Analysis Of ALDI’s Marketing Strategies: Segmentation And Positioning

Brief History of ALDI

The main aim of the report was to analyze Aldi Company and its current marketing strategy and tactics and recommend persuasive communication strategies to promote Aldi Company to New Zealand.

Aldi is a Germany leading chain of discounted supermarkets famous known to offer products of high quality at low costs. The name “Aldi” is abbreviated from Albrecht (family name) Discount. Aldi Company started in 1913 as a food store in Germany called Essen (Peter, 2009). By 1960s Aldi company expanded its business to 300 stores in Germany and was separated into two groups Aldi Sud (South) with headquarters in Mulheim an der Ruhr and Aldi north with headquarter in Essen (Ruddick, 2018). Aldi North operates in Denmark, Belgium, Netherlands, Portugal and France. Aldi south operates in United States of America (USA), Hungary, United Kingdom (UK), Austria, Ireland, Slovenia and Australia. The main reason for business separation was disagreements. The two organization operates independently and works within the specific market ground. The companies were originally owned and managed by brothers Theo Albrecht, and Karl Albrecht. Aldi Company has transformed from small business to the valuable retail business chain globally with the company operating over 10,000 stores in 20 countries (Peterson, 2018). In addition, the company has an estimated turnover of 53 billion Euros and more than 69,000 employees globally (Cuofano, 2018).

Vision and mission of the company

Aldi Company has a number of guiding principles and business philosophy that can be summarized in one statement “Top quality of products at incredible low prices-guaranteed”. The company has five ideologies including buy with confidence, excellent quality, huge savings, superb special buys and outstanding value.  The vision and mission statement of the Aldi Company is to provide the customers with products they regularly buy and make sure those products are of high quality at affordable price. In addition, the company also promises to be fair to everyone.

Values and beliefs

The values and beliefs of the company include simplicity, reliability and responsibility (Aldi, 2018). In simplicity, the company creates clarity, efficiency and clear orientation to customers and organization. In responsibility, the Aldi stands for commitment towards partners, environment, customers and people. In addition, the company includes principles like friendliness, fairness, service orientation, openness and orientation. In reliability, ADLI Company means what it says. The company is consistent with people, price, products and all other aspects of day-to-day professional life.

Product portfolio offered by ALDI

ALDI offers a range of products lines that meet concerns, needs and dietary interests.  Australia products ranges are limited as Aldi stores offer about 1,000 stock keeping units (SKU’s) as compared to 30,000 SKU’s for Woolworth’s and Coles (Perrey, Freundt & Spillecke, 2015). The product categories offered by the compare are restricted in terms of size on offer and brands. The product range includes simple nature line that consists of several organic items, never any brand of meat products that consist of animal byproducts added hormones and antibiotics and LiveGfree line of certified gluten-free products.

Simple nature product line offers around 200 products every day (Aldi. 2018). The primary products are organic foods and all items produced according to practices without genetically modified organisms. Precisely, simple nature product line ranges from pantry staples such as pasta sauce, fruit bars, cereal and honey, to fresh items like yogurt, salad mixes, kale, milk and bread.  Exclusive line of liveGfree or gluten-free foods includes granola, brownie mix, pasta, bread, cookies and pretzels.

Product Portfolio

Never any is a product line of Aldi Company that has no antibiotics, animal byproducts and added hormones. In addition, never any products are free from added gluten, preservatives, fillers, casein and nitrates or nitrites. Earth Grown are products made with ingredients like hearty grains and vegetables. Furthermore, Earth Grown line of vegetarian products and vegan is for customers looking for plant-based options like tenders, chickenless patties, kale and quinoa crunch burgers.

