Marketing research of Holland & Barrett - Essay Example

?Marketing Research of Holland & Barrett Table of Contents Introduction 5 2.Company Analysis 5 2 Brief overview 5 2.2.Product and Service Analysis 6 2.3.Current strategy 7 2.4.Financial strength 7 3.External Scanning 8 3.1.PEST 8 3.1.1.Political 9 3.1.2.Economic 9 3.1.3.Technological 10 3.1.4.Social 10 3.2.Porter’s Five Force Model 11 3.3.UK Healthcare Retail Industry Analysis 13 3.4.Customer Analysis 17 4.SWOT 19 4.1.Strengths 19 4.2.Weaknesses 20 4.3.Opportunities 20 4.4.Threats 20 5.Marketing Objectives for Next Three Years 20 6.Financial Budget Plan 21 7.Segmentation and Targeting 22 8.Selecting a Suitable Strategy 22 8.1.Ansoff Matrix-150 22 8.2.TOWS Matrix 23 9.Marketing Mix 24 9.1.Product 24 9.2.Price 24 9.3.Place 24 9.4.Promotion 25 9.5.People 25 9.6.Process 25 9.7.Physical Evidence 25 10.CRM Strategies 25 11.Recommended Functional and Operational Strategy 26 12.Conclusion 27 Reference 28 1. Introduction The importance and necessity of effective marketing strategies in this competitive business environment has increased manifold. At present, the business opportunities in the global market scenario has raised significantly and prevailing business organization are constantly trying to capture the available marketing opportunities before their key rivals. Development of marketing plan is a comprehensive task and requires a detailed marketing analysis including external and internal. Realizing the increasing importance of marketing activities, many scholars and academics have developed multiple useful marketing models and strategic analytical tools for framing effective marketing plans and strategies. Boone and Kurtz have defined the market strategy as “an overall, companywide program for selecting a particular target marker and then satisfying consumers in than market through a careful blending of the elements of the marketing mix-products, distribution, promotion and price” (Boone and Kurtz, 2011, p.42). In case of service sector, market mix is extended to other three major aspects including people, process and physical evidence. This paper aims to frame detailed strategic marketing plan for the next 3 years based on environmental scanning. 2. Company Analysis 2.1. Brief overview Holland and Barrett is a European retailer company which deals in the products of herbal supplements, vitamins and other health care products. It is widely diversified company which operates through more than six hundred outlets. It mainly operates in UK and Ireland. The Holland and Barrett was founded in 1920 by Samuel Ryder. The head quarter of the company is situated in United Kingdom. The staffs of the company are well trained and most of the training is provided by the company itself (Holland and Barrette-a, 2011). In 2008 Holland Barrette bought Julian Graves another health food retailer of United Kingdom, which expanded the number of the company’s outlets across UK and Ireland (Holland and Barrette, 2008). The parent company of Holland and Barrette is NBTY Europe Ltd whose former name was Holland and Barrette ltd. The parent company was established in 2002. It is also based in UK and operates in the pharmaceutical sector. 2.2. Product and Service Analysis The Holland and Barrett offers a number of products from its retail outlets. All the products are health care products which can be categorized as food and health drinks, body building products and services, dietary products, multi vitamins, toiletries and other products. Food and health drinks contains various brands of cereals, confectionery, dried fruit, honey, nuts and seeds(Holland and Barrett-b, 2011). Body building products includes a number of brands of protein supplements, creatine, amino acids, weight gain products, weight management products etc (Holland and Barrett-c, 2011). Dietaries products have a number of brands which are all weight reducing products (Holland and Barrett-d, 2011). Most popular brands of toiletries are chemical free deodorant, instant hand sanitizer and tea tree oil soap (Holland and Barrett-f, 2011). The major brands of multivitamins are radiance multivitamin and mineral, ABC Plus, Radiance multivitamins and iron and ABC Plus Senior (Holland and Barrett-e, 2011). Holland Barrett is a retailer and provides services through its retail outlets located in various parts of the cities of United Kingdom and Ireland. Now customers can also buy their products through internet shopping directly from the manufacturer. 2.3. Current strategy The current marketing strategy of Holland and Barrett is everyday low pricing. The company has adopted the everyday low pricing method to market their products. Everyday low pricing method is a type of value pricing strategy through which the companies target to achieve the customer by offering good products at low price. This type of strategy helps the company to gain customers’ confidence and loyalty. It also helps to reduce the price fluctuations (Kotler, et al, p.384). The best selling brands of Holland and Barrett like chemical free deodorant and tea tree soap are offered at ?2.99 and ?1.39 respectively. Apart from everyday low pricing strategy it also practices the strategy of buy one get one free. This is a very common strategy which is followed by most of the retailers. 