Market Segmentation & Expansion

through Market Penetration

Overview
This study will look at: The 4Ps of Marketing How they apply to the Musgrave Group and its marketing strategy The Ansoff Matrix of growth strategies

Introduction
Musgrave Group was founded in Cork in 1876 by brothers Thomas and Stuart, and has grown to become Irelands biggest grocery distributor. Currently the group has operations in Ireland, Northern Ireland, Britain and Spain. It has developed from small beginnings into a major Irish and international firm with annual sales of more than 3.8 billion. It currently accounts for a large percentage of the wholesale grocery sales in Ireland, and is one of the two largest private companies in Ireland. Musgraves core strategy is simple to support independent retail operators in the grocery sector. This is achieved by delivering a superior level of professional expertise and support services to ensure success and profitability.

The overall business is currently made up of five divisions: Musgrave SuperValu Centra (MSVC) Republic of Ireland (ROI) and Northern Ireland (NI); Musgrave Wholesale Services (MWS); Musgrave Budgens Londis (MBL) in Britain and Dialsur which operates from a base in Alicante in the south-east of Spain. Musgrave Group is a tertiary business it provides both consumers and its business customers with retailing services.

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Changing face of retailing in Ireland today

Market Segmentation
Following the identification of the gaps in the market, Musgrave decided to segment the market of the independent retailer into two groups:

The "Trolley Shopper" who bought most of their groceries in one weekly shopping trip to the supermarket. The "Basket Shopper" who made smaller purchases on a more regular basis.

Manufacturer

Wholesaler

Retailer

Manufacturer

Retailer

In the 1960s, the Irish retail market changed with the arrival of supermarkets, which grew swiftly by opening in multiple outlets. In a relatively short period of time, large quantities of grocery sales were accounted for by a small number of supermarket multiples. As these retailers grew in size, they bypassed the wholesalers and bought directly from the manufacturers, availing of discounts which independent smaller retailers could not acquire due to their size. This led to increased competitiveness and many of the smaller retailers were unable to survive. In 1966, there were 12,681 grocery retailers in Ireland. Thirty years later, this figure had shrunk to just 5,296.

In 1979, Musgrave created two new brands, SuperValu and Centra to meet the needs of both segments. SuperValu was aimed at the "trolley shopper" while Centra was expected to cater for the "basket shopper". Both were offered as franchise opportunities to independent retailers. The franchise Musgrave offered was quite unique it was purely voluntary and the independent retailers did not have to pay a franchise fee, or relinquish ownership. Instead, they would be provided with an extensive range of services aimed at improving their performance. In return, Musgrave would benefit from the increased sales of these retailers.

Marketing Mix
The Marketing Mix is better known as the 4Ps Product, Price, Place and Promotion. Businesses aim to have the product consumers need or want available at the right price, in a convenient place, using suitable promotion.

Marketing Strategy
Threatened by this rapid shrinkage of the retail market, Musgrave was forced to act and develop a marketing strategy to withstand this loss of market share. As a wholesaler who supplied the independent retailers, its business faced a rapid decline. In response, managers looked at the trends in the market and decided upon a strategy to deal with the changing situation. They identified several gaps in the market that were not at that time being filled by either the large supermarkets or the independent retailers.

Product
The good or service offered; it must satisfy the needs of the consumer.

Price
The amount charged for the good or service; it will affect demand for the product.

Place
Refers to the methods used to distribute the product to ensure it is available where and when the consumer wants it.

Promotion
Techniques used to increase sales for the product, e.g. advertising, personal selling, sales promotions, sponsorship.

Supermarkets provided a wide range of goods at competitive prices, but tended to be located on the outskirts of towns, and could be time consuming to visit. Local ownership/personal service was not provided by large multiples. Large multiples were not customising their businesses to meet the specific needs of their customer base. The market was becoming more competitive therefore the need for increased marketing activity and promotions was required. Independent retailers could not compete on price, product range or standard of modern retailing system.

In the following paragraphs, you will learn how Musgrave developed the marketing mix for both SuperValu and Centra. Product SuperValu targets "trolley shoppers" and prides itself on its friendliness and the services it provides to customers. Stores are located in cities, towns and villages, in convenient locations at the heart of the community. Shopping is child-friendly and timefriendly, aimed to please shoppers who find a visit to a multiple store located out-of-town both time consuming and stressful.

