Circular Distributors Ltd Service Marketing - Essay Example

?Circular Distributors: A Case Study Table of Contents Table of Contents 2 Facts of the Case 3 Analysis for New Service Development strategy 4 Marketing Analysis 5 Competitor Analysis 6 Internal Analysis 7 Segmentation, Targeting, and Positioning 8 Locating CD in the Ansoff Matrix 10 Strategic choices 12 Market Positioning (Diversity/Complexity) 13 Marketing Plan (7 Ps of Services Marketing by Lovelock, 2001) 14 References 15 Facts of the Case Circular Distributors, Ltd. has been in business for more than 50 years as a supplier of targeted messages, a form of direct marketing services. It began by delivering leaflets and free product samples of fast moving consumer goods (fmcg) from door to door. It launched a publication called “Emma’s Diary” which was co-produced with the Royal College of General Practitioners. One-third of revenues is from advertising, one-third from companies distributing products through gift packs, and one-third from sales of consumer information. Spin-off publication “One Step Ahead” is likewise successful. The firm upgraded by changing its name to CD Marketing Services, while maintaining “Circular Distributions” for the existing door-to-door distribution. Under CD Marketing , Lifestyle Marketing brand concentrated on the sale of marketing information, and invested heavily in new technological capacity; ?400,000 of investment reaped additional ?33 million in sales and ?2.4 million in profits. Two new publications are Emma’s Diary Pre-School Guide and Married Life…The Small Print, which both attracted higher than average response rate and additional revenue through advertising and sample packs. More importantly, the new publications aimed to collect new data and build a database about its consumers. CD publications enjoyed a high response rate. Services offered by Lifecycle Marketing were availed of most especially by financial services and home shopping businesses. These services include: Segmented lists of consumers that organizations can rent for one-off use Licenses by which other organizations may incorporate CD’s data in their own databases Inclusion by client-companies of specific questions in its publications; the data generated shall be for the contracting client’s exclusive use Later, the firm embarked on systematically supplying information to companies as a regular activity. In the meantime, the traditional fmcg business was still strong, and the company is ways by which it can be improved. New clients were attracted by the door-to-door service include Internet Service Providers which distributed free CD ROMS to targeted households. The Analysis for New Service Development strategy During its early days, Circular Distributors distributed generic products in a homogeneous market, for trial purposes that, it was hoped, would encourage future purchases. The company eventually developed the B2B consumer information service by which data it has gathered from its consumers are organized, packaged and sold to companies. Somewhere in between the company has been able to successfully create four publications, the latter two of which are used to gather data from consumers who are constantly expanding due to lifestyle changes. All three types of services – door-to-door distribution, publications, and information databasing and sales – are growing significantly, but while information sales is highly competitive because of the number of players already established in the industry, door-to-door distribution and publications have a huge following but few competitors. These three classes of services shall be analysed in the following discussion. Marketing Analysis Size – The market size for the door-to-door delivery service is substantial, but due to the physical nature of the service reliance on manpower limits the extent of the service and the geographical scope is limited. Publications would have a wider reach, as far as GPs (for obstetrics and paediatrics), vicars (for weddings), registrars (for births) and similar channels of survey questionnaire distribution are feasible. On the other hand, information gathering and sales to companies has a potentially extremely wide reach particularly when using the internet, and if the company is able to contract clients that have a pan-European reach, as expected, then the size and reach of internet-based data gathering could be hugely lucrative (Andrews, 2007). Composition – With the door-to-door and publications content, the basic market catered to by Circular Distributors are the consumers who are new parents, who have children, or who are just getting married. This market could be expanded to households with teen-agers, young adults starting on their own, or mature and senior consumers. The content would of course remain within the realm of life styles and life changes. Data gathering by CD through its Lifestyle Marketing brand may expand similarly; however, with added technological capability, CD may even create a new brand that was not anchored on life styles or life changes. It may touch on new market segments such as new entrepreneurs, various skills or occupations, or specific professions (Chettayar, 2002). This would expand the type of information CD can gather and from which it may create new databases which may be linked with current databases. Expanded information services, such as correlational studies across demographics, can be created from the linked data sets. Location - Location (reach) for the internet-based data gathering is practically limitless. Door-to-door distribution, as earlier mentioned, is geographically finite. The publications are somewhere between these two services earlier mentioned. Trends – There is increasing accessibility of consumers through the internet, but many competitors are also capable of meeting these in tandem with CD. On the other hand, Circular Distributors and the publications are both growing steadily in numbers of consumers reached, and although the maximum growth in consumers reached will be limited by geography and company resources, there are few competitors with the readership and response rate commanded by them. Overall, however, “markets are becoming increasingly fragmented, and lifestyles became more diverse.” This will eventually cause firms – CD included – “to employ product differentiation targeted at small niche segments” (CD case, page 2). Competitor Analysis Strengths – Competition is stronger for information supply services, and the case mentions several of the established competing firms (i.e. Claritas, ICD, and Experian) who have a head start in the business compared to CD. On the other hand, other competitors are nowhere near Circular Distributors (door-to-door and publications) which is still regarded as the market leader by far, because of the substantial database it had accumulated and the name