The effectiveness of marketing segmentation strategies in British supermarket chain: the case of ASDA

Table of Contents

1. 2. 3.

Background of the research ............................................................................................................... 3 Rational of the research topic ............................................................................................................ 3 Research aim, objectives and research questions............................................................................. 4 3.1. 3.2. 3.3. Aim ............................................................................................................................................... 4 Objectives of the research .......................................................................................................... 4 Research questions ...................................................................................................................... 4

4.

Literature review ................................................................................................................................ 5 4.1. 4.2. 4.3. 4.4. Effectiveness of the segmentation strategy ............................................................................... 5 Key success factors of the business ............................................................................................ 5 Factors those provide the competitive advantage .................................................................... 7 Impact of environmental factors on ASDA's segmentation strategies ................................... 8

5.

Research methodology ........................................................................................................................ 9 5.1. 5.2. 5.3. Research design ........................................................................................................................... 9 Research methods ....................................................................................................................... 9 Research instrument ................................................................................................................. 10

6. 7. 8.

Ethical consideration ........................................................................................................................ 10 Research limitation ........................................................................................................................... 11 Time plan ........................................................................................................................................... 11

References ................................................................................................................................................... 13

1. Background of the research The research idea on which the research will be done is the effectiveness of marketing segmentation strategies of ASDA. The researcher here will try to evaluate the effectiveness of the marketing strategies of the chosen firm especially its segmentation strategies to find out the key factors responsible for its performance. ASDA is a British supermarket chain which retails food, clothing, toys and general merchandise. It also has a mobile telephone network, ASDA mobile. It has its head office in the ASDA House in Leeds, West Yorkshire. This company is performing well but not as well as Tesco did. In the following figure the scenario is showed.

Figure 1: market share of top three in the supermarket chain in UK (source: http://www.coriolisresearch.com/pdfs/coriolis_tesco_study_in_excellence.pdf)

2. Rational of the research topic Now a day, marketing is very influential and dynamic in different business. In the supermarket chain market, marketing is as important as it was before. In this industry, many companies set highest annual expenditure on their marketing activities. For instance for drinks companies like Diageo or Pernod-Ricard, marketing and promotional budgets run at more than 15% of total revenue. For these companies that means marketing expenditure of more than $500m per year across the globe (Dobney.com 2011).

Segmentation of markets is part of marketing activities and the success and profitability of a business has dependence on effective segmentation largely. So in the marketing point of view, segmentation is important as important as whole marketing activities. 3. Research aim, objectives and research questions To start a journey, it is important to decide a path to go. In a research, aim, objectives can be that path to start a research. This section delivers the aim, objectives and research questions of the proposed research. 3.1. Aim Aim of this research is not that broad, but specific to research interest of the researcher. The aim of the research is to measure the effectiveness of marketing segmentation strategies of ASDA, a British super market chain 3.2. Objectives of the research To make the aim fulfilled, there are some objectives of this research for the more specification research coverage. The research objectives are as follows: To investigate the effectiveness of the segmentation strategy of ASDA To examine the initiatives taken by the firm to make its segmentation strategies effective To pinpoint the key success factors of the business To locate the factors those provide the competitive advantage for the firm To assess the impact of the external and or internal environmental factors on ASDA's segmentation strategies 3.3.Research questions As written in the previous section, the objectives are used as the source of research question. The research question based on the topic of the research is given below: How effective is the market segmentation strategy of ASDA? What are the KSF of Supermarket chain businesses?

 4. Literature review

What are the sources of competitive advantages? What are the impacts of environmental factors on ASDA?

Literature review is an essential part of this proposal. This section discussed on various issues related to research topic and objectives. The discussion covers market segmentation effectiveness, key success factor of business, factors of competitive advantages, environmental impact on segmentation strategy etc. 4.1. Effectiveness of the segmentation strategy A segment of market can be defined as a part of a market, which is made up of some people who has some common taste, characteristics which lead to similar product choice of product. A marketer can segment market based on various criteria, such as gender, price, Interests,

Location, Religion, Income, Size of Household etc. (Kotler and Kevin 2006). Yankelovich (1964) did a research to find out new criteria for market segmentation. He described three findings from the research analysis. The three points he had stressed are A marketer should reject that demography is always the best way to segment markets. Strategic choice concept of segmentation is favorable for established product and new product both for positioning in the market. As the market becoming very dynamic, a marketer must have his own theory for interpretation of market dynamic in the industry and should not borrow it from others.