2.4. Financial strength The financial strength of the company can be judged from the fundamental and technical analysis of the company’s financials. The annual turnover of the company in 2010 was about ?249 million. The annual profit of the company for that same year was about ?41 million. In that same year the turnover per employee was about ?74 thousands and the profit per employee was ?12 thousand approximately (Works smart, No Date). There has been a constant rise in the turnover (refer figure1) from the year 2000 only in 2008 during the global meltdown the turnover declined slightly. From 2000 to 2009 the company earned highest profit in 2005 after that year there is a steady decrease in the profits. Figure 1: Turnover and Profits of the Company (Source: Work Smart, n.d.) 3. External Scanning 3.1. PEST The macro-environmental factors are external forces that influence the nature and attractiveness of business within any economy. PEST is a widely used strategic analytical model for identifying the underlying issues and opportunities coming from economic forces. The following model presents the four major aspects of PEST and their inter-relationship. Figure 2: PEST Model (Source: Grundy and Brown, 2002, p.31) As per the above table, these four factors are describes in accordance to retail business of Holland & Barrett. 3.1.1. Political UK has a stable political and legal system and chief of the state is the Queen the head of government is the Prime Minister. UK’s judicial branch aims to protect intellectual and other rights of the trade and business. Retail is one of the major sectors and Government aims to encourage this sector as it contributes significantly to the growth of economy and employment (Balchin, 1994, p.43-57). 3.1.2. Economic UK belongs to the fist world country and as it is a highly developed and stable in terms of economic condition. The GDP purchasing power parity and per capita GDP are nearly $2.173 trillion and $34,800 respectively. This indicates UK people are having high spending power. Moreover, significant amount of unskilled and skilled labour forces are available. In 2010, labour force was nearly 31.45 million and among which 80.4% of labour forces are engaged in service sector (CIA, 2011). 3.1.3. Technological The UK retail market also highly developed in terms of technology. Major retail players like Tesco, M&S etc are constantly implanting new technologies for better retailing and customer services. Besides, online technologies has revolutionized for UK retail market (BPL Business Media Ltd, 2011). UK’s infrastructural accessibilities are helpful for growth of trade and business. In UK the number of Internet host and users are 7.03 million and 51.444 million internet respectively. The transportations services are very well linked by means of road, air and water transport (CIA, 2011). 3.1.4. Social UK is densely populated with diversified ethic and religion groups and there income group. The total population of UK is around 62,698,362 with population growth rate of 0.557% (U.S. Department of State, 2011). Due to diversified population, their demand is also quite demand. However, their spending power is quite high. The following table shows the weekly household income. Figure 3: UK Household Expenditure (Source: Office for National Statistics-a, 2010, p.2) 3.2. Porter’s Five Force Model Assessment of industry competition is also major and integral part of marketing strategy formulation. Michael E. Porter has developed a model called Industry Five Forces and the model in given below. Figure 4: Porter’s Five Forces (Source: Roy, 2011, p.26) UK retail market is completely crowded with multiple leading market leaders in each segment like healthcare products, apparels, groceries etc. However, government encouraging domestic trade policies lead to attract many players. In 2011 nearly “9% of all VAT registered businesses in the UK are retailers” as people’s disposable income is rising and retailing sales are expected to gain s hike (KPMG, 2010). Moreover, entry barriers in vitamins and other herbal health products retail is comparatively lower. Customers bargaining power are also substantially high as there are large of local and unorganised retailers of organic foods, vitamins, and herbal supplement products present in UK. Holland & Barrett has partnered with a number of suppliers like Maximuscle, Good 'N Natural and many more. Therefore availability of suppliers is not an issue with Holland & Barrett. Therefore suppliers bargaining power remain moderate for the company. Holland & Barrett mainly deals in the herbal products and organic food and there are other substitutes of these products are available in the market like allopathic medicines and other food products are present in the