Contemporary Retail Marketing - Research Paper Example

Contemporary Retail Marketing Table of Contents Situation Analysis 2 2: Goals and Objective 2 3: Target Market 3 4: Proposed Strategy 3 5: Price4 Approaches and Pricing Options 4 Channel-Specific Pricing Approach 4 Omni-Channel Pricing Approach 5 Combination-Pricing Approach 5 Cost-Based Pricing Option 6 Demand Based Pricing Option 7 Alternative Options 7 Objective of Pricing 8 Liquidity Objective 8 Alternative Objectives 9 Pricing and Its Relationship to Value 9 Involving Factors 11 Technological Factor 11 Regulatory Factor 11 6: Conclusion 12 References 13 1: Situation Analysis Lloyds Bank plc is a British based financial institution, which is specialised in providing banking services to its customers in the UK. The bank deals with the business activities that encompass corporate banking, retail, investment provisions, life insurance and pensions. There are certain issues being faced by the UK banking industry out of which the happening of worldwide economic crisis is the prime one (A. T. Kearney, Inc., 2009). In relation to the strengths of Lloyds Bank, it can be apparently observed that the profitability position of the bank is quite good as it involves in dealing with several businesses. However, if one segment of its business fails to succeed in the market, then the other segments also get affected, which portrays one of the weaknesses of the bank. The major threat for Lloyds Bank includes intense competition from its diverse rivalries. Specially mentioning, the bank possesses the opportunity of diversifying its business into new portfolios (Lloyds Banking Group, 2012). Therefore, it is considered that a systematic plan needs to be developed so as to address the issues being faced by the industry and its business. 2: Goals and Objective The primary goal would be creating a strategic marketing plan for Lloyds Bank, which will help it to attain superior competitive position as compare to others operating in the respective industry wherein the bank operates. In relation to the smart objective of Lloyds Bank and key messages for the plan, the specific objectives will include differentiating the services and focusing more on developing the business segment of corporate banking. This can be measured through examining the numbers of new customers who get attracted to the differentiated services provide by the bank. The aforesaid objective will be assigned to the finance manager who will emphasise corporate banking and differentiate its services in the intended regions. The objective will be realistic in nature as it will provide a competitive advantage to the company and create better profitability position. It is expected that the bank can be able to reap significant benefits within a time period of 2 years after proper execution of the plan (Oren and Smith, p. 90). 3: Target Market The market will be segmented based upon varied demographic factors and occupation of people residing at Whitechapel London, UK. In addition, the target customers will be the young group of people including both businesspersons and employed people. The rationale behind targeting these customers is that the services of corporate banking such as providing loans and financial services are highly demanded by this people group. Moreover, these sorts of target customers in the region prevail in a higher proportion as compared to others, which in turn will create better profitability position for the company in future (OECD, 2001, p. 331). 4: Proposed Strategy It is quite indispensable for Lloyds bank to adopt a sound strategy in order to attain the above discussed objectives. This strategy will mainly include identifying the requirements as well as the demands of corporate banking services amid the young people residing at Whitechapel. Moreover, the strategy will also entail include appraising the services that are provided by the competitors of the bank to the customers. In addition, the offerings of the company will be positioned in the target markets through making advertisements in newspaper and media. It is worth mentioning that the aspect of marketing mix will be organised through creating an effective distribution channel for the product or services that will be available to the customers in any situation. In relation to price, discounts may be provided on loans and new terms of payment will be introduced (Sharma, 2009, p. 122). 5: Price Price represents the cost of a specific product or service, which is typically expressed in monetary terms (Jain, 2010, p. 80). With this concern, the pricing approaches as well as options that might fit suitable for Lloyds Bank have been discussed hereunder. Approaches and Pricing Options There are different approaches that can be used by Lloyds Bank in relation to pricing their product or services at the Whitechapel region of London. These approaches include channel-specific pricing approach, omni-channel pricing approach and combination pricing approach. Channel-Specific Pricing Approach Channel-specific pricing approach is an approach, which completely depends on the distribution channel rather than the customers. This approach can be used for pricing its products and services differently in various distribution channels. It mainly focuses on optimising the prices of products or services provided by a company along with the profit margin. However, it is duly considered that this approach might create a sense of frustration amid the customers wherein they might feel that the prices vary in diverse distribution channels. This in turn might create a bad image for a company in the eyes of its customers, resulting in affecting its business at large (Carroll and Guzmán, 2013). Omni-Channel Pricing Approach Conversely, omni-channel pricing approach focuses on consistent pricing wherein same price is used in the distribution channels of a company. It is considered that this approach eases the experiences of the customers while availing the product or services offered by a company as the interaction process between customers and retailers becomes quite simpler. This particular approach is viewed to be inclined much towards inducing customer loyalty, which ultimately results in improving the market share along with developing the