4.2.Key success factors of the business KSF was first mentioned by Daniel (1961, p.111). Daniels main thrust was the need for the elimination of issues not directly related to the success of the firm in the planning process of management information systems. In 1970s, Anthony, Dearden and Vancil (1972) found some important variables affecting profitability of a business. These variables known as the strategic factors, KSF, key result areas and/or pulse points. Later these scholars further researched and found that these variables are influencing the success of business operation and lacking of the

variables caused failure. Therefore, some definitions of Key Success Factor are presented by several following authors. Hofer and Schendel (1978) suggest that the critical success factors concept could be used to analyze the relative competitive positions of the firm in an industry.

Key success factor when a new product failure occurred very frequently, and additionally, the competition in the distribution channel are getting increased, one should use familiar brand name to stay in the industry (Urban and Hauser 1993). Because by establishing similar brand name, the acceptance o new brand is increased and it become a popular growth strategy (Buday 1989 and Tauber 1988). A range of brand leverage strategies exist, varying from line extension to brand extension. Line extensions involve the launch of new products from the same product category or product class under the familiar brand name. Brand extensions stretch the brand franchise beyond the current product class (Tauber 1981 and Aaker and Keller 1990). Lynch (2003, p.102) reports that critical success factors are the resources, skills and attributes of an organization that are essential to deliver success in the marketplace. While the definitions and views provided by the above authors differ, there appear to be a few common characteristics that help to explain the nature and extent of critical success factors.

First, critical success factors are the sub-goals and success outcomes that are directly related and critical to the attainment of the vision, mission and long-term goals of the organization.

Second, critical success factors can be internal areas like resources, skills, competences, attributes, conditions or market related areas like product features and profitable market segments.

Third, critical success factors are limited areas of success that will ensure that successful competitive performance of the organization. Finally, critical success factors are result areas in which success can be measured. Critical success factors are normally determined by two distinct levels: the industry level and the organizational level (Rockart 1979, Leidecker & Bruno 1984 and Lynch 2003). Each industry, by its very nature, has a set of critical success factors determined by the industry itself. Each organization in the industry will pay attention to these

factors and use them as benchmarks for competitive performance. Organizations in the same industry would however, have different critical success factors as a result of differences in geographic location, strategies, product features and internal resources and competences.

4.3.Factors those provide the competitive advantage Johnson and Scholes (2002, p. 108) define competences as those competences that critically underpin the organisations competitive advantage. They argue that critical success factors are underpinned by core competences. These competences are essential in gaining competitive advantage in each of the critical success factors. Critical success factors refer not only to the factors that are critical for success in the external and internal environment, but also the competences that are needed for this success. According to Kaplan and Norton (1996), there are twelve critical success factors that should be discussed as below: Teamwork: Works cooperatively with all staff for the greater good of the team. Communication: Effectively uses written and oral communication skills to deliver messages in a clear, concise and understandable way. Customer Service: Exhibits a positive attitude while striving to understand and meet customer requirements. Learning Orientation: Actively seeks and applies new knowledge, learns from experiences, seeks and accepts feedback from others. Initiative: Demonstrates a bias for action, works independently to exceed expectations and actively tries new ideas. Job Knowledge: Demonstrates an understanding of relevant job knowledge and responsibilities. Management Skills: Utilizes budgets and staff to effectively manage projects and programs. Strategic Thinking: Considers a wide range of options and makes decisions that have the greatest impact on long-range goals. Leadership: Has a compelling vision and influences staff to accept and support that vision.

 Developing Others: Actively provides support and feedback to staff about current performance as well as future opportunities. Dependability: Can be relied upon to meet commitments and demonstrates reliable work progress. Multitasking: Handles multiple activities and recovers quickly from disruptions or interruptions.

4.4.Impact of environmental factors on ASDA's segmentation strategies Environmental scoring, econometric models, socio-political consulting services and

governmental affairs departments are a few of the diverse approaches used to monitor and assess environmental impact on the industry and the firms comprising that industry (Leidecker & Bruno 1984 and Lynch 2003). The major advantage of the environmental analysis is the breadth of the analysis as the scope goes well beyond the industry interface. So the factors identified from environmental analysis will have an important impact on ASDAs segmentation strategy, as it involved with socio-political situation and environmental scoring and these factors are related to the major decision on segmentation.

