Introduction
The two selected supermarkets are Woolworths and Coles, which are two of the largest retail chains in the market. The latter can be considered a local supermarket due to the fact that it is headquartered in Melbourne. On the other hand, Woolworths is a multinational chain that is originally from South Africa. It should be noted that despite the difference in place of origin, Woolworth is ideally the largest supermarket in Australia with approximately 900 stores compared to Coles 800. Critically, whereas the two are the largest in the market, Australia boasts of various retail chains/supermarkets, making the said environment highly competitive.
The fact that Woolworths has more stores also ensures that its scope of operations is larger compared to that of Coles. For instance, the former has sources for more products due to the higher number of physical stores it has compared to the latter. Interestingly, the number of employees in the two stores differs only slightly despite the over 100 store difference. Whereas Woolworths has approximately 115,000 employees, Coles has 100,000. The stated premise is critical in understanding some of the marketing distinctions the two companies support. It can be argued that whereas Coles’ marketing focuses more on the clientele and consumer support, Woolworth’s focuses on the products and range offered.
A quick assessment of the marketing approaches of the two companies reveals that they have both similarities and differences. For instance, one similarity is that they have invested in marketing their products both traditionally and digitally. On the other hand, a key difference is their distribution. The paper will analyze the two companies in regards to their segmentation and targeting, positioning and differentiation, promotional mix, and distribution.
Segmentation and Targeting
Debatably, the two selected supermarket retail giants, Woolworths and Coles, explore different targeting strategies. Woolworths uses concentrated marketing, which is also referred to as niche marketing. Ray and Yin (2019) argue that this strategy focuses on a few selected segments of the larger target population. In the case of Woolworth, the difference between the niche is age. However, the unifying factor is that the company targets wealthy or high-income individuals. On the other hand, Coles uses an undifferentiated targeting strategy. According to Schlegelmilch (2016), this type of approach usually offers one element that is deemed of value to the larger population. Coles’ main feature is affordable or cheap products. The supermarket’s taglines include phrases such as “why pay more” (Pride and Ferrell, 2015) showing that it focuses on providing inexpensive products for all types of clients.
One can clearly identify the market segments that are targeted by the two companies based on their strategies. It is arguable that both companies have used psychographic segmentation (Baker and Hart, 2016). Coles targets low-income earners and people who appreciate saving when they shop. On the other hand, Woolworths, as stated earlier, targets high-income earners. Arguably, the segmentation used is sustainable for both supermarkets as they target different types of people within the same market. Whereas Coles gets its profit from moving large masses of products, Woolworths uses high pricing to improve its bottom line. One can identify a similarity in the strategy used for segmentation (that is psychographic). However, the niche targeted is different in both companies, where Woolworths targets the wealthy while Coles focuses on low income earning individuals and families.
Differentiation and Positioning
In order to understand the differentiation and positioning strategies used by both companies, one has to first appreciate when both stores entered the market. Whereas Coles opened its first stores in 1914, Woolworths entered the Australian market in 1924, ten years later. It is arguable that Coles had already differentiated the market and created a niche for itself by the time Woolworth was penetrating the market. Thus, the two have used the same strategy since their inception into the market. As mentioned earlier, the two companies target different segments of the population and this can be perceived as the first point of differentiation. Coles’ competitive edge is based on the fact that it offers lower prices compared to Woolworths and other supermarkets in the region. Due to this, it attracts low- and middle-income earners in the population. Their approach offers value to their target audience as it allows them to spend less in shopping.
On the other hand, Woolworth’s competitive edge is quality. The supermarket describes its product as high quality, thus, the higher price. Interestingly, this aspect is of value to the target audience (the wealthy/high-income earners) as they prefer to pay more for quality products and convenience. Therefore, a key similarity between the two companies is that they offer value to their target audiences. However, a critical difference lies in the fact that they have completely separate niches.
A possible positioning statement for Woolworths is “quality fresh products right from Australia’s back yard.” Debatably, the position statement for Coles should be “affordable fresh vegetables for the whole family.” Arguably, one can already tell the niches of the two supermarkets from the proposed positioning statements.
Market Offerings
The two selected companies have similarities and differences in their marketing offerings. A similarity is that they have both focused on marketing offerings that push their competitive edge. On the other hand, a key difference is a type of offering each of the supermarkets provide. For Woolworths, the core customer value is in the quality of their products. The actual products that are fronted in regards to the company’s marketing strategy are fresh vegetables, although the supermarket offers other retail products. Apart from this, the company also has augmented products which are enhanced versions of the flagship ones. For instance, instead of selling only tomatoes, the company adds other products to create a vegan package for the target population. In turn, such packages increase the company’s value proposition for the market segment targeted. It can be argued that this is one of the reasons why the company’s selected niche prefers to shop at this specific store.
Critically, the core customer value for Coles is the affordability of its flagship and augmented products. It is arguable that this lower pricing is a critical value addition for families that earn little to no income. The market offering, therefore, creates value for the specific group that the company targets amidst the larger population. Additionally, the company has tied its value proposition to the affordable nature of its flagship and augmented products. Whereas its competitor Woolworths has focused on augmented products that complement each other and raise the price, Coles is keen on augmented products that complement each other but encourage savings. This is another key difference between the two companies.
