Introduction
Flipkart is an e-commerce company which was founded on 5th September in 2007 by Binny Bansal and Sachin Bansal. The firm is headquartered in Bangalore, India and employs approximately 33,000 people. The firm was started with an initial investment of INR 4 lakh or $6,000. In a manner of few years, the Flipkart business model became a successful one and transformed the form into one of India’s most successful and prosperous e-commerce firm. Flipkart was initially launched as a simple website to be used for price comparison, but then it took the shape of an e-commerce company or portal. When Flipkart was at its nascent stage, it used to sell only 12 products per minute ; however, with the course of time and its popularity increase, now it does business in terms of over a million dollar each day . The business model of Flipkart thrives on the increased use of the internet in the country who finds it comfortable, convenient and easy to shop online now more than ever before. Online shopping tends to enable shoppers to compare prices of a range of products, features, attributes, etc.
Their business model was initially based on the inventory model wherein they would purchase all the goods and then store them all in their warehouse. Upon receiving an order, they would then ship the item to the customer. However, now, the firm’s business model is entirely based upon the marketplace system since most of its investors are based out of India. As per this business model, it has tied up with various vendors who want to sell their respective products online . After they receive an order, they send their products through Flipkart. This business model is thus based upon controlling end to end value chain which refers to connecting procurement to delivery – everything being controlled by a service provider.
This business model is used by the e-tailors are ‘inventory led model’ (Flipkart) and ‘marketplace model’ (Amazon) respectively. Flipkart established its operations initially with the inventory based business model which requires substantial investment as well as logistics. Now, Flipkart uses mix of both of these business models . Starting its business by selling only books, now it sells a range of products including electronic items, books, clothes, etc. The shift from moving inventory led format to marketplace model enabled the firm to host various retailers on a single online platform. However, now the industry sources tend to reason that the firm may not left with the inventory based format at all and thus require significant investments. A loss making business may not seem attractive, but e-commerce business can be called as an exception which can be very attractive for venture capitalists as well as private equity investors. As for investors, profits do not necessarily have to be in sight and that any increase in market share of the business can also lead to a particular windfall increase in its overall valuation which is coupled with the growth in its investment . Their mission was to be one of the most successful e-commerce firms in the country with 100 million sales a day, they have become one of the most popular and leading e-commerce businesses in the country.
Existing Pricing Strategy for the Firm
Flipkart has been accused of using predatory pricing strategy. As per the Indian Laws, predatory pricing is defined as the sale of goods and services at a price which is actually below the cost of production of the said goods and services, with the objective to reduce overall competition as well as eliminate the overall competition. One can wonder if selling below the cost is illegal, but it’s not . However, the main issue in terms of predatory pricing is when the seller who is selling below the cost is dominant in one particular market. Thus, if a firm is not a dominant player, then they may sell below the cost just to remain competitive or even to improve their overall market share. However, the same will be difficult in order to establish that they are attempting to eliminate the said competition.
However, the situation tends to change completely when a firm is a dominant player. In such a case, selling a product below its cost can amount to abusing the position of being a dominant player which can also have a serious consequences which usually consists of 3 years of average turnover as a penalty.
The strategy of the firm in terms of selling the products online at low prices as well as offering substantial discounts has made the brick and mortal business model raise the question whether this kind of pricing strategy is fair, legal, aggressive (necessary ingredient of competitive markets), unfair pricing (the same can eat into the traditional system of retail), etc . On the other hand, the sale of products below its cost, for consumers, does not indicate that there is a sustainable outcome. Since once these players get eliminated, and the fight for the market share is over, the e-commerce firms tend to be free to charge higher prices in a given market as opposed to what they are offering now, unless competition with another firm keeps the price rise in control.
The pricing of Flipkart is based on three elements:
How pricing strategy is decided on a general scale;
How Flipkart largely optimizes pricing;
How Flipkart compares itself with its competitors.
