EVALUATING THE 4Ps FOR A RECORD STORE

THEODORIDIS ANTONIOS

This report is submitted in partial fulfillment of the requirements for the Executive MBA at the City College an International Faculty of Sheffield University

Supervisor: Chris Liassides

December 16, 2011

CONTENTS Pages Abstract.1 Introduction.2-3 Evaluation of the 4Ps Pricing.4-5 Product6-7 Placement8-9 Promotion....10 Personalization11 Personal...........................................................................................................11 Process11 Physical Evidence (Service)...12 Recommendations Future Actions and Solutions..13-14 Conclusion.....15 Bibliography..16

Abstract. Primary goal of this project is the strangling effort of keeping those things aware that gives us freedom to express ourselves. In a well known unknown environment, we humans, having the need of expressing ambitions, and acoustic irritations of inner selves, manage to make life to anxieties by reaching this outcome, the Cd, and the previous ones,(cassettes, Lp vinyls). Global environment changes rapidly, and the worst economic crisis ever spreads misty in the outlook for most of the Greeks. Applying the 4Ps into my working environment, I have to create an optimal solution for my business, in order to develop and gain market share.

Introduction. Before opening my shop, I did some research in the area by questionnaires, surveys, and took the courage to start, SKYWALKER. I already knew my external threats and specially the illegal and legal downloading from the Internet, but I am a man of vision. From the beginning of designing which strategies to choose or how I should proceed with my store in general, I had to make another decision, that, of the products. Should I look for specialized segmentation i.e. sell only electronic music or have multiple segments? Since I was entering a mature market with the competition on its peak (by the time I open the record stores, were 130 in the area of Thessaloniki), I track my knowledge and my instinct, that the market will decrease, due to external threats. To avoid tightening, I prefer to have two different segmented areas, Greek, Foreign music; a decision that I have not regretted. The range of my customers varies, from the age of 11 to 73 years old. I was too expensive than the others, not my choice, but, customers trusted me. With a lot of attention, I manage, to close 4 shops out of 5 in my area, the record store that still exists belongs to a group of companies. I have to make a key note. I was a stranger to the area, with no friends, relevant or know any people. Competition was leading, so the strategies I had to choose for the time being were a mixture: Defense: a) Hedgehog (new in business, I had to recognize my customers b) Pre emptive (due to specialization of products inside the segments). Attack: a) Flanking b) Encirclement by bringing new products and making offers. (Reference book 2) The location of the store is on a central road of the city at the East and can be accessed easily. Distribution channels were always on time and still are, so I do not have any problem. The same situation applies inside the shop. For my profits, to keep in touch with competition, I use all three generic strategies (Reference book 1). I collaborate with 17 companies and try to keep my costs extremely low. I have several cds specialized which can not be found in either large or small record stores, that still exist. I focus on providing products, tailoring my customer needs.

Pricing.

The store is a retail one. Hence, I will stick to my side, that of the retailer, (where the price should be prescribed). I do not mean, that cds companies import, but for those that are domestic, (for marketing to be able to stand on its knees, and initiate fair competition). Therefore, the only relevant rule that applies for a retail store is the cost-plus pricing, while the strategy, is skimming, due to circumstances (mature product). Below some factors that affect the final price of the product, which in my opinion can be either external or internal. a) Marketing Objectives The primary goal, is profit followed by market share, brand name and dominance in the segment. Actions taken are quantity, trade, cash discounts inside the store. In the beginning, companies sent promotional cds but after years stopped. I save songs from almost all my cds and I am able to play and fulfill the needs of my customers. b) Companies Market Profile I have one of the most beautiful stores in Thessaloniki, not only in my segment but in general (other peoples opinion). I could do it better from the beginning, but I did not want to provoke the local feelings. c) Competitors I was the last one to open a record store in Thessaloniki, 9 years ago. My competitors had better discounts, information, public relationships, time to settle their accounts; my final price came almost the same. I have to pay on delivery. The large store sells at lowest margins. I managed to survive, due to the constant profit I had to my cds and that of seeing the customer as a human and as a person that loves the subject. d) Potential Competitors Nothing to say, almost impossible to open another store, but the biggest competitor is the Internet. e) Differentials That is where my strength come from, introducing new record companies and be able to make better profits, also searching for cds that even though released from the same artist where not so popular (Collectors). The rest of the stores had stuck in what they believe they want to hear along with their customers. I choose an extremely hard way; open embracing was the key for more customers to purchase the product. f) Consumer Attitudes Some of them in the beginning, were intensely hostile, full of arrogance. Others, attempt to interfere with my profits. Some wanted to make me beg. Others were curious for my store. Some just wanted to experience my products. Few of them were friendly. Many were passionate with music. In short, 9 years now, I

