4Ps Marketing Mix Implementation - Report Example

Marketing plan (Part III 4Ps (Marketing Mix) Implementation Introduction Marketing mix is a set of strategies, tactics,activities and actions that a company develops and implement for promotion of its products or brands in the market. The 4Ps which typically make up a marketing mix are Price, Product, Place and Promotion. All the elements of marketing mix influence each other. Marketing mix forms a part of the company and if it is handled in the right way it can give great success. But in case it is handled wrongly it could take many years for the business to recover. The marketing mix needs a lot of market research, understanding, consultation with other individuals and from users also to trade, manufacture and do several other things. Through this a company is able to meet the needs of the business and thus the company must develop appropriate marketing mix. Marketing mix means designing products to satisfy the customer’s needs and charge them right price and get the products at the right place and making it sure that the existence of product is known by means of promotion. In marketing mix no element is more important than other and thus a company should carefully focus on each of the element. Business must try to modify each element in the marketing mix in order to establish an overall brand image and create a unique selling point which makes the product stand out in the market. Best Buy is a multinational, physical and e-commerce retailer of consumer electronics like tablets, mobile phones. Computers, televisions, large and small appliances and other related accessories. This report will take a look at the marketing mix of Best Buy. Discussion Product Best Buy is a multinational, physical and e-commerce retailer of consumer electronics, tablets, mobile phones, television, large and small appliances, digital imaging, computers, entertainment product and related accessories. Best Buy under the Geek Squad brand also offers technology services like repair, support, installation and troubleshooting. The company has online retail operations, call centers, retail stores. The needs and wants of the consumer electronics consumers comprises of different variables. These variables are very important to the customers while making purchasing decisions. Best Buy has targeted the entire consumer electronics market and by doing this the brand has taken into account a wide variety of needs and wants of the consumers. They recognize the fact that for consumer’s venue is very important. A consumer may wish to go to the store and physically test the product to check the product. Thus in such a case he or she might prefer mortar and brick store over online stores. Further the product offering is very important to them which depend on what the consumer has in mind. For example in case a consumer wants a speaker wire, then he or she might a different place than if that person need a sound system. Best Buy recognizes that selling electronics goods is not enough and it understood that consumers need other additional services like installation, delivery and warranty. Thus Best buy offers such services where after purchasing a product, the consumer is relived of the headache and it knows that someone will come to their home and deliver the electronic goods, properly install it and offer warranty in case of malfunction or break. Thus customer service plays a crucial role in the purchasing decision of the consumer (Griffin 142). They understand that most of the consumer which purchases electronic products is unfamiliar with new brands or uneducated about new technologies. Thus such consumers will prefer stores which will offer them assistance to them from well educated and highly trained staff. Such consumers want that the staff will walk them through the purchase and help them in choosing the best possible product that will satisfy their wants and needs. Consumers in the electronics market needs product feedback and convenience. The product feedback helps the potential customers read the reviews of products while taking decisions. This feature is very important to the customers since generally consumers trust the word of another consumer instead of salesman who is trying to sell to earn maximum commission. Best buy understands the needs and wants of the consumers in the electronics market to remain in the marketplace and be successful against the competition. Thus Best buy is catering to the entire consumer electronics market along with looking after the needs of varieties of segments. Best Buy currently operates under different names like Best Buy Mobile, The Carphone Warehouse, Five Star, Geek Squad, The Phone House and Pacific sales to name a few. Best Buy has domestic and International segment. In domestic segment offers their customers variety of consumer electronics, mobile phone products, entertainment products, related accessories and service with variations on staffing, product assortment, promotions and store design for addressing specific customer groups and local market needs. Best Buy has acquired many electronic companies to offer customers with high end electronics and enhance the unique product offerings along with high-touch customer service in their stores. The buyers in this category have changed. Consumers is now looking to grab every bit of opportunity they can have for grabbing the greatest and latest product as sophistication of products increases with falling low prices. Further the category of products has also changed from hardware sector to consumer gadgets and gizmos which fit virtually every need of the