Pricing is an important part of a firm’s strategy as it can be linked to the firm’s profitability. Yet, it can be difficult for firms to use a particular kind of pricing strategy. Some of the pricing strategies are discussed below –
Value based pricing: In this case, pricing is the main profit driver; however, not all firms get it right. Most of the firms may base prices as per competitor’s benchmark. Pricing should partly be based on it, but not in its entirety . Value based pricing is appropriate for highly unique products. It would, however, be a mistake to assume that it is only apt for those products which have a clear competitive advantage, such as lifesaving pharmaceuticals.
Premium Pricing: It is also known as prestige pricing since a firm charges high price for its products when it has competitive advantage or when there is uniqueness about the product.
General Pricing Strategy: Pricing can usually be set as per operating margins and as per strategic pricing. Operating pricing essentially determines what a firm earns in order to sustain business as well as earn a profit. On the other hand, strategic pricing is usually an overall pricing strategy wherein some of the products tend to be provided at a higher discounts so that market share can be captured . Thus, in such a situation, individual product pricing can be lower or even higher, whereas the overall picture is usually kept in mind in order to make sure that a firm as a whole can better sustain itself on an overall profit. It is also to be noted that no firm can survive on perpetual or continuous losses and therefore, they have to move towards sustainable operating margins with regard to a long term so that they can have a far reaching strategy.Effect of Pricing on Firm’s Success
If a firm has monopoly then the demand will be inelastic. Hence, more price will add to the revenue and contribute in the financial success of the firm.
However, if market is competitive, then profit will be low in case the price of the product is high .
Strength of the demand should be high to put a high price for a product. If there is a strong demand, then high price will also lead to more revenue.Pricing Optimization of Flipkart
It is important to note that the price is optimized only when the overall cost with regard to the company per its product is largely optimized. This indicates that the major contributing factors have to be looked at while determining a price and also costing has to be optimized as well.
As such, the price policy of the firm can be termed as flexible since all of its transactions happen online. The amount that is to be charged is ascertained only after looking at various expenses such as supplier expenses, transport expenses, courier charges, maintenance expenses, packaging costs, office expenses, shipping cost, discount allowances, advertisement expenses, depreciation, taxes, marketing and advertisement expenses. Furthermore, the firm also allows for a 35% discount periodically in order to boost its sales and also to maintain competitive prices . For its payment transactions, the firm allows for credit cards, cash payments, debit card transaction, etc. Thus, it can be stated that the pricing structure of Flipkart is competitive since it tends to work at all levels.
Literature
The literature will revolve around general and specific factors that contribute to the pricing strategy of a firm.
Considering the pricing strategy of Flipkart, various cost factors are taken care of by the firm.
Supply Chain: The core competency of Flipkart tends to lie in its supply chain as well as logistics which is monitored perfectly and managed well by professionals. The same also involves comprehensive understanding of location of suppliers and thee location of the end consumers so that when a consumer places an order, the same can reach him through the shortest route within the shortest time, at the lowest possible cost. The same also indicates that the customer demand is usually anticipated and all kind of pre emptive steps are taken already to ensure that products are ready to be shipped from the closest point to the consumer even before they place an order . This process tends to reduce the overall cost of moving a particular product to the place of a consumer. Thus, the overall cost of the firm has been reduced to a great extent. The same is also because the cost of transportation has also been reduced and thus the firm is able to earn its reasonable profit margin (2%) on the sale of a product, belonging to an actual producer.
Manpower and Time Spent on Every Order: All the operations in an e-commerce business model have to be sustainable in order to have a competitive pricing strategy for long term growth. So, all process from which route has to be taken for a material to be picked to how much time it usually takes for a product’s packaging and it is only when a firm optimizes these processes that it starts to take a lead .
