Reed Supermarkets

1 January 2017

A New Wave of Competitors *Exhibits discussed in the following report refer to the exhibits in the Reed Supermarkets Case Study. Question #1: After careful deliberation and analysis of the Reed Supermarkets case, the marketing team has concluded that Mr. Jack Morrissey’s goal of attaining a market sales share of 16% as being achievable. It is important to note that market sales share is calculated in terms of dollar sales (revenue) generated as opposed to the quantity (amount) of items sold, with respect to the entire market.

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Reed currently has a market sales share of 14% in Columbus with 25 stores in the surrounding area. Ultimately, the team has elected to attain the additional 2% of market sales share by focusing on top line growth measures. Mr. Morrissey has advised the group that there will be no new capital expenditures for the upcoming two fiscal years and for that reason the marketing team has devised a plan that will convey the value of Reed Supermarkets to its respective consumers through a series of small adjustments in marketing and product offerings. This will translate to more customer traffic and thus, more sales.

The demographics in Columbus, Ohio are strong from the perspective of a business. Population growth is at a rate of 11%, which is above the national rate of 9%. Unemployment is at a rate of 8. 5%, which is below the national rate of 9. 8% and finally the median income of Columbus is right around $52,000. While this encouraging data demonstrates that the demand is there, it will not be enough on its own to meet our goal for the 2011 fiscal year. The problem that must be addressed is that the typical Reed shopper has a median income “12% higher than the area household average. While Reed has branded itself as being a high quality supermarket, it is losing too many customers with its high prices. A survey of 250 Columbus non-customers (Exhibit 5) cited that the most important reason for not shopping at Reed were the prices. Therefore, with a series of small adjustments, which will be elaborated upon throughout this report the marketing team has developed a strategy of changing the perception of prices as well as the products carried at Reed Supermarkets. Another concern that could potentially inhibit our market sales share gain for 2011 is competition. Research that was hared to the marketing team in the case showed that market share appeared to be capped at 3%-5% for limited selection stores and at about 3% for Dollar stores. The market sales share at Reed on the other hand, is not nearly at its limit and while competitors may be growing, they are nearing their potential market sales share. They are therefore not a direct threat. Supermarkets like Reed distinguish themselves on selection. If Reed is able adjust its product offerings successfully in order to cater to different consumers, Reed will be able to differentiate itself as a supermarket and ultimately reach its goal.

Top line growth measures take into account how well an organization is able to produce sales while bottom line growth measures focus on how efficiently an organization can manage its operations (costs). Bottom line growth measures tend to depend on many different factors since the bottom line, net income, of a company is calculated after making adjustments for various expenses. Therefore even if Reed Supermarkets was able to successfully increase sales by 2%, bottom line growth may not reflect this due to some adverse change in the company’s operations like a non-reoccurring legal expense.

Therefore, bottom line growth is much more risky to depend on in ones analysis of growth. On the other hand, while top line growth will give an accurate depiction of sales attained it often leaves out a lot of important information on how the sales growth was achieved. The marketing team is confident that for the particular task at hand, focusing on sales (top line growth) will be a more acceptable determinant of not only market sales share but also fits better with the planned strategy.

Question #2: The pricing strategy that the team determined to be most effective for Reed moving forward is to stay the course and adopt small adjustments to the current model. The notion of our concept is to change the ways in which prices are perceived by customers while maintaining the same quality products. The goal here is to offer products that are a bit more expensive but within the dollar range from our competitors. More specifically, for a same sized item sold at the dollar store, Reed will be charging a higher price for our product, but within a one-dollar range.

For the same product in a smaller size than the dollar store item, Reed will be charging the same price. To illustrate this point, take for instance, a 300-mL ketchup bottle sold at the dollar store for $1. That same product will be sold at Reed for $1. 30 or alternatively, $1. 00 for a 200-mL bottle. Another adjustment Reed can adopt is to price products in a way that the tens decimal place is moved down. So instead of charging the regular $2. 25, we can charge $2. 19 before taxes. The figures vary slightly and are fairly hard to detect. As a result, the price differences become negligible and easy to for customers to disregard.

