Morrison Supermarkets: Marketing Planning and Promotion Report

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Table of Contents

Executive Summary
Introduction
The Problem
Strategic Report
Marketing Plan
Costs and Budgeting
Contingency Considerations
Conclusions
Reference List

Executive Summary

As the Marketing Manager of WM Morrison Supermarkets, it essential to critically review the current marketing and promotion policies of the company regarding its existing product line in order to ensure flawless operations and efficient performance of the relevant responsibilities of a manager. The purpose of this report is to prepare a marketing plan to amend, improve, and extend the existing policies and practices of Morrison Supermarkets and develop a promotional policy in due course; so, the report first outlines a brief company overview, reviews the current operational model, identifies the key problem of the business, and analyses the strategic report.

Subsequently, the report prepares justification for launching the new product and extending the product range and assesses the major marketing opportunities for the new product, whilst generating a marketing plan by constructing industry and market analysis, external macro analysis, and competitive analysis, and evaluating Porter’s five forces model and the key marketing objectives.

In addition, the paper also considers the segmentation, targeting, and positioning of the new products, whilst assessing the demographic, psychographic, and geographic segmentation, and appraising the benefits of such segmentations; conversely, in order to better understand the market, this paper also prepares a consumer profile and formulates the marketing strategy, product positioning, and perceptual mapping, and delineates the BCG matrix. The report also defines the adoption placement, FAB marketing, marketing communications process, marketing mix variables, promotional strategy, costs and marketing budgets, and contingency considerations for Morrisons Company.

Introduction

Being the fourth biggest retail chain, Morrisons competes aggressively in the UK’s retail industry, which is chiefly characterized as an oligopolistic market; in March 2004, the company took over Safeway (a major retail chain with 479 stores), and in June 2015, it ensured a market share of eleven percent; moreover, it generated a revenue of £16,317 million until January 2017.

Company Brief

Morrisons was established in 1899 by William Morrison, with headquarter in Bradford, West Yorkshire; today, it is a major retail supermarket chain in the United Kingdom and its product range includes Morrisons-branded chicken, eggs, pork, milk, beef, and flowers; in addition, the company possesses food-producing facilities for bringing fresh bakery, deli, lamb, fruit, fish, and vegetables to the stores. There are about five hundred outlets by which Morrisons serves the consumers throughout the UK, and the organization has also developed corporate websites for offering e-commerce facilities and online home delivery services; in addition, it runs more than ten production plants throughout Britain along with seven local distribution centers and a national center for assisting the major supermarkets (Reuters 2017).

Overview of Current Operational Model

The company has designed its current operational model by categorizing its activities in four distinct levels; firstly, it works as a food producer to make fresh foods visible to the final customers; secondly, it serves as a distributor of the products from the manufacturing plants to the retail outlets to ensure the efficiency of the network (Morrisons 2017). Morrisons also emphasizes on two other roles it plays in the industry, which includes the most crucial role of a retailer (selling products from the outlets or via the eCommerce sites), and working as a wholesaler (for delivering its branded items to its retail collaborators and third parties upon relevant request); the following figure briefly illustrates its current operational model:

The Problem

The most critical problem of the company is that Tesco is its biggest competitor having a huge market share. Therefore, Morrisons must constantly seek new ways to grasp a bigger share of the market either by expanding its presence within the UK or by extending its current product line and launching new or innovative products in its portfolio, so that a greater consumer base can be ensured. However, there are some other internal corporate problems as well; for example, the business has lost the connection with its roots, disrupted its pricing policy, and created some customer dissatisfactions, whilst making a delay in entering the convenience market and online selling system (SkyUK 2017).

Strategic Report

The strategic report of Morrisons published earlier this year suggests that there are a number of strategies the company shall adopt from now on; for example, it should be more competitive in the market, and should better serve its consumers through numerous policies, whilst emphasizing on identifying local solutions, building teams, ensuring freedom and democracy, and controlling costs:

The company has also undertaken risk management strategies to boost its internal capabilities to make better ‘risk-informed’ decisions; the key elements of the risk management framework have been demonstrated in the figure below:

Risk management strategies of Morrisons. — *Figure 3: Risk management strategies of Morrisons (Higginson 2017).*

Justification for Launching the New Product and Extending the Product Range

The UK’s grocery and retail industry are highly competitive, even though it consists of only a handful of market players (such as Tesco, ASDA, Sainsbury’s, Aldi, Lidl, and Waitrose); as a result, it is particularly essential for Morrisons to find new strategies not just to sustain in the market, but also to create a stronger customer base and larger market share.

