Reed case memo

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University Of Connecticut *

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3101

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Marketing

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Feb 20, 2024

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TO: Meredith Collins FROM: Tessa Lundin DATE: October 5, 2023 RE: Reed Supermarkets Pricing Strategy The recent influx of lower-price competitors in the Columbus, Ohio grocery retailer market, has created competition for Reed Supermarkets, resulting in a decrease in sales and customer loyalty. To address these issues, Reeds should cut their dollar specials, start a customer loyalty program, and expand their private label brands. Background Fast growth of the number of competitors in the industry has increased the battle for market shares, and customer retention in the Columbus, Ohio grocery retailer market. The failure to change Reed’s pricing strategies has reduced customer loyalty and operating efficiency, which threatens the company’s sales volume, market lead, and overall profitability. Recommendation Reeds should lose their dollar special programs, utilize these funds to finance the new projects, focusing on customer satisfaction and sales. Specifically, Reeds should expand the use of private label brand - currently 17% of total sales – (see Strengths, Exhibit A) and begin a customer loyalty program by offering rewards/discounts after a fixed amount is spent at the store. Basis for Recommendation  Neglecting to make any changes will lead to continued decline in customer loyalty and do long-term damage to the company’s reputation.  Lack of a new pricing strategy threaten the company’s profitability through lower operating efficiencies and sales volume.  Alternative strategies risk deterring customers, due to consistent high prices, therefore providing competitors with more business (see Bar 1, Exhibit B) Assumptions and Risks The recommended plan presumes that the goal of increasing the market share of 14% to 16% will be delayed because it isn’t currently feasible . Customers will not be able to abuse the promotional program due to the requirement of spending a fixed amount. It will be expected that many of the current will be diminished with the new program. It’s important to advertise both the new customer loyalty program, and the private label brands to ensure customers are informed. Next Steps Introduce the new customer loyalty program to entice customers to shop at Reed. Give rewards, and fix perceptions while selling high quality products. Sell more private label brands at lower prices to curb perceptions of expensive products . In six months, assess the effectiveness of the recommended strategy in terms of customer retention, brand reputation, and sales volume. 1

Exhibit A: SWOT Analysis of Reed Supermarkets Strengths  Market leader with share of 14%  Emphasis on quality  Long operating hours  Private labels becoming popular Weaknesses  Customer perception of “high price” products  High pricing/ cost structure Opportunities  Focusing on private label brands  Expand organic and health product selection  Creating a loyalty/reward program to change customers price-sensitivities Threats  Intense competition from Trader Joe’s, Aldi, etc.  Customers view of a high-end, expensive company, therefore will not shop when price sensitive  Reduction in customer loyalty Exhibit B: Bar chart for reasons why customers aren’t shopping at Reed 0 10 20 30 40 50 60 Shoppers in 2.5 mile radius, reasons for not shopping at Reed (2010) Most important reason Next most important reason Reasons for not shopping Percentage of Respondents 2

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