Business 001: Digital Technology and Retail Malls

Traditionally, location and tenant mix are the two most important factors that determine the success of retail mall businesses. Even though these factors remain important, the use of digital technology is allowing weaker players to level the playing field in the industry.

Facing Digital Disruption

Retail mall business is only concerned with the management of physical space in the past. However, with the proliferation of online retailing, the industry struggles to handle digital disruption, with various malls adopting a spectrum of strategy. At one extreme, we see retail malls embracing the online platform by rolling out “click & collect” programs, allowing shoppers to make purchases online but collect the goods at the physical store. At the other extreme, there are malls which reject digital technology entirely. Most retail malls adopt some forms of digital technology to complement their business, but at this stage, there is no indication which strategy will come to dominate the industry, and all malls are expected to tread carefully into this area.

Connecting with Shoppers

Omni-channel marketing has been gaining attention in the industry. Technology is empowering retailers to connect with potential customers with more targeted and personalised messages, across multiple digital platforms. Compared to Above The Line (ATL) marketing channels, digital marketing is likely to be more cost effective. The software tools to design, orchestrate, execute and analyse omni-channel marketing campaign is also readily available in the market. Should the mall management not have any IT expertise, these software are also available in cloud subscription models.

However, even if a retail mall wish to embrace such technology, the direct impact on retail mall revenue is still limited. The mall would ultimately require cooperation of its tenants as the core content of all marketing campaign is still made up of the products and services of the shops in the mall.

Loyalty program is another avenue for retail malls to grow their business organically. You can see that almost all of our local retail malls have some form of loyalty program. This is a great initiative for the mall, as a little bit of investment into a Customer Relationship Management (CRM) system to hold the data of all the loyal members will allow the malls to gain deeper insights through analytics and provide leads for future marketing campaign. The loyalty program also provides great value and cost efficiency, as any promotions, e.g. “10% off” will yield the desired outcome and limit the cost to strictly 10% of sales, or what ever the ratio depending on the promotion.

Besides the CRM system, technology plays a part in helping the retail malls acquire and retain loyal members through websites and mobile applications. The key to success is to provide great user experience, keep the contents fresh, and deliver proper information to the right target audience.

Expectations of Tenants

The expectations of tenants have also evolved, creating another set of challenges for the retail malls. The trend of pop-up store is expected to pick up, as more online retailers look to physical stores to complement their sales activity, such as organising flash sales, set up show room and etc. Traditional lease duration and lease terms do not appeal to this new segment of tenants, which will be looking for shorter leases and lower rentals. However, as retail malls cater to the needs of online retailers, the management must take note of the potential backlash from existing tenants. This poses a dilemma which may eventually cause a paradigm shift in the business model of retail malls.

Most retail mall rental rates consist of a variable component that adjusts according to the sales turnover of the tenant. However, as shops are increasingly looking to close sales through their online platform, the physical shop spaces in the malls will function as show rooms and storage space instead of a venue for transaction. The malls will no longer be able to accurately measure the sales performance of their tenants and price the rental accordingly. This is certainly a tough problem with no clear resolution available.

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Marketing 005: Experiential Branding

A brand mantra is like an elevator pitch for the brand. It should concisely deliver what the brand is about. A way for companies to start discovering what their brand is about is by creating a mental map of all the qualities associated with the brand, and finally focusing on just one or a few key qualities that truly describes the brand DNA.

Now that we have covered the brand positioning statement, the brand mantra, it is also important to note a brand is not limited to the meaning and the words that describe it, but the entire experience that the customer will live through. Therefore when designing a brand, we should think about how it interacts with the customer’s senses.

  • The kind of music, colour, images, smell and taste that associates with the brand
  • The kind of emotions that customers should have
  • The kind of actions and behaviours related to the brand, and how it interacts with the community, the social environment or social context
  • Etc.

Of course a brand mantra is insufficient to deliver this entire experience. All the 4 P’s of Marketing, which are the product, place, promotion, and even the price, will be the media to deliver this brand experience.

