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Lowe’s: Optimizing Marketing Communication mix case study


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MIP Polimi MBA: Digital marketing course

Published in: Marketing
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Lowe’s: Optimizing Marketing Communication mix case study

  1. 1. Marketing II Group 2: Bonfanti, Garzelli, Ravelli, Russo Lowe’s: Optimizing Marketing Communication
  2. 2. Lowe’s is a leading home products retailer in the kitchen remodeling business. Lowe’s is going to launch Next Generation Installed Sales (NGIS), in order to become an end-to-end solution provider for customer’s projects. Lowe’s will provide free-in-home consultations and will work with customers throughout the design, purchase and installation. LOWE’S 81% 19% US Kitchen renovation market in 2008 Market Lowe 75% 25% Share between DIFM and DIY DIFM DIY 53% 52% 55% 32% 47% 48% 45% 68% 0% 20% 40% 60% 80% less than $25K $25k-49,9K $50K-74,9K $75K+ Remodeling Kitchen Cabinets by Household income Self/Other household member Outside Service $- $20,000.00 $40,000.00 $60,000.00 $80,000.00 $100,000.00 Mid-range materials Upscale Materials Average cost of major kitchen remodeling projects 30% 70% Market composition by company size Private, local companies Corporate companies
  3. 3. The business objective is to increase the market share in this segment. Business background: KITCHEN RENOVATION MARKET SIZE: 17.5 B $ KITCHEN RENOVATION FOR LOWE: 3.4 B $ (19% market share) Stable and mature market LOWE’S BUSINESS OBJECTIVE +4% in market share – TARGET: 23% Turnover increase: +690M $ - 20% yoy Turnover increased through 23,000 new remodeling projects (each accounting for 30,000 $ on average). Considering a group of two people as a single customer, we need to reach 46,000 new customers with a new omni- channel marketing strategy. 77% 19% 4% US Kitchen renovation market in 2009 Market Lowe Increase
  4. 4. MARKETING OBJECTIVES Use an omni-channel Marketing approach, a mix of Traditional and digital media working synergically to deliver a consistent message in a complementary way. • Create awareness of NGIS and be top-of-mind for potential customers • Engage customers through the buying cycle (at touch points) • Increase customer retention With a 3 steps strategy: 1. Awareness: Driving awareness with traditional media 2. Perception: Fostering a perception change through digital engagement 3. Lead generation: Creating lead generation and demand generation through paid search method
  5. 5. • Offer products at low prices • Trusted position of the company • 2° biggest home improvement retailer in USA • Work guaranteed by Lowe’s • Limited interaction with customers during the process • Low after sales service provided • Limited involvement of the customer at the beginning and at the end of the buying cycle • Low consumer awareness about Lowe’s value preposition • Wide customer base • Improvements of the pain points along the customer journey map • Digital marketing tools to enhance Lowe’s position in the segment • Strong competition given by Home Depot, IKEA, SEARS and small players • Long incubating period S T R E N G T H S W E A K N E S S E S O P P O R T U N I T I E S T H R E AT S InternalExternal SWOT
  7. 7. MARKETING MIX – CHANNELS EFFECTIVENESS 0 20 40 60 80 100 120 Broad TV Broad Print Direct Mktg In-store Mktg Digital destinations Digital Advertising Digital Direct Social Media Paid Search Organic Search Incubation Active shopping Design Purchase Installation Post-Completition
  8. 8. TRADITIONAL MARKETING Advertising would have to be mapped to reach the target at the right time of the decision making. Media space would have to be chosen also to limit competitor access. Content should be close to consumers needs and tastes. Television and print Costly. It allows to communicate with a large number of potential customers. Local television advertisings are well suited as the remodeling program went through a regional rollout. Cable channels can reach specific target audience. Commercials would not be effective at keeping Lowe’s at the top of mind for consumers, due to the long incubation period in the decision. Print ads are very selective and it’s possible to show color and «before» and «after» pics. Circulation is known. Consumer promotions Coupon / flyers / mail. Can generate interest and enhance awareness. Need to be targeted to appropiate demographic to ensure success. Work only on short term basis and could erode the value of the brand in the long run. In-store Marketing activities Limited information can be displayed. Problem in locate in the store (no specific product sold). More effective at the early stage in the consumer decision process because some customers could not know that Lowe’s provide such service. Would not work for consumers who did not traditionally shop at Lowe’s.
