Marketing: Boots UK - Essay Example

Marketing Essay: Boots UK Part A Situation Analysis In order to serve consumers’ needs profitably, Boots UK should understand its internal and external situation that includes market environment, consumers and organisational capabilities. A useful technique for performing situation analysis of the company is SWOT analysis, while incorporating 3Cs (Company, Customers, Competitors) of marketing. Company: Boots UK is one of the leading pharmacy chains in United Kingdom (UK) and is a subsidiary of Alliance Boots. The primary products of the company comprise health and beauty commodities. The company has about 3100 stores in the country along with 370 distribution centres. Customers: The stores of Boots UK are mainly located in well-known localities and streets of UK. Hence, its main consumers are male and females between age group 15-45 years from nearby neighbourhoods. Competitors: The primary competitors of the firm are Tesco, Sainsbury’s, Superdrug, Space N.K and local boots. SWOT analysis- Strength: The primary strength of the company is that it has a well-recognised brand with wide product range. The company is established in the market and has strong reliance on research and development. Weakness: Boots UK considers that location and ambience of its store are outdated, which can prove to be a weakness. Apart from this, analysis showed that the company has little dependence on technologies, which increase processing time of activities. Furthermore, the company also charges comparatively high price. Opportunity: The company is planning to renovate its store and install self-service checkout points. Also, it is planning to broaden the variety of brands in the store. Threat: The main threats to the company are local boots and other competitors in the market (Reynolds, Cuthbertson and Bell, 2004). Goals and Objectives The company has applied SMART techniques to determine goals and objectives. The company is planning to achieve an increase of twenty-five percent in the sale annually. It also has an objective to attract ten percent more male consumers every year, compared to the previous year. These goals are specific, measurable, achievable, realistic and time-specific in nature. Realizing such goals can prove to be company’s competitive advantage. Target Markets The company has used demographic and geographic segmentation while determining its target segment. Boots UK has placed stores mainly in the high streets of UK; so, the obvious target market of company is individuals from the neighbourhood. From demographic point, the company ensure that both genders, male and female, are its product users and the age range is between 16 and 45 years (Armstrong, Cunningham and Kotler, 2002). Proposed Overall Strategy In its strategy, the company is planning to implement Ansoff’s matrix to decide upon products for existing as well as new markets. The model was proposed by mathematician, Igor Ansoff. It states that there are four growth strategies that a firm can adopt: Market penetration and product development for existing market and market development and diversification for new markets. Boots UK is planning to adopt product development and diversification strategy. Further, the company is planning to position its product as competitive value offering, that is above-average competitors’ products (Reynolds, Cuthbertson and Bell, 2004). Part B: Product Merchandise Management In retail business such as, pharmacy, product and merchandise, management is one the primary activities that a company needs to look after. Merchandising initiated the growth of organised retailing worldwide. Earlier, retailers had only a few stores to manage and functions of buying merchandises, pricing and selling were comparatively simple. However, growing competition has resulted in existence of numerous stores by one particular company. This has complicated the situation and it is necessary to integrate activities so as to simplify the structure (Donnellan, 2013). Merchandise management is a process of analysing, planning, procurement, handling and controlling merchandise investments in a retail operation. Analysis of need and demand is essential so that the retail company is able to identify correctly the requirement of consumers, before they create any product to suit their buying decision. Planning in merchandise management is important because the company must have optimum stock available in its store for future sell. It emphasises on availing right product at right time at right place in right quantity and at right price. Boots UK need to keep a track of product stock so that orders can be refilled from time to time and also that the company does not have over-stocking of merchandises. There is a number of merchandise planning methods: Gross margin return on inventory Basic stock method Percentage variation method Weeks’ supply method Stock to sales method Boots UK operates in the field of distribution and retailing of pharmacy products, which is why it needs to procure the products timely from manufacturers. Procurement is important because without proper procurement channels, the company can lose its competitive edge. Merchandise handling and control is to ensure that the merchandise is in right condition and available at the location where it is needed. Controlling is necessary as purchasing merchandise involves investment and a company needs to keep a check on the same. Controlling ensures that products that have been added or dropped from the merchandise mix are appropriately monitored and adjusted. There are two methods that are widely used for handling and controlling assortments. The inventory turnover rate determines frequency of replenishment and depletion of stock and framing specific time period for making purchases. The main steps in merchandising process are: 1. Development and establishment of merchandise mix and merchandise budget 