Appropriate Marketing Strategy for Glenmeadie - Case Study Example

Strategy for Glenmeadie Case scenario: The Glenmeadie company is currently facing a marketing dilemma; it has invested heavily in its front end operations to improve its relations with its customers, which is an excellent short term strategy because it has produced a jump in sales which has far exceeded the Company’s expectations. But from a long term perspective, the efficacy of this strategy is questionable, because in effect, it is drawing resources away from product innovation as well as research and development which are vital to ensure that the Company is able to sustain its competitive advantage. This report assesses the marketing issues to be considered in this case scenario and provides recommendations on the strategy that is likely to be most effective in the Company’s present circumstances. SWOT Analysis: The strengths of the Company may be listed as follows: A distinctive and unique product that has consistently won awards A close and continuing relationship with its customers A well planned, funded and executed marketing strategy The weaknesses of the Company are: High level of expense on the marketing program Targeting bartenders and aiming the product at the mass market rather than the connoisseur of whisky Lack of adequate forethought and planning on long term strategy The most distinctive opportunity that the Company has is perfecting the new flavours of single malts that it could develop, thanks to its distiller, Ellis Cameron. It also has the opportunity to use its talented salespeople such as the apprentice distiller at the New York marketing event, who could be putting their skills of discerning the subtleties in taste and flavour to good use in maintaining the high quality of Gleanmeadie whisky. The threats the Company is faced with arise from the competition, where other single malt companies may seek to develop distinctive brands of whisky and attract the discerning customer that Glenmeadie may not be able to satisfy if innovation and development of new flavours is not adequately funded. The essential dilemma that the Company is faced with in determining its strategic initiatives is the question of whether (a) the high expense customer centred marketing approach is justified and must be continued or (b) whether the Company needs to pay greater attention to investments in long term strategic initiatives.(c) to what extent innovation and customer research must form a part of company strategy and (d) how the Gleanmeadie brand is to be promoted. The experts who have offered views on Glenmeadie’s present strategy and what future course of action it should pursue, display a wide range of differing options. David Herman suggests that there should be a careful balance between front end initiatives and product development, by developing the single cask bottling which would command higher profit margins and provide consumers with more individual choices. He emphasizes that Glenmeadie’s core brand must remain strong. Jeffrey Rayport suggests that the success of the front end initiatives have not necessarily been achieved at the expense of product innovation. Rather, the development of single cask bottling is more of a marketing initiative rather than a production strategy, hence Glenmeadie’s strategy should remain customer centric, because it’s working and enabling the Company to rack up impressive levels of sales. Stephen Dull offers the view that Glenmeadie’s marketing strategy may be flawed because it is not being targeted at the proper customer base, i.e, the discerning whisky consumer. As a result, it is focused more on drumming up mass demand and pulling in new customers rather than retaining a smaller, but more high end, loyal clientele. He offers the view that Glenmeadie should be focusing on the top 20% of its consumers who account for 80% of its profits and devising ways and means to turn them into loyal customers rather than on creating awareness of its brand through offering tasting trials. Joe Scafido suggests that the future strategy of Glenmeadie should be directed towards an integrated ad unified approach focusing on innovation, so that there is less dissension between the production and marketing departments by putting all the groups under one umbrella to focus on the different forms of innovation in the business of whisky making and marketing. At the outset, it is evident that the extent to which an organization is successful in the present day depends upon the extent to which it is able to sustain a competitive edge in the global marketplace. During the 1980s, this was gained through an emphasis on delivering a quality product or service, and this was the element that distinguished it from other similar products (Yanovitch, 2007). Glenmeadie appears to have already achieved this in the superior product that it has developed, which is high on quality. But as more and more organizations responded to the quality challenge in the 1980s and 90s and began to develop ways and means to improve the level of quality in the services that they were providing, quality has ceased to be as important in distinguishing and setting apart one organization from another and providing it a competitive edge. Most organizations were able to meet the quality challenge to the point where most products and or services were equivalent to commodities (Yanovitch, 2007). As a result, the single distinguishing factor which ensures that an organization can sustain a competitive edge is the customer experience, which in turn generates customer loyalty. Therefore, Glenmeadie may be heading on the right track by adopting a consumer-centric rather than a product-centric approach. As a result of the increasing