Philip Kotler in 90-ies argued about the transition from product-oriented to consumer-oriented market, today this transition can be assumed completed with a high probability (Kotler and Armstrong, 2012). With the advent of digital in the life (online) and business (e-commerce) customer’s voice became much louder, in some cases, thunder, and serve as a mouthpiece for social media. Customer relationships got paramount role for business. Quality of service is seen as an important area of activity. No matter how much the company spent on improving services, these costs will be repaid only if the existing and potential customers know about company’s superior service. Quality of service should be prominent. It should always be, not only from time to time. In addition, customers should be informed about the services offered by the company and are regularly reminded of the opportunity to use them (Shoal, 2008).
Every company strives to set strong cooperation with customers in order to get their loyalty. Service has a multiplier effect: it multiplies the results achieved by advertising, marketing and sales. The basis of this multiplier effect is a positive attitude toward the company that is created by customers through quality personal service and motivates them to recommend the company to others (Reinartz and Kumar, 2002). Therefore, one of the UK primary pharmacy companies and retailers, the Boots Company PLC, considers its customers as the core of the business.
In order to assess Boots Company’s advantages through superior service and customer relationship, it is necessary to apply such marketing tools as BCG-model, GE-McKinsey matrix, benchmarking model and VRIO analysis.
Boots Company’s Background
Being a part of division of Walgreens Boots Alliance of Retail Pharmacy international Boots UK offers its customers superior health and beauty products. Established in 1849 as herbalist shop, the company achieved noticeable success in pharmaceutical industry (Reference for Business, n. d.). Operating more than 2500 stores crossways the United Kingdom, Ireland, The Netherlands, Norway and Thailand mainly in high streets and shopping malls, almost 57,000 company’s employees provide customers with hearing care, pharmacy, opticians, insurance and photo processing services (Boots UK, 2015; Walgreens Boots Alliance, 2014). Boots has always produced innovative goods with advancements, modifications, betterment and improvement as it values customers. Its purpose is to provide with goods and services that help individuals look and feel their best (Walgreens Boots Alliance, 2014). In December 2014, Walgreens Alliance Boots was formed over the arrangement of Walgreens and Alliance Boots. Performed deal combined two primary organizations with iconic trademarks, matching geographic paths, common values and an inheritance of reliable healthcare amenities over medical wholesaling and public pharmacy carefulness (Boots UK, 2015).
BCG-model
It is believed that the level of income or consumption of cash is strongly functionally dependent on the rate of market growth and relative share of the organization in this market, which parameters are crucial for the BCG model. The growth rate of organizations’ business determines the pace at which the organization will use the cash (Hollensen, 2014).
Stars, as a rule, are the business area that has a relatively large share of the rapidly growing market, transactions on which bring high profits. These business areas can be called leaders of their industries (Stacey, 2011). For Boots UK health and beauty products belong to stars. These products are considered as major products of the company and directly involved in its success and growth.
Cash cows are business area, which in the past has received a relatively large share of the market. But over time, the relevant industry growth slowed markedly. As usual, the cash cows are former stars, which now ensure sufficient profit for the organization in order to keep its competitive market position (Wright et. al., 2013). Boots Opticians can be considered as cash cows with about 600 practices, approximately 180 out of which function on a franchise basis. About 30% of practices are situated in Boots outlets including the poise being separate optical practices (Walgreens Boots Alliance, 2014).
Dogs are a business area with a relatively small market share in slow-growth industries. Any step in the direction of the organization to obtain greater market share is immediately counterattacked by uniquely dominant in this industry competitors. Only the skill of the manager can help an organization to hold such a position of the business area (Stacey, 2011). Electrical items, toys, gifts and photo processing are dog products of Boots UK as they have no such demand in market.
Question marks are business area, which competes in growing industries, but they occupy a relatively small market share. This combination of circumstances leads to the need to increase investment in order to protect its market share and to ensure the survival of it. High market growth rates require considerable cash to meet this growth (Wright et. al., 2013). Mother care and skin care products are new and placed in question mark box.
GE-McKinsey Matrix
The main feature of the GE- McKinsey matrix is the use of weighting factors in constructing the model and taking into account trends in the industry. The basic principle of the method is to increase investment in attractive industries, if a company has a competitive advantage over them, and, conversely, to reduce investment if the market position of the product or the company on it is weak. It is possible to estimate the contribution of the product in the company’s profitability (Kotler and Armstrong, 2012).
