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Brand Strategy for Supermarket Industry in Hong Kong Essay

In the growing FMCG market of Hong Kong, the concept of brand strategy for supermarkets is the most vital variable of interest to retailers. This research makes an in-depth analysis of the dimensional aspects of brand strategy for supermarket industry with additional focus on the store image which is the antecedent for store loyalty. The research extends to examining the efforts of the supermarkets in Hong Kong to assess the effectiveness of such efforts in building a brand strategy for an effective store loyalty towards their stores.

The research proposes to achieve the objectives of assessing the effectiveness of the efforts of the supermarkets in building a brand strategy by a review of the available literature on the topic of study and also by conducting a social research by employing recognized research methods to present a comprehensive and analytical report on the findings of the research. The study proposes to use qualitative methods for the collection of secondary data and information including a collection of a wide range of resources for a review of the literature on the topic of the study.

Quantitative method in the form on an ‘Online Survey’ of the customers of supermarkets by using a well constructed questionnaire

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to collect their opinions on the effectiveness of the efforts of the supermarkets in building a brand strategy in the supermarket industry in Hong Kong. The study will consider various attributes that promotes the brand strategy towards the supermarkets in Hong Kong. The case of PARKnSHOP will be studied to present an analytical report on building brand strategy by the supermarkets in Hong Kong.

1.0 Introduction

It will be astounding for the people who visit the Asian Cities like Hong Kong, Singapore and Bangkok for the first time to witness the role, shopping plays in the culture of the local people in this region. Retail therapy can be considered to be a conspicuous national pastime of these regions. With the growing wealth in Asia and with the enhancement in the disposable income of the people in the continent, there are every chances that consumer based firms will emerge as the strongest sector in the coming periods.

Under the Closer Economic Partnership Agreement (CEPA) there had been a higher influx of tourists from China which has resulted in a growth of 9. 7 percent higher sales in the departmental stores as of September 2006 on a year-on-year comparison. According to a survey conducted by ACNielsen the market research firm, on 22000 global consumers, Malaysia, Hong Kong, and Indonesia were included in the top 10 markets in the consumer confidence. (ACNielsen Global Consumer Confidence Report, Jan 2006)

With the increased consumer activities in the retail sales it becomes important for the super markets to assess the shopping habits of the consumers and adjust their marketing strategies to maximize the sales growth and revenue. This is especially necessary in a large consumer market like Hong Kong. The effectiveness of the actions from the supermarkets on improving the stores loyalty, though depends largely on the consumer buying habits there are several other factors that determine the store loyalty like, proximity of location of the stores, brand awareness, quality of the products, pricing and promotional offers and other consumer habits.

Being a highly sensitive issue getting the store loyalty of the consumers is a tough task for the supermarkets as switching to alternative stores by the customers costs nothing to them and is also less cumbersome. This poses a great challenge to the supermarkets. In this context this research makes a detailed study into the effectiveness of the efforts of the supermarkets in building a brand strategy for establishing store loyalty among the consumers.

1. 1 Rationale behind the Study

With the advent of globalization there has been tremendous increase in the industrial activities globally which in turn has resulted in the increase of the purchasing power of at least a section of the people. Especially the higher level of compensation being offered for various levels of employment positions in the information and communication technology sector has led to a boom in the retail sector. With the increase in the affordability of the people new supermarkets come in to the market.

This has also resulted in the number of new supermarkets in the market apart from increase in the volume of business of the existing stores. With the increased entrants the supermarkets find the competition among them going stiff and it becomes necessary for them to find newer ways of attracting the customers and retain them by building a brand loyalty for their stores among them. It becomes interesting to witness the additional efforts being taken by the supermarkets especially in the Hong Kong market where there is a large volume of shopping activity.

Being a Hong Kong resident I was inquisitive to study the effectiveness of the efforts being taken by the supermarkets in Hong Kong in building store loyalty and how far they are successful in retaining the customers by using the concept of building a brand strategy.

1. 2 Research Objectives

The research aims to study the brand strategy of the supermarkets in Hong Kong to attract new customers as well as the existing customers. In order to achieve this aim the research has identified the following objectives which the research propose to achieve using appropriate research methods.

• To study the various factors that affect the store loyalty of the customers in Hong Kong to understand the brand strategy required to be adopted by the supermarkets to improve store loyalty among the consumers

• To examine the various efforts being taken by the supermarkets for building a brand strategy to improve the store loyalty of the customers in the context of Hong Kong market

• To conceptualize the promotional efforts of the supermarkets in Hong Kong in achieving the loyalty of the consumers by adopting suitable brand strategy.

