Customer Value and Value Proposition Analysis: Aldi's Marketing Report

This report provides a comprehensive analysis of Aldi's customer value proposition within the Australian supermarket industry, comparing its strategies to those of UK supermarkets like Tesco and Sainsbury. The report delves into key concepts such as customer value and value proposition, emphasizing their importance for a firm's financial success. It examines Aldi's focus on value-for-money offerings to target specific customer segments, while also assessing its communication strategies through its website. The analysis includes a comparison with competitors such as Lidl and explores the advantages and disadvantages of Aldi's current approach, particularly its appeal to utilitarian customers. The report concludes with recommendations for Aldi, suggesting strategies to broaden its product line, improve its appeal to premium customers, and ensure future growth in a competitive market. The study uses various research papers and customer surveys to support its arguments and analysis.

BUMKT5902 MARKETING MANAGEMENT
Individual Assignment—Customer Value and Value Proposition

Executive Summary
Customer Value Proposition (CVP) may be considered to be one of the most critical success
factors (CSFs) for a business organisation. A firm may need to strategically devise its value
proposition in its offering so that the targeted market and customer may get inclined to the same
and become the customers of the brand. It is needless to mention that the process of creating and
maintaining value at a general level of the standard may call for several considerations which are
not only internal but also external to the business. The instant report delves into the analysis of
such value proposition framework a conceived by Aldi, a supermarket giant in Australia in the
backdrop of its comparison with the value proposition by the industry and also a comparative
evaluation of the theme with the supermarkets in the UK.
The researcher has provided a brief background of the topics followed by the discussion of key
concepts involved in the subsequent discussion. In this context, it may be noted that such
discussion pertains to the conceptual framework of value proposition and customer value in the
context of supermarket products as the essence of the research revolves around the study of value
offered by the supermarkets only. In the subsequent sections of the study, the researcher
evaluates that the value provided by the Aldi targets primarily people in their changing demands,
testes and preferences horizon.
It has been observed that people in the country are no longer running after premium services and
even ready to sacrifice quality, to a certain extent, against the price being offered. In other words,
the offering which is value for money is worth in the present context. Big supermarket brands
like Tesco, Sainsbury in the UK are facing similar challenges and issues with respect to the price
war and changing the landscape of customer focus. Aldi, on the contrary, has been successfully
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able to provide a moderately priced offering across all demographic profile and thereby enhance
its market share considerably.
The comparison has also been drawn in the Australian market with Lidl which is providing
similar value proposition in the market and therefore, running quite successfully, however, Aldi
may seem to have a competitive advantage over Lidl in terms of quality and brand value and
hence, the business has been fairly sustainable.
However, the research also shows that the brand has been failing to appeal premium and niche
customer as they are focussing more on discounted offerings. This approach may lead to a
product stagnancy in the market in future and hence, it has been recommended to widen the
product line and also value engineering the operations to accommodate the quality perspective
within the business strategy where the premium customers may also get a proper fit.
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Table of Contents
1.0 Introduction................................................................................................................................5
1.1 Background to Task...............................................................................................................5
1.2 Purpose of the Report.............................................................................................................5
1.3 Format of Report....................................................................................................................6
2.0 Overview of Customer Value....................................................................................................6
3.0 Overview of Value Proposition.................................................................................................8
4.0 Importance of Value Proposition to a Firm’s Financial Success...............................................9
5.0 Value Proposition in UK Supermarkets..................................................................................10
6.0 Value Proposition of Aldi........................................................................................................12
7.0 Customer Segment at Aldi and Its Value Proposition Requirement.......................................12
8.0 Communication of Value Proposition by the Website of Aldi................................................14
9.0 Recommendations....................................................................................................................15
10.0 Conclusion.............................................................................................................................15
References......................................................................................................................................16
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1.0 Introduction
1.1 Background to the Task
In the present age of competitive business environment, the testes and preferences horizon of the
customers have also been changing at a fast pace. In order to meet the needs and demands of the
customers, the companies are offering a certain degree of value along with the products or
services they deal in. Such value is success-critical for the firm's success as the same may denote
the brand image of the firms in the market and thereby establish the sustainability of the firm’s
position in the industry for the long-term (Eggert, Ulaga, Frow, & Payne, 2018). The instant
report deals with the analysis of such a value proposition of an Australian supermarket in the
context of the retail cum supermarket industry in the country.
1.2 Purpose of the Report
The report focuses primarily on the concept of the value proposition in the context of the
supermarket industry in the country. It has been observed that the supermarket segment provides
value to the customers either by way of product differentiation or cost leadership. In doing so,
quality, at times, may get adversely affected. Though there have been certain customers who are
focussing more on cost part and hence, ignoring the quality aspect, the long-term strategy may
not be sustainable for a business if it fails to deliver quality as part of its value proposition.
