Whether The Marketing Mix Contributes on the Success of Wal-Mart

Whether The Marketing Mix Contributes on the Success of Wal-Mart Introduction The marketing mix, as a paradigm, has been keeping applied in business since it was merged more than 50 years ago. Many companies are still using it as a guide in marketing (Zineldin, 2007) to gain more competitive power in the market. The activities integrated in marketing programmes to create, communicate, and deliver value for consumers were classified into product, price, promotion and place in marketing mix tool by McCarthy (cited in Davies et al., 1995) in 1960, and Kotler et al. (2009) defined the sub activities of each element of the 4Ps: product variety, quality, services, etc for Product; list price, discounts, allowances, etc for Price; sales promotion, advertising, public relations, etc for Promotion; and channels, coverage, locations, transport etc for Place. By using the guide and adjusting the elements and the sub activities of them, companies can find a marketing strategy suitable for both the industry and the organizations. Although the application of the marketing mix seems to be different among industries, it still has influences on the businesses in extents. To see whether the marketing mix can work to the achievements of the organizations, the strategies and the application of the marketing mix of Wal-Mart, the largest retailer in the world, can be a great choice to analyze. As a well known hypermarket business leader, Wal-Mart serves customers and members more than 200 million times per week at more than 8,650 retail units under 55 different banners in 15 countries (Anonymous, 2010), and it is still extending its business globally. This essay will analyze the contribution of the marketing mix on the success of Wal-Mart, and a brief scheme of improvement will also be looked at. Product As a retailer, the term product can be divided into two parts, the retailing service to suppliers, and the products and services to customers. Since both suppliers and retailers are pursuing a low-margin, high-volume strategy (Kotler et al., 2009), the stable and high-volume orders from Wal-Mart can meet the needs of the suppliers. However, only large orders are not enough in current business, according to Hansen (2009), a service-centered philosophy and service quality are crucial for building long-term relationship with suppliers. To keep a high quality of service, Wal-Mart is innovative and a pioneer in technology development. It is among the first retailers using computers to track inventory (1969), adopting the bar codes (1980) and wireless scanning guns (late 1980s), and introducing EDI for better coordination with suppliers (1985) (Johnson, 2002), which developed the efficiency of distribution and turnover of goods so that it can meet the requirements of suppliers. To individual customers, not only selling products of suppliers, Wal-Mart has private-labels such as Great Value, OlRoy, Partents Choice etc, which provides products in wide fields. Kumar et al. (2007, cited in Geyskens et al., 2010) argued that private-label products are positioning at mid-quality, and they are as good as national brand offerings but cheaper. However, Wal-Mart focuses on the quality rather than only mimic other brands (Neff, 2009), trying to meet the needs of most customers focusing on cost performance. Because of the efforts Wal-Mart made, customers are increasingly relying on the private labels (Rae, 2009). Also, according to Min (2010), customers evaluate the service with product quality, which is followed by cleanliness of the store, competitive price, product variety and fast checkouts. By making collection of customer information and IT innovation, these factors are getting focused on by Wal-Mart, which keeps the service quality and satisfaction of customers. Price The price factor of Wal-Mart can be looked at by the view of both B2C and B2B businesses. For the pricing strategies towards individuals, a lower price can capture more market share even competitors build price wall to fight in the market (Chiu et al., 2009). Wal-Mart has a great advantage in the competition among retailers because of offering a lower price and promising it the lowest among all, but lowering the price does not definitely lead to a cut in the profit. Wal-Mart uses a broad line and low value added product lines to keep prices low and raise the volume that is increased greatly enough to make up for the low margin (Kotler, 2009). However, there is always a risk: if the added revenues from the increased demands cannot cover the loss of margin, it will diminish the profit (Nijs et al., 2007). By using and collecting a huge database of consumption of products in large regions and super centers, according to the law of large numbers, the demands of the products could become stable and predictable. With a prediction of consumer behavior and risks, an aggressive pricing strategy helps Wal-Mart gain huge advantages and profitability. Place For Wal-Mart, a company that has been focused on discount merchandising and growth (Graff, 1998), cost is always a key to it. With mature management and decisions on places the products available to customers, distribution and channels, Wal-Mart gets phenomenal growth and excellent performance. First of all, considering the size, majority of Wal-Mart supercentres are located in nonmetropolitan counties and get around the distribution centers (Graff, 1998), which can make Wal-Mart benefited from a low land-rent cost and a more efficient distribution. However, a great negative impact on Wal-Marts market share occurred because of the factors of the growing maturity of internet retailing industry and lower prices offered by on-line retailers (Bock et al., 2007). In order to keep the market share and the customer satisfaction, Wal-Mart launched its own retailing websites and planned to build multichannel. This shall benefit the giant retailer as researchers found that the adoption of inte rnet and a multichannel strategy will be more profitable for retailers than traditional strategies (Zhang, 2009; Bock et al., 2007). Other than the location of supercentres, the performance of distribution of Wal-Mart is outstanding. Firstly, by geographical segmentations, distribution centers, around by supercentres, are located in appropriate regions. Suppliers make most deliveries to distribution centers, and retailer then ferry goods between the regional centers and individual stores using its own trucks (Burritt et al., 2010), which reduces the cost of transportation