product. Again there has been change in the product technology which has weaved itself into very DNA of daily life. Thus Best Buy needs to make its name synonymous with this product category. The company needs to refine their brands of products so that they can be perceived more as a horizontal halo provider of consumer electronics instead of being vertical products like video games and music. The company must be customer centric and include products which will cater to young technology buffs, affluent male professionals and small business owners. Thus Best Buy should try to outfit their stores with new layouts and make sure that they are updated with latest products and retrained personnel for meeting the needs of different types of consumers. Price The primary competitors of Best Buy are consumer electronics retailers like vendors who offer their products directly to the customer, wholesale clubs, and internet based businesses, home improvement superstores and discount chains. The competitors of Best Buy operate on low cost structures and seek to compete with them based primarily on price. Further the online only operator in US is exempted from collecting sales tax in certain states. But Best Buy believes that this advantage will get eroded as sales tax rules will be re-evaluated at both the federal and state level. Best Buy carefully monitors their pricing offering with respect to other retailers and continuously adjust their pricing in order to maintain their competitiveness. Best Buy implemented new enhanced price matching policy form March 2013 in US. This strategy allows the customers to request that they match the price offered by other retail store and online operators. To make it happen, Best Buy focuses on maintaining efficient operations and leveraging the economies of scale to them and their global vendor partnerships. Certain elements of the cost structure of Best Buy are largely fixed in nature and with consumer spending in recent times remaining uncertain it is challenging for them to increase their operating income. With increasing price transparency and competitiveness Best Buy needs to focus on achieving efficient operations greater than ever. Hence Best Buy needs to continuously focus on managing their cost structure which can severely impair their ability to maintain their price competitiveness so that they can achieve high profitability (Winter 1). Best Buy understands that the retail business is highly competitive in nature and thus price is an important factor to them. It is also important to customers and price comparability and transparency is increasing particularly due to digital tools. Best Buy needs to compete with other local, regional, national and international retailers along with certain of their own vendors who offer their products directly to consumers. Many competitors have greater financial resources and market presence than Best Buy. Further the business model of Best Buy is based on offering superior levels of customer service by using multichannel platform and thus their cost structure is higher than some of their competitors. Again changes in the level of many other competitive factors have significant impact on the consumer demand of their products and services and it will have an impact on the margins generated from them. As the brand sells consumer electronics at relatively inexpensive prices, it is advisable for Best Buy to use a penetrative pricing strategy. It will fit the name of the company “Best Buy” which means customers will get great value for low prices. Using the penetrative pricing strategy is important since for consumer price is an important dimension when consumer goes for shopping electronic goods. Hence Best Buy should strive to offer goods at low prices. In general retailers use penetrative pricing strategy for taking advantage of intensive distribution capabilities which makes sense as a brand which is selling goods at low prices, and thus generating low margins, must look to sell high quantity goods for generating sufficient or huge profits. Thus Best Buy should look at establishing an intensive distribution strategy along with penetrative pricing strategy. The core benefit proposition of having non-customized stores nationally and worldwide will be reinforced by their intensive distribution strategy. As Best Buy has their stores located practically every where the consistency of their brand will be reinforced continuously in the minds of the consumers (Lamb, Hair and McDaniel 254). Price of consumer electronic goods is highly elastic in nature. Thus the demand for such products change will little change in price. Electronic goods are superior goods or may in some cases be classified as luxury goods. Thus Best Buy needs to formulate appropriate pricing strategy for their products. Penetrative pricing strategy enables the company to capture significant market share as demand of the products at their stores will be higher. Best Buy needs to ensure that the prices of their products are competitive in nature with respect to its competitors. Major retailers like Wal-Mart and Target offers discounted prices and thus Best Buy should offer discounts and make sure that the value of their products is similar to the expectations of their target market. The company should aim at delivering competitive prices via its low price guarantee, where in case customers find a price of an online retailer which is lower than them, Best Buy will match the pre-tax price for qualified products. Best Buy shouldn’t always look at aggressive pricing strategy which can hurt the margin of the company. Thus to improve the