Theory of Product and Price Affecting the Success of British Homes - Research Paper Example

The Application of the Theory of Product and Price Affecting the Success of British Home Stores By Institutional Affiliation July 13, 2014 Introduction Contemporary organizations face greater challenges in sustaining profitable financial condition given the level of competitiveness in the local and global market. Some organizations design diverse marketing strategies to adapt and adjust to the changing forces in the external environment. For British Home Stores (BHS), one of the most renowned establishments in the United Kingdom, historical documents revealed that BHS started as self-service cafes in 1928 (Arcadia Group Limited, n.d.). The focus on home wares was reported to have initiated in 1995, attesting to the need to transform their marketing thrust and strategies due to the changing demands of the times. Currently, BHS was revealed to operate as much as 100 department stores in the United Kingdom (Yahoo Finance, 2014). There are elements in the decision-making process of organizations, like BHS, that determine the need to change or to sustain current strategies to ensure success. The theoretical framework which guided the management of DHS to apply a strategic decision is found in the concept of the marketing mix. According to Kar (2011), “the term “marketing mix” was coined in the early 1950s by Neil Borden in his American Marketing Association presidential address…The basic major marketing management decisions can be classified in one of the following four categories, namely Product, Price, Place (distribution) and Promotion” (p. 1). The current research hereby aims to present an in-depth evaluation of the application of two (2) of the four (4) marketing mix elements, namely product and promotion, as these contribute towards the success of BHS. Background Theory The theoretical background of the marketing mix was reported to have originated from “the single P (price) of microeconomic theory” (Chong, 2003; cited in Goi, 2009, p. 2). As acknowledged, McCarthy (1964) completed the four elements of the mix and comprehensively discussed relevant applications in organizational settings. The factors influencing core competencies of the organization guide decision makers into using the four elements into designing appropriate stategies that would tap opportunities in the external environment, as well as ward off imminent threats. The use of the marketing mix was identified to be instrumentally advantageous for the organization in terms of assisting marketing managers in “trading off the benefits of one’s competitive strengths in the marketing mix against the benefits of others” (Goi, 2009, p. 2). As such, the internal stengths of the organizations are capitalized through strategies that increase the perceived value of the products or services offered to the clientele. Concurrently, the limitations of the mix were indicated to originate from criticism received from marketing practitioners and researchers in this endeavor (Goi, 2009). One of the issues revealed included the assignment of relevance among the elements of the mix. Accordingly, “the introductory marketing texts suggest that all parts of the marketing mix (4Ps) are equally important, since a deficiency in any one can mean failure” (Kellerman, et al., 1995; cited in Goi, 2009, p. 3). Other studies have concluded that the most relevant components were product and price (Kellerman, et al., 1995). The product is defined as a tangible object or an intangible service that the organization offers to the clientele. The price is defined as the amount pegged by the organization for the product offered and is reflected as the amount that the customer would pay to avail it. In addition, the place is the location where the products or services could be purchased. In contemporary settings, aside from stationary outlets or corporate sites, the place could include online official websites where products or services could be availed through order placements. Finally, promotion” represents all of the communications that a marketer may use in the marketplace to increase awareness about the product and its benefits to the target segment” (Kar, 2011, par. 6). To comply with the requirements of the current research, only two (2) of the 4Ps in the marketing mix would be evaluated in greater depth and detail: product and promotion, as applied by BHS. The next section would present a brief background of BHS and present the application of the theoretical framework of product and promotions, as seen instrumental towards that attainment of organizational success. Case Study Brief Background for British Home Store BHS has evolved from its humble beginnings in the 1920s to emerge as a dynamic organization that offers diverse products in three major categories: home wares, fashion, and lighting (Arcadia Group Limited, n.d.). The owner, Paul Green of Acadia Group, was reported to be seeking investors who signify intentions to purchase BHS (Bloomberg Businessweek, 2013). A quick view of the financial highlights of BHS indicated that the net worth of the firm has been declining since 2009 (Company Check Ltd., 2013). From a net worth of £30,501,000 in 2009, it declined to £-178,182,000, a significant loss in 2013 (Company Check Ltd., 2013). The official website of BHS revealed product categories according to the following: home and lighting, furniture, women’s clothing, men’s clothing, children’s apparel, as well as wedding dresses and accessories (BHS Ltd., 2014). The organization was revealed to have established other stores in the following locations: “Armenia, Bahrain, Falkland