Alliance Boots Marketing Essay

Task 1 (L.O.1.1) What is the Marketing Process? There are many different definitions of the Marketing Process, here are just two of them. i) â€Å"Marketing is the social process by which individuals and organizations obtain what they need and want through creating and exchanging value with others.† (Kotler and Armstrong 2010) This basic definition of marketing explains how societies and organisation interact, where an organisation fulfils the wants or needs of individuals. In return, the organisation hopes to make a profit. ii) â€Å"Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organisational goals† (Marketing Principles, BPP Learning Media,2010 pg.6) This definition looks at marketing more from the view of an organisation. It takes into account a lot more factors, such as the marketing mix, and looks at marketing as something that has to be done in order to achieve their goal, ie. Profits. The marketing mix is essential for an organisation to establish both its target market and unique selling point, it uses the 4 P’s to help find these. The four P’s are the idea of modern marketing theorists and they cover the ways that an organisation can influence consumers to buy their particular brand. The Four P’s are Product, Price, Place, and Promotion. Product: A product is anything that can be offered to the marketplace for consumption that will satisfy a need or want. It is not just something physical (tangible), it can also be a service provided e.g. cleaners, psychics etc., where, once the transaction is finished the consumer does not have anything to show for the money spent. These are non-tangible goods. The packaging of a product is important, not only as protection, but for communication (how to use a product), to remind consumers of the brand, and also to express company brand values (fair trade, supporting charities etc.). (appendix 1.1.1) Price â€Å"Costs will dictate the minimum price that can be charged in order to make a profit† (Marketing Principles, BPP Learning Media Pg.19)  Except for Loss Leaders, the purpose of a product is to make a profit for an organisation. The product must be bringing in more money than it’s costing to make or it’s not a viable source of income. This involves balancing a range of factors. Some examples are: 1. The price of competitors: If a product costs too much when compared to a similar product, the company could price itself out of the market. 2. What the target market is willing to pay: â€Å"The amount your target market is prepared to pay for your product depends on its features and the target market’s budget.† (http://www.learnmarketing.net/marketingmix.htm). 3. Consumers Perception: Some consumers will equate the price of goods with quality. What matters for a product in relation to pricing is the average price paid. Eg. Fashion & technology starts off with high prices, while FMCG’s start low Place   Traditionally in the 4P’s, place refers to distribution. It is concerned with where the product is bought and consumed, and getting the product in the right place at the right time (S. Hilliard, notes). Distribution also concerns itself with where a product is made, how it is stored and how many people are involved with a product before it reaches the shelves. The more people involved, the more expensive the product. If the producer of a product sells directly to the public, they must be easily accessible. There are three main distribution strategies available: 1. Intensive Distribution: This can be used for impulse or low-priced goods e.g. Coca-Cola. 2. Selective Distribution: This is used when a product is sold in a few places. Products still gets to wide geographical markets, but at the same time, feels like there’s some exclusivity to it. Eg. John Rocha at Debenhams. 3. Exclusive Distribution: Is when a product  is given to a sole distributor. The product is usually high-priced. Eg. Ferrari dealers or boutique clothes. Promotion Promotion is the means by which information about a product is communicated. It is done through advertising and Public Relations, where the company pays for, and so has control over information given to the consumer (Tesco’s Computers for schools programme). Publicity is uncontrolled and so can have a bad, as well as a good impact on a company (BP’s Gulf of Mexico’s oil spill). It is vital for businesses to have good reputations since the internet is so easily accessible to the public nowadays, and news is not so easily forgotten. Promotion also involves the selling efforts of staff involved with a product. If a consumer is happy with service they would be more likely to come back to the same store but may not talk about it to other potential clients, on the other hand, if a consumer has a bad experience in a place they are far more likely to tell other people about it. You can find examples