Wal-Mart and Products

Wal-mart Summary

2005-06-23T16:21:00.000-07:00

Wal-Mart. 3,500 stores worldwide, with over 1,000 outside the United States. $220 billion in annual sales, more than Sears, Kmart, Target, and J.C. Penney combined (Kotler, 442). As the only discount retailer to make Fortune's "100 Best Companies to Work For" for four of the last five years (Kotler, 443), how did Wal-Mart's business model become so successful?

Product: Everything, well almost everything
Wal-Mart prides itself of carrying a broad enough selection to make it the ultimate one stop shop. While they do carry tobacco and firearms, they have strict policy about offensive media. Wal-Mart is apparently very sensitive to its working mother target audience, but at what cost?

Price: Every Day Low Prices as Motto and Creed
Wal-Mart's pricing strategy is "everyday low prices," which means day in and day out, Wal-Mart's customers can rest assured knowing the goods they are buying are offered at prices lower than they would be at other stores that use a high-low pricing strategy. Using an everyday low prices strategy, Wal-Mart positions itself as a reliable destination for consumers who want to find products at good value.

Promotion: Wal-Mart on the Defensive, and Using the Web for its Brick and Mortar
Wal-Mart spends well over $100 million annually on marketing and advertising, although the message is not "everyday low prices." Wal-Mart 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 Wal-Mart customers into the physical stores.

Place: From Arkansas to South Korea
As of 2005, Wal-Mart has 16 stores in South Korea, whereas E-Mart has 74 stores with only 13% of the annual Korea sales of E-Mart, which posted sales of over $5 billion in 2004. Expert analysis of E-Mart's relative success vis-a-vis Wal-Mart shows: (1) Korean customers prefer bright and fancy store designs, with a pleasant atmosphere and good customer service; and (2) they prefer a store not far from home (E-Marts are generally located in easily-accessible downtown shopping districts.

customer entertainment

2005-06-19T18:10:00.000-07:00

Reference Post 2

In the first chapter of Kotler and Armstrong's Principles of Marketing, they say:
"To attract and keep customers, a company must constantly seek ways to deliver superior customer value and satisfaction." (Kotler and Armstrong p17)
After reading a few recent posts I think that value and satisfaction are being supplemented by what I will call "customer entertainment." While value and satisfaction have to do with what the company actually sells to the customer, the entertainment is something that really only links to the brand. Entertaining people through advertising and through shows like this helps make a ho-hum company seem more alive and friendly. This sort of co-branding is focused on getting the company's name aligned with good times and smiling faces. (p295)
First of all, I found Clare's recent post about Amazon very interesting. This will certainly be a great show for the employees that are able to go and a treat for the customers who have enough bandwidth to watch (i.e. their target audience). Amazon is making itself known as a provider of entertainment. For someone who actually does sell books, music, and movies, this is not really very far from just being advertising. However for Chase bank, who is also sponsoring the event, this is concert is mostly about having their name associated with fun and exciting events.
My thoughts on this subject became a less positive when I read more on this blog about the entertainment at the Wal-mart annual shareholders' meeting. Having recently been to my own company's shareholders' meeting, I was a little shocked to find out how they handled this event. Ours was a much smaller event, but it was conducted very formally in parliamentary fashion and basically stuck to business. At the Wal-mart meeting on the other hand, "Jessica Simpson sang the National Anthem, while Jon Bon Jovi performed with the help of Lorenza Ponce on violin, Jeff Kazee on keyboards and Bobby Bandiera on guitar. Bon Jovi sang acoustic versions of the band's standards, 'Livin' on a Prayer' and 'It's My Life,' as well as The Beatles' classic 'Help.'" (more here)
In Wal-mart's case, this spectacle has been criticized as being a designed distraction from the issues. While many important motions came to the floor about women's and minority rights as well as disclosure of stock options practices (all of which were soundly defeated), the most publicized details were about the performances. It is a shame to think that Wal-mart spent so much money getting Bon Jovi and the others when there are so many employees making minimum wage. The irony is that since Wal-mart is responsible for nearly a third of Bon Jovi's record sales it would be impossible for him to refuse to play.

