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The Kroger Project

Review & Recommendations


Rosenfeld, Vlastuin, Kashuck & Thomas

Part I: Executive Summary


This report provides a detailed analysis of Athens, OH Krogers suggested target market,
the grocery market, customer value, and comparative analysis with its main competitor,
Wal-Mart. This report also provides three recommendations on how Kroger can maintain,
or improve target customer value in comparison to Wal-Mart. The specific value we used
in our report and analysis is functional, psychological, and monetary value of Krogers
offerings.
Methods of analysis include collecting previously identified market trends, and research
over Krogers strategy and marketing mix tactics based off of accrued primary and
secondary research. A compiled list of secondary research is in the works cited portion of
the report.
Primary research was collected by individual mystery shopping experiences at both
Kroger and Wal-Mart in Athens, OH. A survey was then distributed to mystery shopping
analysts where Kroger and Wal-Mart were ranked on a scale of 1-5, 1 being the worst
and 5 being the best. Average rankings were compared, and used to determine how
Kroger can improve or maintain customer value. Tables D-G explain the benefits, costs,
advantages, and disadvantages of the marketing mix tactics comparing both companies.
Results of both primary and secondary data display that for Kroger in Athens, OH to
maintain or improve customer value towards the target market, Ohio University students,
in comparison to Wal-Mart, Kroger must maintain its strong product mix within the meat
and seafood departments, and improve upon communicating prices, as well overall
distribution. See part IV Comparative Customer Value Analysis for more details.
We have provided three recommendations on how Kroger can maintain or improve the
extension of customer value in comparison to Wal-Mart based off of the previously
identified current market trends, and comparative customer value analysis. More
information on these recommendations as well as identified counterarguments is provided
in Part VI of this report. These recommendations are:
1. Continue current product mix offerings
2. Start Distribution redesign of store entrance
3. Start Price Marketing Campaign
This report also acknowledges that the analyses conducted over Kroger and Wal-Mart
during the comparative customer value evaluation has multiple assumptions and
limitations. These limitations include subjective bias in primary research. In an attempt to
improve upon these limitations we included the data collected from the quantities ranking
surveys. Tables I-O include analyst rankings with averages used to create
recommendations. We would also like to state that the following recommendations are
purely suggestions to maintain or improve customer value, and are not strategic answers.

Part II: Define the Target Market


Target Customers
We are recommending that the target market for Kroger in Athens should be students
attending Ohio University.
Value Potential
College students have the potential to deliver monetary value to the company. Based on
data collected from the United States Census Bureau, Ohio University students make up
90% of residents in Athens (US Census Bureau, 2013). Due to the large population
within the geographic area, marketing products toward this majority we suggest would be
profitable. See Table A for more information over the Athens, OH resident
demographics.
Table A: Athens, OH Resident Demographics

Value Drivers
Kroger offers a variety of value drivers for the college student market. One value driver is
the Kroger Plus card. This incentive allows the customer to benefit from in-store
discounts on certain store items, thus building store loyalty. Along with the low prices,
customers using the Kroger Plus card can benefit from gas points earned from purchasing
products at their stores. Most often, full-time college students do not have independent
financial stability, or have a fixed income, and therefore offering monetary incentives
drives students to Kroger.
Another value driver Kroger offers is the quality of their products. Kroger offers a wide
range of fresh meat and seafood. Customers have the option to choose from organic, lean,
or standard types of meat along with fresh seafood as discussed in Part 2 of the project.

Lastly, Kroger is a reliable company that provides excellent customer service. With the
slogan Friendly & Fresh, customers can always count on Kroger to provide quality
customer service along with strong product mix. Strong customer service is delivered
from reliable product accessibility, technological advancements to increase the efficiency
of the checkout lines, and opportunities to sample products before purchasing.
Behavioral Profile
According to Forbes, as of 2013 Kroger is the nations largest traditional grocery chain
with more than 2,600 stores and $108 billion in sales, second to Wal-Mart in grocery
sales. They are able to create a relationship with their customers by treating each
customer as an individual.
Twelve customized coupons are mailed to their customers throughout the year that is
specific to the household. In 2013, after the coupons were mailed, 71% of the households
will redeem at least one coupon in the store. These coupons generated $10 billion in
revenue for Kroger (Forbes, 2013). Customers have shown to be receptive to Krogers
marketing efforts.
College students today are categorized as millennials. Millennials, the 80 million
individuals that are aged 16 to 34, have become more loyal to brands then ever before.
Millennials are more in tune with retail brands such as Kroger, Wal-Mart, Whole Foods
and Costco than non-millennials. Non-millennials are more tied to smaller grocery chains
such as Publix and Aldi (Ad Age, 2011).
In addition, 34% of millennials are more susceptible to grocery shop at a grocery chain
store such as Kroger or Safeway as opposed to a mass retailer store like a Wal-Mart
Supercenter (Ad Age, 2011). Shopping at grocery chain stores allows these students to
buy fresh and healthier food. Over 85% of millennials said that they shop where they can
purchase high quality products and fresh produce, meat and seafood (Ad Age, 2011).

