Name程家琪 tudent no.:17307100075 CATER TO CUSTOMERS' NEEDS SECOND THOUGHTS ABOUT A STRATEGY SHIIFT Jiaqi Cheng 17307100075 Course: English for Academic Purposes(Business) Date: 21 December 2018
Name:程家琪 Student No.:17307100075 1 CATER TO CUSTOMERS’ NEEDS: SECOND THOUGHTS ABOUT A STRATEGY SHIFT Jiaqi CHENG 17307100075 Course: English for Academic Purposes (Business) Date: 21 December, 2018
me程家琪 Student No: 17307100075 I Case summary After Augustin was recruited as the leader of Emilia, a century-old retailer company in Spain whose original target customer group was middle-aged women purchasing only goods on sale, he decided to change the pricing model as well as the indoor decorations of it The old and new pricing model's influence on customers and Emilia itself is showed in Table 1 Customers Emilia Old Pricing model: uy products hose. Spend a huge amount Weekend promotion IgIn rices were of money executing artificially inflated sales and promotions Seduced to buy more than while gainingthe what they indeed need same gross profit New pricing model: Offered products of the. Save a considerable Every Day Low same prices every sum of executing g Prices which are even lower thancost Table I Two pricing models influence on customers and Emilia It could be told from the table above that the new pricing model is expected to effectively release both sides of the transactions from a mutual victimization dilemma brought by the old model. However, the decreasing customer traffic and revenue indicated that the result of the new model turned out to be disappointing. Besides, the laborately decorated indoor central plaza failed to exert a lasting influence among the young generation. Therefore, the board decided to let Emilia go back to its former 2. Emilias customer segments Two customer segments were involved in Emilia's strategy: the middle-aged women and the young generation. The two groups have diverse features and
Name:程家琪 Student No.:17307100075 2 1.Case summary After Augustin was recruited as the leader of Emilia, a century-old retailer company in Spain whose original target customer group was middle-aged women purchasing only goods on sale, he decided to change the pricing model as well as the indoor decorations of it. The old and new pricing model’s influence on customers and Emilia itself is showed in Table 1. Customers Emilia Old Pricing Model: Weekend Promotion Buy products whose original prices were artificially inflated. Seduced to buy more than what they indeed need. Spend a huge amount of money executing sales and promotions, while gaining the same gross profit. New Pricing Model: Every Day Low Prices Offered products of the same prices every day, which are even lower than most retailers’. Save a considerable sum of executing cost. Table 1 Two pricing models’ influence on customers and Emilia It could be told from the table above that the new pricing model is expected to effectively release both sides of the transactions from a mutual victimization dilemma brought by the old model. However, the decreasing customer traffic and revenue indicated that the result of the new model turned out to be disappointing. Besides, the elaborately decorated indoor central plaza failed to exert a lasting influence among the young generation. Therefore, the board decided to let Emilia go back to its former policy. 2. Emilia’s customer segments Two customer segments were involved in Emilia’s strategy: the middle-aged women and the young generation. The two groups have diverse features and
Name程家琪 Student No: 17307100075 preferences and figuring them out could be helpful for Emilia to develop targeted arketing strategies catering to their needs respectively The features of both group are showed in Table 2 Features The middle-aged Price sensitive women Shopping for the whole family Enjoy the satisfaction and excitement brought by discounts The young generation L ove so g Obsessed with Internet Table 2 Features of two customer groups It could be analysed from Table 2 that the reason why the new pricing model failed to attract the middle-aged women in spite of the fact that the prices offered by it were indeed lower than products in other retail stores was that the new model lacked discount products acting as incentives. So to win them back, Emilia could find a substitute for them which can fulfil the middle-age's needs for excitement in a similar way.(4.1.2 Good Bargains"plan) for the young generation, their main feature is their growing obsession with Internet just like what has been mentioned by Maria. Although Augustin said that they were planning to replicate the indoor experience online, its declining influence among the young showed that they were not doing well enough. Emilia could establish more connections between online and offline shopping and socializing platforms, providing customers with a coherent experience to ensure its continuous reputation among the young generation.(4.2. 1"Online to Offline"omnichannel strategy) 3. Emilia,s current situation Clarifying Emilias own strengths and weaknesses, as well as the opportunities and threats that it confronts is of significant importance 3.1 Strengths and weaknesses
Name:程家琪 Student No.:17307100075 3 preferences and figuring them out could be helpful for Emilia to develop targeted marketing strategies catering to their needs respectively. The features of both group are showed in Table 2. Features The middle-aged women Price sensitive Shopping for the whole family. Enjoy the satisfaction and excitement brought by discounts. The young generation Love socializing. Obsessed with Internet. Table 2 Features of two customer groups It could be analysed from Table 2 that the reason why the new pricing model failed to attract the middle-aged women in spite of the fact that the prices offered by it were indeed lower than products in other retail stores was that the new model lacked discount products acting as incentives. So to win them back, Emilia could find a substitute for them which can fulfil the middle-age’s needs for excitement in a similar way. (4.1.2 “Good Bargains” plan) As for the young generation, their main feature is their growing obsession with Internet just like what has been mentioned by Maria. Although Augustin said that they were planning to replicate the indoor experience online, its declining influence among the young showed that they were not doing well enough. Emilia could establish more connections between online and offline shopping and socializing platforms, providing customers with a coherent experience to ensure its continuous reputation among the young generation. (4.2.1 “Online to Offline” omnichannel strategy) 3. Emilia’s current situation Clarifying Emilia’s own strengths and weaknesses, as well as the opportunities and threats that it confronts is of significant importance. 3.1 Strengths and weaknesses
