated that as Sainsbury has lack of loyal customers, so it should also focus on making its own loyalty scheme to get long-term business success and growth.
With the analysis of Sainsbury’s value proposal, I have come to know that building and delivering of value to customers as per their expectations is not an easy task for marketing planners. There is need to develop understanding about this concept as well as to know what customers expect from a particular organization in terms of delivering value to them. Additionally, from the Tesco’s value proposition analysis, I have also learned that building of loyal customers can be an important success factor for today’s business organizations (Hassan, 2012). It is because such customers expend their money, make repeat purchase, and also recommend to others the same company as long as it delivers logical and uniform values to them. It is also important to communicate the value propositions to customers adequately and manage any change in it as per the change taken place in the market.
As currently, Sainsbury does not focus on making customers loyal, a new value proposition will be proposed in order to match the customers’ value criteria. For the reason, nowadays customers perceive value in terms of taking loyalty benefits offered by the company.
In order to develop a new value proposition for Sainsbury, value life cycle will be used. Through the use of this cycle, value elements will be developed at the life cycle’s different stages. The below section summarizes the new value propositions for Sainsbury:
Introduction of Value: At the stage, with the use of historic data and observations of customers needs and expectations as well as current value proposition, the research and development department along with the marketing section will work to add value (Hassan, 2012). Additionally, customers will also be involved in this step to make the value proposition effective. For example, Sainsbury will develop a loyalty scheme and will also focus on maintaining price and quality to meet with the value standards of customers.
Value Appropriation: At this stage, Sainsbury will create value by improving purchase experience of customers. For example, by improving the online presence and providing all information required to make a purchase decision, the value will be created for the customers (Hassan, 2012).
Value Use: Customers feel and see the value at this phase through the products or the services actual use (Hassan, 2012). Therefore, at this level, Sainsbury will create value by linking different benefits to the product/service.
Renewal of the Value: At this phase, the value is created when value finishes due to expiry of products at a supermarket like Sainsbury (Hassan, 2012). Therefore, in the renewal process, Sainsbury can create value by adding more features and benefits to different product and services.
Transfer of Value: In the value life cycle’s final stage, the customers can no more get value. Yet, by transferring value from obtained benefits, value can be created (Hassan, 2012). For example, Sainsbury can offer exchange of some used goods at significant discounts.
In addition, some value dimensions such as innovators, price ministers, and socializers will also be used to make the value proposition effective that meets with the value criteria of different customers (Hassan, 2012). For example, Sainsbury will continuously invest in developing and improving the technology and the value proposition is related that customers are advanced in technology. Similarly, by considering the price minimizing dimension, Sainsbury will emphasize on selling products not more than competitors’ prices (Hassan, 2012). As a result, value for money is the value proposition for customers. Moreover, by making effective loyalty schemes, Sainsbury will develop an interpersonal relationship with main customers. The value proposition here includes believe, trust, closeness, and social relationships. Additionally, it can also be discussed that as the new value proposition supports Sainsbury to develop close relationship with customers, it would be helpful for the company to attain long-term business growth, success, and survival.
Both the internal and external environments of the organization are linked with the value proposition. In this, the value proposition internally, defines the firm’s operations, as it is interpreted into value creation actions and processes (Saren, 2013). In contrary, externally, it represents the firm in the customers’ eyes. It is the reason that to get long-term business success, it is necessary that the value proposition implemented both internally and externally.
Therefore, a plan will be developed to enforce the proposed value proposal in both internal and external business environment. Firstly, marketing strategies and tactics will be developed and aligned with other organizational strategies so that best value can be delivered to customers. In addition, to implement the value proposition internally, a new strategic framework will be developed in order to deliver value to end-consumers (Hassan, 2012). This framework will be beneficial to make clear the value proposition that the company should deliver as well as the alignment of products, organizational resources and processes to deliver the value in a profitable manner. At the same time, to implement the proposed values, they will be defined sharply, clearly understood and will be communicated to different stakeholders including customers, shareholders, employees, etc. appropriately (Hassan, 2012). It would be beneficial to ensure the proper application of the value proposition at all levels in the organization.
Moreover, internally, the firm will focus on attaining the operational excellence so that optimum value can be delivered to customers (Clark and Baker, 2007).Additionally, Sainsbury will identify the operational processes and activities to translate the value proposition and delivering values to customers. For example, market research department will focus on identifying customers’ expectations so that benefits can be designed accordingly to create value.
In contrast, to externally implement the value proposal, Sainsbury will focus on positioning itself in the eyes of customers (Viscusi, Batini, and Mecella, 2010). For this, effective marketing strategies and plan will be developed by the company. For example, a new marketing mix will be proposed by the company that will consider the new value proposition. The marketing mix is as follow:
Product: Wide range of products will be offered with the use of advanced technology, current fashion and as per customers expectations. It would be helpful to meet with the customers’ value needs in terms of advance technology and availability of wide product range (Beamish, 2012).
Price: Competitive price will be offered to attract and retain customers in grocery retail markets. Concurrently, Sainsbury will also make differentiation on prices and offers in comparison of competitors to positioned itself among customers (Hassan, 2012).
Place: It is evaluated that store location is the biggest delivered value along with the store distance and availability of other distribution channels such as parking facilities and online purchasing and delivering (Hassan, 2012).Therefore, to strengthen the current brand image, Sainsbury will improve its current store location as well as online presence.
Promotion: Promotion is another element that adds value to customers in terms of discount offers, and other schemes (Drummond and Ensor, 2006). Moreover, loyalty cards are also viewed as the main source of value to customers. Therefore, Sainsbury will promote its loyalty card schemes to customers to strengthen its current image and differentiate itself in the market.
Conclusion
From the above discussion, it can be concluded that customers of Sainsbury mainly perceived values as locations, availability of range of products, fresh food, and maintaining quality at lower prices that encourage them to visit this supermarket as compared to others. It can also be stated that Sainsbury needs to improve its current value proposition as compared to other competitors. For the reason, nowadays, customers acquire more value from the company that offers them loyalty benefits along with maintaining product prices and quality. The new value proposition for Sainsbury will focus on delivering value by offering different loyalty benefits along with asserting product range, price, and quality. In last, it can also be summarized that the implementation of value propositions both internally and externally would be helpful to ensure the company’s long-term success.
References
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