Morrison Supermarkets

University Degree Business and Administrative studies

Introduction

Wm Morrison Supermarkets (Morrison) is UK's fourth largest supermarket chain and is primarily engaged in the operation and management of a chain of supermarkets across the UK. The company in early 2004 acquired one of its larger competitors, Safeways. The company operates primarily in the UK. It is headquartered in Bradford, UK and employs about 150,000 people.

However, this company faces a collapse in profits that will see it fall into the red for the first time in its 106 years history. Although, this company has many difficulties and continued problems relating to the integration Safeway, research shows that Morrison does not really understand consumer behaviour.

The purpose of this report is analyse the importance of consumer behaviour in marketing decision-making and recommend how Morrison can try to better understand its customers.

The importance of understanding consumer behaviour

“Consumer behaviour is the dynamic interaction of affect and cognition, behaviour and environmental events by which human beings conduct the exchange aspects of their lives.” (Olson & Peter, 1994, p.13) Companies are interested in consumer behaviour because they can develop marketing strategies to influence consumers to purchase their products based on consumer analysis. The success of a company’s marketing strategy will depend on how buyers react to it. To find out what satisfied customers, marketers must examine the main influences on what, where, when and how customers buy goods and services (Dibb, Simkin, Pride & Ferrell, 2001). By understanding these factors better, marketers are better able to predict how consumers will respond to marketing strategies. Ultimately, this information helps companies compete more effectively in the marketplace and leads to more satisfied customers.

Consumer decisions can be classified into three categories (1) routine response behaviour, (2) limited decision-making and (3) extensive decision-making. A consumer uses routine response behaviour when buying frequently purchased, low cost, low risk items that require very little search and decision effort (Dibb at el, 2001). Customers for Morrisons and food retail industry are in this category.

Which elements of consumer behaviour do Morrison need to understand?

Morrison faces a collapse in profits of £74m into the red in the six months to 24th of July, compared with the £122 million profit last year (Finch, 2005). Morrison merged with Safeway and spent £3.3 million to complete this acquisition. However, the main issue for Morrisons is loss of customers and loss of their main investors. 4% of shares have been sold off. Therefore, shareholders are worrying about losing their main customer base the top socio-economic group AB1 because the Morrison strategy is not providing high quality ready meals which the AB1 socio group wants. Another criticism is that Morrisons after consolidation appears to have such a limited product and price range. A UK consumer body has criticized Morrisons over the healthiness of their products. Consumers have become more health conscious however, Morrisons own label brands contain more salt, fat and sugar than other retailer products (Field, 2005). The AB socio-economic group pays more attention to health issues and spends more money on healthier products. This may be another reason they are losing the AB1 socio group customers. ABs are forecast to increase in numbers by 36.8% of the population between 1998 to 2007, to 13.4 million adults (Mintel, 2004) therefore, losing the AB group is a major threat to the company’s future. All these issues indicate that Morrisons needs to be more customer-centric.

For the food retail industry, market segmentation is one of the most important factors in consumer behaviour analysis. Market segmentation is the process of dividing markets into groups of similar consumers and selecting the most appropriate groups and individuals for the firm to serve (Olson & Peter, 1994). Consumers vary in terms of product knowledge, involvement and purchasing behaviour. The Five-Stage Model of the Consumer Buying Process is described by Kotler as a model of the 'typical buying process' (2005) and is a way to explain how consumers make their purchases. The five-stage process includes problem recognition, information search, ...