Critical Analysis. 11 Essay Example

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    Business
  • Document type:
    Article
  • Level:
    Masters
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Critical Analysis

Lecture;

Brynjolfsson, Hu and Rahman (2013) discuss the changing competitive landscape in the US retail industry. According to the authors, new web-based technology is presenting a new challenge to existing brick-and-mortar retailers. However, the new online marketing channel is also an opportunity to existing online retailers who can take advantage of the channel to increase their sales. The research main strength is that it is supported by consumer surveys and interviews with customers. The article is a useful source of information on the competitive strategies that existing retail stores can adopt to remain competitive under the onslaught of online stores. The article also highlights how retailers can react in a new environment where the consumer is empowered by availability of product information which enable better informed purchase decisions.

The findings of the research present some of the challenges and opportunities that have arisen as result of online retailing. One of the opportunities which the researchers discuss widely is the use of location-based application on mobile devices. The authors report that some stores are already using location-based applications to reach their customers. They give the example of Walgreens Store which use location-based application to offer its customers electronic catalogs. Other stores like RedLaser allow customers to locate specific products that are near them.

Brynjolfsson, Hu and Rahman (2013) point out those online retailers have excelled in marketing to niche markets. Online retailers focus on bringing products that are not available locally to consumers. The fact that online retailers are succeeding in niche marketing is supported by the view of Andersen, Fritt and Favre (1997). According to Andersen, Fritt and Favre (1997), organizations have to segment markets into distinct group with heterogeneous needs and market to them profitbly. In response, Online retailers identify customer groups that need niche products and market to them. Brynjolfsson, Hu and Rahman (2013) identify segmentation of markets as the reason why online retailer and traditional retailers who have embraced niche markets very successful.

Brynjolfsson, Hu and Rahman (2013) assert that mobile technology enables consumers reach new consumers more than ever before. According to Wang et al (2016), mobile internet enable consumers access information about products 24 hours every day. Rasinger, Fuchs and Hopken (2007) assert that the internet in the biggest source of information for travelling retail customer. On the other hand, Brynjolfsson, Hu and Rahman (2013) give the example of apps that direct out of town visitors to local specialty shops. Today, customer review sites like Yelp enable small and independent stores to come to the attention of customers who would not ordinarily know of their existence. Information on price, item availability and product reviews combine to make the retailing landscape more competitive than ever before. According to Wang et al (2016), information obtained from online customer reviews has become very important for tourist purchase decisions.

According to Brynjolfsson, Hu and Rahman (2013), mobile internet presents a challenge to marketers relied on customer ignorance and geographical barriers to provide inaccurate product information to clients. Today, customers can seek information from third-party sources to verify product attributes they perceive as exaggerated by the marketer. Jacobsen and Munar (2012) reported that tourists are increasingly using their mobile phones to obtain third-party information on their tourist destinations. Brynjolfsson, Hu and Rahman (2013) conclude that marketers of services are forced tp be more honest about different product attributes.

Brynjolfsson, Hu and Rahman (2013) also report that location-based apps are one of the unique opportunities availed to marketers by mobile internet technology. The location-based apps are already in use to send sale information to customers who are in the vicinity of the store. Other location based apps track customer movement and can analyze the stores visited and items purchased. Bestbuy is already using an app that considers a customer previous history and purchase behavior to make offers to the customer. However, Watson, McCarthy and Rowley (2013) cautions marketers that marketing messages sent arbitrarily to customers may not be perceived positively. Sometimes customers may be annoyed by marketing messages which they perceive as deliberate attempts by the marketer to influence their purchase decision.

Brynjolfsson, Hu and Rahman (2013) also recommended several strategies that companies can use in omnichannel retailing to ensure success. Bell, Gallino and Moreno(2014)concur that success in omnichannel business will depend on adoption of best practices in pricing, shopping experience design and customer relationship building. One of the success strategies already in use in OmniChannel marketing include the use of curated content and attractive pricing. According to the three authors, the success of Amazon is dependent on curation of products. Amazon’s systematic arrangement of products ensures that customers do not get lost while trying to navigate to the products they need. Cho (2014) concurs that the ease of locating a product in an online store is considered an important feature by customers. No customers is comfortable browsing across multiple WebPages searching for a single product that can be easily located on a competitors site.