Pricing
One can argue that a key similarity between the pricing strategies used by Woolworths and Coles is the fact that they are both tailored to their target niche needs. However, due to the fact that the two companies are focusing on distinct groups of people, their pricing strategies differ significantly. It can be argued that Woolworths uses a value-based pricing approach, which affects both its price floor and ceiling. Schlegelmilch (2016) defines the approach as determining prices based on what the target market believes is the worth of the full consumer experience. There are two main aspects that have to be noted. The first is that the company uses the customer’s perceived value of its brand to set its pricing. It can be debated that the consumer views Woolworths (brand) as highly prestigious, therefore, easily agree to pay more for shopping at that particular store. Secondly, the fact that consumer experience is also included in the strategy affects the prices charged.
Notably, Coles has adopted a cost-plus pricing approach. Schlegelmilch (2016) explains that the approach allows a company to calculate the fees of a product or service and adding a mark-up. Simply, Coles calculates up all the fees for getting a particular product to its stores, then adds a profit on that amount. This approach has allowed them to be significantly lower than Woolworths but ideally not the lowest retailer in the market. It is prudent to note, therefore, that the price charged in Coles is affected significantly by a change in the original/flagship price compared to Woolworths. For example, if the retailer buys a product at US 3 from the farmer, and the price changes to US 4, then the overall amount the end-user (consumer) has to pay will increase.
Promotional Mix
There are five elements of the promotional mix that have to be considered. The first one is advertising, which as Stimpson and Smith (2015) note, includes both traditional and digital approaches. A similarity between the two companies is that both have focused on digital advertising more compared to traditional. They each have online stores including their social media accounts, where clients can reach them easily. The second element is personal selling which involves interacting with clients directly (face to face). Coles has perfected the act of personal selling compared to Woolworths. This explains why Coles has more staff in their physical store, as stated earlier. It can be argued that the difference between the two communicates to their target audience. For instance, the lack of many face-to-face conversations speaks to the convenience of Woolworths’ consumers who would prefer little human interaction.
The third element of the promotional mix is sales promotion. Interestingly, in an attempt to also capture Coles’ target population, Woolworth schedules frequent sale promotions such as half-price events. These events usually target a different clientele for the company. Due to the fact that the store is perceived to be prestigious, people who do not shop at Woolworths often respond well to these sales promotions. Similarly, Coles schedules sales promotions but on a weekly level. This ensures consumer loyalty as each week the store offers different discounts. To this end, the company still communicates value to its clients.
Further, the concept of public relations is critical for both companies. The two use their digital platforms to ensure proper public perceptions. They communicate different events, sales promotions, and similar activities through these platforms. Lastly, the fifth element, direct marketing, focuses on using middle players to reach the clients (Chaffey and Smith, 2017). One way Woolworths is using direct marketing to speak to its client is through endorsements by both celebrities and “people next door.” This is similar to Coles’ strategy on the same element.
There are various ways both Coles and Woolworths use their strategic marketing choices and tactics to engage their potential and actual customers. First, Woolworths utilizes its approaches to communicate quality and class. The company uses this theme of communication even in the sales that they support. As explained, sales promotions usually target people who do not shop in Woolworths. The fact that the brand is perceived as luxurious (in regards to supermarkets) ensures that a significant number of the “untargeted” population explores such events.
On the other hand, whereas Coles also communicates to its clients, the message sent is different from Woolworths. For Coles, the theme of such messages includes how its clientele can save more. As explained, the company offers weekly promotions on its different products. This ensures that its customers are constantly engaged with the brand to know which products are on offer each week. This can be perceived as a significantly successful way of ensuring consumer loyalty as well. Critically, whereas the two companies communicate value addition to their clients, they are doing so differently. The two supermarkets still stick to their brand promise where Woolworth communicates quality while Coles focuses on affordability and saving.
Place or Distribution
There are two things that have to be discussed in terms of place and distribution. The first is the physical stores for both supermarkets. It can be argued that Coles and Woolworths have many physical stores that are specifically located in areas where their target audiences can reach easily. Both have focused on cities such as Melbourne and Victoria, where most of their clientele is located. One similarity between the two stores, in regards to their physical shops, is that they have invested heavily in their brick and mortar. Still, on the physical stores, it is also important to state that Coles has shops that are considered lower in terms of rental value. This is in an attempt to minimize operating costs to ensure that their products are also priced correctly. On the other hand, Woolworth’s rental value is perceived to be high. This speaks directly to their consumers as their products are also priced more expensively.
The second element of place and distribution is the online stores/platforms that both firms use. One similarity between the two is that they have given their digital stores needed attention due to the growing digital economy. Despite this, one can argue that Coles has better consumer engagement than Woolworths due to the fact that they have invested in more staff. Again, this communicates two different things to the consumer. Whereas Coles’ main objective is to please the client, for Woolworth, the company comes first. Therefore, the latter relies on its reputation and prestige to attract shoppers while the former relies on client management.
Reference List
Baker, J.M. and Hart, S. (eds.) (2016) The marketing book. 7th edn. New York, NY: Routledge.
Chaffey, D. and Smith, P.R. (2017) Digital marketing excellence: planning, optimizing and integrating online marketing. 5th edn. New York, NY: Taylor & Francis.
Pride, M.W. and Ferrell, C.O. (2015) Marketing 2016. 18th edn. Los Angeles: Cengage
Ray, S. and Yin, S. (2019) Channel strategies and marketing mix in a connected world. New York, NY: Springer.
Schlegelmilch, B.B. (2016) Global marketing strategy: an executive digest. New York, NY: Springer.
Stimpson, P. and Smith, A. (2015) Business management for the IB diploma. 2nd edn. Cambridge: Cambridge University Press.