One final takeaway from the lesson on branding: Having a strong brand that the company is able to align with internally will guide business decisions and resource allocations, prioritising the most important tasks to deliver the brand promise to the customers. Therefore strong brands are clear and concise. They also represent consistency and commitment. You can hardly confuse the products of a strong brand with others, even if the competition had created something very similar. Coke and Pepsi are the classic example.

(Reference: Coursera Wharton Online Introduction to Marketing)

Marketing 004: STP Framework

The STP Framework stands for Segmentation, Targeting and Positioning. Each subsequent activity will build on the foundation laid by the previous activity.

The first step is to perform market segmentation. As highlighted in Market Leadership, a business which only delivers fair value in all aspect will eventually be eliminated in a competitive market. Therefore, segmentation is important to help businesses understand what different customers truly want, so that businesses will deliver genuine value through their products and services with a unique Market Mix (the 4 P’s).


Segmentation

Divides the market into distinct subsets, so that a particular segment can be targeted. There are many ways to divide the market, for example using:

  • Characteristics of the customers – this includes demographics, gender, income level, etc.
  • Preferences of the customers – this is a more product oriented approach, by looking at the different benefits that customers look out for in a product, and segment the customers accordingly.
  • Method of purchase – the way customers like to purchase divides the market into different groups.

There can also be a combination of all the above, such as cohort analysis, to divide the market into Baby Boomers, Gen Y and Millennials, each with some distinct product preferences. Segmentation by geography may also reveal distinct preferences in methods of purchase.


Targeting

After the market has been divided into segments, target the specific segment(s) that is the most attractive to the business. Points to consider when targeting a segment includes:

  • Potential of segment – the size of the market, future growth, spending patterns and stability.
  • Business capabilities – how well the business is currently able to meet the needs of the segment, what needs to be improved, and how easy to achieve.
  • Market competition – number of competitors targeting the same segment, potential new competitors, strength of competitors. Businesses will want to pick the segment which allows them to have the most differential advantage over the competition.

Eventually, a business will be able to rank all segments according to attractiveness, and pick a few of the most attractive segments to target.


Positioning

Positioning your product to meet the needs of the target segment. This course focused on positioning the brand to deliver what the customer wants.

A brand is essentially what the customer perceives of the brand, therefore a company can work very hard to shape a brand, but ultimately it is what the customer thinks that determines the brand.

Every brand has a positioning statement that ideally indicates the position clearly. It should contain 3 components,

  1. Target segment – who are the customers?
  2. Point of difference – what is the unique value that the business is delivering to the customers?
  3. Frame of reference – who are the competitors that the business is trying to differentiate from?

Take for example one of the game company that rise to success over the past 6 years, Riot Games. The first line from their website states:

“We aspire to be the most player-focused game company in the world.”Riot Games

We can see that game players are the target segment, the point of difference is to be the most player-focused company, that focus on experience, and lastly, the frame of reference is the other game companies in the world.

A noteworthy point to make: every brand should focus on only one or a few unique selling point, as trying to be good at everything will end up with nothing due to the lack of focus, and it is also difficult for customers to associate strong and unique characteristic with your brand. A point of difference must be the most important aspect of your business and what the customers truly want.

Frame of references are defined by points of parity. These points are common characteristics that associate with all competitors and defines the business or industry. One strategy that companies can adopt is to negate other companies’ points of difference by adopting them and making it the point of parity.

Just like how touchscreen technology had revolutionised the mobile phone market, it eventually became a point of parity that defines smartphones and are common among all competing producers.

(Reference: Coursera Wharton Online Introduction to Marketing)

Marketing 001: Business Orientation

Marketing is the study of markets, which essentially consist of an exchange between two parties. Any exchange counts, and money need not be transacted.

Marketing then, can actually mean different things depending on different aspects of the market. Here are four marketing approaches that companies generally focus, and as you will see, their business environments are pretty distinct.


1. Production Orientation

  • Create generic products
  • Aim for lowest cost of production
  • Profit from increasing market share

Semiconductors, hardware OEM for smartphones are typical examples.