Competition: E-commerce competition is increasing everyday with many players entering the Indian market on a yearly basis. Also, with the rise in the number of internet users, the number of firms catering to these customers is also rising. So, in future, in terms of its pricing strategy, the firm can face a lot of pressure from the viewpoint of competition . As such, currently, Snapdeal is Flipkart’s biggest competitor. Thus, with only 2% in profit margin, the firm will soon have to undertake certain recommendations to make changes in its pricing strategy to boost more profits and to sustain for a long period of time in the country.
Recommendation
It can be argued considering the existing structure and pricing strategy of the firm, it should lower the commission rates of its suppliers so that more of them are attracted to use Flipkart’s portal. Thus, as a new strategy, by lowering the commission rates of its suppliers, the firm may allow for more suppliers to enter and it can also attract thousands of small businesses. Furthermore, by venturing into digital ads, they can create more revenues in certain ways and not just through their pricing strategy. They are as follows:
They can sell their banner and other ads where various kinds of consumer brands tend to advertise to Flipkart users.
They can also get brand partners, especially the new entrants into the Indian market such as Xiaomi in order to spend on marketing on their shopping app.
They can also charge fee in order to promote products of third party sellers. For instance, any third party seller can pay to have their unique products shown first when a shopper types in certain keywords to look for the app. For instance, if a user searches for formal shoes, a seller can make sure that their products are shown prominently by paying additional fee. This kind of strategy can modify the pricing strategy of the firm and will also help it to sustain long term growth and competition.
The “Formula for Growth” for Flipkart is based on a number of innovations and appropriate business decisions. Executive managers of the firm need to effectively plan and execute in order to reach their growth objectives. The development of analytical competencies should be named one of their prime tasks.
Conclusion
The case discusses the firm of Flipkart and the unique pricing strategy it uses. As per the research, like any other e-commerce firm, Flipkart does not follow any particular pricing strategy but it is competitive. Also, with increasing competition, it is clear that the firm needs to adopt a new strategy which can include pricing approach as well in order to remain competitive. One of the recommendations made in the research is that the firm can reduce the commission rate for its suppliers in order to attract more small businesses. The same will ensure more products, wide variety, and a bigger portal for the firm itself. The same will also enable it to push forward the 2% profit margin by focusing on its pricing strategy (commission rate). Based on Flipkart’s competitive business model, the firm adapts the strategy of increasingly using the internet for the benefit of its customers to make their shopping experience more comfortable, convenient and easier than ever before. Moreover, quality online shopping also enables the shoppers to compare prices of a range of products, features, attributes, etc.
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Introduction
Marketing Intelligence can be described as a network of source as well as regular procedure through which marketing executives tend to obtain information on a daily basis with regard to non-recurrent development in an external marketing environment. On the other hand, it can also be stated that market intelligence is the process of obtaining relevant information with regard to competitors, their position in the marketplace, their respective core competencies and applying this knowledge in order to achieve unique competencies and executing short and long term planning. Additionally, Fao (2010) argues that marketing intelligence system is a set of main procedures as well as data sources that are used by marketing managers to sift through information from various economic and business environments that the same can be applied in their decision making. One of the most apt definitions of marketing intelligence has been provided by Odunlami & Ofoegbu (2011) who argue that marketing communication and intelligence is a promotional tool that can be utilized in order to communicate favourable information in terms of organization and its products to its target market. Thus, it can be stated that entrepreneurs need to make efficient decisions based on prompt, correct and reliable information about their target market that they want to serve before they can put appropriate marketing strategies in place . This indicates that the firms have to manage their marketing intelligence effectively as well as sufficiently. This process enables a firm to have a continuous interaction with their buyers and sellers in a given market place. As per Mohammadsaid & Freihat (2012), since marketing decisions tend to get affected by various external and internal environmental factors on a regular basis, getting marketing information through communication channels and marketing intelligence is important. As for the case, the study was conducted on Indian e-commerce giant, Flipkart which was founded on 5th September in 2007 by two partners, Binny Bansal and Sachin Bansal. The firm is headquartered in Bangalore, India and employs approximately 33,000 people. The firm was started with an initial investment of INR 4 lakh or $6,000. Within the next few years, it has become of the fastest growing e-commerce platform in the country. As per their business model, it has tied up with various vendors who want to sell their respective products online. This report will include an evaluation of marketing intelligence, its importance, its use by Flipkart and how it can make its marketing intelligence even better using certain recommendations.