2. Creating logistic system for procurement of the merchandise mix 3. Pricing offerings of the firm 4. Managing personal selling efforts and customer support services 5. Developing advertising and other promotional programs Developing merchandise mix and budget Merchandise mix is the overall product range that a retailer offers to consumers. The merchandise mix of Boots UK includes variety of healthcare and beauty products. The company needs to consider certain factors while determining merchandise budget of the company such as, planning and controlling of retail sale, inventory level, retail reductions, purchases and profit margins (Varley, 2005). Logistic system for merchandise procurement Merchandise is generally procured externally and then circulated through various distribution centres of the company. Efficient logistic system ensures timely deliveries, packing, receipt and posting of relevant issues. In addition, integrated logistics systems are beneficial in planning and monitoring transportation of merchandises (Bowersox, Closs and Cooper, 2002). Pricing strategy There are four kind of pricing strategies are used in merchandise management: 1. Market skimming: Market skimming proves advantageous for targeting a niche market. Market skimming is useful when the product has high value and places the product above competitors’ product. The general pricing strategy of Boots UK is market skimming. 2. Market penetration: The strategy of market penetration ensures that a company sets low price for its products and earn high sales volume, besides acquiring greater share of market. Market penetration is valuable when a company is trying to enter a new market or to gain market share. 3. Floor pricing: Floor pricing method is beneficial when a company is trying to appeal price conscious consumers. This strategy is most appropriate when there is little differentiation between products of the company and that of its competitors. 4. Competitor pricing: It is also known as competitor indexing. In this strategy, a company sets price of its merchandises based on that charged by competitors. Competitor pricing is appropriate when companies are selling similar products and the price has achieved equilibrium. Companies generally apply competitor pricing technique when products have been in market for a long period of time and there are substitutes as well. Managing personal selling efforts and customer support services In most developed economies, personal selling has become a crucial tool of direct marketing. Personal selling is important because it is flexible in nature and sales representatives can adapt to a particular situation. Personal selling helps in building long-term relationships with consumers as well as resolving their problems. Nonetheless, personal selling is extremely labour intensive. Hence, the company need to take care of the cost. In pharmacy companies such as, Boots UK, Customer Relationship Management (CRM) is very crucial as it results in increasing revenue and coordinating all activities that involve interaction between consumers and company. CRM focuses mainly on marketing process, selling process and after-sale services. CRM helps in developing valued relationship with important consumers. Developing advertising and other promotional programs Development of advertisement and promotional programs depend on the product life cycle stage. The promotional strategies implemented in early stage are very different from those in latter stages. Especially in pharmacy companies, promotional programs are very different from other retail companies. The company needs to thoroughly understand its target audience before deciding any of the promotional strategies. In pharmacy industry, the best way of promotion is personal selling. Even so, local publicity and advertising are also useful. Often companies change interior design of their stores for the purpose of attracting greater share of consumers, which can be counted in promotional programs (Armstrong, Cunningham and Kotler, 2002). Overall, all these factors are necessary to create an integrated merchandise management system. Branding decisions A brand can be defined as a name, term, design, phrase, symbol or a combination of any of these, selected by an individual or a company in order to distinguish its products from that of competitors. Nonetheless, according to marketers, a brand holds greater significance than being a mere symbolic expression; it creates awareness of the product that is related to company’s reputation and present in the market place. There are two brand elements, also known as brand identities: brand name and brand mark. Brand name is expressed verbally and can include letters, words and numbers. The brand mark, on the other hand, is represented by graphic design or symbol and cannot be expressed verbally (Rust, Zeithaml and Lemon, 2004). According to Kotler, brand is reflection of the product and its company. It communicates and establishes beliefs among consumers about features and attributes of the product. Once a brand is established, it reinforces image of the product in consumers’ mind and serves as trademark. As a consequence, branding decisions are very vital for an organisation. Kotler (2012) has explained that a brand needs to be consistent with messages conveyed by the product throughout its use; hence, brand name and mark should be chosen carefully. According to Keller, the following qualities should be taken into consideration while selecting the brand name: The brand name should reflect qualities and benefits of the product. The name should be easy to remember, recognise and pronounce. It should be distinct in nature and should not create confusion with competitors’ products. The name should be easily translated in foreign language. It should be capable of legal protection and being registered (Keller, Parameswaran and Jacob, 2011). There are three major decisions