  9. 9. DIGITAL MARKETING Digital communication could be precisely targeted and highly interactive. Higher ROI. Consumer were increasingly using the Internet as the default starting point for making decisions on kitchen remodeling projects (96% of potential customer look before going in a store). Digital Adverstising Paid search: appear on search results pages, more than 40% of all adversting is spent for this. Classifieds: list the products on other Internet firms’ websites. Display Advertising: banner or logo on pages. Banners could be seen as annoying. Lead Generation: qualified purchase inquires. Rich Media: advertising which include sound, animation. Social Media Tools Blogs. Review sites. Social Networks. Influencing and promoting events. Share experience with photos of projects. Generate by consumers and disseminated through social interaction. Due to low average of renovation per person per 30 years, the social base community would constantly turn over. Good customer could become Lowe’s evangelist but frustrated ones could give negative reviews. Web Based Customer Design Tools Online tool for design and manage projects. This could cut the incubation time if budget and quality are met. Online Customer Service Tools «Ask a consultant», «Report a problem», «Track your order». Personnel need training in order to answer a bigger variety of question. Need to evaluate cost-benefits of this tool.
  11. 11. INCUBATION / VISIONING BACKGROUND It is the longest stage, as the time between first thinking to actual start of the project mainly range from one month to 1 year. Creating awareness and reaching consumers in this early stage is critical for the success. Almost 70% remodelling projects reasons come mainly from purchase of new home. It’s crucial to move the possible do-it- yourself consumers to Lowe’s customer. It is also important to move consumers from local providers, active in each community. CONSUMERS BEHAVIOR They normally do: 1. Set a budget 2. Seeking ideas on and off-line (active) 3. Seeing at firms offers (passive) CONSUMERS IDEAL EXPERIENCE They would be able to: 1. View / browse pics 2. Find material info: color, design, funcionality 3. Find pricing: material and labor 4. Get others experience TOUCH POINTS • External Marketing • Website • Stores
  12. 12. MARKETING GOALS Based on the background and the consumer map: • Awareness: reach as many consumers as possible and let them know the service provided. • Information: give consumer the chance to find the information they are lookign for. ANALYSIS In order to reach the goals for this stage, Lowe’s has to use channels which allow to reach big numbers of potential customers, letting them be aware of the existence of the firm in this service. Both on a country and local scale. It is needed to address the active and a passive role of the consumers and their on/off line activities. Using the channel effectiveness graph, it is visible which channel has a big reach, weighted on cost per reach. INCUBATION / VISIONING
  13. 13. MARKETING CHANNEL DECISION Based on goals and analysis: • Television & print: this channel allows Lowe’s to be highly visible and reach passive consumers. The ads can let family and friends of consumer (which just bought a house or have to renovate) tell them about it, increasing the reach. • Paid search: the paid search will address them to Lowe’s stories or website, making it a reference for them. They will be able to find Lowe’s content and website based on the request of information they are looing for. • In-store: well targeted, this will let the active consumers which go to the stores to get more aware and more involved about the service through promotions. • Local events: eventually, just on most critical communities, with high increase of home constructions or strong presence of small players, will give awarness to consumers. INCUBATION / VISIONING
  14. 14. MARKETING CHANNEL DECISION - ISSUES / DRAWBACKS Based on decision, take care of: • Television & print: reaches a broad number of customers but it can be difficult to make a proper segmentation and targeting. It is also very expensive and the message should be well studied in order to be effective in generating customer’s awareness and then interest. • Paid search: competitors could use the same key-words; it could increase costs and it can be difficult to be effective. • In-store: requires a continuous personnel training in order to let them have in mind the promotions. • Local events: must be well targeted despite being a pure awareness phase, in order not to disperde resources, and be mainteined. INCUBATION / VISIONING
  16. 16. ACTIVE SHOPPING BACKGROUND The active shopping phase is all about getting the right information. Consumer starts refocusing on project and developing the vision of it. He browses showrooms and actively interviews and searches for opinions. He eventually starts budgeting the remodeling project. Since consumer is already engaged with Lowe in this phase it is important to move him/her straight to the point giving the right tool and information. CONSUMERS BEHAVIOR They normally do: 1. Focus on the project 2. Develop a vision 3. Interview and ask for opinions 4. Specify budget CONSUMERS IDEAL EXPERIENCE They would be able to: 1. Ability to establish a preliminary budget and get a visual rendering of the remodeled space 2. Establish “go-to” information sources on and offline 3. Obtain recommendations 4. References for contractors are “nice-to-have” TOUCH POINTS • Lowe’s website • Instore experience
