Crisis? What Crisis?

Three Years On
Introduction

Kim and Mauborgne (2005) in their studies stated that there is an opportunity in every situation and only visionary entrepreneurs could be able to create an opportunity and even exploit a situation whereby there is economic crunch and customers are not easily willing to spend. Source: Infomarketing (2008)

Read and Sarasvathy (2009) noted in their article that entrepreneurs were able to stay afloat during the harsh economic crisis that was witnessed during the year 2008 to 2009 by offering customers with products that offer additional value at a lower cost, and superior quality at an

Figure 1.1 Source : GMI/Mintel (2012)

The above figure 1.1 shows how the credit crisis has affect consumers in a

affordable cost.

This present essay is a follow-up on the article written by Read and Sarasvathy (2009) and it intends to look at products and services that have been successful for the last three years and how organisations offering them have been able to utilise new marketing strategies to position them within the market and attain a competitive edge and how they can further strengthen their position

Flight to value- LG Optimus One

Source: LG (2012) The cover page of LG group report clearly states it is a story about how your wishes become the inspiration for our engineers and designers which shows the extent LG as a brand goes to, in order to fulfill the customers demand (LG, 2011).

The highly competitive global environment has increased the emphasis on organisations trying to outdo each other in terms of superior technology and value for the product and emergence of new competitors. Saylor (2012) states that the manufactures who have been able to record impressive growth and financial performance have one thing in common, which is offering mobile phones handsets that offer a good value for money. Strategy During the Crisis LG electronics is a part of the LG group which is one of leading organisations based in Seoul, Korea specialising in energy solutions air conditioning, home appliances, home entertainment and mobile communications. LG is one of the most notable organisations that has been able to focus on the value of products, especially during the credit crisis (LG, 2012). The companys mobile communication sector is considered as the fifth largest in the world in term of sales that it recorded in the second quarter of 2012 (Saylor, 2012). According to Tom Linton CPO of the organisation, the company grew 20 percent during the recessionary period and substantial profit gain of 1.7 billion (CPO Agenda, 2010).

Figure 1.2: Image of LG Optimums One Source: LG (2012) The high volume of sales in the past three years has increased the growth of the mobile phone industry, from 29 million units in 2009 to 32 million in 2011 and an anticipated sale of 41 million units in 2016 (Mintel, 2012a).

In particular, the LG Optimus One (figure. 1.2) is an example of how the company offers value for their customers money. It is of essence to note that value for money valuates the selling price of a service or product in comparison to quality offered. The smart phone was first released two years ago and till date has sold two million units mainly because of the value that customers get. Graham (2010) stated that even though the phone runs on an Android system, the Optimus One does nearly 80 percent of what other more expensive Android based mobiles do at less than 50 percent of the cost which in turn contributes to the success of the phone in the market. Recommended new strategies for the future LG as an electronics brand seeks to develop a relationship with their customers by fulfilling their needs or wishes. The marketing strategy for the LG Optimus One was the value for money attached with the phone, marketing director Steve Gater states consumer seek affordable and attractive smart phones to fulfill their needs (Marketing Week, 2012a). In order for LG electronics to strengthen their position further in within the market it has to focus on product differentiation so that their products stand out in the market and revise their pricing strategies, a low pricing strategy does not always attract customers. Marketing distinct smart phones that are of high value as well as reasonably price as compared to other strong competitors such as Apple and Samsung poses to attract many customers who are seeking a value for their money, even though Apple thrives on the quality of its products, launch of the global brand campaign by LG at the start of the recessionary period with the tag line stylish design and smart technology, in products that fit consumers lives focused on a brand marketing strategy (Mintel, 2010a). These strategies will be more

successful if the company engages in vigorous marketing campaigns to create awareness and develop a long-term relationship so that customers stay loyal to LG as a brand.

