Mark2055 Service Marketing Strategy And Assessment Answers

Product positioning: IKEA has tried to position its products, by selling them at affordable prices in China, (BBC News, 2013). It has also majored in the provision of some services like interior design, after sale services and offering customers with valuable knowledge about their commodities.

Price

Price refers to the value attached to a product. Good pricing strategy enables a business to determine the best price at which it can maximize its profits on sales, (Gordon, 2012, p. 124). When setting the price of a commodity, one needs to put into consideration, a variety of factors including the production and distribution expenses, product positioning strategies, market target and competitor offerings, (Shah, 2012, p. 163). When goods are priced too low, customers may question the quality of the products. On the other hand, customers may not be able to afford very expensive products. Proper market targeting should also be carried out so as to identify the ideal customers for specific products, (Sheikh & Beise-Zee, 2011, p. 29). Companies that target low-income earners may attach average prices for their products, while those that target high-income families may rate their products highly.

The pricing strategy for IKEA is value. It believes in low prices or no frills pricing strategy whereby the goods are designed, raw materials collected, manufactured and distributed, (Wei & Zou, 2007, p. 13). In China, IKEA has always targeted middle and low-income earners, by keeping the costs between customers and manufacturers down.

Low price strategy: The low price strategy adopted by IKEA in China has helped it to attract more customers and increase its market share, (CCTV, 2013). According to this strategy, the products are priced at 20% cheaper than other competitors’ prices for home furniture, (CCTV, 2013). The company uses this strategy as a prerequisite to realizing its strategic mission.

Cost Leadership: This is an approach that ensures pricing at the lowest prices as compared to other competitors, (Kotler & Armstrong, 2016, p. 622). IKEA has always indirectly applied this strategy. Although it continually capitalizes on providing goods at rather affordable prices than low prices, its prices are lower compared to other companies’ prices.

Place.

Location refers to the distribution of the commodities offered by an enterprise. It is concerned mainly with making goods available at the places where the customers need them, (Yasanallah & Bidram, 2012, p. 194). The place is also concerned with the logistics and distribution management through which the commodities will be flown from the manufacturers to the clients, as shown in the following diagram:

Stepping into the Chinese market was a significant advancement to IKEA. It needed to exploit the potential customer market that was available in China. The Chinese customers are unique as compared to other clients since they tend to purchase less when they visit stores, (Miller, 2017). However, during its initial stages in Shanghai, The average customer visit was more than any of its stores in the world, (Lallanilla, 2013). This required the company to execute a lot of changes in its stores to stock the right amount of products.

Location of the Store and market targeting: The location of stores is significant in determining the accessibility of the products, (Chikweche & Fletcher, 2012, p. 511). In China, most IKEA stores are located next to some city centers, (Chu, et al., 2013). The location in rural areas would not be ideal as most Chinese do not have access to vehicles as compared to their European counterparts. This is a transparent replica of market targeting. It targets most of the Chinese population living in towns. The stores are also located next to bus terminals, (CCTV, 2013). A good illustration is the Shanghai warehouse.

  The company has a well-defined stores locator, search tool on its website which enables the members of the public to locate the stores near to them. It also exhibits social media marketing. The IKEA China has Twitter and Facebook pages where consumers can obtain information about the company, (BBC News, 2013). It also launched a campaign called Sleep like a Princess, on Facebook, where several customers participated and in turn popularized its products and stores.

Promotion.

Promotion entails all the activities carried out to ensure that the goods are successfully sold in the market. It involves trying to persuade the potential customers to buy a company’s products, (Rohde & Muller, 2015, p. 49). A promotional mix encompasses personal selling, sales promotion, direct marketing, advertising and public relations, (Hunt, 2011, p. 8). The combination of tools used in advertising is mainly based on the size of the market and the type of customers being targeted by the firm.

IKEA uses a variety of promotions. However, due to its strong brand reputation, and pricing strategy, the appropriate promotions which result into desirable results for this firm are Trade promotions and sales promotions, (Miller, 2017). In China, The Company uses price Discounts, Coupons, and festival promotions to promote its products, (BBC News, 2013). Some promotional activities used by IKEA in China are as follows:

Advertising.

Advertising is a method used to provide information about a product using different channels. Some channels that can be utilized include, print media, Televisions, and Radio stations, (Yasanallah & Bidram, 2012, p. 194). An advertisement must be persuasive and able to convince the clients to buy an individual commodity.

The Brand name of IKEA acts as a satisfactory mode of advertising. It also has various slogans which communicate the benefits of the furniture it manufactures, (CCTV, 2013). It has also emphasized on local advertising so as to attract local customers to its products.

