Marketing Mix Strategy for John Lewis - Essay Example

Marketing Mix Strategy for John Lewis Executive Summary The study is about John Lewis, a UK based retailer of furniture, electronics, home wares, toys and other products. The aim of the study is to illustrate a marketing plan for John Lewis along with a few suggestible marketing mix strategies for the company. Demand and capacity planning has been included with supply chain management as it has become imperative in a retail industry in order to minimize cost and enhance profit levels. At the end of the study, innovative and creative products and services designing techniques will be discussed that will assist the development of business and achieve the goals of the organization. Part-A: Marketing Mix Strategy and Marketing Plan 1.0. Objective for John Lewis John Lewis is based upon ownership structure and commercial success that are unique in nature and built upon partnership reputation. Thereby, the overall objectives of the organisation should focus upon partners, customers and profit. Partners should achieve personal satisfaction in being one of the members of a co-owned enterprise, employ and preserve loyal customers through their application of their continuous trust and should make adequate profit to continue commercial vitality with expectation and profit sharing among members (John Lewis, 2011). 1.1. Marketing Objectives Marketing objective will be towards the achievement of overall goals of the business. There are objectives that are related to product. John Lewis needs to launch more product lines either through their own brands or through collaboration with other brands in different parts of the world (Mesure, 2005). Production cost and other costs need to be reduced so that products are affordable and competitive pricing is maintained. There are certain merchandises that have gained high sales volumes. Also, many of the merchandises experienced low sales volumes. Strategy needs to be developed to manage the product lines according to own brand and other brands that are associated with high and low margin. 2.0. Environmental Analysis 2.1. Political Environment The government of the UK encourages the retailers to offer mix job opportunities from locally-based, flexible jobs to highly-skilled and higher-paid jobs. This industry is high with regards to staff turnover. However, the model of John Lewis ensures that the employees are loyal to the company. 2.2. Economic Environment Economical factors have the influential power to affect John Lewis and Waitrose in terms of price, profit and cost. Due to financial crisis, there has been increase in the level of unemployment. This tends to affect the demand for goods and services (Adair & Et. Al., 2009). The economical factors are at certain point of time, out of control of John Lewis and have its affect upon the company’s performance and thus marketing mix can be intense. The slowdown in market will affect John Lewis in non-food category and Waitrose in food category. However, this is not under the control of the company. The company should develop strategy for long run that might sustain the economic slowdown. 2.3. Socio/Cultural Environment The recent trends of the UK customers have shifted their preference towards ‘one-stop’ shops and bulk shopping. This occurred due to changes in the lifestyle. John Lewis should focus more on non-food merchandizes. The consumers are increasingly being aware about their health and health related food items. John Lewis should focus upon the health food items that are available in Waitrose. The focus should be in keeping and offering health conscious food items. 2.4. Technological Environment With the help of technical advancement, the business has been developed and several products are being invented at John Lewis. The implementation of Electronic Point of Sale (EPoS), Electronic Funds Transfer Systems (EFTPoS) and other gadgets have improved the performance in delivering efficiently and on time basis to customers. The partnership firm needs to recognize the advancement of the technology, and adopt and implement it in the operations in order to achieve higher competitive advantage. 2.5. Environmental Factors There are certain environmental factors that have posed as threats to food retailing in the UK market. Waitrose should develop strategies for the future so as to eliminate the threat such as developing program for health conscious food consumption. Due to the affects of environment factors, the competitors can gain advantage. For this purpose, John Lewis should develop cost leadership strategy and product differential strategy that will attract more customers (Neblet, 2005). 2.6. Legislative Environment There are various governmental regulations and rules that have the power to create an impact directly on the retail sector and this will affect the operations of John Lewis and Waitrose. The Food Retailing Commission drafts certain polices for the UK market that might not be suitable for the firm. The firm needs to have different alternatives to adopt the changes and focus upon the objectives. There are also pricing issues from the government that are related to the consumers’ favour (Government of UK, 2006). With respect to the tough price competition from competitors and the government polices, John Lewis should be able to bring down the cost of products that will enable them to gain more margin in this situation as well. 3.0. Target Market Selected and Corporate/Brand Positioning John Lewis has different categories of merchandizes and they are appropriately grouped to attract the exact market. They have different categories such as electrical, home & garden, women, men, beauty, baby & child, toys, sports & leisure, gifts and special offers. Even the option of shopping by brand name is available online. The target audience is huge and have appropriate segment for each category (John Lewis, 2011). John Lewis should develop each segment separately and apply differential strategies accordingly. This will allow the firm to keep track and maximize the level of profit margin. For branding, private level brands and non-private level brands should be appropriately mixed according to the segments. Private level brands that consist of high margin should be focused that will allow the company to generate higher revenues. Selecting a segment with mixture of brands and private level brands for a particular target audience will develop the market for John Lewis and assist in gaining competitive advantage over the competitors. Selecting brands for a particular segment of target audience is important. The trusted brands and well-known brands should be considered that offer greater margins. This strategy will assist in offering various brands under a category to larger audience and customers can gain access to different brands. The option to select from different brands at differential pricing makes the customers attract towards the stores. Customers always want varieties and transformations. The store should be different from other stores in terms of offering unique merchandizes, prices and brands. This will create a different market for those who prefer differential products and services. The selection of target audience and branding decision are vital as most of the revenues are generated from brands and appropriate positioning of the target audience. This will assist in achieving the objectives of the owners, satisfy customers with various offerings and ultimately generate profit for the company. 