Effective Marketing Strategy in Retail: Simon and Smith - Case Study Example

Case Study about Retail Management INTRODUCTION The purpose of any business either big or small is to bring in s to increase sales and definitely to have more profits. This purpose can only be achieved through a marketing strategy that is ongoing and current. In the case, Simon and Smith are partners in a medium-sized specialty store for women which currently experiencing a good business condition in terms of profits, efforts, good employee relations, and customer service. In other words the business has developed and maintained the important opportunities of a sustainable competitive advantage. However, the case is surrounded with so many challenges because today’s retailing world is vastly covered by competition. The future will be reshaped by the emerging trends where it illustrates on what the business is experiencing today will surely be changed when tomorrow comes. This is the reason why critical knowledge about fast changing trends must be integrated into the retail strategy to drive opportunities. The business must plan ahead of time before it will lose its competitive advantage. The main thrust of this paper is to analyze the different positions of Simon and Smith in their store’s direction as well as the alternatives that would help in looking for potential changes and opportunities. THE PARTNERS POSITION WITH JUSTIFICATION ON EACH OPINION Simon and Smith had different views in terms of directing their store in order to stay ahead of the competition. Simon seemed to be satisfied with the current performance of the business. Furthermore, he said that as long as they will be using the same retailing strategy for the coming years, the business will remain to be at the top of the competition. He was not in favor on the idea of attracting young customers for the reason that both of them did not have enough knowledge on the nature of the new segment and it might drive away their loyal customers. On the other hand, Smith was less satisfied compared to Simon because he was worried on the foreseen intense competition. He wanted to change the retailing concept and the growth strategy of the business to be more prepared when competition arrived. He presented potential changes in the customer base of the business and discussed important opportunities to develop sustainable competitive advantage. The opportunity was on how to attract younger customers as the new target audience. Instead of putting all efforts on customers whose profile ranges from 35 to 50, the business will now shift to a larger audience which is the young generation. “The retail sector is one of the most competitive in the business world, and so marketing strategy is needed in order to be successful” (Amos, 2006). This strategy must be ongoing and current to avoid trailing behind the competition because this is a critical factor that would define success (Barrett, 2002). To attain an effective retail strategy, a well-defined target market must be considered first. The retailers also need to have an intimate knowledge on the nature of the business, and understand the intensity of the competition by doing an extensive market research. Competition and approaches in the market should be analyzed because the gathered information will be used to shape an effective retail market strategy. Once a change in the retail environment takes place, it will be easy for the business to survive and prosper because of retail strategy. Simon has a point when he did not consider the strategy suggested by Smith because it is a fact that catering the needs of younger people is unknown to them and it might be detrimental to the old customers. However, being farsighted when it comes to competition and future challenges as the stand point of Smith is more valuable. According to James Canton, CEO and chairman of the Institute for Global Futures, “Firms must analyze the top trends, scenarios and strategies that will shape the future of their industry. “Whether the future is one minute or one year from today, they need to be prepared to face the future challenges and risks” (cited in Ravindran, 2008). Following an effective growth strategy is the needed framework, either the partners will pursue with the existing customers (market penetration) or reposition its retail offer to attract new segment (market expansion). ALTERNATIVE COURSES OF ACTION: ADVANTAGES AND DISADVANTAGES Alternative courses of action can help in making a good and sound decision. The challenge that Simon and Smith must have to face is on how to match their retail strategy to the changing needs of their target market. Currently they are only serving the customers with a profile between 35 and 50 and do nothing to attract younger customers. Now, they are planning to develop their retail format to look for potential changes and opportunities in their target market. The first alternative that they can take is to focus on meeting the needs and demands of their current target market (old customers) who are at the same time their loyal customers. This alternative is also called market penetration. Advantages. Market penetration is the least risky among other alternatives because the retailer is using the existing market in the existing retail format (Pradhan, 2007, p.112). In retailing, focusing on the loyal customers is an on-going opportunity that will leverage the impulse of shoppers. If the business wanted to grow, the effort must be on the 20% customer base because it made up the 50% of the sales (Hunter, n.d.). The people that are loyal to the business are reluctant to patronize the competitive retailers because they felt an emotional attachment that they are being valued. These people should be valued more than the new ones for them to stay much longer. They are committed to the business to the point that they will serve as a good instrument in advertising the products. Another advantage is on the adjustment of the offered services wherein a small amount of investment is needed in developing the retail format because it involved the same target market. Having a clear target market audience will offer a communication that is more precise and focus and all of the investing effort will be in one