The launch of modern hypermarkets and superstores is re-shaping and reviving the retail sector in UAE. The country’s grocery market closed at approximately 9.5 billion U.S. dollars in 2012 with more than 9,000 grocery outlets. Huge opportunity is seen by modern grocery outlets in Dubai due to favorable government regulations. Currently 943 stores are categorized as modern grocery stores but this number will increase enormously as the distinctive demographic makeup of the country with a large number of immigrants and expatriates attract many international and global chains
Keeping the increasing investment and government focus on the grocery retail sector in mind, this report aims to analyse how these supermarkets in UAE segment, target and position its customers. Proper segmentation and targeting is critical to business success in a setting with varied demographic customer profiles. The selected supermarket for this purpose is the recently launched store Waitrose in Abu Dhabi. The report starts off by a brief overview of the company and the products/services it offers. Followed by, a detailed customer segmentation analysis. The report reviews the variables that can be used to segment consumer market and then describes the variables used by Waitrose supermarket to segment the market. The segmentation analysis is followed by an in depth discussion on market target strategy of Waitrose. The discussion revolves around the various market target strategies and Waitrose’s selected strategy. Moreover, the report also analyses the competition and based on it studies Waitrose’s Point-of-difference (POD) and Points-of Parity (POP). Finally, based on informal conversation with target consumers, a perceptual map is drawn that illustrates the position of Waitrose supermarket in the minds of the consumer.
Founded in 1904 by Wallace Wate, Arthur Rose & David Taylor, Waitrose began its journey as a small grocery story. As of now, Waitrose is a British supermarket chain which shapes the food retail divison of Britian’s largest employee-owned retailer, the John-Lewis Partnership. With 305 Waitrose branches and over 37,000 people, Waitrose is Britian’s one of the leading food retailers .
According to John Lewis’s annual report 2014, Waitrose has consistently achieved sales growth and have always been ahead of its competitors. The company highlights that the success factors behind Waitrose’s strong performance is due to service from its loyal and dedicated partners (employees) and the commitment to source the finest items for its food range. More importantly, the success of Waitrose loyalty card and free delivery for its online shopping have also been considered the building blocks of success.
Waitrose defines its values in ‘The Waitrose Way’ naming Championing British, procuring the very best of British ingredients; Living Well, promoting healthy meals with low fat and calorie recipes; Treating people fairly, supporting the principle of fair-trading; and Treading Lightly, making choices which support the environment.
Waitrose offers its products into the following major categories :
- Groceries; fruits, vegetables, breads, dairy products, drinks, etc.
- Entertaining; cakes, desserts, wines, sandwiches, lunches, dinners etc.
- Flowers & Hampers; wide range of flowers and gift hampers
- Cellar; huge wine collection & wine hampers
- Garden; plants, bulbs, tools and equipment
- Pet; pet food and accessories, toys and beds.
Waitrose also offers Waitrose Weekend magazine & Waitrose TV for its customers. The content is carefully designed for its customers and a broad category of recipes is made available for its customers. The Waitrose magazine and TV is part of the company’s content marketing strategy and is used to capture customers and market Waitrose brands.
Waitrose customers can also order its products online and get it delivered to their footstep free of cost.
Waitrose has won many awards in its journey to success. The awards won in 2013 are as follows :
- Good Housekeeping Favourite Supermarket
- Favourite Food and Grocery Retailer (Verdict’s Customer Satisfaction Awards)
- Top performer in National Consumer Satisfaction Index
The key to development of an effective marketing strategy in UAE’s competitive retail environment is marketing segmentation. No successful company can offer the same thing to all customers. Waitrose recognized the fact that it cannot serve all customers equally. The customers in UAE are widely scattered, too numerous and specially too diverse in their needs and wants.
The basis of a segmentation exercise is simple: different customers portray different needs and purchasing behaviors and therefore respond differently to marketing stimuli. Therefore, grouping such customers who share common needs and wants and respond similarly is the crux of marketing segmentation.