Task 2

Competitor	Strengths	Weaknesses	Product features or benefit	Promotion strategy
Pak n Save	-Market leading position in New Zealand -good reputation because of community programs -Self-checkouts register which helps people save time instead of waiting on line – the company offers multiple products	-limited product selection -uncertainty in cost structure –  higher prices -stores famous in certain locality hence less market share -no provision for ordering online	Fresh food and great quality vegetables, fruit, bakery items, seafood, meat at low prices.	-Sales promotions -Advertisements on billboards, televisions, newspapers and radio stations. advertisement through pamphlets
Countdown	-offers products at relatively low prices -shopping mobile applications – customized products and loyalty cards -online food bank -brand name – a large number of outlets – effective supply chain and distribution channels	-failure of operation from the EFTPOS machines -bad acquisitions -Work inefficiencies	-customers can order fresh vegetable and fruits online through countdown application. – customers can compare prices of the products online with other companies	-social media advertisements like Facebook and Twitter. – sales promotion

Task3

Strengths

Pricing and trusted supplies: Aldi Company survives by offering low prices to the customers. Most customers needs are sold on the company’s stores at lower prices than other mainstreams retailers. In addition, through the technique of “low prices,” the company has significantly gained a competitive advantage in the industry. The company also has trusted suppliers who are loyal to the company and supplies bulky products to the company at relatively low prices.

High level of customer support: Aldi Company enjoys a strong support from loyal customers. The strong customer base and brand trust in diverse regions have maintained repetitive purchases and therefore the company has generated high revenues in those areas.  According to Aschemann-Witzel & Niebuhr-Aagaard (2014) when a company offers a wide range of products at low prices, people tend to shop frequently for most of their daily needs. Therefore, the high level of customer support in Aldi Company is associated with increased in sales and a large number of new customers who shop in the company every day.

Good product mix: Aldi Company has a strong product mix. The key element of the company’s product mix is general merchandise taking more than twenty-five percent of total spaces in shelves. In addition, the company has private label brands and premium brands that are non-discounted. Therefore, the company gains “low pricing” competitive advantage because its product mix is highly differentiated in terms of products.

Weaknesses

Poor penetration in high-income groups: Aldi is a preferred shopping place for medium and low-income groups. Furthermore, it is hard to find High-income groups shopping in Aldi supermarkets chains. Therefore, despite the company being in the market for many years, it has failed to penetrate into higher income segments. Poor penetration in high-income groups impacts Aldi Company by limiting its ability to enter new markets with potential buyers.

Low margins: Aldi’s company heavily depends on the sales volume and therefore it thrives on low margins. Frequently, the company indulges in unethical practices like treating suppliers inappropriately and price discrimination for maintaining their margins consistent.

Poor employee’s satisfaction: Aldi Company requires a very high level of productivity for it to survive in the competitive market. The low number of the staff is one of the company weakness. The employees are paid less than most of the similar jobs and often are needed to work in multiple shifts hence creating high employees attraction and attrition.

Opportunities

Customer’s preference: customer needs are growing every day and therefore the tendency to spend has increased. In addition, the customers have increased their willingness to pay for premium services. Therefore, Aldi Company has an opportunity of charging higher prices by offering better qualities of products and services. Currently, there is increased in new product categories particularly in niche products hence creating new avenues for Aldi Company.

Competitor Analysis

Online: Globally majority of the customers are using the internet to order for groceries items. The company has an opportunity of utilizing online platforms like Facebook and Twitter to advertise their items alongside other printed media advertisements such as newspapers and brochures. In addition, web and mobile application and growth of E-commerce have grown significantly and many people are using these services to order products from their favorite stores.

Economy recovery and population in developing countries: In some countries like India and Brazil, Population has grown significantly and the majority of potential customers can afford the products. Hull (2009) once stated that “the growth of population and employment rates is always associated with high GDP”. Therefore, Aldi Company has an opportunity of offering low prices and quality products in the overpopulated. The economy of developing countries has also recovered with people now able to afford Aldi Company products. Therefore, Aldi should explore these opportunities and enter into the markets of these countries.

Threats

Competition: Aldi Company faces a stiff competition from other key players like Best buyers and Walmart. Other great retailers like Amazon has moved into grocery and offers differentiated products. In addition, the industry also is flooded with new entrants penetrating markets with new tactics. Competition is the greatest threat of the company as it can lead to a decline in sales.

Government policies and taxation: Aldi Company Operates in diverse markets globally and therefore changes in the government policies and taxation affect the company significantly. In addition, the increased trend of Isolationism in USA economy and uncertainty of Brexit in UK and Germany markets can lead to a similar reaction from other countries and therefore impacting the company’s international sales.