A third strategy is the increase in product varieties and introduction of new items with different features. Also recommended is the use of reference pricing, or the fair price consumers expect to pay. If ketchup prices are generally deemed to hover around $2. 00 for a 300-mL bottle, the reference price, then our offered price at $1. 30 will be perceived as a “good deal. ” Furthermore, we can also exploit the influences of external reference prices, which are context-based, by labeling on our products the higher manufacture suggested retail price.

With regards to promotions and discounts, the team does not recommend implementing any, with the possible exception of a customer loyalty card where shoppers can be rewarded for frequent visits by accumulating points that can ultimately lead to discounts. This not only creates consumer value, but also incentive for people to shop at Reed more often. Net profit margins for a typical supermarket averages around a 1. 5% to 2. 5% range, low in comparison to their competitors (dollar stores maintain net margins of over 8%).

For this reason, it would not be worth it nor would it make sense to endorse sales or discounts. Therefore, it is advised that Reed terminate their “dollar special” campaigns. We agree with a few executives that Reed “should cede customer’s periodic stock-up trips to the discounters and focus on reinforcing the range and quality of their offerings. ” In addition, as stated, the campaign appears to be too close to the services of dollar stores and would confuse consumers and “at worst muddy Reed’s image through association. Most importantly, customers are increasingly “cherry-picking” and only visiting stores to take advantage of the temporary deals, a practice we essentially want to avoid. Despite its many benefits, there are nonetheless disadvantages of the proposed pricing model. First, discontinuing the dollar special could, in theory, be a premature move since multiple impressions over at least six months are called for to move consumer perceptions on price and it is possible that Reed has not given the program sufficient time.

Second, both Columbus area non-customers and customers cited their reasons for not shopping at Reed, and factors most important to them, being better prices at other outlets, and better prices at Reed, respectively (Exhibits 5 and 6). Eliminating the campaign would undeniably drive a fragment of consumers away that are solely “cherry-pick. ” Moreover, with this model we are still positioning Reed as a higher quality therefore pricier brand, so as to discourage price-sensitive consumers. This pricing design is conceivably a superior choice of measures to the alternative.

To entirely revamp Reed’s current pricing model otherwise would be overworking it. Reed was not off to a bad start to begin with: the supermarket’s number of stores and estimated 2010 total sales is ranked as the highest, while its estimated market share of 14% is sizable to its competitors (Exhibit 1). This supports the grounds that change at the grass-roots level would be unnecessary. In the end, our goal is for our shoppers to think: “by paying a little more, I can purchase better quality and higher value products. If we effectively keep the course and adjusting moderately to Reed’s current pricing model, in time, we believe we can reshape the ways in which are prices are perceived by customers, and succeed in allowing our quality and value justify for our slightly higher prices. Question #3 (Market Map on Page 8): Since Reed is only making minor modifications to its pricing model, target market segments will be consumers who are not only price sensitive but quality and value sensitive as well. Consumers who are highly price sensitive but much less quality sensitive would not find Reed’s higher quality to justify its higher price.

Currently, Reed’s position is high in price but lower in value of product in relation to price, which is different from quality of product alone. While there may be a low chance of winning back predominantly price sensitive consumers, with the right marketing position, there is a good chance that Reed will succeed in winning back customers who desire quality. Attributes Reed will use to position will be price and value of product in relation to price. Efforts to reposition will mostly be focused on the latter, where the firm will aim to achieve a position slightly lower in price but much higher in value of product in relation to price.