This is the justification for Morrisons to launch, amend, improve, and extend its existing product line – in fact, according to the latest annual report of the company, this year; it is looking forward to launching new products like Free From, vegan, and low-sugar products for health-conscious consumer groups (Morrisons 2017).

Major Marketing Opportunities for the New Product

Morrisons would be launching new products like Free From, vegan, and low-sugar items in order to extend and improve its product ranges, and amend its existing product line with more organic items – this indeed poses great marketing opportunities for the company, since the number of health-conscious people in Britain is increasing rapidly in recent years. It has been reported that in last ten years, over 360% people in the United Kingdom has chosen a fully vegetarian diet, mainly due to the recent scientific indications supporting the idea that vegetarian lifestyles can have a substantial range of advantages on human health over the longer term (Quinn 2016).

On the other hand, whilst the demands for these kinds of products are high, their availabilities in the nearby supermarkets are comparatively lower in the downtown neighborhood stores. As a result, Morrisons can get a huge marketing opportunity for the new products, and effectively monetize the market prospects in order to generate higher revenues and greater market share.

Marketing Plan

The marketing plan for the forthcoming launching of the new products by Morrisons, and the extension, amendment, and improvement of its product portfolio has been put forward in the following subsections:

Industry and Market Analysis

The industry is highly competitive and Morrisons seem to be strong enough to retain its position in the sector; on the other hand, Tesco is strategically well equipped to keep hold of its position as the market leader (Agriculture and Agri-Food Canada 2016). Morrisons’ goal for the new product development and the extension, amendment, and improvement of its product line is to make sure that it can get hold of a greater share of the market and compete more aggressively with Tesco and Sainsbury; therefore, a detailed industry and market analysis of the retail sector has been outlined in the table below:

Position of the companies	Name of the companies	Total sales in US dollars	Total grocery sales in US dollars	Total market share in the retail industry in percent	Total number of stores	Banner sales CAGR % 2009 to 2014
1	Tesco	76,568,074,769	57,751,476,921	20.13	3,520	3.5
2	Sainsbury	42,592,280,234	32,760,094,633	11.42	1,309	5.2
3	Walmart (Asda)	42,346,686,085	28,826,747,983	10.05	589	4.7
4	Morrisons	29,356,060,601	20,601,246,702	7.18	667	2.8
5	Co-operative Group	13,179,778,116	12,091,936,797	4.21	2,778	2.3
6	Marks & Spencer	16,750,181,159	7,669,181,016	2.67	846	2.9
7	Booker	10,269,675,721	7,762,049,920	0.93	3,316	8.6
8	John Lewis (Waitrose)	10,719,532,279	8,328,454,315	2.90	333	6.7
9	Aldi	9,167,499,460	8,353,425,508	2.91	557	29.2
10	Schwarz Group (Lidl)	6,719,367,587	6,037,351,777	2.10	658	12.8

Table 1: Industry and market analysis (Agriculture and Agri-Food Canada 2016).

External Macro Analysis

Political factors	As grocery and retail businesses operate in the entire UK, national political issues deeply influence their performances; so, Morrisons is also affected by these factors, and the major decisions that affect it include tactical changes, election results, and the overall political stability of the country
Economic factors	Economic issues remain a major concern for Morrisons, as these are able to bring changes to the corporate expenses, demands, incomes, and prices; as a result, the company should remain responsive to the prospective alterations in policies, like modifications in taxation, inflation, austerity, or any other factors that could influence the access to funds (Bloomberg 2017)
Social factors	Because of a range of social alterations, the consumers in the United Kingdom have shifted towards bulk buying and one-stop-shopping; as a result, Morrisons augmented the amount of organic food products offered for sale, since social conditions affect consumers’ demand patterns, and presently the customers are becoming more health conscious due societal changes
Technological factors	Technological developments brought various fresh opportunities for Morrisons; this, for example, includes expansion of ecommerce trades with home delivery facilities, and self-service checkout-points for convenience of consumers, which resulted in lower labour expenditures as well
Environmental factors	There are rising pressures on present day corporations to address environmental factors; as a result, Morrisons has also invested a considerable sum on power-efficient projects to fulfil the long-term goal of reducing its carbon footprint; in addition, it is lowering the amount of waste materials produced in their stores by boosting social conscience in consumers
Legal factors	Both national and international laws directly affect the performance of Morrisons; for instance, in 2004, the FRC put forward a Code of Practice prohibiting numerous existing practices in the retail industry, such as altering costs without notice; as a result, Morrisons always closely observes the rules and regulations to make sure that it strictly complies with them

Table 2: External macro analysis for Morrisons.