profitability the company should slowly increase their prices and make crucial cost reforms. Promotion Best Buy offers promotional financing by means of credit card which is issued by third party banks. It manages and directly extends credit to their customers. In fiscal 2011, promotional sales of credit card reported for around 19 percent of their revenue. But due to continuous changes in regulatory and economic environment in the banking industry, the banks continue to revaluate their practices, strategies and terms where the consumer credit is granted and strategic focus is on various business segments like retail partner card business (Best Buy 15). In case any of their credit card programs ended prematurely, the terms and provisions of it were modified substantially or types of financing offered to the customers were amended it could have an adverse effect on the promotional financing volumes. In 2013 the show rooming strategy of Best Buy resulted in increased store traffic. This ad was launched in late October 2013 which featured actors like Maya Rudolph, Will Arnett, LL Cool J and Jason Schwartzman. The company showed that there is a better way to buy electronic goods through its low price guarantee along with the ability for ordering online and picking up store. But Best Buy needs to invest wisely into promotional activity so that they don’t get trapped by it. In 2014, the sales at stores feel due to aggressive promotional activity which persisted for the entire holiday shopping season like new gaming consoles. But the sales didn’t pick up much. Best Buy should make their stores more of a playground destination along with fun in-store events, refer- a-friends and group discounts programs (Berg 1). Best Buy should capitalize on this huge opportunity of linking their product showroom appeal with the social experience of the consumers. Consumer expectation will vary when one enters into a Best Buy store, but research has shows that the largest consumer expectation had nothing to do with what the company can expect like sampling and touching the product. Consumer wants social gratifications i.e. have fun at the stores. Consumers comes with their friends and they friend become the pre-purchasing sounding boards for the customers and it is seen as a destination for them. In 2013 Best Buy increased their promotional activity in the International markets and domestic. During this year due to greater price transparency and continued strong competition in the consumer electronics industry, the company increased their promotional activity especially during the holiday season to improve customer traffic and drive market share gains. Though these actions resulted in increasing their overall results but it also contributed to decline in gross profit. It is important for Best Buy to use both push and pull promotion. With push promotion the company will be able to generate good revenues through good customer service by thoroughly trained employees. The helpful staff of the brand will draw consumers towards the brand. The pull promotion will focus on three components of the core benefit proposition which are unbiased product reviews, enhanced customer service and non-customized stores. Best Buy will use newspaper advertisements, television advertising and direct marketing campaign as part of their pull promotion. Place The current distribution intensity of Best Buy is selective distribution where the company relies on distribution centers located across the world and products are supplied to respective stores from it. Best Buy runs its business through domestic and international segment. In the domestic segment the online merchandise sales in US Best Buy are generally picked up either at Best Buy stores in US or it is fulfilled directly to the customers from their distribution centers. Most of the products for their US Best Buy Mobile, US Best Buy, Pacific Sales stores, Magnolia Audi Video are shipped directly to their distribution centers or warehouses from manufacturers located. For meeting the release dates of new products, it is shipped from suppliers to their stores directly. There are contract carriers who transport merchandise from warehouse and distribution centers to the stores though in some cases the goods are transported directly to the customers. The International Segment of the company has the Phone House and the Carphone Warehouse merchandise stores merchandise where the products are shipped directly to the distribution centers located across Europe. The Contract carriers transport the goods from the distribution centers to stores. For example the Canada stores merchandise transports the products directly to their distribution centers from their suppliers. For merchandise of Five Star stores there are nearly 40 warehouses and distribution centers which are located throughout the Five Star retail chain. Their five star stores are dependent on distribution centers for inventory storage and transport to their stores and customers. In case of large electronic merchandise, the goods are shipped directly to the customer through their distribution centers and warehouses. Best Buy distributed their products from third party suppliers. Best Buy has 20 large suppliers which account for just fewer than 70% of the total merchandise. These include LG Electronics, Sony, Hewlett-Packard, Samsung and Apple. Best Buy doesn’t enter into a long term contract with their major suppliers. Majority of their distribution facilities and almost all of their stores are leased. The Term of lease agreement generally ranges from 10 to 20 years and most of the leases contain rent escalation