The Branded business model at Morrisons
The UK supermarket chain Morrisons is a great example of what I call a "branded business model". Rather than relying on communication to differentiate, their point of difference is baked into the way of doing business: making and preparing more fresh food in store than anyone else.
This approach has helped Morrisons deliver good business results in today's tough times: turnover in 2011 was up 7% and profit up 8%. Here's how they've done it.
1. Build on your business model
Morrisons was re-launched in 2007 to turn around a declining market share. The re-launch aimed to challenge consumer perceptions about the brand being good on value for money and promotions but not on food quality. What is so smart about the re-launch is the way it was built on Morrisons' business model. This is focused on preparing and selling fresh food in store, which in turn is seen by consumers as being better quality:
– Strategic supply chain: Rather than buying all its food from suppliers, Morrisons has three abattoirs, three bakeries and six fruit & vegetable packhouses of its own. This allows them to ensure freshness, control quality and reduce costs
– Local produce: 100% British fresh beef, pork, lamb and poultry. 100% sustainable fresh fish. 100% own brand British free range eggs
– In-store skilled staff: more more craft-skilled staff preparing more fresh food in-store than
any other supermarket – over 6,000 people.
The genius of Morrisons is to have bring to life the brand truth of freshness in the customer experience with "Market Street". This is a part of the store where you can find a collection of fresh food stalls, such as a bakers, fishmongers and butchers. And these are not just for show. As discussed earlier, these stalls are staffed well trained, skilled staff.
Market Street is a powerful and distinctive brand property which really helps Morrisons communicate freshness and stand out from the competition. It clevery taps into a the desire of consumers to have the convenience of a supermarket AND the personal touch of a local food seller.
3. Brand storytelling
The brand communication did a great job of telling the freshness story in an entertaining and memorable way. You can see the launch ad from 2007 here, or click below on the blog.
Importantly, the ads showcase features, such as freshly prepared fish and meat, that you can try out for yourself in store. And consistency over five years should have helped build memory structure, with the same music, "Shine" by Take That, and use of Market Street as a key property.
And this is all summed up with a strong and simple tagline: "Fresh for you today".
4. Focus on the core
Morrisons is clearly a business focused on the core, as CEO Dalton Philps says in The Times (subscription needed): "We will be better in food because we focus on food. its 90% of our in-store business. It's our core and we will make it stay that way".
What's also interesting is their different business model for selling non-food goods (TVs, fridges, clothes, CDs etc.). These have been an important part of the sales mix for big hypermarkets like Tesco's. But Morrisons plans to serve these via the online channel. This may prove to be very smart given the way that many of these "durable" goods are increasingly bought online. Philips describes his approach as follows: "Hypermarkets will be a blip in retail history. For thousands of years, people have shopped in vibrant markets, not soulless sheds".
In conclusion, Morrisons is a brilliant example of building a brand on a differentiated business model, executed beautifully both in-store and in communication.