Internal Marketing and Organizational Behaviour at WH Smith - Case Study Example

WH Smith Introduction WH Smith PLC (known simply as "Weskit is the UK's largest magazine and book retailer. It is well known for its presence of its High Street retail stores and has about approximately 550 of them. They sell books, magazines, stationery, music, computer games, and videos. It also has a ubiquitous presence with more than a 100 stores in European airports and train stations. It is the largest magazine and newspaper wholesaler in the UK, supplying about 22,000 retailers daily. Background WH Smith started its sojourn in London as a newsvendor in 1972 by Henry Walton Smith and his wife Anna. Their son, William Henry Smith took over the business and was joined by his son, William Henry Jr. and WH Smith and Son was born. The firm based its growth on the railway boom and capitalized on it by its presence in the railway stations and using the railroads as a means of distribution. For many years, the main rival to both W H Smith's railway station and news distribution business was John Menzies. WH Smith addressed this competition by buying out all retail outlets of Menzies in 1988. This has resulted in an amazing presence for WH Smith in every single railway station in Britain. In the year to 31 August 2004, W H Smith plc had a turnover of 2,834 million, on which it made a pre-tax loss of 130 million, due to significant "exceptional items" and losses on the sales of subsidiaries. Disposals during the year reduced the group's net assets from 409 million to 256 million. At its December 2004 share price of around 323p, the company's market capitalization was just under 600 million. (wikipedia.org) Current problems The company had been having a series of problems including the retail where it has faced tough competition on diverse fronts, significant fall in pension funds that has caused internal tensions and from the threat from its distribution side that all contributed to its financial downfall. There is no doubt that the company has to try to revamp on all fronts to recap its former glory. The main disadvantage of WH Smith is that it lacks a distinct retail identity and that shoppers no longer have a real reason to visit its stores. It has lost its niche and needs to re-find it in order that it builds itself a solid identity. It has suffered the onslaught of specialised competitors and its sales have declined due to it losing customers. Specialist retailers such as HMV, Waterstone's and Ottakar's offer a far wider range of music and books. Amazon burst on the scene as an online retailer and built its base so quickly and this has influenced WH Smith's sales. It has also been squeezed by Asda and Tesco, which sell basic stationery and magazines more cheaply. In addition, shoppers seeking DVDs and compact discs are just as likely to pick them up at their local Tesco too, along with their envelopes and greetings cards, other traditional WH Smith staples. Attempts at diversification such as publishing have not been as successful as expected. Kate Swann, WH Smith's chief executive, said the company aimed to "reinvigorate" itself. "We aim to return the UK High Street Retail business to its role as Britain's most popular stationer, bookseller and newsagent," she said. Ms Swann admitted the firm had lost out to competition from supermarkets and had not helped itself by providing "an inconsistent product offer and an inadequate strategic response to competition". However, she said the stores still had great potential. "The business has unique strengths through its extensive store portfolio, strong market shares and high customer footfall. "Our plans encompass improved efficiency through cost savings and margin enhancement, while rebuilding the competitiveness and depth of our product ranges." Relationship management Relationship Marketing is a marketing method in which businesses consistently maintain two-way communication with their prospective, current and inactive customers in order to gain a deeper understanding of their needs while delivering personal and compelling marketing throughout their lifecycle. Relationship management is based on developing and maintaining the four components of involving the relationships with customers, employees, stakeholders and suppliers. Cornerstones of relationship management The three corner stones of relationship management are employee motivation and commitment, Mutual trust and respect coupled with information sharing and these working towards common goals and targets that bond the relationship. Customer Relationship management Relationship management tries to not only gain a customer but retain him as well. It nurtures the process of identifying potential customers, initiating the exchange of information and moving consumers or businesses through the entire process of information that culminates in a purchase. It then concentrates on improving the relationship making it more sustainable and profitable so that it builds loyalty among the customer base. Customer royalty builds repeat purchases. It also means that customers are retained using a sustained effort and means are incorporated to win-back customers who have changed loyalty and lure them using promotions, newer methods of marketing etc. In an attempt to understand customer loyalty, many marketers have studied the Customer Loyalty Ladder (Christopher, Payne, Clark and Peck, 1995). The basic ladder concept provides a sequential set of goals for growing the lifetime value of customers, and thus attaining their maximum value. The aim is to move the customer from the lower rung to hip marketing. For this relationship marketing is utilized where the customer is first "caught" and then he is "retained". The Loyalty Ladder: Moving from the lower rung to the higher - Prospect: A business or individual who has been qualified with intention to purchase from or donate to your organization - Customer: A business or individual that has on one or more occasion - Advocate: A customer that provides unpaid promotion for your organization, product or services For WH Smith, due to the financial difficulties at the current time, when marketing budgets are not very liberal, it pays to keep the current customer happy, build a relationship, and move him up the ladder. The market conditions of intense competition, high customer expectations, in crease in the number of options available for the consumer, the necessity to retain a customer cannot be emphasised enough. The relationship ladder that moves the customer up, assures WH Smith of that customer's loyalty, thereby reducing further costs incurred to gain a consumer. When Richard Handover took over as WH Smith chief executive in 1997, few people expected the 53-year old to last long. Critics regarded Handover, who had been with the retailer for more than three decades, as a time-server ill equipped to lead WH Smith into the Internet age. Nevertheless, Handover has confounded the critics, taking WH Smith back into profit and launching a successful online retailing venture that has more than 250,000 subscribers. The online business is now growing and the company hopes to build on it. It has run online promotions and storewide sales where it has offered 60% discount on books, both hardback and paperback as well as half-price sales on stationary items in an effort to lure the customer. WH Smith also offers a club card where the customer accumulates points for the pounds spent and can redeem them later for specific items. The company has also has cut costs, strengthened its management, improved the look of its stores and their range of products. In order to increase its online sales and compete efficiently, it would do good to run an online promotion that will "retain" the customer it has "caught". When customers shop online, the costs involved in concluding the sale are lesser for the company because, no work force is involved in concluding the sale and serves better to improve its bottom line. Hence, it should make sure that a customer who visits its website is propelled towards concluding a deal. Therefore, it can offer extra discounts to customers who shop online, just like the airlines, which offer better deals for an e-ticket. Secondly, sites like Amazon now sell used books alongside new ones, thereby those who cannot afford the cost of a brand new book, are happier with a used one than walking away empty handed. Books are WH Smith's primary selling feature and to keep its customer, it needs to get into the used books channel. It can also offer loyalty rewards, like if a customer has concluded, say 10 purchases or more on its website, it can give him some extra bonus points to redeem, or offer an extra discount on his next purchase. All this will serve as an incentive to bring him back to the site and this is very important to keep the subscribers growing. If the customer recommends a friend to sign up as a new customer, then both can be given some incentives that will widen the customer base for the company and build brand loyalty for the consumer resulting in repeat sales. Internal Relationship Management Relationship marketing also stresses the importance of internal marketing. This refers to building relationships within the organization itself. Here, the continuous selling of the organisation, its goals, its culture etc. are constantly marketed based on the needs of the employee. They are treated as "internal customers" and are given as much consideration as a supplier of the company's needs and who in turn, receives the products of the company. An employee obtains a service at a point in the value chain and then provides a service to another employee further along the value chain. The benefit of internal marketing is that while the management does not take its employee for granted, it also helps to sell management ideas to the employees. It helps in managing change and streamlines the service provided by the employees to the company. If implemented well, it can also encourage every employee to see the process in terms of the customer's perception of value add, and the organization's strategic mission. Further, it is claimed that an effective internal marketing program is a prerequisite for effective external marketing efforts. (George, W. 1990) WH Smith on its corporate website has claimed to implement the following policies. 1. Training provision doubled within WH Smith Retail. 2. Launch of a new and easy-to-use training and development intranet site to raise staff awareness of the resources available to them, so that they can take the initiative in requesting training. 3. Launch of a Career Development Framework for High Street store staff to support succession planning and work force requirements. The framework provides a clear route map showing how a member of staff can progress from one role to another, for example from Sales Assistant to Regional Manager. 4. Development of a 360 feedback process for our top 100 leaders that is aligned to our Values and Leadership behaviours. Over the last year, the top 100 have had 360 profiles, which have helped them recognise their strengths and potential opportunities. 