Walmart Promotion Commentary

An Unscientific Look at Wal-Mart Advertising

2005-06-26T19:13:00.000-07:00

This marketing course has a welcome side benefit: you look at advertising in a completely different way. Rather than through away those wasteful Sunday color inserts that are hardly read, I carefully picked my way through the countless promotions. Objective: Wal-Mart.

The twenty odd page color insert depicted the typical Wal-Mart array of product: patio table and chair set, barbeque grills, and various toys. EDLP was prominent, with some good deals to be had. What particularly caught my eye, however, were the pictures depicting typical American families enjoying their Wal-Mart purchases. A typical photo would show African-American children with their parents relaxing near a pool on an array of Wal-Mart products. Most of the photos showed Wal-Mart employees enjoying their employer’s products. Interestingly, many had rather high-brow titles: Financial Analyst, Programming Analyst, and Replenishment Manager. Not a Greeter or an Hourly Associate to be found. Children were depicted most often (thirteen occurrences), closely followed by African-American adults (twelve). Caucasians, Hispanics and Asians followed. Wal-Mart’s strategy in this advertisement was to show its own professionals in presumably high-paying jobs, enjoying the benefits of products aimed for an upper-middle class living. This picture is a far cry from the picture painted by critics of a firm that underpays employees and keeps unions from forming.

It’s interesting what you can find in the Sunday inserts.

Hedge Funds Interest in Wal-Mart?

2005-06-26T10:32:00.000-07:00

A June 14, 2005 Financial Times article discussed an interesting subject: hedge funds interest in buying shares of Wal-Mart, the $200 billion market cap retailer. Why should this surprise a Wal-Mart watcher? Hedge funds generally (and secretively) seek out underperforming companies with inefficiencies, or simply undervalued firms. Given Wal-Mart's better than military precision and high value, then why should funds such as Renaissance, Eton Park, and Citadel be looking to Arkansas? The answer is simple: diversification. Hedge funds hold a wide variety of stocks, including some that will benefit from a Chinese renminbi devaluation, others who will hurt from such (including Wal-Mart, as driver-consumers pay more to get to the store). Rising energy prices hurt some companies (Wal-Mart) while benefiting others (say, Exxon).

In the current Wall Street cycle, Wal-Mart's stock has posted anemic earnings, and is actually down nine percent this year. One analyst suggests that Wal-Mart is undervalued and should be on the buy list: its P-E multiple is below 20 for the first time since 1996, and is trading below its average price since 1998. As Wal-Mart is poised for international growth in Asia and South America, market watchers may wish to join the hedgies in a buy option.

2005-06-20T13:53:00.000-07:00

While far from the intracacies of blogging and marketing's four P's, the growing tension in the European Union over a host of key issues has been largely unreported by the American media. France's recent rejection of a planned EU constitution; Britain's decision to postpone a similar vote; concerns over monetary policy in key EU members states such as Germany and Italy; and the 8-10% slide of the euro versus the dollar in the past weeks has Eurowatchers on the edge of their seats. As noted in the referenced blogline subscription [CODE IT Knowledge @ Wharton Blog], the Euro has encountered a number of difficulties with political, economic, and even social bases. The continued growth of the EU has presented the larger donor EU states with critical choices on their own domestic economic decision-making. Socially, continued high unemployment in Germany and France has brought internal political pressures on elected officials, who have in some cases taken a less aggressive approach to EU integration.

What is to be done? The European Union is having a classic case of growing pains, as was seen in the mid 1980's with the accession of Spain and Portugal, and at the turn of the twenty-first century with the inclusion of the Visegrad countries. While the Euro's bumpy tenure has had its critics, its overall remarkable performance has shown that the only true path is further monetary integration. While some of the larger economies have claimed that their growth has been shaved 1-2% because of Euro currency integration, the increased trade efficiencies and competitiveness of EU economies as a result of one currency will provide for long-term growth.