image of a company (Carroll and Guzmán, 2013). Combination-Pricing Approach On the other hand, combination-pricing approach is regarded as an approach, which considers providing same price for the products or services that are offered to the customers across different distribution channels with certain exceptions. In precise, it can be affirmed that this particular approach is focused towards charging same price of the products or services that are offered to the customers, which might enhance the experience of the customers, despite affecting the aspect of customer loyalty (The Parker Avery Group, n.d.). Therefore, based on the above analysis of varied pricing options, it can be affirmed that Lloyds Bank might adopt omni-channel pricing approach as it will provide an exceptional experience to the customers while availing the products or services offered by the bank. It is often considered that maintaining a consistent price will certainly provide an opportunity to the company for creating better relationship with the customers, resulting in raising customer loyalty by a considerable degree. This in turn will create prospects for Lloyds Bank to expand its market share at Whitechapel and thus enhance its profitability position at larges. Moreover, this approach will ensure that the brand image of Lloyds Bank is enhanced along with raising maximum customer loyalty. Cost-Based Pricing Option Lloyds Bank requires adopting an appropriate strategy for pricing its products based upon the available pricing options. In general, there are two options in pricing methods that comprise cost-based pricing and demand-based pricing. Cost-based pricing is categorised into four types of methods entailing ‘mark-up pricing’, ‘marginal cost pricing’, ‘absorption cost pricing’ and ‘target rate of return pricing’ (Nair, 2012). Theoretically, mark-up pricing is a method wherein prices remain fixed depending upon the costs incurred for producing a product. On the other hand, marginal cost pricing is a method in which cost and demand of a product or service is taken into concern for determining its price. Conversely, absorption cost pricing is a method of standard costing in which each type of cost is included in the product or service such as advertisement cost, selling along with administering cost, fixed cost and variable cost. This method is mostly used by the manufacturing companies in order to obtain certain margin of profit from their respective manufactured products. In contrast, target rate of return pricing is a method in which prices remain fixed as per the return on investment. This method is mostly used by top business companies or market leaders based upon the assumption that if 5% of capital is invested, then the revenue obtained will be 10% (Nair, 2012). Demand Based Pricing Option Demand based pricing is the other pricing option for Lloyds Bank, which is duly considered to be more realistic in nature. This method involves three sorts of pricing that entail ‘skimming pricing’, ‘traffic can bear pricing’ and ‘penetration pricing.’ Conceptually, skimming pricing is a method in which prices are kept fixed initially and consequently the prices are lowered down as per the demand of any product. Similarly, traffic can bear pricing is a method in which the price of a product remains fixed based upon the willingness of the customers to purchase the product in a given situation. Likewise, penetration pricing is a method in which the price of a product is kept lower initially in the market, which subsequently rises as per the market demand (Singh, 2013). Alternative Options In addition, there also lay certain other pricing options that can be used by Lloyds Bank. One of options can be competition pricing, wherein the price of a product or service remains fixed based upon the prices determine by the competitors. Product line pricing is the other pricing option wherein price remains fixed in relation to the existing product line prices. Tender pricing is also a pricing method, which is primarily used for selling industrial products. Affordability based pricing is another method used by companies to sell products to the targeted group of customers at a reasonable rate. Differentiated pricing is also an effective pricing method in which price varies for a single product based on diverse geographical locations or market situations (Chawla, 2003). Therefore, based on the analysis made concerning the available pricing options, Lloyds Bank may use a combination of both demand based pricing and differentiated pricing. This is because both of these methods will certainly help the bank in differentiating its services as per the demand of its targeted customers. Objective of Pricing Liquidity Objective It is worth mentioning that the prime pricing objectives of Lloyds Bank will be differentiating its products or services from the chief business market participants and most vitally attaining superior competitive position over them in terms of attracting the customers at large. While discussing about the pricing objectives, it is accordingly considered that a company must possess a robust pricing based objective, which will determine its business position in the respective markets wherein it operates and help in attaining its long- term objectives. Enhancing Lloyds Bank’s liquidity position will also be a pricing objective so as to ensure that the interests of the shareholders are protected along with timely disbursement of dividends. It would be vital to mention that firms operating in banking industry such as Lloyds Bank generally use certain pricing strategies in order to ensure that the objectives of pricing are addressed that positively influences their businesses towards the attainment of intended targets. Pricing objective is often viewed to be one of the imperative aspects in the banking industry, as it helps in generating revenue for the companies and provides flexibility for making prompt pricing decisions. It is conceived that pricing objectives provide direction specifically to the banking companies for determining future action courses that actually works as an effective action plan. Accordingly, this action plan helps banking entities to maximise their profits through increasing overall sales of the products or