With an average total shopping ticket of $7 to $10, data shows that those who shop at dollar stores seek a “fill-in trip” instead of a full grocery run. Consumers are not necessarily looking for the best deals per unit, but simply a lower total price of purchase. Reed will therefore cater to these deal seeking customers by maintaining a varied inventory. To accompany the above strategy and enhance its effect, price difference between Reed and its competitors (per unit) should be within a dollar range; goods sold at $1 by competitors shouldn’t be sold by Reed for more than $2.

Reed should aim to sell goods identical to its competitors at approximately the same price, and within a dollar range for goods in the same category but higher in quality. At the same time, it is still important that Reed also offers products in bulk for returning customers who have sampled the product. Both types of offers are necessary to serve different purposes in attracting and retaining customers. For a higher position of value in relation to price, a professional and welcoming ambiance must be present in all stores.

Decor ideas can include using wooden floors and shelves to radiate a more “natural,” relaxed, and welcoming atmosphere—ideally giving the impression that goods sold are also fresh, natural, and trustworthy. Sleek decors like those of Apple stores would be inappropriate, as they may suggest prices are high. Professionalism should be shown not predominantly through the visual, but through customer service. For example, with regards to the training program at Reed Supermarkets, new employees should be taught to always be friendly and willing to help the customers that enter the store.

When spotted by managers, this behavior by employees can be rewarded with quality points that translate to raises in salaries over time. Potential disadvantages of the chosen strategy may be the increase in time and effort to offer individual goods and ingrain more professionalism in employees. Arranging individual goods and making them look organized is harder than arranging bulk goods, because individual goods could easily look disorganized since there are more in number. Employees would have to be constantly alert and ready to clean after consumers, while being available to help at the same time.

However, if the firm’s objectives are achieved, these costs will be not only met, but will also generate profit. Reed’s market position goal is essentially a balance of dollar stores and Wholefoods, where no other firms are currently positioned. Successful repositioning would allow Reed to dominate this sector of the market. Question #4: The decision to retain Reed’s existing price model and terminate its dollar special promotions will help to protect the firm’s top and bottom line. Supermarket poll data shows that only 40% of shoppers make egular weekly stock-up trips, while 60% make regular fill-in trips (purchasing 11 or fewer items) at least weekly.

Consumers are more price sensitive, and are likely to patronize numerous stores of differing formats “in search of the best deals”. These shifts in consumer behavior have negated the effectiveness of the dollar special campaign. They are not effective traffic-driving options because customers are “cherry-picking” discounted items and diverting the rest of their purchases to stores that maintain lower prices across the board.

Collins’ observation that “dollar specials had increased same-store traffic by 3%” is misleadingly optimistic. Since few if any of the items were purchased “on deal”, they have lowered overall margins. The increase in traffic has not resulted in a commensurate increase in revenue. Sales analysis data shows that when a customer buys three or more dollar specials in a single order, total transaction value is only 40% of an average ticket. Reed’s present efforts to increase its range of private label goods, bulk-packed goods and its adoption of psychological and reference pricing will subtly alter customer perceptions of Reed’s “high” prices.

This will allow the supermarket to attract and retain increasingly price sensitive customers. In the long term, Reed’s retention of its “premium product labels and organic produce” will position it for growth when at least a “moderate economic resurgence” occurs. Although Collins gloomily predicts that Reed’s low-cost competitors will retain most of the customers drawn away during the 2008-2010 recession, Morissey recalls the 2002-2003 recession during which Reed “fought the same battle with warehouse stores… and… rabbed back” its targeted 10%-15% of Columbus’ most prosperous customers. These adjustments that will ultimately translate to increased sales (top line growth) with little to modest increases in expenses should lead to a roughly 2% increase in operating profit, similar to the projected increases in market sales share. The marketing team at Reed Supermarkets is confident of this proposals ability to reach our goals and believe it to be the best course of action for the restrictions faced in capital expenditures as well as the current economic climate.