Secondly, Brynjolfsson, Hu and Rahman (2013) recommend that omnichannel marketers should leverage the power of analytics and data. Omnichannel retailers have the chance to make use of data on that is available on mobile, social and local networks. Dow (2013) agree that data analytics allow retailers to understand customer transactions and interaction such as website visits, check-in at establishment and product likes on social media. Many organizations already use customer web history to personalize advertising to customers. However, the use of analytical information raises several ethical dilemmas in Omnichannel marketing (Corrigan, Craciun, and Powell 2016). Customers have complained on occasion that businesses are violating their privacy by tracking their web history and movements. For instance, it is questionable whether American Apparel analyses on CCTV footage and interception of mobile phone and Wi-Fi signal can pass the test of ethical advertising.

Brynjolfsson, Hu and Rahman (2013) also call for omnichannels marketers to avoid direct price comparisons. Direct price comparison can hurt businesses that do not compete on the basis of prices. It is therefore imperative that they offer their products while omitting pricing information. According to Armstrong and Vickers (2010), retailer should play up the distinctive features of the product instead of emphasizing on the price of the product. However, the challenge of differentiation is even greater on the Omni-channel where search costs are reducing and richer information becoming available (Ellison and Ellison 2009). Brynjolfsson, Hu and Rahman (2013)suggest product bundling and exclusivity as tactics for avoiding direct pricing comparison. Armstrong and Vickers (2010) assert that bundling enables marketers raise the prices of individual items by including product of less value in the bundle. According to the authors, marketers can avoid price comparison if they offer products in bundles that are not available from other retailers.

Brynjolfsson, Hu and Rahman (2013) have also recommended the creation of exclusive products that will only be available on exclusive sites. According to the authors, Target and Amazon exclusive are succeeding by offering consumers exclusive products that are not available anywhere else. However, online retailers can only succeeded in marketing non-exclusive products if they offer lower prices than physical stores (Armstrong and Vickers 2010). Armstrong and Vikers (2010) point out that low prices tend to create excessive loyalty among consumers who are likely to remain with the firm despite changes to product attributes. According to the Brynjolfsson, Hu and Rahman (2013), physical stores have the advantage of offering in-store services and offer instant gratification and trust.

One of the most successful strategies that can be pursued by online retailers is the marketing of niche products (Brynjolfsson, Hu and Rahman 2013). Ordinarily, it is not economical for stores to stock products that can only be marketed to a very narrow market (Brynjolfsson, Hu and Rahman 2013). In traditional stores these products are rarely available or hard to find. However, traditional stores now have online catalogs that enable consumers to find information on the availability of niche products. According to Bell, Choi and Lodish (2012), increasing interactions between customers and marketers enable identification of new narrow customers’ needs. Marketers respond to these needs by creating niche products that satisfy these narrow needs.

Raising switching costs is a strategy that has been widely used by marketers for decades. According to Brynjolfsson, Hu and Rahman (2013), Omnichannels retailers have the opportunity to achieve a competitive edge by increasing the witching cost for their customers. The authors point out that some online retailers like Amazon and Best Buy already have customer loyalty programs. Express and mobile checkouts can also be used to increase the switching cost of consumers to other retailers. According to Kim, Fiore and Lee (2007), if an omni-channel retailer offers a superior shopping experience to consumers the consumers are more likely to remain loyal to the particular retailer.

According to Brynjolfsson, Hu and Rahman (2013), Omnichannel retailers will need strategies that respond to the competitive nature of the contemporary market. According to the authors, one of the ways that retailer can become more competitive is by backward integrating in their supply chain. The pressure to reduce prices and increase quality demands that retailers find new ways of improving quality and cutting costs (Shankar et al 2010). The authors offer the example of Amazon.com that has entered the publishing business in order to decrease the cost of books it offers on it online store. According to Lin,ParlaktürkandSwaminathan (2014), backward integration allows retailers to offer the level of customization and exclusivity demanded by their customers. The changes in retailing are likely to have large-scale impacts on the market where organizations will start to intergrate backwards to produce what they customer want.