services in the market, resulting in raising profitability in terms of market share (Avlonitis and Indounas, 2005). Maintaining liquidity in the business is also one of the topmost pricing objectives for the banking entities, which ensures that their operational activities run in a smooth manner and day-to-day business requirements, are met through developing liquidity position. Alternative Objectives In addition, maintaining adequate return on investment also falls under the pricing objective of banking entities, which increases their capacity to pay back the shareholders and meet their expectations. Additionally, banking entities use pricing objectives for retaining price stability in the market, which actually helps in creating a better association with the customers. However, the pricing objectives use by banking entities might differ based upon their respective long-term objectives and the nature of competition prevailing in the business markets. Therefore, the pricing objective of Lloyds Bank will be inclined towards creating differentiation in its products or services at Whitechapel, London and focusing on corporate banking that will help in attracting the young segment of customers along with creating a good relationship with them. In addition, these objectives will also focus on increasing the sense of satisfaction amid the customers, which will help the company to sustain in this competitive landscape (Avlonitis and Indounas, 2005). Pricing and Its Relationship to Value The concept of pricing is regarded as one of the imperative aspects for retail banks in the present day context, as it plays a decisive role in providing satisfaction to the customers along with obtaining substantial profits. Therefore, it would be vital to mention that price has a direct association with value creation for retail banks as it induces transparency of pricing information within the banks, resulting in raising market efficiency at large (PricewaterhouseCoopers LLP, 2012). Lloyds Bank in its pricing strategy will primarily focus on creating transparency in the products or services offered through which the customers will not have to incur any hidden cost or charges while availing banking services. This will be done effectively by providing adequate product information to the customers, which will certainly help in raising their knowledge about the varied product or services that offer by the company. Specially mentioning, this pricing strategy will ensure creating greater for the customers of Lloyds Bank through complying with their respective preferences along with likings. In addition, Lloyds Bank will need to integrate its pricing strategy with the long-term strategy, which will certainly help the bank in attaining better market position for long-term survival. Lloyds Bank will set the prices of its products and services in such a way that will create a sense of satisfaction among the customers, wherein the interest rates on loans will be comparatively lower as compared to other banks at Whitechapel and the fees charged on certain banking services will be minimal. This, in turn will ensure that the existing customers of Lloyds Bank do not switch over to other banks as the prices of the product and service will be set as per customers’ expectations. This will ultimately result in raising value creation for Lloyds Bank, as more customers will get attracted to the products or services provided by the bank, raising its profitability at large (Wruuck, 2013). Involving Factors Technological Factor There are various factors that influence pricing of products or services in retail banks and these factors play an imperative role in making effective pricing decisions. Accordingly, technological factors highly influence pricing decisions of retail banks as these often helps in reducing the overall costs incurred by banks while providing information of products and services to their targeted customers (Accenture, 2011). Regulatory Factor Regulatory factors will also influence the pricing strategies and decisions made by Lloyds Bank as the policies framed by regulatory bodies determine the interest rates on bank loans along with influencing the funding requirements. It is conceived that regulatory regimes are the actual drivers of transparency within the banking system in relation to the broad array of products or services offered by the banks (KMPG, 2013). Therefore, regulatory factors will highly influence the pricing decisions of Lloyds Bank that will certainly determine its efficiency in the markets wherein it operates (Anderson et al., 2013). In addition, other factors will involve the level of competition prevailing in the operating business markets, wherein pricing strategies may vary depending on the market situations. This might directly influence the pricing decisions of the bank at large. 6: Conclusion Based on the above analysis and discussion, it can be ascertained that the occurrence of worldwide economic crisis has certainly affected the overall performance of the banking institutions prevailing in the UK. Thus, in this regard, Lloyds Bank in its strategic marketing plan will focus on differentiating its product or services from its competitors and put more emphasis on developing its corporate banking business segment. It would be vital to mention that the young people group will be the targeted customers and accordingly certain strategies will be formulated. Thus, the pricing strategy of Lloyds Bank must be ethically sound, which will help the company in maintaining transparency and gain customer loyalty, ensuring that the desired business goals are achieved successfully. References Books: Jain, A. (2010). Principles of Marketing. India: FK Publications. OECD Publishing. (2001). International Mobility of the Highly Skilled. United States: OECD Publishing. Oren, S. S. and Smith, S. A. (1993). Service Opportunities for Electric Utilities: Creating Differentiated Products: Creating Differentiated Products. United States: Springer. Sharma, K. P. (2009). Entrepreneurship. India: FK Publications. Journals: Anderson, R. D. J. et al. (2013) United Kingdom: The influence of product age on pricing decisions: An examination of bank deposit interest rate setting. 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