MKTG 6550U

COMPETITIVE BRAND STRATEGY ANALYSIS

Lowes Canada | Ebube Anizor (209347741)

EBUBE ANIZOR 209347741 - MKTG 6550U - COMPETITIVE BRAND STRATEGY ANALYSIS (LOWES CANADA) The recent recession precipitated by the collapse of the US housing market has been felt globally. The ripple effect of the downturn caused Canadas hot housing market to cool and consumer spending to decline. The home improvement (HI) industry was hit particularly hard as spending in this sector is considered discretionary. As a means of spurring growth the Government of Canada introduced the Home Renovation Tax Credit in January 2009 with the rationale that renovations were smart investments for the long term value of a home and provided immediate economic activity by increasing the demand for labour, building materials and other goods.1 Households could receive up to $1350. Early indication is that consumers are reacting positively.

MARKET DEFINITION
By way of definition the HI market consists of decorative materials (e.g. paint, tiles), non-decorative materials (e.g. doors, window frames), electrical hardware, hardware and tool segments. Non-decorative is the largest segment with 35% of the market value.2 From an industry perspective, while approximately 50% of the market is comprised of independent dealers there is a palpable trend towards consolidation - with larger corporations digesting or creating affiliations and partnerships with smaller dealers.

CUSTOMER ANALYSIS
TRENDS
Customer Variety. HI has evolved from a functional to discretionary and leisure-based activity creating with it new Do-It-Yourself (DIY) customers who have taken on some or all aspects of home projects.3 Big-Box Stores. Expansion of the customer base beyond the pro to the general consumer and the time pressures that families face has created a preference for shopping at stores that carry a wide product range. Home Improvement Television. Channels like HGTV and shows like TLCs Trading Spaces have created, reflected and exposed the design, renovation and transformation appetite of millions of Canadians. Private Labels. Customers across industries have shown increasing willingness to buy private label products as the quality gap disappears and prices stay favorable when compared to brand name alternatives.

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EBUBE ANIZOR 209347741 - MKTG 6550U - COMPETITIVE BRAND STRATEGY ANALYSIS (LOWES CANADA) Multi-Use Homes. As growing numbers work from home they demand more out their space and require multi-functional rooms. While these consumers may be price sensitive they still desire quality and style.4

Smaller Jobs. There is a drop in sales of large ticket items and discretionary projects as consumers focus on
necessities and opt for making small, incremental changes or accents that still transform their living space.5

SEGMENTATION
Within the particular market segments (above) the typical industry segmentation is as provided below;6 however research indicates that nearly 80% of home improvement decisions are initiated not by men, but by women.7 This is a possible indication that retailer emphasis on design rather than renovation may gain more traction.8 Upcoming segments that can be considered for future targeting include single women home buyers, younger (Gen X & Y) home buyers, new immigrants, baby boomer remodelers.9 DIY customers. Typically home owners who purchase products and complete their own projects. Do-It-For-Me (DIFM) customers. Typically home owners who purchase materials themselves and hire third parties to complete the project or installation, or both. Professional customers. Remodelers, contractors, repairmen, small business owners and tradesmen.

MOTIVATION
A Lowes survey indicated that even in the light of the recession nearly 50% of Canadians plan to do some home renovations by February 2010; with quality of life being the key motivator, followed by increasing home value and energy efficiency.10 Beyond the survey the following additional motivations are suggested. Creative expression. Individualism and a sense of ownership drive the DIY consumer. TV and the web have empowered consumers who now envision themselves as designers, interior decorators and handymen. Prosumerism.11 Connected to expression is the growing need for people to produce content and share with the world. Reality TV, blogs, social networks and YouTube make us stars.

UNMET NEEDS
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EBUBE ANIZOR 209347741 - MKTG 6550U - COMPETITIVE BRAND STRATEGY ANALYSIS (LOWES CANADA) Metropolitan/urban consumers who require the selection and services provided by big-box stores (and cannot be provided by a local hardware store) without needing to travel to distances to suburbs. Younger home buyers looking for individualization in their homes.

COMPETITOR ANALYSIS
Because of the wide range of products and services offered by Lowes competition legitimately runs the gamut. However, strictly speaking Home Depot (HD) is Lowes greatest competitor in Canada and the US. In Canada, Rona holds the second position and further competition is provided by Home Hardware. See Appendix B. HI products are largely commodities and customers tend to lack loyalty to a particular retailer so the industry is highly competitive with firms battling on price, store location, service and product. Barriers to entry are considerable given the brand equity of incumbents and the scarcity of prime real estate. Nonetheless with more than 50% of the market consisting of small dealers opportunities for growth are available. See Appendix A.