pertaining to branding of a product: Brand sponsor decision Brand name decision Brand strategy decision Brand sponsor decision When an organisation decides to brand its product, decisions regarding the brand sponsor are fundamental. A brand sponsor can be any one ranging from manufacturer, distributor, license holder to the government. As a result, the product can be launched as manufacturer brand, government brand, distributor brand or licensed brand. The products under a manufacturer brand are marketed nation-wide and it is also known as national brands. These brands are assigned, owned and used by the product manufacturer. The responsibility of marketing these brands and developing their value lies on the manufacturer. The branding strategies adopted by the manufacturer are reflected through customer or brand loyalty. A government sponsored brand is also a national brand as it is supported by the government or its agent. The development of branding and promotion strategies regarding the product depends generally on a third-party hired by the government. These brands are mainly built for public welfare. The distributor brands are also termed as private brands. These own-label brands are mainly designated, owned and used by retailers and/or wholesalers. The private brands can be a source of retail power as well as provide greater value to consumers when related with high quality supplier control. Licensed branding is referred as obtaining a company’s permit by manufacturer to use the company’s trademark by means of licensing agreement in exchange of licensing fee. In licensed branding, the licensee is entitled to bear all costs (manufacturing, selling and advertising) in case the product fails (Rust, Zeithaml and Lemon, 2004). Brand name decision When the brand sponsor is selected by the organisation, next step is to decide the brand name. According to Kotler, brand name decisions are influenced by different strategies such as, individual names, family names and corporate names. The main advantage of individual-name strategy is that companies do not link reputations to the product line. Family names are assigned to an entire product line or product mix. In corporate name branding decision, organisations usually use company name as well as individual names for products. Many a times, a number of products use a common family of brand names. The main advantage of using same family name is that if the company has high reputation in the market, all brands under the group enjoys benefits of brand name effect and can be sold simultaneously. There are also certain companies that take advantage of both manufacturer name as well as individual name (Keller, Parameswaran and Jacob, 2011). Brand strategy decision In branding decision, one of the major considerations is to determine brand strategy that is to be followed. As a brand grows, it becomes necessary for the company to develop respective strategies. The major decisions pertaining to brand strategy includes decisions regarding line extension, brand extension, multi brand and new brand or co-branding. Line extension is the process of using successful brand name for introducing additional items in same category of the product or product line under the brand name, such as, addition of new flavour and ingredients, change in package size and shape and change in form. Line extension strategy is implemented by companies in order to launch new products at low cost and minimise risk level while meeting consumers’ desire for variety. Line extension is also employed by companies to utilize surplus production capacity or acquire more shelf space at retail stores (Klimchuk and Krasovec, 2013). Brand extension involves marketing new categories of products under an existing brand name. Brand extension ensures instant recognition and quick acceptance of a new product. Moreover, this also helps in reducing marketing and advertising costs. Family name branding is the most common form of brand extension. Nevertheless, if one particular product under the brand fails, then it may have an adverse effect on sale of other products under the same brand. Introduction of multi-brands in the market by a single company is done in order to promote new features and appeal different motives of consumers. Multi-branding is done to incorporate a holistic approach of marketing. Multi-branding is done when a company launches a new product in the market for which none of its other brand names are suitable (Kotler, 2012). Many companies introduce new brands under co-branding. Co-branding is the process of introducing a new brand by combining established brand names of two different companies with complementary attributes so as to have a better product reflection in consumer mind (Washburn, Till and Priluck, 2000). Reference list Armstrong, G., Cunningham, M. H. and Kotler, P., 2002. Principles of marketing. Ontario: Prentice Hall. Bowersox, D. J., Closs, D. J. and Cooper, M. B., 2002. Supply chain logistics management. New York: McGraw-Hill. Donnellan, J., 2013. Merchandise buying and management. United Kingdom: A&C Black. Keller, K. L., Parameswaran, M. G. and Jacob, I., 2011. Strategic brand management: Building, measuring, and managing brand equity. India: Pearson Education. Klimchuk, M. R. and Krasovec, S. A., 2013. Packaging design: Successful product branding from concept to shelf. New Jersey: John Wiley & Sons. Kotler, P., 2012. Kotler on marketing. New York: Simon and Schuster. Reynolds, J., Cuthbertson, C. and Bell, R., 2004. Retail Strategy. London: Routledge. Rust, R. T., Zeithaml, V. A. and Lemon, K. N., 2004. Customer-centred brand management. Harvard Business Review, 82(9), pp. 110-120. Varley, R., 2005. Retail product management: buying and merchandising. London: Routledge. Washburn, J. H., Till, B. D. and Priluck, R., 2000. Co-branding: brand equity and trial effects. Journal of Consumer Marketing, 17(7), pp. 591-604. Read More