4.0. Key Aspects of the Suggested Marketing Mix Strategies 4.1. Product Strategies John Lewis has different segments of offerings for wide range of customers. Each segment needs to be dealt separately. Since there is significant price war between retailers and different government policies that are increasing the market competition, the option of creating profit margins is through the decrease in the cost of production of private level brands. For other brands, only those should be highly displayed that offer greater margins. This way there will be increase in the profit margins. The developing and offering of unique products will attract customers in the store compared to competitors. There is a special offering segment that should be focused as it contains offerings that are different from the competitors and can gain more advantage in the market. New product lines should be developed in order to offer more variables and also associate with other brands to promote the stores. 4.2. Pricing Strategies According to the objectives of marketing there should be reduction in the costs. For this purpose, a strategic price leadership model needs to be implemented in the operation of the business. The cost reduction can be achieved through the reduction in cost of private level brands. The other option is through the procurement contracts with other brands for margins and cost. For special offering segment, a premium pricing strategy should be implemented. This segment is different than others and offerings are unique than competitors. This will assist in increasing the profit margins. 4.3. Distribution / Channel Management The distribution management has been outsourced by John Lewis and Red Prairie looks after the entire distribution. With the assistance of Red Prairie, the company has been able to increase its sale with the centralized distribution system. The strategic decision of John Lewis in the distribution management is perfect and should continue its strategy towards the management of logistics and distribution. 4.4. Promotional Strategies Every retailer needs to implement the promotional strategy in order to gain maximum attraction towards their stores. John Lewis should focus upon e-marketing strategy. This strategy will assist John Lewis to capture the attraction of large number of customers. The offering of various renowned brands and own brands will provide the customers to have wide assortment of merchandizes with wide range of brand assortment. Even through this promotional strategy, the company can maintain its Customer Relationship Management (CRM). The CRM is vital in retail industry to convert the customers into loyal customers that benefit the company for the long run. 4.5. Extended Marketing Mix Process The strategy needs to be flexible in terms of process that will ensure the exact delivery of service and product to the customers. It is important in this industry to deliver the right product and service at the right time to the customers; else there are possibilities of switching of the customers to other stores. Furthermore, the switching costs of customers are extremely high in this industry. People With proper training and development programs, the skills of the employees can be upgraded. This will assist in delivering enhanced services and delight the customers with their quality service. Provision There should be provisions for services that will assist in maintaining the similar quality of services. This can be through buffer system of staff management. Physical Environment Many of the customers shop online and get service such as free home delivery under certain conditions. The store needs to ensure that merchandizes that are promoted online and services committed are actually delivered. 5.0. Operational Consideration and Resources The marketing strategies and objectives to be achieved at a certain level that have been discussed require appropriate budget expenditure. This will include staffs, services, vendors and suppliers of different brands, category management, visual merchandize programme and several other retailing aspects. The budget should be drafted in a manner to assist in achieving the overall objectives. For the funds there are resources in form of liquid money and non-liquid money. Both should be utilized at the outset and then required external debt should be considered, maintaining the desired debt-equity ratio. This will provide advantage in the operations and generate more profit margins. Part-B: 1.0. Demand and Capacity Planning There has been increase in the competition in retail industry in the UK and global market. These have resulted to increase the product variety and also the uncertainty that are associated with the demand of products. Capacity planning under the uncertainty of demand is complex as the retailers have to deal with opportunity loss for not being able to meet the demand because of capacity constraints and ‘trade off’ between ‘costs of investment’ in excess capacity (Bose, & Chatterjee, 2008). John Lewis needs to place the orders of merchandizes before the actual demand of the market is known. This is done due to transportation lead times and long production process. There are high uncertainties of demands that increase the risk for John Lewis. These are the reasons that there should be appropriate forecasting techniques that will assist in minimizing the risk and satisfying the demand in the targeted market (Ozen & Et Al, 2000). The principles of lean management includes the value management that assists in reducing cost and wastage ensuring maximum utilization of the resources available that can be achieved through the forecasting technique in utilizing the ‘inventory pool’ technique in John Lewis. There is application of this technique in various industries and its consequence