ASDA has to take care of its business environment, because it is important for the survival of other backward and forward industries. Sometimes the environmental factors are becoming out of control, then a firm need to adapt with the changing environment. In the external environment, the elements are economic, social, political, technological, ecological and legal factors and these influence and regulate the business environment of ASDA (Pearce & Robinson 1991, Shirvastava 1994 and Wright et al. 1996). Environment can change the dynamics of critical success factors of a business. Among the environmental variables, world economy, political dimension, and ecological dimension can result a tremendous shift in the business trend. Moreover environmental factors are responsible for the attractiveness of industry as well (Hax & Majluf 1996). The success of a particular industry is therefore influenced by the current and future impact of external factors.

5. Research methodology In this section, the research mechanism is discussed. The research methodology part is containing three different parts, which are research design, research methods and research instruments. These aspects of research methodology are discussed below. 5.1. Research design In research design, the planning of data collection and use of different methods are decided. The aim of this research is to measure the effectiveness of segmentation strategy of ASDA. This research will be more qualitative in nature. There are several reasons for making this research qualitative. In a qualitative research, it is telling a researcher about how and what etc about the research topic (Cooper and Schindler 2008).

Besides, for extracting, motivating, seeking perceptions etc qualitative research is appropriate in favor of the researcher. But in a quantitative research, the concentration is given on to measure something by answering how many, how much. This research will measure segmentation strategy effectiveness in a qualitative way. Now it is time to choose inductive or deductive approach. As it is decided that the research will be qualitative, so it will be appropriate to select inductive approach. Because in inductive approach, a research can draw a conclusion from different facts and evidence, in the contrary, deduction method measure the strength of relationship between reasons and conclusions (Cooper and Schindler 2008). To measure the segmentation strategy effectiveness, it will be needed to collect data from different sources and then leading to a conclusion. So inductive approach will be used. The nature of the research will be descriptive, as the effectiveness of the segmentation strategy can be found by analyzing the market characteristics of ASDA.

5.2.Research methods Sampling: usually for the effective use of samples, probability sampling methods are used, but considering the easiness of data collection, it is better to choose non probability sampling method. In this research, convenience sampling is chosen to be used as sampling technique.

Data collection: data will be collected from primary and secondary sources. Primary sources include customers, employees and other stakeholders. It will be tried to cover other companies in this industry, such as TESCO.

Data analysis: to analysis the data, content analysis method will be used. Krippendorff (2004) describes this technique to have the following steps to analyze data1. Identify the major themes or issues. 2. Allocate codes to these points or issues. 3. Categorize the data based on the coding under the major points. 4. Combine the categorization and response to set it in the report. . The technique will be used manually; no specialized software will be used. But for faster analysis MS excel will be used for producing charts, tables etc. this tools will help to present the research findings in graphical view.

5.3.Research instrument The research instrument to be used in this research will be interview method. The interview will to facilitate using a questionnaire including some questions. The nature of questions will be both close and open ended. There will be a use of likert scale for recording the response of the participants.

6. Ethical consideration This study will maintain highest ethical standard. This research will not do anything which can be ethically harmful on any element. To ensure the ethical standard, some guidelines will be followed throughout the research and in its data collection procedure. The guidelines include the following The participants in this research will participate willingly, they will not be forced or pressured to participate. The participation is totally voluntary. The response of the participant will be kept in safe and secret If a participants want to stay anonymous, it is allowed

 The data will be presented as it found in the response, no manipulation and no bias

7. Research limitation To conduct this research, some limitations can be faced by a researcher. In this section, these limitations are highlighted. Firstly, time constraint allows spending only one month to data collection, which not adequate. But the research will try to manage more time to get for data collection.

Secondly, budget constraint, to conduct a research is becoming expensive. As the researcher has limited income sources, the budget for research is limited as well.

Thirdly, access to the participants in the interviews, are not available every time. Sometimes appointments are made but participants are not available for their business.

Fourthly, Supermarket chain industry is a very large industry in the world, and in UK it is large enough to cover. In this research, it may not be possible to cover all over the industry in UK. 8. Time plan
Activity January February 01-28 March 1-31 April 01-15 April 16-30 May 01-15 May 16-31 June 01-30 July 01-14 July 15-31

Deciding the research topic Submit Proposal Writing literature review Completing literature review Writing Methodology Completing Methodology Collecting primary data Analysing primary data Writing results and analysis

Completing results and analysis Writing conclusion Full write-up of major project Submission of Project

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