Hi-Value Supermarkets- Everyday Low Pricing Essay

Case AnalysisI. Factual SummaryHi- pry Super grocerys became a division of star sign Consolidated, a privately owned wholesaler and retail nutrition electrical distri thator in 1975. Hi- range Super commercialises is considered to be the smallest of the threesome super grocerys chains owned by sign of the zodiac Consolidated, with a small store distribution for its social class. Hi-Value was the number one or two ranked supermarket chain in each(prenominal) of its trade markets (as mensural by market sh atomic number 18).Hi-Value is known as al well-nigh convenient, having three stores in Centralia compargond to its top competitors to a greater extentover having one each. Hi- Values three are major competitors are Harrisons, meter American, and atomic number 42 Mart. The three major competitors in Centralia contain stores all subsequently larger in size than those of Hi-Value. The cardinal major supermarkets in Centralia make up 85% of all food sales, with the re main (prenominal)ing 15% stemming from smaller, independent grocery stores and gismo stores. All 3 major competitors contain a shoot a line attributes and a unique slur in the market. With Hi-Value having three locations in Centralia, it puts them at an advantage for convenience that the contention can non duplicate without having the funds or some opposite resources to do so.Although Hi-Value Supermarkets suggest the highest train of convenience, there hurts are boilers suit are the highest as well. Residents of Centralia prefer get off monetary pass judgments because according to the U.S. Census held in 2000, the median income was 36,000. It is understood that price is the close to important store determinative for the residents, which poses a problem for Hi-Value. The major marvel described in the case is whether or not Hi-Value should implement a deplorable-price strategy. With the examination of Hi-Values current situation, it is evident that their future falls in betwe en several courses of action that executives must examine and choose whether or not to integrate them. This process must be done in order to maintain a strong position in their served market and prosperous future.II. Case Problem/OpportunityHi Values main problems are that they lack strong guest image and are passing priced. Each of the local supermarkets in the Centralia area has an image. Harrisons has an extremely favorable image. They are well managed, clean, orderly, and loving, and the store is conveniently located along with excellent parking. Grand American is the most modern store in Centralia and has a super regarded dairy department. Contrarily, they postulate a modest motley in meats, and make water and offer double coupons. Missouri Marts primary merchandising strength is in groceries and special leveraging displays, but its store lacks quality and freshness. Hi-Value has multiple locations but has highly priced merchandise. A supermarket interview was conducted to give customers an chance to share their overall thoughts and go steady they had when shopping at local supermarkets in Centralia. The questions were asked based upon the characteristics each store had to offer. The number one concern customers had with Hi Value was price. At the time Hi-Values prices ran 10 portion above Harrisons, and 7 pct above Missouri Mart and Grand American. Although Hi-Value is recognized for its store convenience it lacks a top ranking sales item that sets it aside from other supermarkets in the area. Since Hi- Values reputation is not where steering expected, Hi-Value Supermarket is reviewing whether or not it would be a serious business decision to incorporate an day-after-day low pricing strategy to stay hawkish with the other supermarkets in the area market tactic.The most important opportunity for Hi-Value Supermarkets is the growing price informedness Centralia shoppers are becoming. The increase on price e lastlyic customers should be p remeditationfully taken into consideration when developing new strategies, or fetching new courses of action. One of Hi-Values opportunities could be identified in the customer spending habits. Company records point out fresh meat, poultry, and seafoodto be among the items heap in Centralia spend the most money on. This representative 14.32% come accession the fact that meat quality is the second most important determinant of store choice can be clavern as an attractive opportunity for Hi-Value executives to improve the quality of their butcher in order to attract more customers. Another opportunity for Hi-Value is to modernize their store to make it more attractive and easier for customers to maneuver around to make their shopping experience better. It whitethorn not be a bad radical as well to offer a greater variety of bakery choices along with unspoilt produce.III. alternate(a) Solutions1). put through commonplace low-pricing strategy to all Hi-Value Supermarket produ cts By choosing to implement terrene low-pricing strategy to all Hi- Value Supermarket products in Centralia, Missouri, Hi- Value would begin reign over competition with Harrisons via most healthy prices. According to the Exhibit 6 found on page 506, data shows that, Harrisons is a market leader with 36 percent of customers agreeing that Harrisons has the most reasonable prices , turn customers rated Hi- Value with whole 7percent . Also in this data we can see that Hi Value scored lowest on scoop overall variety with 2 percent while Missouri Mart came in at 74 percent. With 13,500 households retaining an average income of a mere $36,000/ year, consumers of Centralia are money conscious and smart shoppers. Since Harrisons is favored 29 percent higher(prenominal), than Hi-Values pricing, they are undoubtedly the average consumers penny stretching, go-to supermarket. Because price is believed to be the most important store choice determinant for customers, this may be a strategy that Hi-Value should consider. By implementing the Everyday low-pricing strategy, Hi- Value Supermarkets would promise customers a low price, without the need to wait for a sale price or other comparison.A strategy like this has proved to work well with a broader store positioning strategy and if it is well supported with advertising. Since Hi-Value has 3 stores compared to the other retailers who only have 1, it is positioned as the most convenient and uses a value feeler when advertising. With the current positioning as Hi-Value= Superior Value, in convenience, armed service and bakery items, Hi- Value falls short in the pricing category and in like manner typically spends .11% less on advertising annually than the average advertising sales (which is 1% ofannual revenue). Implementing this strategy