of this all over social media sites. Promotional offers are also helpful in stimulating a demand for goods, especially impulse bought goods. Eg. Boots pharmacy’s â€Å"Three for the price of two†. Task 2 (L.O.1.2) Alliance Boots Marketing Approach: Charles Revlon said â€Å"In the factory we make cosmetics, in the store we sell hope†. This can also be said of the company this assignment will be looking at. Alliance Boots marketing approach is both market and consumer based. They have necessary goods like prescription medicines & opticians, but they also have their health and beauty ranges in-store, they are also a major pharmaceutical wholesaler and distributor, in doing this they have become a world leader in their field. Their revenue at year ended 31March 2012 is  £23 billion, up 18.4% on 2011. Their trade profit was almost  £1.03 billion, up 12.4% on the previous year and 88% over the last five. The cause for this is that they been increasing their direct ownership in emerging global markets, they have also been increasing joint ventures with companies such as Farmexpert & Guangzhou Pharmaceuticals Corporation in China (Alliance Boots Annual Report 2012 Pg.7). They have brought their products such as No.7 and Boots Laboratories into countries where they do  not have a retail presence through selling to independent pharmacies and online. In their stores, the organisation is very concerned with customer care. They have training programmes for their staff when launching a new product so staff can be informed in case of questions from the public. At the moment they are refitting stores and opticians so as to make them more accessible to consumers. Boots are continuing to develop their website, and also their BootsWebMD.com page, a health. The Boots brand is the most recognisable pharmacy-based health and beauty brand in Europe and their No.7, Soltan and Botanic ranges are synonymous with good quality and good value (Appendix 1.2.2). This and other promotions like their â€Å"Only at Boots† offers are what they use to keep themselves ahead of competitors. They seek to give consumers the best possible value by reducing prices where possible and also increasing their â€Å"Advantage Card†, and in doing so promote brand loyalty, which leads to extra sales. The organisation has gone into multiple charities to continue with improving the brands name and keeping itself in the public’s mind. They understand that the â€Å"link between good Corporate Social Responsibility and good business is vital† (Boots Annual Report 2012 Pg44). In this, they encourage their people to volunteer in charities that benefit local communities, and have developed a good reputation by doing so. They have volunteers that travel to the developing world to help promote eye-care in collaboration with Vision Aid Overseas. (Appendix 1.2.1) In the U.K. especially, Boots have a very selective strategy when looking at where to put their stores so as to maximise their profits. They place their flagship stores in the heart of major towns or cities for all the consumer’s needs, their local pharmacies are healthcare focused for communities, high street stores are geared towards health and beauty, and finally their stores in airports for travellers’ last minute needs. Task 3 (L.O. 2.1) SWOT Analysis of Alliance Boots Strengths * They are world leaders in a market that has potential for long term growth and so are at the forefront of technology * 69% of a survey asked why they shopped at Boots said it was because of the range of products in  their store(*table down the bottom*). They have a wider selection than competitors in their market. * With training programmes for Boots staff, especially for their own brand products, consumers can be more informed about any questions or worries they may have without necessarily having to go to a doctor. * Their brands are well trusted by consumers so they have a loyal group of consumers. * Through BCM, their Contract Manufacturing business, they manufacture special prescription medicines for individuals. * Boots have an excellent reputation when it comes to delivery of prescription medicines for patients’ needs Weaknesses * As a major organisation in their field, any negative publicity could cause major damage to the brand’s name. In 2011 Alliance Boots offered members of its final salary scheme the chance to take part in a so-called â€Å"pensions increase exchange†. This would see members handed a one-off increase to the value of their pensions in place of annual inflation-linked rises. This may lead to problems for them in the future if pensioners do not get enough money to see them all the way through old age which, in turn, could see consumers look at Boots in a bad light. (http://www.telegraph.co.uk/finance/personalfinance/pensions/8820994/Alliance-Boots-could-be-open-to-pension-mis-selling-claims.html) * During