Technologies and market demand: The market disruptor and new technology developed by competitors is a great threat to the Company. Competitors can use the new technology to attract loyal customers of Aldi and therefore the company experiences a huge decline in sales. The company should, therefore, keep updated on any technology trend in the markets. Demands for the products offered by Aldi Company are also seasonal. Therefore, any unlikely event during the peak season can impact the company significantly.

Aldi SWOT analysis summary

Strengths	weaknesses
· Low prices · Trusted and  suppliers · High level of customer support · Product mix · Strong distribution network · Superb performance in new markets · Strong free cash flow · Good returns on capital expenditure · Strong product portfolio	· Poor penetration in high-income groups · Low margins and net contributions · Poor employee satisfaction · Poor financial planning · Poor technology investments · Gaps in product ranges
Opportunities	Threats
· Customer preferences · Online · Economy recover in developing countries · Population growth · Successful Organization core competencies · New environmental policies · Low inflation rate · Market development	· Intense Competition · The decline in market demands · New technologies from competitors · The increasing trend toward isolationism. · Rising pay level. · Rising raw material · Liability laws in different countries are different.

Task 4

Segmentation strategy

According to Madhavaram & Hunt (2008) segmentation strategy organizes customer along behavioral, geographic, psychographic, demographic or combination of them.  In addition, market segmentation strategy breaks the target market audience into smaller and manageable groups.

Demographic segmentation: In demographic segmentation, customers are organized according to education, income, ethnicity, family size, gender age and religion. Aldi Company segments its products in a manner that people with different incomes can purchase the items. For example, there are products with very low prices for low-class people and others with moderate prices from middle-class people. Women are considered to be into groceries so much and therefore, Aldi Company main target is middle-class women as they are likely to have a high consumption of the products.

Geographical segmentation: In Geographical segmentations, a grouping of products is done in accordance with the nation, population density such as urban areas and suburban, city, climate and neighborhood. Aldi Company target areas with the high population as they likely have many buyers. In addition, the company considers opening stores in a population of more than 30,000. Stores are located at a good visibility from main roads. The company also targets urban areas because of good infrastructures and potential customers.

SWOT Analysis

Psychographic segmentation: In Psychographic segmentation, target markets are grouped in accordance with personality, lifestyles and characteristics. Australia has an advanced and modern society that considers purchasing bulking products in supermarket chains. Additionally, there is plurality in Australian’s lifestyles. The Australian’s shoppers have an attitude of purchasing products from the supermarket and urban centers and therefore Aldi Company locates its stores in urban areas.

Behavioral Segmentation:  In Behavioral segmentations, customers are grouped in accordance to Customer’s knowledge, attitudes, loyalty and response to conduct. Aldi company stores exist in popular cities and town as people in these areas have attitudes of purchasing products from supermarkets. For example, a large share of Aldi stores are located in Germany and European nations as people are well equipped with knowledge of products, and customers are loyal.

Targeting strategy

Aldi Company adopts the differentiated strategy. According to Spencer, Joiner & Salmon, (2009) differentiation strategy is a manner that a company launches new products with unique features that separate itself from competitors. Aldi Company has differentiated its product by launching new products and services in the markets that are different from competitors. For example, Aldi Company has their own brand labels with a limited product range that differentiates the company from other companies. In addition, the company has rebranded itself for customers to identify their brands easily and has been offering unique prices. The company also offers non-food items despite specializing in the grocery industry.

Positioning strategy

  According to Varadarajan (2010), positioning strategy is a way a company chooses market niches to concentrate on and excels in those niches. Positioning strategy focuses on how an organization competes in the market. In addition, through the positioning strategy, an organization is able to identify particular areas where they can beat their competitors. Aldi companies use different position strategies for designing an image and values that customers within target segments understood.

Aldi Company has aligns its operation to embrace the cost-positioning strategy. The company has eliminates wasteful procedures in stores and transportation in order to pass savings to customers. The company has invested largely in capital into an operational process that automates delivery, ordering and inventory procedures. Currently, the company is successful because it operates in a cost-effective structure allowing stores to offer lower prices than its main competitors.  