MARKET MAP OF GROCERY STORES IN COLUMBUS Question #1: After careful deliberation and analysis of the Reed Supermarkets case, the marketing team has concluded that Mr. Jack Morrissey’s goal of attaining a market sales share of 16% as being achievable. It is important to note that market sales share is calculated in terms of dollar sales (revenue) generated as opposed to the quantity (amount) of items sold, with respect to the entire market. Reed currently has a market sales share of 14% in Columbus with 25 stores in the surrounding area.

Ultimately, the team has elected to attain the additional 2% of market sales share by focusing on top line growth measures. Mr. Morrissey has advised the group that there will be no new capital expenditures for the upcoming two fiscal years and for that reason the marketing team has devised a plan that will convey the value of Reed Supermarkets to its respective consumers through a series of small adjustments in marketing and product offerings. This will translate to more customer traffic and thus, more sales.

The demographics in Columbus, Ohio are strong from the perspective of a business. Population growth is at a rate of 11%, which is above the national rate of 9%. Unemployment is at a rate of 8. 5%, which is below the national rate of 9. 8% and finally the median income of Columbus is right around $52,000. While this encouraging data demonstrates that the demand is there, it won’t be enough on its own to meet our goal for 2011. The problem that must be addressed is that the typical Reed shopper has a median income “12% higher than the area household average. While Reed has branded itself as being a high quality supermarket, it is losing too many customers with its high prices.

A survey of 250 Columbus non-customers (Exhibit 5) cited that the most important reason for not shopping at Reed were the prices. Therefore, with a series of small adjustments, which will be elaborated upon throughout this report the marketing team has developed a strategy of changing the perception of prices and of Reed as a whole. Another concern that could potentially inhibit our market sales share gain for 2011 is competition.

Research that was shared to the marketing team in the case showed that market share appeared to be capped at 3%-5% for limited selection stores and at about 3% for Dollar stores. The market sales share at Reed on the other hand, is not nearly at its limit and while competitors may be growing, they are nearing their potential market sales share. They are therefore not a direct threat. Supermarkets like Reed distinguish themselves on selection. If Reed is able adjust its product offerings successfully in order to cater to different consumers, Reed will be able to differentiate itself as a supermarket and ultimately reach its goal.

Top line growth measures take into account how well an organization is able to produce sales while bottom line growth measures focus on how efficiently an organization can manage its operations (costs). Bottom line growth measures tend to depend on many different factors since the bottom line, net income, of a company is calculated after making adjustments for various expenses. Therefore even if Reed Supermarkets was able to successfully increase sales by 2%, bottom line growth may not reflect this due to some adverse change in the company’s operations like a non-reoccurring legal expense.

Therefore, bottom line growth is much more risky to depend on in ones analysis of growth. On the other hand, while top line growth will give an accurate depiction of sales attained it often leaves out a lot of important information on how the sales growth was achieved. While they are both risky, the marketing team is confident that for the particular task at hand, top line growth will be a more acceptable determinant. Question #2: The pricing strategy that the team determined to be most effective for Reed moving forward is to stay the course and adopt small adjustments to the current model.

The notion of our concept is to change the ways in which our prices are perceived by customers while maintaining the same quality products. The goal here is to offer products that are a bit more expensive but within the dollar range from our competitors. More specifically, for a same sized item sold at the dollar store, Reed will be charging a higher price for our product, but within a one-dollar range. For the same product in a smaller size than the dollar store item, Reed will be charging the same price.

To illustrate this point, take for instance, a 30mL ketchup bottle sold at the dollar store for $1. That same product will be sold at Reed for $1. 30 or alternatively, $1. 00 for a 20mL bottle. Another adjustment Reed can adopt is to price products in a way that the tens decimal place is moved down. So instead of charging the regular $2. 25, we can charge $2. 19 before taxes. The figures vary slightly and are fairly hard to detect. As a result, the price differences become negligible and easy to for customers to disregard.