Key market segmentation variables are geographic, demographic, psychographic and behavioral segmentation. Under these variables lie a lot of factors which will be further analyzed below . Waitrose has a huge variety of products and services which cater to millions of customers. Therefore, no one segmentation variable can be enough to segment the Waitrose customers. Waitrose uses multi-segmentation strategy in order to make the most of its offers and win all customers. All segmentation variables used by Waitrose are analyzed below one by one.
Geographic segmentation refers to dividing markets into geographies such as nations, cities and territories which then allows the marketer to adapt to local tastes and variations . This can be illustrated by analyzing the marketing campaign deployed by Waitrose in the UK and UAE. Arabic is prominent in all the material and messaging used in Abu Dhabi where as in UK, English is the prominent language. Similarly, UK is hit by extreme winters whereas UAE barely faces winter. Therefore, Waitrose stocks very limited winter food/beverages in UAE compared to UK.
In demographic segmentation, marketers use statistical data of the population such as age, gender, income, education etc. to divide the market. It is believed that people with the same demographics will own the same set of needs and want and therefore respond similarly. For example, generation influences plays an important in Waitrose’s market segmentation strategy. The newer generation is digital focused. The phrase ‘our lives are digital’ is not new for anyone. The explosion of social networking sites such as Facebook, Twitter, Linkedin etc. have set a new trend of communication practices and changed the way marketers communicate to their consumers.
In psychographic segmentation, customers are segmented through their lifestyles, personality traits or values. The VALS Framework is a popular framework used to segment customers according to psychographics. In this framework, customers are segmented through the parameters of level of resources, level of innovation and primary motivation factors. AIO (Activities, Interests and Opinions) is another very popular framework in psychographic segmentation. Activities are actions such as hobbies, vacations, events etc. Interest refers to interest in particular subject, object such as food, media, fashion etc. Finally, opinions are described as descriptive beliefs such as on religious or social issues .
Waitrose segments its customers on the basis of psychographic segmentation by using its customer data to track innovators so that all new launches can be targeted towards them. It does so by analysis the purchase patterns of customers into categories where new products/SKUs are launched. In this way, Waitrose easily and tactfully identifies innovators and targets its campaign accordingly. Moreover, it also uses the AIO model to differentiate people who love food and enjoy cooking to market its branded content and food products as well.
Behavioral segmentation refers to division of buyers on the criteria of their knowledge or attitude towards a product. This includes both the motive behind the use of a product and also the customer’s feedback/response to a particular product. For example, Waitrose uses its loyalty card figures to segment its customers according to their spending patterns. It uses the data to chart the spending habits of its customers and then uses its data to alter and adapt the content of its websites with items aimed at individual shoppers online.
Products which fall in the category of repeat purchase are ideally segmentised through behavioral segmentation. For example, daily grocery items, basic food ingredients etc. are purchased regularly. Therefore, a customer’s preferred brand in these categories is easily marketed to the customer through various digital and traditional channels.
Waitrose Target Strategy
In cutthroat and competitive UAE retail industry, no company can survive without a clear cut marketing strategy. Market target strategy can be classified as differentiated, niche (focused), undifferentiated and market integration. Based on a company’s vision, mission & strategy, a company may choose to follow any of the market target strategy or a combination of these strategies.
In a market with more than 9,000 grocery stores, Waitrose feels it will be lost if it doesn’t follow a differentiated marketing strategy. Therefore, Waitrose differentiates itself from the rest by offering quality food and service. The tagline “quality product, honestly priced” best describes Waitrose’s positioning & differentiation strategy.
The key to value creation is the fact that value is customer’s perception of overall evaluation of the utility of a product or service received by a customer. Therefore, for some customers value may be quality and for some price .
Based on the above description of value, Waitrose differentiates itself by concentrating its efforts on quality and service. For years, Waitrose has been associated with upmarket image i.e. high prices and that’s what kept the supermarket differentiated from its competition. In the UK, people believed that Waitrose offers high prices only because it has better quality. The company now believes that this upmarket image is just a perception as now the company sells majority of its brands at the same price as Tesco and some are even less than Tesco. Even with the same pricing, the company has a differentiated marketing strategy by offering the best food to its customers and offering wide variety on each product. The company claims that it has 25,000 SKUs (products) – which is more than any of its competitors.