Part III: Define the Market


The Company: The Kroger Company
The Kroger Co., or Kroger, was founded in 1883 by Barney Kroger in Cincinnati, Ohio
(Kroger, 2015). Kroger has long been known as a trendsetter in the grocery industry due
to their relentless pursuit to better serve their customers. For example, after recognizing
that he could still produce a high quality product, turn a profit and still lower the price for
his customers, Kroger implemented bakeries in their stores (Kroger, 2015). Kroger was
also the first grocery store to sell meats/seafood and regular grocery items under the same
roof (Kroger, 2015).
In 1960, the company first began including pharmacies into their store formats (Kroger,
2015). Kroger also pioneered consumer research when it began interviewing customers
in the 1970s. This insight and willingness to listen and adapt to customers requests later
led to Krogers partnership with dunnHumby USA to provide individualized discounts to

customers. More recently, in 2010, Kroger partnered with Shell to launch a customer
rewards program (Kroger, 2015). This rewards program allowed customers to gain fuel
discounts by shopping at their Kroger affiliated stores. Kroger credits this program with
increasing customer loyalty by providing additional savings to their customers in a
unique way (Kroger, 2015).
Krogers various brands include:

Kroger
City Market
Dillons
Jay C
Food 4 Less
Fred Meyer
Frys
King Soopers
QFC
Ralphs
Smiths
Kroger Value
Simple Truth
Simple Truth Organic

Operations
Early on, Kroger recognized the importance of manufacturing their own
products. Currently, Kroger operates 37 food processing facilities (Kroger, 2015). About
40% of the companys private label products are made in one of Krogers
facilities. These private label products account for nearly 26% of Krogers total store
dollar sales, giving them a strategic advantage over their competition (Kroger, 2015).
Kroger has also changed its format through the years to better serve their
customers. Stores have increased in size to accommodate more merchandise and allow
customers to have the convenience of one stop shopping (Kroger, 2015). Krogers
primary format, combination stores, average 76,000 square feet. The companys
Marketplace stores, which offer expanded general merchandise, are between 100,000 and
130,000 square feet, and multi-department stores under the Fred Meyer banner are over
161,000 square feet (Kroger, 2015).
Mergers have also been important in Krogers history. In 1983, Kroger merged with
Dillon Companies Inc. in Kansas to become a coast-to-coast operator of food, drug and
convenience stores (Kroger, 2015). The biggest merger in Krogers history came in
1999, when the company teamed up with Fred Meyer, Inc. in a $13 billion deal that
created a supermarket chain with the broadest geographic coverage and widest variety of
formats in the food retailing industry. The merger also enabled Kroger to generate huge
economies of scale in purchasing, manufacturing, information systems and logistics. In
an era when many larger mergers failed, the success of the Kroger-Fred Meyer merger

stands out (Kroger, 2015). Finally, in 2014, Kroger merged with Harris Teeter, a
regional chain of more than 200 stores, and Vitacost.com to enhance their e-commerce
capabilities and expand their reach into all 50 states and internationally (Kroger, 2015).
Today, Kroger has more than 2,600 stores in 34 states, under two dozen banners and has
annual sales over 108.5 billion (Kroger, 2015). Kroger operates 781 convenience stores
in 19 states, 327 jewelry stores, 1350 supermarket fuel centers and has over 2116 in-store
pharmacies (Kroger, 2015). Kroger and its affiliates are one of the major players in the
grocery industry and hold a 15.4% market share (IBIS World, 2015).
Kroger utilizes a three-tier marketing strategy in order to fulfill every customers needs
(Kroger, 2015). All tiers are value priced to offer shoppers big savings over other
premium, national and economy brand items (Kroger, 2015). The three-tiers include:
private Selection, which is a premium quality brand. This brand is designed to meet or
beat "upscale" national brands. Banner brands (such as Kroger, Ralphs, King
Soopers), are designed to be equal to or better than the national brand, and the Value
brand is designed as a fighter brand to deliver good quality at a very affordable price
(Kroger, 2015).
Mission
Kroger began with a motto of, Be particular. Never sell anything you would not want
yourself, and guiding principles of service, selection and value. Over time, the
companys mission changed, but their guiding principles have not. Krogers most recent
mission is about providing freshness to the customers and being the leader in providing
quality, fresh grocery items. Krogers key values include: honesty, integrity, respect,
diversity, safety and inclusion.
Customers
Krogers mission and guiding principles are greatly focused on providing a superior
shopping experience for their customers. Platforms such as I can make it right offer
employees the ability to take action and ensure a customer is satisfied. This may include
offering free samples and discounted products. This strategy shows how Kroger values
customers time and business. It also offers psychological value to the customer, as they
perceive their shopping experience to be more enjoyable at Kroger than other
locations. Soon, customers start to feel like family at their locations because they know
they will always be taken care of.
Krogers alliance with dunnhumbyUSA allowed them to further increase the value given
to customers. This partnership has allowed Kroger to study shopping behavior and
develop custom promotions for customers. By tailoring promotions, Kroger has created
functional and monetary value for each shopper.
Additionally, customer data allows Kroger to make changes at a storewide level to further
address customer needs. For example, the Athens Kroger has some of the highest sales in
the region in their natural food department. As such, the Athens store incorporated even
more organic selections throughout the regular departments such as dairy, frozen and
meat/seafood. Because Millennials have so much purchasing power in the industry and

their behaviors differ from other generations, Krogers ability to track their shopping
behavior/trends and customize offerings should help them continue to succeed.
The push from customers for lower prices while still maintaining quality has allowed
Kroger to expand its line of private label brands to help meet customer needs. This has
benefitted both the customers and Kroger as customers gain a lower price, similar quality
product and Kroger gains a higher profit margin on private label purchases. Kroger
continues to offer daily specials and individualized coupons to their customers to offer
customers good monetary value.
Specifically in the meat and seafood department, Kroger has increased their options of
value-added selections such as stuffed pork chops, marinated chicken breasts and preseasoned fish fillets. This offers value to the customer because it helps them save
time. Additionally, Kroger has increased its selection of organic and all-natural meats as
well as sustainably sourced seafood. These changes have increased value for customers
by offering a wider selection and helping to better fulfill their needs.
Table B: Kroger SWOT Analysis
Strengths

