Question

Introduction

By focusing on the needs of consumers, an organization creates a business that can outperform its competitors. Being closer to consumers and providing exactly what they want is known as market orientation. A market orientated business carries out research to find the needs and wants of consumers. It then uses the findings to design products and marketing strategies to satisfy these needs. This compares to product orientation which focuses first on developing a product and then seeks ways to persuade the consumer to buy it.

This case study describes how JD (part of the JD Sports Fashion PLC Group of companies), a large and well-known retailer, manages the balance of its marketing mix around its consumers’ needs in order to achieve business growth. The marketing mix is often termed the 4Ps. It is a useful way of looking at how organizations reach their consumers. For example, businesses need to create a mix that involves:

• the right products

• sold in the right place

• at the right price

• using the most suitable forms of promotion.

Founded in 1981 in Mossley, in Manchester, with a single shop, JD today is a well-recognised brand. With 335 stores JD is the UK’s leading retailer of fashionable sports and casual wear. For 20 years JD expanded through organic growth. It opened up stores in new locations to grow its customer base and increase revenues. It traded on the rising trend, particularly amongst young people, of wearing sportswear in everyday life.

In addition to organic growth, The JD Sports Fashion Group has also expanded in recent years by acquisition and now has a number of businesses in its portfolio. It has increased its JD store base through the acquisition of First Sport and All: sports as well as acquiring Scotts (premium branded menswear) and Bank (young male and female branded fashion) in the UK. The Group also made international acquisitions including the French sports fashion retailer Chausport and Champion Sports in Ireland. The JD Sports Fashion Group has also acquired brands such as The Duffer of St George, Nicholas Deakins, Canterbury of New Zealand, Kooga, Kukri and also the fashion brands Chilli Pepper, Nanny State, and Sonneti. Brands such as Mckenzie, Brookhaven, Carbrini and Pure are exclusive brands that are only available at JD stores. With over 500 stores in the UK, Ireland, and France, the JD Sports Fashion Group has a reputation for stocking the most exclusive and stylish lifestyle products.

As a B2C (business to consumer) organization, the performance of the JD fascia depends on how desirable its brands are to consumers. By providing exactly what the consumers want JD can outperform its competitors. It also helps it to remain buoyant in a challenging business environment. JD has continued to grow despite the fact that levels of unemployment are increasing and many consumers now have reduced disposable income. The demand for non-essential goods, such as branded clothing, would normally decrease as incomes fall.

Product

The ‘product’ is concerned with the function and features offered by a good or service. The product also encompasses factors such as quality, design, after-sales service and branding. JD sells lifestyle products. These are sportswear ranges worn in everyday life. JD targets different groups of consumers who desire trainers and sports fashion as casual day wear. Many of the products that it sells are from the global ‘power brands’. These are long established, popular brands such as Nike and Adidas. These brands appeal to large groups of consumers and are easily recognized by JD customers. They are backed by large marketing budgets which help to boost sales and sustain demand by consumers. Usually, it is manufacturers who decide what products to produce and retailers have no say in this. However, JD is different. The company has so much buying power and knowledge of the market that manufacturers are happy to take its ideas. These are then used to produce exclusive products for JD. For example, the Adidas Forest Hills and Adidas Training PT footwear ranges were developed exclusively for the JD Group and cannot be found in any other retailer. JD works with suppliers across the world to develop and deliver own-brand products. Prior to any orders being placed, all new suppliers must complete the Group’s risk assessment form to ensure that their activities are in line with the Ethical Trade Initiative Base Code. This code covers areas such as health and safety, working hours, wages, fire procedures and maternity pay provisions. This ensures that the people employed to make JD’s own brand products have good working conditions and that product are sourced ethically. Other social and environmental factors are also taken into account. For example, last year 423.3 tonnes of cardboard, used in packaging, was returned to the Group’s distribution center for recycling.

Price

The price charged for a product will depend on a number of factors: the cost to make it, the level of profit required, competitor prices and the price consumers are willing to pay. The demand for necessities, such as bread and fuel, is unlikely to change much as prices fluctuate. The demand for sportswear and casual clothing, however, is more likely to be price sensitive. Getting the price right is a key part of an organization’s marketing strategy. This is because it is the price that directly generates income, allows debts to be paid, re-investment to occur in the business infrastructure and profits to be made. Businesses need to ensure that the price charged is perceived by consumers as value for money in relation to the quality of goods and services.

There are different pricing strategies which can be adapted to generate demand:

• Market penetration – introducing a new product at a lower price to help gain market share.

• Competitive pricing – often used for well-known products or brands that are in high demand. Prices are similar to competitors. To be competitive, JD must ensure it doesn’t charge higher prices for the same goods (or similar) than other sports and fashion retailers.

• Strategic pricing – This might be used to position an exclusive product or brand to make it more desirable for consumers and generate demand or demonstrate value. By buying in large volumes, the company’s unit costs are lower. For example, discounts achieved by bulk purchases of trainers means the cost for each pair is lower than that paid by smaller retailers. This ensures JD remains competitive.

Place

The place element of the marketing mix involves making products available to the customer in the most convenient way. JD operates in:

• the high street

• out of town locations

• shopping centers

• e-commerce.

JD wants to make the shopping experience distinctive from that of its rivals. It does this by innovative displays and creative imagery to make the store experience fun and exciting. For example, the JD store in Cardiff won a UK Retail Interior of the Year award for its design and ambiance. This included a giant table-football fixture and light-boxes to display trainers.

The JD Property Committee meets regularly to look at the performance of all stores and consider new locations. This includes analyzing sales performance and forecasting sales. This type of data helps JD to assess where its outlets are giving the best return on investment. The right location can maximize sales, limit costs and therefore maximize profits. There is a range of factors that influence the choice of new store locations.

