In could be argued that maintaining brand loyalty would be the optimal way to ‘steal’ customers away from close competitor Superdrug and fuel the expansion and growth of the firm. With a 50% market share in 2008, Boots has proved it has a significant cut of the customers. However, customers are beginning to use supermarkets to buy their non-food items. The table shows the percentage change in supermarket purchase over several sectors from 2003 to 2008:
Source: http://www.bized.co.uk/compfact/boots/boots4.htm#non-food
The personal care sector has seen a 12.5% increase over 5 years, which poses a threat to Boots and will hinder their long-term strategy of fast development. External factors, such as the actions of competitors, cannot be helped and so remain an obstacle to meeting strategies. But by developing on the successful brands, such as No.7, Soltan and Botanics, Boots can gain a loyal customer base and maintain a steady footfall despite the emergence of competitors into the market. Coupled with the loyalty card scheme Boots use, where customers are awarded ‘points’ for purchases which can be exchanged for real discounts, then it is possible to achieve the desired long-term plans.
By attempting to maximize market share, Boots will ultimately meet their long-term strategy. Market share is the proportion of the market (measured in terms of sales or value of sales) one firm has. If Boots increased their market share from 50% then it will gain some monopoly power over consumers. This would allow prices to be set higher than the equilibrium rate (where market demand meets supply) and increase the mark-up on certain products. The extra profits gain could fund new stores, research and development (R&D) into new products or if drastically increased allow a horizontal merger between Boots and a competitor to occur, to increase market share further. However, if Boots’ activities are seen to be against consumer welfare then the competition commission, who regulate the market and manage business mergers, could fine them obscene amounts of money which would be detrimental to future development.
Market research is crucial for a business when developing and launching new products. Marketing is all about meeting and responding to customers’ needs and wants. Hence, market analysis essentially provides the backbone to new product development. If Boots need to increase the product range of their top brands, then a significant amount of capital will be needed to fund the initial R&D. Internal factors as well as external factors influence a) the marketing objectives set and b) the ability to meet these marketing objectives. As Boots is a profitable business, finance isn’t as important a factor as if, say, a sole trader pharmaceutical company went to implement a new strategy. Boots have the human resources, finance and sophisticated operational systems needed to successfully meet their marketing objectives and ultimately allow for a successful marketing plan.
Throughout innovation a business can expand its product range and exploit market niches which have previously been unfilled. If Boots create a truly unique product, then the USP will allow a high selling price and a wider profit margin, recouping the costs of development and meaning an increase in market share. A prime example is the ‘protect and perfect serum’ which was proven to perform better than most ‘premium’ brands, giving a boost to sales and Boots’ overall brand reputation. With affordable quality as a unique selling point, and a strong brand behind them Boots would be able to maintain their foothold on the market and allow a successful health and beauty group to form.
Data taken and adapted from http://www.bized.co.uk/compfact/boots/boots7
Moreover, one can see from the above table that approximately 72% of Boots customers are female, it would be wise to focus marketing on this specific segment rather than trying to expand market share rapidly. The demographics of a typical Boots customer are females aged 25 – 44 with no children, generally with a medium to high income. To meet the long-term strategy Boots could either focus on its target market and core business and hope customer loyalty and goodwill prevail, or begin to expand and diversify to target new market segments which may or may not pay off. One tactic would be to increase the number of points awarded for a period of time, to encourage repeat purchases and increase marketing on males. If this pays off, Boots will see a boost to its sales and profitability.
Overall, I think Boots’ marketing objectives are very succinct and directly aimed at leading the pharmaceutical, healthcare and beauty markets. Specific targets are beneficial to a business because the management team know exactly what is expected of them and their sub-ordinates to achieve long-term success and they can co-ordinate business activity and resources effectively if there are direct targets. Efficient organisation will allow Boots to meet their strategy easily, but will not guarantee anything because of the possible external factors which cannot be helped. However, all businesses are affected by changes in the economy, market, technology and the actions of their competitors, so effectively Boots’ competition will be in the same boat if the market unexpectedly declines.
Also, they are not too ambitious, and are aimed more at securing and maintaining their current reputation rather than targeting new market segments and taking a risk. Risk adversity is a safe option which is justified in the current economic downturn, where consumers see a fall in their real disposable income and where unemployment has soared, hence creating a ‘domino effect’ (formally known as the downwards multiplier) on consumption. Because Boots already has a strong reputation which they wouldn’t want to lose to supermarkets - who are diversifying into the healthcare industry. This seems counter-productive to Boots’ long-term plan of expanding rapidly (‘accelerated development’) as it may keep sales constant which is good, but it won’t increase them significantly, which is bad.
The capabilities of the other business functions within Boots’ will not act as a limitation towards succeeding to meet their long-term aims. As a business earning supernormal profit (profit earn above the rate needed to keep the firm in the market) it has the potential to retain profit for marketing activities and campaigns, which generally cost a lot and acts as a huge cash outflow. This money can be used to purchase new capital equipment if the operations department cannot supply enough products if demand peaks and also to train and motivate the workforce so Boots’ succeeds at every level of the business hierarchy.
Ultimately, I think Boots’ marketing objectives act a clear, focused pathway to meeting their proposed plan in the future and will definitely allow Boots’ to keep its competitive edge and generate significant profits for years to come. The extent to which they will help achieve future development is highly supportive, as they all focus on maintain a strong position in the market as a leader, but in the world of business nothing is set in stone and many variables influence business activity which simply cannot be controlled, hence contributing a degree on uncertainty.