Article:

http://knowledge.wharton.upenn.edu/index.cfm?fa=viewArticle&id=1224

Procter and Gamble's Pur Product: Marketing in the Third World

2005-06-20T13:20:00.000-07:00

Having reviewed my colleague's blog and presentation on Procter and Gamble's PUR "instant portable water" product, several experiences came to mind based on my ten plus years experience in the developing world. During my time in emerging/subsistence economies in Ukraine, Kazakhstan, Azerbaijan, and Afghanistan, I understood that distribution networks were very difficult to create given sales regionalism, poor roads and communication, and a fair dose of corruption. With each sachet as little as $0.10 and a solid, ten liter yield of drinking water per sachet, P&G can provide low cost, even revolutionary changes to water-parched areas of Central Asia, the Middle East and the Indian subcontinent.

Key to success is the business and development case for sales and distribution. As was pointed out by my colleague, despite the low price and universal need for the product, a proper system must be put in place to ensure commercial success. Assuming that P&G has priced and volumed the product correctly to ensure a decent ROI over a specified period, sales nodes need to be developed. The United Nations, the U.S. Agency for International Development, the British Department for International Development, and others are excellent though highly-bureaucratic potential buyers of PUR. As was discussed in Kotler, selling to government and institutional markets is difficult, with a dispersed group of decision makers and demanding documentation requirements (Kotler, 228). That said, these institutions can pay, and buy large quantities. In order to develop a more long-term commercial market, these assistance institutions should be targeted to get product in country, develop buyer awareness and loyalty, and develop sales relationships on the host country, state, municipal, and commercial buyer levels.

Walmart Promotion Priorities: Corporate Citizen and Internet Relationships

2005-06-15T14:12:00.000-07:00

Introduction
Walmart spends well over $50 million annually on marketing and advertising, although the message is not “everyday low prices.” Building on its considerable marketing success in the United States and recently in overseas markets, Walmart customers are well aware of the tremendous price value that the world’s largest retailer offers. With over 3,500 U.S. stores and one opening each day worldwide, Walmart’s $285 billion in 2004 sales showed an 11% increase over 2003. Neverthless, Walmart has focused its well-oiled promotion machine on two key themes: (i) Wal-Mart as a solid corporate citizen that cares about the communities in which it operates and (ii) using online platforms to move virtual Walmart customers into an “in-store shopping experience.”
The discussion below will explore the motivations behind these promotion strategies.

Wal-Mart as Good Neighbor and Corporate Citizen

For several years, Walmart has been under constant attack by citizen-action, media, and local publics (Kotler, p. 110) for its perceived corporate self-indulgence. Critics have focused on several Wal-Mart practices, including its payment of low wages, its increasing low cost imports negatively affecting American manufacturing, and union busting, among others. Such criticisms, whether true or unfounded, initially caught Wal-Mart offguard and forced it to move on a public relations offensive to show “the good side” of its work. Specifically, Wal-Mart has embarked on a nationwide marketing communications mix of radio, TV, and events focusing on its multi-million dollar donations to communities in which it works. In designing a message, Wal-Mart sought to obtain attention, interest, desire and action by profiling John Q. Citizen, Wal-Mart Hourly Associate, as an individual who has moved up the corporate ladder within the organization and achieve a good, middle-class existence (Kotler p. 473). Interestingly, Wal-Mart has recently moved into reality television to show its good works, embedding in the June 2005 pilot run of “The Scholar.” This prime-time show depicts the trials and tribulation of ten graduating seniors who view for a $250,000 Wal-Mart, all college-expenses paid scholarship to the school of their choice. Commercials are shown during the program depicting Wal-Mart’s community assistance efforts, thereby providing a double-dose of this firm’s message.