market. The threat from these substitutes is quite severe. It has been already communicated that UK retail market is highly crowded with big and small players. The competitions among the existing players are too intensified. Some of the major competitors of Holland & Barrett are Alliance Boots GmbH, Co-operative Group Limited, Superdrug Stores Plc etc and they all the large scale firms and they have greater market share in UK. 3.3. UK Healthcare Retail Industry Analysis Due to the recent global financial crisis, the retail sectors of UK were severely affected. As per KPMG report, the UK retail sectors have not been able to recovers its growth pace. There has been reduction in household income causing 1.4% drop in sales volume comparing to previous (KPMG, 2010). The following figure shows the retail sales trend lines. Figure 5: Retail Sales in UK (Source: Office for National Statistics-b, 2011) The above figure signifies that there are quite fluctuations in retail sales and there has been very little growth in overall retail sales. However, it is expected that the retail segment for healthcare food and other products are expected to recover sooner than other retailing segments like apparels, grocery etc. During 2007, health & beauty retailing market experienced a growth of 5.5%. By the end of 2012, the sales of health & beauty care products are exacted to rise very significantly. Figure 6: Figure 6: Health & beauty specialists sales as a % of total retail spending 1997-2012 (Source: Verdict, 2008) The above table shows that growth of healthcare and beauty products us expected to growth at higher are and by 2012, the forecasted sales growth rate can be reach to 6.9%. Besides, past evidence of healthcare and beauty retailers along with Holland & Barrett and others like Alliance Boots, Crabtree & Evelyn, Superdrug, Lloydspharmacy etc has been engaged in expanding the retail stores aggressively (Verdict, 2008). Holland & Barrett offers a wide range of healthcare products including supplements products. During 2009, supplement products accounted for 36% of total sales volume and it is presented in following figure. Figure 7: Vitamins and dietary supplements in the UK (Source: NHS, 2011, p.2) Besides, in 2009 the vitamin market in UK was more than ?209 million. The following figure shows composition of vitamin markets. Figure 8: Vitamins and dietary supplements (Source: NHS, 2011, p.8) The market share of different products of vitamin, and other supplementary products are given below. Figure 9: Market Share of Herbal, Non-Herbal and Vitamin in 2009 (Source: NHS, 2011, p.3) The above figures portray that there is greater opportunities in UK healthcare, herbal, and other supplementary retailing. Higher product demand has lead to increase the total market size. In coming years, projected demand is expected with recovering economy. 3.4. Customer Analysis A recent report disclosed that has been a decline in the health of UK people. The country’s population is nearly 62,698,362 where 17.3%, 66.2% and 16.5% of population belong to 0-14 years, 15-64 years and 65 years and over respectively. The following figure shows the age-wise general health of UK people. Figure 10: General Health of UK (Source: Office for National Statistics-c, 2006) The above figure shows with increasing health people health are declining and the demand of vitamins among aged people are too high. Moreover, studies also shows that people with higher income are with better health as given in the following table. Figure 11: Health as per Social Class (Source: Office for National Statistics-c, 2006) 4. SWOT 4.1. Strengths The Holland and Barrett operates in United Kingdom and Ireland. The per capita GDP of UK is $34800 and the purchasing power parity GDP is eighth compared to the rest of the world (CIA, 2011). As the cost of living is more in these countries, people will prefer to have products offered at low prices. The people of UK are becoming health conscious day by day and are following health eating habits (Wardrop, 2009). All these reasons provide a good market for the healthcare products. Its pricing strategy is also one of its strength as it provides the customers to have good heath supplements in fewer prices. 4.2. Weaknesses The main weakness of the company is their declining profits. In figure1 it can be seen that the turnover has increased during 2000 to 2009 but after 2005 the profits of the company declined. This indicates Holland and Barrett could not efficiently control the operating costs. Moreover the company is also facing a stiff competition in the retail sector. 4.3. Opportunities After the global recession, the UK healthcare retail is the fasted recovering sectors. Moreover, considering the health of UK, the demand of vitamins and other supplementary products are expected to remain high. 4.4. Threats The market competition among the healthcare products is too intensified. On the other hand, the threats from the substitute products are major challenge for Holland & Barrett. 