Major Factors Affecting Waterstones Marketing - Essay Example

Running Head: Marketing Marketing [Institute’s Marketing Environmental factors affecting Waterstones Marketing Marketingdoes not take place in isolation; in fact, it remains in a constant dialogue with the micro and macro environment. The former consists of the company itself, customers, suppliers, marketing channels and competitors. The latter is a sum of larger forces which could be environmental, cultural, societal, technological, political-legal, economic and demographic. Like any other company, Waterstones is facing an ever changing and turbulent marketing environment to which it should respond in an effective manner (Armstrong et al., 2009, pp. 52-53). The greatest force, which is influencing Waterstones, is the technological revolution of eBooks and the rise of digital gadgets that are offering large contents of online books, which can be accessed at a single click of the customers. Furthermore, more and more publishers and writers are now offering their books on the internet. On the cultural side, the era of library and paper books is quickly fading away. People today live busier lives and believe that they have too much to catch up on. Therefore, the “gadget culture” is prevailing where people conduct almost all their operations and duties with their cell phones, laptops, tablet devices and others. From booking an airline ticket to sending a birthday card, from shopping for grocery to ordering a pizza, from reading the newspaper to watching movies, everything is now happening online. This online or e-book mindset will further support such companies. The economic environment, which can be characterized by economic recession and its continued impacts, is dampening the sales of books. The statistics for the first half of the year 2011 reveal that book sales and volume have been decreasing even the export of books from UK is also on decline. In the midst of this recession, the digital book sales are growing at an exponential rate. To be exact, the growth for the first half of the 2011 for digital book sales was over 37 percent compared to first half of 2010. The total size of the digital market now stands at 180 million pounds which now represents over 7 percent of the total book sales (digital and physical combined) in the UK. Another important development for Waterstones in the political-legal front is the fact that the government seems enthusiastic and determined to stop any online piracy. Even as today, when the eBook industry is in its infant ages, there are many eBooks available on the Internet, which infringes the copyrights rules. The UK government is hopeful to bring the Digital Economy Bill so that any illegal eBooks should be removed from the site. Furthermore, both Amazon and ePub have created mechanisms where friendly lending is not possible. The only way to lend online books is to register the account for multiple devices (up to six) and then transfer the file. Since it is an encrypted file, it is highly unlikely that any file transfer would take place between users. On the other hand, the imposition of VAT on eBooks sold in UK may end up being a disadvantage for the eBook retailers. Moreover, as people become more and more aware about the environmental issues, they might switch to the digital books because of the number of forests that need to be cut for creating pages for every book. Digital books, on the other hand, pose no such threat to the environment. Segmentation for Waterstones Segmentation refers to the process by which marketers divide the target customers into different subsets that share certain characteristics. There are only a few organisations as of today that do not engage in segmenting their customers are which are not aware of the segments in their target market (Pickton and Masterson, p. 85). Segmentation is the most efficient way to appeal to a boarder range of customers by understanding the dynamics and variables that could trigger their purchase. Waterstones can segment their customers in terms of demographic and behavioural characteristics. There are many demographic variables but the most suitable for Waterstones are the variables for age and gender (Cant, et al., 2009, pp. 285-286). People from different age group tend to pay different types of books and have varying buying decision-making process. Young boys and girls may look for educational and technical genres, whereas, people in their late 30s and 40s may go for more sophisticated and classy themes. Furthermore, men and women are less likely to share similar reading habits. (Kurtz, et al., 2010, pp. 41-42) Where prefer genres like crime, fiction, history, science and others, women are more likely to choose, romance, religion, plays. Furthermore, women are also more likely to purchase for their children as well. Under the umbrella of behavioural segmentation, variables such as benefits, occasions, user status and loyalty play an important role. With its loyalty cards, Waterstones has already segmented its market into regular, frequent, occasional, first time and previous users, each of the group requires a different market strategy. Furthermore, there are buyers who visit the stores on certain occasions and there are buyers who visit in different seasons, each group is different from the other. Buying Decision Making Process Since customers are at the heart of marketing orientation, companies know that they cannot be successful in the absence of any understanding of the decision making process that buyers go through (Pride and Ferrell, 2007, p. 148). Typically, the buying decision process is a five-stage model, which consists of stages of problem recognition, information search, evaluation of alternatives, purchase decision and post purchase behaviour. However, the fact is that the buying decision making process of book store and online books consumers is much more complicated (Armstrong et al., 2009, pp. 52-53). This is true because the customer loyalty in both cases, physical and digital books, is low therefore, the decision to enter into a shop or not, buyers make this decision in less than four seconds. In other words, the retailers have only four seconds to convince the buyer, with the outlook of the stop and books shown through the window glass, to enter the shop. Furthermore, research reveals that buyers are more likely to be buying on impulse, which means that their purchase decision would be influenced by situational and secondary factors. The colour of the book, the quality of the cover and pages, the title, background music, the length of the book shelve, any previous association and any entity in the subconscious mind of the consumer may decide the purchase of the book. Furthermore, due to this impulse-based purchase, the dealing of the staff, knowledge and suggestions may also end up playing a decisive role. While purchasing books through physical stores, convenience of stores also plays an important role since the customers are more likely to stay within a certain radius from their work and home while purchasing their books. When consumers