a recession, people are more willing to buy generic brands, in doing this, the organisation may lose out on selling their own brand products and so lose out on profits. Opportunities * Boots are continuously evaluating franchise opportunities in selective countries with large populations, and growing healthcare expenditure that they have not yet penetrated. * They have attempted to tackle the weakness mentioned above by releasing their own generic brand of pharmaceuticals, â€Å"Almus†, which has been released in six countries, after the recent launch in Germany. * In certain health and beauty stores (mainly stores inside shopping centres), the group have just started to sell sandwiches and drinks to give consumers a place to grab a quick lunch. When it comes to profit, to paraphrase another company’s slogan â€Å"Every Little Helps† . Threats * Boots had an excellent market position; it was in this position that the company had to deal with changes in the external business environment. There were supermarket chains like TESCO that entered the personal care market with big plans and stores that covered every product line that the customer would deal with. Naturally, supermarket chains threatened the niche that Boots was ruling and these large retailers had much more to offer than just drugs, drawing in crowds from all parts with a comprehensive product package under one roof. * Other more direct competition, like Superdrug have been a threat to Boots recently. They have launched their own brand of cosmetics which has meant that Boots, in response have had to lower their prices. Pest Analysis of Alliance Boots Political With governments increasing the number of medicines available for purchase for minor illnesses, Boots have been able to sell a lot more over the counter products to consumers without them having to go to the doctor for prescriptions. The American company Walgreens have bought a stake in the organisation. â€Å"The U.S. government is becoming the largest payer of prescription drugs could be a larger long-term challenge for pharmacy reimbursement.† (http://eupolitics.einnews.com/article_frame/120352863) There is a view that this has been done as a way for Walgreens to hedge their bets, in case it becomes problematic getting reimbursed from a government trillions of dollars in debt. Economics With the worldwide recession at the moment, a lot of companies are finding it hard to run a business profitably. Alliance Boots seem to have made their industry recession-proof. Consumers may go without holidays or nights out, but it seems the population still can’t do without their health and beauty products. Although, consumers do seem more brand aware and are more receptive to lower priced or generic brands. Sociocultural Factors A person’s social environment includes their living and working conditions, income level, educational background and the communities they are part of. The organisation seems to understand this and in developing worlds where they have a market presence they support multiple charities, Doctors without  Borders in Africa and South America. â€Å"As an organisation focused on pharmacy-led health and beauty, promoting and supporting a range of initiatives that improve the health and wellbeing of the communities in which we serve is a natural extension of our business activities.† (http://media.allianceboots.com/app_media/alliancebootscsr/home/pdfs/AllianceBootsCorporateSocialResponsibilityReport.pdf). Closer to home, they understand how the government are trying to promote a more healthy lifestyle (although not doing a whole lot to encourage it, reduce taxes on health products/ fruit)* and are trying to capitalise on the idea. Technology Through Boots â€Å"Centre of Innovation†, the organisation tries to get new entrepreneurs to get in contact with them. If a product is good enough Boots may help fund it with a view to the product going into their stores. In the U.K., they are trying to lower their carbon footprint by fitting new stores, and refitting existing stores with sky lights, sun pipes and solar panels. These stores have seen their carbon emissions reduced by a third. Task 4 (L.O.2.2 & 2.4) Buyer behaviour is the study of the why, when, what, where and how consumers buy a certain product. To steal a line from the real estate industry, the three most important things in marketing are segmentation, segmentation and†¦ segmentation. Research places groups into different segments and allows an organisation to know the geographic, demographic, and psychographic variables (target market) to aim their products at. The two products this assignment will be looking at are 1) â€Å"Boots Winter vaccine† and 2) â€Å"FCUK men’s deodorant†. (Appendix 2.2.1, 2.2.2 & 2.2.3) The stages of buyer behaviour are: * Need recognition * Information search * Evaluation of alternatives * Purchase decision * Post purchase evaluation (Marketing Principles BPP Learning Media Pg. 132) Need recognition: 1) A person vulnerable to influenza and wants to protect against it. 2)  Consumer needs a new can of deodorant. Information search 1) Internet search, Emails ( If the consumer has an Advantage Card) 2) Ask friends, TV adverts, flyers from the last time shopper was in the store Evaluation of alternatives: 1) Talk to a GP. Are the GP’s services more hygienic? 