Case 1: Cub Foods
In 2003, Cub Foods had 78 corporate and 30 franchised stores. The chain built its success by focusing on its primary market: families of four or five individuals with adults ages 24 to early 40s who are informed. Value-conscious consumers – consumers like Leslie Wells.
Leslie Wells’s recent expedition to the new Cub Foods store in Melrose Park, Illinois, was no ordinary trip to the grocery store. “You go crazy,” says Wells, sounding a little shell-shocked. Overwhelmed by Cub’s vast selection, tables of samples, and discounts as high as 30 percent, Wells spent $76 on groceries - $36 more than she had planned. Wells fell prey to what a Cub executive calls “the wow ...view middle of the document...
It suggests there’s massive buying going on that translates in a shopper’s mind that there’s tremendous savings going on as well,” says Paul Suneson, director of marketing research for Cub’s parent, SUPERVALU Inc., the nation’s largest food wholesaler.
Cub’s wider-than-usual shopping carts, which are intended to suggest expansive buying, fit easily through the wide aisles, which channel shoppers toward high-profit impulse foods. The whole store exudes a seductive, horn-of-plenty feeling. Cub customers typically buy in volume and spend four times the supermarket average per shopping trip. The average Cub store has sales quadruple the volume of conventional stores.
Cub Foods has a simple approach to grocery retailing: low prices, made possible by rigidly controlled costs and high-volume sales; exceptionally high quality for produce and meats – the items people build shopping trips around; and immense variety. It’s all packaged in clean stores that are twice as big as most warehouse outlets and four times as big as most supermarkets. A Cub store stocks between 35,000 and 49,000 items, double the selection of conventional stores, mixing staples with luxury, ethnic, and hard-to-find foods. This leads to overwhelming displays: 88 kinds of hot dogs and dinner sausages, 12 brands of Mexican food, and fresh meats and produce by the ton.
The store distributes maps to guide shoppers. But without a map or a specific destination, a shopper subliminally led around by the arrangement of the aisles. The power alley spills into the produce department. From there the aisles lead to highly profitable perimeter departments: meat, fish, bakery, and frozen foods. The deli comes before fresh meat because Cub wants shoppers to do their impulse buying before their budgets are depleted on essentials.
Overall, Cub’s gross margin – the difference between what it pays for its goods and what it sells them for – is 14 percent, sex to eight point’s less than most conventional stores. However, because Cub relies mostly on word-of mouth advertising, its ad budgets are 25 percent less than those of other chains.
1. List at least five marketing tactics Cub Foods employs in its stores to increase the probability of purchases.
2. What accounts for Cub’s success in generating such large sales per customer and per store?
3. Given Cub’s lower prices, quality merchandise, excellent location, and superior assortment, offers reasons that many consumers in its trading areas refuse to shop there.
Case 2: Amazon.com
In 19194, Jeff Bezos, a young senior vice president at a Wall Street investment firm, decided to become a part of the Internet revolution. He decided to try to sell books via the World Wide Web. Why books? Because about 1.3 million books were in print at the time. Also, Bezos thought he would be able to provide the customer with discounted prices, the opportunity to get any book wanted, and convenience. Bezos initially come up with a...