THE PROMOTIONAL PLAN FOR PRICERITE
Background
This paper is devoted for the presentation of the promotional strategies and tactics of Pricerite for the next year. The firm is a Hong Kong (HK) retailer of home improvement products that ranges from furniture, electrical appliances and maintenance tool and other consumable accessories. It generally targets middle- to high-end markets as it offers value-for-money and innovative products. Retail outlets are scattered in three major HK regions. There are 10 stores in Kowloon, 6 stores in Hong Kong Island and 14 stores in New Territories. Pricerite value their customers by using technology and people to know their expectations as well as to exploit or mitigate market trends in accordance to customer needs. They usually carry branded products in categories such as appliances, power tools and home consumables like detergent while they would place store label to most furniture and bedroom accessories. Pricerite is a subsidiary of a HK listed retail conglomerate IV Cash Retail Management Group Limited.
Resolving Industry Issues: The Firm’s Early Tactics and Promotional Position
The industry is typical of high fixed costs due to marketing, logistics, inventory and administrative costs associated in the conduct of business. In the home improvement sector, major products are seasonal as furniture can be considered as semi-fixed asset due to long lifespan ( 2004) except for few consumables. Due to this, as much as Pricerite wanted to sell this significant part of its inventories (likely to be the most space-demanding) through promotions, the strategy would not result to actual sales. However, it can stimulate furniture sales through design innovations making product design evaluation crucial. Another concern is the utilities and personnel costs in connection to store lay-out. As larger space induce more of lighting, air-conditioning, personnel and renting costs, location assessment will rationalize the need to reduce the size of the selling area or the warehouse area. In addition, complex product and supply chain relations minimize the chance of the firm to exploit its competitive advantages and key products that makes supplier and product rationalization useful.
Activities at the start of promotions strategy are now identified. As noticed, product and place factors of marketing are initially handled as promotions would be subjected to price-focus if operation improvements are undermined. They are merely targeted for efficiency to deduct some costs from extravagant promotional activities. It should be emphasized from this point onwards that the firm is competing for quality less on price. Promotions should be intended to lure customers to enter Pricerite stores to experience quality and customer-driven approach within its premises. Bargain prices will be the last thing visitors would think and associate to Pricerite.
This rationale is consistent to the fact that HK retail industry is battled by both local and foreign competitors under less restricted business arena ( 2003). As Retailer Sentiment Survey shows that most companies expected higher profits coupled by intension to expand (2006), next year’s intensity of rivalry for slow cycle market of home improvement products will increase. While giant retailers have high bargaining power than suppliers and will compete in price ( 2006), Pricerite is in the good position to compete on value. Small retailer’s consolidation ( 2006) confirms bargaining advantages of “giants”. If the firm wanted to survive alongside indigenous Chinese products, value strategy should be used in this promotional plan. Its name, Pricerite, would be compatible with value-orientation in which customers are offered with value products at a premium price.
Resolving Consumer Behavior: The Outline of Major Promotional Activities
Generally, HK consumers are more sophisticated and demanding than ever ( 2006). In this respect, Pricerite should arouse interests of potential costumers to try its product features and customer services which at this point should be rationalized according to its resources and corporate goals. On the other hand, former costumers require relationship marketing. The latter is prioritized in advertising while the latter is on sales promotions but both necessarily involve public relations. As shopping is considered a form of entertainment and a way to get out of small house spaces ( 2006), store location will be improved towards lean but mean settings. Furniture, beds and other appliances inside the store are also available for actual use. Personal selling of salespeople will be informal and friendly. Due to this, employee trainings before actual work will be done to equip them with the right tools to support 2007 strategy.
HK men will also be an important market aimed by the promotion. Collectible items of figurines will be available next year to minimize the key role of women in shopping as well as stimulate men within Pricerite premises. In addition, as online shopping will not rise significantly for the industry (2006) while HK market value the location advantages and convenience of shopping malls, the current features of the firm’s company website will be retained. Web postings are dedicated for new product and promotional information still there will be no fixed prices indicated rather description, dimension and advantages of products are given priority. However, they use their credit cards for payment over-the-counter. Consequently, economic indicators will be closely monitored as buyer’s spending on furniture and appliances are highly affected by HK economic performance ( 2005).
Implementation of Promotions Plan
As observed below, the Gantt chart of the promotional plan shows when a supporting activity should be carried out with highlighted 9 suggesting the end of the plan and final evaluation of the its effectiveness. The plan will start on developing plan objectives and weighing its forecasted costs and benefits for Pricerite. Basically, the plan goals would be increase in repeat and first-time customers, increase in revenues/ profits, positive feedbacks from the promotions,
Gantt Chart of Promotional Campaign for the year 2007
Activities
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
1. Planning phase which includes developing promotional plan objectives as well as estimating both explicit (financial) and implicit (stress/ resistance from employees) costs
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2. Product Line, Distribution Channel and Supplier Assessment
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3. Rationalization/ Implementation of Product, Place and Suppliers
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4. Reconstruction of store outlet and warehouses to rationalized strategy
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5. Training of Sales Personnel
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6. Media Advertising (website, print, TV, radio) that formally announces Pricerite use of Value Strategy
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7. Publicity through product fairs and store outlets highlighting the rationalized products. This would entail distributing “entry cards” particularly aimed for first time customers that avails them to great surprises in their first visit.
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8. Sales promotions will be made available for current customers
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9. Monitoring and Evaluation of the Promotional Plan which includes time data comparison of number of customers, sales and other costs.
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10. Monitoring of HK economic indicators and effects to the plan
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11. Contingency Actions/ Reactions
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unique products from competitors, lean but mean supply chain, lower overhead and inventory costs and efficient logistics. To achieve these, there is a need to understand important aspects of the activities to assure their success and positive net contribution to the plan.