clause and renewal options. Best Buy is looking for improving the effectiveness of their online channel by expanding their online capabilities into their existing distribution centers and improves their allocations of inventory so that their product availability is optimized. Further the company is looking for consolidating the multi-unit customer orders into one shipment and refines their order management so that they can fill orders from optimal locations. The company is aiming at improving the transportation efficiencies to reduce the expenses. Best Buy is significantly improving the information sharing, route planning and collaboration with their carrier partners to send fuller trucks and leave as empty trucks. The company is also reviewing all product movement for identifying opportunities to alter product flows and transportation methods so that they can further reduce the expenses. Best Buy must look at making their supply chain processes efficient so that it can offset huge investments in multichannel sales and lower pricing. Best Buy should look at reverse logistics so that they can handle the returns. This process is usually left unnoticed by retailers. The outdated processes resulted in loss of $ 400 million each year to the retailer. Best Buy should again look at supply chain vendor of the company. The company must look to reduce and shorten truck trips by re-allocating inventory and consolidating freight so that the shipments can be sent to their nearest destinations from the distribution centers. The company should move up their no sales activities higher up in the supply chain. Thus the company should move certain non-sales activities out of their stores so that they can maximize the time of the salespeople with the customers. For example the company should configure the floor plans of individual stores such that not much time needs to be spent by store employees in moving products to proper places. Best Buy should give their store employees greater flexibility to respond to demand. This means the company has to change the floor layout area or change inventory management plan so that store can meet certain spikes in local demand. Best Buy should ensure that supply chain reacts quickly to such signals and reconfigures the shipments for accommodating a new floor plan. Best Buy can use software for allowing dispatchers to change delivery schedules whenever loads are in transit. The company should make the supply chain more accurate so that less waste are produced. This means the company needs smaller shipments and higher frequency of deliveries. The company needs to consolidate many distribution centers and bring them closer to retail outlets. Such kind of streamlined network will allow more loads in the channel to deliver to smaller facilities. The company is in need of high velocity distribution system and thus they need to send product to where it is actually needed instead of just sending it and the company needs to make the loads ready for the sales floor. Best Buy should make the store associates and dispatchers have greater access to information like they must have automatic alerts in case of delays in port. They can also have a technology which uses predictive modeling such that in case similar problems of past happens the company can easily recall the solutions. This will enable the managers for effective execution of corrective actions. Conclusion Best Buy is a multinational, physical and e-commerce retailer of consumer electronics like tablets, mobile phones. Best Buy has to far implement its marketing mix appropriately and have achieved great success so far. Best Buy understands the needs and wants of the consumers and thus caters to a wide range of consumers by including a range of electronic goods. At the same time it provides services like installation, repair and warranty which are needed by the consumers after product purchase. Further the competitor of Best Buy operates on low cost model which is a challenge for the company. The business model of Best Buy is based on offering superior levels of customer service by using multichannel platform and thus their cost structure is higher than some of their competitors. Thus it is advisable for Best buy to use penetrative pricing strategy. Best Buy offers promotional financing by means of credit card which is issued by third party banks. It manages and directly extends credit to their customers. Due to this the cardholders can collect no-or low-interest promotional financing on qualifying acquisitions. In 2013 Best Buy has increased their promotional strategy which resulted in overall lower profit margin. Best Buy needs to use both pull and push strategy for increasing profitability. Further the company has a domestic and international centre through which the company carries out its operation and the company is trying to reduce the expenses of transportation by reviewing all product movement. Works Cited Berg, Meredith Derby. Is Best Buys Showrooming Campaign Working?, 26 December. 2013. Web. 21 April. 2014. < http://adage.com/article/cmo-strategy/buy-s-showrooming-ad-campaign-working/245831/. > Griffin, Ricky. Management. Mason: Cengage Learning, 2012. Print. Lamb, Charles, Joe Hair and Carl McDaniel. Essentials of Marketing. Mason: Cengage Learning, 2008. Print. Best Buy. Annual Report, 21 March. 2013. Web. 21 April. 2014. < http://phx.corporate-ir.net/phoenix.zhtml?c=83192&p=irol-reportsannual. > Winter, Caroline. How to Save Best Buy From Extinction, 06 August. 2012. Web. 21 April. 2014. < http://www.businessweek.com/articles/2012-08-06/how-to-save-best-buy-from-extinction. > Read More