The relationship between customer loyalty

Product proliferation is another strategy which Woolworths has employed and should continue to employ in the years to come. This is when a company produces an array of products and services which are aimed at attracting different segments of the same market. For example Woolworths has entered into the acquisition of liquor stores such as Dan Murphy’s Liquor Chain and BWS in order to satisfy further needs of their existing customer base and attract new consumers. This is also a strategy aimed at deterring the entry of new companies in mature industries.

Corbett has confirmed that “The benefits that will flow from that inter-relationship with our systems will give Woolworths a very, very strong advantage moving forward in the marketplace. ” (Ambler E, 2006) However cost effective retailers, such as Aldi, have still been able to enter the market as they are aimed at a different niche market (Anonymous, 2004). Other possible suggestions which would achieve increased product proliferation would include differentiating the products and services which are offered at Woolworths retailers.This would have the effect of creating a ‘one-stop’ shopping experience and therefore increase customer loyalty and the volume of sales.

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An example of this could be to include a ‘Drive-Thru’ type window, similar to that at McDonalds, which sells only ‘everyday products’ such as bread, eggs and milk. In addition, Woolworths could offer significant amounts of ‘food-for-now’ alternatives rather than the traditional “food-for-slightly-later” in order to distance itself from the likes of Aldi who are unable to stock fresher foods due to their extreme cost-effective aims.However it must be noted that such innovations are most profitable during their initial stages whilst there are no competitors. It is perceived that eventually, other competitors such as Coles will likely imitate such ideas if deemed profitable and this will result in a shared market share instead of a monopoly style operation. This is illustrated in figure 2 below.

Woolworths also attempted to make acquisitions into the pharmaceutical market in order to broaden its target market and also to continue its drive in product proliferation via the process of unrelated diversification.It planned to invest in a number of fully stocked pharmacies and health and beauty stores in its supermarket chain (MediaNet, 2005). The rational behind this is identified in figure 3 below, where it is evident that shoppers are frequenting pharmacies more than convenience stores and almost as much as supermarkets. However, despite the policy of the Commonwealth Government which “prohibits anybody other than a pharmacist from owning a pharmacy,” (Hill C, Jones G, Galvin P, 2004, C49) Woolworths has not relinquished the idea and is determined to pursue this strategy (Atkinson B, 2006).Should they be allowed, Woolworths will generate a mass increase in its volume of sales as shoppers will be granted with a greater level of convenience when they enter a Woolworths retailer as they no longer have to shop in multiple locations to obtain their desired products.

Further, Woolworths should aim to achieve economies of scope within its operations. This is the process whereby benefits are derived when more than one business unit in the company uses the operations of a component of the value chain. One suggestion is to utilise the same distributor company for Big W and Woolworths to save costs.This will help achieve Total Quality Management as it is aimed at constantly improving the quality and controlling a company’s products and services. In 2003, Woolworths employed this strategy when it allocated Telstra to handle all of its telecommunications services. Corbett stated that the new telecommunications relationship with Telstra is aimed at providing an immediate and significant savings as it would enhance the efficiency of Woolworths’ operations in regards to its communications networks throughout Australia.

Further, he stated that “Woolworths will have ongoing access to the latest innovations in telecommunications technology as Telstra is committed to maintaining world-class standards going forward. ” (Brown I, 2003)With the impending departure of current CEO Roger Corbett in October 2006, newly appointed CEO Mr Michael Luscombe (Horton P, 2006) must continue to implement new strategies at Woolworths.This may include the currently debated topic of expanding to the United Kingdom (Anonymous, 2004), or by implementing any of the previously discussed strategies. Woolworths should act upon the words of the director of the world’s leading supermarket retailer Walmart when he stated; “And that doesn’t mean you take people away from the checkouts at the store and the people out of the meat department, it means that the efficiencies of the process can be improved. “