Argos (marketing Strategy) 472s3m

Student no: 200884962 Program of study: MSc. BUSINESS MANAGEMENT Module title: PRINCIPLES OF MARKETING MANAGEMENT (56181) Module Leader: DR. WEN-LING LIU Assignment Title: THE MARKETING PLAN OF ARGOS Submission date: 17/12/2008 Word count excluding Marketing Game, Index, References & Appendix: 3,948

EXECUTIVE SUMMARY Argos Limited is among the leading retail outlets of UK, with around 680 stores all over the country and also in Ireland. It is known for its range of consumer goods, like electronics, electrical appliances, toys, and other household’s goods like furniture, and clothing. It also sells gardening supplies, power tools, and sporting equipment. In addition to its stores, its catalogue and Web site are the main source for selling these products. As of now United kingdom is in the process of switching to the digital signal by the end of 2012, therefore, Argos limited has planned the strategy of selling Digital TV’s, Set top Boxes, and other necessary equipment required for the use of people to switch over from analogue to digital. This will bring an opportunity to gain substantial incremental sale and profit, in its position as a leading retailer of television and associated equipment. Our stress will be to market this product in the Yorkshire region of UK, during the period of Christmas 2008 and New Year 2009; this is the peak season in the United Kingdom and the ideal time to increase sales, profit, database and customers for the company. Argos has planed to fund expensive national and coop advertising campaigns to make its presence felt in this specific marketplace, to sell digital TV’s and set top boxes. The product will be sold directly from the company through the stores, catalogues and websites without involving wholesalers and retailers and middlemen in a carefully targeted marketing campaign. The Digital Televisions and Set top boxes will be sold at minimal profits in this specific period of time, as a discount benefit for the customers in the Christmas and new year, to increase the sales by giving satisfaction and gaining creditability which will earn it customers for increase in profit in the near future.

SWOT ANALYSIS Argos has a strong and excellent service in diverse selection in electronic goods sold to its 130 million customers every year in UK and Ireland, it provides 17 million UK households with catalogues to enhance its sales by publishing two catalogues a year, the spring-summer edition, and the autumn-winter edition, it plans to develop and open 35 new supermarkets a year during the next three years, Argos

make sure that 98% of the UK population lives with 10 miles reach of it cataloguing ventures, they have a vast range of 12000 goods which include DIY and Gardening, consumer electronics and furnishing, sports equipments and jewelry etc, to do so they have employed 23 thousand people.

Strengths

Weaknesses

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UK’s Market Leader

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Geographical concentration

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Multi channel distribution

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dependent on Technology

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Financial

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Market Presence

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No. of employees

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Focused future

Opportunities

Threats

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Retail environment in the UK

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Rising Labor cost

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Bank rate

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Economic crunch

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Government imitative

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Intense competition

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Fuel price

Strengths Strong performance: Argos sales grew 8% to £ 4.2 billion compare to the last fiscal year. The Group’s performance was enhanced to its having two complimentary retail brands, Argos and Homebase. They operate within the same product mix, thereby reaching a broader range of customers and leveraging at a greater combined scale. They have also transferred new retail innovation and practices to give strength to their customer propositions, they also maintained and increased there market share in

number of specific categories and their special areas of growth for Argos was consumer electronics and for Homebase was fitted kitchens, the important sales driver for a broader customer base was providing instillation services by Homebase, the Argos value range and branded ranges including a wide selection of merchandise delivered recorded profits for Argos by their continued offer of highly competitive prices. Over 15 millions customers and increase of 40% used the check and reserve to order goods for the in store collection, this was helped by the internet increasing the gross margin by 50 basis points for the year. The operating cost and efficiency was the key to success this year. Despite home enhancement market fall this year Homebase subsidiary performed well, its gross margin increased by approximately 250 basis points. Multi channel: Argos the leader in multi channel retailing is responding to future, consumer and retail trends as they are changing how thy order and buy goods. The Argos offers in-store to shopping at home using catalogues and the internet, while looking for new opportunities for innovative enhance retail experience, the fully integrated and well nurtured of Argos ed highly developed chain systems provide differentiation and is a model for future retail business. That is buying in store, online or over the phone, for collection in store or home delivery provide a fast and efficient experience. For 10thousand product lines are available to be reserved from home for collection from the customer store of choice using a check and reserve option. By combining the efficiency of preordering and guarantee of immediate delivery facilitates consumers in a hurry. The quick pay kiosks are convenient in helping to speed up the shopping process by ing the till. These transactions for around 17% of Argos store sales. The same model has been use to competitive advantage in Homebase.