levels of competition in the global business environment, customer expectations about products and services have however, also changed and become more demanding, with more and more customers becoming increasingly critical about the products they buy(Albrecht and Zemke, 1985). As a result, if Glenmeadie chooses to adopt a static policy on its products and fail to divert adequate levels of investment towards maintaining the superior quality of its product and sustaining innovation to develop and refine its product, then it is likely that fickle customers could shift to other products if their expectations about quality are not satisfied or if a superior product from another company becomes available (Harrington and Aklehurst, 2000). This is a very important factor which determines customer loyalty, because it is only when a customer is satisfied with the quality of a product he or she receives that continued patronage of the product is likely on a long term basis. Thus, the major strategic thrust of the Company should be directed towards developing and sustaining customer loyalty and directing its marketing efforts towards the development of a strong and loyal customer base. Loyal customers are an asset to retail Companies because they provide higher profitability in the long term and reduce operational and advertising costs, while also providing the Company with a competitive advantage. Loyal customers provide higher profitability in the long term and reduce operational and advertising costs, while also providing the business with a competitive advantage. (Frank, 1962; Carmen, 1970). Muffatto and Panizzolo (1995) propose that consistent consumer satisfaction with a product is one of the factors designed to provide a competitive advantage and one of the best indicator’s of a firm’s future profits. Brand loyalty and repeat purchases is one of the ways in which a consumer demonstrates his or her satisfaction with the performance and quality of the product. (Bloemer and Kasper, 1995). Therefore one of the best ways to conceptualize brand loyalty is to adopt a behavioral approach and to measure observable behaviors of customers, since that is a better indicator of actual customer intention as opposed to self reported intentions and declarations to purchase. It is also easier to measure behavior that may be observed to discern underlying motivation in repeat purchases of a product. Sometimes, repeat purchases may be merely through force of habit rather than out of loyalty to a particular brand and there may be several alternative motivations and dispositions that influence consumer purchases. ). Customer satisfaction is the leading criterion to determine brand quality, in terms of price, performance and quality of the product, including satisfaction with the ongoing business relationship and because it has met customer expectations. (Vavra, 1997). Customer loyalty has been defined by Dick and Basu as “the relationship between the relative attitude toward an entity (brand/service/store/vendor) and patronage behavior.” (Dick and Basu, 1994: 100). They have distinguished customer attitudes in terms of four different aspects: loyalty, latent loyalty, spurious loyalty and no loyalty. The first of these of course, is the most desirable attribute and according to Dick and Basu, it signifies a positive correlation between the customer’s relative attitude towards a product and repeated patronage of the product.(Dick and Basu 102). This suggests that customer loyalty may be governed not merely by behavioral displays but also by internal attitudes and motivational factors. According to Jacoby and Kryner (1973) brand loyalty is not only a behavioral response, it is also a function of psychological processes. Merely repurchasing a particular brand is not an indication of loyalty, rather there must be a commitment to that product which is based upon positive attitudes as well as repeat purchases. Glenmeadie’s marketing approach therefore needs to be more focused rather than continuing with the present wide ranging approach. In assessing the motivation and behaviour of customers who are likely to not only purchase the product in the future but are likely to become loyal customers, the Company must direct its advertising and promotional efforts through offers of tasting and customized services specifically to the whisky drinker rather than to the general drinking public. It must first take steps to conduct surveys to determine customer drinking habits and frequency of whisky consumption, as well as the features and qualities they look for in making purchases. Carrying out customer research in this manner and segmenting the market would be much more helpful to Glenmeadie in determining who its most loyal customers are likely to be, so that it can direct the major thrust of its marketing effort towards this market segment and also reduce its front end expenses in the process. Customer loyalty extends beyond customer satisfaction. A satisfied customer in the retail industry may not necessarily become a loyal customer. For instance in a study conducted by Reichheld and Aspinwall (1993), the findings showed that 90 percent of the customers surveyed, who had changed their supplier were actually satisfied with the service provided by their original supplier, but had not chosen to remain loyal to the latter. Kandumpally (1998) has suggested that one of the features that could inspire customer loyalty is specialized or customized treatment for repeat customers, such as for example offering discounts, reward points or monogramming of scotch bottles in Glenmeadie’s case. A customer who has a favourable experience with the quality of a product and finds himself treated in an extra special way when he