In addition to traditional forms of shopping, JD has also invested in e-commerce. JD recognizes that with the increasing use of online shopping, consumers now expect very high standards of service and functionality from a web ordering site. In order to reach consumers in the best possible way, the company’s web designers constantly aim to improve the functionality of the site. It is now possible for consumers to buy products directly from the website.

In a mystery shopper survey of 49 major UK e-commerce sites in 2010, JD was the top all-round performer. It scored well for:

• quality of its customer service - particularly its clear delivery and returns information

• its checkout process - which is simple and easy to use

• its product pages - with photography that provides consumers with the most helpful views of products before they buy.

Promotion

The purpose of promotion is to create awareness in consumers or generate interest and desire to buy products. Promotion can also be used to create or change a brand image and maintain market share. JD wants to position itself away from competitors to give it a competitive advantage. This means that high profile manufacturers and brands will prefer to release their products to JD rather than its competitors as they are likely to sell more products and protect the brand’s positioning.

JD promotional activity uses a mix of above-the-line and below-the-line promotions. Its above-the-line activities include:

• paid-for advertising in newspapers and magazines. JD advertises in high circulation titles, such as the men’s lifestyle magazine FHM and the music magazine NME

• product placements in a range of publications are used to promote the different brands

• TV and radio advertising. Radio advertising, in particular, allows JD to target its key 13-20-year-old audience quickly and in a way that young people find relevant.

Although these types of media reach a wide audience, they can be costly. It is also difficult to measure response rates. JD also makes significant use of other forms of paid-for advertising. Described by JD as ‘ambient marketing’, this uses outdoor advertising such as poster sites and t-sides on public transport and around key stores in areas of high footfall. JD positions itself alongside professional football clubs such as Blackpool FC and has made kit deals under the Carbrini brand, supplying kits for the field of play and training wear. The company also advertises on television backdrops, in club shops, and around the grounds. This approach helps to target the young, largely male audience which is typical of its customer profile. It also establishes the brand within local communities.

Below-the-line promotions offer opportunities to communicate directly with consumers. For example:

• E-mail helps JD to regularly contact its database of consumers with promotions and product information. Magazines and leaflets present product and lifestyle content.

• Sales incentives, promotions, and competitions with celebrities generate excitement and interest in the brand. This reinforces its youthful appeal. For example, JD partnered with Adidas to provide VIP tickets for an exclusive N-Dubz event at the O2 Arena for JD.

• Sponsorship and product endorsement by celebrities and music artists are used to highlight new ranges and products. For example, Tinchy Stryder promoted the Star in the Hood clothing range and The View promoted The Duffer of St George range in a press campaign.

• A JD partnership with the Manchester Evening News Arena not only puts the brand in the arena itself but also enables the company to feature competitions and offer prizes to capture potential custom.

• JD also uses impactful photography and high-quality point-of-sale materials in stores and window displays to attract consumers and increase footfall.

The growth of social media such as Facebook and Twitter also enables the company to use consumer recommendations as part of its promotional activities. It is estimated that every person viewing a page may pass on information to another 150 people.

Conclusion

JD’s marketing mix has created a unique position for the brand within the mind of its consumers whilst remaining true to its corporate values. The company focuses on stocking the products its consumers want, as well as offering distinctive or exclusive ranges that can only be bought at JD. This, combined with its choice of strategies for placing and positioning the brand, has resulted in significant growth for the business. By uniquely understanding and valuing consumers, JD continues to grow within a difficult economic and competitive market. By constantly adapting and changing its marketing mix through a focus on consumers, it has effectively managed to stay ahead of the competition.

Question: 1 what are some of the key developments and decisions regarding the ‘place’ element of the marketing mix impacting businesses today? (25 mks)

Answer 1

The place is an important element of the marketing mix which can impact the success of any business. Placing a product in locations where they will increase sales and revenues is the aim of a broader sense. But looking into the details, it implies the distribution channels that will be used for the product, the methods of transportation and inventory levels that should be fixed for an outlet in a location. If the product is placed in different locations, the logistics of all those locations cannot be the same. Analyzing the sales performance and making forecasts for the sales can help in allocating and managing the logistics well and making the outlet in that location a success.

Distribution channel decides the intermediaries between the manufacturer and the customer. The place of the product decides these intermediaries. For example, an agency selling the merchandise in the store will have more intermediaries than the product being sold on their online website. These are both different places where the product is placed and can give different sales performance based on customer demand and behaviour.

It is essential to analyze the external factors affecting the product demand and sales to place a product. The same product can be giving very good revenues in a place can be a total failure in another. Thus understanding the location and the environment where the product will be placed and making a thorough forecast can help the business in boosting sales and increasing profits.

The movement of a product from the manufacturer to the customer may involve distributor, wholesaler, retailer and other intermediaries. The cost of this process also matters in placing the product. The same product can be sold on a better price if sold directly from manufacturer to the customer through e-commercing. Hence that can help in reducing cost and increasing revenues. But many times, e-commerce is not practised by customers and they find the traditional manner purchasing from stores a better medium to purchase. In such cases, the product has to go through the supply chain including intermediaries and involving various steps of storage and transportation.

The element of place focuses on determining the right audience and reaching them through the right sources at the right time. It emphasizes placing the location of the product where the target market is and thus increasing sales performance. The right placing will help in reducing costs also which can increase profits. Costly advertising and promotional activities won't be required if the product is in easy reach of the customers. The cost of transportation can also be reduced with the right placement of products at locations where they can be demanded more. Hence understanding how to place a product in the most efficient way to derive maximum sales and increase profits from the product is essential for any business.