Marketing Management of Wal-Mart - Research Paper Example

Wal-Mart marketing John Dicker in his latest book, "The United s of Wal-Mart" places these astounding statistics. "If Wal-Mart was a nation," Dicker writes, "its GDP would be larger than eighty percent of the world's countries." Dicker also claims that every 38 hours Wal-Mart unveils another 200 thousand square foot super center. Thirteen new lawsuits are filed against it each day. Its 2003 turnover rate was 43 percent. In 2004, a full time worker averaged $9.64 an hour for a 32-hour week commitment. A clerk working at Wal-Mart will hear approximately 475 blips from her scanner per hour, these scans will then appear within the hour at the company's headquarters via its 460-terabyte computer system. This computer system, according to the New York Times, carries more data than the entire Internet. " Wal-Mart themselves on their website claim, "Wal-Mart Stores, Inc. is the world's largest retailer, with $285.2 billion in sales in the fiscal year ending Jan. 31, 2005. The company employs 1.6 million associates worldwide through more than 3,700 facilities in the United States and more than 2,400 units in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Germany, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico, South Korea and the United Kingdom. More than 138 million customers per week visit Wal-Mart stores worldwide" With such data that speak for themselves, the mass retailing giant must be doing something right. Marketing may be defined as any gesture executed to create, satisfy, and keep customers. Wal-Mart seems to have mastered the art of bringing in customers to their stores as well as retaining them. It has aligned itself unerringly with the six P's of marketing comprising of price, product (or service), place, promotion, people, and positioning. These six components constituting the marketing mix, when combined to make a winning combination are the basis of a growing business. Walmart's marketing strengths may be attributed to the following three main factors: Low cost- Always! Wal-mart's marketing is all about the customer-oriented merchandising. Wal-mart's own unique strategy right form the beginning has held it in good stead. Responding to a customer's requirement of low cost, high value and all under one roof convenience, Wal-Mart squeezed its suppliers, economized on all fronts, and passed onto the savings to the customers. Its widely publicized jingle, "low cost- Always" with a sunny yellow smiley face logo has created an extraordinary perception of low price that has sent shoppers flocking to its aisle. Although, Wal-Mart does less at a very low cost, there are a few items where Wal-Mart is not the cheapest, but people buy it nevertheless, due to the perceived image. Wal-Mart carries 150,000 items beneath one roof thereby making it a one-stop shop for the purchase. This is an added benefit for Wal-Mart in that not only people are offered more choice, but go through their entire shopping list in a single store setting Walmart's cash registers ringing. Unlike its competitors, Wal-Mart, except for a few seasonal sales does not depend on sales for its revenues. While other competitors lure customers in advertising a few products on sale, while hinging on the belief that this will trigger other purchases. Wal-Mart just banks on the perception that the entire merchandise is competitively priced and the customer can pick up any item, based on the contention he is getting the best bargain no matter what he loads his cart with. With merchandise placed within easy access, Wal-Mart associates are more involved in stoking shelves and offer minimal service and this further reduces costs for Wal-Mart. Customer-oriented marketing was successfully employed at Wal-Mart where the employees were utilized to understand the needs of the customers and the methodology of how they make their choices of products they require. In this way, the research was kept straightforward and simple, and Walmart's marketing was closely aligned to customer needs. The most sophisticated logistics and distribution system Wal-Mart has enormously benefited from adopting a highly sophisticated leading edge technology to lower relentlessly its cost of operations. It has invested in excellent inventory control and central distribution system. The company's headquarters is involved in the purchasing and most of the buying is centralized. The items are collected and delivered to the retailers or directly delivered to the local Wal-Mart's as required. As the sales occur and the inventory goes down, a centralized computer system keeps track of the goods that need to be replaced on the shelf as per the consumer need. This continuous tracking of information serves two purposes. Firstly, it keeps tracks of items that move quickly as well as slowly and allow the level to be adjusted so that sufficient but not surplus inventory resides in stock. This saves a lot of value locked up in inventory storage. Secondly, this information allows sufficient time for reordering that facilitates the store to restock so that when the demand for the item arises, the item is ready to sit on the shelf, thereby not missing a single sale due to unavailability. Wal-Mart has perfected this system to such a great deal that it has contributed greatly to its success in keeping its costs low. Discount Store News reported that Wal-Mart's distribution costs amounted to only 1.3 percent of its sales, compared to 3.5 percent for a major competing discount chain and 5.0 percent for a major general merchandise chain. This is a great