have experience all social, economic, religion, attitudes, from all business and all human categories. g) Legal Constraints As far as I know there are three of them. First is the taxes we have to pay for the government. In the last 4 years, there has been an enormous raise from 18% to 23%. The second one is that we have to follow the distribution channels of the E.U. - hence we are not able to expand to different markets. Finally, subjective value of the area, there is a law that sometimes exists, and others not. h) Costs I am not in a position to analyze these since I am a retailer. For my store I have the fixed costs, variable and semi fixed as all. I try to minimize in everything (Reference book 1). To keep my prices in the same profit level and open my way to the market share I have remarkably strong Periodic review model applied, Moving Average Forecasting methods and JIT (Just in Time) products. I have almost in every aspect that concerns the store statistical records that guide me. (Reference book 4) The prices range, from 6 Euros up to 350, but the average price is 18 Euros.

Product.

Every product is a problem solver, builds an emotional relationship with the consumer and the company secures this. The cd has both tangible and intangible features. Total quality management applies to hardware, errors limit, to near zero defects. For the sound, continuous upgrading take place for the product to reach hybrid sacd formation, but the result was a failure. Another 30% added to the final price, and the sound does not have that difference in the people ears. The perceived difference is to those that have unusually expensive cd players. In the life cycle, the product is in maturity and declines. So we all know the structure and the packaging but even though there are efforts of redesigning the product by bringing pinwheel packages, still do not sell. Similarly, other tangible services try to attract the attention of the consumers, offers in smaller prices or putting small accessories and labels sponsored by radios. The problem is of what it offers. Enormous number of artists launch, inside the industry due to opportunistic profit (Reference 10). The result is to lose its magic and desire of purchase. Some efforts of bringing back well know groups into concerts and perform live albums have dropped the image of those groups, since it is the same as eating a meal that was in freezer, whatever we can say it is not the original one. Other efforts focus for building new artists, worldwide, by living the audience to decide who they like most, (X Factor, Idols), but again the result is not the desired one since most of these artists, fail to meet the market requirements. Maturity is one of the reasons. My product segments are 14 while the total sum of the records is 3500 and growing. I have place the cds in alphabetic order and are very easily accessed. The new entries are on the top of the sleeves so that anyone can have a look. Of course, I have all brand names, and when I run out, I place an order for the next day. In the Greek segment where I sell the most cds individually, but in general foreign, I have in the popular artists depth. Some say that with all these segments that I spread risk or that I capitalize on established reputation for security, but I do not see it that way, since risk is a vice versa process and it is not necessary that reputation will make money. The price of the product here in Greece is remarkably high due to taxes, but the last 4 months the companies reduce the final price to almost 70%, which of course will not generate cash to their pockets, or inflate the market share. Years ago the availability of imported cds was sufficient, now due to financial problems, and that of the Internet and other external threats, is poor. Of course, every

coin has two sides. As retailers, we can create a desire and give a little thrust for quick and unique selling proposition purchase, due to knowledge. In this stage, where the product is, i.e. that they have invented all possible segments and voices that can be heard the prosperity is exceptionally difficult to be achieved that is why one after the other retailers and wholesalers close. The Ansoff matrix will provide feedback, in product development and diversification, a way which of course include high risk taken and will have limitations, in the sense of what to buy (Reference Book 2). The product in the intangible service I think is one of the perfect ones. It originates emotions that most humans have. Also, blossoms the inner insecurity of love, of a slight smile or a tear drop. Another feature that the product offers will be the outlet for emotional pleasure and despair that rules the soul. The store layout is a combination of grid flow and a boutique with 3 main colors, blue, brown and yellow. With secret lighting, the store changes its appearance in the evening and has another mood. My decision for the furniture has to do with the fact that I want to create warmth and give prestige that is why I choose, wood. Industry attractiveness is dying in the retail market, but the primary need to fulfill irritations will be always since everybody wants something new and pleasant to listen.

