CHAPTER | sain: Coin Cusne Vibe wd Engegcnent 53 Company Case Argos: Creating Customer Value amid Change and Turbulence One of the biggest news items in the UK retail sactor recently is the £1.4 baion acqusion m Septarber 2016 of Home atl Crop, tho parent Company of Arges, by Sasi, one of ‘the leading British supermarkets. Unsurprisingly, the highights Of is tsness decison re the hugo sum twelve and the a ‘Soda rake compl markang erwfonment. Why ahs considered a good decision, especially after the Britsh referen- Gum in favor ofleevng the European Union are the uncer inthe busines orvtormant tha flows? “The key answers to these questions are not hard to find. “The dea makers can sbe the gold the tack record of the or (gaitaion, Anges was established i July 1873 a0 the Urted Fandom’ fe eatalog real win ony 17 stores; now has cover 75D stores throughout the United Kingdom and Repaisic litdend Over 130 lion customer, apcoatey one tid cof the UK popuiation, shop in an Argos store annually, buying Cre thing ancihor. Even before tho agreoment on thotaoover Goal 10 Anos ots tat opanod in Sancburys sores aca rata recor 20 percent sees ncreass, end ho taser oF acted to resut in annual savings of £160 millon. is part oft atomps to croutovauo forts customers, Argos ras undergone ramaratie changes nthe 21st eantuy. The de- ‘Sgn makeover has tuned tay fase wooden fesrboards ard (Gepay cabnats in Hod Toots and LED Geply bouds freaay Shopping. It is thus not surprising that Argos is valued so highly ty Saincbery's Unie, ho plano have an Ags Cervo (tory Sairebun/s branch to enaue corverioneo n roping fot customers. While the in-stores catalogs are stil in use at Argos ‘Soro, the centers have been racial tersormed io hitech (alts and "digea sores Th ba behind a hose changos ‘that the customers of today are more informed and daserve the bos. Argoa's approach iso eno that vlus craton fr cis tomers pormcizs ery Paso of tho organza acto Catalog Retailing Athough Argos fs hotd fora nubor of things in ho Bich ret sectr ts core halmatkis ts consisient focus on the ‘Susiocton ofthe needs and wants of target customers. Ths is not ony onared thvaugh tho thoveares of products that i offers 5 customers both onins and acoss ts var ‘ous ctorws in tho county, but also in al the pasos that en (apaiate the customers! sxparinca in their transactions, from placing the ordr to racing the fers. Argoo's focus Cn catalog rtaiing is based on fs qucst to saity custom. @fs through convenience. The shopper checks the catalog, Pacos the order and recovery afterward. twice. {oat catalog and Ira ste support tho way tho etabish- Tent creates aie forts customers. Market Offerings The assortment of products offered by Argos to its disparate ous- tomers accoss the county dusrats ha core vate that ofers ite target markt. Tho organization is ted for ofrng a wido range of products, categorized on its website to make shopping: ‘ay or ts orine vitors. For exemple, cstomers who ao into ‘ated inproducts such as TVs, telophones, er compuaars simpy nged to cick on the “Technology” ink to be ushered into the: ‘word ofthese gacgota, Simi, thera aro categorcatons for “Home and Garden,’ “Sports and Leisure," “Ciothing,” “Health and Beauty,” “Toys,” and many more. ‘One crite noted that Argos's focus is on being a "working class" brand. imphjing that their customers are marty less well “of. However, for CEO John Wallen cisagroes wih this cus- ‘omer stereotype and its that who this may hare bean true ‘ive years care, things have now changed at Argos: the ecm. pany now targets all demographics. Bayond the rhetxic of who ‘heir customers actualy ara is the issue of heaping those cus- ‘tomers satisfied with qualty products and exoslert customer service. This has bean stately idertifed by John Rogers, ‘the now GEO of Argos, as the cometstone of fis appresch in marketing ater taking over the job. The core abjecive is to en- ‘sure not rly that the customers are encouraged to shop a ‘Argos but that they are motivated to tay lyal avon when the ‘corrpetiion tris to draw then away. For example, Tesco has ‘a stong plan in place to pricemaich bestseling toys by the ‘ond of 2079, This is clearly in drect compsttion with Argos. “The retale’s mainstay isthe cocfinuous effort to clearly ouper- ‘orm eompatitors fixe Tasco and Amazon in moeting custorner! sed and addressing thet concams. Same-Day Delivery As the retail environment in the UK becomes more compatitive, ‘Argos also coninues to explore verious meen of meiesring ‘and improving ts merkot share. To tis nc the managorert has sat a long-tarm goal of having 250 Argos collection points: ‘hat wil be lated within Sainebuy's to enere thet customers ‘gether ordbed toms mare icky than thoy ci bola the 2c quisition of the firm. This, according to Mike Goupe, the GEO of ‘Sainsbury's, isto gre customers more chcice fn ths purchas- ing decison and macs He cas fr thom. In 2015, Argos introduced a daring policy—its “Same Day Delve servic, Ashe name saqgests customer cou oer ‘he dedted products ard got thom imeedenl inthe stor or delivered at home on the same day through a “fast tracked” ‘option. Tis icy became a very popular strategy and was. ‘considered good geste by eaters, knot rf rnkrcod loyalty among the organization's current clientele but also wooed ‘thers happy to se more effcieny in the marketplace. As the ‘corpery experoncad an incweasa in demand, it leo razed ‘hat the would requite & commeneurate hotease in rcouresé, fence the recont increase in ns delivery vans to about 800 and ‘the 30,000 people employed in different areas of the organza- ‘on. ncing casos sorvice, packaging end oer delay. ‘cross ts 848 sores. in tho un up to Christmas als in 2018, Argos reportedly added several seasonal staff to the current naanber. Digital Retailing Dovdopments in the word of technology ere trnafonring budhecees in various cect, and retain ie no caption Based on data from the food and grocery research charity IGD, ‘Sparcent of grocery sale in the Unied Kingdom ere dane on- ine. This eral figue f dic to avaray of chalengos asxod -aied with this Wansaction mode, but thes is very likely to improve: ‘over fina. As a key orizaion nthe real sector in the cg ‘al age, Arges i aco working toward ranstonring tl into “lick and collect” business. Toward the end of 2012, Argos an- neunced is mission o reckover tse asa dg tail bade. ‘Join Coombe, the chaiman cf Heme Retal, Agoe's parent or ganization, remarked that Argos is not only an icon of the |BA PART: | Dering Marketing andthe Making Frocass ‘high street but also a leading player in the digital transformation oF UK retaling business. in June 20%, a report indicated that /Argos's Internet sales had gone up by 16 percent, the strongest record fn thes years. Around the time Argos was being sod to Sincbury's, Jofn Weldon debunked the vw that being igtal ‘would be the operating a tactonal retaling outt wit just one ‘tore, Accorcng tohim,t would stil nucle Fring peeps, bring- ing stock in, expanding, and upgrading. Around 60 percent of ‘Argos's ales are now dons as crine transaction, whichis also Closoly linked to the fact that the organization is the first retailer in the Urited Kingdom to make over £1 billon though mobs pay- ments, Its hefty catalogs are being replaced by iPad- style termi ‘rls to facitate onder processing. All of this has helped Argos make a sears entry into the cigtal won retal business. Special Offers ‘Argos’ commitment to delighting its customers is not only evi- Crt the hereanng range of products ores castomers cand the sleek distribution eystem, but also in the various pro- motional prograrms it offers. Some of these are offered to exist- ing loyal customers through the Argos loyalty card scherne while Chere ae to stiact now customers. Peroaly, sends it ‘ustommers various promotional