SERVICE & SALES 8 P’s of Service Marketing 28.02.2010

1. SERVICE & SALES 8 P’s of Service Marketing 28.02.2010

2. Introduction • Marketing can be viewed as: • A strategic and competitive thrust pursued by top management. • A set of functional activities performed by line managers. • A customer-driven orientation for the entire organization. • Marketing is the only function to bring operating revenues into a business; all other functions are cost centers. • The “8Ps” of Services Marketing are needed to create viable strategies for meeting customer needs profitably in a competitive marketplace.

3. Introduction • Mercadona is a distribution company operating in the supermarket segment. It is backed by 100% Spanish capital and its CEO is Juan Roig. Nationally, it is present in 46 provinces in 15 autonomous communities with a network of 1,266 supermarkets. • Its facilities and customers are attended by more than 62,000 individuals throughout the different stages of the process, 100% of which have permanent job positions. • Its supermarkets have an average of 1,300 square metres of retail floor space and are based on a model of urban commerce that is close at hand with an ample selection in fresh and dry groceries, beauty and household supplies as well as pet food.

4. Introduction • In 2008, Mercadona achieved a turnover of 13,986 billion euros, what means the 1,4% of the GDP (PIB) in Spain.

5. 8 P’s of Service Marketing • Product Elements • Place and Time • Price and Other User Outlays • Promotion and Education • Process • Physical Environment • People • Productivity and Quality

6. 8 P’s of Service Marketing P1. ProductElements • Embrace all aspects of service performance that create value • Core product responds to customer’s primary need • Array of supplementary service elements • Help customer use core product effectively • Add value through useful enhancements • Planning marketing mix begins with creating a service concept that: • Will offer value to target customers • Satisfy their needs better than competing alternatives

7. 8 P’s of Service Marketing P1. ProductElements • OWN BRAND - WHITE LABEL PRODUCT: • Company of alimentation, MERCADONA propose more than 9.200 products, many of them dedicate only to MERCADONA (clavo, bonka, don simon...) • A white label product is a product produced by one company (the producer) that other companies (the marketers) rebrand to make it appear as if they made it. • "Mercadona buys from a manufacturer in bulk and puts its own name on the product : HACENDADO / BOSQUE VERDE / DELIPLUS" • "It gives Mercadona:More freedom and flexibility in pricingMore control over product attributes and qualityHigher margins (or lower selling price)Eliminates much of the manufacturer's promotional costs“

8. 8 P’s of Service Marketing P2. Place & Time • Marketing can be viewed as: • Delivery decisions: Where, When, How • Geographic locations served • Service schedules • Physical channels • Electronic channels • Customer control and convenience • Channel partners/intermediaries

9. 8 P’s of Service Marketing P2. Place & Time • Marketing can be viewed as: • OWN DISTRIBUTION CHANNEL • 1.474.775 m² of sale surface, and 12.1% of the share of market • Presence in 46 cities. • 1.137 supermarkets in 46 provinces. • Once the product is bought from the manufacturer, it is stored in the Mercadona logistics centres, which subsequently distribute the product among the shops by its own distribution channel. • Mercadona gives the customer freedom and convenience, because the customers can buy what they want when they want it, all in the same place and always with savings

10. 8 P’s of Service Marketing P2. Place & Time • Marketing can be viewed as: • TOTALLER STRATEGY • Mercadona offers their clients all the product in order enable them to do the "global shopping" • Mercadona offers an ample selection in fresh and dry groceries, beauty and household supplies as well as pet food

11. 8 P’s of Service Marketing P2. Place & Time • Marketing can be viewed as: • SERVICES • FRESH BAKED BREAD • HOME DELIVERY SERVICE • TELEPHONE ORDERS • ONLINE SHOPPING

12. 8 P’s of Service Marketing P3. Price and Other User Outlays • Marketing can be viewed as: • Marketers must recognize that customer outlays involve more than price paid to seller • Traditional pricing tasks: • Selling price, discounts, premiums • Margins for intermediaries (if any) • Credit terms • Identify and minimize other costs incurred by users: • Additional monetary costs associated with service usage (e.g., travel to service location, parking, phone, babysitting, etc.) • Time expenditures, especially waiting • Unwanted mental and physical effort • Negative sensory experiences

13. 8 P’s of Service Marketing P3. Price and Other User Outlays • Marketing can be viewed as: • A.L.P. (ALWAYS LOW PRICES) • The commercial strategy that the company has been developing since 1993 is called A.L.P. (Always Low Prices). • Buying from a manufacturer in bulk enables Mercadona to have a lower selling price • With ALP, the customers receive genuine savings because all of Mercadona products are ALWAYS AT LOW PRICES.

14. 8 P’s of Service Marketing P4. Promotion & Education • Marketing can be viewed as: • Informing, educating, persuading, reminding customers • Marketing communication tools • Media elements (print, broadcast, outdoor, retail, the Internet, etc.) • Personal selling, customer service • Sales promotion • Publicity/PR • Imagery and recognition • Branding • Corporate design • Content • Information, advice • Persuasive messages • Customer education/training

15. 8 P’s of Service Marketing P4. Promotion & Education • Marketing can be viewed as: • LIMITED ADVERTISEMENT INVESTMENT • Total quality, liberty of selecion, variety.Services after sales ( atencion al cliente SAC ) : more than 1 milon of consultation • The main ways of communication are to build the Mercadona´s company image (quality, prices, sutervices) and get spread by the word of mouth of the customers • To a certain extent, White Label products take advantage of the name-brand as a reminder, due to the fact that when the customer see a name-brand product, they think in the equivalent white label product

