Sports Direct International Limited is a discount retailing company owned by the Newcastle football club owner (Mike Ashley). The company was founded in 1982 and is worth more than £700 million and amongst its core brands are Karrimor, No Fear, LA Gear, Donnay, Everlast, Goldigger, and more to be mentioned.
Most of the retailing companies in the world use the Marketing Management principle to market their products to customer. This has yielded a tremendous outcome for many retailing companies even during the high competition between the companies marketing similar products and during the economic melt-down. This work proposes the review on how one of the Marketing Mix (Pricing Strategy) can be applied effectively and efficiently to the marketing business of retailing industries and Sports Direct happens to be my major focus. Also, the means to evaluate how the effectiveness of the pricing strategies on Sports Direct would be ascertained and for this this be completely analyzed, another sports’ company (Decathlon) would be picked to compare their pricing strategy effectiveness with that of Sports Direct. Another measurement will be on how the customers’ money value would be equated with the satisfaction they derive from the products and services from the two companies both in-store and online purchases in order to ascertain a non-bias result from this study. In this document are my methods of gathering information and the schedule on how this work will be completed.
Chen (2006) in his journal using the infinite horizon method to analyze the single product pricing stating that with the use of continuous review model, pricing and inventory decisions can be made simultaneously with the combination of ordering cost and inventory policy to determine the right discount. This is the strategy that Sports Direct uses to fix their prices with the bargains that attracts their customers to purchase more products from the company.
The academic journal on the Retail pricing strategies and their impact on customers’ loyalty by Clark, Peter (2006) enabled me to carry out the rate to which the right pricing strategy can go to accomplish the profitability objectives of the company as this is a major aspect to determined customer retention in the business.
Montgomery (1997) demonstrated in his journal using the micro-marketing to explain how a company can customise their marketing mix variables in their different stores. This shows how prices can be set in a customized profitable strategy at different stores, rather than using the uniform pricing strategy across the whole stores. Sports Direct uses this strategy as well; their prices are not the same in all their shops. The stores that are located in the outskirts of London are cheaper than those in central London and other major cities. This is also applicable to the type of products that are displayed in the different stores of the company. The products displayed in the stores are done according to the region and location of the shop as to sell more products that would be relevant to the most ethnicity that occupies that area.
Kusum et al (2001) in his journal of Marketing explains how different researches have proven the different ways consumers and competitors would respond to short-term changes in advertising and promotion. At the same time contradicting this study is the value pricing strategy where customers would be willing to pay more for a product of more value to them not minding the price. This example can be seen from that of Procter & Gamble study of how customers and competitors response to the sustainable change in marketing-mix strategy. Sports Direct applies this strategy by studying the products that sales most and increases their price after a period of time to maximize more profit and it is definitely working for them because as at the time of the change, the customers would have been addicted to the product. It is from this method that the company sets their pricing objectives by combining the skimming and penetrating price strategy to attract more customers without them being sensitive to the changes.
The Journal on the Pricing strategy for companies with mixed online and traditional retailing distribution market by Yan, Ruiliang (2008) is the suitable literature to measure the effectiveness and efficiency of the different pricing strategies and how to ascertain its performance when it comes to the profitability of the business.
The theory of financial risk and derivative pricing is used by Bouchaud et al (2003), in their journal, they used the mathematical and physics theories to implement different methodologies that would suit different customers at different situations at different period of the year and season. This is the theory that Sports Direct can apply to their pricing system as they frequently encounter situation like this where the initial pricing are being changed as customers would not want to go for the product at a particular fixed price due to some reasons. A typical example was the just concluded World Cup where the England team lost out of the competition earlier that was expected and customers were not ready to pay for the England jersey at the price of £35.00 and Sports Direct had problem with this as they had to reduce the price to as low as £8.00 in order for the large number of the product that was produced and kept in the warehouse.
The Journal of Price Management by allbusiness.com (2010) empowered this work to comprehend the best pricing strategy to be used in the retailing market in order for products and services to be effectively coordinated to achieve the organizational pricing objective. However, this will only be accomplished by conducting market research.
A journal from FT.com (2007) on sports retailing companies in the UK enabled me to understand how Mike Ashley uses different price strategies to beat its competitor (JJB) when it comes selling in bulk at a cheaper rate and retaining customers.
A journal from McKinsey&Company (2010) on the advantages of having a long-term pricing strategy over a shorter-term in the retailing industry enabled me to understand how sports direct reduces their product prices below their production cost price and still makes profit from it. This is the same strategy they use for their continuous on-going bargains to make their customers feel their product is cheaper than that of their competitors in the industry. Different general dependent models are being used to illustrate how this would work in the company that deals with consumer products.
Draganska et al (2003) uses his journal to explain how customers would be willing to pay for products that their prices are being set with the vertical product line strategy. This is another pricing strategy that is working for Sports Direct as they set their prices based on the production characteristics and not on quality. An example is the situations where products are being displayed with different prices and quality but within each line of the product is the collection of styles that evenly priced.