A third strategy is the aforementioned increase product varieties and introduction of new items with different features. Also recommended is the use of reference pricing, or the fair price consumers expect to pay. If ketchup prices are generally deemed to hover around $2. 00 for a 30-mL bottle, the reference price, then our offered price at $1. 30 will be perceived as a “good deal. ” Furthermore, we can also exploit the influences of external reference prices, which are context-based, by labeling on our products the higher manufacture suggested retail price.

With regards to promotions and discounts, the team does not recommend implementing any, with the possible exception of a customer loyalty card where shoppers can be rewarded for frequent visits by accumulating points that can ultimately lead to discounts. This not only creates consumer value, but also incentive for people to shop at Reed more often. Net profit margins for a typical supermarket averages around a 1. 5% to 2. 5% range, low in comparison to their competitors (dollar stores maintain net margins of over 8%).

For this reason, it would not be worth it nor would it make sense to endorse sales or discounts. Therefore, it is advised that Reed terminate their “dollar special” campaigns. We agree with a few executives that Reed “should cede customer’s periodic stock-up trips to the discounters and focus on reinforcing the range and quality of their offerings. ” In addition, as stated, the campaign appears to be too close to the services of dollar stores and would confuse consumers and “at worst muddy Reed’s image through association.

Most importantly, customers are increasingly “cherry-picking” and only visiting stores to take advantage of the temporary deals, a practice we essentially want to avoid. Despite its many benefits, there are nonetheless disadvantages of the proposed pricing model. First, discontinuing the dollar special could, in theory, be a premature move since multiple impressions over at least six months are called for to move consumer perceptions on price and it is possible that Reed has not given the program sufficient time.

Second, both Columbus area non-customers and customers cited their reasons for not shopping at Reed, and factors most important to them, being better prices at other outlets, and better prices at Reed, respectively (Exhibits 5 and 6). Eliminating the campaign would undeniably drive a fragment of consumers away that are solely “cherry-pick. ” Moreover, with this model we are still positioning Reed as a higher quality therefore pricier brand, so as to discourage price-sensitive consumers. This pricing design is conceivably a superior choice of easures to the alternative. To entirely revamp Reed’s current pricing model otherwise would be overworking it. Reed was not off to a bad start to begin with: the supermarket’s number of stores and estimated 2010 total sales is ranked as the highest, while its estimated market share of 14% is sizable to its competitors (Exhibit 1). This support the grounds that change at the grass-roots level would be unnecessary. In the end, our goal is for our shoppers to think: “by paying a little more, I can purchase better quality and higher value products. If we effectively keep the course and adjusting moderately to Reed’s current pricing model, in time, we believe we can reshape the ways in which are prices are perceived by customers, and succeed in allowing our quality and value justify for our slightly higher prices. MARKET MAP OF GROCERY STORES IN COLUMBUS [pic] Question #3: Since Reed is only making minor modifications to its pricing model, target market segment will be consumers who are not only price sensitive but also quality and value sensitive. Consumers who are chiefly price sensitive would not find Reed’s higher quality to justify its higher price.

Currently, Reed’s position is high in price but lower in value of product in relation to price which is different from quality of product alone. While there may be a low chance of winning back predominantly price sensitive consumers, with the right marketing position, there’s a good chance that Reed will succeed in winning back customers who who desire quality. Attributes Reed will use to position will be price and value of product in relation to price. Efforts to reposition will be mostly focused on the latter, where the firm will aim to achieve a position slightly lower in price but much higher in value of product in relation to price.

With an average total shopping ticket of $7 to $10, data shows that those who shop at dollar stores seek a “fill-in trip” instead of a full grocery run. Consumers aren’t necessarily looking for the best deals per unit, but simply a lower total price of purchase. With in mind that a market position is based on consumer perception and not the company’s, Reed can respond to this need without necessarily increasing product quality (which will create additional costs). Perception of a lower price can be achieved by offering products in individual units similar to a convenient store (in addition to bulk goods).