Large and established presence


Presence in several formats
Differentiation measures
(pharmacy, clinics, I can make it
right initiative)

Weaknesses

Opportunities

Growing private label market can


increase revenues and profits
Higher demand for natural and
organic products
Technology
Changing consumer eating trends

Overcharging certain stores has led


to decreased customer confidence in
the brand

Threats

Competition
Unionization of employees can
increase costs for the company
Increase in food safety regulations

In order for Kroger to continue to be successful, the company must look to maximize its
strengths and opportunities while minimizing their weaknesses and threats. Krogers
large and established presence appears to allow them to hold a brand identity of quality
and consistency with their customers. Also, their presence in several formats creates
value for customers because it allows Kroger to reach many different types of customers
and address various needs such as low price or increased organic products. Additionally,
their differentiation measures such as pharmacies, retail clinics and I can make it right
initiatives allow them to offer value above and beyond groceries to their customers.

Kroger also needs to take advantage of their opportunities in order to continue their
success in the future. Some of the key issues include changing market and consumer
trends such as: environmental consciousness, advancements in technology, increase in the
number of customers who eat meals alone and consumers reporting decreased time to
prepare and eat meals. These trends were described in great detail in part 1 of our
analysis, and the ability to stay current with market and consumer trends are a key to
Krogers present and future success.

Competitor: Wal-Mart
Wal-Mart is one of the worlds leading retail companies. They have stores that span the
globe. According to Forbes, Wal-Mart is ranked 16th on the Forbes Global 2000. Forbes
Global 2000 ranks public companies based upon 4 metrics: sales, profits, assets and
market value (Forbes, 2015).
In 2013, 33% of Wal-Marts sales came from their groceries. The grocery department is a
critical category for Wal-Mart and is continuing to grow and expand to this day. WalMart stores are extremely accessible to the average American. It is estimated that about
90% of Americans live within 15 minutes of a Wal-Mart. They are number one when it
comes to the number of operating franchise stores in the country. Wal-Mart is by far one
of the best businesses that optimize their customer, company and collaborator value
(Forbes, 2013).
Mission/Culture
Wal-Mart is one of the largest retailing companies in the world. They hold all of their
employees to a high standard. They have four core values that their associates must abide
by:
1.
2.
3.
4.

Service to the customer


Respect for the individual
Strive for excellence
Act with integrity

These values are held from the corporate level all the way down to their hourly
employees. The values that are put in place create a culture that allows employees to
provide superior customer service (Wal-Wart, 2015).
Operations
Wal-Mart operates in many different facets. There is a Wal-Mart Superstore, Wal-Mart
Discount store, Wal-Mart Neighborhood Market, Sams Club, Wal-Mart International
and Global ecommerce. All of these stores provide customers with different value
offerings.
Wal-Marts supply chain management is what keeps Wal-Mart ahead in the market. WalMart has 158 distribution centers with a fleet of 6,500 tractors, 55,000 trailers and more

than 7,00 drivers. Their distribution operation is one of the largest in the world (WalMart, 2015).
These distribution centers are essential to Wal-Marts success. Each distribution center is
more than 1 million square feet and is continuously moving products 24 hours a day, on
conveyer belts that span five miles. More importantly, Wal-Marts regional distribution
center can have up to 12 miles of conveyer belt, which can move hundreds of thousands
of cases a day (Wal-Mart, 2015).
Wal-Mart became an international company in 1991. Since then, there are more than
6,200 stores internationally. All of these stores span 27 countries outside of the United
States. Currently, Wal-Mart International is the fastest growing section of the Wal-Mart
brand (Wal-Mart).
Table C: Wal-Mart SWOT Analysis (Marcilla, 2014)
Strengths

Scale of operations (Global)


Wide range of products
Competitive in information systems
Superior supply chain management

Weaknesses

Labor related law suits


High employee turnover
Lack of differentiation

Opportunities

Expanding in the international markets


Increase healthy grocery options
Expanding online retail
Entering the banking industry

Threats

Competitors power (Target, Costco,


Amazon, etc.)
International barriers (Regulatory
compliance)
Resistance from local communities
Wal-Mart (Cannibalization)

Wal-Marts Customers
Wal-Mart has a very diverse customer base. According to the Business Insider, WalMarts average customer is a white, 50-year-old female with an annual household income
of $53,125. Below are more statistics about Wal-Marts customer profile (Business
Insider, 2014).
2014 National Customer Data (Advertising Age, 2012)

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40.4% of their customers come from the South (US)


24.1% of their customers come from the Midwest (US)
22.3% of their customers income ranges from $50,000 to $74,999
17.4% of their customers income ranges from $35,000 to $49,999
20.3% of their customers ages ranges from 45 to 54
52.1% of their customers are married
22.3% of their customers are single/never married

Context
Economic Context
The economy has a direct impact on the grocery industry, when it comes to the meat and
seafood section. One aspect of the economy that has to be taken into account is the
natural resources that are available. Land, energy and water used to produce feed grain
for the animals has to be sufficient and available for the animals.
The financial state of the economy is vital to the company and the products. You have to
take into account if the country is experiencing a recession, depression, inflation, etc. If
money is not being spent on the quality goods, then customers may turn to cheaper
grocery stores for their groceries.
Technological Context
Technology plays an instrumental role in the grocery store industry. There are always
new and innovative ways to package and ship products to optimize the value and increase
supply chain efficiency. Finding new ways to package meat and seafood to keep them
fresher can benefit the customer and Kroger.
Technology has also played a major role in the grocery industry when it comes to
communication in regards to mobile apps. Grocery shopping has become more mobile
than ever. There are apps for phones that allow the customer to create shopping lists,
manage dietary restrictions, preferences as well as order items. This alone adds
tremendous functional value to shoppers.
Sociocultural Context
More and more people are becoming aware of what they are eating. Consumers are more
concerned about weight loss, dieting and exercise more than ever. Approximately 80%
of food shoppers assume personal responsibility for their nutrition, and they try to eat as
healthy as possible (The Hartman Group, 2015). If customers are starting to become
more conscious about eating meat and seafood, Kroger will have to find a way to still
provide this psychological value to their customers.
Another aspect of the social trends is the expectation that there are multiple options.
Consumers expect customization, and variety. Since consumers are able to choose from a
variety of options, it is important for Kroger to provide the customer with a diverse
product mix. A diverse product mix will add value to the customers shopping experience.