and enhances Wal-Marts control on the whole inventory and process of delivery. Also, a mature IT system weighs greatly for Wal-Mart: hand-held computers used by employees can collect the information of products such as storage, packaging and shipping, and a satellite communication system set up in 1983 helps managers to track sales and inventories in stores across the country (Chandran et al., 2003), which keeps the distribution under control and improves the efficiency. In addition, Wal-Mart puts a great concern upon the suppliers and the integration of supply chain. Because great volumes of products are sold through Wal-Mart, suppliers are delighted to do business with the retailer at a lower price because of the large orders, which increases the bargaining power of Wal-Mart. As what Davies et al. (1995) found: strength in bargaining power positively relates to commercial success. It seems that Wal-Mart keeps a superior power upon its suppliers to squeeze the cost. However, Even suppliers treat Wal-Mart as a primary customer perform worse financially (Bloom, 2001), there may still be benefits for suppliers to keep a long-term relationship with a higher performing channel member being efficient and aggressive to attract consumers to suppliers products, because the revenue with a high volume sold might cover the squeeze, and some suppliers hope it might help them expand their market share (Bollm, 2001; Erdem et al., 1997). By cutting the cost in the B2B part, the prices of products could be lower and more advantages Wal-Mart can gain in the market. Also, with a thought that putting the volume together of both itself and its suppliers are buying from one supplier can reduce costs (Muntaner, cited in Boyle, 2010), Wal-Mart has been trying to team up with suppliers to purchase the raw materials, like teaming up with Pepsi to purchase sugar together from one sugar supplier at a lower price, in order to reduce the cost of private labels so that more attractive prices can be offered to customers. A good management of the place factor improves the efficiency of distribution and lowers the cost of the company. Promotion The element of Promotion was divided into sales promotion, including reduction of price, discount etc, and communication, including advertising, public relations, store design etc (Van Waterschoot et al., 1992; Davies, 1995). In sales promotion, Wal-Mart uses reduced prices to increase the sales of the inventory in order to keep a high turnover rate and release the problem of stocking of inventory. Also, as it was found that a slight change in the price will lead to great improvement of business performance in a high price-elasticity product (Driussi, 2007), Wal-Mart uses short-term discounts on particular products to stimulate the consumption of products. Concerning about the communication of Wal-Mart, with an increasing budget on advertising from $405 million in 1999 to $2.3 billion in 2008 (Norman, 2009), the brand name and the slogan of save money, live better, formerly always low prices are getting widely known, which leads to a greater awareness of public and an increase in brand equity (Keller, 1993). Also, it uses diversified advertising methods such as TV, websites and newspaper, which is crucial to the success of any advertising campaign (Scott, 2009). In addition, according to Ataman (2010), by making efforts on advertising can improve the customer loyalty to the companies, which might also be an important reason for Wal-Mart being attractive and well accepted by publics in either new or existing market. It seems that Wal-Mart focuses greatly on communication with customers and trying to get more strength of brands. However, there are still some factors that Wal-Mart needs to take into consideration. First of all, although Wal-Mart is widely accepted by the public, the public relationship and the social image from the public tell a different story. With a history of anti-union tactics and worker disputes, including an ongoing gender discrimination lawsuit (Bustillo, 2010), Wal-Mart is getting into a social issue negatively affects its social image. Society worries about Wal-Marts lacking of consideration to health, life and rights of employees. However, Wal-Mart has been trying to making efforts on its CSR while the public does not realize. It offers a better health care plan than the retail average, in which 80% of its US workers can get health coverage while only 58% for the retail sector as a whole (Bustillo et al., 2010). This phenomenon shows that Wal-Mart needs to make effort o n PR to change the biases made by the society. In addition, with a development of customer perspectives, physical environment and social cue, factors influencing customers feelings and satisfaction (Bitner, 1992; Hu et al., 2006) are getting more focused. Wal-Mart can try to collect more customers preference to the store environment such as store designing and employees behaviours in order to build a welcoming feeling to customers and serve customers better. Integration of The Marketing Mix Although each element of the marketing mix Wal-Mart focuses is analyzed, the marketing mix should be treated as a whole. An application of the marketing mix upon the business needs the coordination among departments of a company, not only marketing department, and part-time marketers who are not working for marketing department but have connect with customers need to be greatly relied on to generate and disseminate the market intelligence (Davies et al., 1995; Grà ¶nroos, 1994). It can be shown from the above analysis that the elements of the paradigm influence each other such as price and PR, supply chain and price, cost and distribution etc, and Wal-Mart controls them in a macro vision. With an interaction among the departments, Wal-Mart can get advantage in each element of the marketing mix by using resources widely and efficiently. Conclusion By analyzing the concentration of Wal-Mart upon the marketing mix, it not only treated the paradigm as a guide, but also applies it upon the strategy and management of the company. It is not unfair to say that with a proper application upon the business and a great interaction in the marketing mix, Wal-Mart gets benefit from the classic theory. The application of the marketing mix could be seen as a key positive factor of the success of Wal-Mart. However, to improve the business performance of the giant retailer according to the paradigm, some soft factors such as the flexibility of distribution, PR and consumers emotion can be concerned by Wal-Mart.