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Many SuperValu branches provide a free home delivery service, which encourages shoppers without transport to purchase larger amounts of goods. This service is particularly popular in college and university towns, as many students do not have their own transportation. Home deliveries also facilitate the elderly and disabled. Meanwhile Centra targets "basket shoppers" by offering a wide range of products that meet the needs of consumer lifestyles i.e. immediate consumption or cupboard replenishment at competitive prices, opening longer hours and providing convenient locations for customers. Both brands seek to engage in market research and continually improve to meet the needs of consumers. They offer a wide range of own-label and branded products. They have embraced change with the development of new in-store convenience offerings such as the successful "Good to Go" product ready-meals including hot food. MSVC constantly evolves to meet lifestyle changes, such as "desk and dashboard dining", combined with a demand for healthier, yet convenient foods. The Unique Selling Point (USP) of the group is to offer the advantages of large scale shopping from a community and local perspective. Musgrave and its retailers are committed to using local growers and suppliers wherever possible. Price Both Centra and SuperValu have weekly specials offers. They can offer these price reductions to customers due to bulk buying as part of the Musgrave group. Bulk purchasing allows cost savings to be passed onto the consumer. Both brands engage in extensive marketing campaigns both at national and local levels to promote special offers and to inform customers of price reductions. Place In Ireland, both SuperValu and Centra are proud of their tradition of family-owned businesses in towns and villages, close to the communities they serve. They provide local employment, and the money and profits generated by these businesses stays in the local community, unlike multinational grocery outlets, where the profits are repatriated to the parent company, out of Ireland. For both SuperValu and Centra, Musgrave provides central distribution from their warehouses in Cork, Dublin, Galway and Belfast. A fleet of 128 trucks, 103 chill trailers and 154 ambient trailers ensures that your local supermarket is always fully stocked. There are currently 182 SuperValu stores throughout the ROI. They pride themselves on their level of customer service, and of satisfying local needs. As SuperValu stores are "full trolley" supermarkets, they tend to be located in or very close to the centre of the town or village. Centra has more than 360 stores in Ireland. Local ownership means that Centra stores have the flexibility to provide the services of a big, national retail group, while retaining a role in their local communities. Local owners can tailor their offerings to meet the needs of the area i.e. small town, suburbia or city centre.

ansoff matrix The Ansoff Matrix is a tool that helps businesses to decide their product and market growth strategy. It suggests that growth will depend on whether a business markets new or existing products in new or existing markets.
Market Product Existing Market Penetration Market Development New Product Development Diversification

Existing New

Market Penetration the business focuses on selling existing products in existing markets to increase market share. This can be achieved by introducing loyalty schemes to increase purchasing by existing customers. Market Development the business seeks to sell existing products in new markets or market segments. The various types of Centra store are intended to satisfy the needs of different segments of the Irish grocery market, and to reflect the changing lifestyles of consumers who now shop more frequently, for less groceries and more convenience food. Product Development the business aims to introduce new products into existing markets. Car manufacturers frequently update models to replace existing, older vehicles. The new and improved versions are marketed at existing customers. Diversification the business markets new products in new markets. This is more risky than the other strategies, because the business is moving into markets in which it has little or no experience. Promotion Separate brand teams exist for both SuperValu and Centra. They both provide advertising, marketing and sales promotion for all their retailer members. Advertising takes place on radio, television and in both national and local newspapers.

SuperValus key message communicated through its marketing campaign is hassle-free shopping "shopping as it should be".

SuperValu was one of the first supermarkets to offer a home delivery service to customers in the early 1990s. It sponsors the National Tidy Towns competition, which receives a lot of publicity in local and national press. SuperValu also has a very successful Weekend Breaks offer which rewards customer loyalty through the use of token stamps. Loyalty stamps given with purchases can also sometimes be used to buy furniture at reduced prices.

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Centras positioning reflects the changing shopping patterns of the Irish consumer "Centra for the way we live today". This is reflected in their TV advertising campaign. Centra also rewards loyal customers by giving them savings stamps which can be used to purchase gifts and furniture at reduced rates. One-off incentives are given to customers to increase their total spend, e.g. reduced price offer if customers spend over 10. Musgrave Group is an official partner of Cork 2005 European Capital of Culture.

GLOSSARY
Channel of Distribution: The means by which goods are passed from the producers to the final consumers. Market Segmentation: Breaking the whole market into smaller groups, each of which is targeted separately. Marketing Strategy: A plan which clearly outlines how a business is hoping to achieve its sales targets. Multiples: A number of shops, owned by the one owner. Unique Selling Point (USP): What makes a product or service stand out from the competition.

The Future
Musgrave aims to maintain its leadership role in serving the independent retailer in Ireland, while also developing its business in the UK and Spain to the high standards achieved in Ireland. Musgrave Budgens Londis in the UK is establishing itself as the leading supporter of independent retailers in Britain.

TASKS ACTIVITY
When you solve the clues below, the shaded letters in the grid will make a nine-letter word relevant to the case study. Clue 1. A tool to help businesses to decide their product or growth strategy. (6,6) 2. The type of person who buys most of their groceries in one weekly trip to the supermarket. (7,7) 3. A strategy which outlines how a business is hoping to achieve its sales targets. (9) 4. Increasing market share by selling existing products in existing markets to increase market share. (6,11) 5. The type of market in which MusgraveSupervalu-Centra operates. (7) 6. The way in which goods pass from the producers to the end consumers. (7,2,12) 7. What makes a product stand out from its competitors. (6,7,5) 8. A business marketing new products in new markets. (15) 9. Selling existing products in new markets. (6,11) 1. Explain why Musgraves business was threatened by the decline of the independent retail sector in Ireland. 2. How have changing lifestyles impacted on retailing in Ireland? 3. Explain what is meant by market segmentation. 4. Outline how Musgrave segmented the Irish grocery market. 5. Outline how SuperValu and Centra compete with multiple supermarkets. 6. Explain what is meant by franchising. 7. Take three companies of your choice and explain how they use the different options outlined in the Ansoff Matrix to increase sales.

Find out more

Click on the website www.musgrave.ie

1. 2. 3. 4. 5. 6. 7. 8. 9.

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