16. 8 P’s of Service Marketing P5. Process • Marketing can be viewed as: • How firm does things may be as important as what it does • Customers often actively involved in processes, especially when acting as co-producers of service • Process involves choices of method and sequence in service creation and delivery • Design of activity flows • Number and sequence of actions for customers • Nature of customer involvement • Role of contact personnel • Role of technology, degree of automation • Badly designed processes waste time, create poor experiences, and disappoint customers

17. 8 P’s of Service Marketing P5. Process • Marketing can be viewed as: • WHY MERCADONA CAN OFFER ALP? • Because Mercadona buy products directly from the source. • Because Mercadona set up long-term agreements with manufacturers, which lets them offer their customers high-quality products at prices that are extremely low and stable. • LOGISTICS NETWORK • More than 2000 suppliers, 800 millonseuros invest. • Mercadonacan guarantee the efficiency of the supply chain with its logistics centres in Spain as: • Ingenio centre in Gran Canaria, Riba-Roja de Túria (Valencia), Antequera (Málaga), SantSadurní de Anoia (Barcelona), San Isidro (Alicante), Huévar (Sevilla), Granadilla de Abona (Tenerife) and Ciempozuelos (Madrid), Villadangos del Pbuiltáramo (León), Guadix (Granada) and Pla-Za (Zaragoza).

18. 8 P’s of Service Marketing P6. Physical Environment • Marketing can be viewed as: • Design servicescape and provide tangible evidence of service performances • Create and maintain physical appearances • Buildings/landscaping • Interior design/furnishings • Vehicles/equipment • Staff grooming/clothing • Sounds and smells • Other tangibles • Manage physical cues carefully— can have profound impact on customer impressions

19. 8 P’s of Service Marketing P6. Physical Environment • Marketing can be viewed as: • "ENVIRONMENTS" • Supermarket sections laid out in “environments” • Customers can buy what they want when they want it, all in the same place • Spacious and modern facilities with a full range of services so that the shopping can be as convenient as possible • Butcher´s Shop replacement with modern counters of meat • 8 Blocs Logistics and funcionement • 3 Blocs of logistics project and execusion: Granada, Leon and Zaragoza.

20. 8 P’s of Service Marketing P6. Physical Environment • Marketing can be viewed as: • SERVICES • CUSTOMER PARKING • BAG LOCKERS • CLIMATE CONTROL • BANK CARDS

21. 8 P’s of Service Marketing P7. People • Marketing can be viewed as: • Interactions between customers and contact personnel strongly influence customer perceptions of service quality • The right customer-contact employees performing tasks well • Job design • Recruiting • Training • Motivation • The right customers for firm’s mission • Contribute positively to experience of other customers • Possess—or can be trained to have— needed skills (co-production) • Can shape customer roles and manage customer behavior

22. 8 P’s of Service Marketing P7. People • Marketing can be viewed as: • SERVICES DATA • 3.700 workers, investement of about 72 million of euros for the formacion (1.200 e by workers). Bonus if the companie reach his objectives : 160 millions, share between all the workers. • "THE BOSS" • MERCADONA implemented its TOTAL QUALITY approach in 1993. This decision prompted the company to rearrange its priorities as follows: Customers, otherwise known internally as the "Boss", Workers, Suppliers, the Company and Capital. • The TOTAL QUALITY model has led Mercadona to regard Workers as their second priority. An example of this is that 100% of the more than 62.000 individuals that form a part of the organisation are permanent.

23. 8 P’s of Service Marketing P7. People • Marketing can be viewed as: • It also bears mentioning that workers are paid 100% of their salary in the event of occupational disability, and that their minimum salaries are higher than the average paid in the sector. • The more than 62.000 individuals that make up the company receive TOTAL QUALITY training, with each worker enrolling in specific courses of 70 hours/year, among others. • Training of the personnel in butcher´s shops: Transformation of the Butcher in a customer advisor • Reply complaints is an obligation for the employees. A complaint is understood as an oportunity. • FREE CUSTOMER SERVICE LINE

24. 8 P’s of Service Marketing P8. Productivity and Quality • Marketing can be viewed as: • Productivity and quality must work hand in hand • Improving productivity key to reducing costs • Improving and maintaining quality essential for building customer satisfaction and loyalty • Ideally, strategies should be sought to improve both productivity and quality simultaneously—technology often the key • Technology-based innovations have potential to create high payoffs • But, must be user friendly and deliver valued customer benefits

25. 8 P’s of Service Marketing P8. Productivity and Quality • PRODUCTIVITY DATA • Contribution to the spanish PIB : 2.516 million euros. • Investment to the "green policy" (medio-ambiantal) : 17 millions. • EBITDA: 336 mil (+39%) • Productivity: 220 000€ • MAXIMUM QUALITY • MERCADONA guarantees their clients the Maximm Quality of its products at the moment of purchase and at the moment of consumption • MERCADONA is making efforts to ensure intrinsic product quality through its Life Principle strategy. • MERCADONA buys their products directly from the source, without go-betweens.

26. 8 P’s of Service Marketing P8. Productivity and Quality • MERCADONA schedule our purchases, which cuts down on transport and storage times, with products being kept at their optimal temperature. • MERCADONA select the finest quality and make sure that products arrive to the customers in the least time possible and with the maximum freshness. • All of MERCADONA´s products are subject to rigorous quality controls in order to ensure that they are maintained in perfect conditions of hygiene and freshness. • MERCADONA has their own exclusive brands that are supplied by the leading manufactures, whose products are checked and guaranteed to sell them in the finest conditions. • Productivity and quality must work hand in hand • Improving productivity key to reducing costs

27. 8 P’s of Service Marketing P8. Productivity and Quality • Improving and maintaining quality essential for building customer satisfaction and loyalty • Ideally, strategies should be sought to improve both productivity and quality simultaneously—technology often the key