Advertising and China’s advertising laws

Advertising in China must comply with the relevant regulations and uphold morality, protect the national reputation and professional ethics. IKEA uses the following means of advertising in China:

Use of Brochures: Unlike in other countries where the company uses catalogs, Chinese customers do not regard catalogs as a means of advertising, (Lallanilla, 2013). Therefore, the company makes small brochures which are distributed to the customers. The folders are usually made by the same person for consistency purposes.

Public relations activities: The Company conducts benchmarking activities for the general public, (Chu, et al., 2013). This involves such activities as taking a Journalist from China to Almhult and Sweden and making them learn about IKEA’s global stores.

Out of the Box Approach: The Company offers creative programs that help enhance public interest. For example, it started a TV show, where the viewers were given lessons in Home decoration, (CCTV, 2013). It also runs various ads in TV, newspapers and print media.

Use of Internet: The websites created by IKEA for different stores in China are critical in ensuring effective advertising. The company has also created a Facebook page for its followers and customers, where the clients can see the progress and every product being offered, (Miller, 2017). This is a vital aspect of social media marketing.

People.

All firms rely on the people who manage them from the sales staff to the executive director. Having the right team in the business is a key factor in determining success, (So et al., 2012, p. 399). A company must have qualified sales staff so as to promote its products into the market effectively, (Tigga et al., 2014, p. 12). With the increase in technology and diversification of business activities, firms must have a technologically competent marketing staff.

Enterprises interact with several stakeholders. Some stakeholders are active, while others are passive, (Fuoli, 2012, p. 55). Competitors are classified as unfriendly stakeholders. Therefore, for a firm to compete effectively, it must organize its stakeholders correctly and identify their demands. The IKEA brand is based on the positive relationship with clients, (Wei & Zou, 2007, p. 1). Customer satisfaction is its principal aim. This is why it provides high-quality products at affordable prices. According to BBC News (2013), IKEA also has programs of providing environmentally friendly appliances such as the water saving taps and energy friendly kitchen appliances.

Environmental sustainability is a major factor in determining proper operation of companies. Companies must ensure that they conduct their activities in an environmentally friendly way, (Dauvergne & Lister, 2012, p. 36). In this respect, IKEA formulated a strategy of charging its customers a small fee for plastic bags, (Wei & Zou, 2007, p. 13). This was geared towards encouraging recycling of non-biodegradable products. It also supported the supply of green products by its customers.

Process.

This refers to the route followed in ensuring the products reach the customers. The method utilized in delivering the services and outputs to the clients have a great impact on how the customers perceive the business, (Yasanallah & Bidram, 2012, p. 194). The process involves such aspects as getting the products delivered to the customers, ensuring the employees deliver their promises, keeping the buyers informed about the activities of the firm and handling the complaints from the customers efficiently. In IKEA, The company manufactures the furniture itself, the customers visit the stores and select the finished products, makes an order, collects it and then drives the product home, (Chu, et al., 2013). This has enabled the company to keep the prices of its products low.

Physical evidence

This is the type of image that the business exhibits. It includes business premises, its assets, and the staff, (Brooks & Simkin, 2012, p. 502). A company must consider its reception in a particular area, ensure its image is consistent with the type of commodities and services it offers and examines the physical nature of its products. The IKEA stores in China contain mostly recyclable goods, (CCTV, 2013). This is a show of sustainability. IKEA has also capitalized on green energy solutions like the solar power.

The physical evidence for the existence of IKEA can be derived from its big stores in China. The stores are situated in strategic places and provide a broad range of furniture products, (BBC News, 2013). The stores are also well-endowed with car parking areas and restaurants.

Environmental concerns in China.

All businesses operate in an open environment, which influences their operation. Environment refers to the surrounding of any enterprise, (Fuoli, 2012, p. 60). There are two types of business environment, the internal and external environment. The internal environment entails the factors within the enterprise which affect its operations, (Crittenden et al., 2011, p. 71). These may include customers, sales staff, and suppliers. Customers are imperative to the enterprise as they are the ultimate consumers of the business products, (Zhang et al., 2011, p. 360). Enterprises should, therefore, ensure they meet the customers’ expectations.

The external environment of a business can be evaluated using the PESTEL model. This model contains technological, economic, political, ecological social, and legal factors influencing proper operations of an enterprise, (Sheth, 2011, p. 166). The business can also evaluate its strengths, weaknesses opportunities and threats using the SWOT model, (Zhang et al., 2011, p. 360). In assessing the significance of the environmental concerns in China, ecological and social factors constitute critical aspects for the analysis. Some of the environmental concerns in China are as follows:

Decertification

This is as a result of cutting down of trees leaving the ground bare. The Chinese government has regulations and rules that control deforestation, (Lallanilla, 2013). IKEAs main raw materials include wood, glass, and cotton, (Miller, 2017). Trees must be cut down, to get wood. This makes deforestation a significant problem for the company.