marketing strength for wal-Mart that its competitors were not able to duplicate. Pressure on suppliers to keep its costs low Wal-Mart has come under a lot of fire in the policy of its suppliers. Because of the enormity of the volume of procurement by Wal-Mart, suppliers were often put under immense pressure to supply at the lowest possible costs at very low margins. Wal-Mart is supposed to have done a thorough check into the financial situation of the suppliers, scrutinized their processes to inject utmost economization to cut costs and insisted on the highest level of efficiencies. The suppliers were forced to re-engineer themselves, in terms of quality, price and processes in order to meet the stringent demand that Wal-Mart placed on them. Wal-Mart offered accurate timed delivery schedules for its suppliers that had to be strictly adhered to. It is also known for giving many a supplier the boot when unable to meet its demand. It had a second-in-line list of suppliers who were invited in when one of their current suppliers were booted out. On its own website when it invites applications, Wal-Mart insists that the suppliers absolutely understand the cost structure of Wal-Mart and demonstrate how they will be able to value add to the company by low costs and innovative products as well as lure customers by attractive packaging to compete with the item currently on the shelf. Overall, these measures of marketing, while coming under microscopic scrutiny, also served keep the prices low for its customers. Futuristic Business marketing efforts Wal-Mart has now moved into business marketing for its consumers. While consumer marketing induces customers to pay a higher value for a product over and above a generic brand, business marketing tries to grant the lowest total costs to the consumer. Price is a major factor for many buyers but selective buyers look for value beyond price. While " branding' is based on a lot of factors other than a perceived value, Wal-Mart is trying to move a step ahead by involving the customer into understanding the value of total economics of the product as opposed to" branded products". It has vigorously started promoting "Store brand" or "generic brand" by offering the same quality of nationally branded products at way lower prices. These products are strategically placed right next to the "branded" products attempting to educate the customers to understand than low cost does not necessarily mean low quality. A tag affixed to shelf urges the buyer to "Compare to" a branded product. A slightly higher price may offer better advantages. In effect, Wal-Mart has decided to involve the customer at the highest level possible by letting him comprehend the highest economies of scale and benefit by it. Wal-Mart struggles with negative PR Its huge size that is its strength has also put Wal-Mart in the limelight and served to put its actions in the public eye. Wal-Mart has constantly been criticized for various issues. The same marketing strategy that has contributed to its phenomenal growth has also been the cause of it being bad-mouthed. Suppliers who could not keep up with the demands of Wal-Mart were booted immediately and replaced by another one. These suppliers often went out of business or filed for bankruptcy because suddenly replacing a client the size of Wal-Mart was impossible. Hence, this has created many upsets and evoked a negative image about the ruthlessness of Wal-Mart. While it insists that its suppliers keep costs to the minimum, it has also tried to keep prices low by cutting unnecessary expenses. Here again, Wal-Mart has been criticized for paying its employees extremely low wages and poor healthcare benefits. The average Wal-Mart employee is supposed to earn approximately $20,000, which is below the poverty line. The working environment and facilities offered for its employees have found to be lacking. Its supervisors have been accused of not paying overtime to its employees while extracting work from them. Wal-Mart has been slapped with discrimination against women lawsuits, and has been accused of employing illegal immigrants for cleaning its stores. The fact that Wal-Mart has not joined the union has been a cause of disagreement for years now. It has resisted this move much to the chagrin of the nation-wide unions. It has been faulted for gobbling up huge chunks of land in suburban landscapes outside town to avoid taxation and building concrete jungles of super centers and huge parking lots. Needless to say, it has the reputation of closing down many a local shop, since they lose their niche business to the mass retailer unable to compete with the prices of the giant retailer. All these have added up to Wal-Mart being compromised in the eyes of the public. Wal-Mart fights back Wal-Mart was usually a less inclined media player. Its marketing campaign primarily consisted of television commercials that emphasized "low cost always" and people claiming that they found everything they wanted at Wal-Mart. Its newspaper and magazine flyers were often restricted to seasonal periods. However, to counter its mounting criticisms and ill will, Wal-Mart has launched a counter attack using all its ammunition and has faced its accusations head on. It website addresses each issue and explains its side of the coin. In the case of gender discrimination, it claims, "Sixty percent of Wal-Mart associates are female and currently approximately 40 percent of our managers are women including professionals like pharmacists and opticians. We have been steadily increasing the percentage of women in management for