Aldi's Market Performance (Research Paper Sample)

Name of Student Course Code Course Title Date of Submission Table of Contents TOC \o "1-3" \h \z \u 1.0Introduction PAGEREF _Toc133089380 \h 32.1 Marketing Performance Measurement System (MPM) PAGEREF _Toc133089381 \h 42.1.1 Strategic Metrics PAGEREF _Toc133089382 \h 5Market Share PAGEREF _Toc133089383 \h 5Revenue Year-on-Year Growth PAGEREF _Toc133089384 \h 62.1.2 Financial Metrics PAGEREF _Toc133089385 \h 7Sales per Square Foot PAGEREF _Toc133089386 \h 7Net Profit Margin PAGEREF _Toc133089387 \h 72.1.3 Brand & Customer Metrics PAGEREF _Toc133089388 \h 8Customer Satisfaction PAGEREF _Toc133089389 \h 8Brand Equity PAGEREF _Toc133089390 \h 8Percentage of Customers Shopping Online PAGEREF _Toc133089391 \h 92.1.4 Marketing Activities Metrics PAGEREF _Toc133089392 \h 9Annual Return on Marketing Investment PAGEREF _Toc133089393 \h 9Basket size PAGEREF _Toc133089394 \h 10Share of voice PAGEREF _Toc133089395 \h 103.0 Recommendations PAGEREF _Toc133089396 \h 114.0 Conclusion PAGEREF _Toc133089397 \h 125.0 References PAGEREF _Toc133089398 \h 146.0 Appendices PAGEREF _Toc133089399 \h 16Appendix 1 PAGEREF _Toc133089400 \h 16Appendix 2 PAGEREF _Toc133089401 \h 16 1 Introduction Fig 1.1 Aldi’s logo ALDI is a company that operates in the supermarket and grocery store industry. The company has stores all over the world but this report mainly focuses on its UK market. ALDI is a discount shop with more than 6,250 stores in 11 countries and has employed over 150,000 employees (ALDI, 2023). The company sells high-quality products at low prices which has enabled it to compete effectively with other competitors such as the gigantic Tesco and even Walmart. Most consumers are interested in cost-effectiveness especially since the majority are middle to lower class and are looking for high value for their money. The market that ALDI operates in has low barriers to entry and there are therefore ongoing threats of new competitors and already established players. ALDI therefore faces a lot of competition but it has been able to establish a presence in the UK by offering competitive prices that competitors have not been able to directly match and a SWOT analysis has been conducted in Appendix 1.1. These low prices have led to Aldi being voted as Britain’s most popular supermarket yet again in the last quarter of 2022 (Aldi, 2022). Aldi has been increasing in popularity and market share in the last 4 years which has greatly threatened the likes of Tesco. The latest market data shows that Aldi currently has a market share of 9.2% in the UK making it fourth in terms of market share CITATION Car22 \l 2057 (Houlton, 2022). The industry has seen inflation rates rise which has made it difficult to conduct business with grocery price inflation hitting a record of 16.7% (Houlton, 2023). Despite this setback, Aldi has been able to steadily grow and offer very stiff competition to competitors due to its low pricing strategy. 2.1 Marketing Performance Measurement System (MPM) Aldi is an upcoming company and from 2015 to 2023, the company has been able to grow its market share from 4.9% to 9.2% overtaking Morrison’s to become the fourth largest in terms of market share CITATION Jam22 \l 2057 (Davey, 2022). The dashboard of Aldi in Figure 2 below will help provide metrics that can be measured over time to help with marketing activities. Fig 2.1 Aldi’s dashboard From the above dashboard, the metrics can be divided into four broad factors: * Strategic Metrics * Brand & Customer Metrics * Financial Metrics * Marketing Activities Metrics Appendix 2.1 provides a better explanation of the above metrics. 2.1.1 Strategic Metrics Market Share The market share of Aldi has been increasing consistently and continues to do so. The market share is a representation of how much control a company has over the market in which it is operating. The market share of Aldi has been increasing yearly indicating that the company has been having more control in the market. To obtain an increase in market share, the company has to steal it from another company indicating a competitive edge that is attractive to consumersCITATION Rob75 \l 2057 (Robert Buzell, 1975). From 2015 to 2019, the market share increased by 3.5% which is a good indicator as it means strategically, the marketing department is beating competitors. In 2020, there was a drop in market share because of the COVID-19 pandemic that greatly affected this industry and there was a decrease in market share in all companies in this industry. In 2021, the company’s market share continued to increase and by the end of 2022, the market share sat at 9.20%. This means that of all the sales made in the industry, Aldi contributed to 9.2% of those sales which is an indication of increasing dominance. The market share of Aldi has been increasing gradually to reach the top four