Competitive Analysis

The industry is fairly competitive and the rivalry is the highest amongst Tesco, Sainsbury, Asda, and Morrisons; a forecast of the potential sales of these retailers until 2020 has been outlined in the table below:

Competitors	2016	2017	2018	2019	2020	CAGR 2016 to 2020
Tesco	46,631.26	47,921.14	49,342.45	50,821.69	52,714.03	3.1%
Sainsbury	25,858.12	26,505.27	27,381.20	28,338.32	29,163.07	3.1%
Asda	21,811.06	22,300.52	22,746.96	23,092.49	23,555.30	1.9%
Morrisons	16,482.15	16,478.85	16,607.03	16,759.45	16,753.34	0.4%

Table 3: Competitive analysis until 2020 (Agriculture and Agri-Food Canada 2016).

Five Forces Model

Five Forces Analysis

Rivalry among existing competitors	The product line of Morrisons will become quite diversified due to the launch of the new products like Free From, vegan, and low-sugar items; as a result, the company will not have too many direct competitors
Rivalry among existing competitors	Market players like Tesco, ASDA, Sainsbury’s, Aldi, Lidl, and Waitrose do have certain outlets where fully vegan and organic items are also offered under one roof; however, these services are not extensive, and thus the rivalry among existing competitors remains moderate
Bargaining power of suppliers	In the UK’s grocery and retail industry, the suppliers have very low bargaining power as the switching cost of the suppliers is very high and there are only a few numbers of retailers throughout the country
Bargaining power of suppliers	In addition, in the vegan and organic food sector, even the larger suppliers have relatively low bargaining power, since the demand for these items amongst the retail businesses are comparatively low
The threat of substitute products	The diversified product line of Morrisons will consist of all types of vegetarian items; as a result, this new product portfolio will not have too many direct substitutes
The threat of substitute products	Other retail shops can offer substitute vegan products; however, it should be kept in mind that Morrisons will be offering these new items at relatively lower prices, so the customers will be more likely to stick to this company – since otherwise, their switching cost would be high in this sector
Bargaining power of the buyers	Various companies have started their businesses in the UK grocery and retail sector featuring a diverse range of products
	The presence of a huge number of alternative companies has a propensity to give the purchasers numerous alternatives, making them considerably powerful in this sector
	However, due to the new product development, Morrisons will from now on offer different types of items and afford a high level of differentiation projects to distinguish itself from the rest of the players in the industry
	In addition, the products of Morrisons will also be targeted at the niche market and looking for scrupulous consumers
	As a result, it can quite effortlessly get its clients, and make sure that the switching costs of the customers are high
	Thus the bargaining power of the purchasers will remain moderate
Threats of new entrants	Because of high competition and extreme level of regulatory requirements, there are many obstacles to enter and sustain in the market
Threats of new entrants	As a result, the threats of new entrants are comparatively lower in this industry

Table 4: Porter’s five forces analysis of competition for Morrisons’.

Marketing Objectives

The key marketing objectives for the new product development and the renovation of the existing product line are:

To reach the niche market of vegan foods, which is growing gradually;
To create more choices for the customers;
To utilize the diversification strategy and gain a competitive advantage;
To increase the average annual revenues;
To grasp a higher market share;
To make sure that there is a constant flow of demands even during recessionary periods.

Segmentation, Targeting, and Positioning

The following subsections of the paper assess the recommended marketing strategy for the new products of Morrisons based upon segmentation, targeting, and positioning strategies; therefore, the following segmentation techniques would be used in this research:

*Figure 5: Segmentation techniques to be used.*

Segmentation – Demographic

Total inhabitants	64,430,428 in 2016
Zero to fourteen year old	17.44 percent (men 5,761,311 and women 5,476,649)
Fifteen to twenty-four year old	12.15 percent (men 3,997,150 and women 3,830,268)
twenty-five to fifty-four-year-old	40.74 percent (men 13,367,242 and women 12,883,674)
The total average age of the population	40.5 yrs
Men: the average age	39.3 yrs
Women: the average age	41.7 yrs
Population growth rate	0.53 percent in 2016
Birth- rate	12.1 births per thousand population
Death- rate	9.4 deaths per thousand population
Ethnic origins in the country	White 87 percent, black/African/Caribbean/Black British 3 percent, Asian/Asian British: Indian 2 percent, Asian/Asian British: Pakistani 2 percent; mixed 2 percent, other 4 percent (2016)

Table 5: Demographic segmentation of the UK.

