ACADEMIC THEORY AND MODELS

Academic theory and models

Sainsbury's

Academic theory and models

Sainsbury's

Introduction

The organisation I have chosen to analyse is J. Sainsbury plc. (Sainsbury's) This is because I believe that Sainsbury's is at a crucial stage in its history: Sainsbury's Supermarkets have experienced a period of dramatic decline, in which they have been overtaken by rivals Tesco and, more recently, in 2004, Wal-Mart-owned Asda.

While it is rare for major brands to disappear completely from the UK high street, these competitors have gained share from Sainsbury's through their commitment to low prices, while Sainsbury's has focused on its Business Transformation Programme and promoting an image of quality rather than affordability.

Unfortunately for Sainsbury's, UK consumers have increasingly come to trust the communications, quality and assurance of Tesco and Asda at the same time as being attracted to their low prices. As a result, Sainsbury's is in danger of being unable to compete in the modern UK retail environment without committing itself to low prices, and thus has pursued a significant price cutting policy, which started in the summer of 2004.

Background

Sainsbury's is attempting to respond forcefully to the challenges it faces, however competition in the UK market is becoming increasingly intense, and Sainsbury's faces a difficult struggle to regain the ground it has lost to rivals that continue to expand aggressively. I intend to analyse the marketing communication reasons behind Sainsbury's decline, including it's failure to convince customers to buy food on purely a quality basis, and also analyse the company's new strategies, with a view to predicting their current, and future, effectiveness.

Previous Marketing Strategies and their failings

The company has traditionally invested substantial resources in marketing through traditional channels. It has, for example, traditionally outspent Tesco when it comes to advertising through the broadcast media. Moreover, evidence shows that such communication channels have proved successful in terms of generating a fresher, more youthful image for its core UK supermarkets business, particularly through advertising fronted by TV chef, Jamie Oliver. However, the company has failed to capitalise on the knocking down of its old image, as an expensive, premium brand supermarket, and this is largely a result of the success of its rivals, with Tesco and Asda challenging Sainsbury's in terms of quality and assurance, but at lower prices, and some critics consider Sainsbury's media communications strategy as a significant factor in the company's current problems.

However, there has been wide acclaim for Sainsbury's advertising strategy: in 2002, the campaign, was widely recognised for its successful contribution to the bottom line, and Sainsbury's snagged a prestigious IPA Effectiveness Award that year for the campaign. The award recognised the 1bn of incremental revenues that were generated by the campaign and the remarkable return on investment of 27.25 for every 1 spent on advertising, and from 2000 to the present day, the Oliver campaign has provided incredibly effective advertising for Sainsbury's. However, the key failure of Sainsbury's media communications strategy has been cited by Ritson (2004) as being the company's remarkably outdated approach ...