Image differentiation is another technique used by the company to position itself in the market. Aldi Company has a logo that is different from other competitors in the industry. The customers are able to identify the company’s stores through the company’s logo that is always displayed on Aldi’s stores and billboards. In addition, “Aldi” name and trademark is a significant trade name. The name leaves an impression on customers, generating customer loyalty.

Task 5

Product strategy

According to Beard (2008) Product are manufactured with intention of meeting customer’s needs and maintaining satisfaction. Therefore, a successful company develops a product that satisfies the needs of customers. Aldi Company strategizes on offering products at low prices that are of the same quality as other branded items. In addition, the company has selected a few suppliers that distribute groceries. The buying of bulky product from single or limited supplier reduces costs hence helping the company to offer its product at relatively cheap prices as compared to competitors. In addition, Aldi Company rebrands the products sold at the company from suppliers in order to have a maximum control over costs and productions. The Company also stocks its products and does not change food products but keep experimenting with non-food items. For example, during the winter season, Aldi Company offers warm-camping gear and snow gear. The company also launches different products during on a week which are different from the initial products offered by the company. For example, on a specific day like Thursday, it is very common to find household items and kitchen accessories. The products are limited in stock and therefore they attract many existing customers. The scarcity and affordability of these items make many customers revisit the company frequently.

According to Andrews (2010) Prices drives demand. Aldi has a strong customer base because of the cheap prices and discounts it offers to customers. The company uses various pricing strategies including unit pricing strategy, market penetration, competitive pricing, loss leader pricing and psychological pricing. Competitive pricing is the main strategy used by Aldi. Through competitive pricing strategy, the company buys products in bulk and offer them into customers at affordable prices. According to Schotanus, Telgen & de Boer (2009) when a company buys a product in large quantities, it allows great power for negotiating best prices with suppliers. Therefore, large quantity purchase does not only provide low prices but also allows the company to pass these savings to customers. The company also uses unit pricing for customers to compare and benchmark with a competitor. In market penetration strategy, the company charges low prices for new products for them to gain share and have low market resistance. In psychological pricing, the company considers a minor difference in prices that can have great power in the customer’s mind. For example, the company price is placed in a smart way like $3.81 instead of $4. In loss leader pricing strategy, the company also offers non-food items at low prices in order to bring customers to the Aldi’s store so they can buy groceries products.

Place strategy

The place identifies a location where products are sold. Aldi Company keeps its store’s layout simple to reduce wastage of space and keeping the costs down. In addition, all bulky products procured from the suppliers are stored in the local warehouse. Proper storage of the items makes sure the quality of the product is maintained. Furthermore, the company uses environmentally friendly equipment in the stores. This makes sure there is minimum waste disposal when transporting goods. The company also maintains regional appearance by naming its stores according to their location of operation. For example, in Switzerland Aldi is known as Aldi Suisse. Apart from the physical stores, Adli stores have online presence and platforms where customers are able to check details of products and locate nearest stores. In addition, when Aldi Company looks for stores, it considers the population of the area, the position of the store, availability of store and large space because of packing.

Promotion strategy

Promotion strategy is a way firm communicate to target customers on products and services they offer in the market (Sari, Maseleno, Satria & Muslihudin, 2018). The activities involved in the promotion include branding and advertising. Promotions must be appealing, gain customer attention and give customer clear message why should consider product over competitors. In addition, promotion must tell customers what they will gain after using the product. One unique marketing strategy adopted by Aldi, the company is advertising with the brand comparison. The promotion strategy has proven that the company is of well-established brands to equal quality. Aldi company promotion strategy is classified into two methods: below-the-line method and above-the-line method. The above-the-line product includes printed leaflets and advertising.

Above-the-line product

Advertisement:  Aldi Company have advertises its products in televisions and radio station. For example, there was an advert on television for Aldi company with the slogan “like brand only cheap” which leaves a central message to customers that no place offers cheap product than Aldi company.

Leaflets:  Aldi Company is believed to distribute over 1 million every week to customers. When customers see the leaflets, they develop a desire of shopping with the company. Wells (2008) defined leaflets as a printed sheet of paper than consist of information or advertisements and they are distributed free to targeted audiences.

