Close-Up: Live Issue - Can an ad review revive Sainsbury's?

It may take more than new ads to boost Sainsbury's flagging market share, Rachel Gardner writes.

Months of speculation have come to an end with the news that Sainsbury's is reviewing its £47 million advertising account, held by Abbott Mead Vickers BBDO.

The review had been widely anticipated as part of a radical overhaul instigated by the Sainsbury's chief executive, Justin King. This is designed to revive the flagging fortunes of a supermarket that was once the biggest in the UK, but is now struggling to keep pace with Asda and the market leader, Tesco.

Sainsbury's commands a market share of about 15 per cent, which is 2 per cent less than Asda and 13 per cent less than Tesco. Last year, to add to its woes, Sainsbury's recorded a financial loss for the first time in its 135-year history.

So how can King attract back the customers and put Sainsbury's in a more competitive position?

The company has already addressed some of the most pressing issues - the automated distribution system has been improved to prevent a repeat of the empty shelves fiasco of last year and it is creating around 3,000 jobs on the shop floor to deal with in-store availability. But this is just the start of the process - as retail zones have developed, Sainsbury's has been left behind, looking outdated and out of the way. One of the greatest factors determining which supermarket a shopper chooses is geography. Tesco stole a march on its rivals when it acquired 45 London sites last year from Adminstore.

Marc Cave, the founder of Drugstore and formerly the director in charge of Tesco at Lowe, thinks the supermarket must be single-minded in its business strategy. "Sainsbury's needs to decide whether it is really customer focused and whether it really wants to shake up the retail equation. And it needs to be clear on its company culture," he says.

It took 15 years for Tesco to make the customer its focal point but King will have much less time to convince the City that things are back on track at Sainsbury's. A change in advertising strategy seems to be a key factor in the process of sorting out the mess.

It's rumoured that Jamie Oliver will be dropped from the new ads. Back in 2000, his appointment was innovative and brought results. In 2002, Sainsbury's claimed he had generated more than a quarter of its profits - increasing turnover by £1.12 billion in less than two years.

However, five years on and Oliver is no longer seen to represent the value for money that customers are looking for. His glib endorsements in tired-looking campaigns have begun to alienate some customers.

Furthermore, brand research has shown the slogan, "Making life taste better", has done little to enhance the grocer's position.

Sainsbury's has also lost out as the market has polarised between premium and low-cost outlets. And, in the absence of a price-led or totally quality-oriented strategy, it has lost ground to its rivals.

Waitrose customers understand that Waitrose isn't the cheapest, but believe the premium it charges is in keeping with a higher-quality product, while Sainsbury's is seen as uncompetitive in price against Tesco and Asda and of a poorer quality than Waitrose.

Sainsbury's now needs to remind customers that it is offering good value, without being sucked into a price battle that it can't win. King must rediscover what Sainsbury's stands for and why people should shop there, and do it quickly.

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RETAIL ANALYST - Simon Proctor, food and general retailers analyst, Charles Stanley

"The task at hand for those deciding Sainsbury's ad campaign mirrors the task King has in setting the strategy of the company as a whole: how to make Sainsbury's relevant in an age when Tesco and Asda have changed the basis on which supermarkets compete.

"Given the relentless process of volume-driven price cuts by the market, Sainsbury's has to re-establish its value credentials, with value being a function of both price and quality. It has to resolve the chaos in its supply chain and provide an in-store experience that matches the positioning of the brand."

CREATIVE DIRECTOR - Ken Hoggins, creative director on Waitrose, HOW

"Sainsbury's basic problem is a business one, rather than a communications one. The real issue lies in the stores themselves. Empty shelves, missing ingredients, demotivated staff and untidy car parks are the real reasons sales are down.

"There's not an agency or campaign in the world that'll make a difference until these are put right. The trouble is it's easier to change agency than culture, and too many clients take the easy option.

"It's arguable, however, that Jamie Oliver is in danger of becoming a 'video vampire' these days - people see Jamie Oliver commercials rather than Sainsbury's ones."

CONSULTANT - Mike Moran, managing partner, The Orchard Consultancy

"First, Pareto's Law. I wonder how much focus King is giving it? It is highly relevant for his forward revenue target. If 20 per cent of his customers deliver 80 per cent of his profits then it is with these people that he must seriously engage - and a decent direct communications programme is the only way to do it.

"Talk food, talk quality, talk new product lines and talk value. If he can get this group to spend just £5 per week more, he will have reduced his revenue gap by 40 per cent.

"Second, Jamie Oliver. Keep him. Used properly, he still offers much for the Sainsbury's brand."

CUSTOMER - Laura Borg, mother of two

"I live equidistant between a Waitrose and a Sainsbury's and I use Sainsbury's, though I like Waitrose for luxuries. Sainsbury's is a lot cheaper than Waitrose, but still has a really good range of produce. I would probably shop in Tesco if there was one as close, though.

"The only frustration I can think of with Sainsbury's is when it has run out of the thing I need. That used to happen quite a lot, but it's much less frequent these days. I've also noticed prices coming down more recently.

"I quite like the Jamie Oliver ads. I think he stands for family values."