Marketing Mix Critique of Aldi Australia
Essay by Kehong Liu • August 23, 2016 • Case Study • 2,700 Words (11 Pages) • 1,923 Views
Marketing Mix Critique of Aldi Australia
Evaluations on current marketing mix situation and recommendations on future improvement
Kehong Liu
Since announcing the first store in Germany, Aldi has recently established over 8000 stores worldwide. Its leading position continually has an impact on global retailer pattern. In past 15 years, Australia, as the third largest market of Aldi, has opened 400 stores nationally and operated well. The secret of success in Australia depends heavily on its philosophy which is providing value and quality with a fair and efficient way (Aldi, 2011). It leads to every decision and strategy they make are based on great customer value. As a marketer, it is essential to uncover the reasons why Aldi differentiates with other retail company and how they maintain constant energy in market share. In this report, it will firstly conduct an analysis about Aldi micro and macro environment in Australia. Then present an overview on marketing mix they employ and provide some critiques on it. Gradually, select several specific aspects of the marketing mix to redesign them by providing improvements suggestion on current company situations. Lastly, prioritize recommendations to discuss what actions should their company implement.
1. Marketing environment analysis – Micro Trends
1.1 Micro Trend One: Competitors
For years, retail competition in Australia present a duopoly by Woolworths and Coles, the two giant local company combine to occupy almost 70~80% market share. Besides, IGA takes the leading position on the second team, maintain 15% of market share (Mortimer & Parker, 2013). Highly concentrated market shares somewhat inhibit other companies to enter the market. Woolworth and Coles, two giant mammoths, continually outline competitive strategies to defend their customers. They both offer a broad range of product and implements provide a better experience to make consumers think first when they shop (Sophie, 2016). Aldi as a German company entered in Australia in 2001 and continually employ strategic advantages to gain market share. Until 2014, the growing rate of Aldi store is similar to wildfire, occupying nearly 3% market share now (Paul, 2015). All company shares one cake, competitions between business will determine the success or failure of a company destiny.
1.2 Micro Trend two: suppliers
Suppliers now contribute a lot in retailers' overall consumer value-creating network. The motivation is enhancing the value during its channel marketing will directly determine the total costs and customer satisfaction. Also, the purchasing process starts with suppliers. Therefore, companies today regard them as a partner to create values together (Narus & Anderson, 1986). The supplier size on Aldi is ranging from a niche boutique manufacturer to Australian large production brand. They all provide high quality in products. Aldi cautiously selects products from suppliers and ask them to guarantee product quality. Due to without long-term contracts, vendors require offering high qualities to maintain a partnership with Aldi (Brandes, 2005). On the other hand, supplier plays a vital role in assisting Aldi’s smarter shopping strategy. Aldi understands the supplier is the fundamental factors of business success. Therefore, the relationship between Aldi company and its suppliers is close.
2. Marketing environment analysis – Macro Trends
2.1 Macro Trend One: technological
By improving technology, traditional exchange pattern is facing a serious challenge. Constant acceptance and intensive engagement of consumer behavior in electronic commerce enlarge the alternatives of consumers when they shop (Pavlou & Stewart, 2000). Especially in developed countries which the rate of Internet connection is over 77 % (ITU, 2012). Australia within the developed country experiences a high level of online purchase penetration, which is now most dramatic power on shaping consumer pattern (Mancini & O'Reilly, 2013). New technology purchasing model stimulates Australian tradition retail to employ high-technology into the sale strategy to optimize the efficiency. In a competitive business world, a company with outstanding technology strategy will make consumers feel more convenient and comfortable (Australian Bureau of Statistics, 2013).
2.2 Macro Trend Two: demographic environment
Demography which refers to analysis people (size, gender, age, race, etc.) is always attracting business attentions because the market is made up by people. Based on demography pattern, companies cautiously draw their plans which are ranging from determining the retailer size to selecting a place to open. According to Australian Bureau of Statistics (2013), Australia's population presents a positive growing annually, the population in 2012 is over 22.7 million and statistics project in 2061 the population will maintain 36.8~ 48.3 million. Marketers require keeping a close eye on the growing size trends in order to seize the enormous potential purchasing power. Also, increasing demographic diversity is another characteristic in Australia. After World War 2, Australian government office proposed a massive scale of an immigration program. Along with the promotional “populate or perish” slogan, authority intend to create new Australia in world pattern (Wilton & Bosworth, 1984). As a result, migration makes society more diverse than before. According to the Australian Bureau of Statistics (2016), 6.7million residents were not born in Australia, and this number represents 28% of the total population. By comparing to a massive immigration movement from Europe decades ago, Asian group is now heavily changing Australian population structure. This trend both poses challenges and opportunities for business.