HOME DEPOT
Market leader with the largest number of locations in Canada. Positioned to the DIY consumer who is looking for great product choice and good prices in one convenient location. HD will help you get the job done. Brand identity Leader, good prices, variety, helper in getting jobs done Strengths/strategies Size and buying power, popular portfolio of private brands, many store locations Vulnerabilities Poor customer service in terms of product knowledge and other quality factors. Brand once associated with skilled personnel shift towards cheaper staff has hurt image.

RONA
Canadian chain with network of 680 stores. Positioned to the DIY consumer who has an eye for design, trends and innovation and is looking for a retailer to help transform their space. Brand identity Canadian, innovative and eco-friendly. Strengths/strategies Good shopping experience, Quebec roots make it strong in the province, launched My Rona Home TV show in fall 2009 to feature new trends and promote eco-friendliness. Vulnerabilities Possible disjointed experience across franchisees and affiliates, much smaller resources for expansion, operates under multiple banners so may not leverage brand.

HOME HARDWARE
Network of 1000 independently owned stores. Positioned to the everyday consumer who is looking for good product choice and friendly, reliable service. Brand identity Canadian, local, friendly service. 4|Page

EBUBE ANIZOR 209347741 - MKTG 6550U - COMPETITIVE BRAND STRATEGY ANALYSIS (LOWES CANADA) Strengths/strategies Personal care, Canadian identity, variety of services, nice guy posture Vulnerabilities Share loss as independents get acquired, disjointed customer experience across network.

INTERNAL ANALYSIS
Lowes 60 plus year history spans its origins as a small town hardware store in the 40s, to a professional homebuilder focused entity in the 70s, a DIY retailer in the 80s and the transition to its present consumer and professional friendly warehouse orientation. An acute customer-perspective that informs merchandising, store layout and marketing decisions has helped Lowes credibly position itself as a kinder, gentler, big box store.12

STRATEGIES AND PRACTICES

Loyalty. Establish long term relationships with customers by moving beyond selling products to helping complete projects. Accomplished partially via specialty website, how-to-videos and in-store displays. Pricing. Everyday Low Price policy guarantees that Lowes will beat price of local competitors by 10%. Supported by New Lower Price guideline as signal to customers that Lowes wants to save them money.13 New Format Stores. Prototyping smaller stores and multi-level stores to serve customers in metropolitan areas where land availability is scarce. Could address unmet needs of marketplace.
COMPETENCIES

Value Chain. Logistics allows low inventories to be kept but customer demand to be quickly met. Store associates empowered to use tools such as Lowes.com to locate and ship product to meet customer needs.

MARKETING MIX
Product. Variety of national brands and strong private labels to match consumer need for quality and price. People: customer service. Continued investment in knowledgeable and warm staff. Programs like no receipt-return saves time and hassle and sends the signal that Lowes understands its customers. Place: shopping experience. Store layout targets specific segments and customer needs. This includes drive-through lumberyards, space allocated for commercial customers, an integrated shopping experience and environment, and displays that provide project ideas and create cross-selling opportunities.14

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EBUBE ANIZOR 209347741 - MKTG 6550U - COMPETITIVE BRAND STRATEGY ANALYSIS (LOWES CANADA) Promotion. As established brand in the US marketing has shifted from mass media to direct. In Canada the brand is leveraged, but awareness lower so ads emphasize service quality and included the simple Home Improvement Warehouse tag (vs.Lets Build Something Together used in US) to get established.

LOWES BRAND IDENTITY

BRAND ESSENCE
Service excellence

CORE IDENTITY
Service Quality: Knowledgeable, friendly and ready to stretch to satisfy customer needs. Value: Works hard to keep prices at guaranteed low. Provide better than expected quality products at attractive prices.

EXTENDED IDENTITY
Assistant: All the tools, services and knowledge is available to create successful projects. American: Red, white and blue logo creates association with get the job done American persona. Runner up: Although quite successful, still remains humble and underdog to Home Depot.

VALUE PROPOSITION
FUNCTIONAL BENEFITS
Shopping Convenience: Wide variety of products in one location. Store layout enables easy navigation for different customers. Guidance: Many tools provided to help customers do projects themselves.

EMOTIONAL BENEFITS
Pride: Getting the job done by oneself. Satisfaction: Pride in enjoying living space by making small (inexpensive) changes. Creativity: Exploring the expressive side.

SELF-EXPRESSIVE BENEFITS
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EBUBE ANIZOR 209347741 - MKTG 6550U - COMPETITIVE BRAND STRATEGY ANALYSIS (LOWES CANADA) Can design, decorate, build and fix like the experts on television.