Placement.

When I took the initiative to open my store, the area where under development and still is and there was not any other store near, but there were in a range of 2km and further. The location of the store is at the East of the city. It is one of the main, central roads in Thessaloniki, bi-directional. The access can be either on foot, since it has a whopping sidewalk in front. Bus is another way: there are two stops in a distance of 300m each, and by car. In a couple of years, the metro will also pass through here. For customers that come from around the city or outside I think that it is not a spectacular drive since they have to find a parking space, which is unusual for the neighborhood. Apart from that, the borough has not paid attention, to create attractiveness in the area, even though thousand of cars and people cross every day. Especially, the summer seasons, when they want to go to Halkidiki, which is a well know resort area. Having this in mind, I was a pioneer to the area, and I think I urge the people here to improve the looks of the shops. Since then, most of the stores opened were also carefully placed. A few old ones made small modifications, and slowly we strive to make priority the look of the area. The companys perspective is to create a habit to customers and come and buy cds, of course because I have plans in my mind. To achieve all the relevant aspects and be the product available, I remain truly focus on the business without letting any external factors to interfere in my goal. I manage to serve my customers always on time, and sometimes before the deadline, and this is one of the reasons that I have loyal ones. The channels of distribution are the same for all, either through wholesaler or direct to the companies. Of course, these two are the legal ones, but there are external opportunities that I have not followed. Now lets come to real questions. Technology moves on and as the years pass by, in the near future we will be able to shape and build music interactive. Therefore, a crucial question: has a record store any reason to stay in business. In the bottom line, keep unemployment in low levels. Bear in mind that I focus on the legal aspect of life. Below I refer a few other factors, for a record store to stay in business: a) Magic of the product b) Serve those people that want to listen to music and are not able to cope with technology c) Not everything can be found on the Internet d) Physical contact

e) Time is a significant variation I can go deeper to an extensive consumer behavior, but I make my point. As the product is in the maturity, the market coverage has passed through all the stages. Transportation is standard, and almost all the companies use private posts for their transactions. Of course, I have to pay the fees in the invoice, (another factor that raises the final price, it is 6%).

Promotion. Actions taken:

a) Print double sided cards with a small logo and a few words from one side and the other blank, if someone wants to make a gift, be able and write whatever wants b) Bags with the same logo, advertisement in the street c) Wrap paper d) Flyers to inform my presence and my competitors e) Industrial roll, paint outside a message Love Music with a heart in the middle f) Headsets to promote cds g) Discounts either little or large ones h) For large consumption, free cd single, whatever the customer wants i) I use my computer database to promote products j) I have a constellation, for arouse the curiosity, on the top of the ceiling k) On top of my shelves, I have room, so I can promote whatever artist I like l) Print posters from artists to decorate my columns in the store m) Make phone calls to my best customers to notify if something new comes n) I went to find my customers either in bars or hotels o) I have three signs one that spots what I sell one in a round that shows a cd and one that has the name of the store q) Finally for the summer season I place an awning with a logo. p) I gave a lot of attention for the colors, (brown, blow, yellow) because I want to give the feeling of calm, informal, naturalism which is the body of my store, with power and control to me, stand in and innovation to the products. I have not built on public relations since I think that it is not a marketing problem it is a strategic one.

Personalization.

