Great companies differentiate itself among many competitors through series of marketing practices. Although Aldi and Lidl operate almost fifty stores in Greater Manchester Area and become the leading discounted grocery brands, many people could not tell the difference between these two brands. The aim of this report is to analyze Aldi and Lidl's marketing strategy similarities and difference in Greater Manchester area from a professional marketing researcher perspective.
Market Orientation vs. Marketing Orientation
Market orientation and marketing orientation define a company whether it is product advantage focus or customer value focus. For Aldi, it is market orientated. It continues updating its product based on what do customers need and market want at the moment. Market oriented company requires many market research in order to make tactical decisions. For example, Aldi's 14th December Sunday “Specialbuys” heavily promotes in-room slippers, then the following week's Sunday promotes duvet and coal (Aldi, UK). With predictable temperature change and competitive intelligence information, Aldi responds needs and creates special offers to its target audience.
Although Lidl looks very similar to Aldi, it is more marketing orientated as it is functional sells driven. Lidl does not change its product availability based on consumer's preference. Lidl focuses on reducing cost by massive production and offering those discount products that every family will need. For example, Lidl's “pick of the week” will only offering four type of meats and vegetables so that Lidl can produce more quantities by produce limited type of product (Lidl, UK). Therefore, Lidl does not make decision on what the market wants but what they can offer to the target segment.
Both Aldi and Lidl are cost leadership. They are able to offer quality products with low price is because they don't sell any other brand's product but their private labeled brand. For example, the same quality dish wash soap sold in Tesco that Aldi/Lidl has significant lower price since they are the suppliers of themselves. Rather than having competitive advantage on supply, Aldi and Lidl also control cost on the size of the store, product display process, labor cost (co-production service), and advertising. All of these factors make Aldi and Lidl become the cost leader of the discount supermarket. Aldi and Lidl are not differentiator because they don't heavily advertise the brand about why customers should buy them instead of others.
To better position Aldi and Lidl's market objectives, a strategic characterization matrix based on market attractiveness level and differential level could be applied. The below indicates the market objective of both Aldi and Lidl is to grow market share in the Manchester.
The attractiveness position is near medium. The discount supermarket uses value based pricing strategy so that the buyer power is low and the supply power is low, which gives attractiveness to the market. Threat of new entry for Aldi and Lidl is medium, because entry of discount supermarket requires huge funding and resources that only few companies can implement. In the future, companies who are not currently available in Manchester but available in other market may become potential competitors of Aldi and Lidl. Furthermore, there are many substitutes available that makes the threat of rivalry high.
The differential position for Aldi and Lidl is at advantaged position. Aldi and Lidl has absolute advantage on product pricing comparing to its competitors like Asda and Morrisons. This competitive advantage is difficult to copy in short term.
Based on Aldi and Lidl's marketing strategic objective is growth that both of their strategic focus will be increase sales volume. Convert non-users, enter new market segments, increase the usage rate and win competitors' customer are the marketing tasks that can increase sales volume (Lecture Note Part 1, p.30). Aldi's marketing campaign “Like Brands” educates its target segments that their products have equal qualities as other big named brands to convert non-users and win competitors' customers. Lidl also had successfully marketing campaign to increase usage rate by using customers' tweet review on Lidl's product as posters in the store and putting them next to related product area.
Unlike other supermarkets displaying vegetables and fruit in the front entry, Aldi put pantry items instead. Those products such as canned food, cereal, and coffee are fast moving product that everyone will need every day and do not require further process to cook. Therefore, when customers walk by Aldi, she or he will be able to see those fast-moving products and remind something they need to buy. In result, Aldi converts people who walk by the store to its customers. Another very interesting strategy that Aldi does to increase in shop purchase is that the design of walk path makes customers have to walk by its “Specialbuy” area. It is similar to Ikea's walk path that customers have to walk pass everything they sell.
Competitive Advantage (USP)
Aldi and Lidl's competitive advantage of low price is reflected in all of their business processes. From limited product selection to efficient point of sales, direct logistics, private supply, simple customer relationship management, and limited advertising, all of those directly affect the processes so that they can offer the best value for the least price. So, any rational and not brand pursuit customer will certainly choose Aldi and Lidl when they see the significant cheaper price with even better quality product rather than other supermarkets.
The above process differentiation indicates Aldi and Lidl strategically thought through the market before decision making. For example, Lidl prints barcode on every surface of a product's package so that the customers can avoid spending a lot of time on finding the right barcode while self-checkout, thereby it increases check-out efficiency and ability to selling more within the same amount of time. Most of grocery stores offer free trolleys but Aldi requires one pound deposit to use trolley, and customers can get the money back when they return it. By doing so, Aldi can easily solve the problem of losing trollies and low efficiency on returning trollies without spending a penny. Even more, it saves a lot of labor cost. There are a lot of similar examples from Aldi and Lidl, all of them aimed at offering lower price without decreasing product quality.
Segmenting target market is a series of activities that companies determine their customer groups based on t behavior variables and descriptor variables. First of all, behavior variable is to identify the benefits that a company can provide to their customer bases. Then, by analyzing these benefits, determine the customer's demographic and psychographics for target segment. In Greater Manchester area, the broad market seeks affordability, quality, and convenience. Therefore, both Aldi and Lidl's target market positioned at middle or lower income households and students.