Flight to quality- Virgin Galactic Space Shuttle for Tourist

Over the past three years numerous substantial reports have surfaced about astonishing spending habits mostly among the rich individuals, this is despite the fact that the World is slowly recovering from the financial crisis that rocked the economies of most developed nation in the period of 2008 to 2010 (Chossudovsky and Marshall, 2010). Entertainers have being leading on this list because of the amounts they spend on lavish items such as jewelry, luxury cars and clothes. For example, singer Beyonce surprised many by buying her husband a private jet to celebrate his first fathers day. According to Mintel statistics more 37 percent consumers have not changed their spending habits as result of the recession, these individuals usually tend to be; men under 35, affluent over 55 and single individual household (Mintel, 2010b).

Source: BEA, NIPA Tables 2.1, 2.3.4 and 2.3.5 (2010) Fig.1.3. The above fig1.3 shows how consumption expenditure and disposable income patterns have changed over a period of time and how they continue to improve since 2009. According to a survey published by HSBC in 2011 stated that household income of the wealthy increased by double the rate of inflation and will reduce their savings by 10 percent, households with income of more than 100,000 increased their spending from an average of 81,060 in 2010 to 87,380 in 2011(ft, 2009).

Another example is failure of Tata Nano, which is the cheapest car in the world. Customers have shunned away from the car, which costs less than 2000 due to its bad quality build, on

the other hand quality built cars such as that by Mercedes have reordered increased sales despite the recession. These facts prove that entrepreneurs emphasized on quality despite the global financial situation to attract buyers who are willing to spend as long as they are guaranteed of quality product and / or service.

Strategy during the crisis Virgin Atlantic is marketing space tourism emphasizing on the quality that customers will get from the tour, branding 2008 as Year of The Spaceship (Marketing Week, 2008a). The company is selling a seat in the virgin galatic space shuttle for 200,000 (figure1.4) just for tourist passengers to view the Earth from space in a matter of few minutes. According to marketing week advertising guru Trevor Beattie has provided marketing expertise to Richard Branson, in return for a trip to space (Marketing Week, 2008b). The marketing strategy has prove to be effective since five hundred people have purchased tickets for Virgin galactic spaceship rides that are set to commence next year (Batey, 2010)

Figure 1.4 Source: Chicago Tribune (2009) According to Chief Excutive officer at Virgin Galactic, Richard Bransons venture is driving out recession with would be astronauts paying 42 million to go to space, as stated in the Chicago tribune (Chicago Tribune, 2009)

Recommended new strategies for the future According to Branson real competitive advantage will be in the way the aircraft is designed (Bized, 2008), Space Ventures, a US company using Russian technology gives competition to Virgin (Marketing Week, 2006). In order for Virgin Galactic Spaceship tourism to maintain the lead in the new tourism market, it has to undertake aggressive marketing campaigns in both the old and new media. Secondly, the marketing campaigns should go far beyond the borders and target other nations that have wealthy individuals who will be willing to spend on a quality experience at the Space. In addition, the Virgin Company can promote the space tourism by offering discounts to attract influential celebrities who can further ignite interest on the program (spaceship rides) thereby attracting more customers.

The need for hope- Betting business in the United Kingdom

In order to ignite sales during harsh economic times, Kim and Mauborgne (2005) recommend that entrepreneurs should offer customers hope of winning more cash or additional goods and/ or services that are either related or unrelated when they make a purchase. This strategy gives customers the hope that they are likely to get something additional because of their purchase and therefore, they will be encouraged to buy a particular product or service more often as they seek for the reward.

Fig.1.5 Source: Office for National Statistics /Mintel (2009) The above fig 1.5 compares the dip in consumer expenditure on lottery and gambling activities as compared to the recession in 2008 the impact appears to minimal and the spending expenditure increased back up after a small dip (Mintel, 2010c).

Figure 1.6 source: Gambling Commission/Mintel (2011) Figure1.6 shows the share of consumer expenditure on land based gambling for year 2010-2011, among which national lottery seems to be most popular followed by gaming machines and betting (Mintel, 2011)

The marketing strategy of giving customers hope for something better when they make a purchase is increasingly been adopted worldwide. It is evident that most companies give customers raffle tickets when they purchase their products or service, and this raffle tickets are usually used in the grand draw to reward customers with prizes such as cars, phones or even a huge lump sum.