An iPod Never Dies (it gets traded in)

2005-06-19T10:44:00.000-07:00

Makeup Post 2

This post on Slashdot caught my attention because it brought to my attention a new Apple promotion (page down to June 3). While this promotion is rather understated on Apple's own website, it has received quite a lot of media attention. The post itself brings up the question of how to deal with technological waste. The fact is that all electronics contain many bad components that should not just be put in landfills. Lead in the solder, mercury in LCD screens and many other nasty things with long chemical names that I can't pronounce. When electronics get junked, a lot of this nasty stuff can seep back into our fresh water supply. The discussion of this post is really quite long and repetative, but what I really liked is how Apple decided to handle this issue head on.
Apple has decided to offer a 10% discount on a new iPod to anyone who returns an old one to one of their stores. This is a big deal for many reasons. This move positions Apple as a socially responsible company that is concerned about electronic waste and is doing something about it. Apple want's to capture the business of the segment of electronics consumers who are worried about the "right thing to do" and also to reward the loyalty of repeat customers. (Kotler and Armstrong p245)
I think Apple could benefit even more by positioning themselves as THE environmentally friendly computer company. Socially responsible target marketing would compliment their already positive image and enhance their more-for-more positioning. (p257, 263) They already have a complete recycling program in place, not just one for iPods. Not only could their "switch to Mac" boast that Apple has a better computer experience for you, but they could also say that Apple knows the best way to take care of your old machine. The price of every new Mac should be advertised as including the cost of recycling your old computer equipment.

finding me on the web

2005-06-19T07:47:00.000-07:00

I was able to find a link to my flexplay article using Google. There must not be many Alex Husteds out there because most of the links that came up actually referenced me in some way. Kinda makes me feel special ;)

Technorati also found me without any problem. All those spiders must be working very hard.

On spiders: For those of you that don't know, search engines are so fast because they do not search the internet directly. Every engine has spiders (also bots or crawlers) that constantly update a database with the latest web pages. Then when you type in your search, Google (or whatever engine) only has to search their own well organized database. Getting these spiders to like your web page (and thus put it higher on search results) is rather difficult. Getting them to ignore your web pages is as simple as adding some lines of code to your pages that tell these programs not to index them.

Is it safe?

2005-06-18T08:53:00.000-07:00

Reference post 1

This blog brought to my attention Mastercard's latest "advertisment" about their committment to securing customer data. It came in the form of a surprising press release about how the account info for 40 million cardholders had been compromised. What made this so surprising was that MasterCard took the inititive to publish the bad news. CardSystems, the transaction processing company who was hosting the malware, discovered the breech nearly a month ago and was advised by the FBI to keep it under wraps. Instead of cowering in the corner and hoping customers would not find out, MasterCard saw this as an opportunity to differentiate.
MasterCard could have spent million$ on mass media advertising campaigns promoting their security policies that sound exactly like their competitors'. Instead they wrote a press release about how they handled a real security crisis which quickly circulated through the major news media. This release clearly marks them as company that does more than just "talk the talk" of customer privacy. When something bad happens, MasterCard takes action.
The fact that CardSystems' chief financial officer, Michael A. Brady was "blindsided" by this press release seems to clearly point to the fact that he has a few things to learn about the future of public relations. (Kotler and Armstrong p516) Just because the news is bad, does not mean that the publicity has to be bad.

Online Pricing

2005-06-17T19:16:00.000-07:00

Makeup post 1

A post from Zonk on Slashdot pointed out a report from Penn that reveals a very misguided understanding of retail pricing. It seems that "64% of American adults who have used the internet recently do not know it is legal for 'an online store to charge different people different prices at the same time of day.' 71% don’t know it is legal for an offline store to do that." Whether you knew it or not, a retailer can charge you whatever they want. Also, the security of your personal info is really only a sort of "honor system."
While the public is supposedly concerned about how their personal information is used both online and off, most consumers really know very little about the laws governing the collection and use of this info. Special pricing and the selling of customer info are not new phenomenon. The fact is simply that the internet has made it much easier to collect personal information and use it to personalize value-based pricing. (Kotler and Armstrong p359)
The advice from the folks in the Annenberg Public Policy Center basically boiled down to educating consumers about how direct marketing works and forcing businesses to be more upfront about what info they are collecting and how they are using it. While these are nice ideas, it is very unlikely that direct marketing and pricing practices are going to be taught in public schools. Most kids will have to learn about this the same way their parents did: the Hard way. Furthermore, getting businesses to publish the details of their personalized marketing systems is going to be impossible. (p543)
As consumers, we have to be aware of the laws that protect us and the tricks that are used to get our identities and our money. As marketers, we will just have to keep coming up with new tricks. The only real sure way to not get taken advantage of is to not buy anything.