In Greater Manchester are, Aldi's target segments are singles who work in the city center, college students who have limited budget and lower income families. Lid's target markets are middle and lower income families that have three or more family members and college students. Both Aldi and Lidl's target segments aged from 20 to 50 years old.
This group of people usually live in suburban, driving or taking public transportations to work. Although this group of people are price sensitive, but also care about product quality. Lidl's products are more related to fresh produce, so the majority of Lidl's supermarkets in Manchester are located in the populated suburbs. For example, Bolton's Lidl supermarket is next to schools and parks, all surrounded by residential areas. Like other Lidl supermarkets, this Lidl supermarket is not in the center of Bolton, but not far away from it. In contrast, Aldi focuses on fast-moving products that cover everything from everyday essentials to beauty health, pets, and gardening, so that Aldi's stores need to be in areas with large population movements, such as next shopping malls and major underground stations.
The position for Aldi and Lidl are shown at the below chart. Quality and price are the most differentiable factors for supermarket. They both are positioned at top left side of the market which has low price and good quality. Aldi, Lidl, Tesco, Asda and Morrisons all have similar product quality, however Aldi and Lidl sometimes have even better quality. For example, Lidl's fresh made bakery has outstanding quality compares to the bread sold in Tesco. Marks & Spencer stands out that it positioned at the top right part of the market which has high quality as well as high price.
Aldi's brand image of surprising low price is very clear presented to its target segments. Customers favor Aldi's low price and comprehensive product range so that they choose Aldi rather than other supermarkets. Price is a strong strength of Aldi that it increase desirability when customers think about going to grocery store. Lidl's brand image is very similar to Aldi that it also helps limited budget families to find fair quality products. They all use yellow, blue and red in their logo design. Lidl's brand uniqueness also come from its price. However, many people perceive the brand image by its price. Thus, one of the issues that Aldi and Lidl both have is that the low price makes them tagged as low quality.
Both Aldi and Lidl product selection focus on the customer most purchased product types. For each type of products, they only offer one selection. It is called lean production. It not only greatly reduces the logistics costs of Aldi and Lidl, but also established a great advantage in the relationship with the manufactures. Aldi and Lidl's product range is very similar, but Aldi's has wider range than Lidl, and Lidl has more brands compares to Aldi. For both of them, products range from pantry to wine, cleaning, health, beauty, baby, pet, and flower.
When customers visit Aldi, they will have something unexpected for non-good items every week because of the “Specialbuy” promotion strategies that Aldi updates weekly. For example, this week Aldi offers UHD 4K smart TV through online website which customers won't see it available at other time. Lidl's product range remain stable compares to Aldi, but Lidl offers fresh bakery which Aldi does not have.
Customers are strategic and not loyal for Aldi and Lidl. There are many other substitute shops so that customers compare and contrast each shop's daily deals and debating the distant cost opportunity. So, Aldi and Lidl conduct everyday low price strategy to keep competitive advantage on price point. For example, a 2 pints semi skin mild sold in Tesco sells at 1.10 pound while Aldi and Lidl both sells at 75p. The price gap is significant which indicates Aldi and Lidl's private label products successfully lowering product price without compromising the quality. Thus, the price point for Aldi and Lidl is cheap.
It is very difficult to tell exact who has cheaper price when comparing Aldi and Lidl's price point. They have many products that are at the same price but overall Aldi has better price on canned food and Lidl has better price on fresh produce.
People often consider discounted price as low quality, so most of Aldi and Lidl's promotion focus on educating the target market that their product quality is the same as other big brands'. They both use mass communication channels. Examples as Aldi's promotion campaign “Like Brands”, and Lidl's campaign “Lidl Surprises” invoke online conversations and increase brand awareness. As mentioned before, Aldi and Lidl's customers' value is not significant, profitable and loyal. Thus, Aldi and Lidl currently don't have any loyalty program available in the Greater Manchester area. One major difference is that Aldi has online purchase function while Lidl is still off line.
For instore sales promotions, Aldi and Lidl don't offer promotions like “buy one get one free” or “buy more save more” as often as other supermarkets since their product prices are already discounted. Instead, Aldi's “Specialbuys” and Lidl's Pick of the Week” choose some selection of products and discount them for weekly event.
Overall, Aldi and Lidl are very similar in terms of target market, brand image, product price and range, promotion tactics. The generic strategy for both Aldi and Lidl focus on cost leadership and they target middle and lower income families and students in Greater Manchester Area. Because of high differential position and medium market attractiveness, Aldi and Lidl's market objective is to growth market share and focus on increasing sales volume. However, in terms of market share, Aldi has more advantages than Lidl in Greater Manchester area because Aldi has more stores and has more geographical advantages over Lidl's stores.
3 Door Digital. (2017). “LidlSuprises: a Genius Marketing Campaign for a Discount Supermarket China” – 3 Door Digital. (online) Available at: http://3doordigital.com/lidlsurprises-marketing-strategy (Accessed 5 Dec 2017).
Aldi UK. https://www.aldi.co.uk/. (Accessed 8 Dec 2017).
Lidl UK. https://www.lidl.co.uk/en/index.htm. (Accessed 8 Dec 2017).
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