ofsrs, mongy-off vouchors, and ‘ober fancing oflers. When Black Fi ht the UK high street and ils public awareness grew, Argos was quick to explore the ‘opportunity through various spacial price-cut offers that also azracted a recpena fem mary naw and exiting customers ‘About 12 rrilion customers reportedly visted the compary's ‘website on tha 2075 Black Fick, resuting in 18 purchases por second. John Rogers also estimates that at least 70 percent of ie orders wl ba taken orine on Black Fray wie normal rad jing will account for 50 percent. The Argos gift voucher promo- ‘irs, which are managed by the company's afiiates, offer its ‘customers something to fall back on during their various subse ‘ent purchases. The petiodisproduct-pacte spedal oFerson ‘rain products Ike furnture, computers, and TVs also const ‘te part ofthe package thal keeps Argos’ stores busy over the {far3. and with this, t goneratos customer vals profitably. ‘Argos and Society ‘t's tempting to condude that Argos's focus an maximizing cus- toner vies predominar ty ven by the roftrotve. However, ‘reports suggest that the company does beleve in taking respon- ‘sbilty for the environment, improving local communities, andCHAPTER‘ | Maan Craing Customer ord Engosonert 5B Questions for Discussion pursing a numba of itv that rave around long-run ban ‘ts or customers and society Argos focused on reducing the “arount of resources used in cperations and the CO emis Sons it produces. It clearly communicates its gresn credentials ‘nits web pages. Apan fom its catalog, wrich is 100 percent rooydablo, = sources the papor it wie rom sustainably man- aged forests and encourages customers to recycle old catalogs inthair poscossion as these havo provon ucold to nowepanor print manufacturers. According to the firm, it has aiready been ‘able to roayce 81 percent of westa fom the business, had a8 (Percent reduction in its carbon footprin, ensured a 36 percent: recuton nthe wart cant to land, ands exalted a goal ‘reduce ts CO, emission per square foot by 40 percent bythe year 2020. Argos's impacts in the local community are also nota: ble: it supports various charities and othar related organizations, ‘andi spectcally chose Macrrilan Garoat Suppor asi carry ‘of tha yoar fom 2015 to 2017, Arges has shown that ts qt possbo to creat vlusfor auctomare and sll buldrolaboncips ‘with stakeholders 1:16 wT 1.18 1.19 “To what attent do you think the acquisition of Argos by ‘Sainsbury's resulted in deivering superior valuo to the ‘autores? How is the concept of share of customer ustated in the case study? To what extant would you agree with the claim that ‘Arqce's marketing management orientation is @ mar- keting concept? Justiy your standpoint with relevent pines from the case stacy What are the key actions taken by Arges which show ‘hat the organization is follaving the changing markst- inglandscaps? ln view of the sti cernpattion in the UK retail soctor, suggest various ways Ey which Argos could cortinue ‘to provide better valn ots customers.Company Case Dyson: Solving Customer Problems in Ways They Never Imagined ‘The impact of Dyson Led. on veriousindustriss bells its relatively brief history. In just 25 years, Dyson has succeeded in caus ing revolution afer revolution as thas reverted the wacuum ‘loaner, the household fan, the hairdryer, and the commercial hand dyer. cid this across a variety of mature product cal- ‘agorias thought to be anything but movative, a tbuta to tha _corrpany’s simple founding principles. Ft, very Dyson proc: uct must previde real consurnor bereits that make if easier. ‘Sacond, each product must taka a totaly urique approach to accomplishing common, everyday tasks. Finaly, sach Dyson product must infuse excitement into products that ars 50 mun- ‘dane that mest people never think much about them. The Man behind the Name «James Dyson was born and raised in the Urited Kingdom. In 11970, he purchased what its maker claimed was tha most pow- ‘erful vacuum cleaner on the markat. He found it to be anything but that. instead, ths vacuum cfd litla more then move dirt82 PART 1 | Defining Merketing and the Merketing Procass _sround the room. Ths lt Dyson wandering why no one had yet inverted a decert vacuurn cloaner, He remembered something he'd sean in an industria sawmil—a cyclonic: separator that re moved dust rem the air Why woulce'® that approach work well in vacuum cleaners? “I thought no one was bothering to use ‘technology in vacuurn cleaners” said Dyson. Indeed. the core ‘technology of vacuurn motors atthe time was mero than 150 years old ‘I saw a great opportunity to imrewa.* ‘Dyson then did something that very few people would have ‘the patience or thevision to do, Through tial and error, Fe spent 15 years ard made 5,127 vacuum protolypes—all based on a bagless cyclonic separator—before he had the one that went ‘to market. In fis own words, “There were 5,126 falures. But | leamed for each one. That's how I carne up with a solution (Dyson's al-new vacuum was far more than tachno- gadget. Dyson had developed a compictely naw motor that ran at 110,000 revolutions per minute—throe times faster than any ‘other vacuum on the market. tt provided tremendous suction ‘hat other brands simply couldn't match. The bagess decign ‘was very effective at removing dit and particles fem the ait, land the machina was much easier to clsan out than vacuums requiring the mesay process of changing bags. The vacuum also ‘was easier to maneuver and could reach places other vacuums ‘coudd nat. Dyson's vacuums realy werked. ‘The major appliance companies and retallers of the time had no interest in Dyson's design. But Dyson gained distriae ‘ton through a small maikorder catalog with an unusual sales Fitch: “Your catalog is boring’ Shonly thereafter, Dyson vacu- urna were picked up by other mail-crder catalogs then by small appliance chains, and thn by large department stores. By tho late 1980s, Dyson's ful ine of vacuums was being cistibutsd in mutiplo global markets. Today, Dyson is the glabal leader in ‘vacuum cleaners, wih a Ine now dominated by Eghtwoight, re chargeable units. ‘The Dyson Method “THroughaut the development of Dyson's vacuums, a moda for new products began to take shape: Take everyday products, {ocis on thir shorcomings, and improve them to the point ‘of remeron. Dyeon is knoun fr saying, ike gong for ut ‘glamorous products and making them a pssue to use" Whe {aking tis route, boyond nding soliions to tha probs is “trying to solve, the company sometimes finds solutions for other problers. ‘For example, the vacuumn motor Dyson developed sucked air with unprecadsnted strength. But the flipside of vacuum suction is exhaust. Why coud such a motor How ai at wet hands ‘fos tha the Weer woul be reseed off a ecuneg ka tenner rather then the alow, evaporative proach employed by ‘commerdil hand cyers? With that reakeaon, Dyson created and launched the Artlad, shard dyer thet bows ar trough 2. 