Introduction
Circular Distributors is a service provider of consumer information to marketers. The company has been in existence for over half a century and the demand for its services continues to increase in the modern markets. There is increased need for consumer information as more marketers seek to interact with consumers on a one-on-one basis. The days when the mass media was the most effective platform to conduct marketing are long gone.
Those were the days when companies used to produce standardized products for the masses. Consumers only needed to be aware of the products that were in the market then with that information they go in search for them. Currently, consumers have become more cautious on the products that they buy.
They spend a lot of time evaluating products and the consumer decision making process has become more complicated. Marketers now have to find ways of communicating with consumers in a personal manner and not through generalization of messages.
Circular Distributors uses targeted messages to communicate with consumers on a one-on-one basis. The targeted messages are sent to individual consumers and in so doing gets communication passed across on a personal level. Circular Distributors is a service provider but it works on behalf of companies that are both in the goods and services industries. Targeted messages fall in the category of direct marketing services.
The messages are sent directly to consumers and this triggers a special feeling since they are given special attention. Circular Distributors has benefited from the growth of the direct marketing sector since the 1990s. The business environment in the direct marketing sector has undergone drastic changes which are now consistent. Circular Distributors therefore has to position itself strategically using a new service development strategy.
Circular Distributors was one of the first companies to develop a system through which they could deliver leaflets to a large number of consumers on a door to door basis. This method was effective 50 years ago when companies in the fast moving consumer goods industry sought to bring about trial use for their products. Circular Distributors could then distribute free samples to consumers thereby being the most effective medium to carry out this marketing activity.
Markets have however changed drastically today and direct marketing involves more than delivery of leaflets to consumers’ doorsteps. Consumers have become more particular of the goods that they want and this has led fmcg companies to fragment markets so as to identify customers by their unique lifestyles. This is necessary so that the unique needs of a particular customer segment can be met using differentiated products and cost effective marketing techniques.
As competition intensified in the market, Circular Distributors was forced to change its approach. The distribution of leaflets was already an outdated technique of direct marketing. The company was forced back to the drawing board as the environment got more competitive and consumers’ lifestyles more diversified.
The new management that took over the company in 1991 decided on the use of publications to create a stable audience. This strategy led to the development of the Emma’s Diary publication that has become very successful in terms of reach and communication effectiveness. This publication that is distributed for free enjoys a higher readership than any of the competitor’s pregnancy publications because of its reach and detailed.
Positioning of Circular Distributor in the service industry
Circular Distributor developed a successful publication known as Emma’s Diary in 1992 to target expectant women. This publication has grown to become the most read pregnancy guide far outdoing other parenting magazines. This publication captured the audience of 78% of women who were pregnant. An impressive 81% of women who were pregnant for the first time were also found to read the publication in search of information about motherhood.
Therefore, Emma’s Diary has captured the audience of pregnant women and companies intending on reaching this customer group can use this channel to advertise their products. Circular Distributors should move a step further and position itself as the leading pregnancy publication so as to increase the audience further and reduce the possibility of competitors matching up to their services.
Circular Distributors uses its distribution strategy to gain mileage from its rivals. The distribution of the pregnancy publication is meant to create a large audience for the company. Through the free distribution that is done by midwives, pregnant women are able to access the publication without having to pay any amount.
This strategy also made all pregnant women able to access Emma’s Diary without having to belong to a certain lifestyle or customer segment. While other pregnancy magazines charge customers so that they can purchase their products, Circular Distributors distributes its publication free of charge so that a large audience will access the information presented in the magazine.
The positioning strategy used by Circular Distributors enables them to raise revenue from alternative channels other than sale of publications. They get their revenue from advertisements and free samples that marketers include in their publications. A third of the total revenue comes from advertisements and another third comes from free samples that are distributed in addition to the Emma’s Diary.
The remaining portion of revenue is obtained from the sale of consumer information. Through this unique strategy, Circular Distributors has been able to position itself as the number one pregnancy guide in the market. Any company seeking to reach pregnant women will seek the services of Circular Distributors due to their effective distribution strategy and consumer reach.
Differentiation
Circular Distributors was also able to differentiate its services through the development of the One Step Ahead publication. This was a publication that was sparked off by the success of Emma’s Diary which was collected by about 400,000 out of the 720,000 reported expectant mothers in 1999 (Lovelock & Wirtz, 2010). Circular Distributors differentiated this product from Emma’s Diary by focusing information on newly born babies.
Emma’s Diary included information about pregnancy and motherhood in general. One Step Ahead was exclusively for disseminating information about accident prevention after delivery. This publication was distributed by registrars after the registration of new babies was done.
Through this differentiated product, the company was able to reach 84% of new parents while many of these also collect a baby gift pack. This reveals that through differentiation, a company is able to acquire additional market share by appealing to customers who might not have been satisfied with the original products.
The differentiation strategy also works to place a company in a better market position away from competitors (Anderson, Fornell & Mazvancheryl 2004). By differentiating products, Circular Distributors was able to cement its stronghold on the market. The new publication was able to reach an additional 3% of new parents.