Strong brand image: Around 2/3rd of the UK population have and Argos catalogue at home giving them an idea of what it offers, thereby, serving 130 million customers every year on an average.

Market Leadership: Ten years back and now Argos was the first retailer to offer online shopping convenience to its customers, making it the second most visited retail site in the country. It is an icon amongst general merchandise retailer for its customers for offering choice value and convenience over a large range of products. Argos and Homebase are well placed to meet changes in customer preferences they emphasize on customer service and product choice. They are out reaching in under penetrated customer areas and developing formats tailor-made to serve specific local catch mates. For the financial service business drive sales and customer loyalty for both, Argos provides a range of credit and insurance products to customer’s in–store on telephone and online retailing the products at affordable prices and giving peace of mind to the 1.1 million active store card customers. Financial : Argos has a strong financial in the marketplace due to the excellent performance over the past few years. The home retail group under the flagship Argos is a leading home and general merchandising retailer notching a sale of 5.9 billion in the last financial year. They have been increasing there bench mark operating profit since 2006 by increasing sales £5,985m, an increase of 2% on the previous year. “Benchmark operating profit rose by 11% to £398m and benchmark profit before tax by 15% to £433m. Basic benchmark earnings per share of 33.9p represented an increase of 16%. Benchmark pre-tax return on invested capital improved by 70 basis points to 12.7%. A net cash position of £174m reflects the strength of our profit performance and overall financial position”. (Argos annual report) A strong team Argos financial performance proves how well its 53,000 employees are full commitment and ionate about its achievement. Focused Future Argos has a right business model and strategy to deliver superior long-term performance and looks for exciting opportunities for further growth.

Weakness Dependency in UK market: Argos is totally dependent in UK markets for selling its products. In case the UK economy slows down the whole business of Argos will crash. Dependency on technology: Argos is concentrating only on the technology based goods, which has narrowed its market, with such a brand image if Argos will focus on other opportunities, it can take over the UK market in a whole.

Opportunity Bank rate The government of United Kingdom is providing full opportunity to the investors by bringing down the interest rates of the bank. So it is the exact right momentum for Argos Limited to speed up their growth by targeting the Christmas sale as much as possible. Market expansion The increase of other big retail stores is making it possible to put forward their maneuver in new states to make use of the chance there e.g. Wal-Mart, the biggest retail chain in USA, has been in service in the market of UK under a new brand name called “ASDA”. Argos has the financial strengths; therefore, they have a chance to expand their operations on the market expansion in the other developed countries like China and India. Government imitative The government of UK Government has clear plans of Digitalization they want to switch over from analogue to digital as soon as possible. Therefore, this is an opportunity for Argos to sale Digital TV and digital Switch over in the Christmas 2008.

Threats: Intense Competition: Argos is in front of serious opposition from ASDA, Tesco, Sainsbury, PC World etc. in UK retail market, as it is among the highest competitive markets of the world. Reducing rate of television viewing: Due to busier consumer lifestyle, availability of more lucrative leisure activity, and easy accessibility of TV program on internet are encouraging consumers to find alternative solution for recreation instead of TV. Rising labor cost: The locals of United Kingdom nowadays are facing a lot of serious problems because of the recent economic crash fall in the world. High Inflation rate (figure), high unemployment rate (figure) and high price of the food- these three dimensional problems are changing the buying pattern of the customers. So, this is the main constraint for Christmas sale that we have to face.

PEST ANALYSIS Macro Environment Political: “UK government is planning to change analogue terrestrial TV signal to a digital signal between 2008 and 2012. This digitization takes place by all the TV region and Yorkshire region will be ended in late 2012” (Source: Case). Economy: The relation of the inflation rate has a direct relation with consumer buying power, it’s because if this rate goes high, the buying power of the individual customer and household is abridged.

As per the latest information available, inflation rate

currently is 5.2% (Source: Central Bank of England) while the target is 2%. Unemployment is another economy problem for the people of UK. In 2006 the redundancy rate was getting worse; but at the middle of 2007, it was turning down. But it again started rising sharply from Aril, 2008. In spite of slow financial growth, domestic annual disposable income is going up in United Kingdom. Because of it the buying power of the each household has

increased and now they afford more luxury products than they could have the last year.