Therefore, the study of the supermarket business in the context of customer value is important to
consider especially in the backdrop of the competitive age of retail industry. Therefore, the
researcher justifies the preparation of the instant report on the given note.
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1.3 Format of the Report
The researcher has made the report considering the different aspects of the discussion and theme
of the research. In addition, the researcher has kept in mind the logical flow of the study for the
purpose of better understandability and readability. As a result, the paper has been segregated
through various headings and sub-headings.
At the very outset of the study, the researcher introduces the topic by providing a brief overview
of the topic such discussion includes a preliminary idea about the conceptual framework of the
theme of the research. In addition, the researcher provides the justification behind the preparation
of the report and also the entire structure of the report. In the subsequent parts of the paper, the
researcher defines the concept of customer value and value proposition in the context of
supermarket industries in the country. In addition, the researcher has also analysed the value
offer made by the Australian supermarket industry and compared the same with UK supermarket
giants like Tesco and Sainsbury etc. In the latter part of the report, the researcher has more
specifically picked up Aldi as a business and attempted to evaluate its value proposition to the
targeted market along with its pros and cons. Based on the discussion and analysis, the
researcher has finally been able to provide a recommendation to the management of Aldi in order
to improve their operational flaws and deficiencies that may prove to be an impediment in their
subsequent and future growth and expansion. Finally, the report is wrapped up by way of
concluding note.
2.0 Overview of Customer Value
The concept of “customer value” is one of the most crucial in the studies of marketing and
consumer behaviour. Every customer wants value for the money they are expending on the
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purchase of the product or the service from the business and that value determine the saleability
of the offering in the market in the long-run. Various researchers have identified the definition of
the terms some of which are listed briefly as below:
Sl. No. Author Definition
1 (Payne, Frow, &
Eggert, 2017)
Customer value may be defined to be the satisfaction a
customer receives after using the purchased products or
services.
2 (Kumar & Reinartz,
2016)
The concept of value does not necessarily mean the cost of the
product or service, but also the convenience associated in terms
of time taken to buy the product or service and also their
experience with selling personnel etc.
3 (Rihova, Buhalis,
Moital, & Gouthro,
2015)
The customer value is the benefit (tangible and intangible)
derived from using a product or service over its cost price.
4 (Key, Clark, Ferrell,
Pitt, & Stewart, 2017)
Customer value may also be stated as the perception of the
buyer towards the product which may not necessarily convert
into reality.
It has been observed that Aldi in the Australian market had managed to frame its business model
by keeping in mind the demand of its utilitarian customers. In the opinion of few authors, the
unified customers base of Aldi prefer low prices with a fast shopping experience and they are
also ready to make sacrifices on their choices and services (Key, Clark, Ferrell, Pitt, & Stewart,
2017). Hence, to satisfy the explicit criteria of its customers, Aldi framed its business models to
consistently sell grocery products that are relatively cheaper than its rivals. The specific strategy
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had helped the brand to augment its customers’ values and hold 10% of the market share in
Australia (Meili, 2015). Aldi has been enabled to offer greater discounted offerings to its
customer for managing its miscellaneous expenditures. The brand does not spend on the
intermediaries and middle line operations for its product management, which incurs high costs.
The brand is also religious in terms of reducing its store labours. The entire product packaging is
shelf-ready indicating no time is wasted on the stocking. Additionally, shopping cart labour is an
additional expenditure Aldi avoids contending with (Key, Clark, Ferrell, Pitt, & Stewart, 2017).
Its shopping carts need a deposit of coin that is refunded to its customer after returning the cart.
The savings are usually used to enhance the discount limits, which relatively serve the purpose of
Aldi’s customers and their preferences are being valued effectively.
3.0 Overview of Value Proposition
It has been stated that the emerging pressure of economy is trending Australian customers to opt
for money value over fresh foods. This is where Aldi hits with its business strategy, where the
greater discounted offerings to the customers are steadily influencing them to choose Aldi over
Coles and Woolworths (Eggert, Ulaga, Frow, & Payne, 2018).
A survey conducted over 1500 customers shows that their rapid inclination towards good
promotion and value for money (Mitchell, 2015). These factors have become the key driver
influencing customers purchasing behaviours, whereas, the range or quality of fresh foods have
become less important. Aldi has efficiently managed to organise its internal operation but cutting
down the process incurring unnecessary expenditure and used the saving in offering greater
discounted margins to its customers. Around 44% of the customer's rated value for money as the
most significant factor driving their purchasing behaviour towards supermarket products
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(Mitchell, 2015). Coles and Woolworths are still focusing on product quality and freshness to
enhance their customer value proposition rate and differential their brands from Aldi and Costco.
On the other hand, Aldi went into the mainstream to impact on what customers are actually
looking for in supermarket stores.