The planning phase will be headed by the business manager with other head departments of Pricerite including each outlet supervisors at least twice a week. All ideas concerns will be taken with the decision of the business manager being the final. He is also responsible for constructing key priorities and the plan itself with the aid of respective department heads for financial, logistics, operational and maintenance information and expertise. Assuming that the plan is according to those presented in the Gantt chart, Activity 2 will be carried by department/ division heads with the support of outlet supervisors and coordination of marketing leader. This will be done in an integrated manner to maximize benefits within the system. The intention to implement Activity 3, 4 and 5 will be finalized by the business manager upon checking documented recommendations. Executive meetings will be held for questioning prepared by the BM resulting to actual execution of Activity 2 plans.
Funding, store reconstruction (if any), store interior design adjustments, and training centralized to those responsible departments and data arising from these areas are searchable to their records. Documentation is an important aspect of the promotions plan since Activity 9, and subsequently, Activity 11 would be irrational and subjective if there is no basis for decision-making. In this view, the secretary of the BM will be responsible in compiling information through the progress of the plan. In this way, BM can easily determine the current benefits and costs associated in the each activity. Due to this, Activity 9 and 11 will be done on a monthly basis or as the need arises. To prevent BM with laborious participation in the plan, the marketing head will serve as coordinating body and BM representative with regards to resolution of operational conflicts. As a result, the marketing head should stand as a leader because technical actors will be its subordinates that may introduce behavioral differences and disagreements. Activity 10 will be outsourced from industry consultants who have ample experience in market research and forecasts.
Now, the promotions part should be prioritized as it is the heart of the plan. Activity 6 will be implemented primarily using a combination of front store and HK newspaper informative advertising that value strategy in Pricerite is already in place. New products will be highlighted in every advertising material showing the improvements in the product line the store offers especially on designs of furniture and innovation of appliances. Renovations in each store interiors and shopping environment and customer-friendly approach of salespeople will be conveyed. The tag line of the promotions strategy which is “Quality is more than price… Try us at Pricerite…” will also be aired in HK popular radio stations. The informative nature of these advertisements will also include invitation for a 5-day Grand Pricerite Display on mid-April.
Activity 7 is when the grand display will be conducted somewhere in the populous city and high income bracket destination of Kowloon. This publicity is intended for the firm to hand potential customers brochures and “entry cards”. The latter includes them as members of Pricerite newly established novice account in which card holders automatically receive freebies that goes along their main purchases. Such freebies (can be house consumables or furniture accessories) are strategically placed to new product offerings to stimulate demand and make assessment, rationalization and implementation processes in Activities 2-5 look fruitful. As implied, no price-based promotions will be applied as it will counter the whole promotional plan that is based on value strategy. There will be no individual product discounts. Instead, this will be replaced by “set buying” or banded offerings where card holders can have dining set, bedroom set, etc under below-individual-gross prices.
The counter part of entry cards for repeat and loyal customers are “at-home cards”. Aside from the benefits of entry cards, holders under this premium account are entitled for monthly brochures of new promotions and products. In addition, they can also request for reservation on fast moving and new items over the phone to secure stocks for at most two weeks prior to their store visit and actual purchase. Administration of these cards will be the primary responsibility of each outlet supervisor. As there will be still no online shopping experience available for customers, they should bring with them these cards to avail promotions under them including abrupt promotions that could happen.
Promotions Plan Analysis and Appraisal
Product life cycle theory is challenged in the promotional plan ( 2001 ). Home improvement products generally have slow product life cycle due to their inherent durability. Most of the furniture even becomes tough through time; however, design factors adjust to the development of new home appliances and accessories. On the other hand, electronic appliances are heavily transformed to mediocrity due to continuous technological improvement and globalization. These issues proved the validity of Activity 2 and its implementation. Focusing the initial activities of the plan towards product improvement only strengthens the goal of the company to differentiate its products to competition through innovation. In addition, high-end market is known to charge their lifestyle implying status and personality that makes regular home improvement regimes.
The theory of short-term impacts of price promotions is used as a guide (1994 ) to arrive on value strategy. Price-based strategy usually leads to huge sales spikes only to end up with large net costs without certainty of improved market share over the long-term. However, value strategy departs from this idea as the firm segmented on markets as well as its products. Focusing on quality, innovativeness and healthy relationship with customers, the firm prevents failure risks. Further, activities 3, 4 and 5 cannot be identified as merely cost drivers for the purpose of the plan since it has lasting effects for the firm and also promotes continuous improvements. Having novice and premium accounts with the use of entry/ in-house cards are healthy promotions. New products will have fast turn-over and new customers will experience improved store shopping and product quality. On the other hand, loyal customers will continue to be loyal due to prioritizing of their home improvement needs that may also connote their status as high-end consumers. In effect, inventory and other costs will be reduced and market share will be increased and protected. This is done without emphasis on price on the part of Pricerite strategy rather on value.
Lastly, theory on efficient outsourcing is applied. Consultancy services will be an optimizing tool to derive critical issues during assessment phases. This follows the saying that “One cannot smell his own stink.” This is an efficient measure because costs associated from an ill-prepared assessment findings and recommendations will be prevented. Also, external environment research would entail another creation of another division that consulting becomes cost-effective option. The rationalization of supply chain especially with suppliers is also an efficient tactic to minimize their bargaining power when it comes in delivery and stocking. They are reduced in number to minimize transaction costs associated with finding the “ready” supplier when orders peak or “savior” supplier when it contracted. Rather, there would be buying relationship that will be maintained. And finally, TV as media is not selected as it is expensive and run defeat the effort of the firm for actual store visit from potential and loyal customers.
Credit:ivythesis.typepad.com
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