RELATIONSHIP
Lets Build Something Together

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EBUBE ANIZOR 209347741 - MKTG 6550U - COMPETITIVE BRAND STRATEGY ANALYSIS (LOWES CANADA)

APPENDIX A: HOME IMPROVEMENT INDUSTRY 5-FORCES ANALYSIS (FROM PERSPECTIVE OF LOWES)

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EBUBE ANIZOR 209347741 - MKTG 6550U - COMPETITIVE BRAND STRATEGY ANALYSIS (LOWES CANADA)

APPENDIX B: COMPETITOR MARKETING COMPARISON

Product

Great variety across in houseware, tools, building and garden National, Private & Exclusive brands More upscale brands Installation services Credit services Design services

40k products in houseware, tools, building and garden National, Private & Exclusive brands Installation services Credit services Design services

Price

Place

Everyday low price Great value on proprietary products Exclusively big-box stores Strong distribution network Special Order system NO online sales (in Canada) Project ideas and help via web site: LowesCreativeIdeas. com

Reduce volume of one-time sales in favour of everyday low prices Exclusively big-box stores Online sales

Great variety across in houseware, tools, building and garden Focus on full lifecycle eco products Store is product and focus of customer experience National, Private & Exclusive brands Installation services Credit services Design services Competitive prices

Product focus/mix varies by location (see place below) Installation services Credit services Design services

Competitive prices

Big-box: wide variety at low prices Proximity: hardware and seasonal product Commercial: building materials and plumbing Affiliates: small and mid size dealers well established in their communities Quebec is largest market Currently optimizing distribution network Online sales

Hardware: tools, houseware & wide variety of supplies Building Centre: lumber, building materials Furniture: variety of appliances and furniture Primarily smaller hardware stores Network of independent stores NO online sales

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EBUBE ANIZOR 209347741 - MKTG 6550U - COMPETITIVE BRAND STRATEGY ANALYSIS (LOWES CANADA)
Promotion
Website focus on DIY Model rooms in store Marketing has focused on customer service Advertising focus on DIY customer not professional Reduction in mass media advertising Increase in direct mail and affinity programs Website focus on price savings Strong brand connection to orange signage Model rooms in store Marketing has focused on helping customer get the job done All promotions focus on Canadian identity Olympic partnership to create awareness and build empathy My Rona Home TV show to promote environment & homebuilding Marketing focus on customer experience & innovation Air Miles loyalty program Model rooms in store Operates under several banners Distinguishes itself by culture of service Kept training levels high during recession Website focus on variety of services Focus on local / hometown retailer Focus on Canadian heritage Aeroplan loyalty program

Staff type: 65% full time, 8% salaried Returning to more knowledgeable & engaged staff

People

Customer service a cornerstone invests heavily in sales associates

Neighbourly service Owners also serve

APPENDIX C: LOWES BRAND IDENTITY

Product
Scope Extensive Upscale National brands Private brands Wide services (credit, installation, how-to, design) Attributes N/A

Organization
Attributes Efficient Customer focused

Person
Personality Reliable Trustworthy Runner-up

Symbol
Visual Image and Metaphors Red, white & blue logo = USA = get the job done

Local vs. Global N/A

Customer/Brand Brand Heritage Relationships N/A Large but accessible Partner

Quality/Value Low price guarantee Good quality and price on private labels Use Experience Helpful displays Easy to navigate stores Online resources

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EBUBE ANIZOR 209347741 - MKTG 6550U - COMPETITIVE BRAND STRATEGY ANALYSIS (LOWES CANADA)
Users DIY customers DIFM Customers Professionals Country of Origin USA

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Canadas Economic Action Plan: The Home Renovation Tax Credit, Budget 2009. http://www.budget.gc.ca/2009/pdf/pamphletdepliant3-eng.pdf. Accessed October 6, 2009
2 3

Home Improvement in Canada: Industry Profile. Data Monitor. September 2009.

Hernandez, T. Emerging Trends in Home Improvement Retailing. http://www.csca.ryerson.ca/publications/2001-11.html. Accessed October 6, 2009
4Home 5 6 7

Improvement in Canada: Industry Profile.

Lowes Annual Report 2008. Home Depot explicitly segments its customers as indicated; a breakdown suitable for all in the industry. Annual Report 2008.

Wang, Shaoyong. Lowes Research Report,2005. http://fisher.osu.edu/fin/courses/sim/rosenfieldreports/report_lowessummer.pdf. Accessed October 6, 2009

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Lloyd, Jeromy. DIY, WITH HELP. Marketing Magazine. December 24, 2007.

Lowes Companies, Inc. and The Home Improvement Industry In 2007, http://www.cluteinstitute-onlinejournals.com/PDFs/ 524.pdf . Accessed October 7, 2009.
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Tax Credit Spurs Spending Among Canadian Homeowners. http://www.lowes.ca/lowesforpros/jobop.aspx. Accessed October 6, 2009.
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Prosumers are consumers that go beyond purchasing or consuming content to also creating the very content (e.g. online videos). DIY, WITH HELP.

Lowes Signage.Guidelines, http://www.loweslink.com/llmain/pubdocuments/Signage_Guidelines_InfoSec.pdf. Accessed October 7, 2009.

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Lowes Profile. Data Monitor. September 2009