customer pool (Rito, 2010). Disadvantages. The usage of market penetration must have a back-up strategy because when it reached the saturation point, the result is not desirable anymore. In other words, time will come that focusing only on one type of customers will not help the business anymore. Although valuing the old customers has built customer loyalty, the business at the same time must not forget that attracting new customers is part of the top priorities. If the retailers are one sided, they will surely be left behind by the competitors who are catering both of these customers. Since the customers are getting older and the younger people are growing in number, then it is the perfect time for the business to grab this opportunity. The second alternative is to attract young customers as the new target market audience and be part of the retail strategy to stay ahead of the competition. This alternative is also called market expansion / development. Advantages. Market expansion takes place when other strategies have reached its saturation point and changing a customer base is needed (Pradhan, 2007, p.113). Attracting the young people as the new customers did not mean that the old customers are being left out. The retail strategy will only be adjusted on acquiring new customers while existing customers are retained because it is important to understand that different customers have different needs and demands. The business will grow in a profitable relationship and at the same time it will create a valuable competitive advantage. The retailers must acknowledge that the young generation constitutes a large population compared to the old market. Therefore, this innovation strategy would surely bring more profits to the business. Nobody can tell the intensity of population growth in Brookline if the place becomes more industrialized. If this will happen, for sure several shopping centers will arise and a fierce competitive environment will be created. For the business to cultivate an internal framework, purposes and culture, it must rapidly adapt to the new opportunities no matter what are the threats and challenges involved (Barnett, 2008). Disadvantages. This strategy involves a greater risk and capital because the retail offer needs to be reposition to make it more appealing to the new segment (Gupta & Randhawa, 2008, p.164). Before the retailers decide to discuss opportunities, they should investigate, analyze and understand the market to get all the necessary information. In other words attracting new customer requires a lot of time, money and effort to be exerted. RECOMMENDATION FOR SIMON AND SMITH’S FUTURE Before retailers would decide on which direction they will go, it should analyze first the opportunities and challenges that they will be facing. They should consider their capabilities as retailers and also the attractiveness of the retail’s market. The business can adapt the market position matrix or competitive position matrix to determine its position in terms of market attractiveness and retailer’s competitive position. In terms of growth strategies and alternative in retailing, retailers may pursue: market penetration, market expansion/development, retail format development and diversification. Simon and Smith need not to argue about the retail strategy that they will be using because the alternatives presented are both necessary for the business. They can engage in market penetration opportunities and at the same time pursue a market expansion opportunities. The two partners can still generate more sales from the loyal customers by increasing its retail marketing activities. They can apply price reductions, improve the visual merchandising to leverage the impulse of shoppers, increase promotions, implement retail mix to have a distinctive image relative to the competitors, and increase customer loyalty by adapting more loyalty programs. They also at the same time need to consider the potential changes in customer base by attracting younger customers. Although the challenges and risks are present, they have to accept the fact that emerging trends change in a fast and complicated way. They can attract the young market by increasing the number of existing outlets in a new retail format and reposition the product in a way that it looks appealing to the new segment (Gupta & Randhawa, 2008, p.164). CONCLUSION In summary, the case of Simon and Smith involved many challenges that a retailers must face. One of those is to determine the right strategy to respond the changing needs of the target market. Every strategy contributes success for every retailing company with the help of an adequate framework. Finally, market penetration and market expansion/development are essential strategies that help the two partners in seeking a valuable position of sustainable competitive advantage. They only need to investigate, analyze, and understand the changing trends especially in terms of competition to retain a favorable standing in retail. Reference Lists Amos, J. A., 2006. Effective marketing strategy in retail? [Online] Available at: http://ezinearticles.com/?Effective-Marketing-Strategy-in-Retail&id=397008 [Accessed 06 October 2010]. Barnett, G., 2008. Application management: Challenges in the retail industry. [Online] Available at: ftp://public.dhe.ibm.com/common/ssi/ecm/en/gbw03041usen/ GBW03041USEN.PDF [Accessed 06 October 2010]. Barrett, M., 2002. Retail marketing strategy for small business. [Online] Available at: http://www.essortment.com/career/retailmarketing_sphv.htm [Accessed 06 October 2010]. Gupta, S. & Randhawa, G., 2008. Retail management. New Delhi: Atlantic. Hunter, M., n.d. The 5 types of customers. [Online] Available at: http://sbinfocanada.about.com/od/customerservice/a/customertypesmh.htm [Accessed 06 October 2010]. Pradhan, S., 2007. Retailing Management 2E. New Delhi: Tata McGraw Publishing Company Ltd. Ravindran, N., 2008. Predicting the future so as to remain competitive. [Online] Available at: http://www.entrepreneur.com/tradejournals/article/187622262.html [Accessed 06 October 2010]. Rito, B. T., 2010. Who is your target audience? [Online] Available at: http://shetakesontheworld.net/2010/07/who-is-your-target-audience.html [Accessed 06 October 2010]. Read More