3.Marketing Mix- Overview and critique
3.1 Overview of Current Marketing approach
3.2 Critique of Effectiveness
Current Approach | Critique of effectiveness | |
Product | Aldi offers a limited product range. However, this limited number, in fact, is selected cautiously by employers. Aldi proposes high quality always comes first. Almost 95% of its products are private-label which made by reputable companies. Moreover, Aldi always avoids necessary wastage in products. | Limited product range enables consumer to select items simpler and less time consuming, because enormous products range sometimes become a burden when they shop. However, less product range meanwhile inhabits it to gain attractiveness, because Aldi only captures the basic consumer needs. Less select power may force customers to visit another shop. |
Price | Product price in Aldi is much lower (nearly 30%) than its competitors, but this is not equal to compromise product quality. National pricing policy which firstly introduced by Aldi aims to make everyone regardless of distance to access a cheaper shop. (Kass, 1994). Sales psychology is seldom used by Aldi company, because it intends to make consumers think honest (Brandes, 2005). | Price strategy in Aldi makes a significant contribution to business success. According to Australia retailer competition situation, using market penetration strategy is practice for a company to enter a new market quickly and deeply. By lower price, Aldi continually attracts plenty of buyers and gain market share. However, keep price and cost down sometimes squeeze other investment, affecting consumer negatively (Loeb, 2013). |
Place | Aldi keeps their place simple due to that company wishes to minimize wastage and reduce cost. When they establish a new store, they consider four major aspects, including demographic of the area, good visibility location, accessibility and convenient transportation and available parking space (ALDI, 2013). | Place selection reflects the concept of Aldi company. Choosing a right place for Aldi shop could increase the efficiency, this both beneficial for consumers and company. For company, reduce cost and time from long journey delivery is helpful for Aldi to maintain a low price. Besides, for consumers, a favorable location ensures that they could shop in anytime and anywhere to boost brand loyalty (ALDI, 2013; Brandes, 2005). |
promotion | Above-the-line promotion: Aldi uses a range of methods to reach audiences. In television, they advertise campaign “Like Brands.” In leaflets, they print 1 million copies per week to distribute them in stores and costumers’ living areas. In Newspapers and store posters, they showcase the product categories and highlight their messages. Below-line promotion: conduct two- way communication through social media (Facebook & Twitter), Target customers with e-mail and create positive press exposure with effective public relations (ALDI, 2013). | Aldi combines Above-the-line and Below-the-line promotion to increase consumer awareness. This promotion mix successfully helps Aldi to reach their potential customers and gain market share. Moreover, a combination of promotional tools overcome some shortages of each message channel. However, by comparing to other companies' promotion investment, Aldi is considerably small. Besides, it still invests traditional media with more effort rather than to integrate more high-technology into promotion. |
Physical | Store size (1/3 of the traditional retailer and layout (limited range). Aldi uses a "no frills" strategy to let consumer think useful at first rather than superficial. So, they keep store interior so simple to let customers feel honest and comfortable. (Loeb, 2013; Brandes, 2005). | Physical strategy indeed makes consumer regard real purchasing is beyond a slogan. When costumers shop inside, they know what they want immediately. But, too much enforcement on simple concept will somewhat inhibit the attractiveness of store by specific buyers (upper class) |
Process | Due to a concept of bringing value with less money, Aldi increase efficiency in each business process, including "Lean thinking" in production, offset investment in promotion, convenient logistics and eliminate wastage (store open during peak hours) (aldi, 2011). | Process in Aldi satisfies most of the consumers. This efficiency of process constantly brings completive advantages. Therefore, the development rate of Aldi stores will like wildfire in Australia. |
People | Aldi knows how importance employees are. A combination of On-the-job training (Coaching, Mentoring, Job rotation and “Sitting next to Nellie” which refers to working alongside colleagues) and Off-the-job training (recruitment, performance review and Aldi Management System) is a core method for Aldi. Moreover, employee wage is paid higher than most of the Australian retailer companies (Aldi, 2012). | Aldi focuses on a long-term capability of their workforce rather than narrowly focus on a short-term effectiveness. They understand employees represent their company to directly "face" with customers. Well-trained employees will make shopping easier and maintain a good relationship with their clients. But, the number of employees is restricted. As a result, it will occur unstaffed situation during peak hours and incompletely customer shopping experience. |
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