5. Marketing Objectives for Next Three Years The main hurdle which the company is facing now is Decreasing trend in profits Tough competition in the retail sector The company’s main focus in the next three years will be to tackle these problems. The company was successful in increasing the turnover but then also the profit declined this clearly signifies that the company has incurred more operating expenses compared to earlier years. The main objectives are as follows: Packaging the new product which could attract the target customer Reducing the operating expenses Increasing sales volume 6. Financial Budget Plan In order to achieve the above stated marketing objectives within next three years, it is also very necessary to develop a proper financial plan as the entire process will incur a significant amount of money. For designing a new package for attracting the target market and increasing, the company needs to make investment. In case of new packaging, Holland & Barrett should also focus on lower cost as packaging is an important variable cost, and hence should be a long term decision. However, designing a new and attractive package will be capital expenditure for the company and it will require nearly ?5000 in the next operating year. On the hand, for reducing, operating expenses, the company has to implement certain technologies and better training to employee. However, for this, the company have to incur high capital expenditure that seems to expensive, but on a long run basis, it has several advantages like efficiency, productivity and lower cost. For implementing technology backed systems like ERP and RFID, nearly ?25000 of capital investment will be required and company will start working on this from next years and by third year, it will be completely installed. Finally, for increasing sales, it has to concentrate on its marketing activities like promotions and advertising. This will be part of daily expense for the company. It will aim to invest 8% of sales revenue each year for the next three years on its marketing advantaging activities i.e. nearly 20 million every year on an average. 7. Segmentation and Targeting In order to overcome the intensifying competition, Holland & Barrett should more focus on its target market. Based on the customers’ analysis, aged people are more suffering from bad health. Therefore, the prime target should be people aged from 35 and above. Moreover, low income group are not able to afford high expense for health care. Hence, Holland & Barrett should target the high and middle income group. 8. Selecting a Suitable Strategy To make a proper market strategy the main models which are generally used for strategy formulation are as follows: 8.1. Ansoff Matrix-150 Ansoff Matrix helps to identify the course of action should be taken for fulfilling the growth strategy of the enterprise. As per this matrix any enterprise which is planning to grow can adopt any of the four alternative strategies for growth. These four strategies are market penetration, market development, product development and diversification. Market penetration strategy is generally used when the company is planning to grab more market share in the present market with the present products. This is mainly done by either branding the products again or changing the pricing strategy. If the company has achieved saturation in the present market but the currents products can be used in other markets where they had more demand. In this type of situation market development strategy is used. For implementing this type of strategy companies generally form corporate tie ups and practice franchising. If the current product is at the declining phase then product development strategy is used. This strategy is used by offering new products in the existing market. If both the current market and the current product has reached to the saturation level and there is no scope of growth the company adopt the diversification strategy by operating in the new market with new products. 8.2. TOWS Matrix TOWS matrix is used to formulate a perfect strategy by linking the strength and the weakness with opportunities and threats. In the following figure the TOWS matrix is given. Figure 12: Tows matrix (Source: Purdue University, 2010) The TOWS matrix presents four strategies; WT strategy, WO strategy, ST strategy and SO strategy. Weakness and threats strategy mainly deals at decreasing both weakness and threats of the company. This can be done by either downsizing, retrenching etc. Weakness opportunity strategy links the weakness of the company with the opportunity. This strategy focuses on minimising the weakness and maximising the opportunity. The ST or strength and threats strategy links the strength of the company with the threats it is facing. As per this strategy the company aims at using its strength in order to cope up with its threats like if the company is facing any threats in terms of product replacement then the company can use its strength of technical and R&D department to develop its current products. The last one is the strength and opportunity strategy in which the company uses its strength to grab the new opportunities. 