MARKETING 1. Managing Customer Heterogeneity
Various brands of SSG target different consumer segments. The products sold at SSG can be categorized into three types: grocery, fashion & beauty product, and home appliance & daily supply. In addition, fashion & beauty consumers are divided into 12 three groups: high price apparel, mid-low price apparel, and cosmetics consumers. At first, grocery consumers often use E-mart Mall, E-mart Traders and Dawn Delivery, and they are the biggest consumer group in SSG, accounting for 43% of total sales.15 Moreover, representative of SSG mentioned that delivering fresh goods is the main business sector and is a great competitiveness of SSG, implying that the grocery distribution is the primary business of SSG. 16 Among the food customers, people who are in their 20s to 40s are the main customers who often order food online.17 Recently, due to COVID-19, the sales growth rate of the food category of SSG between Feb 1 and April 28 actually increased 82% in 2019 than 2018.18 Especially, fresh goods including vegetables, livestock products, fisheries and fruits showed excellent growth. Next, fashion and beauty product consumers are divided into three segments. Highpriced apparel consumers tend to purchase apparel in high-end brands such as Shinsegae Department Store and Shinsegae Mall. Consumers of medium and low priced apparel use brands such as Shinsegae TV Shopping, S.I Village and Premium Outlets to purchase affordable garments. From January to August 2019, sales of fashion and beauty product categories rose 20% compared to the same period last year, suggesting that Shinsegae’s fashion and beauty sector is likely to grow after this pandemic.19 Meanwhile, cosmetics buyers of SSG use high-end cosmetics brands such as Chicor, Seolhwasu, Shinsegae Department Store, and Shinsegae Mall. Among cosmetics, high-priced overseas products sold well and showed high growth rates in the last year.20 Lastly, home appliance and daily supply consumers usually purchase goods at Howdy, E-mart Mall and Shinsegae Mall. Furniture, toilet paper, and consumer electronics are the examples. The average number of home appliances that customers are willing to purchase in the next 3 years is the highest from 1 st to 3rd year of marriage among all married couples and 13 singles, suggesting that consumers of home appliance are mainly married 30s.21 It can be inferred that they will also consume a considerable amount of daily supplies.
1-2. Visualization of Current Situation: GE Matrix and Positioning Map (1-c, 1-d) 1) GE Matrix
Figure 4 is the GE matrix which visualizes and classifies SSG’s customer segments. The y axis indicates the market attractiveness based on Appendix M-0, the market growth rate, and the x axis indicates competitive strength of SSG. The size of the bubble shows the market size reflecting Appendix M-1, sales amount of online transaction by product categories. According to the Figure 4, grocery consumers are the most attractive customers in the market, suggesting that the online grocery market is huge for now and likely to grow. Also, SSG has a distinctive advantage in the distribution and delivery of groceries, applying the distribution system of E-Mart and building automated logistics center. Another GE matrix for the grocery customers will be developed because fresh goods distribution is the major Figure 4. GE Matrix Figure 5. GE Matrix 14 business sector for SSG. Figure 5 is the GE matrix of the grocery consumers of SSG, indicating that the delivery sensitive and quality sensitive consumers are the most attractive consumer segments. The market for quality or delivery sensitive consumers would be more attractive than the market for price sensitive consumers, because of the high unit sales profit. In addition, about 40% of consumers of E-Mart Mall, which is representative online grocery mall in SSG, answered that the fast and customized delivery service is the primary strength of the E-Mart Mall.22 It suggests that SSG has competitive strength in delivery capacity. In addition, the quality management system and reduced delivery time through automated logistics center ensure quality of groceries. Thus, delivery and quality sensitive customers are the best customer groups among the SSG’s grocery customers.
2) Perpetual Map Figure 6 is the perpetual map of SSG, indicating that both of delivery and quality Figure 6. Perpetual Map 15 sensitive consumers would like to choose SSG.23 Firstly, quality sensitive consumers use Market Kurly and SSG, considering the Appendix M-2. The biggest reason consumers use Market Kurly is fresh and excellent quality of the products. On the other hand, users of SSG set personalized delivery services as the biggest reason for their purchases. Considering that consumers cannot control delivery times at Market Kurly, customized delivery service is a strength of SSG. Secondly, consumers who value delivery experience use Coupang and SSG, referring to Appendix M-2. Coupang has a competitive advantage with delivery speed (e.g., Rocket Delivery service), and has a variety of delivery options including one-day delivery, early morning delivery, daytime delivery, and night delivery. Although SSG also offers customized delivery services, consumers rated Coupang’s delivery capacity higher. Despite Coupang’s excellent delivery capacity, it has been shown that consumers value the quality of SSG’s products about 6 times higher than Coupang. Correspondingly, superior quality is the point of difference of SSG when compared with Coupang. Additionally, Homeplus does not have a distinct position in delivery and quality, but consumers with low prices tend to choose Homeplus Mall. Consequently, SSG is able to target both segments of consumers -quality and delivery sensitive consumers- with personalized delivery systems and superior quality.