Islands, Gibraltar, Jordan, Kurdistan, Kuwait, Libya, Malaysia, Malta, Mongolia, Oman, Qatar, the Russian Federation, Saudi Arabia, the United Arab Emirates, and the United Kingdom. BHS Limited operates as a subsidiary of Arcadia Group Limited” (Bloomberg Businessweek, 2013, p. 1). Application of Product as an Element of the 4Ps The official website of BHS would reveal the extensiveness of the products being offered for sale by the organization (BHS Ltd., 2014). Navigating through the home and lighting portal, for instance, would reveal as much as 507 different items and where, as much as 60% in price discounts are currently offered (BHS Ltd., 2014). Product categories for home and lighting include: accessories, bathroom, bed linen, duvets and pillows, kitchen and dining, lighting, and luggage (BHS Ltd., 2014). Likewise, there were 32 different brands that BHS carry as to home and lighting, alone. Concurrently, for the wedding portal, BHS offers wedding dresses, bridesmaid dresses, young bridesmaid dresses, as well as “groom and usher suits as well as cute pageboy outfits” (BHS Ltd., 2014, p. 1). The products being offered by BHS were cited to be described, as follows: “We offer clothing for women (including brands Sophie Gray and Vanilla Sands), men and children (including Duck and Dodge, Sweet Millie and Tammy). Plus, we offer an all year round wedding collection and an extensive home and lighting range (including collections from Nigella Lawson, Gordon Ramsey, Kylie). BHS has been part of the Arcadia Group since 2009, and now BHS integrates Arcadia concessions (Dorothy Perkins, Wallis, Miss Selfridge and Evans) within all its stores” (BHS Ltd., 2014, p. 1). Application of Promotion as an Element of the 4Ps Promotion is an important element in the marketing mix to entice current and potential clients into purchasing the organization’s products. BHS currently offers as much as 50 to 60% price discounts through its online official website (BHS Ltd., 2014). In addition, another strategy undertaken by BHS was allegedly copying one of its major competitors, M & S (Champ, 2014). As indicated in the report, “BHS is about to fight M&S by introducing 50 new food halls, a range of high-quality home ware in vamped-up shops and a new line of well-cut clothing designed for older women” (Champ, 2014, par. 3). Concurrently, BHS is able to offer its online services through BHS Direct (BHS Direct, n.d.). Part of the promotional effort includes “special offers and exclusive deals, coupled with service-level backup, both before and after purchase” (BHS Direct, n.d., par. 2). In addition, advertising efforts were noted to have been intensified to include television and press marketing campaign, to wit: “the company launched a major TV and press marketing campaign designed to “signal the real change” happening across the business. Focusing on the catchy “You’ll never guess, it’s Bhs” strapline, this is supported by a plethora of “As Seen on TV” signs within the stores and would appear to be working well” (EMAP Publishing Ltd., 2013, p. 1). Findings From the application of product and promotion elements of the marketing mix, it was evident from the experience and financial performance of BHS that successful applications of these theoretical frameworks depend on the ability of the organization to adapt and adjust to the changing needs and demands of the clientele. Since the organization is basically a retailer of diverse products, it does not present unique or distinct product features that make them stand out above the rest in the retail industry. As such, BHS had to apply different marketing strategies to entice consumers to patronize their stores. Aside from providing pricing discounts, BHS has been noted to carefully study the reaction, response, and even current marketing strategies applied by its major competitors, specifically M& S. It is now applying a direct confrontational strategy by emulating similarities in product offerings (Champ, 2014). In addition, a closer evaluation of the financial performance of BHS would reveal that since it was integrated into the Arcadia Group in 2009, the financial highlights, particularly its net worth had declined. This could be due to the application of a disparate organizational vision that confused current stakeholders. Likewise, increasing competition and labor costs required changes in strategies by focusing on products (or services) which would make BHS stand out above the rest. It was revealed that various changes were implemented with the integration of BHS to the Arcadia Group: restructuring of management, increased fashion stance, reduction in homework network, and streamlining of previous operations (EMAP Publishing Ltd., 2013). As emphasized, “there has seemed to be to outside observers the need for a clearer market place statement of what BHS stood for if it was to avoid further confusing its customer base, being something of a jack of all trades but master of none in a differentiating retailing environment in which mixed goods exponents have been increasingly exposed to specialist competition and dynamic value propositions” (EMAP Publishing Ltd., 2013, p. 1). Recommendation From the evaluation of the product and promotional elements of the marketing mix, it could be deduced that BHS needs to strengthen its selection of product offerings, in conjunction with promotional efforts to announce to its diverse clientele the distinctive and core competencies that BHS offers. The products being offered come from different suppliers and brands which are just being retailed by BHS. Customers could thereby perceive that BHS makes money through adding mark-ups