Analysis of Lidl's Marketing Strategy | 7Ps, SWOT
Introduction
Lidl’s history begins in the 1930s, when their first store was created in Germany acting as
a grocery wholesaler. Since then, Lidl has now become one of the largest grocery
retailers in Europe, with over 600 stores operating in the UK, and thousands based
across Europe (Butler, 2014). Although the amount of stores that Lidl have in operation
is staggering, it is made even more amazing by the fact they only expanded out of
Germany 20 years ago (Lidl, 2015). This rapid expansion has made them one of the most
dominant and feared competitors in the UK grocery market, with major grocery retailers
constantly trying to minimise Lidl’s portion of market share.
Although Lidl’s market share in the UK is still relatively small, with them acquiring 3.5%
at the beginning of 2015, they are one of the fastest growing grocery retailers. Whilst
many supermarkets are losing their market share, Lidl’s was increased by a stagger
15.1% from 3.1% to 3.5% (FT, 2015). Figure 1 highlights the variation in market share,
and how much market share each supermarket currently holds.
,As previously mentioned, although Lidl have a relatively low market share, they are
currently one of the fastest growing retailers in the market. An analysis of Lidl’s current
marketing strategy will be conducted, with particular emphasis on the 7 P’s of
marketing. Furthermore, Porter’s Generic Strategies will be analysed in order to aid in
the understanding of Lidl’s current strategies. This will then be concluded with a SWOT
analysis, with recommendations being drawn up via the utilisation of a TOWS matrix.
Marketing Strategy Analysis
The five core concepts of marketing are; consumer needs/wants/demands, products and
services, value/satisfaction/quality, exchanges/transactions/relationships and markets
(Kotler, et al., 2008). One of the most efficient ways to analyse these factors is to conduct
a marketing strategy analysis, which looks to explore the strategies an organisation
utilises in order to grow and expand their market share.
7 P’s Analysis
,In order to successfully analyse Lidl marketing strategy, a 7 P’s analysis can be
conducted, which seeks to analyse some very basic, but significant issues. Originally, the
7 P’s was only comprised of 4 P’s which aimed to address certain issues that would allow
a firm to have a more developed understanding of their internal operations. The 4Ps are
comprised of; product, price, place and promotion (CIM, 2009). However, due to the
limited applicability of the 4 P’s, three more were added to form the 7P’s, which aims to
encompass some service qualities the 4 P’s do not cover (Booms & Bitner, 1981; Lusch,
et al., 2007).
Product (Quality, brand name, service line, warranty, capabilities, facilitating goods,
tangible clues, price, personnel, physical environment and process of service delivery):
Very solid brand name from being one of the cheapest supermarket retailers in
the industry. Their main competition as a value supermarket is Aldi (Bosshart,
2006).
The products sold in Lidl are often very similar to the goods sold in other
supermarkets, such as Tesco or Asda. However, the main distinction would be the
different brand names of the products in Lidl stores.
Consumers could have a negative perception of the quality of Lidl’s products as
they are sold for such a cheap price (Siro, et al., 2008).
Price (Level, discounts and allowances, payment terms, customers own perceived value,
quality/price interaction and differentiation):
One of the key competitive advantages for Lidl is their clever pricing strategies.
Lidl entered the market on the basis of being one of the most value-driven
supermarkets in the industry (Dolgui & Proth, 2010).
All payments are made up before leaving the store at the check outs.
As they offer goods at an incredibly cheap price, consumers may believe that the
goods they sell are poor quality, however this is generally not the case (Siro, et
al., 2008).
Place (Location, accessibility, distribution channels and distribution coverage):
Lidl have a plethora of stores across the UK and Europe. However, depending on
the country, they operate in different segments of the supermarket industry,
ranging from value to high-end goods (Butler, 2014).
They have a variety of distribution hubs across the UK and Europe to ensure that
stores are maintaining a constant level of stock (Brown, 2015).
As their business model is to sell as many goods as possible in the shortest
amount of time, ensuring stock levels are maintained is incredibly important. This
means that it is imperative to have stores in reasonably close proximity to
national distribution centres.
Promotion (Advertisements, personal selling, sales promotion, publicity, personnel,
physical environment, facilitating goods, tangible clues and process of service delivery):
, Lidl do not current have any loyalty schemes present in the UK, as they believe
their pricing model is enough to incentivise consumers.
Lidl often have in store promotions, but they do not discount their goods as
highly as other retailers due to the low prices that already exist.
People (Personnel training, discretion, commitment, incentives, appearance,
interpersonal behaviour, attitudes and customer behaviour/degree of involvement):
Employees’ are generally paid a very attractive salary, but have to work incredibly
hard whilst on the job. The amount of items scanned is often used as a
performance measurement indicator (Ruddick, 2015).
High training standards to ensure employees can scan items fast enough and
meet all customer needs.
Consumers may feel that staff do not pay them enough attention as they are very
rushed doing their job responsibilities.
Process (Policies, procedures, mechanisation, employee discretion, customer
involvement, customer direction and flow of activities):
Primary process of Lidl is to purchase and sell as many goods as possible on a
low-cost basis.
Consumers are not very involved in any of the processes or procedures of Lidl,
and would have little power over their business operations.
Physical (Environment, furnishings, colour, layout, noise level, facilitating goods and
tangible clues):
The majority of Lidl stores are laid out in a very linear and traditional manner. This
is to aid consumers in finding their goods as soon as possible and having easy
access to purchase and leave (Lidl, 2015).
Lidl will often exhibit their brand colours, yellow and blue, throughout their stores
or surrounding areas. This will help consumers know there is a Lidl nearby.
Porter’s Generic Strategies
Porter outlines four generic strategies; differentiation, cost leadership, differentiation
focus and cost focus (Porter, 1980).
From utilising the information gathered from the 7 P’s analysis, it becomes quickly
apparent as to what strategy Lidl are currently pursuing. Lidl have a reliant focus on
selling quality products at the cheapest cost possible. This would suggest that they are
utilising a cost leadership strategy, and are implemented it with incredible effectiveness
(Morschett, et al., 2006). However, in order to maintain their current rate of growth and
expansion, Lidl may have to diversify from their current strategies in order to stay
competitive and innovative within the UK grocery market.
SWOT Analysis
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