Company’s wide range of products and services, its brand name and image with 166 years’ experience as well as human resource management (following the policy of remaining the employer of the choice) ensure Boots’ strong competitive position in the market. Customer loyalty program is another Boots UK’s benefit. Its Advantage Card is a loyalty card – a way of rewarding customers for continuing to shop at Boots stores. It’s one of the largest smart card retail loyalty card schemes in the world. Introduced in 1997, there are over 11 million active users (active meaning card holders who actually use their card regularly). The aims of Boots Advantage Card are to provide unique insights into how their customers shop, enable targeted marketing and one-to-one communication and drive sales through rewarding loyalty. For Boots, the Advantage Card helps the company to make better marketing and merchandising decisions and sell to customers more efficiently. The scheme has been created on the principles of relationship marketing. Every time a customer uses their Advantage card, all transactions are linked to the customer via the Smart Chip. This allows Boots to maintain a database of information, which can be used to review the way a customer shops. It helps Boots to make more accurate marketing decisions. The company can tailor its products and offers to meet customers' needs. This sophisticated database is one of the most advanced technological sources of customer information available today. The way Advantage Card information can be analysed means that Boots can obtain a better understanding of customers’ requirements and have a relevant two-way communication with them (Walgreens Boots Alliance, 2014).
Company’s weaknesses are in delivery system and lack of presence in social networks, which currently cover third part of traffic. Social media allows partners to virtually maintain the interaction via the Internet and eliminates the need for employees on business trips for personal meetings.
Therefore, GE-McKinsey matrix has the following structure:
Benchmarking
Benchmarking can be seen as a process of long-term thinking about the activities of business strategy, based on the best practices of partners and competitors at the sectoral, cross-sectoral, national and international levels. There are many purposes for which the companies conduct benchmarking. The main ones are the evaluation and formulation of achievable goals based on the experience of other companies, the introduction of changes, improvement of business processes and monitoring of the activities of competitors (Hollensen, 2014).
Today, social media changes the way of benchmarking. It provides companies with new communication tools. This reduces the need for a mission to conduct field work, as a significant part of these problems can now be solved online. As a result the benchmarking becomes less expensive. This sequentially allows companies to reduce the threshold standard of comparison with each other and turns benchmarking of single event in a continuous iterative process.
Boots UK famous competitors are Celesio AG, Lloyds Pharmacy LTD and PHOENIX Pharmahandel GmbH & Co KG. Concerning health and beauty products, where Boots UK is the star, the company should support its market share. However, geographically Celesio AG is presented in 14 countries all over the world, so Boots UK can analyse company’s position and try to penetrate new markets. PHOENIX Pharmahandel GmbH & Co KG is the second in Europe with only 29,000 employees.
Boots UK offers high essential service rates to pharmacists as regards frequency of distribution, product obtainability, distribution correctness, suitability and reliability at reasonable prices. Moreover, the company provides its consumers with inventive added-value amenities, which aid pharmacists in the development of their personal organizations.
VRIO Analysis
The procedure for VRIO-analysis is to assess the resources and abilities of the company by four criteria, namely the value, rarity, imitability and organization. Analysis of the resources and abilities by these criteria makes it possible to identify the most important for the formation of competitive advantage the resources and capabilities, and to identify the strategic implications of their use (Hollensen, 2014).
Figure 1. VRIO-analysis of Boots UK’s advantages
There is a number of resources and capabilities of Boots UK, which gives strength to company and added value to achieve competitive advantage. Unique location, assets and legal copyright are basic resources and company is capable to use them efficiently. Brand name and its image are also among important resources.
Resources and capabilities are controlled by Boots UK at most as it is most successful pharmaceutical company of UK. It has variety of products and range of items along brand image that is formed on basis of quality assurance.
Customers of Boots UK are very loyal to the brand. Promotions and sales techniques using by Boots UK are very difficult to use by other firms and companies as it uses very advanced techniques such as smart Advantage Card for making customers loyal.
Boots UK is continuously involved in maintenance and improvement of quality of product and use of different techniques to achieve competitive advantage. Boots UK increases its value in the market using different techniques to target audience.