2. Marketing Orientation

  • Create differentiated products and services
  • Aim for high quality and service level
  • Profit from increasing customer loyalty and customer share (share of customer’s wallet)

Breakfast cereals, energy drinks, sport shoes are some examples.


3. Experience Orientation

  • Prioritise customer experience
  • Aim for customers to co-create the desired product or service
  • Profit from generating buzz and increased referrals

We often see this in hipster cafes, yogurt outlets and the like.


4. Trust Orientation

  • Build relationships and create genuine value
  • Aim to build trust overtime
  • Profit from discipline and consistency over the long term

I could only think of Traditional Chinese Medicine practitioners, but I guess wealth managers and insurance agents also fall into this category.


A company may be focused on a few of the above orientation but it is near impossible to be good in all orientations. Large corporations may have different business units focusing on different orientations (think Samsung).

(Reference: Coursera Wharton Online Introduction to Marketing)

Marketing 003: Market Leadership

There is a framework in this course that can be employed by companies to think like a market leader. This framework of Market Leadership is based on 3 key assumptions about the market:

  1. Competitive Market – companies are always trying to know what the competitors are focusing on, what kind of marketing is being deployed, and constantly catching up with the competition.
  2. Customers Decides All – customers compare products and services across all competing businesses before making a decision. Businesses will have to deliver value.
  3. Be The Best – if the first 2 assumptions hold, then a company will need to be the best compared to other competition, at certain aspect of the business, in order to attract customers.

If a company is merely doing decently in all aspects, then it will not survive the competition as customers will be attracted to the various other market leaders.

These assumptions help to build the following framework of Market Leadership:

Market Leadership Framework.PNG

These are the 3 aspects of business that companies focus on as part of their leadership strategy.

The first is Operational Excellence. This is about being the most efficient producer, being able to bring the product to the market at the cheapest cost or shortest time compared to other companies. The second is Performance Superiority. This is about having the best product design and style such that customers will prefer the product over all other competition. The last is Customer Intimacy. This is about understanding customer needs and trying to be responsive to those needs.

A company looking to use the framework will go through the following steps:

  1. Figure out the product attributes that correspond to each of the 3 aspects that is particular to the market of interest, and have them clearly defined.
  2. Next, anticipate the fair value of each aspect. These are the average standard or quality that are still decently acceptable to the customers.
  3. Map out where the company is currently performing in the market on the three axes, relative to the fair value.
  4. Figure out where the competitors are performing on the same axes.
  5. Finally, design the marketing strategy required to move the company further out along the axes to become a market leader and beat the competition. The company may set short term and long term goals.

Companies aim to be the best in one of the aspect, while delivering at least fair value in the rest of the aspects, to be a market leader. Based on the assumptions established, being mediocre in all aspects is not a good strategy. Also, as the market is competitive, any premium value introduced by a market leader will eventually be imitated and eroded by the competition, turning into fair value. Therefore, businesses are constantly improving to stay ahead of the competition.

(Reference: Coursera Wharton Online Introduction to Marketing)

 

Marketing 002: Principles & Tools

Principles of Marketing

Following on the previous post, although companies may take different marketing approaches, these are the essential principles that describe pretty much all that they are doing.


1. Principles of Customer Value

  • Deliver what the customers really want
  • Create genuine value

2. Principles of Differentiation

  • Differentiate from competitors
  • Make customers prefer your products

3. Principles of Segmentation, Targeting, and Positioning

  • Segment the customers into different groups
  • Target specific groups of customers to optimise resources
  • Position products to meet the specific needs of target groups

Tools for Marketing

To deliver the marketing principles, there are four tools that companies can deploy. Of course, these are abstractions of the myriad of physical marketing tools to convey the idea.


1. Product

  • What the seller puts into the exchange
  • This is what the buyers will be paying for

2. Price

  • What the buyer puts into the exchange
  • Indicates the willingness to buy, need not be money

3. Promotion

  • What the seller communicates to the buyer in the exchange
  • Entice the buyer to purchase the product
  • May be advertising, sales, etc.

4. Place

  • The way the product is delivered – method of distribution
  • It may be online, offline, subscription model, etc

(Reference: Coursera Wharton Online Introduction to Marketing)