Not much to be said apart that whenever I do not have something to sell, I place an order. For companies that are overseas, I know that they try to personalize the product just for the country it is going to be sold. Other efforts are to perform live albums that come from the tours in that country. Personal. I run the store by myself. I am well dress and clean. I keep clean my store. Committed to my customer needs, very discrete, resolve any problems raised, passionate for my hobby, kind and honest with integrity, educate and vice versa from the customers, familiar with humor. I have working experience on leading people since I was a master sergeant in the Greek army for 10 months out of 18 of my military service. Furthermore, I was working in a factory where I had to deal with hundred of people every day, in a quite unpleasant working environment, with a lot of pressure and infinite working hours. Process. My policy from the beginning of opening the shop is to ensure that the product reaches in its top quality to my customers, no copies and always give receipt and that because of my primary goal (abstract). Attention is the key word, for understanding consumer behavior and creates an atmosphere that will lead to trust and repeat. This is an extremely difficult task due to my character. Most of them are pejoratives. The habits are remarkably different due to mentality. I use technology to maximize involvement with the customer and direct them. I fulfill my customers expectations (tangibles, reliability, responsiveness, assurance, empathy), but I have the disadvantage on empathy (Reference book 2).

Physical Evidence (Service).

There is a service gap between me and the customer. It is impossible for me to know all the songs in every album that exist. Also with the rate, I place my orders, there are songs that I am not able not even a glance to take. So this gap eliminates by asking the companies, through Internet, by my personal look at that time or the customers information. This is one reason of losing a customer, but here is the power of the seller to be innovative, without make the customer feel stressed, manage to persuade him/her to make a purchase. When a customer is not sure of what to buy, there it is me, with surrealism and communication skills I convince them to take the product I recommend, of course always I do not have the right result.

Future actions and solutions.

For prices at the moment, I can maximize my profits since I am alone in competition by: a) Increase my sales through advertising with the message of that still going and keep my fixed costs at the same level b) Revise my discount methods c) Change my minimum order size d) Charge an additional 5% for deliveries and services in time e) Make my customers pay for overtime demand for rush orders f) Charge an additional 2% to the customer on deliveries that do not meet on time and force me have the product in stock For the product, all these years, I learned which segments need, to be cut, a thrust for development and in which I will pay bigger attention. I will keep on investing in bringing new artists but with a lot of scanning before. I have two propositions to change the package of the product, so as to introduce new dimensions that of personalization and that of a decorative item. In the jewel case make it round with a small rotational basis in which, orientation of another small base will occur and everybody will be able to engrave whatever message wants. Little additional change will occur on the measurements of the actual cd. For the pinewood package, the companies can launch shapes of musical instruments with unique numbers on the front from popular artists and make the product collectable. For promotion, I will not place significant impact, because of maturity; still the actions I will consider to forward will have to do only with reminding of the store. a) Print the proper flyers b) Radio station c) Change the flow in the store d) Create an online page For the rest of the marketing mix, I can only comment for the two sections some comments. For the process, I have to be more social which is difficult for me, or I will hire an employee. Finally, for my service I can establish a database with Greek songs so as to gain more profits and time.

Conclusion. Since Greece is a small country with senescence knock the door, with young people not able to cope with economic uncertainty and not too many births, things are looming.

I have another two possibilities for expanding my business which follow below. My store has a basement and a higher level of 45m each. I have made all the proper preparations and I am thinking of making my own production line and a radio station. Finally, soundly efforts have occurred on understanding the customer behavior; still the feedback is not true, in some cases when purchasing a product! Religion is a key area that has to be researched.

Bibliography 1. Malcom, McDonald. (1995) How to Prepare Them: How to Use Them.3rd edition. Butterworth Heinemann. 2. Michael, J. Baker. (1997) The Marketing Book. 3rd edition. Butterworth Heinemann.

3. The Drucker Foundation. (1996) The Leader of the Future. Jossey Bass Publishers. 4. Wagne, L. Winston. (1994) Operational Research 3rd edition, Duxbury. 5. S. Winkler, L. (1983) Pricing for Results. Butterworth Heinemann. 6. Akshay, R.Rao, Mark, E. Bergen and Scott, Davis (2000). How to Fight Price War. Harvard Business Review, p.107-116. 7. Antony, W. Ulwick. (2002) Turn Customer Input into Innovation, Harvard Business Review, p.91-97. 8. Stefan, Kolle.(2006) Top Ten trends in Marketing Innovation. 9. Marketing Strategy in the Music Industry//Record Companies//Vertigo Team. http://www.vertygotearn.com/music_marketing.php. 10. Music Business Producers Article: How Record Companies Make Money. http://www.music-business-producer.com/record-companies-money.html