Strategy during crisis Among the most notable companies that have adopted this marketing strategy is the Betfair Company (Fig1.7 shows the logo of the organisation), which is the largest Internet betting exchange in the World. According to Lara OReily at marketing week, Betfair used its marketing strategies around the Euro 2012 football tournament to restate what the brand stands for (Marketing Week, 2012b). The betting company gives customers hope of winning huge sums of money based on the bet they make and this strategy has so far paid off greatly as the company records a turnover of more than 50 million on a weekly basis (Wood, 2008). This is despite that fact that the UK economy is still recovering from the recent economic recession. According to Read and Saravathy (2009), the success of a company such as Betfair means that customers will spend more on products or services that offer them a mix of affordable entertainment and opportunity to reap huge returns. Betfair uses a range of marketing strategies and mediums to reinforce its value messaging; it uses social media activity as springboard to launch gaming products, Iphone as well as android applications and facebook. According to the global head of online marketing, the companys main focus is on long-term valuable customer relationships (Marketing Week, 2012b)

Recommended new strategies for the future In order for Betfair to remain the leader in the internet betting exchange industry it has to ensure that indeed the hope of some customers do come true and this can be used to encourage the already existing customers whilst attracting new ones. As a marketing strategy, the company should reward customers who have won huge sums of money publicly, and ensure that their winnings are documented in the media including the social sites. This will give other customers hope as well as promote the company for truly fulfilling the hopes of their customers.

The need to connect Nokia Connecting People

In reference to the writings by Read and Saravathy (2009), it is evident that during harsh economic times the need to connect amongst individuals is high because of also the need for support. Therefore, products and services that enable people to connect easily, faster and cheaply will usually sell well during economic downturn.

In the past three years social sites have witnessed a tremendous increase in the number of users, which has prompted the creation of more social sites within the span of three years with the most recent to increase in popularity been instagram, which allows users to share photos and connect with other members. The need to connect has increased so much in the past three years to an extent that facebook has over one billion active users thus becoming the most popular social site and it marked this success by officially becoming a public trading company (Miller, 2011).

Mobile phone gadgets are also tools that facilitate the connection of people in different parts of the world and they have equally been sold in big numbers over the past three years (Lattanzi et al. 2006). A big percentage of the Worlds population has mobile ph one handsets and these are among the reasons why there has been a sharp increase in the number of

Figure 1. 8 Source: Mintel (2012)

mobile phone manufacturers as well as service providers across the globe.

Strategy during crisis According to Steinbock (2010), Nokia is the second largest mobile phone manufacturer in terms sales after Samsung (figure 1.8). This success can be attributed to its marketing strategy that uses the slogan Connecting People as it has been pictured below. Figure 1.9: Image of Nokias slogan Source: Nokia (2012)

The adverts for Nokia, emphasize on the fact that the Nokia mobile phone handsets connects people and because people are in need of support from each other and therefore, they will opt to buy Nokia phones in order to connect with their families and friends. According to Lattanzi et al. (2006), this marketing strategy positions Nokia perfectly among people who need to connect. However critics argue that in 2008 during recession Nokia was unable to properly communicate the benefits of 6 million free tracks on launch of Nokia comes with music hence the below expectation sales when the campaign could have worked to Nokias advantage during recessionary period (Mintel, 2009)

Recommended new strategies for the future Other marketing strategies that Nokia can use to further increase its market share and take the leading role within the industry is to manufacture products that are of high quality and offer customers value for their money. Secondly, Nokia should ensure that the prices of its phones are affordable and fairly priced in order to market the product with the slogan connecting people at a lower cost. These key marketing strategies will give Nokia a competitive edge over its rivals and by using its slogan in advertisements, it able to communicate to the target audience that it knows and understand their needs.

Conclusion Chossudovsky and Marshall (2010), states that during economic recession consumers need compelling reason in order to spend the little they have, therefore, every purchase has to be justified and worthwhile. This essay has noted that among the reasons why customers will make a purchase during times of economic recession is because of the value they will get, quality of the goods and services, the need for hope, and the need to connect. Therefore, for an entrepreneur to be successful during times of economic downturn he or she has to offer goods

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