This will reduce consumer’s psychological risk of purchase and make the product seem “cheaper”/demanding less commitment—hopefully eliminating a few steps in consumer’s decision-making process. For example, if an apple costs $1 in dollar stores, consumers would be more willing to try Reed’s apple (with better quality) at $1. 2 instead of 10 apples at $12, or even $11. To accompany the above strategy and enhance its effect, price difference between Reed and its competitors (per unit) should be within a dollar range; goods sold at $1 by competitors shouldn’t be sold by Reed for more than $2.

Reed should aim to sell goods identical to its competitors at approximately the same price, and within a dollar range for goods in the same category but higher in quality. At the same time, it is still important that Reed also offers products in bulk for returning customers who have sampled the product (with additional discount if appropriate). Both types of offers are necessary to serve different purposes in attracting and retaining customers. For a higher position of value in relation to price, a professional and welcoming ambiance must be present in all stores.

Decor ideas can include using wooden floors and shelves to radiate a more “natural,” homey, and welcoming atmosphere—hopefully giving the impression that goods sold are also fresh, natural, and trustworthy. Sleek decors like those of Apple stores would be inappropriate, as they may suggest prices are high. Professionalism should be shown not predominantly through the visual, but through customer service. For example, training staffs to be friendly, always greeting customers with a smile, and being available to help could be integrated in employee training.

Potential disadvantages of the chosen strategy may be the increase in time and effort to offer individual goods and ingrain more professionalism in employees. Arranging individual goods and making them look organized is harder than arranging bulk goods, because individual goods could easily look disorganized since there are more in number. Employees would have to be constantly alert and ready to clean after consumers, while being available to help at the same time. However, if firms’ objectives are achieved, these costs will be not only met, but also generate profit.

Reed’s market position goal is essentially a balance of dollar stores and Wholefoods, where no other firms are currently positioned. Successful repositioning would allow Reed to dominate this sector of the market. Question #4: The decision to retain Reed’s existing price model and terminate its dollar special promotions will help to protect the firm’s top and bottom line. Supermarket poll data shows that only 40% of shoppers make regular weekly stock-up trips, while 60% make regular fill-in trips (purchasing 11 or fewer items) at least weekly.

Consumers are more price sensitive, and are likely to patronize numerous stores of differing formats “in search of the best deals”. These shifts in consumer behavior have negated the effectiveness of the dollar special campaign. They are not effective as traffic-driving loss-leaders because customers are “cherry-picking” discounted items and diverting the rest of their purchases to stores that maintain lower prices across the board. Collins’ observation that “dollar specials had increased same-store traffic by 3%” is misleadingly optimistic. Since few if any of the items were purchased “on deal”, they have lowered overall margins.

The increase in traffic has not resulted in a commensurate increase in revenue. Sales analysis data shows that when a customer buys three or more dollar specials in a single order, total transaction value is only 40% of an average ticket. The abortion of the dollar special campaign will prevent Reed from further ineffectual sacrifice of its profits and revenues in the short term. Reed’s present efforts to increase its range of private label goods, bulk-packed goods and its adoption of psychological and reference pricing will subtly alter customer perceptions of Reed’s “high” prices.

This will allow the supermarket to attract and retain increasingly price sensitive customers. In the long term, Reed’s retention of its “premium product labels and organic produce” will position it for growth when at least a “moderate economic resurgence” occurs. Although Collins gloomily predicts that Reed’s low-cost competitors will retain most of the customers drawn away during the 2008-2010 recession, Morissey recalls the 2002-2003 recession during which Reed “fought the same battle with warehouse stores… and… grabbed back” its targeted 10%-15% of Columbus’ most prosperous customers. contact infos

Aaron (as5034) – 917 855 1532 Carlos (cfs263) – 321 795 0607 Sori (sc2865) – 917 499 9661 Vivian (vc687) – 516 859 0350 Unrevised Q2 Question #2: As mentioned previously, the pricing strategy that the team determined to be most effective for Reed moving forward is to stay the course and adopt small adjustments to the current model. The notion of our concept is to change the ways in which our prices are perceived by customers while maintaining the same quality products. The important goal here is to offer quality products that are a bit more expensive but within the dollar range from our competitors.