Name:程家琪 Student No: 17307100075 Strength Augustin has carried out many successful cases in the retail industry Emilia has a good reputation and a considerable user base as a century-old retailer Emilia has stores all over Europe (Spain, France, Italy), thus facing with a broader market Weaknesses The company cannot afford a four-year loss(211 million EURO in the first year) Table 3 Strengths and weaknesses According to Table 3, Emilias competitive advantages were its reputation and company scale as an established brand which Augustin did not make full use of. As a company owning branches in foreign countries and having a long history, emilia failed to turn them to its advantages but chose to take the same promotion strategy as its small-scale local competitors did, which was not effective enough to differentiate it from others. Emilias KSF(Key Success Factors) should be something exclusively owned by it and hard for its competitors to replicate due to their limited resources or influence. (4.1. 1"Annual Promotion" plan) In terms of its weaknesses, although Augustins new pricing model might work in the future, the financial burden made it tough for Emilia to survive the four-year experiment period, it was in urgent need of finding a way out 3.2 Opportunities and threats Opportunities It is a new pricing model that no one has ever tried in the The new arrangement of Emilia's space will attract customers from both age groups(indoor central plaza for the young to meet and socialize, and the old will stay upstairs looking for good deals) Threats It is losing both customer groups, the customer traffic was down significantly(dropped by 10%
Name:程家琪 Student No.:17307100075 4 Strengths Augustin has carried out many successful cases in the retail industry. Emilia has a good reputation and a considerable user base as a century-old retailer. Emilia has stores all over Europe (Spain, France, Italy), thus facing with a broader market. Weaknesses The company cannot afford a four-year loss (211 million EURO in the first year). Table 3 Strengths and weaknesses According to Table 3, Emilia’s competitive advantages were its reputation and company scale as an established brand, which Augustin did not make full use of. As a company owning branches in foreign countries and having a long history, Emilia failed to turn them to its advantages but chose to take the same promotion strategy as its small-scale local competitors did, which was not effective enough to differentiate it from others. Emilia’s KSF(Key Success Factors) should be something exclusively owned by it and hard for its competitors to replicate due to their limited resources or influence. (4.1.1 “Annual Promotion” plan) In terms of its weaknesses, although Augustin’s new pricing model might work in the future, the financial burden made it tough for Emilia to survive the four-year experiment period, it was in urgent need of finding a way out. 3.2 Opportunities and threats Opportunities It is a new pricing model that no one has ever tried in the market. The new arrangement of Emilia’s space will attract customers from both age groups (indoor central plaza for the young to meet and socialize, and the old will stay upstairs looking for good deals). Threats It is losing both customer groups, the customer traffic was down significantly (dropped by 10%)
Name:程家琪 Student No: 17307100075 Other companies are making use of this opportunity to ramp up promotions and occupy the market Table 4 Opportunities and threats The opportunities Emilia had were not necessarily decisive to improve emilia current situation. In fact, the models novelty which was considered to be an opportunity turned out to be the reason for failure. Therefore, it is a wise option to abandon the strategy for it has proved to be invalid. Additionally, Emilias new space arrangement has not yet showed its superiority, and the root cause of it is Emilias failure to attract both customer groups. As is mentioned in the second part,proper methods could be applied to seize the opportunity Threats posed by lost customers and aggressive competitors jointly put Emilia in a risky situation, forcing it to implement a marketing strategy reformation. 4. Suggestions for future development Generally speaking, the goal of Emilia could be divided into two parts: retain the existing customers(the middle-aged women) and expand the customer base (attract the young generation to compensate for the possible customer loss due to the pricing model shift). Thus, it could take different approaches contraposing both groups'needs to promote customer-oriented shopping experience and achieve these two goals 4.1 Goal l: retain the existing customers To retain the existing customers, namely the middle-aged women, Emilia should abandon the "everyday low prices"strategy considering the alarming situation of decreasing customer traffic and revenue. But it does not mean that Emilia has to go back to its former policy; instead, it could make full use of its reputation and considerable customer base to execute new plans 4. 1. 1 Annual Promotion plan A new promotion plan called"Annual Promotion" plan is about uniting with other retailers to offer one big promotion a year rather than small promotions every
Name:程家琪 Student No.:17307100075 5 Other companies are making use of this opportunity to ramp up promotions and occupy the market. Table 4 Opportunities and threats The opportunities Emilia had were not necessarily decisive to improve Emilia’s current situation. In fact, the model’s novelty which was considered to be an opportunity turned out to be the reason for failure. Therefore, it is a wise option to abandon the strategy for it has proved to be invalid. Additionally, Emilia’s new space arrangement has not yet showed its superiority, and the root cause of it is Emilia’s failure to attract both customer groups. As is mentioned in the second part, proper methods could be applied to seize the opportunity. Threats posed by lost customers and aggressive competitors jointly put Emilia in a risky situation, forcing it to implement a marketing strategy reformation. 4. Suggestions for future development Generally speaking, the goal of Emilia could be divided into two parts: retain the existing customers (the middle-aged women) and expand the customer base (attract the young generation to compensate for the possible customer loss due to the pricing model shift). Thus, it could take different approaches contraposing both groups’ needs to promote customer-oriented shopping experience and achieve these two goals. 4.1 Goal 1: Retain the existing customers To retain the existing customers, namely the middle-aged women, Emilia should abandon the “everyday low prices” strategy considering the alarming situation of decreasing customer traffic and revenue. But it does not mean that Emilia has to go back to its former policy; instead, it could make full use of its reputation and considerable customer base to execute new plans. 4.1.1 “Annual Promotion” plan A new promotion plan called “Annual Promotion” plan is about uniting with other retailers to offer one big promotion a year rather than small promotions every