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It is also likely that more Americans are relying upon foods that require little to no
preparation, including pre-prepared meals from grocery stores as research indicates that
approximately 16% of all eating occasions were within one hour after purchasing the
food product (Smith et al, 2013).
Lastly, a trend affecting the current food market is the conscious effort by Americans to
encourage retailers to be environmentally friendly. This encompasses both corporate
sustainability practices such as clean energy initiatives, as well animals rights.
Animal welfare accounted for 17% of important retailer attributes within the food market
(Hartman Group, 2015). This dimension climbed to 21% in only two years. Researchers
believe this is due to consumers increasingly drawing connections between their own
health and the conditions in which animals are raised.
Regulatory Context
There are many laws and regulations that must be followed in order to operate in the
grocery industry. Kroger must make sure that their food is regulated and passed
inspection from the United States Department of Agriculture (USDA). Kroger also has to
make sure that they abiding the laws applied to sell fresh and packaged meat / seafood.
Physical Context
The location of Kroger is significant to their business. East State Street in Athens, Ohio
encompasses a majority of Krogers competitors. They must differentiate themselves
from companies like Wal-Mart or Aldes. Since they are located near their competitors,
they are able to capitalize on their current customers needs and create value for them and
the community. Because of this, Kroger is one of the leading grocery stores in Athens,
Ohio.

Part IV: Customer Value Analysis


A customer value analysis for both Kroger and Wal-Mart has been included in the report
to define the offerings value proposition for the college student target market. There are
specific details of both Kroger and Wal-Marts benefits and costs to its offerings within
the marketing mix produced by primary and secondary research.
Mainly, there was a consensus that the positioning for Wal-Marts value proposition of
cheap everyday low prices was an active and beneficial promise, however, the
psychological feeling of purchasing poor quality products, because it is cheaper, was
costly towards the overall shopping experience.
It can be observed that the overall value proposition of Kroger is a holistic view of the
shopping experience to increase customer loyalty, rather than a focus on monetary
benefits primarily. This lead to an overall psychological feeling of shopping for quality
items, and receiving incentives to do so. Both analyses document the companys strategy
and tactics, which will be compared in Part V of the report.

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Table D. Kroger Company Customer Value Analysis

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Table E. Wal-Mart Company Customer Value Analysis

14

Part V: Comparative Customer Value Analysis


According to Chernev, for a company to succeed an offering must not only create
intrinsic value for the relevant market entities but also create value superior to that of
other market offerings (Chernev, 2014).
The following Tables F-G evaluate Krogers strengths and weaknesses relative to WalMarts offerings. Overall, in the value proposition and positioning strategies there is an
emphasis of a balance between monetary, functional and psychological value delivered to
customers from Kroger, while Wal-Mart focuses primarily on extending monetary value
to customers to increase customer loyalty. The benefits and costs of each value
proposition are detailed in and Table F, and the key advantages and disadvantages of the
marketing mix tactics are outlined in Table H.
Advantages
The key advantages for Kroger in the marketing mix we deem necessary to repeat are:
Variety of Products leads to functional and psychological value
Strong corporate private and premium brands with different price tiers is able
reach different customer preferences
Incentive program of Kroger Plus Card creates customer loyalty and
communication of savings extending psychological and monetary value
Disadvantages
The key disadvantages for Kroger in the marketing mix we deem necessary to repeat
are:
Strong emphasis on customer service potentially instills automatic decrease in
psychological value when that expectation is not met during shopping experience
Prices are consistently higher than Wal-Mart which loses customers that are
unable to recognize the monetary incentives provided
The smaller overall size makes Kroger seem busier, but also causes traffic that is
deemed an inconvenience to shoppers
Overall Findings
Overall, according to our comparative analysis in Table H, Kroger outperforms Wal-Mart
in product mix and customer service; however, it struggles to communicate value to
customers in terms of price. Kroger also lacks rank in the distribution tactic. This
comparative analysis is consistent with the results from Part 2 of the project.

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Component

Value
Proposition

Benefits of
Value
Proposition

Costs of Value
Proposition

Table F. Value Proposition Comparative Analysis


Wal-Mart
Comparative Value
Kroger Offering
Offering
Analysis
Friendly service,
Guaranteed
Similarities between the
quality products,
everyday low prices companies are an
affordable prices, an
and customer
attempt to provide
overall excellent
satisfaction
affordable prices to
shopping experience,
customers. Differences
with rewards for
are that Kroger attempts
customer loyalty
to create customer
loyalty with high quality
Touches on all
High focus on
products and friendly
aspects of value
monetary value
service by extending
functional, monetary, incorporated into
psychological/functional
and psychological
brand
value
value
Attempted balance of
all aspects of
functional, monetary,
and psychological
value potentially
could decrease overall
value

Focusing on only
monetary value
means a potential
decrease in
functional and
psychological value

Table G. Positioning Comparative Analysis


Component

Positioning

Key Benefits of
Positioning

Kroger Offering

Wal-Mart Offering

Friendly & Fresh


(reliable service &
product commitment)