Bitran and Caldentey (2002) in their pricing model for revenue management journal explains with the use of stochastic price-sensitive demand processes how menu of final products to the end customers can be set with the revenue management being put as a priority to decide on the right price that would yield profit for the company. Sports Direct uses this theory to determine the right price reduction for their product that would not bounce back at them to run at a loss. When considering taking this decisions, faulty and stolen products are being put into consideration as if they are being left out, the company would run at a loss not minding the good patronage that would have been done by their customers.
The use of tobacco industry pricing strategy by Chaloupka et al (2002) based on the VAT that is imposed on the product to regulate the smoking habits of smokers. Evidence from their journal explains how pricing strategy can be amended to cover up the VAT increase on the product where by other cheaper cigarettes were produced as a substitute for those customers that would not be able to cope with their initial brand as a result of the price increase. Sports Direct is using this strategy to produce a lot of similar products that is a little inferior to the original one and advertising that their prices are still the same not minding the VAT increase. This means attracts customers to go for their product more than they would have gone for that of Decathlon Sports retailer in the industry.
Zettelmeyer (2000) in his journal on pricing and communications strategies when firms compete on multiple channels, shows how the size of the company’s internet pricing and communication approach can facilitated as the internet is used by most customers. Sports Direct has to focus their attention on this aspect as to use this means to beat their competitors by emphasizing more attention towards the conventional channels. This will be by aggregating their internet market power through tactically using the statistics on multiple channels to accomplish their advanced consumer subdivision.
Yaozhong et al (2007) analysed in his journal that how consumers can be highly price perceptive, he explained how consumers would patronise the stores that uses a discount pricing and bargaining strategy which Sports Direct is one of them. They uses their on-going price reduction means to attract customers mostly the tourist and foreigners from developing countries that believe that their products are cheap and it’s the right place to get presents for their friends and families.
Lazear (1986) in his journal on retail pricing and clearance sale, emphasized on how managers are to take the right steps to choose the right clearance prices for their products and this would not have to be done once whereby in the cases where the products are not being purchased after the clearance sales price, the price has to be further sliced in order for them to be purchased. This happens to be one of the most aspects that Sports Direct has to look into as clearance sales is their major focus in the pricing strategy.
An effective and efficient customer satisfaction in both product offer and services of any business organization is the most important aspect that would be expected to be fulfilled. According to Kotelnikov on his statistical illustration of customer retention, an “exceptional customer service results in greater customer retention” Kotelnikov (2001, p.43) and most organizations have not gotten this message yet. However, it is this retention that would lead to a higher profitability. Customer loyalty has a huge role to play when it comes to contributing to sustainable profit growth and to ensure that this is realized, business organizations must afford to make a highly standardized customer service satisfaction their second nature when being compared to that of their competitors, employee satisfaction and value creation must not be left out of this process in order for the whole satisfactory circle to be complete.
PROPOSED RESEARCH QUESTION
How can the satisfaction of the customers’ wants when being compared to their available resources be ascertained in the most possible way in order to maximize profit in the company?
Who are Sports Direct and Decathlon customers?
PROPOSED RESEARCH OBJECTIVES
This study is conducted to evaluate if the everyday low pricing strategy used by Sports Direct (EDLP) is effective for their business operation or not.
To study the customers’ perception towards the company’s pricing strategy.
This will be patterned in a two segment format where it will comprise of interviews and secondary data collection.
Interview as my primary research:
This will be carried out in the company’s five busiest shops environment where different customers ranging from people from different parts of London and tourist from different parts of the world. This will give me non-bias qualitative information as I will be using a recorder to record all that will be interviewed and it will be carried out in different sections of the shop as there are different customers that goes for different types of products and there will be the need not to interview only the customers in the centre of the shop. Most of the customers would be interviewed while checking-out at the tills as this will enable me to identify those customers carrying out bulk purchases and those purchasing single items. My purpose for doing that will be to find out why they will be buying in bulk if it will be as a result of the pricing strategy or something else. After this would have been done, the information in the transcript would be compared to that of the secondary research in order to know what would be lacking in order to carry out adjustments for the research objectives to be effectively and efficiently useful to the company after the work completion.
There will not be the need for questionnaires as the customers would not be having that time to stay back to fill them and there will not be assurance of getting the questionnaires back if being given to the customers to take home.
Another aspect will be the use of customers’ responses from the company’s websites to analyse how they feel regarding the prices of product in the company as this has contributed to the formulation of the answers of the research question. These would be compared with relevant journals and articles to draw out a conclusion from it.
The judgement is not going to be based meanly on Sports Direct only but I am going to compare the company’s pricing strategy with that of Decathlon Company. This is because they both shop are similar when it comes to bargaining pricing strategy. One of their busiest branches is not far from my house where I can have an easy access to the company to carry out my study with the permission from their management.
Secondary Data Collection (research):
The secondary data comprises of related book, journals, articles, company websites, reports that are current and not more than five years of publishing in order for the information to be current and relevant as to get a background literature of the project. It is from these materials that I found different interlinked subjects concerning Sports Direct that enabled me to formulate my research objectives and research question in other to make my work relevant and problem solving to the company.