2-ramtersot ‘at 400 mie pr hour aries hands in 12 seconde camered with the more typical 40 seconds required by othr hard dry. vofs, It also uses cold air—a huge departure from the standard ‘warm: air approach of existing commircial dryers. This not only recices energy consumption by 75 parcert—a mor bonus for ‘commercial svi that pay te soci iks— bur custom. ‘ersere mech mere Hel 10 une a procct that works fast and does the job right. ‘With highly observable benefits, the Airblade was rapidly ad- “opted by commercial customers. Mearwtil, guided by Dyson's: caustomerccantic approach to daveoping products the Aéblads sroted. With the fst Arbiade, & was apparam that all hat high-powered air is noisy. So Dyson spent saven years and a staggering $42 rion ta develo the V4 moto, one of the srall- fet and quitost commercial motors avalabls, As a suf, the Able grew quot and ightor— almost si pounds fighter than the original. Dyson's inncvation process lod to vara of the Arblade, incung the Blade V, 00 percent thier and much dosker than the Aiblade, and the Airblade Tap. a faucet that washes and dries hands with complstaly touch frea operation, Despite the fact that the fon's share of Dyson's usinass comes fem vacuum desners, Dyson Lid. dows not deine it- self a5 € vacuum cleaner company. In fact. Dyson sees itself fs 8 technology-ctven company that develops products with the end user in mind. But rather than using traditional market. recourch methods, Dyson takes a cflerant approach. “Dyson avoids the kind of focus group techniques that are, frankly, completely averaging,” says Adam Rostrom, group markating. rector or Dyscn, “Mast comparias slart withthe consumer and say, ‘Hey Mr. or Mrs. X. what do youwant from your tooth brush temarow oe what do you want fom your shampoo t0- rmorow’! The deprescing realty i that you ohn won't got many inspiing anawers." Trstead, Dyson's uses an approach @ cals “aterragating products” to develop new technologies that produce real solu- fins to customer problems. After idontiyng the mast obvious shortcomings for everyday products, tnd ways to improve: them. Founder Dyson's philosophy is so focused on solving, customer problems that he even developed the James Dyson | ‘Award—the top piza at an arrual contest that challenges. collage students to dacign somathing that Wes a pratlom, Choe a prablem-cenared design i in placa, the eompary than teats protoypes with real consumers und heawy nondiclo- sure agreements. In this marner, Dyscn can observe con ‘sumer reactions in the context of real people using products inthoi relives. ‘This approach enables Byson to develop reveluionay proce uss, uch as thoea in isa woatmant ine of fare, air purif- fs, hurisifers, aed portabla heating and cooing devices. hall started withthe Air Malipee, a fan that moves large volumes. of sir arund a room wih ne blades. In fact, the A Mute looks. nothing tke a fan, By using technology sia to tha found in lurbochargers and jet engines, riven by the power of its small gil motors, the A Muli craw sin. aries 18 tes, and Blows it back out in an urinterupted stearn that elimi: nates the butting are drect ai presc.re of comentional fans. The davelopmert ofthe Ar Nutr come about because of (Dyson's approach to developing new products. “Ttyou ... asked poopliivhal thay warted ra the fan torneo, they would ‘say ‘got rid of the blades," explains Rostrom. "Our approach is about product breakthroughs rather than the approach of just: nurninga focus group and esing a concept” The Next Big Thing About tres years ago, Dyson Lid. shocked the world when i announced plans to enter the autornotive business. Specifically, it plarned t design and produce zero-emission, ak ebectic ve. icles (EVo} with fhe utmate goal of developing fly sa-ing ‘oii, Reactions to this annauncemert varied. but moat 2x ports and observers were skaptical and critical. Aher all, this venture was unlike any that Dyson had previously pursued. For fares, automcbiles are hardly products th are "so mundane,most people never think much about them.” In fact, the an- ouncement came at a fine characterized by more innovation in automotive design, propulsion systems, coneral systems, and ‘aven ownership models than perhaps ever bofore. Add the fact that no new auloratile company had been successilin star ing from scratch, penetrating the mass market, and sustaining business long term in wall ver SO years. The barriers to entry in ‘the automotive business far exozed thosa in the industries where Dyson curenty comptes. Obsarvers alco scratched their hoads as there wore no) readily apparant applications of Dyson technologies to the au- ‘tomobil industry. None of that has deterred Dyson. The comn- pany has committed more than $3 bilion to get the business falling and has begun construction of a manufacturing plant in ‘Singagore with the express purpose of producing its EVs. in fact, Dyson is moving its main headquarters from the United Kingdom to Singapore, signaling the importance of this new ventura, Dyson is also invested in the development and po- ‘duction of its own batterigs to power the vehicles based on ‘anew sold-stats technology that promises batteries that are ‘smaller. saier, lighter, longer-lasting between charges, and ‘quicker-charging. And recently, as i applied for patents, the ‘company revealed preliminary deans for both an EV and bat- tery. Itnow accents with confidence that Dyson wil bagin sling Eve in 2021. ‘What the otside world seems to overlook are the similarities between Dyson's sal-crving EV project and fs previous procuct ‘development projacts. it all started with another James Dyson ‘observation on the status quo ofan industy. Al | could 366 ancl smell ware these huge clouds of diesel ethaust corning out says Dyson, That led 10 he exploration of developing Dyson air ering ‘echnologias for application in vehicle emissions: While emissions Jitraion showed prorrise, that project evernually led ta the com- pany’s frst and only acquisiton of an outside company —Salti3, ‘a.smal catup that was developing sof stato bartrios. Mast ‘experts agree that the entre future of EVs and rechargeable + vices rests on better, more eficient batiories. Dyson simply ac ‘gured a technology t did rt areacly have, ‘Beyond battens, mary core Dyson technologies could play ‘signicart roles in the development of sai-crving EVs. Dyson GHAPTER 2 | Company and Marketing Strategy 83 Lid, has done mor 10 advance aectric motor technology than perhaps ary other company today. Trus, Dyson's current con- ‘sumer products motors ae far too small to power a vehicle, But proprietary laments of Dyson motor designs are ike relevant ‘todeveloping beter, mow efficent motors for cars. For example, Dyson's technologies could do for wet windshields what the ‘Aitlace does for wet hands. And then there's the Dyson robot vacuum, one of the most advanced on the market. Seventeen years in the making. Dyson's robot uses eri itoligsncs, ‘sophisticated sancors, and panoramic cameras to operato au ‘tonomously and foam its environments 30 that can do its job without sucking up any stray socks or geting stuck behind furiture—capabiltss on par with se-diving capabities cf to- ‘day'smmost achanced vehicles. ‘Wat each step toward daveloing is new EVs, Dyson makes it more clear that it means business. When pressed for details ‘about is cleric ar, Jarnes Dyson indiates that won't be a ‘sports cay, i wil ely ba pricey, end it wil have at Keast vel 2 ‘eutonorny (hands-off) He also ads that Dyson's frst EV may not Took much lis ary car the word has ever seen, But its prew- ‘ous enties into new product categories didn't look much tke vacuum cleaner, fans, hand dryers, and hair yrs other, ‘At Dyson Lid. innovation never ends. The company not ‘enly continues to demonstrate that it can coma upwith winring products again and again. it expanding throughout the workd ‘ata ratid pace. Dyson sells products in mara than 60 global markets, emerging econcrriss as well as developed nations. [Dyson does wel in both econorric good times and recession- ‘ary patos. From a sngl vacuum ccaner 19 EVSin ust ovr 20 yyoars— that’s quite an ancornplishment2! Questions for Discussion 2:46 White a mevtet oriented mission statement for Dyson. ‘2-47 What ae Dyson's goals and objectives? 218 Does Dyson have a business portiolo? Expain. 