Action Plan for Reed’s Growth
Background: Meredith Collins, VP of Marketing, Reed, needs a plan for 2011 to execute togrow its current market share from 14% to 16%. Margins for error are negligible as competition has intensified in every segment and current economic conditions aren’t looking good.
Recommendations for Growth:
1. Stop the dollar special for each week: 1st step is to stop the dollar special promotion immediately. This is not consistent with the brand equity and positioning built over the years. It’s resulting in net operating loss of 76% on each discounted item and overall decreased the net operating profit for 2010 to 0.4% only (details in justification). Moreover, this promotional activity is polluting the message for regular consumers, considering that some of the dollar stores are located nearby. 2. Increase Sales Target: To increase the current market share to 16%, sales target is set to775Mn for 2011. It’s an increase of 95Mn. from 2010, on the assumption that total marketsize (4.74Bn) remains same. 3. Focus and Maintain current Target Segment and Increase the Wallet Share: Continue focusing on the current target segment of affluent and older customers with smaller household size. Their wallet share is 8.93% only as compared to average supermarket customer’s wallet share of 10.0% (details in justification). Wallet share of Reed customers will be increased by at least 1% which will result in additional revenue of 79Mn/year. 4. Maintain current Brand Positioning: Maintain current brand positioning by serving to highend of customers with good and specialised quality of products (like sea food and organic).Continue leveraging on better customer experience by providing attentive staff, shortercheck out times, and opening stores for long hours, with clean and better lit lay outs. This will able to defend the competition from Delfina, Whole Foods Market and Galaxy and Top Val. 5. Improve Product Mix: Improve the product mix by introducing more private labels. Increase the private labels to 25% of total products on offer while maintaining the same Gross Marginand SG&A. Offer 2 types of product in each category, one with different brands (total 75% ofthat category) as a premium product and second with private label with lower prices as compared to branded ones. This increase in private labels will send a signal to stores like Aldi to not to enter their territory of high end market with private labels. Roll out the bundled products containing food and beverages. Increase the organic andprepared food (high margin) in a product category where feasible and continue the organicpets food for its customer (comprises 20% of existing customer). 6. Increase Customer Base: Reed will grab at least 1% of market share of Galaxy storesresulting in additional sales of $47.15Mn (details in justification). 7. Price: There will be no change in pricing policy for all the products (dollar sp. is scrapped). 8. Promotion: Leverage the integrated marketing channel of online, print and ad to promotenew addition of more private labels, organic food and prepared food. Promote the message healthy food adds to betters quality of life and for this no compromises should be madeesp. in later part of the life (for older affluent population). This will help in tackling theperception of consumers that prices are high. Promote the excellence in customer service,clean stores and convenient locations. These promotions will drive the increase in customerloyalty, awareness, choice and will increase the trips to store. 9. Maintain Current Locations: As far as distribution is concerned don’t add new stores oracquire any new store this year. Lot of dollar stores have come up at convenient locations toconsumers but it has made only a marginal impact (increase of 0.05%) on their habit ofregularly shopping at supermarkets, so don’t react to it. Additionally there are no plans forany capital expenditure for next 2 years as market conditions are quite...
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