1.3 Research Hypothesis

While trying to achieve the research objectives the study also attempts to test the following research hypotheses

H1: Hong Kong being a market with a high level of variation in the demographic structures it is difficult to precisely identify the factors that will contribute to the creation of store loyalty among the supermarket customers.

H2: The supermarkets by evolving suitable brand strategies for loyalty promotion would be able to improve the effectiveness of their efforts in building store loyalty among the customers.

H3: The customers of supermarkets because of the nature of the goods they purchase the brand loyalty is more prominent than the store loyalty.

1. 4 Structure of the Dissertation With a view to present a comprehensive and cohesive report on the efforts of the supermarkets in Hong Kong for building store loyalty, this presentation is divided into different chapters. Chapter 1 which introduces the subject matter of the research study to the readers also presents the rationale behind the research and objectives of the research as also the research hypothesis.

Chapter 2 makes a detailed review of the available literature on the global supermarket industry supermarket industry in Hong Kong, the shopping habits and store loyalty of the customers, and the efforts of the supermarkets in evolving a brand strategy for building the store loyalty.

Chapter 3 describes the methodology the research study has undertaken to achieve the research objectives including the research design.

Chapter 4 details the findings of the research followed by chapter 5 which presents a detailed analysis of the findings of the study.

Concluding remarks on the report in the form of a recapitulation of the issues that are studied by the research forms chapter 6. , which also includes few recommendations that may help the supermarkets in evolving the right strategy for building up the store loyalty of the customers.

2. 0 Literature Review

Brand loyalty forms the basis of customer satisfaction. Many scholars on the different perspective divided brand loyalty into different levels. For example, Hallberg (2003) attempts to encapsulate both emotional loyalty and behavioral loyalty into the loyalty pyramid, and argues emotional is the primary driving force of brand loyalty.

Fournier (1998) states that brand can be acknowledged as the relationship between customer and brand. He also classified this relationship into three types: marital commitment, falling in love and adolescent best friendship. Customer satisfaction has always been identified as an outcome of the relative strategies of the retailers and an essential prerequisite for customer loyalty and retention. However Reichheld (1996) points out that the view that ‘customer satisfaction is the key to securing customer loyalty’ is far from a fully robust philosophy.

Buttle (1997) is of the opinion that satisfaction does not always lead to customer retention and also conversely the dissatisfaction also does not always result in defection. Where there are high emotions attached to consumer purchase, it generally may happen that there are some initial efforts of shopping around. When this emotion drains the initiative to look for more sources of supply fades away. Therefore according to Blois (1997), it is necessary for any model to differentiate between true vendor loyalty and simple repeated purchase behaviour.

The model should also provide for inertia. (Cumby & Barnes, 1998) But Hallowell (1996) observes that most of the consumer studies of satisfaction and store loyalty do not recognize these factors. Inherent satisfaction may form the basis for one form of loyalty in those situations where the customer has put some efforts in identifying the store for a best deal. But in other circumstances where the other situational drivers like time or opportunity costs operate the satisfaction may lead only to ‘default loyalty’ when the customer does not any more require any efforts to locate the store.

In these cases, satisfaction does have only very little or no effect in creating loyalty. Convenience of location was found to have more strong motivational capability in FMCG store loyalty than supermarket loyalty schemes as per the study by East (1977). Jones & Sasser (1995) have observed that these customers are made ‘hostages’ too many other potent forces acting on them. “In FMCG retailing in particular strategies designed to encourage simple repeat behaviour or to minimize disruption of consumer inertia may be considerably more beneficial than costly, interactive, relational strategies”(Jones & Sasser, 1995).

There is a direct relationship between the store image and store loyalty. It can be pointed out that more positive is the store image greater is the degree of store loyalty. Stores always use a number of measures to measure store image and thereby store loyalty. There are more dimensional aspects that are being used by the scholars in the store image and store loyalty studies. Mueller et al. (1992), has identified the following measures:

(1) Advertising Efforts: The advertising efforts of the retailer are the first measure that is being used for the building up the store image.

The effectiveness of the advertising efforts depends on the characteristics of providing more information, help to the consumers, appeal aspects and the extent of truth contained in the advertisements.

(2) Store Presentation The physical appearance of the store helps a lot in building up the customers’ loyalty towards the store. The appearance is influenced by the cleanliness, attractiveness, display of the items which makes the customers to find them easier, space for moving through the store and the speed of check out. Thus the physical characteristics of the store are an important measure for improving the store loyalty.

(3) Location of the Store The location of the store also influences the store loyalty of the customers. The location should facilitate easy reach for the consumers within the shortest time possible. There should be ease in driving to the store and also the store should be located in such a way that the customer can reach the other stores easily for their other requirements.