Brand image and sales & promotions are major aspects in competitive advantage. These two factors are sustainable in competitive advantage as company maintains its position in the market using different techniques. Boots UK have an advantage to maintain same position in market because of its quality of products and customer loyalty. Customer loyalty is helpful to increase chances of sustainability in competitive advantage and customers are very loyal to Boots UK while loyalty is increasing with use of smart card technology of company. Research and development and spending on customer loyalty are resulted in sustainable brand image and sales of company. Smart card helps to increase sales as it directly increasing number of loyal customers and loyalty makes customers to repeatedly come to same brand for different products.
Conclusions
Customer satisfaction depends on how his expectations were met. Consumers can experience varying degrees of satisfaction. If the quality does not justify the expectations of the consumer, he is dissatisfied. If his expectations were met, the customer is satisfied. If the quality of service exceeds expectations, the customer is very satisfied or even delighted. In order to remain strong in such competitive industry as pharmaceutical, Boots UK should keep going to improve its customer relationship management based on superior quality of highly differentiated products and services through providing with a trustworthy value proposition. Superior service of Boots UK includes a great location, a wide range of products, leadership and efficiency, and at times competitive prices (Ernst et. al., 2011). Superior service means the concentration of all resources and all employees on customer satisfaction. It is about all employees, not just those that directly communicate with customers personally, by phone or over the Internet (Goetsch and Davis, 2014). Boots UK provide its customers with the attractive customer loyalty program through offering Advantage Card. The aims of Boots Advantage Card are to provide unique insights into how their customers shop, enable targeted marketing and one-to-one communication and drive sales through rewarding loyalty.
Also, Boots UK can benchmark its major competitors, namely Celesio AG, Lloyds Pharmacy LTD and PHOENIX Pharmahandel GmbH & Co KG in order to discover new ways of development and improvement. GE-McKinsey matrix identified company’s most and least successful areas. VRIO analysis focused on brand and sales and promotion sustainable competitive advantages. Boots UK should concentrate its efforts on the presence in social networks for better CRM. Thus, the main advantages Boots UK gets through superior service and customer relationship are brand loyalty and awereness, additional investments, growth of market share and income increase.
References
Boots UK (2015). About Boots UK. Retrieved from http://www.boots-uk.com/About_Boots.aspx [Accessed: 10 July 2015]
Boots UK (2015). Timeline. Retrieved from http://www.boots-uk.com/About_Boots/Boots_Heritage/Timeline.aspx [Accessed: 10 July 2015]
Ernst, H., Hoyer, W. D., Krafft, M., & Krieger, K. (2011). Customer relationship management and company performance – the mediating role of new product performance. Journal of the Academy of Marketing Science, 39(2), 290-306.
Goetsch, D. L. and Davis, S. B. (2014). Quality management for organizational excellence. Pearson.
Hollensen, S. (2014). Marketing Management: A Relationship Approach, 3rd ed. New York: Pearson.
Kotler, Ph. and Armstrong, G. (2012). Principles of Marketing, 14th edition, Pearson Prentice Hall.
Reference for Business (n. d.). The Boots Company PLC - Company Profile, Information, Business Description, History, Background Information on The Boots Company PLC. Retrieved from http://www.referenceforbusiness.com/history2/2/The-Boots-Company-PLC.html [Accessed: 10 July 2015]
Reinartz, W. and Kumar, K. (2002). The mismanagement of customer loyalty, Harvard Business Review, July, 86-94.
Shoal, J. (2008). First-class service as competitive advantage. Alpina Biznes Bux.
Stacey, R. D. (2011). Strategic management and organizational dynamics: the challenge of complexity to ways of thinking about organizations. 6th ed., Harlow, England; New York: Financial Times Prentice Hall.
Walgreens Boots Alliance (2014). Alliance Boots Annual Report 2013/14. Retrieved from http://files.shareholder.com/downloads/WAG/0x0x800573/C56C15B0-74DC-4FCE-BD73-8ED4082420DE/017140_AllianceBoots_AR14.pdf [Accessed: 10 July 2015]
Wright, R. P., Paroutis, S. E., & Blettner, D. P. (2013). How useful are the strategic tools we teach in business schools? Journal of Management Studies, 50(1), 92-125.
