Aldi’s Marketing Strategy

Report on Aldi’s Marketing Strategy Student’s Name Instructor’s Name MKT00720 – Marketing Southern Cross University Date Report on Aldi’s Marketing Strategy Abstract A marketing strategy is the drive behind an organization’s increased sales and sustained competitive advantage. It comprises all basic activities, both short-term and long-term, that involves analyzing strategic situation of an organization and formulates, evaluates and selects a market-oriented strategy. As a result, marketing strategy contributes to the realization of the company’s goals. ALDI is a cost leader. To cut down on operational costs, it has no marketing department and has a thinned marketing budget of approximately 0.3 per cent of the total company revenues. In addition to that, the company does not spend any money on public relations. That allows it to stock goods at a low costs and sells them at a price above the average price. The firm thus makes profit from the sale of its products by giving discounts on the purchase of its products which, as a consequence, increases its profits. Customer satisfaction involves knowing what the customer wants by observing their shopping culture and offering it at premium prices that cover the excess production costs incurred in differentiating the product. ALDI can still exploit maintenance of customer loyalty because selling products to existing customers is much easier and cheaper as compared to finding new customers and selling to them. Company Background ALDI is a brand of two major discount supermarket chains in 18 countries with over 10000 stores and an approximated turnover of 50 billion pounds. It is based in Germany and was founded by the two brothers Karl and Theo Albrecht in 1946. The two took over their mothers’ store which had been in operation in Essen since 1913. The two brothers split the chain stores into ALDI Nord and ALDI Sud with their headquarters at Essen and Mulheim respectively. the two stores operate independently in different geographical areas are among the world’s major privately owned companies. The Nature of Aldi’s Marketing Strategy Aldi Discount Supermarket Chain uses a marketing strategy solely aimed at minimizing the cost. The strategy involves not having a marketing department and a thinned marketing budget of approximately 0.3 per cent of the total company revenues. In addition to that, the company does not spend any money on public relations but offers some sort of selective “Super Buys” which change weekly and are available as long as the stock lasts (Aaker & McLoughlin 2010, p. 169). The cost saving culture is evidently a plant of the company’s founding officials and is continually reflected by its employees in every way possible. For example, the employees will switch of the lighting in the company as soon as they notice the presence of day’s light. It is therefore, pretty clear that Aldi discount supermarket chain squarely reduces its expenditure on promotion by impressing cost effective strategies on its employees as a culture. Marketing Strategies The company employees the use of many different strategies to not only survives in the market but to also edge off its competitors. These strategies referred above are responsible for Aldi discount supermarket competitive advantage. A competitive advantage implies the capacity of a company to makes profits by offering better prices or quality for high prices paid by the customers as compared to its competitors. Below is a summary of the four sections of Porter’s competitive advantage that Aldi discount supermarket employs. Product differentiation Cost leadership Focus on Cost Differentiation Costs Leadership This marketing strategy involves the production of goods at a low costs and selling them at the market which is still above the average price. The firm thus makes profit from the sale of its products by giving discounts on the purchase of its products which, as a consequence, increases its profits. Aldi Supermarket offers products at the lowest possible price and operates on its Low price philosophy of “Strictly no frills” (LEAO 2011, p. 59). The supermarket manages to sell its products at low price because of its highly minimized operational costs, transportation costs are minimized by keeping goods directly in the stores and buying a single line of a brand per item. Also important in the cost management strategies of ALDI is the simplistic design of its stores so that customers are the first people to interact with the product. The queue system common with ALDI’s competitors is eliminated and replaced by the use of a check-off system made efficient even with fewer workers. With all these avenues for cost reduction, there is no doubt that the feasibility of offering their products at prices very much lower than those of their competitors is sustainable and responsible for their competitive advantage. Differentiation Focus Customer satisfaction is about knowing what the customer wants by observing their shopping culture and offering it at premium prices that cover the excess production costs incurred in differentiating the product. ALDI mainly targets people in the middle class whose buying is mainly controlled by price rather than product quality. Pash (2015) maintained