Marketing Strategies Employed by a Waterstones Retailer - Assignment Example

?Running Head: Marketing: Waterstones Marketing: Waterstones [Institute’s Marketing: WaterStones Introduction This report is anattempt to explore various marketing strategies employed by high street book retailer, Waterstones. Due to the advent of digital books and others events, the company has been the target of turbulent market conditions. The sales have decreased and the industry structure has become more competitive. This report will shed some light on the industry environment, Waterstone’s web presence, buying decision process, segments in the target market and the marketing mix of the company. This would be followed by a few recommendations for the company, which would mark the end of the discussion Industry Environment Porter Five Forces Model presents a good framework to explore the environmental and industry forces, which are affecting the marketing of the company. First, the rivalry against the existing competitors within the industry is high (Armstrong, Harker, Kotler & Brennan, pp. 19-22, 2009). Despite the fact that more than 500 independent bookshops have closed as of 2009 due to their inability to compete with the big bookstores, the barriers of borders are coming down and thus exposing companies like Waterstones, with the help of internet and others, to competition on an international level. Furthermore, currently, there are three big players in the market namely Waterstone’s, Amazon, and WH Smith; however, the problem here is that none of them has a considerable lead and in the absence of huge differences in size, these competitors would fuel the rivalry to greatest limits. Rivalry decreases when competitors are aiming for different market segments or different niches in the industry; however, it appears that all of the major competitors are trying to appeal to all of digital and traditional segments of the market, thus, intensifying the rivalry (Armstrong, Harker, Kotler & Brennan, pp. 19-22, 2009). The bargaining power of customers is moderately high and is constantly on rise. Despite the fact that customers pose little threat of backward integration, they are now more informed and have great deal of options, thus, threatening retailers to provide them with good bargains. The problem for retailers here is that they cannot achieve a high degree of differentiation for the books they sell since the product remains the same (Kotler & Armstrong, pp. 41-48, 2008). Due to low degree of differentiation, the competition rests on the price alone thus forcing the customer to look for better bargains. As mentioned in the case that UK booksellers are having the lowest profit margins because of excessive discounting to appeal to the customer as compared to the book retailers in Ireland, USA, Finland, Holland, and Ireland. The supplier power in the industry remains moderate. Four major companies namely Hachette Livre, Bertelsmann, Pearson, and HarperCollins hold more than 50 percent of the market share in the publishing industry. Many authors cannot get their books published, sold, or promoted if they do not have any association with big publishers. Furthermore, they also pose a strong threat for forward integration in the market. However, there power is moderate because they depend highly on these high street retailers for promotions and shelf space for both new and old authors and books. Furthermore, with well-established players in the industry, they have lesser options to get good bargains (Peter & Donnelly, pp. 122-123, 2010). The threat of substitutes is high due to the illegal and pirated books that are easily accessible on the internet through various websites. Furthermore, these substitutes cost way less than the original books; in many cases, these are free, thus increasing their attractiveness to great limits. Lastly, the threat of new entrants also remains moderately high. This is true because not only setting up a bookshop is relatively easy but also because lately many supermarkets such as Tesco, Sainsbury and others have jumped into the industry with impressive deals and discounts (Peter & Donnelly, pp. 122-123, 2010). Segmentation for Waterstones Considering the business and buying behaviors of customers of Waterstones, segmentation is possible based on demographic and behavioral characteristics. Under the umbrella of demographic segmentation, gender and life stage would play an important role in segmenting buyers. Men and women have different reading habits, purposes, and approaches towards buying and reading books (Cant, Strydom & Jooste, pp. 52-54, 2009). Furthermore, people in their 20s and 30s are likely to buy books for their needs; however, people in their early 30s and so on, reach their maturity age where their book choices show sophistication, dedication and commitment to reading and books. Benefits, occasions, user status, and loyalty status could be the few segments under the umbrella of behavioral segmentation. Buyers differ from each other in terms of their purchase time or events that trigger the need of purchasing (Kurtz, MacKenzie & Snow, pp. 14-18, 2010). For example, various buyers only visit before Christmas, others visit when there is a new release and some would visit based on their impulse. Furthermore, the benefit, which buyers seek also, differentiates them in the retail book industry. Some are looking for detailed explanation of the content in the book, some search for good