1-3. Positioning Statement and Customer Centricity (1-e, 1-f) Table 5. Positioning Statement Who All consumers who prioritize quality of products and delivery capacity What Diverse products, mainly groceries, with superior quality and personalized delivery system that gives consumers sense of satisfaction Why Thorough freshness management system, including cold chain system, and automated logistics center, reducing the delivery time that even produces goods.
The positioning statement of SSG is that “For all consumers who prioritize quality of products and delivery capacity, SSG offers diverse products, mainly groceries, with superior 16 quality and personalized delivery system that gives consumers sense of satisfaction, due to thorough freshness management system including cold chain system, and automated logistics center reducing the delivery time that even produces goods.” The main target customer segments are the quality conscious and delivery sensitive grocery customers, as mentioned in Figure 5, GE matrix for grocery customers. SSG offers customers trust and satisfaction, through the high quality of products and delivery service. Although there are various brands and diverse product categories in SSG, the grocery distribution is the main business, as it also mentioned by the representative of SSG. As a quality management, SSG has a high proportion of direct transaction and cold chain system. The automated logistics center contributes to reduced delivery time and is ultimately related to the quality preservation. In this regard, SSG implements customer-centric strategy. SSG offers customers best solution which meets their demand, rather than the best products. Since customers nowadays want high quality of groceries and customized delivery service, SSG tries to meet the demand of them. According to the Appendix M-3, the Product Team of the Sales Division is subdivided into several teams in charge of different customer segments, such as cosmetic team and processed food team. It suggests that SSG is conscious about the customer needs and would try to cope with customer heterogeneity and customer dynamics.
2. Managing Customer Dynamics 2-1. Customer Analysis Based on Easy Payment System, Mobile Phone Usage, and Delivery System (2-a) 1) Easy payment System and Mobile Phone Usage Customers in their 20s to 40s showed dominance in the usage of mobile and easy payment system in the online shopping. More than 70% of 20s to 40s have online shopping 17 experiences, suggesting that they were the most experienced group of online shopping.24 These online shopping leaders also had high shopping rates on their smartphones. The percentage of people using smartphones in online shopping malls recorded 79.8% in 2018, increased 14.7% from the previous year, suggesting that the online shopping leaders mainly use mobile phones and would assist establishment of an easy payment system in the long run.25 The ratio of easy payment system usage of 20s to 40s exceeded 20 % in 2018. The easy payment system can effectively shorten the purchasing process, and the simplified purchasing process increases consumer convenience, which in turn contributes to the sales increase.
2) Delivery System
In the past, consumers preferred fast delivery, but now they prefer the goods to be delivered when they want.26 As consumers prefer personalized delivery services, many online shopping malls are equipped with a variety of delivery options. SSG has a delivery system that allows delivery to be made at the time consumers want, which is called SSG delivery. SSG can ensure its brand position and target more customers by emphasizing its personalized delivery system. Therefore, SSG needs to improve low marketing intensity which is only 3.85%, as it mentioned in strategic part. By raising the advertising expense from about ₩30 billion to ₩50 billion, which is about ₩20 billion more than SSG’s advertising expense in 2019, SSG will be able to aim the consumers these days who value customized delivery service.