Save money. Live


better (Cost
efficiency)

Creates image of a
positive atmosphere
with high quality
products

Promotes large
savings

Comparative Value
Analysis
Kroger may not focus
on monetary value in
positioning customer
value, however by
communicating reliable
service and quality
products ultimately
suggests customer
loyalty because of the
overall positive
experience

Table H. Marketing Mix Tactics Comparative Analysis


Marketing Mix
Comparative Value
Kroger Offering
Wal-Mart Offering
Tactics
Analysis

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50+ types of fresh


meat & seafood with
many variations
Product

Service

"I can make it right"


offer employees the
ability to take action
and ensure a customer
is satisfied

20,000+ corporate
brands
Brand

Product Line using


Good, Better, Best
strategy
Price

Loyalty Program:
Kroger Plus Card

Incentives

30+ types of fresh


meat & seafood
with many
variations

Advantage: Many
products with strong
variety increase
functional and
psychological value
Disadvantage: Too
much variety may cause
confusion for customers
We save people
Advantage:
money, so they can
Psychological value of
live better reflects
being treated well at
their brand meaning company creates
of low prices
Disadvantage:
Expectation of high
customer service every
visit
National identifiable Advantage: Strong
brands
corporate brands
associated with high
quality
Disadvantage: Kroger
brand unknown on most
products
Low prices
Advantage: multiple
product line reaches
many customers needs
increasing monetary
and psychological value
Disadvantage: Prices
frequently higher than
Wal-Mart
Everyday low prices

Advantage:
Nonmonetary
incentives such as gas
perks increases
customer value as well
as ensures customer
loyalty
Disadvantage:
Customers need card
and may not take the
time to understand all
the benefits of the
Kroger Plus Card

17

Communication

Content provides
awareness of savings
and freshness of
products

Everyday low prices


with strong
customer services

Advantage: Focus on
quality while still
promoting savings
Disadvantage: Needs
Kroger card to save
effectively

Clean store

Large aisles

Advantage: Clean
building with easier
access to products
Disadvantage: Smaller
aisles and crowded
store

Distribution

Part VI: Recommendations


After careful analysis of the target market, the current market, Kroger and Wal-Marts
customer value strategies and tactics, as well as our collected secondary and primary
data, we have developed recommendations to answer the question: Does the offering
create superior value for target customers relative to the competitive offerings? Our
recommendations suggest ways to maintain superior value in terms of Krogers
marketing mix, and ways to improve value in terms of Krogers marketing mix towards
the college student customer segment.
Our recommendations are:
1. Continue current product mix offerings
2. Start Distribution redesign of store entrance
3. Start Price Marketing Campaign

Recommendation 1:
We recommend Kroger continue their current product mix offerings. This
recommendation is based on past market research and personal experience. According to
our Product Mix Average in questions 1-3, Kroger had a higher average ranking than
Wal-Mart. The list of questions asks for Table I are available in the appendix. We
conclude that Krogers product mix is therefore offering higher functional value than
Wal-Mart in the product mix tactic.
Table I. Product Mix Average
Analyst 1
Analyst 2
Analyst 3
Kroger Product
Mix
Q1
Q2

4
4

5
4

Analyst 4
5
4

Averages
5
5

4.8
4.3

18

Q3
Wal-Mart
Product Mix
Q1
Q2
Q3

4
Analyst 1

4
Analyst 2

4
2
4

4
Analyst 3

2
1
1

5
Analyst 4

2
2
1

3
4
3

4.3
4.4
Averages
2.8
2.3
2.3
2.4

During our shopping experiences at Kroger and Wal-Mart, we identified that Kroger has
much larger product width and depth compared to Wal-Mart. The product mix at both
Kroger and Wal-Mart is listed below as evidence of our findings.
Table J. Meat Product Mix at Kroger
Chicken

Turkey

Types
-Legs/Drumsticks
-Thighs
-Breasts
-Wings
-Whole Chickens
-Sausage
________________
_
Variations
-3 Per Pack
-5-6 Per Pack
-7-9 Per Pack
-8-10 Per Pack
-12 Per Pack
-14-16 Per Pack
-Skinless Items
-Boneless Items
-Organic Items
-Marinated/Stuffed
-Fresh (In case)
-Packaged

Types
-Ground
-Patties
-Drumsticks
-Thighs
-Breast
-Necks
-Whole Turkeys
______________
_
Variations
-2 Per Pack
-3 Per Pack
-85% Lean/15%
Fat
-93% Lean/7% Fat
-99% Lean
-Organic Items
-Boneless/Bone-In
-Fresh (In case)
-Packaged

Pork
Types
-Boneless
Half/Whole Pork
Loin
-Chops
-Ribs
-Ground
-Steaks
-Cubed Steak
-Roast
-Shoulder
-Sausage
-Bacon
-Kielbasa
-Bratwurst
______________
_
Variations
-Tenderloin
-Country Style
Ribs
-St. Louis Pork
Ribs
-Boneless/Bone-In
Steaks
-Spare Ribs
-Baby Back Ribs
-Fresh (In case)
-Packaged
-Stuffed

Beef
Types
-Ground
-Chuck Pot Roast
-Cubed Steak
-Flat Iron Steak
-Round Tip
Sirloin -Roast
-New York Strip
-Roast
-Patties
-Round Steak
-Beef for Stew
-Chuck Steak
-T-Bone Steak
-Corned Beef
Brisket
-Shoulder
_______________
_
Variations
-92% Lean
-91% Lean/9% Fat
-96% Lean/4% Fat
-80% Lean/20% Fat
-85% Lean/15% Fat
-73% Lean/27% Fat
-Angus Beef
-90% Lean/10% Fat
-Organic Grass Fed
-Gain Fed