purchases it again is likely to feel appreciated and valued as a customer and will purchase it again (Kandumpally, 1998). Similarly, customers are also likely to become loyal repeat consumers of the product or service if they perceive it to be superior to other similar products or services available in the marketplace (Kandumpally, 1998). The key to building brand loyalty towards a particular product or service is the concept of value differential, so that while two products or services may be completely similar, it is the perception of superiority about a particular product or service that will create brand loyalty in customers. The ultimate goal of creating brand identity for a particular product or service is to create attachment to the brand, which constitutes brand trust, image and satisfaction – all of which have a direct influence on consumer loyalty and influence the customer decision to repurchase the product or reuse the service (Esch et al, 2006). Hence, in Glenmeadie’s case, focusing on developing the single cask bottling suggested by Ellis may be very effective, especially in targeting the whisky connoisseurs who may be identified as potential customers, after Glenmeadie has carried out its market segmentation to identify its correct market base. On the basis of the above, the recommendations offers for Glenmeadie’s future strategy are as follows: The present customer centric approach adopted by Glenmeadie may be a step in the right direction. But this marketing approach must be refined by first carrying out consumer research and determining who its strongest and most loyal customers are likely to be, i.e, the discerning whisky drinkers and connoisseurs rather than the mass drinkers. In this way, future front end initiatives can be directed towards this market segment for highest returns on investment. Secondly, the major thrust of Glenmeadie’s marketing strategy should be to develop a staunchly loyal customer base and develop marketing initiatives such as customized service and rewards to develop such loyalty. Thirdly, the development of single cask bottling could be an important step in developing and sustaining customer loyalty by building up brand identity and trust in the long term. Hence, it is very important for Glenmeadie to develop and sustain innovation in the distilling part of its business, in order to plan for the long term. Lastly, Glenmeadie could develop a core team of professionals, including marketing professionals such as Nevin Wallace and production professionals such as Ellis Cameron to plan, develop and maintain company strategy. This would ensure that a unified approach is adopted in policy development and the resolution of problems through active interaction, communication and cooperation between the various departments. This strategy would be effective by firstly ensuring that the level of expenses on front end initiatives are reduced as the marketing approach is refined to make it more focused. It would also reduce promotional costs because loyal customers can contribute towards reduction in promotional costs. Secondly, it would ensure that innovation and product development are also adequately funded, so that the product and its brand image remains strong and can be sustained for years to come, guaranteeing the Company continued profits in the long term as well. Alternatively, the Company could continue with its present front end initiatives, which are directed towards a more broad based customer base and continue to develop its distillation according to the procedures it currently follows, without necessarily trying to introduce innovative measures, such as the distinctive flavours and taste that are being developed through Cameron’s techniques in using different kinds of wood casks. This may be a more expensive strategy for the Company and may cut into its profits further but it would ensure that the Company is able to sustain its sales over the long term as well. This is however, a more risky proposition, because it entails higher expense and the loyalty of the present customer base cannot be guaranteed over the long term. Bibliography * Albrecht, K. and Zemke, R. (1985) Instilling a service mentality: like teaching an elephant to dance”, International Management, 40(1): 61-67 * Bloemer J.M.M., Kasper, H.P.P, 1995. “The complex relationship between consumer satisfaction and brand loyalty”. Journal of Economic and Psychology, Vol. 16 pp. 311-329 * Carman, J.M, 1970. “Correlates of brand loyalty: Some positive results.” Journal of Marketing Research, 3: 67-68 * Dick, A.S. and Basu, K, 1994. “Customer loyalty: Towards an integrated conceptual framework.” Journal of the Academy of Marketing Science, 22(2): 99-113 * Esch, F, et al (2006), “Are brands forever? How brand knowledge and relationships affect current and future purchases”. Journal of Product & Brand Management, 15(2): 98 – 105 * Frank, R.E., 1962. “Branc Choice as a Productibility Process.” Journal of Business, (January): 43-44 * Jacoby, Jacob and Kryner, David B, 1973. “Brand Loyalty vs Repeat Purchase Behavior.” Journal of Marketing research, (February 10):1-2 * Kandampally, Jay, 1998. “Service quality to service loyalty: A relationship that goes beyond customer services”, Total Quality Management, 9(6): 431-444 * Muffatto and Panizzolo, 1995. “A process-based view for customer satisfaction”. International Journal of Quality & Reliability Management, 12(2): 154-169 * Vavra, T.G., 1997. “Improving your measure of Customer satisfaction: A guide to creating, conducting, Analyzing and reporting Customer satisfaction measurement.” WI: American Society for Quality. References: Nunes, Paul F and Driggs, Woodruff W, 2006. “What serves the customer best?” HBR Case study Read More