is known to be effective. With the assistance of inventory pooling technique the risk of mismatch of demand and supply can be minimized and thus there can be increase in the revenues of John Lewis. It is not feasible to employ physical inventory pooling technique in the international distribution systems. This is due to the scattered locations of the stores of John Lewis and customers' unwillingness to linger until the merchandises are not distributed from the central warehouse. In this kind of situations, John Lewis has to keep their inventories at their nearby conveniences in order to satisfy their customers. This approach will not affect the customers negatively as there are also many other alternatives available for risk pooling (Ozen & Et Al, 2000). There are season times when the sales are high and similarly, sales are low during the off-season. To determine the demand according to the seasons that will generate revenue benefit and derive customer satisfaction, Multiplicative Seasonal Model is appropriate. This model provides the information of the seasonal demand pattern that can be analyzed for the future demand for the seasonal period. This will reduce the inventory cost in stocking the appropriate merchandize that are in demand by the customers. Through this model at seasonal time the cost and wastage in inventories can be minimised that are not in demand and ensure higher utilization of all the resources. Analysis of the demand trends for consecutive years will provide the pattern of consumption of certain merchandizes and the volumes of purchases. There is risk associated with it as the consumers’ taste and preference changes and John Lewis needs to not only identify the future demands for merchandizes but also identify the changing trends of the customers in order to satisfy them (Kalekar, 2004). High forecasting errors are possible as consumers’ preferences rapidly changes because they seek for more variety. It is due to this reason that the electronics segment of John Lewis is highly risky in demand forecasting. Any kind of opportunity for reallocating the preliminary orders through the implementation of updated forecasts will assist John Lewis to match the expected and forecasted demand with appropriate merchandize. This will assist in increasing the revenues with proper utilization of resources and minimum wastage of resources. John Lewis has thousands of merchandizes in its each store. Forecasting is an important activity and is expensive as well. It is not feasible for the company to manually forecast the demands for each and every product. To forecast for every product that are available at the stores, automated tools will be required. Through the application of special software and automated process and expert analysts, the exact demand for every product can be recognised. This will reduce costs as well as wastage of resources and assist in increasing the revenues. The slow moving merchandizes should be restocked slowly and the fast moving merchandizes should be restocked as soon as possible. This will not affect the customer’s level of satisfaction as they don’t have to wait in the queues for longer period of time. It is important for the John Lewis to provide specific merchandizes to the customers that they desire for. Under-stocking would lead to unsatisfactory customer and there is possibility that they will move to another store. Another problem is that of over-stocking which will block the money in inventory. John Lewis through various techniques of forecasting and analysis should bring in appropriate stocks so that the racks never get empty and overflowed. This is the way to minimize cost, reduce wastage and maximize the revenues (Gabale & Et. Al, 2008). 2.0. Supply Chain Management (SCM) SCM is an important activity in the retail industry. The SCM has been conceptualized with an integrative business beliefs, values and attitudes and implementation of actions that manage the overall course of the distribution channel from the suppliers to the end users or customers. The SCM will assist John Lewis to minimize the investment in inventory in the entire chain, enhance customer service through the application of availability of increased stocks and reduction in ‘order cycle time’. The SCM will also assist in developing competitive advantage by developing customer value in the entire process (Min & Mentzer, 2000). Waitrose has invested more than $100 million for the purpose of improving their supply chain in the year 2010 (RBR, 2010). For the enhancement of John Lewis supply chain, Waitrose has invested more than £64 millions. In the mid of the year 2010, a new chilled warehouse was opened in Bracknell which was approximately 100,000 square feet (Centaur Media PLC, 2011). John Lewis and Waitrose expect that the investment made in an attempt to enhance the supply chain will be able to meet the end-to-end focus upon the operational efficiencies that will generate substantial savings. It is expected that the investment will drive efficiencies, derive better profit margins and develop more capacity for growth for long term purpose. In the long run operations, the investment made will provide its advantage. Thus, they can gain benefit from enhanced supply chain management. The supply chain management can encourage sustainability for longer period of time through ensuring the participation of the suppliers by incorporating sustainable innovations in the supply chain processes and operations. In this manner, integrity and courtesy can be maintained through effective participation of suppliers and vendors of different brands and their own brands. Thus, John Lewis too can maintain their integrity and courtesy along with upholding corporate relationship with brands and customers (Mahler, 2007). To develop sustainable supply chain management for John Lewis, it should analyze risk and opportunity associated with it. The SCM needs to recognize the probable risks that might occur in the future operations. This will assist the management to develop the process of SCM in a manner that will minimize the risk and increase the efficiency that will ultimately affect the savings of the retail store. The opportunity needs to be recognized that will assist the management so as to develop SCM in a manner which will ensure to trap the opportunity in order to benefit the retail store for long term. The imbalance between the supply and demand can be reduced with the exact identification of potential risks and opportunities. This will lower the cost and increase the revenues and provide the delivery of merchandizes at the right time (Mahler, 2007). John Lewis has the model of e-business to