This can be achieved by making minor alterations to the costs of our goods. More specifically, for a same sized item sold at the dollar store, Reed will be charging a higher price for our product, but within a one-dollar range. For the same product in a smaller size than the dollar store item, Reed will be charging the same price. To illustrate this point, take for instance, a 30mL bottle of ketchup sold at the dollar store for $1. That same product will be sold at Reed for $1. 30 or alternatively, $1. 00 for a 20mL bottle. Another pricing adjustment Reed will adopt is to price our products in a way that the tens decimal place is moved down.

So instead of charging the regular $2. 25, we can charge $2. 19 before taxes. The figures vary slightly and are fairly hard to detect. As a result, the price differences become negligible and easy to for customers to disregard. Another proposed adjustment is the aforementioned increase of the variety of products offered and the introduction of new products with different features. A third policy the team recommends Reed to assume is the use of reference pricing, or the price consumers expect to pay or consider fair.

Applying it to the same example referred to earlier, if consumers generally deem ketchup prices to hover around $2. 0 for a 30-mL bottle, in other words the reference price, then our offered price at $1. 30 will be perceived as a “good deal. ” Furthermore, we can also exploit the influences of external reference prices, which are context-based, by labeling on our products the higher manufacture suggested retail price. With regards to promotions and discounts, the team does not recommend Reed to implement any with the possible exception of a customer loyalty card where shoppers can be rewarded for frequent visits and purchases by accumulate points that can ultimately lead to discounts.

This not only creates consumer value, but also creates incentive for people to shop at Reed more often. Net profit margins for a typical supermarket averages around a 1. 5% to 2. 5% range, terribly low in comparison to their competitors (dollar store major players maintain net margins of over 8%). For this reason, it would not be worth it nor would it make sense to endorse dollar items or huge discounts. In accordance with this suggestion, it is advised that Reed terminate their “dollar special” campaigns, the weekly 250-items offered at dramatic discounts from regular sale prices.

We agree with a few executives that Reed “should cede customer’s periodic stock-up trips to the discounters and focus on reinforcing the range and quality of their offerings. ” In addition, as stated, the campaign appears to be too close to the services of dollar stores and would confuse consumers and “at worst muddy Reed’s image through association. ” Most importantly, customers are increasingly “cherry-picking” and only visiting the stores to take advantage of the temporary deals, a practice we essentially want to avoid. Despite its many benefits, there are nonetheless several disadvantages of the proposed pricing model.

First, discontinuing the dollar special campaign could, in theory, be a premature move since multiple impressions over at least six months are called for to move consumer perceptions on price and it is possible that Reed has not given the program sufficient time. Second of all, according to Exhibits 5 and 6, both Columbus area non-customers and customers cited their reasons for not shopping at Reed, and factors most important to them being the better prices at other outlets and better prices at Reed, respectively. Eliminating the campaign would undeniably be driving a fragment of consumers away that are solely coming to “cherry-pick. Moreover, with this model we are still positioning Reed as a higher quality therefore pricier brand, so it would still serve to drive away those consumers who are more price-sensitive.

This pricing design is conceivably a superior choice of measures to the alternative. To entirely revamp Reed’s current pricing model otherwise would be overworking it. Reed was not off to a bad start to begin with: the supermarket’s number of stores and estimated 2010 total sales is ranked as the highest, while its estimated market share of 14% is izable to its competitors (Exhibit 1). This support the grounds that change at the grass-roots level would be unnecessary and excessive. In the end, our goal is for our shoppers to think: “by paying a little more, I can purchase better quality and higher value products. ” If we effectively keep the course and adjusting moderately to Reed Supermarket’s current pricing model, in time, we believe that we can reshape the ways in which are prices are perceived by our customers, and succeed in allowing our quality and value justify our slightly higher prices.