2419. ts Dysona customer contered company? Expiin, 2.20 Based onDyson'spas, predict the outcome of Dyson's {utura inthe automotive business.Company Case Square: in Relentless Pursuit of a More Elegant Payment Experience It happened one day at an art fa. km McKelvey, en arisen who worked i hendbiown gs had an adr of is work roedytobuy apiece priced at $2,000, There was ust one problem. The custorner ‘dnt have that much cash, and Jimwasrt equipped to tke creck ‘cards, McKelvey court cosa the deal and ost avahble saa, ‘But there's a happy ending to this story. McKehey quickly racogrized thatthe prabiem he faced thet day was comman to smal and medum-sze businesses (EMBs) everywhere, Reaing how much manay he was losing by not accepting ‘rect cards got him going on solving the problem. McKelvey: ‘ard partner Jack Dorsey cama up with Square, the payment processing innovator that sot re to an industry. Today, Squares \valued at $27 bilion. So you might say that MeKaway/s glass art isco is tho most valuable piece of glass never sold. ‘Sayers’ crighs are not unlke the orgs of most startup com- pies: The founders recogrize a probiem ior which hares no cur- Tent product or service solution and sat out fo sohvait. The question: is this: What cried the problem tat im McKehey recoryized then etl cky? Th shor anewer: The concur and meting ‘eviorrnent fad chenged but bushecsas hed yet to catch up, ‘The World before Square When consumers used cash as the primary means of paying for ‘goods and savices, SME owners had itl prablem saling thar wares, Butas the 1000s carne toa cose andmors and mora busi nesses acoapled cred cards for payment, people cared las and Nees cach, Ths put SMB at a dsedvartage: mary factors max the processing of cect cars dfict to mpassble forthe. For starters, before Square ard its mary iter it wes i legal for non-ragtered merchants to acoapt cred card pay- ments, Registering with an approved credit card-processing terrinal provider was expensive, wih a substanial fat foe at ‘he stat and teneacton foes tigher than most SMEs coud a fore, Crect card processing was avaable to merchants only cn ‘contact beeis—whan merchamts signed, they wore locked in, Ading to this complet, the terms of the contacts were d- ficut to understand, ofan leading to unexpected fees, ‘Wal his wasn't encug to keop most SMBs out of the cred card loop, when it came to accepting cradt and debit cards, ‘hay ail had tobe approved, Like gating a bark loan, being ap- proved for credit processing serves was contingent on incis- ‘ions of frandial strength and sahil. Then, “even you co gat ‘accepted by a tational terminal provider to accept payments, you fypicaly sign up for a contact thet i at bast opaque and probably not so far? says Square's head of hardware. “There's a teaser rate, there are mortby foes, there's avaroy of cther foes, ‘Gifferant cards cost diffsrent amounts.” ‘Things stated to change inthe ric-1980s with the advert of ‘ecommerce As rikelyesit seems today, nthe early cays cl ay, tryers hd to mal cash ora check to seers before goods were shipped Chins payment ike PayPal tock cave of thet problem, Euinthe offre werd SMBs werasil bing arduded, The Dongle That Changed Everything ‘Square launched in 2008. The idea was simple. Square would fay the roo of a big business, puting up the capital and as- suring the risks of processing credit and debt card wransac- tions, The pramisa of volume et Squaa form parterhips wih creditcard comparies such as Visa and Mastercard, bypassing the credit car-processing comparies alogether and negot ‘ating ower fs. With low fees and minimal overad, Square coud make its senices avaiable to anyona—marchant or av- caydey indviduel—wih no contract and no approval process. Merchants gained piaca of rind fom a simple structure of af- forcable transactions foes that wars the same fr al With the back-offes pat of payment rooesing sorted out, ‘Square needed only o figure ut the interface between th mer. chant and the customer. t dveloped the nowarar Square cdongl—a smal yet dlagert white plastic magsripa read that lugged into the headhhion part of Ancrid or Appa i amar phones and tablets. The reacr cast only $10 ras today), and the app that powered i was fae. The combination of Square's tarda and software processed unencrypted, analog card n+ formation by ding t and sending t to Square's savers. Thus, wih nothing more than a smartphone, ary smal tuusinest owner coud accept credt and debit card payments, wwhatharsaling toma tadtonal ck-and mortar store, asreat, cat, booth at an avert, or even the trunk ofa ca. Highlighting the real banefts of Square, Dorsey notes thet payment process- ing is ‘not even in the category of tings lmecchents| want to think about. They want to thnk about things lke hiring people andintroducing new ngrederts* ‘Once Sauer lunches founders uc ele tattered ‘only ene scien to a vary narow problem. Cred card payment processing was now avaab toa Buta one-izefts-l soon is rely pare or ryone, For most SMEs runing card though ‘areadercornected to a srertchone dd rot ge custorers en i grescon of silty ard secur. Thera lo rained the clnge cf appeding to the sogrent of SMBs tat dread had contactswih honest, Was thet scr tnd ta deep ayo of dary things ands the adap of Fitts bck, don't i" 5s Dora. From its earket days, Square's founders realized that thay ware far fom sching the problems associated with payments And gien how rapid the forces ofthe marketing erironment were changing, ther task would naver be dane, To meet the ‘challenges, Dorsey and McKetvey developed a philosophy of never-ending novation wit the goal of making paymerts lass paiefuland more elogart. By ther nature, paymerts represented fa Tansacton bari to both buyer and sell. To remove thepayment transaction bariers entirely, payments had to become perfectly seamisss, And to fully accomplish that goal, Square ‘Would kel have to venture beyord the payment business, ‘Continuous Innovation Following the orginal dongle, Square urleashed a sting of proce cts and services that rival the bast of Slican Val fr fequancy ‘and quality. Not orly has Square partnered with App for var ‘ous projects, references are often made to the “Apple-esqus" ‘design qualities cf Square's hardware and software davelop- ments. Athough the basic Square dangi is cil avalabi toy, the device is the etry level and lanst sophisticated of Square's products. Corsicer the folowing: ‘Square Stand (2013), The Square Stand tuned the Apple iPad into a mow complete poirtcf-sale aystem. The intagated all Whte stand sts on a merchant's counter and servos as ‘customizable “register” lating emokayees ring up orders. Once: the bil is indie, Square Stard retates to face customers, al lowing them to swipe or inant ther own card and sign on the ‘touchscreen, Today, Square Stand has evoWed 0 interface wih ‘commenly used peripherals such as printers, cash drawers, bar ‘coda scanners, ad aven Square's own Elustooth Reader. ‘Square Bluetooth Reader (2048). Cornecing o other Sauare ‘devices via Blustooth the screenless Square Reader isa versa- ‘le device that reads chip-ambacdled cards aswell as contact- Joss farms of payment such as Apple Pay and Google Pay. The ‘device can sit in an angied stand on a courier or can be handed {oa customer to accept payment i almost ary situation, ‘Square Register (2017). Despite the versatlty of Square's mary products, there were ail customer transaction situations ‘that were not yet “soamioss" Enter Square Ragiter—a stand ‘alone poirt-oF sae aystam designed and produced by Square. A ‘stand holds the (S-inch anodized aluminum tablet that faces the: ‘employes. A second, smaller touchscreen faces the customer, ‘sther attached 10 tho back of the stard or soparata for stu: ‘tions where the customer is a bit removed from the register. ‘Square Rogisterintofacos with cards via magstipe or chip and ‘alco acoopts cortactless forms of payors. Like Stand, Rapier interaceawith avery of peripheral. Fagater saves money and tre by not requiing an Apple Pad. But mare imponart, Square developed gist to mast the needs of lager businesses that found Square's oher prod- ucts tobe problematic. For example, Pads have to