Open the report and take the quiz on page 22. I got 14 out of 17 right which is apparently very high. How much do you know about your rights as a consumer?

Only one choice?

2005-06-16T17:56:00.000-07:00

Topic Post 3

On the subject of product and service, we have talked a bit in class about product mix. For most online retailers, a bigger selection is better. The problem then becomes how to make sense of all these choices. What is the best brand? Where is the best deal? When is the best time to buy? How can you really differentiate yourself in an ocean of online retailers of all kinds?
One wild website has answered these questions by taking the opposite approach. Woot.com only sells one product. That's right, only one. While their product mix ranges from electronics to kitchenware to toys, they only ever offer one thing at a time. (Kotler and Armstrong p290) The product changes every weekday at midnight and once it's gone (or sold out) it's gone. They have an RSS feed to keep you informed of the latest offering and a discussion board, but that is about it.
What makes Woot so unique is that unlike other retailers that differentiate by offering a larger depth or breadth of selection, Woot only has one item. It is always positioned as the same for much less. (p264) In addition, the support is almost as limited as the selection. They have this to say about their support:

Will I receive customer support like I'm used to?
No. Well not really. If you buy something you don't end up liking or you have what marketing people call “buyers remorse," sell it on ebay. It's likely you'll make money doing this and save everyone a hassle. If the item doesn't work, find out what you're doing wrong. Yes, we know you think the item is bad, but it's probably your fault. Google your problem, or come back to that product's topic in our community and ask other people if they know. Try to call the manufacturer and ask if they know. If you give up and must return it to us, then follow on to the next FAQ entry.

Is this a joke? Nope. Even though the FAQ page is funny, this is a real business. So the next question is, how can this business make any money? Well from first glance, I think these folks are not really shooting for the stars. Woot only seems to exist to entertain it's few part time employees and make them a few extra bucks. Because they only sell one product, they have attracted attention and buyers. Ironically, if they sold more than one, they would probably just have gotten lost in the sea of small time e-tailers. While this off-the-wall differentiation has brought them some fame, it will probably not bring much fortune.

Wal-mart censors America

2005-06-14T17:32:00.000-07:00

Topic Post 4

I am not quite sure how to feel about my latest Wal-mart discovery.
Their Music Content Policy may be old news to many of you, but it is new to me. In case you didn't just read it, I will summarize: Wal-mart will not carry any music with the Parental Advisory Label and they will only carry radio-edit versions of potentially offensive songs. This choice to carry a "family friendly" product mix (Kotler and Armstrong p290) is highly questionable since they still sell guns, tobacco and other not-so-freindly items.
This policy does however extend (to a limited extent) to their DVD selection as well. Wal-mart is one of the few retailers that carries "Dove E-rated" versions of films released by Warner Brothers and New Line Cinema. These versions of the films are cut and dubbed to eliminate nudity, violence and profanity in much the same way as edited-for-TV versions that play on network television.
Also, while I was unable to find it on their website, they are one of the first to sell ClearPlay enabled DVD players that can be programmed to automatically edit out offensive content of regular DVDs on-the-fly using a subscription based service.
Why is it that Wal-mart decided to limit their product selection to what they (and the Dove Foundation) deem "safe" for young ears and eyes? Why are they so interested in pioneering the sale of sanitized entertainment?
I suppose that despite having a rather preachy image, the folks at Dove have made a very good point. Family movies just sell more than R rated features. I don't know whether or not the same is true for music, but if the edited version of 50 cent's the Massacre CD can make it into the top 3 downloads then Wal-mart must be doing something right.
The folks at Wal-mart must assume that since their best customers are familes with two working parents and little time to shop, they must also have less time to spend monitoring what their children are watching and hearing. While I do not really condone Wal-mart (or any other company for that matter) assuming this sort of surrogate parental role, their decision does seem to make good financial sense. They are clearly homing in on the concerns of their most important demographic segment. (p240)

Robert Greenwald is Taking On WalMart

2005-06-01T10:43:00.000-07:00

According to an article in today's NY TImes, the controversial Robert Greenwald is targeting his next film at the misconduct of WalMart. He should be releasing more info tomorrow, just in time for the annual shareholders meeting on Friday.