Question 1 (unrevised): Question #1: After careful deliberation and analysis of the Reed Supermarkets case, the marketing team has concluded that Mr. Jack Morrissey’s goal of attaining a market sales share of 16% as being achievable. It is important to note that market sales share is calculated in terms of dollar sales (revenue) generated as opposed to the quantity (amount) of items sold, with respect to the entire market. Reed currently has a market sales share of 14% in Columbus with 25 stores in the surrounding area. Ultimately, the team has elected to attain the additional 2% of market sales share by focusing on top line growth measures.

Mr. Morrissey has advised the group that there will be no new capital expenditures for the upcoming two fiscal years and for that reason the marketing team has devised a plan that will convey the value of Reed Supermarkets to its respective consumers through a series of small adjustments in marketing and product offerings. This will translate to more customer traffic and thus, more sales. The demographics in Columbus, Ohio are strong from the perspective of a business. Population growth is at a rate of 11%, which is above the national rate of 9%. Unemployment is at a rate of 8. %, which is below the national rate of 9. 8% and finally the median income of Columbus is right around $52,000. While this encouraging data demonstrates that the demand is there, it won’t be enough on its own to meet our goal for 2011. The problem that must be addressed is that the typical Reed shopper has a median income “12% higher than the area household average. ” While Reed has branded itself as being a high quality supermarket, it is losing too many customers with its high prices. A survey of 250 Columbus non-customers (Exhibit 5) cited that the most important reason for not shopping at Reed were the prices.

Therefore, with a series of small adjustments, which will be elaborated upon throughout this report the marketing team has developed a strategy of changing the perception of prices and of Reed as a whole. The first aspect that must be addressed is customer loyalty. As a result of the current economic climate, customers have begun shopping around multiple stores to find the best deal. The marketing team has decided to increase the variety of products offered at Reed in order to address retain more customers and allow those customers to have all the options that they are searching for in one place.

Reed Supermarkets in Columbus will now carry more Private Label products like our competitor Aldi as well as bulk-packed products that Warehouse clubs like Costco, and Sam’s Club carry. Furthermore we will work with our manufactures to purchase products that are the same brand but smaller in size in order to appear as we are lowering prices. Also, at the bottom of receipts, in bold letters, will read how much each customer saved on their purchases on that day. These adjustments are small, quick, and in our opinion will be effective in creating a more loyal and larger consumer base in order to generate sales (revenue).

Another concern that could potentially inhibit our market sales share gain for 2011 is competition. Research that was shared to the marketing team in the case showed that market share appeared to be capped at 3%-5% for limited selection stores and at about 3% for Dollar stores. The market sales share at Reed on the other hand, is not nearly at its limit and while competitors may be growing, they are nearing their potential market sales share. They are therefore not a direct threat. Supermarkets like Reed distinguish themselves on selection.

If Reed is able adjust its product offerings successfully in order to cater to different consumers, Reed will be able to differentiate itself as a supermarket and ultimately reach its goal. Top line growth measures take into account how well an organization is able to produce sales while bottom line growth measures focus on how efficiently an organization can manage its operations (costs). Bottom line growth measures tend to depend on many different factors since the bottom line, net income, of a company is calculated after making adjustments for various expenses.

Therefore even if Reed Supermarkets was able to successfully increase sales by 2%, bottom line growth may not reflect this due to some adverse change in the company’s operations like a non-reoccurring legal expense. Therefore, bottom line growth is much more risky to depend on in ones analysis of growth. On the other hand, while top line growth will give an accurate depiction of sales attained it often leaves out a lot of important information on how the sales growth was achieved. While they are both risky, the marketing team is confident that for the particular task at hand, top line growth will be a more acceptable determinant.

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