years, and have in place diversity initiatives to ensure that promotions of qualified women and minorities are consistent with the rate they apply for these jobs." In the overtime issue, the website refutes the allegations saying they have not been proved and that they do not want any employee to work even an unpaid minute. For the first time, Wal-Mart invited a horde of PR experts from Edelman, Chicago to Bentonville, Arkansas to kick start its biggest media blitz ever. Wal-Mart's CEO H. Lee Scott said in a January interview with USA Today "the mega store was taking its proactive media campaign to "the very local level," something that undoubtedly will require making friends out of miffed local editors." Wal-Mart, which often preferred television for its campaigns and shunned local newspapers for advertising, was met with a cold reception from the community newspapers. Wal-Mart slightly mollified the public by its efficient help rendered to Hurricane Katrina victims and the way its associates volunteered their time and efforts to help. It has gone "green" and lists its recycling effects on its website proclaiming, "We recycled 2.8 million tons of cardboard, 9,416 tons of plastic, 262 million aluminum cans, glass containers and plastic bottles and 49 million disposable cameras." What can Wal-Mart do to continue to grow and enhance its image Wal-Mart is a force to reckon with. Wal-Mart has to learn to follow in the footsteps of Nike, who woke up to its negative publicity and took action before it too late. Wal-Mart should also remember that the discerning public is watching its every move and it needs to respect public opinion. Wal-Mart has its size, strength and power that it can put to good use. Its huge size is also the reason that it is in the limelight, and therefore it needs to tread carefully to revamp its image. The best goodwill it can build is to look after its employees. With a mammoth effort, it will be able to increase wages and health care benefits to a decent level and still maintain it competitiveness in the market. Being fair and indiscriminate and have decent working facilities will go a long way to show that it cares for the "Wal-Mart family". This will earn respect for the retailing giant, and its employees will spread the word, which is the best form of publicity it can ever generate to boost its image. It can build landscaped gardens and lawns near its concrete Wal-Mart centers transferring them from being eyesores to being easy on the eye. Enhancing its store interiors and sprucing up the aisles will give it a better upbeat look. Having sections that sell "premium" or slightly "up market" wares for that "special occasions" will help to lure the more affluent into it stores. It can create a "specialty" corner within its stores to display and sell local wares for a percentage of the sales. In this way, it benefits as well as receives goodwill for keeping the local community alive. To enhance its image further, it can offer services like gift-wrapping during festive seasons, in-store credit, and special home delivery for higher volume orders etc. Hosting small play areas manned by a trained caretaker within its premises will help the customers' shop unhurriedly increasing sales and image. While Wal-Mart is a global name, it can target foraying into international markets like China and India, where the potential is very high due to the immense population. At the same time, these countries being developing nations, Wal-Mart has a lot of scope to make a difference by involving itself in genuine upliftment projects in these nations and improve its PR image. Also being in different markets internationally will give it a cushion to counter the various economic fluctuations. Keeping in touch with the local and national media and remaining on good terms with them will keep them in good stead in the public eye. Commercial spots and ads illuminating them as being involved in charity and non-profit organizations will help their PR image. Conclusion Wal-Mart is a powerful corporation. It has established itself and survived all the vicissitudes due to the sheer strength of its marketing strategies. It has offered the customers low cost goods at high quality, all under one roof and great convenience. It does have some obstacles in its PR image, but Wal-Mart is a master of strategy and will find a sensible way as always to get over the top of this and reign supreme. Importantly, it needs to show that it cares, and what better way than to cherish its employees. That more than anything else, will reveal to the public, that it is a company with integrity and compassion and it will be the best PR ever. Sources Wal-Mart Key Topics Retrieved from Website http://www.walmartfacts.com/keytopics/ 16 December 2005 The Age of Wal-Mart 1 August 2002 Retrieved from Website http://www.marketresearch.com/map/prod/805195.html 16 December 2005 Walberg, Robert Can Wal-Mart's PR campaign save its stock 14th April 2005 Retrieved from Website http://moneycentral.msn.com/content/P114414.asp 16 December 2005 Hearn, Kelley Wal-Mart's Wily Ways 13 April 2005 Retrieved from Website http://www.alternet.org/mediaculture/21724/ 16 December 2005 Berner, Robert Can Wal-Mart wear a white hat 22nd September 2005 Retrieved from Website http://www.businessweek.com/bwdaily/dnflash/sep2005/nf20050922_6448_db016.htm 16 December 2005 Kotler, Milton Business marketing 201 Wal-Mart Retrieved from Website http://www.kotlermarketing.com/resources/miltonkotler/pearls/p36.html 16 December 2005 Kotler, Philip Marketing Management Prentice Hall, Millennium Edition Read More