The Marketing Mix for Pets.com - Case Study Example

? Pets.com Case Study Analysis BY YOU YOUR SCHOOL INFO HERE HERE Pets.com Case Analysis The Marketing Mix for Pets.com As far as product, Pets.com emphasized vastness of merchandise offerings that would cater to a large variety of pets, including ferrets, turtles, and fish. Diversity of product was what differentiated the site from other competitors, both online and bricks-and-mortar, thus attracting more potential target segments. During the launch and growth period of Pets.com, product was one of the primary selling points along the marketing mix. Place was emphasized for convenience, providing new opportunities for consumers to get pet products without having to visit a bricks-and-mortar competitor. Place was important in the late 1990s as the Internet was just beginning to become part of consumer lifestyle and thus represented innovation in sales strategy. Furthermore, price was an important part of the marketing mix. This was reflected in the company’s guarantees for a flat rate shipping fee of $4.95 regardless of the volume and weight of the products being delivered. Sales and discounting incentives that provided further value also emphasized the company’s focus on pricing as a differentiation tool. Finally, Pets.com also utilized promotion effectively, gaining brand exposure through cross-promotional strategies with The Discovery Channel and Animal Planet. A very large expenditure to be included in the 2000 Super Bowl ad gave the company considerable promotional exposure and gained more consumer interest in the process. Analysis of Differentiation Strategy Diversity of product variety served to differentiate from other pet-related competition, illustrating that the business wanted to gain market attention and assist many different target segments. However, there were difficulties with this strategy as the company did not maintain the distribution and warehousing capacity needed to support this differentiation tactic. Further, holding costs of high volume inventories must be considered that include lighting, labor, and taxation that can significantly raise operating costs (Heizer and Render 174). Sales and discounting incentives also differentiated the business from competition. The advantage of this is that price-sensitive consumers are more attracted to the business model over competition. When offering a flat rate guaranteed shipping price, this also had advantages related to price. Furthermore, using expert consultations from experts in the pet field, such as breeders and scientists, gave the business more credibility and expressed perceptions of competence to many target segments. Some of the differentiation strategies were implemented successfully, including having expert information available to pet owners that gave the business a better market position under quality. However, discounting and high volume merchandise selection offerings conflicted the process of avoiding losses associated with operational budget. If the business had re-examined its low flat rate shipping policy and redetermined its distribution network strategy, it is likely the cost of goods sold would not have been so high and attracted more investor confidence and interest in common stock purchasing. The Product-Market Growth Matrix Analysis Adding horse products to the business model was a diversification strategy, branching into untapped or new markets with a new line of relevant products (Boone and Kurtz 218). The result of this strategy along the product-market growth matrix proposed by Ansoff is having presence in a new market where the business had not previously been devoted. The company’s diversification strategy, however, was not efficient, especially since the business did not have the capacity to sustain such high volume inventories and inventory holding costs. Horse ownership is a niche market and most consumers procure their products from local organizations and, because of this, it is not likely that Pets.com would have gained much revenue growth in an effort to lure horse enthusiasts to buy grooming and feed products from the online website. Pets.com should, instead, have pursued market development, tweaking existing products to provide new innovations. It would have been easier for the company to conduct market research with existing and potential customers using large participant samples to decide what products desired markets really wanted. By changing procurement to include products aligned with qualitatively or quantitatively-supported research data, the business could have better developed its market to fit the tangible needs of consumers. Furthermore, marketing research tells the business world that horse owners are usually very high resource consumers. They maintain an average net worth of nearly $1 million, spend large amounts of money on travel, leisure and luxury products, and have very high disposable income levels (Taylor 2). It is not likely that this target market would have been lured to Pets.com’s business model as they are not price-sensitive buyer markets and have the ability to procure products all across the country due to their ability to be mobile consumers. Pets.com’s Target Markets Using psychographic segmentation strategies, the business was able to lure its primary target market, middle-resource pet owners with price-sensitive buying behaviors. Psychographics, or the alignment of marketing communications and positioning related to lifestyle and consumption attitudes, is present in the business model used during the growth period. Having expert advice included on the website under the Ask-O-Matic strategy gained this attention from markets that needed competency and expertise to ensure a final decision for purchase. The Pets.com magazine that was used also provided lifestyle-related promotional strategy development that gained target market attention. Pets.com also maintained a mass market appeal due to its focus on diversification as a growth strategy and the volume of merchandise procured to satisfy pet owners ranging from traditional dogs and cats to more unique pets. These segmentation criteria included demographic knowledge as it seems that price-sensitive buyers were more attracted to the business model because of its discounting and sales focus. The case study tends to point toward generic targeting strategies more appropriate for mass markets as niche targeting would spend too many capital resources trying to gain attention from a single market instead of appealing to the broad market of pet owners across the country. What should have been done differently? First, if I was Wainright, I would have delayed the IPO to gain capital through common stock. Instead, I would have sought out independent investors and venture capitalists, along with traditional banking loans and credit, which would have provided more independence over the capital procurement processes. Dismal stock performance left the company at the mercy of investors, especially when providing potential investors with an income statement showing losses in 1999. Secondly, I would have conducted considerable market research for consumers that were used to working with such companies as PetSmart, a bricks-and-mortar and website-based company. According to two business experts, when a first mover in a market is able to provide satisfactory customer satisfaction, they will often look at late movers with skepticism and compare the late mover with the pioneer in the market with unfavorable evaluations (Kalyanaram and Gurumurthy 4). Pets.com did not seem to take into consideration that major pet companies with established brands had already built some consumer loyalty. I would have performed a competent and in-depth competitor analysis backed with supporting market research to determine what factors of PetSmart and other appropriate bricks-and-mortar competitors were satisfying customers. Based on this data, I would have established appropriate loyalty programs or benchmarked these success factors and included them in the operational and promotional models to gain more market attachment and long-term loyalty. Furthermore, I would have slowed the process of expansion until I had an adequate cash flow and could provide more justification to investors about why it would be a good investment decision to purchase common stock under the IPO. The business was unprepared for competitor response from PetSmart, which immediately opened an online sales presence to outperform Pets.com. I would have developed contingency positioning plans in the event that competition was able to replicate my competitive advantages. References Boone, Louis and David Kurtz. Contemporary Marketing. 12th ed. Thompson South-Western. 2007. Print. Kalyanaram, Gurumurthy and Ragu Gurumurthy. Market Entry Strategies: Pioneers versus Late Arrivals. Wright University. 2008. Web. February 5, 2013 Heizer, Jay and Barry Render. Operations Management Flexible Version Package. 7th ed. Prentice Hall. 2004. Print. Taylor, Morgan. Sponsorship Opportunities for Equine Production Inc. 2012 Hunter/Jumper Horse Shows. Topline Equestrian Marketing. 2012. Web. February 8, 2013 Read More