Over the past 50 years the location, in which a retail store is found has also changed immensely. In the past, you could visit your local high street, town centre or local shop. Nowadays as well as those three, many retailers are choosing out of town shopping developments that offer a much cheaper price for the land and a lot more parking space. Although they are mainly designed for people with cars, some offer their own bus/train services to encourage people to visit them. A development in the outskirts of town is often suitable for DIY stores because people need to park their cars nearby so that the products can easily be transported. The retailers also need easy access so that the products can be delivered easily.
In the past 50 years the changes in retailing have changed immensely. The great change in the economy means that customers are offered a much wider range of products, for lower prices. It has not only been a great change for customers but for companies too. Companies are now able to lower costs of production by investing in new technology and can invest in training staff so that the customer is made to feel welcome. The retailers can also offer their product in an out of town development yet still attract customers.
Compare and contrast a large furniture company’s marketing mix e.g. IKEA with that of a small family run business, in the furniture industry, owned by a craftsman.
The marketing mix consists of four things – the product, the price, the place and promotion. Although IKEA sells the same types of product as a small family run business, their marketing mixes are very different.
Both businesses sell furniture, which is a non-perishable good. Although furniture has a wide market, it sells less than single-use products like food. Furniture is considered a consumer durable good meaning that people are willing to pay more for it because it is not bought as often, bust should last longer. IKEA unlike small furniture businesses is likely to produce its products in mass. The products will be made in large factories, whereas a small family run business, which is owned by a craftsman is likely to sell furniture made in either batch production or as one-offs. This is because the craftsman is unlikely to have the means to make large amounts of the product. This means that the costs will be higher for the craftsman because he will not have the kind of equipment that a large company like IKEA would have. IKEA are also likely to offer refunds/exchanges on damaged goods and offer a more reliable service because their reputation is at stake. An advantage that the craftsman has over IKEA is that the service he offers is a lot more personal which may appeal to many people because they feel they are getting a good that is quite unique and hand-made.
The price set for furniture is usually quite expensive. This is because packaging needs to be done carefully so that the items are not damaged. It is also important that the goods are handled carefully during the channel of distribution, which will mean it will take quite a long while to deliver. All of this together makes, furniture quite expensive to buy. However, the price that IKEA sells its furniture at is likely to be very different from that of the craftsman. IKEA will be able to set quite a high price for its products because customers will associate their products with quality, meaning that they are willing to pay a higher price for them. The craftsman however does not have a well-known brand name meaning that he cannot charge such a high price. It is likely that the craftsman will start off with penetration pricing. This is done to attract customers initially and so that the business can gain a larger market share. As the business gains the trust of customers, and the brand becomes associated with quality, the craftsman can raise the price of his products. At this stage however the craftsman will have to sell the furniture at quite a low price, meaning that his profit margin will be a lot lower than that of IKEA because of his high costs and low price.
The way both companies promote their goods will also vary greatly. IKEA can afford to advertise nationally on TV and national newspapers and magazines. IKEA can advertise in ‘Good Housekeeping’ because it will have the same target market and people reading it will be interested in furniture. The small business, however, will only be able to afford advertising in local newspapers and radio stations. It is only necessary for them to advertise locally because the store is no use to people who do not live locally. IKEA can also use below-the-line techniques to its advantage. For example, if the use promotions in which they offer 10% if you buy a matching set, it means that the customer will buy more because they think they have got a better deal. The craftsman can also offer below-the-line promotions but not to the same extent because he will probably not be able to afford it financially.
IKEA has a choice out of many different channels of distribution. IKEA may choose to buy directly from the producer if the store has enough space or a warehouse nearby. However it is quite likely that they will use an agent to send large deliveries to each store and advise them on technicalities. An agent will also probably used for stores in other countries. The craftsman has a much shorter channel of distribution because he makes the products himself. This means that the channel of distribution goes straight from the producer to the customer so transportation costs are a lot smaller.
Although both IKEA and the small family run business are selling the same products, their marketing mixes are completely different.