Social Nowadays the market consumers do not spend enough time for shopping but they prefer the internet to gather the information about the product and pricing before they go to shop. Consumer behavior specialist Anne Warren, of Glasgow Caledonian University, said “the advent of online shopping has meant that people have become more and more used to making their decisions in advance.” Technology Almost all of the major companies now are more focused on online shopping to facilitate their consumers in every possible way. Therefore, in addition of the same these companies are introducing as much technical stuff to mobilize their service and reduce dependency on human as possible i.e. Tesco that introduced the self service system for making the payment system easier for their customer, and rest followed.

Micro Environment Customers: To sell the Digital TV and other digital hardware, mostly the household of the Yorkshire will be targeted. “Upgrading to a newer model is the main motivator of consumer purchases especially for male consumers and buyers from younger age groups” (mintel.com) The most importantly targeted customers for Digital TV’s and Set top Boxes will be: Households who are using analogue TV (Target for both Digital TV & Digital box) Households who are using analogue Territorial (Target for both Digital TV & Digital box) Households who are only using Digital TV (Target for Digital box) Households who are only using Digital Box (Target for Digital TV) Households, who are using cable, but have digital TV (Target for Digital box) Households who don’t have any TV (People are new in Yorkshire like International students, professionals etc.) Suppliers:

For Digital TV & Box, Argos is dealing with all the following renowned brands. Samsung, Sony, LG, Panasonic, Sharp, Bush, Goodman’s, Wharf dale Bush, Digi home, Goodman’s, Hitachi, Humax, Sagem, Thomson, Wharfedale Distributors: Argos has 707 retail outlets across the country and they follow multi channel to sale their products. Their multi channel comprises of the following things: Check & Reserve (Internet) Check & Reserve (Phone) Home delivery (Phone) Home delivery (Internet) Home delivery (Store) Competitors: Argos has a serious competition with PC world, Comet, Curry’s, ASDA, Tesco to sale their Digital TV and digital box. All these competitors have huge economic , with good delivery system, and highly known brand image in the market. Argos is facing the competition from different sources. like: “Established national specialists, such as B&Q, Wickes and Focus in home improvement, Currys and Comet in consumer electronics and domestic appliances, MFI and IKEA in furniture, Woolworths and Toys R Us in toys, H. Samuel in jewellery and Woolworths and Wilkinsons across broader general merchandise Supermarkets, such as Tesco, J Sainsbury and ASDA”, these have been growing the shares in some parts of the non-food, and non-clothing market, constructing on their usual step and the increased room given to these ranges online retailers such as Amazon.co.uk, who symbolize a small but increasing share of the non-food, nonclothing market expert independents, such as local and confined chains selling single product ranges such as toys and jewellery.

Marketing Plan Process- Argos The biggest change in the history of television is the Digital switchover, According to government statistics, “approximately 70% of Britons already watch digital television. Digital TV signals can be received through an aerial, a satellite dish, cable or through a telephone line. More than 98% of households possess at least one television set, making it one of the most pervasive, familiar and accepted

devices in the home”. By now, approximately, a total of 11 million households already have Digital Television and use them to increase access to a broad variety of programming and a more attractive viewing experience and also to gain the knowledge. Through the Digital TV More information is accessible because of the greater compression which is used with digital signals, so that they can hold several times the quantity of information as that of analogue signals. This allows larger pictures (widescreen), teletext, and surround sound audio and even extra channels to be sent with the broadcast. Therefore, Argos is planning to launch the Digital Television and Digital Set Top Boxes in the market of Yorkshire region in Christmas 2008 and New Year 2009, the plan is discussed below.

Positioning The people who are more focused on the unique and uncompromised taste for home entertainment can completely rely on Argos as it is the best local source for selection and price points for the New launched Digital TV’s and Set top boxes, Argos provide, services, and a selection of other accessories and electronic products. Customers will be impressed with, and return for, the great in-stock selection, value-oriented pricing, and excellent customer service. Argos if focused on applying tasteful supply that encourages everyone in the procedure of buying the best quality electronics for there every day life, be it for the office or the home. Argos helps the customers to realize greater value for their every Pounds that they invest in here.