Segmentation – Psychographic

Over the last four decades, the United Kingdom has turned into a hub for people from numerous nationalities and ethnicities across the globe; as a result, the attitudes, lifestyles, values, personalities, opinions, and interests of the UK population are extremely diverse (McDonald 2012). Consequently, it is not feasible for the business to segment the market using the psychographic tool, since this would create too many micro-groups making it difficult for the business to operate effectively (Maciel & Wallendorf 2017).

Segmentation – Geographic

The existing outlets of Morrisons are densely located across all areas of the country. In addition, the targeted customer groups (that is health-conscious consumers and online shoppers) are present throughout the country, and there is no evidence supporting the idea that the above-stated target groups live in any particular geographical location – thus, Morrisons does not have a reason to segment the market geographically.

Benefit Segmentation

The annual report of the company suggests that Morrisons has created the operational units across the country based on benefit segmentation, and it would use its existing segments to launch the new products as well. This is because the current benefit segmentation has proved to be effective enough to control the markets, and at least for the next five years since the product launch, this model would be used.

Targeting

The health-conscious consumers are the major target groups for the new products of Morrisons, as the country’s vegetarian population grew by 360% in the last ten years. However, online shoppers would be another big target group, since it has turned into a highly prospective market in recent years (Dholakia & Chiang 2013).

Consumer Profile

It can be deduced from the consumer profile of the UK that the demands for the offered new products would be high due to the consumers’ behavioral and spending patterns; as a result, the company’s sales targets would be met easily:

Consumer profile:	Spending patterns
Great Britain	Estimated food sales growth was nearly four percent in 2013 and growth in food volumes were nearly two percent; in 2014, the food volumes grew by further one percent (Metzger 2014)
England	Being the sixth major importer of agricultural foods in the world, England’s consumer share for spending on food increased marginally from eight percent in 2007 to nine percent in 2012
Scotland	Purchaser spending on food reached higher in 2012, generating about four percent growth
Northern Ireland	Household expenditure on food-based items has augmented by a great extent in 2014

Table 6: Consumer profile of the UK (Metzger 2014).

Positioning

The positioning has been conducted cautiously using the marketing mix variables as an indicator; it shows that the target market is a niche, but the promotional activities should be comprehensive enough to engage an increasing number of consumers.

Marketing Strategy Formulation

The marketing strategy for the new vegan products has been formulated in several stages; first, Morrisons came up with apt market analysis, and then it developed the strategic plan and carried out the annual and long-range plan. Afterward, it developed growth strategies and measured the results to take corrective actions to make the marketing strategy flawless:

Product Positioning and Perceptual Mapping

The following product positioning and perceptual mapping show that the new products of Morrisons would have high quality, but lower prices in order to be more competitive in the market:

BCG Matrix of Product Function and Overall Strategy

Using the BCG matrix of product function and overall strategy, it can be argued that the new products of Morrisons would have a high market growth rate and high relative market share due to the latent opportunities. As a result, it would occupy the ‘star’ position, as shown in the figure below:

*Figure 8: BCG matrix for new products of Morrisons.*

Adoption Placement

The company is not willing to adopt any new placement strategies for marketing the new products; rather, it aims to use the existing distribution channels and outlets to broaden its product line.

FABs Marketing

The company would be using FABs marketing techniques in order to create a high level of consumer awareness. This technique would make sure that the key messages on the features, advantages, and benefits of the products are quickly and effectively disseminated to a large group of customers at the same time.

FAB Messages for Use in MCP

New products	Messages for use
Low-sugar products	This product has a very low sugar content (approximately 10%) but is still nutritious to make sure that diabetic individuals and those on diet can pursue their goals effectively.
Vegan products	This food is 100% vegetarian and contains plant proteins only – it makes you feel refreshed without having to worry about your religious or health-related values.
‘Free from’ products	This is fully free from bad cholesterol (LDL) and full of high- density cholesterol. It is perfect for cardiovascular diseases, making your heart healthier, and bringing a smile on your face.

Table 7: FAB messages for use in MCP.

Marketing Communications Process

The company is willing to adopt online marketing communication procedures because this is the most promising medium at the moment – therefore, the key methods would be online advertising, which includes promotion on social networking sites, blogs, interactive marketing communications, search engine optimization, mobile marketing, emails, and app development (Lobschat, Osinga & Reinartz 2017). The key benefits of this kind of marketing communication procedures are demonstrated in the following figure:

*Figure 9: Benefits of the marketing communication process.*

Marketing Mix and Promotional Strategy

The marketing mix variables and the detailed promotional strategy are considered in the following subsections:

Marketing Mix Variables

Product strategy	The company is developing a new set of vegan and organic products in its portfolio. As a result, its product strategy is to catch a more diversified base of consumers by targeting several niche markets.
Place strategy	The company will distribute the newly developed products in its existing outlets, and currently, it does not have a plan to set up fresh stores featuring these items. Thus, the placement should be done within the present scheme, since the extension of stores may not always be fruitful when it comes to alterations in the product line (Ngwe 2016).
Price strategy	The company is willing to adopt a highly competitive pricing strategy. Consequently, it would try to keep the prices cheap, at least in comparison to Tesco, Asda, Sainsbury, and Waitrose.
Promotional strategy	Morrisons would implement several promotional methods to publicize the new items, but special attention would be given on rebuilding the brand awareness and adopting ‘single-serve packaging’ for the vegan items in order to attract customers through user-friendliness (Ilyuk & Block 2016).

Table 8: The marketing mix.

Promotional Strategy

The key promotional plan is to advertise the products through TV, newspapers, the internet, public relations, and outdoor advertisements; however, the company will also attempt to upgrade its brand loyalty through attractive packaging and seasonal discounts. The following figure shows the promotional mix for the company’s new products:

Costs and Budgeting

A summarised budget detailing the categories of expenditures and an estimated financial profile of the contributions that would be made by the new products to the annual turnovers are demonstrated below:

Costs, budgeting, and revenues
Revenue generated from the new product development	2017	2018
Gross revenue	GBP 8,500,000	GBP 9,600,000
Net revenue	GBP 8,500,000	GBP 9,600,000
Cost of services provided	GBP 4,250,000	GBP 4,950,000
Operating expenses
Salaries and wages	GBP 200,400	GBP 210,000
Advertising and promotion	GBP 101,400	GBP 122,000
Other	GBP 45,000	GBP 36,000
Utilities	GBP 2,500	GBP 2,300
Miscellaneous	GBP 1,200	GBP 1,100
Total general/administrative expenses	GBP 12,000	GBP 11,500
Total operating expenses	GBP 362,500	GBP 382,900
Net income from the new product development	GBP 3,887,500	GBP 4,267,100

Table 9: Costs, budgeting, and revenues from the new product development.

Marketing Budget

A detailed breakdown of the forecasted budget for the marketing and promotional activities of the new product is outlined in the table below:

Marketing budget for the new product development in 2017
Marketing mode	Expenditure in each promotional activity
TV ads	GBP 40,000
Newspapers	GBP 5,000
Radio ads	GBP 2,500
Online advertising, which comprises costs of promotion on social networking websites, blogs, interactive marking communications, search engine optimization, mobile marketing, emails, app development, and others	GBP 25,000
Examination on the target audience of the promotion via market research	GBP 18,000
Posters, brochures, and press kits	GBP 1,500
Hoardings and other outdoor advertisements and promotional tools	GBP 2,500
Public relation development	GBP 3,400
Other expenses of the marketing branch	GBP 3,500
Total marketing budget	GBP 101,400

Table 10: Marketing budget.

Contingency Considerations

There are a number of uncontrollable factors that might disrupt the operations of Morrisons, which, for example, include natural disasters, hacks or cyberattacks, shoplifting, political turmoil, product recall, etc; as a result, the company has allocated back-up funds in order to confront and manage these potential risks and make sure that the new product development remains to be successful.

Conclusions

Morrisons is operating in a highly competitive market, and thus, constant adoption of apt marketing strategies is essential to sustain over the longer term. The company has selected a highly prospective target market to bring about its new range of products. The numbers of vegetarian individuals are increasing in the UK and are likely to grow in the upcoming years as well; consequently, the company has carried out relevant marketing research to make this project successful. The company aims to attain its projected sales objectives via the implementation of its dynamic promotional plan.

Reference List

Agriculture and Agri-Food Canada, 2016, Grocery retail trends in the United Kingdom. Web.

Bloomberg, 2017, WM Morrison supermarkets plc. Web.

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Lobschat, L, Osinga, E & Reinartz, W 2017, ‘What happens online stays online? Segment specific online and offline effects of banner advertisements’, Journal of Marketing Research, vol. 2, no. 1, pp. 1-87.

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Morrisons, 2017, WM Morrison supermarkets plc annual report and financial statements 2016/17. Web.

Ngwe, D 2016, ‘Why outlet stores exist: averting cannibalization in product line extensions’, Harvard Business Review, vol. 2, no. 1, pp. 1-47.

Quinn, S 2016, ‘Number of vegans in Britain rises by 360% in 10 years’, The Telegraph. Web.

Reuters, 2017, WM Morrison supermarkets plc (MRW.L). Web.

SkyUK, 2017, Morrisons: five mistakes behind its troubles. Web.

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