To: The Kroger Co.
From: Larry Watts, Marketing Consultant
Project turnaround is a plan that is hopped to ensure The Kroger Co remains the industry leader in the grocery store and supermarkets in the California region. The company has been losing customers over the years as they shifted to the upcoming stores such as Northgate and Yucca supermarkets, which are the main competitors. The project aims to keep the customers happy and returning to The Kroger Co stores once the economy recovers from the ongoing Covid-19 pandemic. The project turnaround is based on two strategic initiatives that will enhance the customer experience in the store. The two initiatives are price leading and product optimization.
Leading Prince Initiative
The initiative sets a lower price for products and reducing the company’s typical profit margin to stimulate the customers’ interest in the store as a whole as well as interest in a particular line of products. The rationale behind this strategic initiative is that pricing some products at lower prices will help the company shift traffic from other players in the market and consequently generate sales of other profitable products (Bolton, Shankar & Montoya 2010). The firm attracts new customers with significantly lower product prices in the hope of creating a larger customer-pool and promoting long-term recurring revenue.
Effective implementation of the price leading initiative calls for The Kroger Co to be a cost leader exploring any avenue possible to manage costs. The sources of cost gain vary across organizations depending on the structure and may include aspects such as proprietor technology and economies scale. The Kroger Co can take advantage of its large size and several store chains to maximize central buying to purchase the products at favorable terms, lowering the buying cost. The company can also negotiate for discounts and other friendly trade agreements with suppliers to remain ahead of emerging medium-sized stores that provide competition. However, prize leading initiative may prove risky if not well executed. For instance, if the business attracts more customers on the “loss-leader” products and fails to convert sale on “higher margin” products, the company’s overall margin may significantly decline. There is also the likelihood of attracting only customers who shop for low-priced products (Breugelmans & Campo, 2016). However, with the nature of the retail sector and size and structure of The Kroger Co, price leading analysis projects a 97% success with the strategy.
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Product Optimization to Win and Play
This strategic initiative implies adjustment to products to make them attractive and more desirable to customers. The strategy entails optimizing products in every store, reducing the product line’s number, and overall supplier. This will encourage the suppliers of various products to consider reduces prices. Product optimization also generates an avenue for private-labeled product categories, increasing revenue (Ferreira, Lee, & Simchi-Levi 2016). The present economic condition has customers exploring any avenue to save money. Therefore, the value of Kroger Co.’s private labeled products should be to the advantage for the consumer and the company.
The product optimization strategy plan is to place each of the product lines in either of the following two brackets: win or play.
Win: The win product categories represent the top priority category for The Kroger Co. The company will aim to be the first to market new products introduced into the market, lead with value and price, and stocking varieties of items. Play: products in this line are considered as a strategic group. Under this product category, the growth and profit are “balanced” in the perspective of the general market performance. Suppliers in this product line are encouraged to “aggressively” market to The Kroger Co to keep their products on the shelves, including offering attractive discounts. The expectation is that product optimization will reduce product prices and attract more customers.
Bolton, R. N., Shankar, V., & Montoya, D. Y. (2010). Recent trends and emerging practices in retailer pricing. In Retailing in the 21st Century (pp. 301-318). Springer, Berlin, Heidelberg.
Breugelmans, E., & Campo, K. (2016). Cross-channel effects of price promotions: an empirical analysis of the multi-channel grocery retail sector. Journal of Retailing, 92(3), 333-351.
Ferreira, K. J., Lee, B. H. A., & Simchi-Levi, D. (2016). Analytics for an online retailer: Demand forecasting and price optimization. Manufacturing & Service Operations Management, 18(1), 69-88.