It’s not just words – but Waitrose has gone way far in providing service to its customers. Waitrose has also invested huge sum of money in enhancing customer experience. It focuses on creating a shopper’s experience where customers can’t find anywhere else. Waitrose believes that the company can’t add value to its customers by being just a grocer. In order to wow the customers, they need to scale up their services and hospitality. For example, Waitrose has opened up concierge style dry cleaning & flower wrapping in their stores to add value benefit to their customers. They focus on making shopping easier for customers, something which customers can enjoy by offering services such as free minicab phones, accompanied shopping and free delivery as well . Moreover, if a customer asks a staff inquiring about a particular product, the staff will not only tell them about the product but also show it to the customer rather than letting the customers find their own way. This simple act makes wonders in the customer experience journey.
These efforts have been paid off and Waitrose has been awarded by its customers and the industry as well. According to Nunwood’s Annual Customer Experience Excellence (CEE) Survey, Waitrose stands at the top supermarket in terms of customer experience. This is not all, research companies have placed John Lewis & Waitrose as Britian’s favorite shop for the past three years which has resulted in astounding levels of customer loyalty and achieving record profits.
The launch of myWaitrose loyalty card has been very beneficial for Waitrose supermarkets. This adds another feather in Waitrose’s premium customer service hat. In order to supplement the traditional weapons of brand & customer service, loyalty schemes are one of the competitive initiatives undertaken by retailers. The focus is on end-to end shopping experience, on winning and most importantly retaining the selective group of customers . Currently the supermarket offers 10% discount to its four million members of the loyalty card. Not only discount, but it offers free coffee to all its members, making Waitrose the second largest coffee provider in the UK.
Waitrose POP & POD
The UAE retail industry is a highly attractive industry due to increasing wealth of residents and expatriates. Due to its high attractiveness, it faces fierce competition from global and local retailers such as Majjid Al Futtaim Hypermarkets named as Carrefour, Spinneys, Union Co-operative and Choithram etc. In this highly competitive market, it’s imperative that companies differentiate themselves from the others. In order to analyze the Points of Difference and Points of Parity of Waitrose, detailed one-by-one description of key competitors is necessary.
Carrefour UAE is the largest grocery retailer in the UAE. It is a joint venture between Majid Al Futtaim Group & Carrefour France. The global expertise helps them to offer shoppers the same value for money everywhere. With stores spread across UAE, Carrefour has a huge customer base . Carrefour’s positioning in the minds of customer is clear – i.e. the best value for money. Customers know that when they need to buy cheap products, Carrefour is the place to be. Carrefour achieve low prices by high volumes and its supplier agreements.
Another local big player in the UAE Retail grocery industry is the Lulu Hypermarket. With 111 stores in the Gulf region, Lulu is known as a trend setter in the industry. It is well known for its quality retailing experience. People who opt for luxury, peace and space, opt for Lulu. The stores have extensively laid out space which includes spacious counters, children play area, extensive parking space and food counters.
Another multinational company, Spinneys is positioned as a company with great reputation in terms of quality and service. It is considered as a premium retailing outlet offering best quality, broad product range, and friendly customer service and shopping convenience.
United, a local supermarket continues to rapidly grow and is popular amongst the low-to-middle income segments. They keep a limited range of products but offer very competitive prices. Based on the above competitive analysis, Waitrose’s point of difference and point of parity are clear. Enhanced customer service and experience stands out as point of difference for Waitrose. No other company have invested the way Waitrose has invested in enhancing customer service. Concierge services such as dry cleaning, gift wrapping etc. are practiced in no other store.
The service element by Waitrose is perceived by customers as desirable, deliverable and differentiated. Customers love to go to Waitrose because they know that are actually treated as kings in the store. They desire such respectable service and this is what differentiates Waitrose from the rest.
There is immense war in the industry on price and quality. Waitrose offers good quality with honest prices but others are also focusing and positioning themselves on good quality and low prices. Therefore, justifiable prices & quality will be considers as points of parity for Waitrose in the UAE.
Waitrose Perceptual Map
Based on informal conversation with target consumers, a perceptual map is drawn below that illustrates the position of Waitrose Supermarket in the minds of the consumer.