In conclusion, Brynjolfsson, Hu and Rahman (2013) present an outline of how the online marketing channel is changing the retail market. The authors start by noting that the smartphone presents an opportunity and a challenge to retailing business as it provide a powerful channel for obtaining information used to make purchase decisions. Literature concurs with the authors that mobile device are important sources of information that is used to make buying decisions across industries such as hospitality, retail, medicine and auto. Those retailers who are not able to take advantage of this opportunity risk losing their market share. Secondly, analytics and data obtained on mobile device usage enable to tailoring of advertising campaigns to consumer preference and thus advertising is more effective. However, the tracking and analysis of customer’s usage of communication network raise ethical issues as it border on violation of consumer’s right to privacy. Unfortunately, these privacy concerns have not stopped retailer from using data and analytics of customer usage of mobile communication network to tailor advertising content. Thirdly, omnichannel retailing reduces the ability of marketers to mislead customers by taking advantage of customer ignorance and geographical barriers. Nowadays, customers have multiple ways to obtain third-party information on product attributes the retailer may not have described accurately.

Brynjolfsson, Hu and Rahman (2013) recommend a number of strategies that can make retailers competitive in the contemporary marketing environment. These strategies include systematically curated product with attractive pricing to ensure that customers find them easily on the retailer’s sites. Secondly, the authors urge retailer to leverage data and analytics to better target consumers with tailored messages. Thirdly, the authors recommend the avoidance of direct price comparisons through bundle pricing and exclusive products that will free a retailer product from competitor’s price comparison. However, for ordinary products, competitive pricing is the most effective strategy to win customers and retain them. In addition, online retailers and dual-channel retailers can excel in the marketing of niche product whose markets are too narrow to be economical in convectional stores. Niche marketing is more suited for omnichannel retail as the retailers can provide information about product availability through the Smartphone apps or browsers. Moreover, Omnichannels retailers can take advantage of the opportunity to achieve a competitive edge by increasing the switching cost for their customers. Finally, retailers can become more competitive by backward integrating in their supply chain to have closer control over the cost and quality of product they market to their customers.

References

Armstrong, M. and Vickers, J., 2010. Competitive non-linear pricing and bundling. The Review of Economic Studies77(1), pp.30-60.

Bell, D.R., Choi, J. and Lodish, L., 2012. What matters most in internet retailing. MIT Sloan management review54(1), p.27.

Bell, D.R., Gallino, S. and Moreno, A., 2014. How to win in an omnichannel world. MIT Sloan Management Review56(1), p.45.

Brynjolfsson, E., Hu, Y. and Rahman, M.S., 2009. Battle of the retail channels: How product selection and geography drive cross-channel competition. Management Science55(11), pp.1755-1765.

Brynjolfsson, E., Hu, Y.J. and Rahman, M.S., 2013. Competing in the age of omnichannel retailing. MIT Sloan Management Review54(4), p.23.

Cho, Y.K., 2014. Service Quality and Price Perceptions by Internet Retail Customers Linking the Three Stages of Service Interaction.Journal of Service Research17(4), pp.432-445.

Corrigan, H.B., Craciun, G. and Powell, A.M., 2014. How Does Target Know So Much About Its Customers? Utilizing Customer Analytics to Make Marketing Decisions. Marketing Education Review24(2), pp.159-166.

Dow, C., 2013. Mobile marketing and the value of customer analytics. International Journal of Mobile Marketing8(1), pp.117-120.

Ellison, G. and Ellison, S.F., 2009. Search, obfuscation, and price elasticities on the internet. Econometrica77(2), pp.427-452.

Jacobsen, J.K.S. and Munar, A.M., 2012. Tourist information search and destination choice in a digital age. Tourism Management Perspectives1, pp.39-47.

Kim, J., Fiore, A.M. and Lee, H.H., 2007. Influences of online store perception, shopping enjoyment, and shopping involvement on consumer patronage behavior towards an online retailer. Journal of retailing and Consumer Services14(2), pp.95-107.

Lin, Y. T., Parlaktürk, A. K., & Swaminathan, J. M. (2014). Vertical integration under competition: Forward, backward, or no integration?. Production and Operations Management23(1), 19-35.

Rasinger, J., Fuchs, M. and Höpken, W., 2007. Information search with mobile tourist guides: A survey of usage intention. Information Technology & Tourism9(3-1), pp.177-194.

Shankar, V., Venkatesh, A., Hofacker, C. and Naik, P., 2010. Mobile marketing in the retailing environment: current insights and future research avenues. Journal of interactive marketing24(2), pp.111-120.

Wang, D., Xiang, Z., Law, R. and Ki, T.P., 2016. Assessing hotel-related smartphone apps using online reviews. Journal of Hospitality Marketing & Management25(3), pp.291-313.

Watson, C., McCarthy, J. and Rowley, J., 2013. Consumer attitudes towards mobile marketing in the smart phone era. International Journal of Information Management33(5), pp.840-849.