19

-Boneless/Bone-In
Steak
-New York Strip Bone-In Steak
-Round Tip Steak
-Porterhouse
-Stuffed Patties
-Fresh (In case)
-Packaged
Table K. Meat Product Mix at Wal-Mart
Chicken

Turkey

Pork

Beef

Types
-Breast
-Drumsticks
-Tenderloins
-Thighs
-Wings
-Whole Chicken
-Strips
_______________
__
Variations
-18oz
-20oz
-32oz
-48oz
-Skinless
-Boneless
-Pre-Packaged
-Store Packaged
-Marinated

Types
-Whole Turkey
-Ground
-Breast
-Patties
-Sausage
______________
__
Variations
-90% Lean/10%
Fat
-All Natural
-48oz
-85% Lean/15%
Fat
-16oz
-Bone
in/Boneless
-Pre-Packaged
Marinated
-99% Fat Free
-93% Lean/7%
Fat

Types
-Ground
-Ribs
-Roast
-Tenderloin
-Meatballs
-Sausage
-Whole Ham
______________
__
Variations
-Marinated
-Spareribs
-Pre-Packaged
-Store Packaged

Types
-Ground
-Patties
-Liver
-Ribeye Steak
_____________
__
Variations
-80% Lean/20%
Fat
-85% Lean/15%
Fat
-73% Lean/27%
Fat
-93% Lean/7%
Fat
-Beef Angus

Table L. Seafood Products at Kroger & Wal-Mart


Krogers Seafood

Wal-Marts Seafood

20

Types
-Salmon
-Catfish
-Tilapia
-Trout
-Perch
-Crawfish
-King Crab (Whole/Legs)
-Flounder
-Cod
-Shrimp/Jumbo Shrimp
-Crab cakes
-Lobster
________________________________
Variations
-Fresh (In case)
-Packaged
-Atlantic Ocean
-Filets
-Wild Caught
-Cooked vs. Raw

Types
-Lobster
-Salmon
-Shrimp
-Tilapia
-Muscles
-Flounder
-Cod
-Swai
-Catfish
_________________________
Variations
-Cooked
-Raw
-Frozen
-Thawed
-Skin On/Skinless
-Breaded

Table M. Organic Meat Options at Kroger


Organic Chicken
-Chicken Breasts
-Chicken Thighs
-Chicken Tenders
-Chicken
Drumsticks

Organic Turkey
- Ground
Turkey
-Turkey Breasts
-Patties

Pork
-Baby Back Ribs
-Boneless Half Pork
Loin

Beef
-Ground Beef
-Ribeye Steak
-Beef Sirloin Steak
-Beef London
Broil

Wal-Marts organic selection was very slim. Organic chicken was available as chicken
breasts and drumsticks. In the turkey section there were a select few packages to choose
from. The only organic items were ground turkey and turkey patties. There were no pork
or beef organic options.
Further evidence to continue current product mix offerings is found in market trends that
we identified in part 1 of our analysis, which included increased environmental
consciousness. This incorporates both organic selections and sustainably sourced
seafood. According to a Gallup poll in 2014, 45% of all Americans seek out organic
options. However, this trend isnt only for wealthy individuals; 53% of those ages 18-29,
which includes our target demographic (college-aged students), actively seek to include
organic/sustainably sourced seafood selections in their diets (Goldberg, 2014). This is
the largest percentage of any age group. Relative to Wal-Mart, Kroger creates superior
value for customers by offering a variety of selections that help address this concern. For

21

example, Wal-Mart does not have a sustainably sourced seafood program, whereas
Kroger does. Additionally, Kroger offers their own private label organic options while
also promoting local organic/all-natural produce to increase the variety of their offerings.
Another trend we identified in part 1 of our analysis was that of pre-prepared meals in
Americans homes, U.S. consumers are relying upon foods that require little to no
preparation, including pre-prepared meals from grocery stores, as research indicates that
approximately 16% of all eating occasions were within one hour after purchasing the
food product (Smith et al, 2013). This type of behavior is especially prevalent among
our target market, college students, who are crunched for time amid a variety of
activities. As such, our recommendation to continue offering value-added products in
Krogers product mix allows them to have superior value compared to Wal-Mart in
addressing the needs and current trends of their target customers. Some of the valueadded options at Kroger included:
Parmesan Chicken Breast
Wild Rice Mushroom Stuffed Chicken Breast
Garlic and Cajun Marinated Chicken Breast
Apple Almond Stuffed Pork Chop
Blue Cheese and Bacon Angus Beef Patties
Blue Cheese Angus Beef Patties
Krogers product mix also offers superior value relative to their competition by
incorporating a variety of private label selections. For example, Kroger branded products
as well as Private Selection branded products offer a variety of choices with different
price points. This can be beneficial for the target market because some college aged
students may need to be more price conscious, while others are less so. Private label
offerings were another one of the trends we identified in our part 1 analysis because
consumers are demanding quality products without the large price tag. Therefore,
Krogers product mix is meeting consumer demand and creating superior value for its
customers.
Some may argue that Kroger has too much variety for customers, which can increase the
shopping time for customers, confuse them with too many choices or is even wasteful for
the company if some of these products do not sell. While these arguments have some
merit to them, we do not believe they are accurate.
According to our personal shopping experiences, we found that Kroger actually kept their
meat cases consistently full and extremely clean compared to Wal-Mart. Thus, leading
us to believe that the large amount of selections does not hinder Kroger employees from
completing their tasks. The fully stocked and clean cases also made us more apt to
purchase something from their department because it appeared to be higher quality.
During our shopping experience we discovered that Wal-Mart offers lower prices relative
to Kroger. We do not recommend fighting Wal-Mart on their everyday low pricing, and
believe that offering a superior product mix is a way to combat this.

