20.4 Differentiation of products and services
It is a commonly held belief of marketing professionals that if a business is able to create a level of product differentiation for its particular goods, product or service within its specific product category, it will gain long-term advantages. These could be in the form of being able to charge a higher price or being able to retain customers in the face of increased competition. Whilecompetitors may beat your product on price or what your product offers in the way of features, youwill retain customers because you have previously won their ‘hearts and souls’ and they will stick with you. However, this belief is currently being challenged in the smartphone product category. Apple previously has held the largest market share with its iPhone, but it is being challenged now by the updated Samsung Galaxy S5, BlackBerry Z10 and HTC One: all very good, cheaper smartphones.
Adopting an online presence
For a business to be innovative, it has usually created a better product or service, improved the method of production or come up with an unusual approach to increase its appeal to the marketplace. Many businesses in their desire to be competitive have adopted an online presence in addition to their traditional ‘bricks and mortar’ presence (factory or shop).
Roy Morgan Research showed a 12% growth in online retail sales in 2012.
There are many reasons for doing business online:
- The internet has created a new economy which by its explosive growth and sheer size has already changed our perception of the traditional way of doing business. For instance, companies like Amazon, Ebay, Deals and Gumtree have successfully reached into markets previously dominated by traditional stores. The size of a business (small, medium or large) does not affect the growth of it adopting an e-commerce direction.
- The internet provides a good business venue as the shop or outlet is only a click away from the prospective customers. With good marketing, a website can have more buyers than a business would have attracted with a bricks and mortar shop.
- The image of the business is enhanced and taken more seriously if it has a good website presence. It allows a business to define its brand and then to build a social media strategy. Businesses that do not have a website are judged to be ‘behind the times’ and not taking their customers and competitors seriously. It is a way of providing better customer support. Acquiring and retaining customers are key factors in the value chain of a business. Internet technology enables a business to provide effective customer support. This enhances the level of customer satisfaction and increases profitability.
- Information is more easily available to customers. In previous years, it took days to deliver products or service update information to customers. Now, within a couple of hours or even minutes, the information can be published and shared with everyone via the website of the business.
- Costs can be cut as new technologies allow a business to put any part of its business online. This can include supply chain management, billing, shipping, procurement and so on. Businesses can streamline their processes through online systems, for example, ordering of components and paying accounts.
- The business is open on a 24/7 basis. Online shops are open 24 hours a day, 365 days of the year. When a normal bricks and mortar shop is closed, internet sales may continue, thereby increasing revenue to the business.
- Start-up costs are low. It is not expensive to develop and maintain a website.
- The World Wide Web allows business to take place in any part of the world. The importance of its actual physical location is greatly reduced.
- The business can become a global player – its marketplace is not limited to its physical environment.
Peapol, a US online grocer, has developed a feature on its mobile app that allows customers to restock household staples by scanning bar codes with their smartphones at home. The order then goes straight to the consumer’s virtual shopping basket.
DEVELOPING YOUR UNDERSTANDING 20.4
Read the extract and answer the questions below.
Eight years ago, Aussie Farmers Direct started with one van, 100 litres of milk, and a local neighbourhood of customers that loved what we did. Today, Aussie Farmers Direct is an independent online retailer supplying a broad range of some 170 all-Australian products including fruit and veg,dairy, bread, deli items, meat, chicken, seafood, pasta and fresh gourmet meals, with free delivery to your door. Our 200-odd milkos, a most dedicated bunch of hand-picked franchisees, are small business entrepreneurs on this wild ride with us. Our customers are people who value not only our quality and the convenience of food shopping online at everyday prices, but respect our philosophy, our heart and our soul. It’s why some 130 000-plus Aussies prefer to shop the Aussie Farmers Direct way.
We’re about much more than just getting your fresh produce delivered. We support Aussie farmers and their communities through the Aussie Farmers Foundation. We’re hell bent on keeping Australia’s food manufacturing sector alive and kicking, investing in our own Aussie Farmers Dairy. We believe in nurturing our schools, clubs and groups the healthy way with Aussie Farmers Fundraising. We educate and share the important stories of our farmers, our suppliers, our manufacturers, our milkos and the nation’s issues regarding food security in our Aussie Farmers Direct Magazine. We’re a business founded on soul; it’s the only way we know how to connect. This keeps us grounded and connected to what’s real and what matters. And this is what we believe makes our difference.
Aussie Farmers Direct provides an alternative way to buy what you need and want, when you want it, to make your life easier. We’re fully aware of this era of lifestyle that’s time poor, fast-paced, instant – we’re all living it. We crave reliability and honesty because we simply don’t have enough time for anything else.
We offer a genuine choice. It’s a fine balancing act to offer different things to people with a range of needs and wants, but it’s something we constantly review and finesse – after all, we can. With no huge supply chain or a mountain of product no one wants, we just work direct with the farmer, the manufacturer and our milkos. Simple. We’ll stock some of your favourite products and help keep the businesses that make them afloat. Importantly, the choices we offer are varied and interesting, with an opportunity to discover something new. Aussie Farmers Direct is a chance to buy 100% Aussie food, produced ethically and sustainably, at everyday value. When you shop with Aussie Farmers Direct, you get to make a conscience vote with your mouse button.
Our farmers and suppliers need us as much as we need them. By electing to buy from Aussie Farmers Direct, you know that you’re making a choice to buy Australian. Every Aussie Farmers Direct box represents a little bit of Australia – an investment in our country’s farming and manufacturing. There’s so much more satisfaction in buying direct from the local family farm, or meeting with the husband and wife team of a small business, and working with them to take their product to our audience. Australia is a nation built on small to medium-sized businesses, and we’re one of them too.