Below-the-line product

The below-the-line product includes the use of target emails, texts and social media. Aldi Company uses social media including Twitter and Facebook that encourages two-way communication with potential and existing customers. In addition, the platform provides an effective way in which Aldi interacts with customers. For example, Aldi Company can opt to place a shopping voucher or price for people to win when they advertise or refer the company to potential customers on Twitter and Facebook. Aldi Company also uses email for promoting new products.  “Swap and save.” is a good example of email promotion.

Task 6

The main aim of Product promotional strategies is to inform, persuade and influence consumer’s decision. In addition, product promotional strategies also aim at developing selective demand that puts more focus on the desired for a particular product. Adli Company uses the promotional approach to hold its current position in the market, reach selected markets and expand the markets to new regions.  Currently, the promotional strategies have enabled the company to differentiate its products, provide right business information and increase sales. The two promotion strategies that Aldi Company should communicate to New Zealand people include advertising and sales promotions.

Advertising: In the promotion mix, advertising is a marketing communication message paid by a company to promote or create awareness of a product, service or idea through media (Huh, 2016). Aldi Company should communicate to New Zealand consumers through diverse advertisements Medias such as Television, radio and new papers. The company should also utilize social Medias such as Twitter and Facebook as the majority of consumers from New Zealand spend most of their time on social media. According to research conducted by adhesion (2018), 75 percent of New Zealand’s uses social media to advertise their products. In addition, 97 percent of online users research about products and companies reliabilities and reputations before making products (adhesion 2018). The persuasive technique the company should use in this strategy is pathos that evokes an emotional response to the consumer. For example, on Television advertisements, the company should advertise using an image of happy buyers who have previously shopped Adli products at low prices enlightening a frustrated buyer who has shopped from other companies. In addition, the company should also use an image of a buyer having stomach problem after purchasing wrong groceries. The standardized message from the advertisement should be “shop more for less money”. This message will appeal to New Zealand consumers that by shopping to Adli chains will be cost effective.

Sales promotion: In the promotional mix, sales promotion is a process of convincing buyers to buy products through various methods such as coupons, free samples, direct payments to retailers for shelf space and trade allowances. Aldi Company should also use sales promotion to create awareness of their products. For example, the company should provide free samples of their products giving consumers an opportunity to try the product before initial purchases. In addition, through sales promotion, the sales representatives will have direct contact with consumers and therefore they will be in apposition to persuade them to purchase the product. The persuasive strategy to be used when promoting products will be “ethos” which tends to appeal to credibility. According to Erik Flyvholm Jørgensen & Isaksson (2008), advertising using ethos tends to show that the company is honest, reliable and credible. For example, during sales promotion, the sales representatives might consider using a message such as “recent statistics have shown that ninety-nine percent of people who have used Aldi product earlier are happy”.

Task 7

In Germany (35), power distance is higher than New Zealand (22) indicating that Germany culture is more hierarchical and structured and some people are considered superior because of social status as compared to New Zealand. Individualism in New Zealand (79) is higher than Germany (67) clearly showing that New Zealand culture is concerned about individuals and their immediate family while Germany focuses on group relationships. New Zealand (58) has low masculinity as compared to Germany (66) indicating that Germany culture is concentrated on egos and careers while New Zealand culture focuses on “working in order to live”. Uncertainty avoidance of Germany (65) is very high as compared to New Zealand (49) indicating that the culture of Germany values ambiguity, risk-taking and problem-solving. In Germany (83), long-term orientation is very high than New Zealand (33) indicating that Germany plans for present and save more for the future. New Zealand (75) has higher indulgence as compared to Germany (40) indicating that the culture of Germany controls their desires and impulses.

The five negotiation tactics that manager should apply include commitment, anchoring, authority, nudging and walking away.

Commitment: The manager should show the Aldi Owners that he or she is committed to the business deal. The manager should clearly show planned long-term goals and objectives of the business.

Anchoring: the tactic is implied by influencing opinion by dropping a number as a reference point. Therefore, the manager should negotiate with Aldi owners by setting high goals and giving market comparable.