  17. 17. MARKETING GOALS Based on the background and the consumer map: Lowe’s has to create interest in the consumer and let him use Lowe’s tools to remodeling projects. Both in and off- line experience are important, but they should be direct to personas. ANALYSIS Lowe’s has to use channels which create interaction in potential customers, letting them design and budget their project vision, both on a country and local scale. Consumers have to be involved in a design tool full of information, flexible and in line with Lowe’s value proposition. In addition, an “ask-to-expert” service is essential to provide customer a feedback. ACTIVE SHOPPING
  18. 18. MARKETING CHANNEL DECISION Based on goals and analysis: • Digital advertising: this channel allows Lowe’s to be highly visible and reach active consumers. Digital advertising should be coherent with the Lowe’s vision. Design tool should be advertised as “must-have” experience to exploit consumer needs. • Paid and organic search: the paid search will address them to Lowe’s stories or website, making it a reference for them. They will be able to find Lowe’s content and website based on the request of information they are looing for. • In-store experience & Direct marketing: In-store marketing and experience offered to potential customer should focus on the “giving the right information” and to offer enough consultancy to remodeling projects. ACTIVE SHOPPING
  19. 19. MARKETING CHANNEL DECISION - ISSUES / DRAWBACKS Based on decision, take care of: • Availability of information: consumers are hungry of information, they should get them in the right format and as fast as possible. Website and accessibility are key succes factors in this stage. • Customers design tool: consumers want the project, with their vision, on their screens, NOW! Powerful design tool is the source of success. They should be able to see a rendered image of their project as well as a budgeting process. • Make it real: the digital experience has to be linked to the real one. Once customers are full of information, they will search for opinions, interviews. We will allow customers to “ask to an expert “ or reach us at the stores. ACTIVE SHOPPING
  21. 21. DESIGN DEVELOPMENT / PURCHASE BACKGROUND The stage during which customers select the remodelling company, with the precise design and layout of their new kitchen. They continue to ask for feedbacks to family and friends and to look for internet tools and webpages in order to visualize better their new kitchen, keeping budget in mind. Customers need to be sure about company’s skills and experience. They should also avoid to experience hidden costs or differences and surprises during work in progress. CONSUMER BEHAVIOR They normally do: 1. Select a designer/contractor 2. Finalize price/design/material 3. Sign contracts and ordering parts CONSUMER IDEAL EXPERIENCE They would be able to: 1. Easily access to specific information 2. Control budget and time constraints 3. Be updated about the status TOUCH POINTS • External Marketing • Website • Stores • Paid Search
  22. 22. MARKETING GOALS Based on the background and the consumer map: • Desire: work on final decisions, providing the best design / layout that suits consumer budget. • Action: follow customers after they sign contracts, making their orders status available. ANALYSIS Develop an online tool to decrease the decision time by letting consumers visualize their new kitchen. This tool should be easy to be reached when searching precise keywords. Lowe’s should also reduce influence from families and friends, increasing brand awareness of quality and reliability, with “Tell your friend” campaigns and being active part of forums and social media, increasing its internet presence. Lowe’s should also involve women and families in its new campaigns and signing agreements with famous and trusted appliance suppliers in order to increase its value. DESIGN DEVELOPMENT / PURCHASE
  23. 23. MARKETING CHANNEL DECISION Based on goals and analysis: • Paid Search & SEO strategy: definition of keywords in order to better direct customers towards Lowe’s shop and online tool. Lowe’s advertising should follow customers during their journey towards the final decision when they browse internet. Cost and time information are vital and should be always immediately available. • Social Media: they can be useful to allow customer take the final decision, reading about other customers’ stories and feedbacks, looking at pictures of how kitchens have been remodelled. DESIGN DEVELOPMENT / PURCHASE
  24. 24. MARKETING CHANNEL DECISION - ISSUES / DRAWBACKS • Paid Search & SEO strategy: there should be a high focus on keywords selection, in order to get higher visibility than competitors. These words should lead customers directly to what they need: in this phase, they need a quick response in order to better visualize their future kitchen. • Social Media: it is tough to make demographic, behavioral, psychographic and geographic differences among customers through the use of social media. Precise social contests should target customers leading them to quickly imagine and visualize their future kitchen, without disperding or confusing them. DESIGN DEVELOPMENT / PURCHASE