While the original product the Emma’s Diary publication reached 81% of new mothers, the One Step Ahead publication reached 84% of the same group of customers (Lovelock & Wirtz 2010). This highlights the critical role that product differentiation plays in the marketing strategy of a service company.
Moreso, a competitive business environment necessitates a company to differentiate its products. The additional market share obtained by Circular Distributors would have been scooped up by another company if One Step Ahead publication had not been introduced into the market.
However, differentiation strategy is not meant to divert the focus of a company away from their core competency. This is what threatened to happen to Circular Distributors in 1999 when the company was discovered to be moving at a stagnant pace in the sale of marketing information. The company had been founded on the basis of sale of this information but after the development of the publications, attention shifted to distribution other than collection of information that formed the content of the publications.
This is a threat that most companies face because differentiation can create opportunities which appear as more beneficial as compared to the original service. Circular Distributors found itself more indulged in organizing processes for distribution other than collecting marketing information which was more important.
Service providers ought to remain focused on the core competency. All the strategies used should aim at positioning the service provider as per the needs of consumers. Consumer needs nonetheless keep changing in the current business environment. New opportunities should not divert the attention of a service provider away from their core competency.
Circular Distributors found themselves more concerned with stuffing envelops instead of searching for marketing data that was supposed to be part of the content that is stuffed in the envelops. The service development plan of the company failed to address this as it only sought to create new avenues for the company to increase its audience.
Change of service development strategy
Following the challenges that the company faced, it changed its name to CD Marketing Services. CD also changed its distribution strategy from the letter box system to lifestyle marketing brand. This approach was required because the door to door distribution technique was feared to be dilapidating as new innovative distributive techniques were being developed.
This forced the company to invest in technological facilities that would assist with data analysis. CD also developed new publications that targeted couples that were planning their wedding and those with children aged three to five years. ‘The Married Life…The Small Print’ and Emma’s Diary Pre-school Guide were added to the company’s collection and list of attractions.
As a result of the two new publications that CD Marketing Services had introduced, the core business of the company changed. These new additions targeted a more specific audience and were different from the earlier publications. There was also an additional input in these two new publications.
They both included reader survey forms which were intended on getting information from the audience. This new strategy enabled the company to collect information about customers, a feature that was not there in the earlier publications. In this new approach, the company changed its focus from the mere distribution of information and free samples to information management which involves collecting and analyzing data.
The new core business that CD had decided to venture into would not come without hurdles. The market of supplying information was not new since other companies such as Claritas and Exparian already had built databases of customers. Another company known as ICD had a massive consumer database and it boasted of having some bit of information regarding every household in the country.
It is difficult to compete against such kinds of competitors especially in their own market. While CD struggled to overcome the perception that it was just a company that stuffed letters into people’s mail boxes, the competitors had gathered information regarding customers such that they could serve their clients while overseas.
Proposed New Service Development Strategy
Since technology is taking over all industries in the world, the new service development strategy will take advantage of new innovations. The information age is about getting the world from a paper economy to a paperless system. New innovations revolve around information that is in soft copy as opposed to hard copy. It is therefore proposed that CD Marketing Services upgrades its reach to people’s email accounts.
The internet is people’s best friend in the modern world. There is hardly any household that lacks access to the internet. People stay online at home and at work while others even work from any location as long as they are online. The social media has also increased the amount of time that people spend on the internet. CD should therefore upgrade its scope of business from mail boxes to internet accounts.
The advantage of this new service development strategy is that its costs of operation are low. There are no costs of setting up such as developing mail boxes or hiring a distribution team. All that is needed is an IT team that will manage the collection and dissemination of information.
CD should seek to collect people’s email accounts which they use to access most of their electronic information. Then slowly the company should develop a database of the email addresses that belong to the same households it delivers direct mail to. This new service strategy will work hand in hand with the door to door distribution strategy and will eliminate the need to do away with the old marketing method.
SWOT Analysis
Strengths- Circular Distributors has well built knowledge of techniques that can be used in direct marketing so as to establish one-on-one relationships with customers. The company has strong publications that are effective in disseminating marketing information to consumers. CD Marketing Services has a ready audience in the niche markets of expectant women, new mothers and wedding couples. CD also has a database of millions of families and this information gives them competitive advantage over new entrants in the market.
Weaknesses-Circular Distributors is slow in adapting changes in the market. The company also gets carried away with its successful products. They fail to realize that markets and consumer needs are dynamic and constantly changing.
Opportunities- CD Marketing Services seeks to gain from developments in technological distributive systems. Since the company has adopted technological changes in its new service development strategy, it stands to benefit from technological developments.
Threats- the ever changing consumer needs threaten the profitability of CD Marketing Services. Technological developments such as the internet enable consumers to get information easily without relying on CD publications. The industry of supplying information has large competitors who have established databases of customers. CD will face stiff competition from these.
Reference List
Anderson, EW, Fornell, C & Mazvancheryl, SK 2004, ‘Customer Satisfaction and Shareholder Value’, Journal of Marketing, vol. 68, pp. 172–85.
Lovelock, C & Wirtz, J 2010, Service Marketing, 7th ed, Pearson Education-Prentice Hall, Sydney, Australia.