Product Offering Following are the qualities that our most important points of differentiation offer: • The most extensive access to in-stock, first quality Digital TV’s and Set Top Boxes all over the country and Ireland at affordable prices. • The largest selection of special-order product, with niche requirements of the customers with arrangements to have most of those products shipped to the store within 10 days of placing the order. • Personal assistance from the technical staff that is qualified and capable of Meeting the needs of discerning customers with high expectations.

• Complementary product offering, including hard-covering window treatment, hardware, Aerials, gift coupons, head phones and other small accessories that are Useful for the home entertainment systems and media centers used at home. Argos will qualify for the most attractive retail discount through these suppliers, offering greater profit margins and more competitive pricing Argos is also offering "free installation" at a minimal extra charge for long distance customers and free for the customers with the range of 1.5 miles from the store. The primary product lines will include Digital TV’s and Set-top boxes from the following For digital TV: Samsung, Sony, LG, Panasonic, Sharp, Bush, Goodmans and Wharfedale For digital set top box: Bush, Digihome, Goodmans, Hitachi, Humax, Sagem, Thomson, Wharfedale Beside this, Argos is also selling Sky box to the customers.

MARKET AND TARGET AUDIENCE The Market We are having quite a good amount of knowledge about our market and we also know a great deal about the most common attributes of our most prized and loyal customers. We will make use of this knowledge to better understand who we serve, their specific needs, and how we can better communicate with, some examples are: • Those who have attended college. • Those with a combined annual income in excess of $100,000. • Those with the age range of 23 to 65 years, with a median age of 35 • Those who own their home valued at over $125,000.

Target Market Strategy We have target our market into five separated segments; "university students, "Women", “old aged”, "Professional Youngsters" and “business and media professionals’” the primary marketing opportunity is selling to these well defined and accessible target market segments that focuses on investing discretionary income in these areas:

Women-- The most dominant segment of the four is comprised of women in The age range of 35 to 50. They are married, have a combined income of greater than $80,000, own at least one home or condominium, and are socially active at and away from Home. They have discretionary income, and entertainment is one of the most luxurious priorities. Old aged -- This group, typically ranging in age from 50 to 65, is going through a positive and planned life transition. They are comfortable at homes watching TV, enjoying sports, etc. or just get closer to the world by watching different network programs on the TV. Their surprisingly high level of discretionary income is first spent on home entertainment Professional Youngsters -- Couples between the ages of 25 and 35 establishing their first "adult" household fall into this group. They work, earn in excess of $70,000 annually, and now want to invest in their home entertainment. They seek to enjoy their home and enjoy all the free time that is available to them. They buy big when they have received a promotion, a bonus, or an inheritance.

Business and Media professionals-- This is a segment of market who have to have most of the knowledge of the day to day world economy and other major issues of the world and their primary source of the same is Television, they are also very high income professionals, Television is a major medium to keep a focus on the world.

MARKETING MIX Epigrammatically, our marketing mix is comprised of the following approaches to pricing, distribution, Advertising and promotion, and customer service. Pricing -- We will use a keystone pricing formula plus $3.00 will be applied for most Digital TV’s and Set top Boxes. The goal is to have price points within 5% of the list price of other competitors. This insures competitive pricing and strong margins. Distribution -- All of our products are distributed directly through the company’s retail store catalogues and through website and telephone orders only. Advertising and Promotion -- our most successful advertising has been through the news papers, internet, through ads on official catalogue Radio and television

shows. The quarterly newsletter has also proven to be an excellent method to connect with the existing customer base. Customer Service – we have the most Excellent, personalized, fun, one-of-a-kind customer service. This is possibly the only quality that cannot be duplicated by any competitor. Product Marketing Our products allow our customers to experience , collect ideas and options, and carry out their entertainment goals. They will be open to best digital service at their homes and offices. They will not be able to do this in the same way through any other resource. Pricing The pricing of the product is based on offering high price to our customers evaluated to most price points available in the market. Value is determined based on the best quality available, expediency, and appropriateness in acquiring the product. We will consistently remain below the price points that our competitors offer to the market and consistently above the prices offered through the warehouse/seconds and retail stores, but we will undoubtedly put forward the best quality and selection available. Promotion According to our marketing survey the most successful advertising and promotion will be through the following: • Newspaper ments • Television ments • Quarterly Newsletter • Catalogues - "Argos company catalogue" which is distributed free of cost, has been successful because of the image it has generated among the customers for other products also. • Banners and pamphlets, it is a good source of promotion among the university students etc.

