Case Recap
Superior Supermarkets was acquired by Hall Consolidated in 1975. It is a privately owned wholesale and retail food distributor. Superior Supermarkets is the smallest supermarket chain of Hall Consolidated and is located in Centralia, having a yearly sale of $192.2 million.
The median size of the Superior Supermarket is 20.73 square feet which is considered small as compared to other supermarkets. But still it is ranked as number 1 or number 2 brands in its area (Kerin & Peterson, 2010).
Problem Identification
Randall Jhonson the head manager of District III and Superior Supermarkets has asked James Ellis who is the president of Superior Markets to re-evaluate everyday low pricing for the three stores in Centralia. Randall has also reviewed the market analysis of the company and figured out that Superior’s prices are relatively higher as to other supermarkets in the region and has also considered the price consciousness of the shoppers.
He also emphasized the store sales which were rating below budgeted level in the very first quarter of the year. It is a very keen issue being raised by Randall as due to this problem Superior can lose the market share in its region.
SWOT Analysis
Superior Supermarkets are currently holding a well known market share and is the second largest supermarket in Centralia. It consists of three main stores; one is situated at North Fair View, the other at West Main Street and the third one is located at South Prospect. Superior Supermarkets have a number of strengths such as; Superior is carrying high quality merchandise as compared to its major competitors.
It is providing an efficient advertising exposure to its consumers in terms of television, radio spots, newspapers and circulars. In the year 2002 it has a high rate of gross profit margin i.e. 28.8 percent where as the average profit margin of other stores is 26.4 percent.
Superior is preferred to be the best supermarket for shopping convenience and is considered a good neighborhood store. Centralia shoppers appreciate the quality of appearance, cleanliness, friendly environment and excellent service provided by the Superior supermarkets.
On the other hand, Superior also has some weaknesses. Its greatest weakness is the lack of strong consumer image. In addition, it’s pricing strategy is causing a huge problem for the company as Superior prices are being considered as “above average” by the shoppers.
Although it is providing a very good advertising campaign but its current advertising expenditures are $127,500 which is equivalent to 89 percent of its sales where as its competitors are using only 1 percent of their sales on advertisement.
The biggest opportunity for Superior store is increasing their market share by implementing everyday low pricing strategy.
The company is facing some threats. Its biggest threat is its competitors named Harrison’s, Missouri Mart and Grand American. Harrison is highly appreciated by the customers and is a winner in quality, pricing, variety and convenience.
Another threat for is their own positioning statement that is “Superior Supermarkets = Superior Value” this statement is confusing the customers as it is not fulfilling their perceptions which are related to the high prices of grocery meat and produce (Kerin & Peterson, 2010).
Identifying the Root Problem Components
If the current scenario of the Superior Super Markets is considered the biggest issue right now is it’s above average pricing strategy and the other issue is the risk of losing the hold of a well developed market share which is already down to 3 percent in the first quarter of year 2003. There are number of root causes raised by the consumer research team which should be resolved as soon as possible in order to maintain its market value.
The major problem root components are limited variety of the merchandise in every department, high prices, less cleanliness in the dairy section, prices of meat is very high, variety of goods in the bakery is very low, quality and freshness of the products needs to be enhanced.
In addition, if the sales, gross profit margin, profit goals and expenses are considered one percent negative variance is being shown by the three stores. Advertising expense is another major cause of low profit margins.
Evaluation of the Alternatives
There are two basic alternatives that need to be evaluated. First, to implement everyday low pricing strategy throughout the board to all the products this is highly recommended by Randall Jhonson. This approach has one major advantage that it would present a great impact on the consumer’s perception and this would generate a high volume of profit margins.
There is one disadvantage that their positioning value and their store image would be highly affected. Whereas, the vice president of retail operations is in favor of the other alternative which is to provide a limited everyday pricing to certain products such as grocery items including dairy items, and the seasonal merchandise. If it is viewed from operational standpoint this strategy would be helpful too.
The shoppers of Centralia are category dependant as the grocery items and seasonal products are representing 57 percent of Superior’s sales and by lowering the prices of these categories would help to bring cost savings and would not affect the image of their positioning.
Recommendations
First of all Superior Supermarket should solve the root problems that are pointed by the shoppers. It should increase its variety of the products, cleanliness should not be neglected, out of stock in private labels should be improved, the quality and freshness of the products such as meat, poultry and bakery should be enhanced and prices should be lowered.
Then secondly, it should emphasize upon the expenditure on the advertising, they really need to cut the cost of advertising which would help to bring back its one percent variance. In order to maintain its market value they need to clarify their positioning statement which is confusing its consumers and that can be done only by cutting the prices of their products.
Pull strategy should be adopted in order to improve the strong consumer image. Pull Strategy is basically a marketing communication strategy in which the consumer demand is more important than personal selling of the product.
Reference
Kerin, R., & Peterson, R. (2010). Strategic Marketing Problems. New Jersey: Prentice Hall, Inc.