Marketing Mix of Carphone Warehouse
The Carphone Warehouse Group is a customer orientated business that began trading in 1989 and is now Europe’s largest independent retailer of mobile communications, with more than 1,100 stores in 11 countries.
Since trading began in 1989 The Carphone Warehouse has developed a large product mix. A product mix is all products and items that a particular seller offers for sale.
Brand is a name or symbol that is commonly known to identify a company or its products and separate them from their competition. The Carphone Warehouse is a band in their own right, but they sell many other brands: Nokia Orange Comms T-mobile (UK) Nec UK Ltd, Sony Ericsson, Virgin Mobile Telecom, Motorola, L G Electronics Samsung, 02, broadband and mobile phone accessories. They offer such an extensive selection of different manufacturer brands so that they can encourage the highest amount of customers possible. For example, if a customer wanted a Sony Ericsson mobile phone, and The Carphone Warehouse did not sell this brand of phone, then the customer would go to the competition. Branding is also a way of staying ahead of the competition.
The Carphone Warehouse have diversified their products which brings in Internal Economies of scale i.e. risk bearing. The Carphone Warehouse have introduced new products other than phones, they now offer TalkTalk (broadband), Business solutions and Messaging solutions as well as mobile phone accessories. Not only does this give the customer more options but it also helps The Carphone Warehouse. Also, since trading began in 1989 mobile phone technology has evolved and so with it has The Carphone Warehouse. The increase in mobile technology means The Carphone Warehouse’s product range has increased.
This allows the business to take more risks with new ranges of phones, accessories and other products. This is known as spreading the risk. The Carphone Warehouse can spread the risk of new products being unsuccessful because they have more to fall back on. This therefore allows the business to take more chances by spreading their risks. They may also use test markets to reduce the risk also.
Many other factors of products fit along side with brand; packaging for example. The packaging of a product is extremely important for many reasons; it keeps the product safe, it informs the customer on many levels e.g. contents, weight etc, it also persuades customers in some cases. This is in situations where, for example, there are 5 different products to choose from – all produced to do the same job, one factor for the customer to consider may be that one packaging may look nicer and therefore more persuasive that another, although this might not necessarily be the case with mobile phones, where the product itself is the key to deciding what product to buy.
This is because of the physical factors associated with the products, e.g. its shape, size and in some cases, its weight. From the time when only 1% of the population owned a mobile phone, the size of mobile handsets has increasingly got smaller and smaller. Customers want small, light hands. This may be for convenience i.e. people don’t want a mobile phone which weights a lot, especially if they have to make long phone calls, but also the size. Mobile phones have somewhat become a faction statement, especially to teenage customers, it is common knowledge that a customer does not want a large sized phone as it looks old.
This is because of customer’s belief that as technology is increasing, producers are finding ways to make products smaller and smaller both to cut their material costs and also, if they are produced over seas, import and export costs. In this way, if a person sees somebody with a large phone they assume it is an old phone because they associate new products with small light weight products. As mobile phones are considered faction statements in today’s world, the aesthetic value of a handset is increasingly important to customers. This involves shape and size. It is important that the product looks attractive both in size and shape.
The Carphone Warehouse offer up-to-date products that fulfil the aesthetic needs of the customer. It is important to carry out market research so that they know exactly what the customer wants from a product or The Carphone Warehouse will not fulfil their needs and there Aims and Objectives will become increasingly harder to achieve. For example, if there product range was out of date; their success would go down because the competition would be offering more up-to-date products.
This would affect their aims and objectives in many ways, for example: their objective to increase market share would be greatly hindered. This is because the competition is offering better products which the customer wants to buy and therefore there share of the market will go down. Also, increasing customer base would be harder if they are offering out-of-date products. Objectives such as opening 250 new stores, i.e. growth will be harder because the market share will be less and may therefore be a waste of money to open new stores which customers will not use. This is not an efficient use of finance.
The Boston Matrix allows the business to categorise their products depending on their success and how much money has to be invested into them. There are four categorise:
* ‘Star’ products are those which a large share of a high growth market, they are high earners but they require cash injection. The Carphone Warehouse do not want too many ‘Stars’ because they require cash injection. A ‘Star’ of The Carphone Warehouse would be TalkTalk which has a large share of the market but involves high cash injection. Stars have the potential to turn into Cash cows.
* ‘Cash Cows’ are those which are able to generate finance and have a stable market share. Although their market is saturated. The mobile phone products themselves are examples of Cash Cows within The Carphone Warehouse. They support other products such as the Stars and Problem children.
* ‘Problem Children’ have low market share but they have the potential to grow into Cash Cows. An example of this would be new mobile phone accessories such as Bluetooth headsets which are relatively new and have a low market share but in the future have potential to grow, since the ban on being on the phone whilst driving. The Carphone Warehouse wants a new problem children so they have the potential to grow in the future.
* ‘Dogs’ are products with low sales and might be in decline. Examples of these would be out-of-date mobile phones which they still sell but at very low prices. They may still generate sales through the older market who want cheat and easy mobile phones.
The Carphone Warehouse wants a mix of Stars, Cash Cows and Problem Children with very little Dogs. It is a popular view that business want all Cash Cows and no Stars or Problem Children, but a business with only Cash Cows would be a business with no potential to grow. Stars and Problem children both have the potential to turn into Cash Cows in the future which insures that the business continues to grow. It is important to look at the business product lifecycle. I will investigate the product lifecycle for 3 of The Carphone Warehouse’s products: Nokia 3310, TalkTalk and Bluetooth headsets.