9. Marketing Mix 9.1. Product The company should package the product in such a way so that it can attract the target customers. The target customer of Holland and Barrett is the middle and aged group hence the company should plan its products which are demanded more by the target group. 9.2. Price Holland and Barrett is currently following the everyday low pricing strategy by offering the products in low prices. It can also adopt the other value pricing strategy that is the high low strategy to attract the middle income group. If the prices which are generally quoted high are suddenly offered at lower price, then the middle income group will prefer to buy that more. 9.3. Place The target customer of Holland and Barrett is the middle and the higher income group therefore the company should open its outlets in that part of the city which has high profile people so that the product is available within the reach of high income group. 9.4. Promotion Holland and Barrett can use the traditional promotional strategy like television commercials, advertising through bill boards, hoardings, personal selling etc. 9.5. People The Holland and Barrett should concentrate more on recruiting the trained people who can handle the middle and higher income group people more efficiently and fewer amounts is spent on training them as they are already trained. 9.6. Process Holland and Barrett is already providing its service through retail store and online shopping. As the target customer is higher income group who are more tech savvy and does not have time to visit retail store therefore the company should provide more service online. 9.7. Physical Evidence The Holland and Barrett is a retail chain major who has number of outlets across the cities in which it is operating. Apart from retail store it should concentrate more on online services which does not have that physical evidence. 10. CRM Strategies For any company CRM strategy is very important. Holland and Barrett should strengthen its customer relationship management by recording all the details of its customers like the date of birth, anniversary, products they have purchased, details of their purchase etc. The company can use these data to maintain a good relation with its customers like through the birthday and anniversary data the company could place the product to the customer which can used by the customer as gifts. The company can promote its new products to the old customers by using their purchase details. In this way CRM strategy can help the company in retaining its old customers. 11. Recommended Functional and Operational Strategy Retailing business involves a number of tasks and due to increasing competition, the retailer must frame very effective operational and other functional strategy for gaining a competitive advantages. Therefore, the internal strengths are indispensible considerations in this regard. The supply chain management is a critical task in retail and Holland & Barrett should implement new technologies for managing its supply chains. For example, it should execute ERP systems or RFID technologies for better processes. For other business processes, the e-business and e-commerce can be very effective. It should offer better e-commerce services for its online shoppers. Some of strategies are given below. It should offer multiple discounts and loyalty cards to retail customers. It should conduct a constant analysis to identify the changing demand and need for people better health. It should develop better relationship with high quality manufacturer or suppliers of products for assuring high quality. For better consumers’ services, it should be offer online helpdesk. It should also promote and awareness regarding the usefulness the vitamins and other supplementary product over the substitute products. It can offer free health constancy services to its target market. 12. Conclusion Holland & Barrett is one of the leading privately-held retailers of vitamin and other supplementary products in UK. As per the prevailing scenario, the company is facing declining profit and stiff completion in the market. This paper has primarily presented a comprehensive marketing plan for overcoming these issues. The marketing plan has framed based on environmental scanning of the company. The analysis and formulation of strategic marketing analysis has been done using multiple marketing and strategies analytical tools and models. Reference Balchin A. (1994). Part-time workers in the multiple retail sector: small change from employment protection legislation?, Employee Relations, Vol. 16 Issue 7. Boone, L. E. and Kurtz, D. L. (2011). Contemporary Marketing. 15th ed. Cengage Learning. BPL Business Media Ltd. (August 2, 2011). Optimising online customer service. [Online]. Available at: http://www.retailtechnology.co.uk/market-analysis/optimising-online-customer-service. 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