The perceptual map drawn above highlights the consumer image of the brand and the image portrayed by the brand is same which highlights a successful marketing strategy. The marketing strategy and efforts would have been a failure if the consumers perceived Waitrose as a hypermarket which provides low quality and service.
In a nutshell, Waitrose’s marketing strategy is a gigantic success in the UK. Analyzing its entry in UAE, it can be seen that Waitrose has adopted more or less the same strategy. The positioning is clear and differentiated which makes Waitrose stand out from the rest. Low prices and good quality is offered by every other retailer, but convenience and quality service is what was missing in the UAE retail industry. Waitrose tactfully launched its core USP (Unique selling proposition) and immediately gained success. The combination of good quality, honest prices and amazing service resonates well within the customers minds.
This success is not only due to positioning but due recognition goes to detailed and in-depth market segmentation analysis by Waitrose. Waitrose realizes the fact that not all customers are the same and it’s imperative to treat each customer separately. Following a multi segmentation specialization approach, Waitrose stands above its competitors.
Lastly, the perceptual map exercise highlights that Waitrose’s positioning strategy is doing well as customers have the same image of the company as it aims to portray in the minds of the customers.
Carrefour, n.d. Carrefour. [Online] Available at: www.carrefouruae.com[Accessed 16 December 2014].
Hassan, A., 2012. The Value Proposition Concept in Marketing: How Customers Perceive the Value Delivered by Firms - A Study of Customer Perspectives on Supermarkets in Southhampton in the United Kingdom. International Journal of Marketing Studies, 4(3), pp. 68-87.
John Lewis Partnership, 2014. JOHN LEWIS PARTNERSHIP PLC ANNUAL REPORT AND ACCOUNTS 2014. [Online] Available at: http://www.johnlewispartnership.co.uk/content/dam/cws/pdfs/financials/annual%20reports/JLP-annual-report-and-accounts-2014.pdf[Accessed 16 December 2014].
Kotler, P. & Keller, K., 2011. Marketing Management. 14 ed. s.l.:Prentice Hall.
LuLu, n.d. About Us. [Online] Available at: http://uae.luluhypermarket.com/about.html[Accessed 17 December 2014].
Morgan, B., 2014. Waitrose leads UK supermarkets in customer experience. [Online] Available at: http://www.research-live.com/news/waitrose-leads-uk-supermarkets-in-customer-experience/4012449.article[Accessed 15 December 2014].
RetailWeek, 2014. Analysis: Waitrose spends money to make money. [Online] Available at: http://www.retail-week.com/companies/waitrose/analysis-waitrose-spends-money-to-make-money/5062994.article[Accessed 15 December 2014].
Ruddick, G., 2013. Changing the 'upmarket' perception of Waitrose. [Online] Available at: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10538240/Changing-the-upmarket-perception-of-Waitrose.html[Accessed 16 December 2014].
Segal, M. & Giacobbe, R., 1994. Market Segmentation and Competitive Analysis for Supermarket Retailing. International Journal of Retail and Distribution Management, 22(1), pp. 38-48.
Stone, M. et al., 2003. The Effect of Retail Customer Loyalty Schemes - Detailed Measurement or Transforming Marketing?. Journal of Targeting, Measurement & Analysis for Marketing, 12(3), pp. 305-318.
Vyncke, P., 2002. Lifestyle Segmentation: From Attitudes, Interests and Opinions, to Values, Aesthetic Styles, Life Visions and Media Preferences. European Journal of Communication, Volume 17, pp. 445-463.
Waitrose, n.d. About Waitrose. [Online] Available at: http://www.waitrose.com/home/inspiration/about_waitrose.html[Accessed 15 December 2014].
Waitrose, n.d. Company History. [Online] Available at: http://www.waitrose.com/home/about_waitrose/corporate_information/company_history.html[Accessed 15 December 2014].
Watkins, H., 2008. How to Drive Loyalty through Fantastic Customer Experiences. Kae Marketing Intelligence Report.
Yousef, D. K., 2013. UAE grocery market at $9.5b in 2012. [Online] Available at: http://gulfnews.com/business/retail/uae-grocery-market-at-9-5b-in-2012-1.1135093[Accessed 17 December 2014].