follow in its retail stores. There is requirement of push and pull strategy of supply chain. For the e-business model, the push and pull strategy of supply chain management will offer greater benefit in lowering the stock maintenance and lockage of cash in such inventories, assist in generating more revenues from cost minimization and efficient management of inventories (Guyer, 2001). For better management of planning and supply chains, John Lewis should be able to gather information about trading partners. This will assist the retail store to efficiently manage the supply chain with appropriate information. This information is quite important as it consists of sales forecast and demand forecasts. The supply chain management should be able to respond to customers demand and their changes in their demands. Acting according to the changes of customers’ demands will ensure higher level of satisfaction of customers, build long term relationship and integrate customer, vendors and brands within the process of supply chain management (Mentzer, 2001). The SCM will enhance the value of John Lewis and provide long term benefit if it is appropriately implemented with full integration and courtesy. The business environment is always changing and the retail store needs to identify the risk and opportunities in enhancing and continuously developing the SCM that will provide long term benefit. 3.0. Product/Service Design that Encompasses Creativity and Innovation Creativity is an essential element in the formation of innovation. Innovation in the retail firm such as John Lewis is concerned with the alteration of supplier-user interface. The ‘service relationship’ or ‘delivery’ innovation is applied in John Lewis to enhance the level of service that effectively supports the expected business growth of the retail department store. The creativity of delivering enhanced service to customers and vendors is possible though the enhancement in the service design that consists of traditional service facility as well as services such as e-commerce and online services (Maffei, 2005). Innovation and creativity can occur through introducing new processes and new services in John Lewis stores. According to the objective for sustainable growth towards the future and satisfying the customers and partners, innovation and creativity need to be developed through the changes in the level of service and by introducing differential service offering. This will assist the retail store of John Lewis to provide unique services that no other retailer offers in the UK market. The opportunity needs to be evaluated to improve the service through innovative and creative ideas. This will lead to enhance the level of service rendered and delight the customers as well. The opportunity lies in the environment that the store is operating. The management needs to identify the opportunities in developing innovative and creative service designs that might be customer oriented or supplier oriented or both. This innovative and creative service design will assist in supporting the expected business growth and the customers will also be satisfied with enhanced service (Maffei, 2005). The customer oriented perception assists in special kind of innovative service design. This focuses upon generating creative or innovative services, products, new or enhanced styles of experiencing service that ultimately affects the customers positively and thereby maintain a substantial business growth (Maffei, 2005). According to the recent trends of the retail industry within the economy of UK, there are immense requirements of innovative ideas in the development of business. Innovation has become important due to the changing business environment. To meet the sustainable business growth, John Lewis needs to develop innovative processes for rendering service that will not only achieve the objectives of the business but will also ensure the satisfaction level of customers. The innovation or the innovative idea towards the service design can be recognized and developed when the business performance in the current situation are understood. With the identifications of the weaknesses and the strengths of the current business operations, the innovative idea can be developed to enhance the service or introduce new service in order to attain business objectives (Lowe, n. d). The service innovation takes place with the advancement of technology. There are several technical aspects in recent times that have changed the level of service offering. With the latest technical gadgets, the retailers have been able to utilize them appropriately through their creative and innovative ideas in delivering enhanced services. The implementation of the advanced technical gadgets in stores of John Lewis will provide assistance to the workforce to enhance their service outcomes that will ultimately bring more business in the store. The technical advancement and the rapid development of information technology have changed the value creation in the service sector especially in the retail organizations. The innovation in information technology and advancement provide opportunities to creatively think and develop such services that are beneficial for the customers as well as for the business (Komulainen & Et. Al, 2004). In the recent fashion world, the introduction of new product, redesigning of product and its packaging are known to be as innovation. John Lewis deals with several brands and has different product lines for each category. They need to develop an innovative idea with the assortment of categories of different fashionable merchandizes that will be easier for the customers to access and purchase them. The major concept lies in ‘Visual Merchandize’ (VM) of John Lewis. VM involves the art of presentation that places merchandises in spotlight. The expertise of the management of VM is in exhibiting creativity. Innovative ideas are developed for displaying the merchandise in a way to attract the customers and create a right ambience for purchasing those merchandises. VM is also known as ‘silent language of selling’ and John Lewis needs to be effective in developing innovative ways to manage the visual merchandise setting that will assist the growth of the business. Retailers try to develop such VM that are able to lure customers and hence, VM profits can be generated. An appropriate, innovative VM management of John Lewis stores will develop the business for long run purpose and assist in achieving the objectives. References Adair, A. & Et. Al., (2009), The Global Financial Crisis: Impact on Property Markets in the UK and Ireland. 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