Nudging: the tactic sets direct choices without alternative options. The manager should show Aldi owners that he or she has set a milestone of the deal.

Authority: many managers in negotiations commonly use this tactic as it involves citing or referencing an expert and their qualification. For example, during negotiation with Aldi owners, the manager should cite CEO who has a higher qualification. The referencing will make Aldi owners see potential in the manager.

Walking away: the strategy includes being clear on which terms and conditions are favorable or not favorable. The manager should be clear during the negotiation on terms and conditions that are suitable for the businesses.

References

Adhesion. (2018). Social Media Usage in New Zealand 2017 to 2018 – Adhesion NZ. Retrieved from https://www.adhesion.co.nz/blog/social-media-usage-in-new-zealand

Aldi. (2018). ALDI US – Special Product Ranges. Retrieved from https://corporate.aldi.us/en/corporate-responsibility/customers/special-product-ranges/

Aldi. (2018). Welcome to ALDI. Retrieved from https://www.aldi.com/

Andrews, D. (2010). Real house prices in OECD countries: the role of demand shocks and structural and policy factors. OECD Economic Department Working Papers, (831), 0_1.

Aschemann-Witzel, J., & Niebuhr Aagaard, E. (2014). Elaborating on the attitude-behaviour gap regarding organic products: young Danish consumers and in-store food choice. International Journal Of Consumer Studies, 38(5), 550-558. doi: 10.1111/ijcs.12115

Beard, N. D. (2008). The branding of ethical fashion and the consumer: a luxury niche or mass-market reality?. Fashion Theory, 12(4), 447-467.

Cuofano, V. (2018). ALDI Business Model In A Nutshell | Four-Week MBA. Retrieved from https://fourweekmba.com/aldi-business-model/

Erik Flyvholm Jørgensen, P., & Isaksson, M. (2008). Building credibility in international banking and financial markets: A study of how corporate reputations are managed through image advertising. Corporate Communications: An International Journal, 13(4), 365-379.

Huh, J. (2016). Comment: Advertising won’t die, but defining it will continue to be challenging. Journal of Advertising, 45(3), 356-358.

Hull, K. (2009). Understanding the relationship between economic growth, employment and poverty reduction. Unclassified DCD/DAC (2009) 16/ADD, 30.

Madhavaram, S., & Hunt, S. D. (2008). The service-dominant logic and a hierarchy of operant resources: developing masterful operant resources and implications for marketing strategy. Journal of the Academy of Marketing Science, 36(1), 67-82.

Perrey, J., Freundt, T., & Spillecke, D. (2015). Power brands. Weinheim: WILEY-VCH.

Peter, E. (2009). Case presentations. Journal Of Neurology, Neurosurgery & Psychiatry, 80(11), e2-e2. doi: 10.1136/jnnp.2009.191767

Peterson, H. (2018). A German grocery chain with the power to cripple Aldi, Whole Foods, and Trader Joe’s is about to invade America. Retrieved from https://nordic.businessinsider.com/lidl-is-opening-100-stores-in-the-us-2017-2/

Ruddick, G. (2018). Aldi: a history of the low-cost supermarket. Retrieved from https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10343032/Aldi-a-history-of-the-low-cost-supermarket.html

Sari, I., Maseleno, A., Satria, F., & Muslihudin, M. (2018). Application model of k-means clustering: insights into promotion strategy of vocational high school. International Journal of Engineering & Technology, 7(2.27), 182-187.

Schotanus, F., Telgen, J., & de Boer, L. (2009). Unraveling quantity discounts. Omega, 37(3), 510-521.

Spencer, X. S. Y., Joiner, T. A., & Salmon, S. (2009). Differentiation strategy, performance measurement systems and organizational performance: Evidence from Australia. International Journal of Business, 14(1), 83.

Varadarajan, R. (2010). Strategic marketing and marketing strategy: domain, definition, fundamental issues and foundational premises. Journal of the Academy of Marketing Science, 38(2), 119-140.

Wells, K. (2008). Child saving or child rights: Depictions of children in international NGO campaigns on conflict. Journal of Children and Media, 2(3), 235-250.