"The diminutive Mr. Greenwald, 61, is leading this assault on the retailing behemoth of Bentonville, Ark., from a converted hot-sheets motel in Culver City, Calif. There, where MGM executives once conducted their trysts, he and a dozen or so young producers and editors are compiling digital video from interviewing teams across the country, while spreading the word through advocacy groups and labor unions to invite whistleblowers to come forward."

You can check out the official website, make donations, and preorder a copy of the film here.

Flexplay - the 48 hour, no return DVD

2005-05-29T10:49:00.000-07:00

Topic Post 2

Reading the section about "the Experience Economy" in the text (Kotler & Armstrong p277) triggered memories of an article I read a while back (perhaps it was this one) about something called Flexplay. Has anyone else heard of Flexplay? Well the company spells it out themselves here, but it can be summarized as a new kind of DVD that self destructs Mission Impossible style after about 48 hours. Well, it does not explode, but once you take it out of the package, it reacts with oxygen to become useless.

How could anyone in their right mind (let alone dozens of inventors, marketers, manufacturers, and financiers that started this business) think that this is a good idea? Good question. If any of them had read "The Experience Economy" or any marketing text for that matter, they would surely have understood that NOBODY wants to buy DVDs. Nobody even wants to rent them. People want to watch movies. The "Core Benefit" (p279) of a DVD is that people can watch movies with high quality sound and video in the comfort of their own home. The creators of Flexplay seemed to latch on to the notion that people don't like to return rented movies. If consumers don't like returning rentals to the store, they will not like having to mail coasters off to some recycling center. They formed their product around Less-for-Less positioning: offering a lesser product for a lower price (p264). The lower price is a questionable benefit at best since consumers can easily buy DVDs from places like Columbia House and half.com for less than $10. While they may have initially fooled Disney into thinking it was a great idea (shame on you Disney), this partnership did not last.

Aside from the obvious landfill issues, the problem that these "EZ-D"s have been having is that consumers buy them unwittingly. I am sure that many people bought these thinking that they were getting a really good deal, but later found out that they were duped. I never saw one of these in a store, so either I shop in the wrong places or distribution never expanded past the original test markets. There appears to be one disk still available on Amazon.com. The movie reviews for this film seem to be focused more on the disk itself rather than the film. I flipped through a few and (no surprise) did not find many glowing reviews of this dubious new format. It appears that by now Flexplay is being killed off by Netflix and Blockbuster mail services as well as the TiVo type on-demand services that many Cable companies are now offering. I say good riddance.

a real pickle for Vlasic

2005-05-27T07:38:00.000-07:00

Topic Post 1

This is the best article I have read so far on the subject of Wal-Mart. It demonstrates clearly through the pickle example how Wal-Mart has taken supply chain management thing to an extreme. This is a great example of the power of and administered vertical marketing system. (Kotler and Armstrong p407) Vlasic painfully demonstrates the pitfalls of becoming a Wal-Mart supplier. While they can certainly sell more pickles, they are now at the mercy of Wal-Mart's demand. Using a loss leader to attract attention is not a new trick, however it is usually done at the expense of the retailer. In this case, Vlasic not only has to supply these pickle jugs at a reduced rate, but they also loose the ability to command a premium price in every other store. This was a poor brand management choice for Vlasic. (p297) To preserve their brand equity, Vlasic should have relabeled the pickles as a store brand and kept the Vlasic name as small as possible.

Blog Introduction

2005-05-24T14:22:00.000-07:00

Intro Post 2

I am writing this blog as part of my current marketing class at Wharton Business School. It will mainly be focused on analyzing the Product angle of marketing. It will also be reviewing the current marketing decisions that Walmart is making. I hope to not only learn the basics of marketing in the next 6 weeks, but also how I can apply blogging to the rest of my life.

Personal Introduction

2005-05-24T14:17:00.000-07:00

Intro Post 1

My name is Alex Husted. I live just over the river from Philadelphia in Barrington, NJ and I am currently working for Edmund Optics. This is my family's business, so I have been working there on and off since I was about 13 years old. I have picked orders, packed boxes, manufactured precision mirrors, tested optical elements and designed catalogs, websites and ads. I am currently doing a little of everything in the marketing department: advertising, research, product development, design, etc.
I have undergrad degrees in Physics and Industrial Design, from Franklin & Marshall and Rhode Island School of Design respectively. I am also a two time dot-flop entrepreneur. One of these failed businesses was a competitor of WebCafe so you may hear me grumble when it is mentioned.