(4) Peer Recommendation The advice and recommendations of the friends about the store also have a say in building up the store loyalty. The number of friends who patronize the store also will influence one’s degree of loyalty on the store.

(5) Selection of Merchandize The ability of the retailer in assortment planning will enable him to build better loyalty for the store among the customers. The maintenance of a particular level of stock is of prime importance for a retailer. Out of stock (OOS) is considered as a common phenomenon in the FMCG market. “A study conducted by the National Association of Convenience Stores in the U. S. showed that consumers would typically stop shopping at a certain store after encountering the “out-of-stock problem” for an average of 2. 4 times.

” (HKGCC, 2003) Thus the most important aspect in building up store loyalty is the careful selection and maintenance of an optimum level of stock of various goods. More the number of brands the greater are the chance of improved store loyalty of the customers.

(6) Quality of Personnel The presence of a pleasant and helpful staff inside the store wins half the battle for loyalty of the customers. The politeness and courtesy of the store personnel will always double the loyalty of the customers towards the store. The number of staff present does also make a difference.

The number should be neither too low nor too high. The presence of a large number of store sales personnel would make the customers feel that that the sales personnel are breathing on their necks which is not a healthy situation for developing the loyalty.

(7) Price factor Since all the FMCG consumers will be cost conscious they will have the tendency to compare the prices offered by different store and switch their loyalty easily to that store where they get the maximum price advantage. This makes the retailer to do a careful pricing of various commodities so that they are at comparable levels.

More number of special prices will attract more customers and improve the loyalty. The pricing should be such that the customers should feel that they get real value for the money they spend in the store.

(8) Store Dependability The customer loyalty towards the store will be greatly enhanced by the dependability of the store for the quality of the products and the brands being sold by the store. The store which sells most of the famous brands is likely to hold more esteem in the minds of the consumers than one which sells low quality goods.

The dependability of the store will be enhanced by the value the store provides for the money being spent by the customers on the goods of the store.

3. 0 Research Methodology Several methods of collection of data for this research were considered. It was necessary to arrive at a specific method that will be appropriate to attain the objectives of the research; which depended on the subject under study. For that, the researcher collected the available information about research methods and carefully analysed the difference between the two major data collection approaches (i. e. the qualitative and quantitative research methods). On an analysis of the relative merits and demerits of both the techniques it was decided that this research will use both qualitative and quantitative methods to gather the required data. A brief description of both the techniques is presented below for the information of the readers.

3. 1 Qualitative Method: The qualitative method is ‘one of the two major approaches to research methodology in social science’, which involves ‘investigating participant’s opinions, behaviours and experiences from the informants’ points of view’.

In contrast with the quantitative research method, the qualitative research method ‘does not rely on quantitative measurement and mathematical models, but instead uses logical deductions to decipher gathered data dealing with the human element’. The difficulty in using this research method is ‘that it is more expensive, has smaller sample sizes and is hard to measure’ In qualitative research method non-quantitative’ methods of data collection and analysis is being used (Lofland & Lofland; 1984). Qualitative research method been defined as ‘focuses on “quality” rather than quantity. Read about Doughnut Industry

While some other researchers say Qualitative method involves a subjective methodology and making the researcher as the research instrument (Adler and Adler; 1987)

3. 2 Survey Method Surveys are one of the most popular methods to collect primary data from the informed sources of data. As Denscombe (1998) stated, the purpose of a survey is “to get a detailed and comprehensive view about the data obtained, which will be used for mapping”. There are three main characteristics in survey method which are pointed out by Denscombe (1998) as follows: ? Wide and inclusive coverage

At a specific point in time  Empirical research The popularity of the surveys method is established due to the fact that it provides a quantitative or numeric description of some fraction of the population, that is, the sample, by asking question (Creswell, 1994; Neuman, 2002; Fink, 1995). Under surveys it is possible to make a generalisation of the results obtained as the surveys allow a large number of respondents to participate in the survey. However, there is a low-response bias because many people do not wish to participate in the survey (Aaker, Kumar & Day, 1998).

In order to get a clear indication of the effectiveness of the efforts of the FMCG retailers in building store loyalty, the survey method had been chosen for the collection of more information with the object of describing, comparing or explaining the knowledge, attitude or behaviour of the subjects and thereby to arrive at some definite conclusion for the research question. The research will also undertake the case study of PARKnSHOP as a part of the study into the topic.

4. 0 Conclusion

Having chosen the research topic I intend to collect from all the available sources the basic information and details about the shopping habits of the supermarket customers and the efforts on evolving brand strategy by the supermarkets in Hong Kong. This would enable me to supplement my case study on the topic. To make a comprehensive literature review on the subject I intend to get a collection of all journals and professional magazines which contain articles, research papers and post doctoral thesis papers submitted on the topic.

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