Marketing Intelligence
Information process activities and environmental scanning within marketing strategy are found to be moderated by a degree of environmental uncertainty. The same then leads to increasing information processing process within firms . Also, irrespective of any uncertainty or complexity with regard to any environment, information collection which is also a firm’s ability to adapt to an existing market conditions tend to be largely dependent upon its ability to process important market information in an effective manner. In simple words, it can be argued that the rational model of strategic decision making assumes that there is a need for market intelligence in order to ensure that a firm’s strategy is properly aligned with its environment. This, in turn, tends to require an appropriate design of appropriate information processing infrastructures . Thus, marketing intelligence is a process involving the gathering, analysing, and communicating of environmental information to assist in strategic decision-making. As such, it is also known as the fundamental basis of the strategic decision-making process . From marketing viewpoint, various issues can be perceived, identified and resolved only when a firm has accurate information from various sources. The importance of marketing information is so apparent that entrepreneurs need to make sustainable efforts in order to obtain and evaluate reliable marketing related information.
Types of Marketing Intelligence: Marketing intelligence can be classified into two categories which are mostly based on external and external data . As such, internal data marketing intelligence tends to include various online transaction processes, obtaining reports from internal sources, clickstreams data, etc. On the other hand, external data tends to include primary sources, observation, human intelligence, as well as secondary public domain sources.
Relevance of Marketing Intelligence: Firms have to embark on effective as well as efficient marketing intelligence processes in order to make sure that they maintain their overall competitive advantage and position in a given market . The term intelligence reflects important indicators with regard to business environment. As such, the existence of good sources of business intelligence also indicate survival of a business, as the same can range from any kind of data including existing customers to intelligence (information) with regard to their competitors. It can thus, be stated that marketing intelligence tends to provide firms with information, especially new firms, associated with their business environment in order to make decision making . This information tends to consist of internal or external including political, technological, economic, and socio cultural factors and so it also consists of information in terms of demographics on consumers as well as their competitors.
Flipkart and Marketing Intelligence
Nowadays, ‘Big data’ has become an important topic. It is also important to note that the big data can get wasted if it is not deciphered correctly or implemented effectively with regard to addressing the core customer issues being faced by an organization. With the constant emergence and popularity of data collection technologies, firms are not collecting as well as storing larger quantities of data in terms of information at a faster pace . The diversity and variety of data is become more varied and valid as well. New technology is helping firms to get measured information that is more relevant to their business.
Since more firms are getting digitized, they are also beginning to understand that the use of big data to collect information is important and it is also imperative to gain actionable insights from the data. In order to make decisions based on the big data, three elements need to be taken care of –
Develop a data driven culture;
Transition the overall decision making methodologies from intuition to actually acting upon the intelligence
Interpret and evaluate data correctly and also use it to help the firm make better decisions.
With all of the advances in digital marketing, along with the use of social media technologies, it is important that companies use the right kind of tools in order to gather information and the right people to intelligently interpret the data.
As such, digital marketing analytics have become one of the most important marketing intelligence techniques used by firms such as Flipkart. Marketing analytics are used to track the following –
The overall performance of digital assets such as landing pages, websites, videos, blogs, social pages, search rankings, ads, etc.
User behaviour. This includes where the customer comes from, what is driving them to the page of the firm, what are they doing once they get there, how long do they stay and why do they leave after taking any sort of action.
These kinds of activities tend to help a firm understand the motivations of customers and also help them shape their marketing strategies in order to target the customer in a better way.
Basic Tools: Most of the firms known that Google Analytics tend to exist, but most of the owners in what ways this can turn out to be a good decision making tools. Google Analytics is argued to be the best open source or free analytics that exists and thus can be installed easily in most of the websites. Its capabilities also include – content analytics, conversion analytics, mobile analytics, advertising, and advanced segmentation.