More on Wal-Mart’s reality TV entrée at http://query.nytimes.com/gst/abstract.html?res=F40B12F93C5C0C708CDDAF0894DD404482&incamp=archive:search

Reportage on a small filmaker’s upcoming documentary depicting Wal-Mart’s alleged societal wrongdoing can be viewed at http://query.nytimes.com/gst/abstract.html?res=FA0F14F9345D0C728CDDAF0894DD404482&incamp=archive:search

Using the Internet To Move Customers Into the Store

Even during its meteoric rise as a champion of “everyday low prices,” Walmart kept a low online profile. That has not now changed, with 350 million online visitors tallied in 2003 and over 500 million in 2004. Lee Scott, Wal-Mart’s famed CEO, has made Wal-Mart’s online shopping presence one of a handful of key prorities for the chain into 2010. Importantly, Wal-Mart is no longer focusing its Internet based efforts on non-customers, but on regular consumers of ELDP. Wal-Mart touts its online version of www.walmart.com as providing over 200,000 products for virtual sale, with an additional 800,000 DVD’s, books, and CD’s – this compared to 110,000 total products in an average Wal-Mart store. In addition, online Walmart shoppers can do virtual comparisons of more high-end items such as LCD and plasma screen televisions, complete with product comparisons and other shopping tips. Wal-Mart pioneered digital photography development by allowing customers to upload their electronic snapshots for development within one hour at their nearest Wal-Mart, thereby providing another lure into the store. Indeed, Wal-Mart’s online efforts are not to cannibalize its brinck and mortar operations. The exact opposite is true: all efforts are made to encourage customers to casually shop and price compare online, but then actually go to the store, touch, feel and enjoy the shopping experience.

More on Wal-Mart’s online efforts at
http://news.ft.com/cms/s/abbb60a6-d7bb-11d9-9f43-00000e2511c8.html

Fáilte Ireland: Promoting a “New” Ireland in the 21st Century

2005-06-14T17:34:00.000-07:00

Introduction

Marketing is important for any product and service, but the proper design, implementation and control of such a program is truly critical in the tourism sector. Ireland is widely perceived as building a superlative tourism “brand,” growing in sophistication from the odd unlicensed B&B to a €4.1 billion ($5.2 billion) industry in 2004. Fáilte Ireland (hereafter “FI”), or Welcome to Ireland, the Irish government’s tourism promotion arm, has taken the leading role in promoting Eire as the tourist destination of choice. A four P’s analysis of FI’s tourism promotion efforts is helpful for determining the opportunities and challenges to the Irish tourism industry.

Promotion: How to Manage Tremendous Marketing Growth

From a promotion perspective, FI is having to manage the growth of a large and diverse tourism services market. The small, exclusive collection of four and five star hotels and the random scattering of Bed and Breakfasts that marked the industry into the early 1990’s have now been replaced by a much more sophisticated and refined sector offering. Small and medium size tourist businesses have become more independent actors even less susceptible to government control and more likely to develop their own methods (i.e., direct marketing websites) to find customers. For example, throughout their growth in the 1970’s and 1980’s, Irish B&B’s were cash only businesses that were patronized primarily through word of mouth referrals in small and medium size Irish towns. Little to no formal promotion was involved, as these largely unregulated businesses preferred to remain “off the books” of the local tax inspector. In the late 1980’s and 1990’s, greater government regulation and certification was introduced, bringing these businesses out of the shadows and allowing Ireland to better and more efficiently promote accommodation throughout the twenty-six counties. In the late 1990’s and into the 21st century, Irish tourism service providers, including offerings of golf courses, fishing/angling, cycling, or more traditional bed and breakfast holidays, began marketing directly through websites and through non-geographical tourism portals (i.e., a horseback riding international club). Down to the town referral level, the Internet has altered the promotion channel as more tourists go online in advance to arrange (and pay for) a booking (Brown Lecture, June 13, 2005).

Product: What Is Ireland to a Potential International Tourist?

Ireland has long fostered a positive image among potential tourists enthralled with breathtaking landscapes, a laid-back way of life, and a culture rich in music, literature and the arts. Product perception is key. Very few potential visitors would describe Ireland as “industrial, bustling, and polluted.” Hence FI’s focus on a core message: “Ireland: Friendly people and unspoiled beautiful scenery.” Through walking tours of the countryside, via backpack, horseback, or cycle, FI and Irish service providers have built upon the product (Ireland as a beautiful place to relax) to diversify the product offering. For example, in the 1980’s and 1990’s, FI saw an excellent market for luring second, third and fourth generation Irish back to Ireland through genealogical tours that micro-marketed to individuals interested in retracing their roots (Kotler, p. 254). The Internet has given this a whole new dimension, allowing for in-depth archival searches to enhance the Ireland experience even before the passport is entry-stamped.