22

Finally, we do not believe that the larger number of offerings will increase shopping time
for customers. Our shopping experiences actually proved to be faster at Kroger than
Wal-Mart due to their superior checkout strategy. Kroger uses two employees, one to
check and one to bag groceries, compared to Wal-Mart who only uses one. Additionally,
Krogers employees were more readily available throughout the store to answer questions
and help locate various items. Wal-Mart employees were scarce in the grocery
department, so additional time is spent finding various items.
We believe our above analysis demonstrates how Krogers product mix offers superior
value to the target market and why it should be continued. The variety of selections that
are organic, value-added and private-label offer immense variety for the customer in
quality, taste and price. These offerings also address current market trends, which can
help Kroger to be successful both now and in the future. Furthermore, Krogers superior
product mix helps the company build their brand, and as such we recommend continuing
their current plan.

Recommendation 2:
We recommend Kroger start distribution redesign of store entrance. This
recommendation is based on primary research from part 2 of the project. The distribution
tactic was very even between the stores. Overall, we feel that Kroger offers functional
value to the customers through their distribution methods. However, this could be
improved. Having more parking and customer entrances into the store could provide
easier entry, especially during peak shopping times. Wal-Mart offers multiple store entry
and wider shopping aisles, but still suffers from parking difficulty at times.
According to Table N. Distribution Average in questions 19-23, Kroger had a higher
average ranking than Wal-Mart and therefore distribution is offering higher functional
and psychological value than Wal-Mart. The list of questions asks for Table N are
available in the appendix. However, Kroger was ranked higher by only a .4 margin, and
therefore is not significantly offering better distribution, and should be improved to
increase customer value is comparison to its competitor.
Table N: Distribution Average
Analyst 1
Analyst 2
Analyst 3

Analyst 4

Averages

Kroger Distribution
Q 19
Q 20
Q 21
Q 22
Q 23

2
3
2
5
3

4
4
5
5
5

4
4
4
3
4

2
4
1
5
5

3.0
3.8
3.0
4.5
4.3
3.7

Wal-Mart Distribution
Q 19
Q 20
Q 21

3
4
4

4
4
5

4
3
3

2
2
1

3.3
3.3
3.3

23

Q 22
Q 23

2
4

3
5

2
3

5
5

Specifically, this distribution recommendation would be to construct a side door entrance


towards the Starbucks and liquor store. We believe this would improve the customer flow
as well as parking inconveniences.
We believe that constructing a door on the side entrance to the Kroger building would
allow for convenient access to the only liquor store and Starbucks in Athens, OH. Both
Starbucks and Krogers liquor store heavily attract the target market, college students,
and improving distribution by increasing the convenience of entering Kroger for those
specific product purchases would increase customer loyalty.
In terms of contributing value to our recommended target market, college students, coffee
has become an essential food group for many students. Early mornings and pulling allnighters to finish assignments for classes increases the need for that extra boost to get
through the day. According to recent studies, over 100 million cups are consumed in the
United States every day (Miranda, 2014). A study conducted by the NPD Group also
discovered that from 2002 to 2012 there was an increase to 14% of 18 to 24 year olds
drinking coffee (Miranda, 2014).
One of the most popular coffee brands in America is Starbucks. The average Starbucks
customer visits the store six times per month while a loyal 20% of customers go to the
stores 16 times per month (Lepore, 2011). Thus, this recommendation includes marketing
the Kroger Starbucks as its own facility, as well as provide lounging areas to drive target
customers to Starbucks for a quiet place to do work.
This recommendation does not come without some drawbacks. One counter-argument to
our recommendation is that the current entrances/exits into Kroger encourage foot traffic
to proceed through produce and then through the rest of the store. This can encourage
shoppers to purchase more items because they will need to pass through a larger portion
of the store to get their desired items. Additionally, this recommendation is also costly
and time-consuming for the store. Despite these counter-arguments to our
recommendation, we believe that creating an entrance into the store through the liquor
department would increase customer satisfaction and help drive sales.
Having a quick and easy entrance into the liquor and Starbucks departments allows
Kroger to capitalize on where the target customers spend money. For example, in the
United States, alcohol sales reach over 90 billion dollars, and unlike most other expenses,
data has actually shown that alcohol sales tend to thrive even during a recession
(Morley). Those between the ages of 18-24, which fit into our target market, make up
40% of Starbucks sales (OFarrell). Thus, creating an entrance that leads directly into
this department will likely increase sales in a department that appears to be profitable for
the long-term. Additionally, our target market, college students, typically has to share

3.0
4.3
3.4

24

refrigerators with roommates, and is therefore unable to conduct large stock-up shopping
trips.
Recent successful redesigns at Hy-Vee in Sioux Falls, SD included adding entrances, and
later check-out lanes in the liquor department. Melinda Haensel, manager of perishables
states, The addition of an entrance and later a checkout register to our liquor department
has greatly increased our customer satisfaction surveys. Customers who want to make
quick purchases utilize this new entrance and are able to get in and get out very quickly.
This additional entrance has also decreased the heavy traffic throughout our store during
peak times which has also benefitted our customers who shop the rest of the store.
While there is obvious cost and time to this recommendation, we believe that the increase
in convenience to the customers and easy access to Starbucks and the liquor department
are essential to adding value to our target market. We believe the long-term stability in
alcohol sales, which are likely to increase upon more convenient access, would pay for
the redesign changes. The ability to park and enter on the liquor department side of the
store would offer the target market a convenient and fast shopping experience, thus
encouraging them to continue purchasing Krogers offerings versus competitors. Based
on our phone interviews to the Sioux Falls Hy-Vee stores, we believe that those
customers who are seeking to do more formal grocery shopping would proceed through
the regular entrances, so there would not be a decrease in sales.