This line graph shows the life cycle of Nokia 3310 mobile phones which were introduced to the market in 2001. At the beginning of its lifecycle Nokia 3310’s were Dogs, and had very low sales at birth then progressed to stars as they were growing and then finally Cash cows before decline and then death. In 2001 they have very low sales but between that time and 2002 they saturated their market which is extremely fast growth. After they’ve saturated their market the only way is down. Mobile phones are dynamic products which come in and out of fashion. It is hard for one mobile phone product to stay successful for more than a year because the competition designs newer better phones.
The Carphone Warehouse offer a range of products which consisted of Stars, Cash Cows, Problem Children and Dogs, They understand that mobile phones do not have a long lifecycle and therefore carryout continuous market research. They are a customer orientated business which aim to give the customers what they want.
The price at which The Carphone Warehouse offers their products is a major marketing technique. Some strategies can encourage customers into the business more than others. There are five main pricing strategies that The Carphone Warehouse adopts:
* Penetration: This is used by businesses seeking to gain a foothold in a market, either with new products or with established products being placed in new markets. It involves pricing a product at a low level so customers are encouraged to purchase the product in large quantities. This does not necessarily relate to The Carphone Warehouse’s pricing strategy because mobile phones are rarely bought on mass. This sort of pricing strategy is usually used by whole sellers and large supermarkets.
* Full Cost: Includes indirect costs of a product when pricing it. A more sophisticated method of allocation can also be used. Using this method to allocate indirect cost, each element of the cost will be treated separately. Using other pricing strategies to encourage customers into the business The Carphone Warehouse use this strategy to equal out the losses they may make with other strategies.
* Contribution: This method takes into account that different products within a company might need to be priced using different criteria for example, Direct Costs, Contribution and Indirect cost. This allows a business more flexibility than the full cost approach. The Carphone Warehouse may use this in some cases where they are selling less up-to-date products to encourage people to pay full cost for newer up-to-date products.
* Loss leaders: This means putting a price very low so more customers are encouraged into the business. They expect to make a loss on the products sold but it will encourage people to buy other products so they will make a profit. The picture to the right was taken from The Carphone Warehouse website, it shows how they use cheap prices on some products to grab customers attention and therefore will encourage customers to buy more expensive products.
* Skimming involves charging a high price for a new product for a limited time. The aim is to gain as much profit as possible for a new product while demand is high and it is unique. This is what The Carphone Warehouse use the most when pricing their product. When a new type of mobile phone comes into the market, The Carphone Warehouse put it at a high price until its popularity goes down.
The Carphone Warehouse use many forms of promotion. There are two main types of promotion; above the line promotion and bellow the line promotion. Above the line promotion involves using things outside the control of the business i.e. the media. Bellow the line promotion involves the use of methods within the business control i.e. branding or company website. Also, prices of products are also good promotion scheme.
Magazine Advertisements: – above the line
The use of magazine advertisements allows the business to reach a market they might not necessarily reach with other methods. Depending on which magazine they are featured in, they may be able to reach out to a market segment which generally do not buy as many mobile phones as others. The magazine advertised in is ‘Chatter’, which is a popular magazine aimed a middle aged woman. On the whole, and from the questionnaire I carried out, I found that the smallest segment of the market was ages 35 – 45 year old woman.
There are several stereotypical reasons why middle aged woman don’t tend to buy as many mobile phones as other segments such as, business people, teenagers and men who are interested in technology. Most middle aged woman are parents, have loads of bills to pay and children to bring up, they are quite happy to make an older phone last for longer, whereas teenagers need to update their phones for fashion and business people and people interested in technology choose to update their phones for technology reasons. The Carphone Warehouse’s aim is to turn the wants of each segment into needs.
A disadvantage for using this form of advertising is that it is expensive and may not be instantly effective. This will affect their aims and objectives because if the costs are high then they will be lessoning their profit. They hope in carrying out market research that their profit will increase through revenue. The average cost of advertising in a popular magazine is ï¿½10,000 per page or ï¿½30,000 for a front cover. They hope they the increased revenue from advertising will cause the advert itself to pay for it i.e. the revenue gained from the advertisement is greater than the cost of the advertisement, which will increase their profit. This will aid the business in achieving their aims and objectives, in particular profit based aims and objectives.
Online Advertising: – bellow the line
The Carphone Warehouse is able to advertise their products for the cheapest amount possible when they advertise on their own website. It is cheap and easy for customers to use. Their site is also very successful. As the graph shows The Carphone Warehouse website holds a bigger percentage of the online market than the TV show they sponsor. The Carphone warehouse sponsor big brother – a reality TV show taking place during the summer. The show is very successful and due to be it being broadcasted on channel four, it means there must be commercial breaks in order for the channel four company to gain revenue. The Carphone warehouse is named as sponsor at the beginning and end of each break, which dramatically increases the awareness of the business. Being the sponsor of a TV show means they have to invest a lot of money into it, but they hope through the awareness of the company, it will equal out their profits and help them to achieve their aims and objectives. Two major objectives it will help them to achieve is that to increase market share and encourage more people into the business.
Of all of them I believe that promotion has the greatest impact on the businesses ability to achieve its aims and objectives. Whether it be promoting a product, a product range or the whole business, I feel that promotion is the most necessary marketing tool that a business can use to achieve their aims and objectives. This is because without promotion they cannot encourage new customers into the business as affectively, and cannot therefore increase their profit. Without promotion it will be increasingly hard to grow as a business because they will not be receive more revenue from new customers.