may make Hi-Values image and positioning. However, if it is implemented, the Everyday low-pricing strategy has the potential to reduce operating cost and increase profit (.9% of an nual sales), which the company could then use to bolster a new advertising campaign featuring Hi-Values new Everyday low-pricing strategy.2) Implement Everyday low-pricing strategy to Grocery and seasonal/General merchandise only By choosing to implement an Everyday low-pricing strategy on Grocery and seasonal worker/ General merchandise only to Hi- Value Supermarket products Hi- Value would limit the pricing strategy to all grocery (including dairy) and general merchandise (including beauty care and health care items). Since these categories represents 57 percent of Hi-Values annual sales, this limited approach on the Everyday low-pricing strategy should convey the image they want to retch as well as enter Hi- Value Supermarkets into a contrasting level of competition (reasonable pricing) where they were last in the category before. As a result, this would mean more direct competition with Grand American, Harrisons and Missouri Mart. However, this change does alter Hi- Values po sitioning as greatest value and convenience and may begin to confuse shoppers. Hi- Value Supermarket Shopper interview Resulted in saying that 77.9 percent of all Hi- Value customers are give patrons that have stayed and shopped with Hi- Value for 3 or more years. Of these customers, 51.7 percent leverage about half of their total food demand with Hi- Value Supermarket. Of that 51.7 percent, 36.9 percent purchased grocery items only and 23.4 percent purchased grocery, meat and produce. Of these customers interviewed, 27 percent of them give tongue to that the things they liked best about other stores were the prices. This information allows a death to be drawn that because of the strong base of loyal customers, who mostly purchase grocery items, preferred most stores with lower pricing and shopped most regularly for other groceries at Missouri Mart (whose ads feature very low prices), that the strategy of implementing Everyday low-pricing limited to Grocery and Seasonal/ Gene ral merchandise only, to Hi- Value Supermarket products would only make sense.3) Do not implement the Everyday low-pricing strategy by choosing not to implement the Everyday low-pricing strategy whatsoever to Hi- Value Supermarket products in Centralia, Missouri would allow Hi- Value Supermarkets to maintain their prided image and positioningas the greatest convenience for shoppers. Their 31 ratio of stores located throughout Centralia gives them a competitive strand against the other leading supermarkets in the area. Hi-Values W. Prospect store, being the only Supermarket in that section of town is a definite advantage for the organization. By choosing to commission directly on their existing positioning they ordain be accredited to not confuse customers, also with their large base of 77.9 percent customers who have been loyal customers over 3 years. Hi value has to be certain about simply lowering prices because if Hi-Value was to change their positioning, it may change the fashion they are overall perceived. Higher prices indicate higher value and sea captain service. This is a trend seen worldwide. These categories of high value and service are what Hi- Value Supermarkets was built upon. The option of lowering price may or may not contradict these written values. In a well-defined market area, for Everyday low pricing to work, you do not have to be the lowest priced supermarket in the trade area. This allows the option to always be considered to only slightly lower prices. With Hi-Values pricing to be 7-10% higher than its competitors, if Hi-Value lowers prices by a mere 2-3% they can still be positioned as the most convenient and superior value supermarket, while satisfying their customers price concerns.IV. Selected SolutionsHi-Value Supermarkets best bet is to implement an everyday low pricing strategy in certain product categories with a price reduction anywhere from 5-7% to a lower place the original quote. With growing sensitivity to pricing in the area, this strategy will work to increase customer satisfaction and will lead to a positive company image. Implementing low prices will keep Hi -Value competitive with other markets in the area. Although Hi- value cannot out price Harrisons, it still may be an option worth while looking into. Also Hi-Value needs to greatly improve their customer image. Usually first impression is the last impression, so it is important that Hi-Value staff consider training their staff on the importance of making sure that the customer has a better experience when coming to their stores. Perhaps they can have more staff working(a) to ensure that the isles ate wide enough and that the shelves are neatly stocked and organized so that when the customer shops it will be a smooth transition from the shelves to the cashregister. Along with that it may be a good idea as well if they focused more on whirl a better variety of bakery items as well for customers to enjoy.V. findingWith all the infor mation that has been provided, it can be concluded that if Hi-Value decided to prevail in a way that is seen as being more reasonable and economical for customers, customers will be more inclined to shop there. If management decides to implement better sanitary solutions and decides to clean up the dairy department, it would more than likely lead to better customer satisfaction. If management works more closely with ensuring that customers do not experience out of stock items and fresher produce, customers will be more inclined to shop there and sojourn to recommend Hi-Value to their friends and family. These are simple options that management can takes that will be work out to be both effective and efficient. If management also decides to take this approach it can compensate for their higher prices. If your prices are higher than there needs to be a justifiable reason, so in this case Hi-Values justifiable reason would be again to work on customer image. Altering their advertisin g slogan, start advertising on television, and targeting shoppers distant of Centralia will increase sales and market share. As of now 89 percent of their sales are devoted to advertising. Having an increase in marketing expenses from the new strategy will be offset with increased sales and market share. Once these actions have been implemented, it would be a good idea for Hi-Value to allow customers to take a survey to comment on their late improvements to store and allow them to give feedback so that management is always in the know and so that customers can always contribute. This will put Hi-Value at an advantage with its competitors.