The company has been forced to enact programs geared towards managing forests so that it gets a continued supply of wood. Forest management is an expensive activity which costs the company a lot of funds.

Garbage collections.

Trash pollutes the environment. Garbage do not only arise from the waste products from manufacturing activities of IKEA, but also from the dumping of used products by customers, (Miller, 2017). The government of China has well-established rules guarding garbage collection and environmental pollution in general, (Lallanilla, 2013). The company, therefore, has the responsibility to encourage the consumers to recycle or reuse products that are no longer needed. The company also recycles the used wood, glass and cotton, thus ensuring there is no garbage collection near manufacturing sites.

Biodiversity.

According to Lallanilla (2013), Biodiversity relates closely to deforestation. As the company uses wood as its primary raw material, it cuts down trees. These trees act as habitats for wild animals and birds, (Lallanilla, 2013). As a result, these birds and animals become extinct from the environment. This is a major environmental concern, as birds and wild animals are major tourist attractions in China.

The company is therefore forced to devise more innovative operational strategies that reduce adverse impacts on biodiversity.

Air pollution.

Emission of carbon dioxide causes air pollution. The company has always been forced to enact strategies that reduce these emissions, from its operations that range from the extraction of raw materials, manufacturing, energy usage, and transportation, (Miller, 2017).  

Sustainable marketing strategy.

Sustainable marketing refers to the adoption of marketing strategies that are geared towards meeting the expectations of the customers, the business and the society as a whole. This can be executed by conducting an environmentally and socially responsible marketing operations, (Bonn & Fisher, 2011, p. 5). Sustainable marketing is different from the marketing concept. The marketing concept majors in identifying the daily consumer needs and satisfying them, while viable marketing concept does not just identify these requirements, but concentrate on socially and environmentally responsible ways of marketing, (Chabowski et al., 2011, p. 55). The following matrix illustrates the difference between commercialization and sustainable marketing approaches:

Sustainable marketing is an essential practice, as it helps to avoid consumer reactions, such as consumerism and environmentalism. Some of the sustainable marketing strategies that can be adopted by IKEA include, innovative, societal, consumer-oriented and sense-of-mission marketing strategies.

Consumer-oriented marketing strategy.

This approach requires the firm to organize its promotional strategies from the consumers’ point of view. The marketing activities should be designed to meet both present and future needs of the user, (Kotler & Armstrong, 2016, p. 621). IKEA can carry out this marketing strategy by conducting responsible advertising and avoiding certain advertisements that may compromise Chinese culture and beliefs and make the consumer interests’ supreme when making marketing decisions.

Innovative marketing.

This strategy requires businesses to continuously advance in their services and products, to ensure they offer valluable products to the consumers. The creative ways should also be environmentally friendly and socially accepted by the community, (Day, 2011, p. 183). This strategy can be used by IKEA to ensure it consistently innovates better and environmentally friendly marketing operations. Drafting obscene advertisements or using products such as plastic bags as packages should be avoided to ensure environmental pollution is minimized.

Sense-of-mission marketing.

This is a sustainable marketing strategy that requires firms to align their activities with their mission statements. The mission of IKEA is to improve the lives of its consumers, (Kotler & Armstrong, 2016, p. 619). This is not just a mere statement; it holds a hidden meaning. Some of the assumptions that can be derived from this statement are that the company would reduce environmental pollution, abide by the government regulations and align with the consumers’ cultures, values, and norms. The company should, therefore, align its marketing actions to this mission so as to achieve socially and environmentally sustainable results.

Societal marketing.

The principles of this marketing strategy provide that an enterprise should make its marketing and promotional decisions by considering the needs of its consumers, the long-term consumer interests, and business requirements. The firm should be aware that compromising for the sake of the society is a disservice to the customers and the community as a whole, (So et al., 2012, p. 397). IKEA should, therefore, adopt this strategy so as to produce commodities that are not only beneficial but also pleasing to the society. It should also try as much as possible to minimize environmental pollution.

Conclusion

In conclusion, proper marketing mix is critical to the success of any organization. The 7Ps of a marketing mix have been utilized by IKEA, enabling it to remain competitive in the furniture and retail industry. The company has also been faced with several environmental concerns in China, which arise from its nature of the operation. These include air pollution, deforestation, garbage collection and biodiversity. The company should, therefore, adopt the above sustainable marketing strategies to solve these issues.

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