The tools as mentioned above have potentials as well as limitations and are as such limited in their ability to track across all channels. Multi-channel attribution or multi-attribution modelling is the process of collecting and analyzing data from all of a brand’s various marketing channels and using that data to determine the value of each channel . A firm uses this data in order to gain valuable insights in order to understand the success of individual channels. It is important to note here that since this process tends to collect data across all channels, it also helps in aiding which marketing channels are introducers, influencers and closers.
Flipkart uses Google analytics to track the moves made by its customers so that it can appropriately design its marketing strategy. Being an e-commerce portal, it provides service to sellers as well as buyers. Thus, with the help of Google Analytics, Flipkart collects information from customers and helps sellers’ list appropriate products on its site. There are two main tracking methods which can be used and are based upon Cookies or fingerprinting. Cookies are code snippets which are placed into the web browser of a potential customer when they visit a particular website . These get deleted usually by the user after a period of time or flushed out by the computer itself. Thus, while the cookie stays on the browser, a firm can track the user’s search behaviour with regard to their search and purchase history, impressions from ads they are being served, and the click-through on those ads.
For instance, Google Analytics also has cookie tracking in its reporting itself. It also uses ‘last click’ data which also indicate that the analytics data is essentially attributing the value to the very last place a user was before clicking through the entire website. Thus, it can be stated that for a business to become completely data driven in terms of their marketing strategies, they need right techniques and tools in order to obtain data to decipher the intelligence. The fact thus remains that firms like Flipkart pull out all kinds of stops in order to make analytics work for them. Considering the fact that these firms tend to churn out substantial amount of information, or data themselves, on a daily basis, Flipkart tends to segregate data into three main segments . First segment is consumer behaviour data where it explains what kind of things consumers like, their preferences, their opinion about a product, what is important for them, etc. The second segment is associated with product behaviour data. This explains why does a unique product sells more than the others; in the minds of consumers, which products are substitutes; which two products are complementary. The third segment is the overall supply chain side of data points which are gathered from various vendors.
Recommendation
Flipkart has been following the correct path to gather important information for its customers and sellers. But it needs to take a new step forward in order to be more efficient. It can also be stated that Flipkart should implement a data group which is entirely focused upon machine learning oriented issues where it is working on automatically detecting fraudulent views and reviews on products. The same is also aimed at artificially inflating the overall rating of a product. This move will not only help the firm in expanding its overall seller base, along with the brand name across the e-commerce portal in India. At the same time, it will also help small businesses to become up to date with the changing marketing requirements. Apart from the above mentioned, Flipkart also needs to find new ways how to utilize social analytics, for example. Business strategy of the firm should be based on setting the correct business context followed by gathering and analysis of the data, and analytics.
Conclusion
With the above report it is clear that there are many methods and ways to collect market intelligence information for a firm. Nonetheless, Flipkart being an e-commerce organization, its option to use Google Analytics is efficient since information collected about users (through cookies) is sent to its seller base, which can again design their respective strategies to target customers in a better way. This procedure not only helps the sellers listed on Flipkart’s site, but also the firm itself since with more sales of sellers, its revenues also increase. Up to now, Flipkart uses Google analytics to track the moves made by its customers and to appropriately design its marketing strategy. Being fully an e-commerce portal, it ensures quality service to both the sellers and buyers. Thus, with the help of Google Analytics, Flipkart collects information from customers and helps sellers to list appropriate products on its site. Google Analytics, known as possibly the best open source or free analytics that exists, can be conveniently installed in most of the websites. Its core capabilities also include – content analytics, conversion analytics, mobile analytics, advertising, and advanced segmentation. The above report indicates that keeping in line with the changing environment, it is best to move along with the changes before the competition takes over. Thus, Flipkart should use new technologies as well to connect with more consumers and gather more information from them.
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