  26. 26. INSTALLATION & POST-COMPLETION BACKGROUND These are the final stages as customer agreed to remodel his own kitchen making use of Lowe’s. It is important that what the customers previously imagined is precisely done. Consumers require continuous feedbacks and updates, with responsiveness to any possible unforeseen problem (e.g. an appliance which does not perfectly fit in the new kitchen). In post-completion, customers must be completely satisfied and then loyal, to be willing to tell their story outside to address new customers to Lowe’s. CONSUMERS BEHAVIOR They normally do: 1. Observe progress and address issues 2. Make minor modifications 3. Communicate their experience to others CONSUMERS IDEAL EXPERIENCE They would be able to: 1. Communicate with contractor 2. Site-visit 3. Be satisfied post-completion 4. Be assisted with future upgrades TOUCH POINTS • External Marketing • Website • Social media
  27. 27. MARKETING GOALS Based on the background and the consumer map: • Retention: being able to retain his customers, making them fully engaged with their new kitchen and letting them “tell the story” outside, influencing family and friends. ANALYSIS During installation Lowe’s is working with the customers, remodelling their kitchen. Lowe’s has to be higly responsive in solving possible issues and has to provide feedbacks of work-in-progress. During post-completion, customer experience score is very high: customers can see and enjoy their new kitchen and for this reason they can spread and share their experience also outside. INSTALLATION & POST-COMPLETION
  28. 28. MARKETING CHANNEL DECISION Based on goals and analysis: • Digital Direct Marketing: it is extremely effective because it targets already existing customers who could become interested in Lowe’s kitchen renovation value preposition. It allows to maintain the relationship with customer even if kitchen renovation process is completed. Customers can be invited through promotional e-mails to get discounts for upgrades, being involved in contests or inviting their friends to choose Lowe’s. • Social media: a social media presence could be useful to share succesful stories and for referrals, enhancing Lowe’s perception and reputation. • Broad reach print: used to show how Lowe’s is effective in kitchen remodelling, showing kitchens before and after and informing customers about new available products. INSTALLATION & POST-COMPLETION
  29. 29. MARKETING CHANNEL DECISION - ISSUES / DRAWBACKS Based on decision, take care of: • Digital Direct Marketing: it must be addressed in a good manner, transmitting the right message, effectively targeting discounts or offers that customers cannot refuse. • Social media: could lead to unsatisfied customers posting their negative experiences and influencing a huge number of Lowe’s visitors. It also requires a high responsiveness, in order to enhance satisfied customers to share their experience. As said every issue should be addressed as soon as possible. • Broad reach print: reaches a broad number of customers and based on the choice it could have a proper targeting, it is costly and content must be well selected. INSTALLATION & POST-COMPLETION
  31. 31. SUMMARY Incubation / Visioning Active Shopping Design Development / Purchase Installation & Post-completion
  32. 32. CAMPAIGN BUDGET CHANNEL Unitary cost Reach Cost Assumptions & notes Broad TV $450000 12.000.000 $3.600.000 Cost 1 month per channel. 4 months on first two national TV Broad Print $3000+$69239 800.000 $418.434 On 3 Magazines per 2 issues each Direct Mktg $0,25 1.000.000 $250.000 Using existing DB of contacts In-store Mktg $1.000 500.000 $50.000 In the main 50 stores Digital destinations (Web tool) $0,13 400.000 $50.000 Digital Advertising $0,03 3.000.000 $150.000 Estimated reach up to 3M Digital Direct (e-mails) $0,20 1.000.000 $200.000 Using existing DB of contacts Social Media $0,08 1.000.000 $75.000 Paid Search $0,25 1.500.000 $375.000 Estimated reach up to 1.5M Organic Search $0,10 1.000.000 $100.000 Estimated reach up to 1M TOTAL $5.268.434 Budget prepared for the whole NGIS campaign. On some channel the reach have been estimated based on the buying stage in which is mainly used. Some assumptions have been made on cost of broad TV and print.
  33. 33. CONCLUSION Budget has been established to reach the target of 46,000 new customers. We forecast some overlapping between the different marketing channels especially during the initial stages. Given that we estimate in 15 mil people the audience of NGIS omni- channel marketing strategy. Given the long incubation period we decided to extend the broad TV and print marketing campaign. We estimate a success ratio of 0,3 % equal to 23,000 additional kitchen renovation projects compared to the baseline. These projects will provide NGIS with the targeted additional sales of 690 mil $ (+20% turnover on kitchen renovation business line) and increase market share to 23% of the US kitchen renovation projects yearly turnover (+4% on the 19% baseline). 15,000,000 people audience 46,000 new customers
  34. 34. Thank you