Creating a billion-pound, customer-led turnaround

Case Study

Customer Growth Strategy

Creating a billion-pound, customer-led turnaround

Case Study / Customer Growth Strategy

The Challenge

In 2014 Morrisons was in crisis. Operating profits were down 52%, its worst results in eight years. The new chair and chief executive wanted a fresh, distinctive direction that would appeal to customers and be embraced by colleagues, whilst still remaining true to the heritage of the business. The Foundation supported Morrisons’ new CEO, David Potts, on three specific questions over the next three years, playing a part in helping the Morrisons team with a decisive customer and colleague-led turnaround.

The approach taken

The initial project, which would form the foundation of what came afterwards, was to develop a compelling proposition that would set Morrisons apart in the eyes of customers while being true to the business.

As well as speaking to current and retired colleagues, we arranged for the Executive team to go on shopping trips with customers, understanding the reality of their experience in their stores, and hearing first-hand about the role Morrisons played in their communities.

We then heard from leaders in organisations who had been there and done it, to build belief that a customer-led turnaround was possible, including Lego, John Lewis, O2, Jaguar Land Rover, Metro Bank, and Pret.

The insight uncovered

Colleagues believed that Morrisons’ vertically integrated food manufacturing made them distinctive, but for customers the idea fell flat – they couldn’t see how food from a Morrisons factory would be different or better than food made elsewhere.

To customers, outstanding service started with nailed-on bulletproof essentials like finding what you want and avoiding queues. But the difference comes from people – generous interaction with shopkeepers who care and with foodmakers who love food. Morrisons stood alone as still having fully trained butchers and fishmongers in every store as well as bakers baking bread from flour several times a day. Fresh food and value mattered to both colleagues and customers.

The breakthrough came from a customer focus group, identifying new language to describe the proposition – we are food-makers and shopkeepers.

The answer developed

The strapline ‘Morrisons Makes It’ was born and brought to life in a new advertising campaign. By Christmas 2015 like-for-like transactions were up 1.3% a year.

The idea of foodmakers and shopkeepers was introduced more fully to the wider business at the start of 2016. It felt right to colleagues, bringing them together and creating pride in something that had always been true but not celebrated effectively.

A new purpose was developed, working out why Morrisons matters to give all involved energy and direction. We then helped develop an ‘Outstanding Service programme which meant defining what it looks like for customers and more crucially working out how to realise it with colleagues’ ways of working. This was rolled out across the 500-store estate, leading to 300 extra hours of colleague time in reduced absence.

The impact created

The impact of the turnaround quickly became clear. A 12.7% increase in pre-tax profit in July 2017 was followed by 14 consecutive quarters of like-for-like growth and a 20% improvement in customer satisfaction. Across the following years, operating profit lifted to £432m by 2021-22 – a £1.2bn turnaround in profit over seven years – leading to a private equity sale for £9.97bn.

“Strong growth, including our best quarterly like-for-like sales for nearly a decade, together with another special dividend for our shareholders, shows how new Morrisons can keep improving for all stakeholders. Morrisons continues to become broader, stronger and a more popular and accessible brand. I am confident that our exceptional team of food-makers and shopkeepers can keep driving the turnaround at pace.”

David Potts, chief executive

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