to these brands. As such, the products they offer could be considered considerably higher than those which could be sources directly from suppliers (or manufacturers of these goods). With difficulties in the economic environment, clientele who rely on prevailing wages could have felt decline in their purchasing power. As such, these consumers are looking for products with least cost and do not rely much on the enticing power of brands. In addition, previous promotional campaigns were deemed ineffective to entice clientele into trying their products and making repeat purchases. This was evident from the pricing strategies announced in the official web page of BHS. Despite price offs of as much as 50 to 60% of the offered prices, customers were observed to be indifferent to the campaign. Too much reliance on price discounts could be interpreted as negative images which indicate that products were old stocks and not moving. As disclosed by the owner, “People don’t want to buy cheap rubbish… People want to buy nicer things. Premium value” (Champ, 2014, par. 7). Therefore, BHS was applying a conflicting strategy: offering cheap goods and yet wanting to project premium valued organization. In this regard, one strongly believes that for BHS to succeed, management should make a more comprehensive assessment of the current products that are predominantly preferred by customers. As emphasized, “marketing mix used by a particular firm will vary according to its resources, market conditions and changing needs of clients. The importance of some elements within the marketing mix will vary at any one point in time” (Goi, 2009, p. 4). Slow moving products should already be deleted from their list. Likewise, rather than copying the strategy of M&S, BHS should design an innovative marketing strategy that should focus on their strengths and core competencies. This would necessiate undertaking a more comprehensive market research in the areas of operation to determine the current demands of the clientele in terms of products and brands preferred. After streamlining their product line, BHS should undertake comprehensive promotional efforts using diverse media: television, print, online, and billboards to announce their new image to the sophisticated and discerning contemporary market. The promotional efforts would necessiate revising the offers in the official website to focus on ‘what’s new’ items and to feature distinct features and characteristics of the products which could only be found or sourced from BHS. Likewise, by defining an exclusive target market, BHS should direct is marketing efforts and strategies towards this group. Green has indicated that “his new target customer: ‘a Middle England mum — a slightly older demographic” (Champ, 2014, par. 7) is to be BHS’ thrust. Therefore, the profile of this customer should be studied in greater detail to include preferences, tastes, purchasing power, as well as media frequently used. Previous research on the new customers have revealed that “a factor underlining the change is the increasing consumer power and sophistication due to wide availability of affordable personal computing power and easy access to online global commercial firms, networks, databases, commuruties or marketplaces. These developments have intensified the pressure on marketers to switch from mass marketing approaches towards methods allowing personalisation, interaction and sincere, direct dialog with the customer” (Constantinides, 2006, p. 413). The marketing strategies in product and promotions should then be directed to this segment to ensure that a perfect match in strategies and in the customers’ needs and demands would be addressed. Conclusion The current study has effectively achieved its objective of presenting an in-depth evaluation of the application of two (2) of the four (4) marketing mix elements, namely product and promotion, as these were assessed in terms of their effectiveness (or lack of effectiveness) in contributing towards the success of BHS. The findings revealed that the current product and promotional strategies applied by BHS were virtually ineffective in enticing their customers to patronize the products being offered. As such, the promotional efforts were seen to be ineffective in projecting a positive premium high quality image that the organization aims to achieve. Therefore, recommendations for a re-evaluation of the current product lines being offered were noted to be crucial to streamline products and take out slow moving items. In addition, current promotional efforts project conflicting image of product value to the clientele. Thus, BHS needs to design innovative strategies that would serve the needs of the newly identified target segment. Overall, the evaluation of applications of the marketing mix elements would enable BHS to discover their strengths and weaknesses and to enable them to design strategies that would be more effective in satisfying the customers’ changing needs. Using the lessons learned from the theoretical frameworks of the marketing mix, BHS could move towards enhancing product offering, as well as designing more effective promotional campaigns, in conjunction with the two other Ps: price and place, that would eventually turn losses into financial gains in the near future. Reference List Arcadia Group Limited, n.d.. BHS: About Us. [Online] Available at: https://www.arcadiagroup.co.uk/about-us/our-brands/bhs [Accessed 13 July 2014]. BHS Direct, n.d.. About BHS Direct. [Online] Available at: http://www.bhsdirect.co.uk/content/about.asp [Accessed 13 July 2014]. BHS Ltd., 2014. Affiliates. 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