I do not see this approach giving me trouble as I am a supervisor working in one of the Sports Direct busiest branch at Old Kent road. Arrangement has been made with the manager already as how to go about interviewing the customers and recording their responses to be edited and used when needed. The manager is quite interested with my investigation as this has contributed to shop’s high volume of sales during the festive periods (Christmas and New Year) as different strategies where formulated from the information that was gathered from the customers. This has never been done before in the shop and the amount of target the shop made this last season has never been realised too as the manager confirmed it.
The recording materials would be collected from the Learning Resource Centre of the university if being booked for collection early as it is operated on first come first serve method.
The enrolled modules are part of the major resources for collecting information that are relevant to this work and with the help of the Learning Resource Centre, most of the books can be obtained and use at any time of the day which the centre is the most reliable atmosphere that any student can use for study, discussion and analysing of data in both the general and the quiet zones of the building.
There are sufficient internet connected computers in the centre to enable this work to be done without interruption and a good access to the Mintel is another strong resource that will enable this work to be completed effectively.
CHANGES FROM THE INITIAL PROJECT PROPOSAL
There have been some major changes in this work when being compared with that of the proposal; this has been because of the corrections and suggestion made by my supervisor and the poster event invigilator. The entire literature review is been changed as there has a slight change in the project topic. The methodology has been improved when being compared to that of the proposal as more ideas have been acquired from different studies that I have done during the Christmas break. My timetable had to be adjusted as I could not meet up with the schedules I drafted as a result of different activities during the Christmas break but, I have made a decision to stick to my schedule plans be very disciplined about it.
CRITIQUE OF VALIDITY AND RELIABILITY OF ACTUAL METHODOLOGY UNDERTAKEN
To guarantee that there are qualitative evidences of reliability and validity to the research project, the methodology used for this work includes both primary and secondary data. Anderson, (1986) directs that “care must be ensured when analysing the qualitative data to make sure that the collected data would interpret exactly what it is meant to and not being bias as the case maybe”. The secondary data are a collection of documented, multiple information and surveys that are related to this research topic.
Being that there are many sources to get these resources, it is necessary to collect only those that relevant as there are a lot of these sources that are informative but not recommended to support this academic work. An example is the Wikipedia. For that reason, the university library and other local libraries supply a quality academic search engines such as; Infolinx, that directs a search straight to the academic article i.e. Mintel, Athens, Business insight reports as well as other academic journals. These sources are all valid and reliable to supply me with current and updated data and most of them are based on definite findings.
Being that the primary research to be done would be interviewing the customers, there is bound to be bias responses from the customers as most of them would only want to tell me what I want to hear to please me and not be realistic. In order to avoid this, I will disguise as a normal customer who is carryout a research in the shop in order to get the facts from the customers that would be selected for interview.
In order for the this methodology to be reliable and valid, the information from the websites would not be used directly but would be compared with the different chosen academic journals and only the information that would related to the topic that would be collected. The validity would have to involve the journals that have been released between the last five and ten years of publishing.
Despande (1993) stresses that, “interviews can help you to gather valid and reliable data that is relevant to a research questions and objectives”. However each must be consistent to ensure reliable results. The semi-structured interview approach may interfere with the reliability and validity which might create different responses as factors such as curiosity and nervousness can cause a barrier. A more ‘appropriate’ time should be chosen as some people may be busy and not having enough time to answer all the questions as they would be expected to LeCompte (2009). If all these are controlled, it will ensure the validity and reliability methods of conducting collecting information for this research and the method is to be set in a way that will agree to the completion of the project within the given duration.
CRITICAL SELF-EVALUATION OF WORK UNDERTAKEN
Even though much effort is put in this work, I feel that I still need to improve my researching skills in a better moderation. A more intense reading of journal articles (both online and hardcopies) is needed; though I put a great effort to understand and how to make a clear and correct in-text referencing, but with the help of the referencing handbook from the library, I suppose I am now on a better track than before.
The poster event also assisted this work as the coordinator pointed out some facts which I never noticed. Amongst the points she mentioned are the fact that I did not know who Sports Directs’ customers where and I did not know how I was to store the information I was to get from the conducted interview.
Another point was also given suggestions on changing the retailing company I was to compare Sports Direct to and this suggestion has been very effective as Decathlon happens to be a better match to compare Sports Direct with than Primark which I was planning to use. The idea of corresponding the customers’ reports from the company’s websites and the relevant academic journals is part of the contribution from the poster event and this is very helpful to this work.
I also need to research more broadly than just a surface browsing of information, for this will help me to gather more substantial information for the project and to improve the quality of the final work.
Conclusively, being that I have sought out some of my sources to accomplish this research and know how to get the remaining in future, most of what I will be doing as time goes on will be the sorting through the literature and websites to collect the relevant results, and conducting the interviews to see that my outcome is being presented before the deadline by April. And regarding the cost that would be involve during this work, I estimate £20 to be sufficient as the printing and binding will be done in the university.
I am a final year student studying Marketing Management with University of Westminster business school and I already possess a diploma certificate in Marketing. Based on these qualifications coupled with other modules of Marketing that I have under taken; it will enable me to carry out this research satisfactorily without any stone being left untouched.
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