bargains, some pay a bit higher for the quality of the paper and some may spend a little extra on deals and promotional offers (Kotler & Armstrong, pp. 41-48, 2008). Waterstones can also segment its market based on regular users, occasional users, and first time users and ex users. Similar to user status, loyalty status would allow Waterstones to classify its users in groups of hardcore loyals, split loyals, shifting loyals and switchers. By analyzing and learning more about the hardcore and split loyals, the company would be in a better position to understand its marketing strengths and switchers would allow the company to learn about its weaknesses (Cant, Strydom & Jooste, pp. 52-54, 2009). Buying Process: on store and Online The buyer decision-making process for high street retail stores of Waterstone includes an important element of aesthetics or outlook. Customers have plenty of options while purchasing and in most cases, the customer loyalty is low, thus, allowing customers to make the decision of entering or not entering into the store in around four seconds during which they are passing by the shop. Therefore, the buyer behavior is under great influence of book titles, book cover, and quality of pages, catchy titles, design, lightning, color, and others. Furthermore, price, dealing of the staff and the stock also plays an important role in the process. Moreover, considering the number of stores, convenience of the location also is critical in determining the buyer behavior since customers would prefer to browse through the stores, which are present in their neighborhood (Armstrong, Harker, Kotler & Brennan, pp. 19-22, 2009). On the other hand, in case of online purchases, the characteristic, which become of the utmost importance, is the price of the product. This is true because online books take away the physical characteristics of the product such as design, look, and others and leave price as the utmost criterion for differentiation. Various pricing strategies, use of the term “free”, “discounts” and others become a defining characteristic. However, other factors such as the speed of the download, compatibility with other software and others also have an important influence on the buyer behavior. However, in both cases, brand name of the retailer remains important for the customers. Marketing Mix for Waterstones Marketing Mix, which consists of four basic dimensions of product, price, place, and promotion remain the utmost criterion in determining the success or failure of a marketing activity. This also applies to Waterstone’s as well. The company’s main product is of books and recently it has diversified into the business of online books as well. In terms of durability and tangibility, the company’s offering can come under classification of a durable good. Furthermore, more or less, Waterstone’s product is a shopping good when it comes to classifying consumer goods based on the shopping habits. It is true because during the process of selection of books, the customer pay great deal of attention towards factors such as suitability, quality, price, and style. In terms of categories, fiction, crime, and romance remain the highly sold genres. In case of Waterstones, the most important part of the product mix is the packaging of the product. As mentioned earlier that dimensions and characteristics such as the design of the book, cover, weight, pages, color, quality and other play an important role in helping the buyer to decide during this impulse decision making process. Despite the fact that books are the main product of the company, many stores also sell items such as gifts, stationary, cards, and others (Kurtz, MacKenzie & Snow, pp. 14-18, 2010). Waterstones has appeared to be following market skimming and market penetration pricing. Market skimming pricing refers to the process of setting the highest price in the start and decrease that price with the passage of time so that the company could generate the maximum revenue by skimming all levels of prices which different customers are willing to pay (Peter & Donnelly, pp. 122-123, 2010). Market penetration pricing refers to the process of setting the lowest possible price so that the company could reach to maximum number of customers (Peter & Donnelly, pp. 122-123, 2010). Waterstones uses the former for new and block buster books; however, the later is used for the rest of the books. These pricing strategies make perfect sense since they communicate the message that the company wants to earn the maximum profit and at the same time wants to become the market leader. Market penetration strategy is effective in retail book market because customers are highly price sensitive and low prices prevent existing and potential competitors to attack (Cant, Strydom & Jooste, pp. 52-54, 2009). Furthermore, like other retailers, Waterstone’s uses psychological pricing to appeal to its customers. It refers to showing prices in such a way that it appears lesser than what it is. For example, using 99$ instead of 100$ so that the customers could feel that price is still in double digits. Psychological pricing along with other forms of discounted pricing (Armstrong, Harker, Kotler & Brennan, pp. 19-22, 2009). The company locations and stores would come under the umbrella of “place”. Since Waterstones is a high street retailer, its stores are in various prime locations and differ from each other to great deals in terms of structure, design, and layout. The rational