5. In addition, it has implemented better workplace conditions and has strived to reduce the workplace accidents. Relationship marketing with the wider Public A company can build better relationships with the community as a whole by involving itself with serious issues affecting the community as a whole and contribute to better quality of life. This could be environmentalism issues relating to emissions, wastage, sustainability etc., and legislation by adhering and respecting laws and regulations, ethical principles that define right and wrong behaviour. When a company involves and upholds itself and demonstrates strong ethical and moral values it raises the image of the company in the public eye and creates a customer relationship born out of respect. WH Smith is trying to revamp itself and has implanted several processes to rebuild a successful relationship all around encompassing the wider public. It has set committed recycling targets to gain public appeal and contribute to the community. It has plans to incorporate ethical trading and forest sourcing into the job specifications of key buyers. It has strengthened its engagement with suppliers on labour standards and forestry issues. It has implemented practical tools to improve the way and manage health and safety and human resources. It has resolved to source survey at 70 per cent of volume of all own-brand paper and wood products or increase coverage further and incorporates at least three lines of recycling. WH Smith is focusing all their efforts on a community investment programme called WH Smith TXT that will help to make a real difference to literacy standards in schools and to the confidence of the students involved. WH Smith reports that the programme has enhanced their reputation among staff and increased awareness of the company's role in the community. It has raised the profile of the WH Smith brand among key target audiences and stakeholders, including head teachers, English departments, librarians, students and parents. Schools that had access to a range of products specifically chosen to enable teachers to encourage an interest in reading among students have induced 75,000 potential beneficiaries. All these measures will help to improve the image of the company in the eyes of the people and will serve to generate a wider awareness of the company and its interests to give back to the company. Relationship management with the suppliers Suppliers are another integral part of the business equation. Firms have now understood that the type of relationship a customer wants with the supplier can itself be an effective way of segmenting markets around fundamental customer needs. This can lead to relation building resources on those customer groups where it is advantageous and mutually beneficial, and helps to keep lines of communication open thereby lessening any misunderstandings. An excellent relationship with the supplier will value add to the company and will be a support structure in catering to customer needs. There will be better access to wider skills and technologies and greater talent pools. This is also necessary to understand the customer needs and plan in advance for a diversified or an extended product or service. This however will require sharing of sharing sensitive information. This further emphasises the trust that will need to exist in the relationship that will be basis of information sharing. Misplaced trust will lead to information leaks and time lags. For example, recently, WH Smith ran a promotion along with Tiscali broadband services on the ISP's Internet telephony packages. WH Smith customers who choose a Tiscali SmartTalk package will also receive a free 5 WH Smith voucher. In this way, the customers are often lured by the attractiveness of the package, the broadband supplier is given a good target base to sell his wares and WH Smith will have a wider base to market his online stores. The top publishers in the UK that would include Bertelsmann, Hachette Livre, Pearson and News Corporation to name a few, are part of WH Smith supply chain, and trying to align themselves with the suppliers towards a common goal will help them build better relationships. Offering them exclusive high visibility counter space, scheduling book signing by the publisher's authors to create awareness among the public, and pushing their banner books are all ways in which both supplier and vendor can be mutually benefited by their relationship. Relationship with the Stakeholders Developing a relationship with stakeholders would be essential to move the business forward and would involve a certain amount of sharing of sufficient information to ensure that they are equipped to make a favourable decision. An analysis of stakeholders will get the right people involved at the right time. This will develop relationships that foster their support. Building relationships with strategic alliance partners and government policymaking or lobbying are advantageous. Having a close relationship with the stakeholders helps to document their needs, buying habits and communication preferences of the target group. This further allows researching and diversifying additional opportunities to serve the client. Sources "Richard Handover" 11th May 2000, Retrieved 23rd Dec 2005 from website http://www.justpeople.com/contentnew/People/Interviews/General/RichardHandover.asp "W.H. Smith" Retrieved 23rd Dec 2005 from website http://en.wikipedia.org/wiki/W_H_Smith#Trivia "WH Smith plunges into red" 14th Oct 2004 Retrieved 23rd Dec 2005 from website http://news.bbc.co.uk/1/hi/business/3741684.stm "Corporate responsibility Workplace" WH Smith PLC Retrieved 23rd Dec 2005 from Website http://www.whsmithplc.co.uk/grp/WHSPLC-CR-Community.htm "Start Ups- Customer Relationship Management" Retrieved 23rd Dec 2005 from website http://www.affinityworks.net/pdf/2003_01_aluminate.pdf George, W. (1990) "Internal marketing and organizational behaviour", Journal of Business Research, vol 20, no 1, 1990. Payne, Christopher, Clark and Peck (1995) "Relationship Management for Competitive Advantage" Oxford: Butterworth-Heinemann "Relationship Marketing" Retrieved 23rd Dec 2005 from website http://en.wikipedia.org/wiki/Relationship_marketing "Christmas Sales slide at WH Smith" 29th Jan 2003 http://news.bbc.co.uk/1/hi/business/2705575.stm "WH Smith- WH Smith TXT" Retrieved 23rd Dec 2005 from website http://www.bitc.org.uk/resources/case_studies/wh_smith_251.html "CMS and MLA Overview of the Book Market" Retrieved 23rd Dec 2005 from website http://www.mla.gov.uk/documents/fff_efficiency_04bookmarket.pdf Read More