ba updated ‘Fequerty. For chains with mule checkout lanes in mutipl ‘stores, updating each Pad in the compary became a fubtime: [pb. Rogiter solves this and other problems with a tablet that is stripped down in both hardware for example, no battery) and ‘sofware (rly Square software. The result is a aystee that is ‘ester. mere power and mars rola. ‘Square Terminal (2018). Tris is Square's akin-ens payment ‘ermine Like Rogister, the device is designed and preducedt by ‘Square so that ft doesn't raly on any adticnal hardware or soft ware oan stand alone or reriace with other Square products. With a scree the size of a modem smartphone, Terminal 2:- ‘copts all forms of payment accepted by other Square products, Its touchscreen lts customers see and sign for their bil. And “Terminal can aso print receipts. ‘Square Terminal is Square's way of fling ariche that exist betweenits ther products. Mors importart, it sacks to fx ‘allthe stuf" that's wrong with radtional crac card terminals. Square: ‘exocutves quichy point out the antiquity of standard ternal ‘hal sil dominate the real landscape, put in place by traction paymont processing comparies such as Ingenio and Frst Data. CHAPTER 3 | Analyzing the Marketing Environment 115, “These devioas have many issues thal businesses and customers hae just come to accapt. For example, the keypad is emall and ‘lurky, resembling a handheld calcator of 40 years ago. The ‘screens ere try and do not let customers exarine their complete bill The elder devices ara also cific to update with naw capa bilities, often requiring an ertely naw herdivere interlace. Beyond Exciting Hardware ‘Square designed each ofits products with certain applications in mind. But the corrpany’'s approach to imavation ress on tha ‘expactaton that customers wil apply ts products in ways the ‘company never imagined. Whats excting to mo abou tic that itkind of resonates ack to when ws fst started the compart and we buit the reader” explains Dorsoy, refering to Terrina. “We had como idoa of who would use i, but realy rida how it would end up baing used. This has voy similar popes whare we'l probably be surprised at how people usa” ‘Once merchants get ther hands on a Square dave, they in- -stnctvey igure out Row to maka it wor for ham. While Squara ‘expected Terinal 1 be employed by everyone from “dentists 12 bowing aleys it coulde't have imagined al the ways the prod- Uctweuld bs used. For example fed tests revealed that west in restaurants tote Terminal to ders” tables fr on-the-spot pay- ment. Salon operators hand Terminal to customers whis they are ‘fin the chal. In perhaps on of the most unexpected uses, a plastic surgeon began taking Terrinal tothe treatment race so ‘hat thebil could bs rariawed wih the patsnt and payment could be madein privat, avoiding potential uncomforablestuations. ‘The Square universe alo extends far bayond in-person pay ment processing. Square is invading PayPal’steitry with on- lina payment capabiliss. i's Vonmno ike Square Cash fats inc viduals sand money to each other with the ease of an agp. Mora important to SMBs, Square prevides a full pocticbo of business ‘sorvices, including creating and hosting onine store platforms, ment scheduling, and much more. Thus, Ternial. Regite, ‘and Siand aren't just exciting piocss of hardware. Thay are ‘gateways to an entra ecosystem of emal-business escorts. “There's no. question thet Square has deeply cfsrupiod the ‘codit card payment establishment, Square's revenues have ‘early pled in the past hres years © $3.3 blo. aso hanced ‘$82.66 billonin transaction payrents— impressive but ila crop in the bucket when you consider that Square's poral markat is “all mansactons, crine andiofl* Mra importants the potential ‘of Square's parfobo. “Our approach has been to et ust stop ‘tho davic, bs tho connection 1 the broader ecosystern of tks.” ‘says Dorsey. “We can hand your payrl, we can give yaua loan, we can hare your appointments f youre a selon in ckltion to wabeins who come in to buy product and use [Tarninal| to vine ‘card lfwe can tell story that is tigger than one piece ofhard- ware tht is ible, than we tend ta hit rind” i other werd, ‘Squats potential for growth is practical uriimtod = Questions for Discussion 9-16 Doscribe how Square has avowed based on actors in the micoerwirormart. Describe how Square has evotred based on the foros ‘ofthe macrecnrormert. ‘Ave factors in the marketing envirorment nat men- tioned inthis case afocing Square? Discuss. ‘Specuiate on Square's future, What current and future trends may further shen the company? an a8 a94. Lakeside Technology Services (Carmela Iglesias geting desperate about her new business. She's not sure she can make a goof t—and she ely wants to stay in her hometown of Petoskey, Michigan, a beautiful sum- mer resort area along the eastern shore of Lake Michigon. The area’s permanent population of 10,000 more than triples in. the summer months and doubles at times during the winter skiing and snowmobiling season, Carmela spent four years in the Navy after college gradua- tion, returning home in June 2009. When she couldn't find a 00d job in the Petoskey are, she decided to go into business for herself and set up Lakeside Technology Services. Carmela’ plan was to work by herself and basically serve a a "for hire” computer consultant and troubleshooter for her customers 650 She knew that many ofthe upscale summer residents relied on a home computer to keep in touch with business dealings and friends at home, and it seemed that someone was alrays ask ing her for computer advice. She was optimistic that she could keep busy with a variety of on-site services—setting up a cus- tomer’ new computer, repairing hardware problems, installing software or upgrades, creating a wireless network, correcting problems created by viruses, andthe like, (Carmela thought that her savings would allow her to start the business without borrowing any money. Her estimates of required expenditures were $7,000 fora used SUV; $1,125 for tools, diagnostic equipment, and reference books; $1,700 for a laptop computer, software, and accessories; $350 for an initialsupply ofitings and cables; and $500 fo insurance and other incidental expenses. This total of §10,675 stll left Carmela with about $5,000 in savings to cover living expenses while setting started. Carmela chose the technology services husiness because of her previous work experience, She worked at a computer “help desk” in college and spent her last year in the Navy trouble- shooting computer network problems, In addition, from the time Carmela was 16 years old until she finished college, he had also worked ding the samme for Philp Lee Pili opertes the only ices computer services company in Petey, (Thee vwas one other local computer store that also did some on- location service work when the customer bought equipment at the store, bur chat store recently went out of business.) Philip prides himself on quality work and has been able to build up a good business with repeat customers. Specialising in services to residential, small business, and professional offices, Philip has built a strong customer franchise. For 20 years, Philip's major source of new bustness has been satisfied cus- tomers who tell friends or coworkers about his quality service, He is highly regarded asa capable person who always teats client fuly and honesty, For example, seasonal residents ofen give Philp che keys to thee vacation home o that he can do upgrades or maintenance while they are away for ‘months at atime, Philip’ customers are so loyal, infact, that Fix-A-Bup—a national computer service franchise—found it impossible to compete with him, Even price-cutting was not an effective weapon against Philip. From having worked with Philip, Camela thought that he knew the computer service