it has created for itself in the industry. Weaknesses – CD’s relative lack of experience (presumably at the time the case was written) in information supply service is a drawback compared to its competitors, but CD’s advantage lies in its actual access to the consumers through personal contact by the door-to-door service, where it already had carved a niche for itself, and through the publications which are also data gathering tools. The weakness of competitors therefore lies in their reliance on only a single channel for data gathering – that is, by digital electronic means – while CD has three channels, enabling it to gather more and more varied information. Current positioning – Currently, CD is positioned in supplying information to companies whose products are best suited to family-oriented consumers, in all its three major types of data gathering channels. With the use of the internet and electronic data gathering, CD has the option to expand beyond this niche (Rust, et al., 2000). Internal Analysis Resources – CD already has made substantial investments to address its data gathering capability through electronic communications. No additional investments are needed for the door-to-door and publications data gathering and sample distribution channels. Reputation – CD’s reputation is said to suffer because of its perception as a door-to-door provider, thus a low-tech company. On the other hand, those that have called attention to this fact were not client-companies or consumer respondents, both of whom responded positively by increased patronage and increased response rates. The labelling of Circular Distributor as a letter-box stuffer and “flat and stagnant company” was attributed more to “expert commentators” (i.e. Ray Perry and John Eggleston). The market has not ruled on this. While CD did well in opening up its information sourcing and supply channels via electronic media, it also did well to maintain its core business (door-to-door and publications). There will always be companies who want their information obtained, while at the same time distributing their sample products, which cannot be done by mere e-mail or electronic media. Constraints – The firm appears constrained by the strategic direction to take in light of the fast-changing electronic communications technology, and the case suggests that the tentativeness to commit future resources to the effort may be indicative of the lack of resolve. Another constraint is the unfavourable economic conditions, although this may provide opportunities for other companies to avail of current information in preparation for the coming turnaround (Saleb & Munn, 2003). Values – The firm is so-far committed to the advancement of family unity and cohesiveness through the product samples it distributes to households, the information it provides for children and family through the publications, and to accuracy and timely supply of market information to its client firms. Segmentation, Targeting, and Positioning The marketing position of the firm is a strategic decision arrived at as a result of combining the elements of the earlier marketing analysis consistent with the framework.shown above. The market analysis shows a possibly lucrative opportunity for CD because of its established channels for gathering information that would be useful to companies producing goods and services for young families and couples who are just starting out with married life. Competitors are replete in the electronic information gathering service, but the advantage here for CD is that state of the art technology is constantly innovating and this give a chance to new entrants to master the new technology. Unlike its other competitors in this area, CD is not significantly invested in earlier technologies and thus has a chance to come in with new equipment and systems that are more efficient in gathering and analysing data. There is a gap existing, however, where the new technology provides an opportunity CD has not yet tapped. Lovelock & Wirtz (2010) highlighted the new coverage of technology in the use of social media outlets such as internet-based strategies and biometrics, search-engine optimization, Twitter, and M-commerce. At present, the new digital communications handheld devices have increased the reach of the internet, and new opportunities such as social networking has made advanced marketing tools possible. For instance, CD could build a virtual community around its data gathering and advertising. Virtual community creation involves building familiarity and loyalty among a group with common interests with a company or brand, to establish a vibrant and constant relationship between consumers and the information company, or among the consumers themselves. If consumers can establish a regular and trusting relationship with CD, then it would be easier for CD to secure information from them with which to update their databases. CD could also access current client-companies or prospective clients by providing a channel in its website by which firms can initiate orders for information, subscriptions for publications, requests for inclusion of questions in surveys, and so forth. Clients need not be exclusively marketing firms, but also educational institutions which may be in need for information. CD currently has an advantage over its competitors in terms of the longitudinal information it possesses, since the firm had already been around for half a century. Therefore, CD will be able to conduct, or allow clients to conduct, long-terms studies where the relevant information needed are among the data stored in the company’s database. The new target segment that presents itself is comprised of academic institutions and universities where growing numbers of people will require information about the market for longitudinal and cross-sectional studies (KJ & Parameswari, 2002). Broad macro-data may be required by other entities such as industry associations which are themselves non-profit, although they may serve the interests of profit institutions; therefore data released for such institutions should be under terms which would not compromise CD’s services to (or potential for profit from) their member companies. Government regulatory and policy-formulating agencies may be potential clients for information (Levy, 1984). Locating CD in the Ansoff Matrix Service Development Existing Services New Services Market led (Medium risk) New segments New countries Diversification (High Risk) New services New markets New Markets Market Development Penetration (Low risk) More customers More usage Build share Services-led (Medium risk) New processes New outcomes New rentals Existing Markets The Ansoff matrix provided by Lecture 10 is adapted and present in the foregoing diagram. Because of the fast-changing developments in electronic technology, there is a danger for the firm to