Source 20.11 The story of Aussie Farmers Direct
Visit the Aussie Farmers Direct website at www.cambridge.edu.au/hass9weblinks and use it to help you complete the following tasks:
- Outline the methods and forms of social media customers can use to order and purchase their products from Aussie Farmers Direct.
- Aussie Farmers Direct is based on a franchise business model. Explain what this means.
- List the states in Australia where Aussie Farmers Direct operates. In which state did it commence and when?
- Aussie Farmers Foundation was created in 2010. Explain the purpose of this foundation.
- Discuss whether or not you believe that the Aussie Farmers Foundation would assist Aussie Farmers Direct to be judged as being ethical and socially responsible in the way it operates. If so, why?
- Identify who Aussie Farmers Direct would see as its main competitors. Do you think it has sufficiently differentiated its business from these competitors? Justify your opinion.
- Recall which business publication has recognised Aussie Farmers Direct as being successful in the way it established and operates its business.
Creating a social media presence
Businesses are increasingly using internet services to interact, share and create content with online communities as part of their overall marketing strategy and as a great way to put their products in contact with customers. Once a business has in place a website which is regularly updated and clearly represents its brand values, with content and messages that are controllable by the business, it can then use social media as a way of gaining input from other stakeholders. Social media comes in a variety of forms, such as:
- Facebook – a business can use this site to have conversations (chats) with its customers, promote special offers and post photographs and videos of its products
- Twitter – businesses can use this blogging service to send information and receive brief messages (enquires or feedback) from its customers
- YouTube – this online video hosting service is where both the business and customers can share their videos
- blogs – a business or person can post entries (‘posts’) about topics. This is often used by customers to recommend or not recommend to others particular products or services. It is important that businesses monitor blog entries to ensure they can counteract any negative comments.
Using social media as one of your marketing tools means that you are able to both quickly and cheaply contact a large number of potential customers globally or specifically limit your message to being personal and only directed to your predetermined target group. There are, however, some negatives that need to be considered when adopting this strategy – the risks of posting incorrect information and having it spread rapidly, receiving a negative review by another person, or experiencing legal problems related to privacy issues.
Using blended marketing
Blending marketing is a mixture of both traditional marketing and digital marketing (internet, social media and e-commerce) methods with the aim of creating a complete marketing strategy. Achieving the desired outcome means that you have reached your target market through exposure both offline and online.
For example, Spotlight, a privately owned and operated Australian family business employing more than 6700 staff, adopts a blended marketing approach. When creating a marketing campaign for an upcoming sale of its fabric, craft and home-decorating products, Spotlight utilises emails in conjunction with direct mailing to its VIP customers to provide specific promotional material offering them preferential discounts. This approach is conducted prior to launching the campaign to its broader target market through the use of printed brochures that are more widely distributed.
Undertaking this blended marketing strategy approach can bring many benefits to a business. One such benefit is that it provides the opportunity for greater exposure to and development of brand awareness of your products and services. If successful, both your customer base and potential sales revenue should increase, so increasing your competitive advantage.
RESEARCH 20.2
- Visit the website of Spotlight (see www.cambridge.edu.au/hass9weblinks), identify which forms of social media it uses and describe their role in its overall marketing strategies.
- Visit the websites of the following large retail stores: David Jones, Myer and Harris Scarfe. Choose one of these stores and complete the following questions:
- Identify the types of social media the store is using and describe their purpose.
- Explore the product options available via the online store and their range of product offerings in their ‘bricks and mortar’ store. Are there any differences either in range or price? If so, explain why.
Open innovation
For a business to be competitive in the market, it must have a product or service that is wanted by consumers. This may mean that a new product or service needs to be developed or the life cycle of an existing product or service extended. To assist businesses in looking beyond their own internal business capabilities to find solutions and ideas, many businesses are now adopting the concept of open innovation. New ideas are uncovered through connecting and working with people who have already developed an innovation. This allows for products or service to be developed in a less risky and quicker way. A global consultancy group, NineSigma, often assists businesses with implementing this increasingly popular strategy. An Australian arm of this group was established in the early 2000s to assist Australian businesses.
An organisation which has found success in adopting this concept is the Shell Global Group. Operating in the energy and petrochemical sector it employs approximately 87 000 employees in more than 70 countries and territories. In its quest to gain competitive advantage and reinforce its position as a leader in the oil and gas industry, Shell has adopted this open innovation approach in the hope of helping it build a sustainable energy future. Shell invites innovators from both withinand external to its business to find solutions to the current challenges relating to meeting future global energy demands with less environmental impact. In 1996 Shell created the program GameChanger with the aim of improving the technical and commercial viability of an idea in both a quick and affordable manner. Since its creation, over 1500 innovations have been submitted to GameChanger, with 100 of these ideas now having become reality (see the Shell website at www.cambridge.edu.au/hass9weblinks).
LG Electronics (LG) is a global leader and technology innovator offering a vast product range in the areas of home entertainment, mobile communications, home appliances, air conditioning and business solutions. In Australia, its slogan ‘LG, Life’s Good’ can be judged as a marketing success as it communicates successfully LG’s goal and vision of creating products that enrich lives, so enabling consumers to have more leisure time. LG recognises that innovation is a key driver to business success and by adopting an open innovation strategy it is not solely relying on its own internal resources for innovative technologies. One area it is focusing upon is developing technological products that assist environmentally friendly generation and storage, such as ‘green’ energy. LG hopes that by adopting this open innovation approach it will (with the help of other innovators’ inputs) develop a range of new technologies such as printable solar cells, high capacity batteries, fuel cells and wind generators.