Offering As our product has a specific time frame for the launch and for a limited time period, we need to concentrate more in the promotion, therefore, we are offering special discounts and add on features on the Products like Digital TV’s and set top boxes, we will be offering free gadgets like watches, aerials, radios etc. with the products or gift voucher with huge discounts on the price that can be redeemed at a store within a particular time period.

BUDGET BREAK- UP Marketing operating costs are to be budgeted at approximately 5% of total sales. operating expense are tracked in the major marketing categories of radio adverts, newspaper adverts, the newsletter and catalogue, Web marketing , printed promotional materials, Public relations etc. Total Stores of Argos in the country and Ireland are 680 and in Yorkshire region are approximately 65, Our estimated budget for marketing per store = Pound 800/day = Cost for 65 stores = 800x65 = pounds 52000/day = cost of marketing for 65 stores for 8 days (for the period of Christmas and New Year) = 52000x8 = Pounds 416000/8 days

Marketing Budget distribution in Pounds Television Ads and Shows = 120000 Radio Ads

= 38000

Newspaper Ads

= 28000

Newsletter/catalogues

= 70000

Web Marketing/

= 65000

Public Relations

= 35000

Promotional Events

= 37000

Other Misc

= 23000

Total

= 416000 Pounds

CONCLUSION The above marketing plan to promote the sales of Digital TVs and Set Top Boxes in Yorkshire region in Christmas and New Year for Argos Limited does not finish here; this is just a short term plan for the promotion of this product. The basic agenda of Argos is to Take Over the whole of the UK market and digitalize it as “Argos Digitalized Market” within the coming five years of time. To do so, Argos need to forward the campaign at a very high level for a long period of time, it will cost 500 times or more than the budget used for the launch of same in Yorkshire region for Christmas. More sources of marketing will be involved then. This time our target market was narrow but for the long term we are strongly focusing on whole of the United Kingdom and Ireland market.

THE MARKETING GAME The marketing game is a case study that teaches us about a situation, evaluating opportunities, developing strategy, and making of marketing plan decisions. It is a report that reviews our marketing conclusions and other similar economic results, based on our plan as well as the competitor’s result, it is an experience in which we evaluate our learning by doing, it helps us figure out those answers of the questions that we do not usually know at the start. It is a competitive activity that confronts us to progress our strategy in brightness of the learning. The game simulates a company promoting voice recognition device (VRD). Our team has decided the name “Easy Chat” for the brand as it can be recognized with the product. Every decision (weekly) will symbolize yearly marketing decisions. The industry is in growth stage and the barriers of entry are high. With limited funds, we have to take care of the following: 1) Verification in the quality of product (R&D) 2) Promotion - advertising Methods and amount 3) Channel strength - a) full service dealers b) Discount dealers 4) Personally selling - sales force & their commission 5) Deciding the price 6) Deciding the quantity 7) Buying of marketing reports I got my team to perform a detail segmentation of the market and we decided to go for differentiation strategy. Our target market is the Home Producers as they are into the use of a variety of multimedia materials, their most of the things like family pictures, home movies, videos etc. all depend on multimedia. While as, in one or the other way all of the of the use the package for tor different purposes. They need easy to use software’s with cheep cost. This is a segment of the market that s around 20% multimedia sales. The figures that our team used in the game were not appropriate enough to be used as a budget that can bring out positive results, no profit was made, this happened because of the less knowledge of the market and because our team did not concentrate on the most important budgeting part of the game, figures were inappropriate, and were used in a hay wired manner without being designed for the profitable outcome. We did not spend enough time for the performance of the industry, our team work was not very strong. We spent $250,000 for the advertising, without knowing the proper channels, our sales force – salary was $400,000 but still there was no team work. We spent least on the marketing research $ 19000 whereas, spending more on the research would have brought us more knowledge of the market and any other sectors and factors which we could have used to gain our profits. Therefore, keeping all the mentioned facts in consideration we can come out with a positive result for the company and the brand to increase the sales and the profit to some extent.

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