behind the same is that the customers could feel something new in different stores. At the same time, it also avoids mechanization from the part of the employees and operating workers. On an average, each store has around 30000 books and its total staff of 4500 is always ready to help customers in finding the book of their choice and taste. The company’s website also remains an important tool for promotion of the brand. The website contains links to all in store activities and recommendations from the store workers and other customers regarding books, which plays an important role in promoting the brand. Another way to promote the company is the multichannel loyalty cards, which have attracted over 2.8 million members. Social media, blogging, and internet also remain in the forefront of promotional tactics used by the company. The company tries to maintain a record of its activities, offers, and promotions on twitter and facebook so that customers could keep and at the same time, new customers could be attracted (Donnelly, Stevens & Wrenn, pp. 85-89, 2004). Quite clearly, Waterstone’s appears to be focusing more on the promotional activities that are online and the same makes perfect sense. First, it is less costly as compared to managing, creating and distributing, physical and tangible promotional stuff. Second, this gives an indirect message to the customers about the strong online presence of the company. Without any doubts, it is time for Waterstones to concentrate more on the digital business since clearly that appears to be the future of the business. The biggest competitors of the company are either online or have gone online thus leaving the company no option but to invest and focus more on its online business. Rather than expanding in terms of physical locations, the company may decide to close a few stores and invest more on creating a stronger online presence or selling its eReader to the customers. Recommendations Rather than engaging into discounts, price cuts and other forms of price competition with its competitors, Waterstones should attempt towards providing more value to the customers for the same price. This “higher value” can be provided to the customers with the help of various methods such as offering them free stationary, gifts, meals or others. Customer could get the autographed souvenirs, cups, t-shirts and others. Price cuts or price competition would lead to anything good for the companies in the industry but it would only make the industry worse by decreasing the profit margins for everyone. An important approach towards building relationships with new customers could be through initiating a referral program both on physical store locations and online. Through this referral programs, the hardcore loyal and split loyal customers would be asked to introduce their friends to the store or the website of the company and in case of purchase worth a significant amount, the customer would receive various benefits such as free books of their choice, amazing offers, deals, and others. This strategy would benefit the company in a twofold manner. Not only would it allow the existing customers to promote the company and its brand name, but it would also create partnerships with customers thus allowing them to become a part of the company. On top of it, Waterstone’s would be benefiting from the arrival of new customers and then the job would be to retain those customers (Kurtz, MacKenzie & Snow, pp. 14-18, 2010). As evident in the light of the case, the buying decision process of the buyers is one, which is based highly on the impulse and convenience. Retailer such as Waterstones and others are spending a lot on creating such display, shows, and outlooks, which could attract the customers walking past the shop. The time is of less than four seconds in which the bookstore has to catch the attention of the customer or else he or she would past by. Rather than spending thousands of dollars on displays, designs and outlooks, which can be matched, copied and which may differ in terms of level of likeness and attraction to different customers; it is time that Waterstones should teach its workforce and make it as a marketing goal for the company to focus on relationship marketing. This would be done by focusing on the customer lifetime value of customers with repeated purchases and the ones, which purchase regularly. Research indicates that “the cost of acquiring new customers is five times more than the cost of attracting and retaining the existing ones. With the help of its workforce it would help of identify these customer and cultivate partnerships and relationships with these customers by providing them financial benefits, social benefits, allowing them to contribute and provide feedback and create customer delight” (Donnelly, Stevens & Wrenn, pp. 85-89, 2004). References Armstrong, Gary, Harker, Michael, Kotler, Philip, & Brennan, Ross. 2009. Marketing: An Introduction. Financial Times Prentice Hall. Cant, M. C., Strydom, J. W., & Jooste, C. J. 2009. Marketing Management. Juta and Company Ltd. Kotler, Philip, & Armstrong, Gary. 2008. Principles of marketing. Pearson/Prentice Hall. Kurtz, David L., MacKenzie, H. F., & Snow, Kim. 2010. Contemporary Marketing. Cengage Learning. Loudon, David L., Stevens, Robert E., & Wrenn, Bruce. 2004. Marketing Management: Text and Cases. Routledge. Peter, J. Paul., & Donnelly, Jr, James H. 2010. Marketing Management. McGraw-Hill Companies, Inc. Read More