4.0 Importance of Value Proposition to a Firm’s Financial Success
According to few authors, a brand’s unique value proposition is referred to as the key marketing
tool. A value proposition is a brief declaration regarding the value that a brand tends to offer
through its offered products and services (Kumar & Reinartz, 2016). The intention is designed to
communicate the thought that customers can obtain the maximum potential benefit or value from
buying a brand’s products deriving greater benefits or values than they can get from any relative
products of its competitors. Hence, it has been observed that often a company's value proposition
is incorporated in its mission statement.
It has been asserted that a unique value proposition to customers often helps a brand to
differential its business models and strategies than that of its competitors. This effectively helps
the organisations to attain competitive advantage in the highly competitive market (Payne, Frow,
& Eggert, 2017).
A similar effort has been taken by Aldi in the Australian market, where the management had
been successful in identifying the precise demands of the customers. Based on which, the brand
had prioritised discounted offerings over fresh foods. The quality of foods are somewhat
compromised to offering greater discounted margins to its customers, which serve their purpose
and Aldi enables to increase the value proposition rate of its Australian customer base. By 2018,
Aldi had more than 500 stores in Australia and roughly claimed 13% of the entire Australian
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supermarket sector (Osegowitsch & McCabe, 2018). Despite having fewer outlets than its
competitors, Aldi managed to generate more profit than Coles and Woolworths for being able to
increase its customer value proposition rate.
5.0 Value Proposition in UK Supermarkets
It has been observed that the UK big four supermarket chains, Tesco, Sainsbury’s, ASDA and
Morrisons are losing their customer base over the discounters Aldi and Lidl in the price battle
(Singh, 2016). The UK supermarket sector usually battles for both its market share and consumer
love that is relenting before the discounters. The big four continued to decline in the value
proposition rate, in which both Tesco and ASDA had lost their ground over the discounters
(Singh, 2016). With the passage of time, the consumers’ shopping habits are changing and
showing a steady inclination towards value for money over other factors like product quality,
membership facility, payback card, club card, etc. Moreover, Amazon is also making its
expedition into the supermarket division, which is creating additional pressure on the big four
brands in the UK. Hence, the outlook of the UK supermarket is similar to Australia, where the
price-sensitive natures of the customers are relatively pushing buying preference towards Aldi
and Lidl. It has been observed that Lidl is presently introducing more superior quality and
branded products without sacrificing their aggressive emphasis on lower price margin. This has
helped Lidl to capture 27% share in the discounters market in the UK, whereas Aldi is still at the
top in terms of maintaining value proposition before its customers. The brands pricing strategy
and precise attention towards customers’ nature of demand helped it to gain a market share of
36% in the discounters market in the UK (Voigt, Buliga, & Michl, 2017).
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Figure 1: Supermarket Share in the Discounter Market in the UK
(Voigt, Buliga, & Michl, 2017)
Based on the discussion, the UK market may be evaluated on the basis of Mckinsey’s 7P model.
Product in big 4 firms is almost all similar as all of them belong to the same industry segment.
Price is premium and highly charged in all of them, at least in comparison with Aldi and Lidl.
All the firms make the promotion of their products through both online and offline. Placement
of the products is made through retails outlets, retail chains and stores. Tesco, being the largest
among the all serves most of the people of the country. All the corporations adopt the supplier-
driven process of offering their products through the number of retail outlets and vendors. Tesco
and Morrisons offer all-purpose retailing with rest two are also not lagging behind and the
associated number of value prepositions with the product in terms of post-delivery service,
exclusive sales personnel etc. These all are part of the physical evidence of the product offering
and packaging.
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6.0 Value Proposition of Aldi
As discussed in the previous section that Aldi always attempts to identify the trending demands
of its customers. According to author, the customers of every region are price sensitive and
therefore, opt for products that offer a quality range and high discounted margin. This has acted
in favour of Aldi, where the brand usually differentiates its business lines by focusing more on
price range than product quality (Merrilees, 2016). The brand in the Australian market had
acutely comprehended the price sensitivity of customers and designed its product discounted
strategies to value its target base. Aldi had also introduced ‘special buys’ facilities for its
customers in which every Wednesday and Saturday they are allowed to experiment with the
short-run products that would otherwise be expensive if placed on shelves (Marsh, 2018).
Applying 7P’s model here, the value proposition of Aldi may be presented as below:
 Product: retailing through supermarket stores (no frills)
 Price: moderate and competitive – value for money
 Promotion: both online and offline, “special buy”
 Place: stores, outlets and chains
 People: a substantial and growing number of market share
 Process: direct selling, large supply chain
 Physical evidence: cost-effective and compromise on quality
7.0 Customer Segment at Aldi and Its Value Proposition Requirement
It has been identified that Aldi usually targets the customers of an upper middle segment and
lower middle segment. Whose foremost criteria are to seek value for money over product
superiority; hence, Aldi specifically focuses on the factors that influence the purchasing
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