go online for purchasing their books, price becomes an even more important criterion. This is not because of the fact that eBooks readers are more to be price conscious because of their middle class social status but this is true because price is only comparative characteristic while purchasing online (Lancaster and Massingham, 2010, p 45). Online purchases take away all the physical features of the book such as weight, colour, price, and shelve space, dealing of staff, and others become irrelevant. Customers can log on to three-four sites and compare the price at the same time and the purchase may be decided by the difference of a few cents. Furthermore, psychological pricing such as 14.99 or 5.49 may also help in creating a perception in the minds of customers that they are paying lesser for a book. In addition, the colourfulness of the webpage and the reviews of the readers take more weightage in determining the purchase. As mentioned earlier that online books cannot be gifted, therefore, most of the customers belong to academia that look for online books. Therefore, technical books which are updated for their latest editions are more likely to be in greater demand. Therefore, online retailers who keep a healthy stock of such books may be able to benefit because in these cases, the bargaining power of the customers is very low and online retailers may even charge a premium price. Buyers may also consider factors such as speed of the download; the compatibility of the book with other software, mobile phones and PCs may also influence the purchase. Marketing Mix of Waterstones – 2008 and Present Day Marketing Mix refers to the four Ps of marketing which are price, product, place and promotion. Price, one of the Ps of four Ps of marketing, is an important element of the overall marketing mix. It has appeared that Waterstones has been using market skimming, for physical books, and market penetration pricing for its eBooks. Market skimming refers to the process of setting high prices for products when they are in great demand and gradually decreasing these prices thus generating maximum possible revenue from each customer (Loudon, et al, 2004, p. 48). When a book is new, Waterstones may charge high price for the same and with the passage of time, it would decrease those prices to induce the price sensitive customers for purchases as well. For its eBooks, Waterstones is new in the market and it is currently trying to expand into the market which it believes it can do with the help of setting low prices (Marshall, et al., 2009, pp. 78-79). One change from 2008 to 2011 in terms of price is that the company appears to be having distanced itself from psychological pricing. Most of the products of Waterstones now have flat and straightforward prices. The company’s product is of books, both online and physical, which has not changed much from 2008 to 2011. However, in terms of physical book sales, the packaging of the book, title, cover, colour, price, quality of the pages and other such factors play an important role in determining the purchase and in fact, they end up being a part of the final product. Furthermore, the company also sells gifts, stationary, cards and others which amount for a small portion of the company’s revenues in 2008. However, since then, the company has been trying to rely heavily on these ancillary items, a strategy which has backfired greatly. In terms of place, Waterstones is now more focused towards its online as compared to three years ago. The company realizes that the eBook industry is growing and within a decade, it may end up dominating the company’s total sales. With the rise of internet in operations, the inventory costs are expected to go down. The company expects to save money in that regard. However, one change compared to 2008 that has emerged is the problems that the organisation is facing in terms of distribution. Staff in different stores has started complaining about the delays in distribution and in some instances, stores have had to contact third parities for the delivery of books on certain timely occasions. The famous promotional scheme of two-for-three is no longer in place in 2011 which was present in 2008. The current management believes that the strategy has been place for too long and time has come to revamp the strategy completely. Furthermore, this is not suitable for books because every book is different and where do you find three more books that fit your taste. This may work for products that are no differentiated. Therefore, the organisation now has implemented “local insight and curiosity programs” that allow the local chains to come up with their own promotional programs keeping in view the fact that the tastes and preferences of different consumers are different. In addition, in order to promote themselves, the company has now come up with YouTube videos which act as trailers to promote the new book launches. Problems and Recommendations There are no doubts in the fact that Waterstones is facing great troubles as of today since the organisation reached the point of near bankruptcy. In order to boost its sales of physical books, it will need an extremely talented work force which could persuade the customers. As mentioned earlier that much of the purchases take place on impulse and a talented workforce can play an important role in triggering that impulse of customers to purchase certain books, given that the marketing workforce has been given enough training to persuade the customers. Furthermore, their training should also include in cultivating relationships with their customers. Relationship marketing has created much buzz on the marketing arena where marketers focus on creating relationships, which could help them in retaining customers (Kotler and Armstrong, 208, p 96). Currently, the company is spending hundreds of dollars on improving its design, outlook, infrastructure and others in order to attract new customers. However, the fact is that the cost of attracting new customers is five times more than retaining customers. Furthermore, if the company can satisfy and delight their customers, those customers will engage in word of mouth advertising that would bring in more customers (Pride and Ferrell, 2007, p. 148). Another approach to boost the sales and engage the existing customers would be by inducing them to refer their friends, family and colleagues to the shop and websites of Waterstones. Under this referral program, customers who introduce new customers to the company would get gifts and discount on every first few purchases of those new customers (Cant, et al., 2009, pp. 285-286). This would not only expose the company to many new customers but at the same time, it would also engage the previous customers. Furthermore, in order to market their online presence, Waterstones should promote themselves on the social media, twitter and facebook so that customers could know better about their presence (Peter and Donnelly, 2010, p 341). References Armstrong, Gary et al. 2009. Marketing: An Introduction. 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