ORP

SUPERSTORE PLC

The UK supermarket industry is dominated by four leading chains with all others

competing in the second tier. The four main players have all diversified into the non-

food sector and at the end of the economic recession, with a slow down in price-based

competition, the emphasis has shifted to competition based on customer loyalty and

quality.

Superstore is one of the big four supermarket chains in the UK and operates a chain of

hundreds of stores which retail in excess of 40,000 product lines, including food

products and non-food items like music, personal care products, clothing and

pharmaceutical products. It has positioned itself as a family store offering good value,

and, like many of the large superstores, the company has introduced loyalty card

technology and a self-scanning service with a view to improving customer loyalty.

In a recent Annual Report the company’s chief executive stated that customer

satisfaction and loyalty were the real drivers of the company’s profit and growth, and

that these were influenced by how its people felt about their work, their rewards and

their manager. This was also a central theme in the company’s management training

programme.

To test out this contention Julie Carroll, a senior officer in the personnel department

collected together some existing performance data. The data was a mixture of internal

measures, based on the performance of 15 stores, and a survey of customer and

employee perceptions based on six stores (see table 1).

One particular measure calls for some explanation: store operating ratio is a ratio of

planned to actual working hours. This was considered by the company’s management

to be an indicator of the quality of working life at a store because, as the ratio of

planned to actual working hours increases, it was believed that the workplace became

more stressful and that therefore the quality of working life diminished.

Julie calculated the correlation coefficients between the various data sets and her

results are shown in table 2. The correlations entered in bold signify a significance at

the 95% level or higher. (The minimum value of the calculated correlation coefficient

necessary for 95% confidence was 0.51 when the sample size was 15 stores, and 0.81

where the sample size was six stores.) Julie was not sure what to do next.

2

Table 1 Performance Data

Internal data:

profit margin

sales per square foot

employee turnover

employee absence

operating ratio

Customer/employee survey data:

service delivery value – customers’ perceptions of the value of

the service delivered by the store

share of grocery budget spent at the store

average basket size (i.e. value of the average basket)

customer referral – customers’ willingness to refer the store as a

good place to shop

customer satisfaction with the store

employee referral – employees’ willingness to refer the store as

a good place to work

overall employee satisfaction

employee satisfaction with the style of supervision

Table 2 Correlations Coefficients between the Various Data Sets

S a le

s p

e r

sq u

a re

f o

o t

E m

p lo

y e e t

u rn

o v

e r

E m

p lo

y e e a

b se

n c e

O p

e ra

ti n

g r

a ti

o

S e rv

ic e d

e li

v e ry

v a lu

e

S h

a re

o f

g ro

c e ry

b u

d g

e t

A v

e ra

g e b

a sk

e t

si z e

C u

st o

m e r

re fe

rr a l

C u

st o

m e r

sa ti

sf a c ti

o n

E m

p lo

y e e r

e fe

rr a l

E m

p lo

y e e s

a ti

sf a c ti

o n

S a ti

sf a c ti

o n

w it

h s

u p

e rv

is io

n

Profit margin 0.77 0.18 -0.35 -0.75 0.88 0.91 0.88 0.86 0.70 -0.25 -0.87 -0.63

Sales per square foot -0.10 -0.04 -0.65 0.92 0.95 0.60 0.91 0.59 0.03 -0.61 -0.36

Employee turnover -0.36 -0.27 -0.09 0.02 0.30 0.06 -0.35 0.34 0.10 0.73

Employee absence 0.25 -0.60 -0.51 -0.58 -0.57 0.24 -0.44 0.13 -0.22

Operating ratio -0.97 -0.96 -0.80 -0.93 -0.86 0.36 0.76 0.46

Service delivery value 0.98 0.94 0.98 0.86 -0.21 -0.64 -0.26

Share of grocery budget 0.91 0.99 0.78 -0.24 -0.69 -0.33

Average basket size 0.89 0.72 0.05 -0.60 -0.34

Customer referral 0.82 -0.22 -0.62 -0.18

Customer satisfaction -0.53 -0.83 -0.19

Employee referral 0.61 0.42

Employee satisfaction 0.82