business as well as he did in fact, she had sometimes been able to solve technical problems chat left him stumped. Carmela was anxious to reach her {$60,000-per-year sales objective because she thought this ‘would provide her with a comfortable living in Petoskey, While aware of opportunities to do computer consulting for larger businesses, Carmel felt thatthe sales volume available there as ited because many fms had thir wr. compte pe- cialists or even IT departments, As Carmela saw it, her only attractive opportunity was direct competition with Philip. To get started, Carmela spent $1,400 to advertise her busi- ‘ness in the local newspaper and on an Internet Web site, With this money she bought two large announcement ads and 52 weeks of datly ads in the classified section, listed under “Miscellaneous Residential and Business Services" The Web site simply listed businesses in the Petoskey area and gave a telephone number, e-mail addtess, and brief description. She alko listed her business under “Computer Services” at Craigs. for Northern Michigan—updating this notice and information once a month. She also built a smal! Web site with just a basic fom pg, a page wth her pct and experience, anda thid page that list services she offers, She put magnetic sign boards con her SUV and waited for business to take off. (Carmela had a few customers, but much of the time she wasn’t busy and she was able to gross only about §200 a week. Of course, she had expected much more. Many of the people ‘who did call were regular Philip customers who had some sort of crisis when he was alteady busy. While these people agreed that Carmela’ work was of the same quality as Philip’ they preferred Philip's “quality-care” image and they liked the fact that they had an ongolng relationship with him, ‘Sometimes Carmela did get more work than she could han- dle Tishappened uring Api an May, when esoal bu nesses wee preparing for summer openings and ownets of summer homes and condos were edly to ‘pen the cottage” ‘The same rush occurred in September and October, as many ofthese places were being closed forthe winter; those custom- ers often wanted help backing up computer files or packing up computer equipment so they could take it with them, During these months, Carmela was able to gross about $150 to $200 aday ‘Toward the end of her dscouaing fis year in busines, Carmela Iplesia is thinking about quitting. While she hates to think about leaving Petey, she cat se anyway of making living therewith he independent technology services bu ‘nes. Philip seems to dominate the market, except in the rush seasons and for people who need emergency help. And the resort matket is not growing very rapidly, so there is ltde hope of a big influx of new businesses and homeowners to spur demand, ‘ Evoute Crm esis sae planing fr er new bus ses. Why int sh ol to each er jet of $60, Wha should Carmela do now? Explain178 PART? | Understanding the Marksplace and Goraumer Value Company Case Kraft Heinz: Once a Taste Maker Now Struggles as Consumer Tastes Change In the era of high-tech Siicon Vallay startups, the Googles, ‘Amazone, and Facebocks of the word seem to gst all the at- tention. But planty of comparins today have bean leading thoir industies for decades, some since the start of the Industial Revolution. Kraft Heine is one such compary. Tracing its roots back to the late 1800s, Kraft Hoi has played a big rola in ‘shaping the packaged food industry with innovative process ing, production, and cistibution methods. Today, you'd be hard pressed to find a household in the United States and many ‘other parts of the world that doesn't have Kraft Macaroni and (Cheese, Heinz Ketchup, Oscar Mayer deli products, JalhO, Miracle Whip. or one of Kraft Haire's numerous other biock- bbucter brands on hand. ‘Butin recent years, the compary that's put so mary beloved brands on Amarican tables has encountered some head- ‘scratching market condiions. Alof asuciden, Kraft Heinz'sonce- _gakdon brands have lest some of their sauce. ian age of rapidly increasing heath awaroness and the expancion of store brands, ‘congumer tastes and preferences have shied fast. Grand man- lagers and product developers at Kraft Hain have tweaked land extended the cormpary’s brands as slways. But in the past ‘ow yoars, fla has worked. Aker years of steady growth, Kraft Hait's reverues have been fat for thres years running. Even worse, last year Kraft Heinz posted a net loss of more than $10 billon—an amount nearly identical fo the net proft posted the: year before. At tha sams time, the company was forced to wits ‘down the value af some of its bast-known brands by $15.4 bil- Jon. Wh its stock price in a tres fal, Kraft Hei is now dasper- ately tying to figure out how to once again please the pallts and ‘tickle the taste buds of consumers worldwide. The Men behind the Brands Henry John Heine was bor near Pittsburgh in 1844, By the: age oF 15, he was botling and seling conciments-—horseradish ard picios at st. A few decades later, Haw Tort Ketchup made its debut. Right about that time, James Lewis Kraft was tom. Going his art inthe choses bueinecs, Kraft founded the company bearing his family name and opened its first cheese rmanidactsing pantin Chicago in 1814. In the early 1900s, fewer people were farming and more: people were working n mines and factories. Thus, ewer people ware grwng and raking thet own food. Asaresut. mary Were (geting sick rom foodbome ilnesses. At that tine, “heaty™ mest meant cable! Wi demand fer food proctuct withlong ‘shelf lives skyrocketing, both the H.J. Heinz Company and JL. kro and Grothe wera quick to obigs. Canning was already a known method for making food ‘hel stable fo months. Hei took further, apping science and tochnology to solve problems tko bactra contamination ‘aswel. Silay, Krak got cay with cheese, bringing iin 10 the induztral ago wth pastoureaton techriquas. Krat leo developed corning and dehy ration methods that led tothe do- velopment of brands cuch as Miracle Whip and Kraft Macarer and Cheese. Both companies played key roles in stabilizing foods, making them salor as well as easier to ship and sto. These characteristics played well not just with U.S. consumers: but also with insttuticnal customers. The Urited States and foreign governments becams the biggect fod buying custorn- rs throughout wo word wars and the reconstruction affos ‘that followed, Both Kraft and Heinz became some of the larg- ‘eat food producers in the world while also establishing stan- ‘dards for processed foods and censumar packaged goods in general, ‘As the twontiath century came toa close and a new miller "ium dawned, both Heinz and Kraft experienced verious merg- ‘ers and acquisitions. In 2015, the two companiss combined to form the Kraft Heinz Company—the wortr's fitrlargest food ‘corporation. ‘Like other large and estabished packaged food companies, Kratt Heinz isno stranger to shiting consumer preferences and ‘onde. Krat Heine brands have evolved considerably over the years based cn such tronds. Tako Kraft Macaroni and Cheese, ‘a brand launched as a drect response to spediic consumer reeds. Introduced in 1937 dunng the depths of the Great Depression, the box of cried pasta with the familiar packet of Procesced cheese powder was launched in the United States ‘and Canada as Kraft Dinner—a meal forfour atthe low price of just 18 comts. Kraft sold eight milion boves the frst year ancl 50 rmilion boxes throughout Werld Wer I. “Today, the original-fornat bored and cried Kraft Macaroni 8 Chacse Dinner is stil the: most popular version af the world renowned brand. Butyou can also gst your mac-and-cheese for in microweveabis singls-serve containers as well as in a creamy Deluxe form in variates ranging from White Cheddar and Bacon to Cheddar Brocco Cheese. And Macarori & Chease