German Food Retailer

Topic: BusinessTime Management
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Last updated: April 16, 2019

Branding is an important tool for marketers.

But what precisely is a ‘brand’? As explained in the Oxford dictionary the word brand is “a name given to a product or service”. The following report shows that there is much more to it. A brand is a logo, corporate image, or distinct product or service identity that can become firmly rooted in the public’s mind. Its purpose is to establish a meaningful, differentiated presence that will attract and retain loyal customers.

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To facilitate success a brand ought to possess the following characteristics: Awareness, clear benefits, consistency, distinction [i.e. logo, colour, graphics etc] and continuous improvements. This report is examining the fundamental aims while creating a corporate brand and its equity. In essence, brand equity is the value of a brand.

According to Rust, Zeithaml and Lemon [2000] it stands for the “customer’s subjective and intangible assessment of the brand, above and beyond its objectively perceived value.”Lidl’s history began in the 1930’s when Lidl ; Schwarz Grocery Wholesale was founded in Germany. Since then the company has become known for its discount food stores known as “Lidl”. Today, the Schwarz Group is one of the largest grocery retailers in Europe.The first Lidl stores were opened in 1973 and by the 1980’s Lidl was a household name and very strong brand throughout Germany.

Nowadays it is one of the top 10 retailer brands Germany’s. During the 1990’s Lidl started to open stores outside Germany and today Lidl stores can be found in nearly every country in Europe.Since entering the UK discount food store market in 1994, the company has consistently grown and runs more than 330 stores by now. However, compared to Germany Lidl does not enjoy high brand recognition in this market [see appendix 2A for awareness levels in Germany].

The company is certainly very successful but in terms of equity and its efforts to become known through Marketing & Advertising the German Brand is underperforming in the UK. Lidl would benefit from brand development: A brand that is well known will sell more and therefore would be able to claim higher market share.This paper looks at the reasons for the above stated underperformance in awareness creation and the benefits a branding strategy could offer to the company.

Lidl, the corporate brand is critically reviewed and the following analysis attempts to give some recommendations for the future development of the corporate brand.For the later, it is very important to look at the company’s objectives and philosophy, as recommendations given will have to bear them in mind. Many companies are using 80% if its marketing expenditure on Branding. Lidl is operating oppositional to this trend. For a review on Lidl’s corporate character please refer to appendix 1.

As mentioned earlier, Lidl enjoys great brand equity in Germany whereas in the UK the brand is rather unfamiliar, yet. See figure 3.1 for the four components that fuel a brand’s value and will be vital for Lidl’s equity:Brands holding strong equity are often those with great name awareness [e.g. Coca-Cola], strong associations attached to the brand [e.

g. Kellogg’s – Break fast cereals or Body Shop – the health and beauty brand], and a perception of quality [e.g. Levi’s or BMW].

Often they have very high levels of brand loyalty. In reference to figure 3.1 the management at Lidl should consider the following to achieve an increase in brand equity:I. Brand awareness:Brand awareness consists of brand recognition and recall performance. British consumers should be made aware of the brand in order to increase brand value. Compare appendix 2A for German awareness of discount retail brands.

II. Perceived Quality:A mismatch between customer’s perception and what is received would spoil brand equity. Therefore the management at Lidl has to think about the following question: What does the customer define as quality products and how can those perceptions be satisfied?III.

Brand Identity:Every brand has to clearly stand out from other brands in the market. Retailing in Britain is a major industry bearing high competition levels for Lidl. In order to attract attention Lidl needs to have a very clear identity.

IV. Brand Loyalty:Customers have relationships with brands. If Lidl lives up to its own promises customer see some form of ‘guarantee’ and are more likely to become brand loyal.One has to be aware that the above-described model of David Aarker bears some general difficulties. As with many other similar marketing models nobody can say that the elements mentioned are leading to success or are the only reason for it. Many factors play a role in creating brand equity and it is impossible to create a formula for it. Nevertheless following such models help as long as they are not seen as the only mean of solving marketing issues such as Branding.In order to establish a strong brand in the UK all the above should be looked into and focused on.

This usually involves high financial and time investments, which do not match the company’s character [compare appendix 1]. But as proven in Germany, even with minimum effort and budget a brand’s equity can be built firmly. According to a Mintel report on ‘Branding’ my previous assumption is approved: “Large advertising budgets do not necessarily guarantee high brand awareness.” There is a common misconception surrounding brands that “they are merely created by companies investing heavily in advertising and promotion. Indeed, it is perhaps the case that many organisations have tended to rely solely upon advertising in order to create what they view as a strong brand position. Although developing a powerful brand does require long-term investment in advertising and promotion in order to ensure a high degree of brand awareness, advertising on its own cannot create a successful brand.” The factor to truth success is that a brand has to secure its position of sustainable differential advantage.

Developing and maintaining a strong positive image is vital and the brand Lidl might concentrate on developing a solid reputation for quality and value for money.Additionally to the earlier mentioned four factors of increasing brand equity Lidl should view the following so as to become a corporate brand in the UK:1. Identiy:Lidl must clearly identify itself without any ambiguity. Name, legal protection and design elements of stores etc.

are important elements.2. Shorthand summary:Lidl’s identity should act as a summary of all the information consumer hold about the corporate brand. Lidl has to trigger associations.3. Security:Shopping at Lidl should be reassuring.