Recommendation 3:
We recommend Kroger start Price Marketing Campaign targeted towards Ohio
University students. According to our analysis using our primary research, marketing
mix tactics in which Kroger outperformed Wal-Mart in the Meat & Seafood departments
was in communication, and incentives. Table O Price Average for questions 11-12 in our
survey holds Wal-Mart with a higher average ranking than Kroger. The list of total
questions asked for the marketing mix tactics are available in the appendix. We conclude
that Wal-Marts price is therefore offering higher monetary value than Kroger in the
product price tactic in terms of:

How prices are displayed within the stores


How Kroger compares in price within the stores
Table O. Price Average
Analyst 1
Analyst 2
Analyst 3

Analyst 4

Averages

Kroger Price
Q 11
Q 12

3
2

3
3

4
2

4
3

3.5
2.5
3.0

Wal-Mart Price
Q 11
Q 12

3
4

4
4

3
4

4
5

3.5
4.3

25

3.9
Notice our recommendation does not suggest to lower prices to match Wal-Mart. We are
not including this in our recommendation because not only do we believe this would
create brand devaluation predicament, and would communicate to customers that the
quality of the meat and seafood has decreased, but Kroger already provides high ranking
multiple mediums for monetary incentives to lower customer costs, such as the Kroger
Plus Card, as well as paper/digital coupons.
However, by strategically utilizing Krogers competitive communication and incentive
advantages, we believe Kroger can add and deliver customer value specifically targeted
to the Ohio University students, that not only as discussed in Part A, are the majority of
residents in Athens, but also are grocery shopping at Wal-Mart for meat and seafood
because of its lower prices. As most marketing researchers suggest, it is cheaper to alter
the customers perception, not actually lower prices.
We recommend that the Price Marketing Campaign could target Ohio University students
by creating social media platforms such as an Official Facebook page, as well as Twitter
and Instagram accounts. These social media accounts will communicate savings in price
towards the target customer segment.
Savings on items could be reflected by what is occurring within the Ohio University
community. For example, as a response to Athens annual Halloween Block Party,
Kroger could promote lower prices on relevant products such as beverages and candy on
Facebook, Twitter, and Instagram.
This recommendation also suggests hiring Ohio University students as marketing interns.
Those interns would be responsible for:
Managing Social Media accounts
Understanding campus culture
Awareness of trends occurring on OU campus
Distributing flyers, and tabling on campus to promote awareness of savings
There is evidence to suggest this recommendation is successful. The Midwestern grocery
store chain Hy-Vee, has been utilizing social media techniques to improve customer
value in the price marketing mix tactics both for the company, and individual stores. For
example, Hy-Vee in Sioux Falls has an official Facebook page where they consistently
post throughout the day special deals for customers. The Empire Hy-Vee in Sioux Falls
has over 6,000 likes/follows, individual Hy-Vee stores have a total of 40,419
"likes"/follows, and the Hy-Vee corporate page as almost 800,000.
Through our research, not only does Kroger in Athens not have an official Facebook
page, The Kroger Company does not have an official corporate page monitored by
Kroger employees. Creating official pages can include information over other incentives
such as the Kroger Plus Card, store hours, and contact information thus extending
functional and psychological value.

26

One could argue that creating an official Facebook page is time consuming, and that
students may not actually observe Kroger social media accounts, however, according to
the Department of Academic Development and Counseling at Lock Haven University, the
most popular social media website for college students is Facebook, and research shows
that anywhere between 85 and 99% of college students use Facebook daily (Hargittai,
2008a; Jones & Fox, 2009; Matney & Borland, 2009).
Also, according to part 1 of the project, the last several years have demonstrated a
consumer reliance on technological trends when it comes to their food purchases. The
increase in social media usage has a strong influence on todays food market trends. In
fact, according to a 2015 United States Retail Food Marketing Trends Report, social
media, as well as email marketing and flyers have had a major impact on U.S. citizen
grocery purchase decisions in the last several years (PR Newswire, 2015). The ecommerce arena has also exploded, and retailers are now offering customers the ability to
shop for their groceries online and have them delivered to their home or office for a
minimal fee.
Not only does this recommendation provide an opportunity for a collaboration between
Ohio University students and the company, but also increases the monetary and
psychological value in the price marketing mix tactic towards the college student
customer base.

27

Appendix
Chart 1: Survey Questions for Comparative Analysis of Kroger and Wal-Mart
Category
Questions
Product Mix
Service Mix

Branding
Price
Incentives
Communication

Distribution

1.
2.
3.
4.

What different types of meat and seafood were there?


Were there organic options?
Were there added value meats and seafood such as marinated?
Were the customer service in meat and seafood section aligned
with company mission and values?
5. Were there diverse employee task roles displayed?
6. Did you see employees at all?
7. Were there self service employees versus abled service
employees?
8. What branding elements did you see?
9. Were there a lot of Kroger or Wal-Mart brands?
10. Where was the product placement of the companys brands?
11. How were the prices displayed?
12. How did they compare prices?
13. What monetary incentives were offered?
14. What communication mediums did the company use?
15. How did they communicate sustainably sourced seafood?
16. How did they communicate savings?
17. How did they communicate what was occurring in the store?
18. How were organic or healthy options communicated?
19. How convenient is the location?
20. How was the cleanliness of the store?
21. How were the line lengths?
22. How did the meat and seafood smell?
23. How accessible were the meat and seafood?

28

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