3) Conclusion
Concentrating customized advertisings at a specific time period will be a good way to target 20s to 40s who use easy payment systems a lot with smartphones. Users of easy payments tend to browse more than search, and are especially sensitive to advertising, suggesting that personalized advertising is effective for them. 27 Also, by taking advantage of the fact that more payments are made over the weekend, the company can place personalized advertising on the 18 weekend. In addition, promotion of the customized delivery system would be able to raise the sales, coping with the changed customer tendency of delivery. In conclusion, SSG could target 20s to 40s, who have high rates of usage of online shopping malls and simple payments via smartphones, by effectively providing personalized advertising on the weekend and advertisements on custom delivery systems. 2-2. Consumer Behavior in terms of New Technology Adoption (2-b) The increase in the simple payment system affects the frequency and method of shopping. Convenience in payment is the second most important factor in consumer purchasing decisions, and its importance is increasing.28 After using the easy payment services, consumers responded that the convenience of shopping on the Internet has increased, resulting in 8.4% increase in shopping frequency. The share of online shopping also rose 8.8%, suggesting that the way of shopping has changed from offline to online.29 In the traditional method, there was time to think and evaluate the purchase decision; however, in the purchasing process with an easy payment system, customers tend to be more impulsive. It is because of the lack of time to evaluate and consider the alternatives in the decision process with an easy payment system. Accordingly, consumers purchase more products online due to the convenience and efficiency of an easy payment system. For instance, showrooming is the behavior of checking things in stores and making payments online, a typical change in buying style caused by the enlarged convenience of online shopping. Meanwhile, Amazon Dash is also an example of application of innovative technology. It is a service that automatically orders and delivers goods when customers press a button installed at home, which is also an example of dramatically shortening the online shopping process to increase convenience. Although limitations of this are that customers cannot check their prices directly and it also cannot prevent orders from accidently made. Amazon has 19 developed a smart speaker called Alexa by applying this technology. Consequently, it can be concluded that many online shopping malls continue to attempt to promote customers’ purchases by providing more convenient online shopping experience.
3. Managing Sustainable Competitive Advantage
3-1. Strategy Evaluation & Marketing Strategy Based on Brand (Sustainable Competitive Advantage, SCA) (3-a, b)
Shinsegae implemented brand (category) extension strategy with existing brand image and new offerings. Existing classy and high-end brand image of Shinsegae made it possible for SSG to acquire new consumers while retaining existing consumers of Shinsegae. Moreover, Shinsegae extended its product range by launching new brands in SSG. It offers completely different categories of goods, giving SSG a competitive edge. In this perspective, brand extension was a good strategy in terms of maintaining brand power and adding various products, at the stage of building brand awareness from the Appendix M-4. However, at the stage of defining the brand’s relative advantage and building a deep relationship between brand and customers, appealing luxurious brand image alone is not effective anymore. In the initial stage of SSG, it used emotional marketing utilizing luxurious brand image. However, now it also uses functional marketing, emphasizing SSG’s competitiveness, such as product freshness. Now, SSG should focus on its own positioning statement and form strong barriers against competitors. It means that SSG should more actively promote not only the luxurious image but also the superior quality of groceries and timely delivery, which are the competitive advantages of SSG. In conclusion, as a marketing strategy of brand based SCA, SSG should appeal a brand competitiveness to consumers and simplify the website design to form great brand equity. SSG should inform customers that it delivers fresh goods to consumers at the time they want and 20 maintain the quality of products. On the other hand, as mentioned above, marketing intensity of SSG is relatively lower than competitors, which is 3.85%. The advertising expense of SSG now ₩32,505,711,000, about ₩10 billion less than Market Kurly. If the advertising expense is set at ₩50 billion, ₩20 billion more than the current level, SSG would be able to enjoy a bigger advertising effect. Through repetitive advertising about its delivery system, SGG can incarnate competitiveness to its customers and build a superior brand image. Next, the user interface should be organized and simplified. Currently, SSG’s website lists all the affiliates and brands it covers, as it is shown on the Table 6. The unsophisticated website design not only make a bad impression on consumers, but it also damages the overall brand image. LotteOn, a shopping mall launched on last April, is also an integrated shopping mall that deals with eight brands, but its web design is much simpler and more effective. Table 6. Webpage Design of SSG and LotteOn 3-2. Marketing Strategy Based on Offering (SCA) (3-c) Incremental innovation would outperform in the current situation of SSG. As we mentioned in the strategy part, the competition in the e-commerce industry is fierce these days. In this regard, it is effective to capture the existing market demand by implementing the incremental innovation which means improvement in quality level and delivery range for SSG. If SSG can have a better and more innovative offering than its competitors, SSG