The stores and products need to provide expected benefits and act as a guarantee.4. Added Value:Lidl as a corporate brand must offer more than other corporate retailer brands.Lidl delivers to the above aspects, which should support the brand’s image and personality. As previously indicated, Lidl in Britain does not hold a strong image or personality, yet. Thus why? To create awareness, the management of Lidl needs to ‘get into the consumer’s head’.

Or as Geoffrey Randal puts it: “The image of a brand exists in the mind of the consumer.” In order to transmit messages into the market place models can help to see if intended messages are clear and in accordance with company’s character.Appendix 3 shows an examination of the essence and expression of the brand ‘Lidl’ by means of the Burnett model of brand dimension. This study helps to identify four dimensions important to a brand.

If any shows weaknesses, ambiguity, conflicting or confused messages the company has to work on them in order not to confuse customers. The result of this examination is that Lidl has a clear and clean brand essence, which needs more communication in the UK.To facilitate Lidl’s brand equity, the management team should create a high level of awareness and familiarity with the brand. Value will increase if more and more “customers hold a strong, favourable and unique brand association in memory” [Keller 2003].When creating identity for the corporate brand decisions need to be made in accordance with set targeting and positioning aims as per appendix 1.

The company’s objectives do make the process of branding difficult at times. Using Porter’s definition of different Competitive Strategies one can imply specific corporate patterns do characterize and, in this case, restrict marketing efforts. Lidl’s strategy is that of “Low-Cost-Leadership” which means the company increases market share by emphasizing on low cost compared to competitors [e.g. Walmart, Aldi].

Lidl’s organizational design emphasizes on:o Efficiency with strong centralization, tight cost controlo Standard operating procedureso Efficient procurement & distributiono Close supervision, routinization of tasks, limited empowerment of employeesOn a first glance, the first point presents a strong constraint towards modern branding strategy. Nevertheless the company managed to get to its strong position in Germany. And the results of Mintel’s research mentioned before do show that even with a small Advertising ; Marketing Budget success can be attained. Will it be able to do so in the UK where it is moving in a field of high competition?In Germany direct main competitor has always been Aldi. Aldi operates from the same perspective and ideologies than Lidl and Aldi entered the same European markets than Lidl almost simultaneously.

In Britain, Aldi remains the direct German competitor but additionally the company competes against American and British Retail Giants: Tesco, Asda, Safeway and Netto. Food retailers such as Sainsbury, M;S, Waitrose etc are not regarded competition as these companies serve other markets and targets. Distinctiveness will be a vital component for Lidl. Due to long-established competition in the UK Lidl needs to make great efforts to stand out and claim market share. Lidl clearly has to offer superior value giving something better to British consumers than the existing corporate brands such as Asda or Tesco etc.A further branding model I have taken a look at is the ‘Brand Circle’.

It helps to establish areas of a brand that can be used for branding as well as areas the company should not move towards to. A brand consists of four areas:The Inner Core: The most fundamental attributes of the brand.The Outer Core: Characteristics of the brand that could be used to market it.Extension Areas: Areas the brand could be extended to.No-go Areas: Areas the brand could not extend to, ‘clear No-No’s’.

A detailed illustration of the cores and areas mentioned above can be found in appendix 4. Retailer Lidl has undoubtedly established itself to an European brand and player. It has a strong identity in their customer’s mind. People know what they will find in stores and what level of quality they can expect. Lidl’s core values are expressed in everything the company does: the range and assortment of goods, design and location of stores as well as staff training. As other brands it should spend effort to maintain these factors.

In Britain, little advertising efforts could help a great deal. Obviously, the company could run TV or print adverts. In Germany weekly brief brochures with all the special offers are directly distributed to households or inserted in local papers. This is a cheap advertising solution and in the UK retailers such as Asda or Tesco equally use this medium [e.g. in the Herald & Post].

I argue that Lidl should concentrate all efforts on the inner and outer core and stick to its core ideas instead of trying to explore any of the areas concluded as extension areas. Further more, in appendix 5, I have examined John Grant’s argument that brands will have to display at least one of his 12 rules in order to prosper to find out how much efforts Lidl spends despite a small budget at the early days.After studying Lidl closely I have detected that Word-of-Mouth is the most important tool for Lidl. For the UK this applies too and more awareness should be created to ‘spread the word’. The single promotion tool used is ‘Store Price Reduction’ but no ‘multi-buy/ multi-save’ or ‘additional quantity in pack’ methods.

The British consumer is used to the later and the management of Lidl should also think of taking up these promotional techniques. One of the main critics is that labels, packaging, etc. do not always meet British tastes or standards. When going international it should not all be about standardization and cost saving as in the case of Lidl. Adapting to the local market is important and as for Lidl this should be spent some more time with. Creating awareness should create a positive memory in the consumer’s mind!

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