that it has an edge over its competitors such as TESCO and ASDA by offering high quality products at cheaper prices and hence creates a superb value for customers’ money. Differentiation involves creating an emphasis on uniqueness of products and organization to create a value in the chain over the products in the market (Urquhart 2004). Strategic Marketing Options Aldi Market Entry Strategy The main marketing strategy focus must be maintenance of customer loyalty because selling products to existing customers is much easier and cheaper as compared to finding new customers and selling to them (Aldi Australia 2016). Nevertheless, it is very important for a company to constantly obtain new customers although new customers require more extra investment efforts to be loyal to the firm. The following are the areas of focus on which ALDI can base their marketing strategies. Customer Service The main objective of a customer service is to ensure that excellence is fostered in satisfying customers’ needs. ALDI must ensure that it puts in place excellent strategies to ensure that they stay their competitive advantage over other firms by considering pertinent issues such as exercising incredible courtesy every day. So far, according to Belch and Belch (2004), ALDI is a notch higher, beating its major competitors in offering incredible courtesy and highly satisfactory customer services to their clients. The solution of the customers’ complaints sourced from the complaint boxes or directly from them are in the jurisdiction of the local store managers, liable to solve them. Secondary Activities These are activities that boost the efficiency of service delivery but are not directly involved in the production process. Secondary activities that can form part of the marketing strategy of ALDI are procurement, human resource, technological advancement and infrastructure. Good procurement processes will help in achieving affordable resource management for business operation while human resource reinforces the effort of gaining efficiency by hiring eligible and efficient workers in different departments (Hibbit 2016). Efficiency of management of information and knowledge of the business is made possible through the use of appropriate technologies which is very important in achieving the overall marketing strategy. Lastly, infrastructure concerns support processes such as quality, planning and senior management. The value of efficient resource management in the business operation is important in realization of ultimate low cost-products. If the company recruits efficient and competent staff that satisfy customers’ needs and efficiently run the store, it will be able to edge out its competitors in a price war, as stated by Saarinen, Tinnilä and Tseng (2005, p. 121). ALDI has proved that they have the capacity to manage information in a very restricted way by allow very limited business information to the public. The supermarket regulates the quality of their products and adopts a non-bureaucratic method when dealing with senior management. In conclusion, ALDI’s marketing strategy is based on operational cost reduction. The strategy involves not having a marketing department and a thinned marketing budget of approximately 0.3 per cent of the total company revenues. In addition to that, the company does not spend any money on public relations but offers some sort of selective “Super Buys” which change weekly and are available as long as the stock lasts. This marketing strategy involves the production of goods at a low costs and selling them at the market which is still above the average price. The firm thus makes profit from the sale of its products by giving discounts on the purchase of its products which, as a consequence, increases its profits. To satisfy customers’ needs, ALDI should know what the customer wants by observing their shopping culture and offering it at premium prices that cover the excess production costs incurred in differentiating the product. The main marketing strategy focus that the company can further exploit must be the maintenance of customer loyalty because selling products to existing customers is much easier and cheaper as compared to finding new customers and selling to them. References Aaker, D.A. and McLoughlin, D., 2010. Strategic market management: global perspectives. John Wiley & Sons, pp.169. Aldi Australia, 2016, Supermarket Switch Challenge, https://www.aldi.com.au/en/shopping-at-aldi/supermarket-switch-challenge/ Belch and Belch, 2004, Advertising and Promotion: an integrated marketing communications perspective Hibbit, 2016, Retailer News, http://c-store.com.au/2016/02/03/aldi-sets-up-shop-in-south-australia/ LEAO, P. M., 2011. Germany: Keys to understanding German Business Culture. USA [u.a.], Lulupress, pp. 51. Pash, 2015, Business Insider, http://www.businessinsider.com.au/aldi-is-intensifuing-its-supermarket-attack-against-woolworths-and-coles-2015-9 SAARINEN, T., TINNILÄ, M., & TSENG, A., 2005. Managing business in a multi-channel world: success factors for e-business. Hershey, Pa, Idea Group Pub, pp. 191. http://www.books24x7.com/marc.asp?bookid=10838 Urquhart, 2004, Marketing Focus, http://www.marketingfocus.net.au/ALDIUNDERATTACK.htm Aldi’s Marketing Strategy 8