2) Is the price okay for the product compared to the other products like Lynx, Nivea etc, does it smell better than the other products? Purchase decision: 1) Confirm that factors important to the consumer are met. 2) Price is right, product smells good. Post purchase evaluation: 1) Did the vaccine work? Were the standards of the consumer met? 2) Does the spray do what it was bought for? Segmentation: Geographic: As seen in task 2, Boots have strategically placed stores to maximise their consumer base and profits. (Flagship stores corner shops, airports etc.). Demographic: Appendix 2.2.4 1) Winter Flu Vaccine: * With winter starting soon Boots are beginning to promote their Winter Flu vaccination service. This will be aimed at a wide demographic. * This vaccination is strongly recommended for: * persons aged 65 and over †¢ Those with a long-term medical condition such as diabetes, heart or lung disease †¢ People whose immune system is impaired due to disease or treatment †¢ Persons with a Body Mass Index (BMI) over 40 †¢ Pregnant women (can be given at any stage of pregnancy) †¢ Residents of nursing homes and other long stay institutions †¢ Healthcare workers †¢ Carers †¢ People with regular close contact with poultry, water fowl or pigs. (http://www.boots.ie/winter-flu-vaccination-service.aspx) 2) FCUK men’s deodorant: Boots target market for this and all other â€Å"designer† body-sprays are males aged from 16 to 35. These are consumers (usually) with plenty of discretionary income and who may feel more under pressure to look their best. They don’t always worry about money when it comes to this. Psychographic: 1) Winter Flu vaccine Boots aim this product at people who are security and status seeking. If this is to work for them they cannot afford to be lackadaisical when it comes to hygiene. They can instil confidence in their consumers simply because they are such a well-known brand, and if they had any negative press it would surely be widely reported on. 2) FCUK men’s deodorant: This product is a more expensive option than a lot of the competitive products Boots have for sale. It’s also a bit more expensive than if consumers were to go into a supermarket and buy the same product. As FCUK is a well-known brand, consumers who are status seeking could be looked at as a potential target-market base, but consumers who have the â€Å"Hedonistic† approach to life would be more appropriate. Task 5 L.O. (2.3& 2.5) Boots target-market ranges from the pharmacies they supply as part of their wholesaling and distribution right through to what they hope will be their loyal consumer. Through wholesaling, they must ensure their products are the best quality for the best price when compared to rivals like Superdrug. If they were to be found to lack the quality of their rivals it could have a lasting damaging effect on the organisation. (Boots estimate the goodwill of their name in their joint ventures to be worth  £4.7billion). As a pharmacy store Boots are aimed at consumers who are security and status seeking. Recently their â€Å"First Leaf† advertisement for the autumn/ winter begun on television and was aimed at mothers who want to avoid illnesses in their family throughout the winter with vitamins and throat sprays, and at the  same time promotes luxury items like bubble-bath and autumn coloured hair-dyes. The â€Å"advantage card† is a major factor in how Boots target their market. They have been able to understand their target market so well that they send separate offers to individuals based on their spending habits, which encourages consumers back to the store and can only be an advantage on their behalf. The card has also gotten excellent reviews from consumers on websites like reviewcentre.com. Boots are in a very strong position for the challenges that may face them in the next few years. Although with the â€Å"green movement† becoming a more prolific part of lifestyle segments, they could promote their CSR, which does a lot of charity works in developing countries they have employees in. They do not test on animals, or have testing carried out on their behalf. With governments looking to provide more cost-effective ways of managing healthcare, Boots could possibly expand in communities through weight- management programmes, health check-ups and smoking cessation advice. But if they don’t do this I still think they’ll be fine.