in the UK. The increase in market share means that the company is acquiring customers in the market and therefore growing. Despite Aldi being smaller in size, it has been able to acquire and maintain a substantial market share. Overall, Aldi has been good at obtaining market share and this is a threat to large companies. The marketing department can assess the trends of market share to help them know the success of their marketing strategies and how effective they are at acquiring and keeping customers. This will help managers know the kind of marketing to use whether offensive, defensive or a mixture of both to acquire and retain the new customer. Appendix 2.3 gives a better view of market share calculation. Year Market Share % increase 2015 5.6% 2016 6.2% 0.6 2017 7% 0.8 2018 7.6% 0.6 2019 8.1% 0.5 2020 7.4% -0.7 2021 7.7% 0.3 2022 9.20% 1.3 Fig 2.2 Market Share Revenue Year-on-Year Growth The revenue of Aldi consistently grew from 2019 to 2022. This means that the company has been acquiring more customers, therefore, increasing sales and revenue. In December 2022, the company made a huge record of 26% increase in sales. The marketing department has therefore been efficient in strategies driven toward an increase in revenues. This is evident from the exponential increase in the revenue of the company. To obtain the revenue growth, we take the difference in sales between two years and then divide that difference by the initial revenue and multiply that value by 100%. The calculation of revenue growth is given in more detail in Appendix 2.4. Revenue Growth 2019 10.20% 2020 11.3% 2021 16.4% 2022 26.00% Fig 2.3 Revenue YoY Growth 2.1.2 Financial Metrics Sales per Square Foot Aldi had the largest sales per foot as compared to competitors. This means that Aldi is making more use of space and it sold more with smaller space. This is the reason why despite Aldi being small in size, it has been able to compete with giants such as Tesco and Sainsbury’s which are much larger. The calculation of this metric is given in more detail in Appendix 2.5. This helps the marketing department to know how space is being utilized with a higher value indicating better utilization. The large value of Aldi indicates that Aldi utilizes space better and therefore makes more sales given a smaller space. Marketers can know whether to expand, remain or contract their space to ensure better space utilization. Better space utilization means more cost-effectiveness and diversity. Company Sales per sq foot Aldi £1175 Tesco £985 Sainsbury’s £940 Fig 2.3 Sales per square foot Net Profit Margin Despite large sales, it is important to find out how Aldi is good at making profits. The Net Profit Margin allows us to measure how good Aldi is at converting revenue to profits. From 2019 to 2022, the net profit margin of Aldi sat at has been decreasing. In 2022, the net profit margin of Aldi was at 1.21%. The company has had a significant increase in sales but the profit margin has been decreasing with profit margin. This was way below the industry benchmark meaning the company is not cost-effective and therefore the marketing department has to rethink how it can increase the profit margins of Aldi CITATION JMa23 \l 2057 (Maverick, 2023). The calculation of the net profit margin is described better in Appendix 2.6. Marketers look at how good at making profits their company is and then implement marketing measures. For example, if a company has a high net profit margin but a slow revenue growth rate, the marketing team may decide to use marketing strategies such as discounts, buy two get one free etc. to increase sales CITATION Tim07 \l 2057 (Timothy Keningham, 2007). A low-profit margin will mean that marketers are overusing low pricing strategies to attract customers but forgetting to look at the profits to ensure a healthy financial status of the company. The decreasing net profit margin with increasing sales could be a result of lower prices being used to drive this sales growth which cannot support profitability CITATION Adi06 \l 2057 (Aditya Parthasarathy, 2006). 2.1.3 Brand & Customer Metrics Customer Satisfaction Based on a survey, customer satisfaction sat at 74%. This was a huge value as it meant the company was able to keep customers happy and satisfied. A good level of customer satisfaction translates to customer stickiness and therefore increasing brand loyalty. This helps Aldi to retain its current customers and acquire other customers resulting to increasing customer base CITATION Joh94 \l 2057 (John Hauser, 1994). It is important to ensure that customers are satisfied with the services and products that they obtain to ensure that they come back to purchase again in the future. Return customers are good as they are the first step to establishing customer stickiness. Marketers can look at the level of satisfaction of customers to know wh...