Shapes Prot only puts laters and numbers in kids’ bows but ergartains them with Star Wars, Sponge Bob, Fniding Dory, Trols, and ‘Teenage Mutant Niria Tunes shapes as well ‘A New Kind of Food Consumer While Kraft Heinz has successhily adapted to consumer trends ‘andhas even set some trends of ts own, racent tits have sty- ried the company. One of the biggest shits hes been toward healthio fare. Consumers today are far more aware of the Ink between food and health inung the rae that foods ean play in the davslopmert of major clssases. This trend has bean un- {olding for some time, and Kraft Heinz has not sat iy by. In at- ‘tempting to appeal to conaumer derard foc healthier products, ‘the company initialy took a ‘no problem, well fix a” approach by ding what it has ahways done. Customers warted hesthior food, 50 the company eliminated aria favors, colors, and preservatives fom mary of ts brands. Stil nat enough? Kraft ‘offered whole grain and orgaric versions of consumer favors. Ban such now products have lagely miscad the mark, ‘Athough such products were "haathisr” disoming parents and incviduals stil il not view thorn as “healthy enough” For exarn- ple, Kraft Heinz launched GapriSun Organic, made from organic Juice concentrates without added sugars or erica ingredients. But ctics and activists quickly poirted out tha heathierin some ‘aroas dosen't cerpansats for unhealthy in thers. CapriSun ‘Organic may hare let cut all the unnanuralingredions, bu it til packs nearly as many calories and carbotydrates per cunce 8s ‘good aid fashioned soda pop. Health trends are nething new to the food industry. But to- ‘day's time-starved and heattraware consumers are fooking for more than just buzz words on labeks ofthe same old prec ucts, Customers today want ready-to-eat foods that empha- ‘so the “prepared” but siminate the ‘processed." As a result,{ood-buying customers are spanding mare tims in the produce ‘sections as wol as the refigeratod and frozen food aises of ro- cary stores. These aisles are axplocing with options that have tha lock, tasto, and ruttion of something you right have just made yoursaf frm seatch. Indvidual food tems and completa mal ts ae proeraing. And at price points cose to the cost ‘ofbuying al ths indvidual ingredients andi making the dish, con- ‘sumars are gobbing up thase options about as fast as thoy Fit the sheles. ‘More than just the foods inside the packages, it's the pack- ‘aging itsell. Customs ars favoring labels that are simple and ‘loan with nuitional formation that is eagy to find and in- ‘erpret. Moreover, the vary image of eatabliched food brands ‘often seems to be incompatible with current consurner percep- tions of "heathy." [Beyond health issues, another trend in consurner food pur- ‘chases fits at the very core of big food companies Ike Kraft Here. Consumers are turing away from techandtrue na- ‘ional brands and toward pvata label and riche brands. Mora ‘ard mor, customers are finding groair luo in store brands ‘such as Archer Farms (Target) Krland Signature (Costco), and \Wickedly Prima (Amazon), which offr laver pric with excep ‘ional varoty and quakly. Some of the fasost-growing groscry chains—such as Tadr Joo's. ALDI and Lic sol mostysiora brands, With so many good grooary options, mary consumers ‘ara questioning the loge of peying $1.59 for a pian old bax of Krak Macaroni 8 Chosco when thoy can get the Wola Foods ‘285 brand through Amazon Prime for 89 cents and the organic version for $1.68, ‘Turing the Tables Wn contol over customar purchase and trafic data not 2 marion she and dep space retailers have boon cick fo idently and respond fo Corsamer teria As a veaat, ary of the not new fod tems in sores now Beer store bran acs. Instore rol estat tel is Changing asthe corte aes com nated by processed foods are shrinking while the fresher food ‘Sectors arard the patmeter ofthe stove ae growing in other ores tha grocay space where Kraft Here as thawed! the mast inthe past geting anal nthe soca thal ave rowing, the ‘corrpary has Ite ha fs cuter coreumer moods. ‘Mary of Kiet Hews cunt woes are due in pat tothe major cost-cutting afforts it launched immediately folowing tha (CHAPTER 5 179 rmeryor four yoars ago. In cuting cost, it forgot that the most important thing fora food compary is to make tasty products ‘that people want to buy. At the same tims, Kratt Haire is not alone in its struggles. Cthar food giants such as General fll, ‘Smucker, and Kellogg are having similar problems. On aver- “age, yoar-over-year revenues for lage food conglomerates are ‘fa, whereas those of small, niche-coriented food companios ars growing by double digts. Private labo food brands are posting sire fast growth, One study shaws that 0 of the tam 100 ‘consumer-packaged goods brands have lost market share -owor the past four years. Msarwhip, private-label brands now account for 17 percent of ll ooeries, amavket share figure that has been rising fr years. Kraft Heine and its peers won't likely disappear. But the de- ‘gf20 10 which they continue to lead the industry they created wil depend on their ably to adapt. Each is making efforts. In some cases, those efforts are in RED, such as Nestlé working 1o -dovelop a alow" sugar molscus that wl Itt mae th sams ‘candies with 40 percant less sugar In other cases, established _companios are acquiring success niche brands—Genecal Mis now owns Arnib's, ConAga owns Smart Balance and Ud's, Mondelz owns Tats's Bake Shop, and Kellogg owns AKEAR. But the price of acquiring hot, niche food brands is on the sa, ‘oven as Kraft Heine's cash-on-hand dcines. Ths bottom ine: Unless Kraft Heinz can adapt to changing consumer tastes and preferences. it wil continus to ses both ts treasured brands and its fomunes shrink (Consumer Markets and Buyer Behavior Questions for Discussion 5-16 Of the factors that infuence consumer behavior, which category or categories (oultural, social, personal, or pay chological) best explain Kraft Heinz's current situation? (Choose the specific consumer behavior factor (for ex- ample, cuiture, family, occupation, attitudes) that mast accounts for Kraft Heinz’s current situation. ‘With respect for buying groceries, discuss the buyer decision process and how it has changed in recent years. Make recommendations for Kraft Heinz that you think willtum its stuation around, BT BAS BASCompany Case Shopify: An E-commerce Giant That Doesn't Sell to End Users ‘What do Budweiser, Tesla, The New York Times, Bombas ‘Socks, and Kylie Gosmatics have in common? Each compary ‘s6fs drect-fo-consurmer (DTC) merchandise primarily onine. But mere, sachhas an online stare created, managed, and powered bby Shopitythe biggest e-commerce compar that most peo- Ble have raver heard of. Inthe age of OTC companies, Shopty i behind the-cconos business that takes care of everything for _aryone wanting to sell something online—a genuine end-to-end ‘corrmerce platform for everyone from the young entrepreneur ‘who has nevar started a company tolarge. wal-hnown corpora: {ions needing an aniine store. ‘The concert is simple. For amonthiy foe, Shopily helps inci viduals or corporations cell their merchandise cniina, I supplies ‘evarytting merchants nead to go onfine, including customniz- ‘consultative services and a network of pariners 10 hande ‘manufacturing. promotion, and order fulfillment. Shopéy's plat- form nat ony sells merchandise crectly froma the marchant's ‘ening store or mabiis app, it plugs into a growing number of bbroader platforms, including oniine marketplaces ike Amazon, ‘social media channels Eke Instagram Stories, and even brick- ‘and-mortar locations. The system is completely cloud-based, which means zero iwestmert in hardware and sofware. i ‘also means that business owners can manage things trom ‘aryeharo on ary device with an intemet connection. In