Weather is a factor in Ireland’s product image. While postcard scenes of bright sunny spells on rolling mountains is the image Irish tourism gurus wish the consumer to carry, the day-to-day reality is far different. Ireland is one of the wettest climates in Europe, with over 300 days of precipitation per annum on average. As outdoor beauty and adventure is much of what Ireland previously tried to sell, new strategies were introduced to play down this product weakness. For example, indoor, all-weather “aquadomes” became the rage in the 1990’s, bringing domestic and international tourists in from the rain.

Price: Ireland as the “Ripoff” Country?

Increasing base costs in Ireland (i.e., food, fuel, shelter, etc.) have called into question Ireland’s previous reputation as a “value destination.” Since Ireland’s accession to the European Union in 1974, prices have continued to rise to make Ireland one of the most expensive countries in the EU. The inclusion of Ireland into the Eurozone in 2000 accelerated price increases for the Irish and foreign tourists alike. Beginning in 2003-2004, Ireland was derisively referred to as the “rip off” country by Dáil (Parliamentary) leaders, which spawned a website, http://www.ripoff.ie/. The website provides critical analysis and very human testimonials to what it considers to be unjustifiably high costs of petrol, alcohol, shelter, motor hire, and other tourist consumer areas (see http://www.ripoff.ie/cuttings/20031130a.pdf for more detail). Ireland is no longer a cheap place to vacation.

Position: Ireland vs. its Competitors

Ireland long held a strong and enviable position in European tourism, drawing on its core strengths in the UK/North American (extended) emigrant market looking to “come home” for the holidays. Those with close family connections to Ireland would often have their own tourism infrastructure in place (i.e., connections for a hired car, a place to stay, airport transfer, etc.). The extended emigrant population, often two to three generations removed from their familial roots, often would choose the low stress, profitable “bus tour package,” including transport, guide, and accommodation. However, the proliferation of lower cost, higher quality B&B’s, easily available online car hire, and regional airport connections have changed Ireland’s position strategy and resulted in more segmentation of the market. Broad segments include family camp touring, genealogical treks, long-distance cycling excursions, and less frequently, backpacking.

The deregulation of the airline industry and the strength and prevalence of low-cost, no frills carriers have definitely affected the inbound Irish tourism market. Domestic tourists now tend to be drawn to the sunnier shores of Majorca, particularly given the cheap air travel offered by Ryanair and Go! Cheap, €30 return fares to major global destinations such as Paris and Rome also affect the Irish market. Finally, since the fall of the Berlin Wall in 1989, attractive, high value destinations in Eastern Europe have adversely affected Ireland’s position as a value destination.

Conclusion

Ireland’s marketing mix will continue to evolve to attract high-spend international and domestic tourists. Competition from low-priced airlines to sunny locations has already affected the inbound European market, however tourism from North America remains relatively strong despite the weak dollar.

Articles reviewed for this blog include:

http://www.failteireland.ie/fi

http://www.itic.ie/research_submission_tour_policy.htm

http://tourismreview.ie/InterimRptFinal.pdf

Introductory Blog on the Four P's and Class Project

2005-06-14T10:01:00.000-07:00

This initial entry will focus on the use of the four P's of marketing -- product, placement, promotion and price -- as it relates to our Wharton Marketing class project to study Walmart's marketing efforts. Kotler and Armstrong encourage the reader to look away from outmoded definitions of marketing (i.e., "telling and selling"), and move into marketing as a "social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. (p. 5). One need only look at a written or visual media commercial of the 1960's or 1970's to see how marketing has evolved since that time, with the Internet taking on a more valued role in identifying buyers and delivering what the consumer wants. However, the Four P's remain as relevant today as they were decades ago -- only media have changed in how the Four P's are actually formed and delivered.