can satisfy its consumers. Therefore, as an attempt of performing incremental innovation, SSG must upgrade Webpage of SSG Webpage of LotteOn 21 its own production system and build additional logistics centers. First of all, SSG must achieve a gradual innovation of quality through the application of its own production system in logistics centers. Unlike traditional logistics centers, SSG’s logistics center, NEO 003, can even carry out a production process which allows consumers to have fresher products with reasonable price. By day-to-day production and immediate delivery system, fresh quality of products can be maintained. Currently, only bread is produced in NEO 003. However, SSG will be able to achieve excellent quality of products through innovation, if it gradually expands the range of production including HMR (i.e., Home Meal Replacement). Next, SSG’s delivery system must be able to deliver any products to any region. The great advantage of SSG’s delivery system is that SSG delivery and Dawn Delivery allow customers to receive goods at the desired time, and the critical disadvantage is that those delivery services have limited delivery coverage. This can be solved by the construction of additional logistics centers. However, Shinsegae halted expanding its logistics at Hanam because of the objection of the local residents, and SSG is drastically reducing its investment costs due to the current emergency management system. After all, securing spaces and investments to build logistics centers, including NEO 004, NEO 005, becomes a priority for SSG's delivery system reform. 3-3. Marketing Strategy Based on Relationship (SCA) (3-d) In order for SGG to develop its relationship with customers, the membership rating system must be well structured. In this perspective, SSG needs to reform its existing membership rating system by creating a charged membership system. In an attempt to secure loyal customers and increase customer lifetime value, many companies are attracting charged membership customers as Appendix M-6 shown above. In order to innovate customer relationship, SSG should also establish a paid membership system. The assumed name of 22 charged membership is “SSG SSAG Club”(쓱싹 클럽) and its charge is ₩3,900 per month. As an incentive for the first six months’ customers of SSG SSAG Club, the company offers 50% discount on the first month’s fare and two of Starbucks stars when they subscribe the charged membership. Instead of paying monthly charges, consumers would be able to receive 5% of membership discounts, 10 times of free SSG delivery and Dawn Delivery in a month, exclusive products for the customers who paid, and one Starbucks star per ₩20,000 of purchase. In this way, consumers will be able to increase brand loyalty, and the company would expand sales in a long-term perspective.
4. Qualitative Analysis and Recommendation
(4-a, b) SSG has to add a cold insulator and expand the cold chain system to enhance the quality, the freshness of fresh goods. SSG has high sales proportion of fresh goods, therefore, 300 reviews of apples and watermelons were analyzed as fresh goods which are the first and third best-selling product in Dawn Delivery. Consumer satisfaction after purchase of fresh goods was largely attributed to the freshness of the goods and the well-kept delivery time. On the other hand, there were many negative reviews that mentioned freshness volatility which leads to dissatisfaction. The Appendix M-7 shows the main dissatisfaction about product quality. When consumers buy fresh goods, 76% of consumers care about quality more than other factors.30 It implies that if the firm fails to meet the desired product quality, customers would not consider buying groceries of the company and switch to other brands. Since the quality consistency is hard to be maintained due to the nature of fresh goods, thorough quality control is more crucial. In this regard, SSG has to add an extra cold insulator to the packaging process and supplement the cold chain system to enhance the freshness of the products. First of all, in the case of Dawn Delivery, the products depart from the NEO, logistics 23 center of SSG. The cold chain system keeps products fresh and at a constant temperature from the distribution center to the door of consumers’ house. In the case of Dawn Delivery, however, if the goods are to be delivered at 2-3 a.m., the goods will be placed in front of the house for a long time until the customer picks them up. As waiting time of products may result in deterioration in the quality of the product, the cold insulator should be added proportionally to the weight of the product in order to maintain freshness. Next, in the case of SSG delivery, in which goods are shipped directly from E-Mart, the cold chain system may not be applied. In this regard, strengthening the cold chain system in Emart for SSG delivery products and adding the process of inspecting the products more meticulously could reduce consumer complaints about the freshness of the goods. After all, to address customer complaints about freshness of products, the extension of cold chain system must be executed for Dawn Delivery, and the cold chain system must be effectively applied, and the products must be inspected for SSG delivery. Quality control of goods may increase costs in short-term, however, it can form a barrier to competitors by meeting consumer wants and increase customer lifetime equity by providing an image of a good company that gives consumers long-term trust.
5. Summary of Marketing Strategy (5-a, b) AER strategy was established based on the positioning statement. For quality and delivery sensitive customers, the strategy considered customers’ wants and purchasing stage. Based on the AER strategy and future trends, BOR strategy is created. Through the implementation of each BOR strategy, the firm would achieve SCA based on strong brand equity and relationship management.
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