shod, ‘Shop's mission iste make e-commerce easier andl beter for everyans. ‘Athough that mission seems a bit lfy. Shop i wall n its way. In 2515, tho near 10-year-old company went public at 1 value of $1.3 bilion. The preceding year, Shopiy’s 140,000 ‘stores had sold more than $2.7 bilon worth of merchandise, ‘And Shopiy has been laxced by exports and organizations the ‘word over for its growth and impact. indluging bsing named as ‘one ofthe world's most imovaive corrpanies by Fast Company {his yoar. How Fas Shopty eorno so far co fast yet rernain rla- tively urkrnown to the average concumee? From Snowboards to Startups It all sarted in the early 2000s in Cnawa, Gusboo, when Ta Litho and Scot Lake mot and bonded oer tec owe of technol ogy and snowboarding. The pair joined forces to open Snowdevil, an oniing store selling high-end snowboards. Building the site proved to be an cxareisa in fustratan. Working with popu: far sofware options of the day. such as Microsoh Commerce ‘and Yehoo! Stores. was cficut and expensive. So Litke— who(CHAPTER 6 | Business Markots and Business Buyer Behavior 201 had cropped otf of high school atthe age of 17 to work as a programming apprentice at Siamens—dacided to build ris own “-commercapatfoem Fom seta, He care up wih aorething much simp. fase, and more viualy pleasing than anything ‘rom existing web design venders, ‘Shawcevlcom's cles wore meager at bac. But Lithe and Lake quill reaizedthat the mat vehublo entity thy possessed was the platform beneath Snowdevil. Se in 2006 thay launched ‘Shoply as a plate for creating cnine stores, The going was slow at first, but as they continued to improve the platiorm with innovative tol, the cant base grew steadiy. Shoply also de- veloped a corporate ait based en authority, feo thinking, ‘and what the compary cells the “rust batter/"—a peroaptuel gauge of an individual's potential based less on what they've already dons and mare.on what thay might do in the future. ‘The Anti-Amazon Bung the Shopity e-commerce platform required carctlly ‘atning what that platiorm is. But kay to Shopii's strategy i ‘abo to dafine what the platform is not. In short, Shopily # not ‘amarkoiplace. Athough Shopily cots up and rurs e-correrce ‘operations for DTC companies, it operates inthe shadows, si- lontly and visibly. So whan customers visit Lopsa.com to buy & mattress, every interaction take place with Leesa, the company ‘and brand. Customers Browaing for temporary tattoos at Tatty, ‘com now only that they are experiencing a zelecion of creative, high-quaity temporary tattoos exclusive to Tatty. When DTG brands selon Amazon—whstherfuled by Amazon cr by the third-pary vendors— customers are buying fem Amazon, and the brands thamsalves gain fale by way of brand oquiy. Bu Vistors tothe e-commerce stores powered by Shopiy nypically have no idea that Shopify even eis, let alone tht isthe com pany bahind the engns that dvs thet interactions. Ths DTC brand tse stands out. not the plaiform. ‘Shopity thinks of itseif as the antiAmazon, not because itis against the e-commerce giant but becausa it offers DTC ‘companies a path 10 selng their goods that isso diferent in ‘concept and cuicome. Although Amazon takes care of ev- ‘anything down to operations and fulfilment, vendors don’t ‘50 much buld their own brands as they do Amazon's. As ‘Amazon has grown, mora sellers have complained openty that they hve litle control aver their sales, customer rela- tions, and the data generated from shopeing. In mary cases, ‘controling those assets has allowed Amazon to develop private-label brands that compete directly againet its sclera’ brands. With Shopity, the merchant. not the marketplace, ‘owns accass to the end user. ‘Bang a non-markeiplace e-commerce platiomn gives Shply ‘a unique competitive advantage: Shoply is noutal. ft ieerfaces with and oven plugs into numerous exising marketplaces but ‘doesn’ favor ary. And shor of moritaing to prevent llega activity ‘on the part of vendors, Shopty dos not interfars in then busi- nesses, This nouralty has alowed Shopiy to easy imarface wih the fs of Prterest, Instagram. Facebock, Amazon, and rasner- ‘cus cthor companies that foarure their own marketplaces. Thus, ‘Shoply dionts have access to any and al pariner mevkstpiaces. ‘A Big Boost from Lipstick ‘Sinos going public, Shopiiy's growth has acoslerated. The com- pay go fs igpect pubic it in August 2018 hen the cower cof Forbes featured Kyle Jenner in a black business suit with the headne ‘Amercas Women Bllonare* Tho cover try described haw Jerner would become the youngest aver se made billionaire at age 21 by kveraging her fama into @ cosmet- ice empire, Mera importer, the afc noted that Jenner’ anne ‘Store, kyliecosmatics.com, was powered by Shopify. Less than ‘one yar afer ining Shonily, Kye Cosmetics hac gone from sell ing ts cgnan.e ip kits to sling a fllin of marothan 60 corer “cosmetics products generaiing more than $200 milion in annual sales. Paying tibute to the power of Jenner's fame as a factor in the young branes success, Fars also pointed out that Shorty was the e-commerce platform behind online stores for Drake, Justin Bebe, and Jenner's own hal-sstr Kim Kardashian West. ‘More rocenty, Shopily has takon things ta an orsiraly now love, rsasing a range of raw took that lat small and meciurn- ‘stad businesses betior compete with ¢-commerce giants, Tose include Stony Prg—a pawarfl customer service tol that ets merchants interact with eusternars over Facebook Mecsongor— ‘and Dyrarric Gheckout—a chockout ystom that sfirinates| roadblocks that lad customers to abandon ther cars. Although ‘smal businessas and startups are sil th backbone of Shopity, the compary now offers Shopily Pus —an e-commerce platform and services for companies with revenuss of $1 milion or mere ‘each year. ody, ust four years afte tha cormpary wert pubic. Shopty hosts more than 800,000 active cient stores that have sold mere than $100 lion Worth of merchandise. During that ame period, its stock price has increased by 600 percent, ging the company a vals of mere than $22 blion. Fors forts, ‘Shopify's cut of cant store sles came to mere than $1 bilion| last yea, making it the youngest coftware-as-a- servos compary ‘er to reach the billon-dolarreverue mark. “The 21st-century bend is the disctto-consumer brand” says Shopiy's chist marketing offer. ‘We run the gamut af a real operating sys- tom he say, rican that the cornparyintaeis o be a major {orce in powering DTC cornparies for along time to come. Despite ts momentum. Shopify faces plenty of chalengss ahead, For strtara, Amazon recenlyIaurchad its own Shopy ‘efter, Amazon Stororonts. lled a5 “ana way for small and medium-sized businesses to sol products direct through Amazon,” Storefronts highights small businesses and their col- lections of uique precucts in a separate section. And although ‘Shopily has a clear lead in the end to-end © commerce platform business, some analysts speculate that its model would be eazy ‘orapicate Infact, mary ofthe companios that Shogiy partners with to provide process piscss for its e-commerce plete — such as PayPal and MailChimp—abeady possess data that coud alow tham to epand the ecommerce seevices they provide to their own OTC cients. Fergoing shor-torm profs, ‘Shopily continues to invest heaily in Shopy Pus. ternational ‘Spansion, and innovations it bolas wil continue 10 make i ‘the leading @-commerce platform provider 2 Questions for Discussion: 616 Compare and contrast the nature ofthe busines mar at structure and demand relative to consurnor markt ‘sructure ard demand for Shopify's savices, 6-17 Discuss how a potential dant for Shopily might go ‘through the business buyer decision, 18 How doos the concept of the buying canter apply to ‘Shoniy? 619 Haw much of a threat does competition pose in ‘Shopiy’s ttre?