be over-invested in one technology, only to have it rendered obsolete in the not-too-distant future before the firm may fully recover its investment. At this point, CD’s current services and markets have not been fully exhausted, and therefore advancements in this area must be done cautiously and incrementally. For instance, the basic service of supplying information may stand although it may be packaged in different ways for billing purposes. New markets may be carefully explored by allowing for subscriptions or orders for a few participants in the targeted market segment which, if proven feasible, may be entered into with a firmer resolve and commitment via outlay of resources. As mentioned earlier, the ability of the firm to source data in significant volume may lead it to open its services to companies that operate over a wider geographical market (Bharadwaj, et al., 2007). The values and benefits to promote, however, should remain the same as they are central to the image of CD. This involves the supply of data to firms creating goods and services for families, parents and children. A potential for growth would include exploring other age groups or circumstances, other segments in the market, but CD should not engage in this unless, as earlier mentioned, it is done incrementally and with a view to testing its competence to meet the demand in this market. For the meantime, therefore, the firm would do best to undertake a Penetration strategy particularly in its information supply to companies, but take steps to enhance its current services. One is by developing social network sites by which consumer communities may regularly provide information. By adopting penetration, it does not mean that the company would not seek to develop possible new services or test the waters of new markets; it simply means that doing these in a big may appears premature because of the tentativeness of CD itself. Most likely, systems and other corporate frameworks should be further developed in order to support the firm’s entry in new markets and new services. Strategic choices Presence of a tightly defined market segment - In the case of CD the market segments are not tightly defined. What is mentioned is that the company is currently catering to the distribution of sample products and the gathering of information, to consumers generally in the early stages of family life (i.e., from marriage to having children of school age). Companies who provide services and goods for this consumer group can cover a great number of products and services which may equally serve many other market groups. Existence of a clear benefit concept – There is a clear benefit concept, that of providing information which is useful to the client. In this sense, “usefulness” would pertain to the support afforded by the information to the ability to make sound judgements. The general idea is that the presence of information is better than its absence; whether the information is accurate or not depends on the assessment of the users, based on their other sources, and their past experiences. Ability of establishing a highly focused servuction system (service product model) – The services provided by CD/ Circular Distributors cannot be described as a highly focused service product model. In fact, its services are comprised of two different activities that just happen to support the same interests – i.e., product sample distribution, and consumer information gathering. The differences in the needs and requests of the client may cause the firm to change its service product model, but overall activities remain marketing functions in the broader sense – one in the nature of market research, the other in the nature of advertising/promotions through product sample distribution. Even the media differ; one uses print, the other employs direct and personal communication, while the last involves electronic media. Presence of a clear service image – This is something CD is still struggling with. The proposal here is to maintain the door-to-door service although analysts have derided this image of a low-tech service provider. There is no assertion in the case study that Circular Distributors has lost clientele or revenues in this activity – in fact, the company has gained in both. The firm’s foray into the information supply industry is admittedly new to the firm and therefore has a high degree of risk, moreso after noting that technology changes so quickly. CD should therefore just emphasize for now the differences between CD (the electronic information gathering company) and Circular Distributors (the service that brings samples to the doorstep of the consumer). Market Positioning (Diversity/Complexity) Diversity (customization) Low High X CD/ Circular Distributors High Complexity (number of services) X X Low In the final market positioning matrix, therefore, the firm should find its location in the high diversity, high complexity quadrant, because of the special information needs of each client, and the discernment and organization of information gathered for the clients to suit their needs. Marketing Plan (7 Ps of Services Marketing by Lovelock, 2001) Product – The service product should be consumer information supply for corporate marketing purposes. It should also include the physical distribution of sample product goods which companies contract the firm to do. Place – The place should remain the same current locations the firm serves, but allocations should be made for possible expansions at some future time when a clearer opportunity presents itself. Price – The clientele of CD are businesses, which means that price elasticity is not too constricted and, in some cases, may approach infinity. This means that the firm will usually be able to pay, within reasonable limits, of course, the changes in prices that the firm may want to make. Promotion – Conceivably, CD may offer trial subscriptions to its information supply, but given the nature of the service the promotional offer would be shortlived. Trial subscriptions may also be offered the new market segments expected to be entered. People – Employees and staff in CD/ Circular Distributors must be familiar with both the electronic media used by CD and the door-to-door system in Circular Distributors, as they include different skills sets and personality traits. Continual training is necessary. Process – As earlier mentioned, there are different processes involved, so persistent patterns of behaviour may be observed and refined into a better defined process. Physical evidence – Physical evidence is readily seen in the case of door-to-door distribution, in the form of people walking around in their uniforms. For the information supply service, physical evidence will be evident by onscreen perusal of CD’s website and the request for information. 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