2002, Professor Jerome M. Katrichis
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Sports Authority Example
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V. Generation of Alternative Marketing Programs
A. Alternative Objectives/Strategies/Missions
1. Strategy Alternatives
Sports Authority currently combines a price leadership strategy with a differentiation strategy. The company seeks to have the lowest prices in the industry, while differentiating themselves with large selections and strong customer focus. Moving forward, the company has three viable options regarding this strategy. One option would be to continue the existing strategy of combined price leadership and differentiation. An alternative would be to abandon the price leadership strategy and focus on differentiating themselves within the sporting goods industry. Another alternative for the company would be to focus on the price leadership strategy while eliminating their differentiation strategy. Each option will be discussed with regards to its effect on the marketing mix and programs.
a) Existing Strategy
If Sports Authority continues the combined price leadership and differentiation strategies, no changes will be required to the marketing mix. The company’s current mission, objectives, and programs support this combined strategy.
b) Price Leadership Strategy
One alternative strategy would require Sports Authority to abandon the differentiation strategy and focus on a price leadership position. This alternative would have a large effect on the marketing mix and existing company programs as outlined below.
The product line’s narrow width would remain constant; as Sports Authority would continue to offer three product lines of sporting equipment, footwear, and apparel. The product line depth would be impacted by this strategy modification, and Sports Authority’s large selection would transition to a shallower product line. Currently, the company has the largest selection of merchandise within each product category as part of their differentiation strategy. If a price leadership focus is adopted, Sports Authority’s goals will no longer include large product selections. To maintain price leadership, the company will be required to negotiate better pricing from suppliers. Purchasing products from a smaller number of suppliers will assist in attaining these lower prices, but will limit the merchandise selection in each store. Sports Authority will need to examine sole source suppliers to maintain the lowest prices in the industry. Overall, a price leadership strategy will decrease product line depth.
Pricing and discount policies would be affected significantly with a price leadership strategy. Across all product categories, Sports Authority’s objective will be to have the lowest pricing in the industry. Currently, the company does not offer an extensive discount policy. This strategy alternative would change the company’s discounting approach to include the options that follow. The company can offer discounts based on the frequency and volume of purchases made by customers. This would include the implementation of frequent customer programs, providing special discounts and promotions to loyal customers. Sports Authority could extend their Automated Allocation System to include individual customer tracking and offer promotions based on frequent customer purchases. Sports Authority could also implement student and school discounts, where partnerships with local schools and recreational programs would be developed. As an example, athletes on the University of Connecticut’s basketball team will receive a 15% discount on athletic footwear and basketball accessories. “Limited time” offers can be implemented to increase store traffic. With the growing number of mature adults, senior discounts can be offered on days when store traffic is low (e.g. Monday).
With regards to promotion, modifications to selling strategies and advertising would result from this strategy change. Customer service levels and employee training will decrease to maintain low costs. The Sports Authority will need to re-evaluate the efficiency of segregating selling and non-selling functions, which is currently done at the retail store level to focus on customer service. The current customer service approach will be replaced by cost cutting measures aimed at providing the lowest prices in the industry. With regards to advertising, Sports Authority will no longer proclaim to be the “authority on athletics.” They can continue to maintain their slogan of “get out and play” but their advertising theme will need to revolve around pricing and sales promotions and discounts. Advertisements will need to be overhauled to focus on low prices, and media channels will need to be reevaluated. Ad frequency will need to increase to continually inform the consumers of sales and promotions. Public relations will become less important to the company but programs will remain relatively unchanged.
Sports Authority currently has a multiple distribution network, which includes traditional brick and mortar stores as well as their retail Internet site. In order to maintain low fixed costs, Sports Authority will need to create a niche for e-commerce in the sporting goods industry. Although the company’s website is well designed for ease of use, the company will strive to increase sales through the Internet. One means of achieving increased Internet sales is to establish partnerships with suppliers to create Internet links directly from manufacturers’ informational sites.
Regarding Sports Authority’s brick and mortar stores, the company’s objective to refurbish existing stores would be modified. The remodeling efforts were part of the company’s differentiation strategy and would not be required if a price leadership strategy were adopted. Store locations will also need to be evaluated. Currently, Sports Authority employs freestanding stores or shopping center stores. The price leadership strategy will invite the company to include mall location stores where consumers often compare prices between competitors before making a purchase.
c) Differentiation Strategy
Another alternative that Sports Authority must consider is focusing on a differentiation strategy. Although this strategy is consistent with the company’s mission, various changes to the marketing mix and company’s programs will be required. With this alternative, Sports Authority will abandon their price leadership role in the sporting goods industry, and will continue to focus on their existing differentiation objectives and goals aimed at establishing themselves as the “authority on athletics.”
This alternative requires no changes to the product line width, but the strategy will encourage increases in the product line depth. The company’s objective of having the largest selection of sporting equipment, footwear, and apparel in the industry will remain unchanged.
The differentiation strategy will allow Sports Authority to increase prices on merchandise in order to improve net margins, specifically on sporting equipment where margins are extremely low. Equipment prices will be increased by 3% with this strategy alternative. The discount policy will remain relatively unchanged. To better serve customers, the company will need to expand their Automated Allocation System to include individual customer tracking and offer promotions based on frequent customer purchases.
With regards to promotion, this strategy will require Sports Authority to maintain their strong customer focus by enhancing their selling strategy, advertising, sales promotions, and public relations image. Sports Authority should continue to segregate selling and non-selling functions of employees within their retail stores to continue providing excellent customer service. Employees should be knowledgeable about the product selection and brands that the store carries. The existing sales force is mainly comprised of high school and college aged adults that typically do not mature with the company, while the field management consists of more educated professionals. This sales force is sufficient to service customers; however, continual training is necessary in order to maintain current product knowledge. This change in work culture can be achieved through direct product training from manufacturers, such as a Nike sales representative providing a product specific demonstration, as well as monthly training seminars. This training objective is an expansion to their current policy of providing training to employees at the time of hire. Pay scales will need to be adjusted to include annual increases in order to reduce high employee turnover rates and maintain an experienced sales force.
Currently Sports Authority employees are trained in all product categories. An alternative to this type of organization would be to have employees specialize in a given department. One employee may be dedicated to outdoor sports while another is dedicated to footwear, resulting in a more educated sales force. This alternative allows for a more knowledgeable sales staff and improved customer service.
Advertising will remain relatively unchanged with a differentiation strategy. Advertisements will continue to focus on promoting the company as the “authority on athletics” with less of a focus on product pricing. Product information and instruction will be a key element to establishing the proper image for the Sports Authority. Advertising media will continue to use billboards, newspaper inserts, television, and radio announcements. Sales promotions such as athlete autograph signing sessions will need to be coordinated to increase store traffic.
Presenting a positive public image is integral to Sports Authority’s differentiation strategy. No changes are required in the company’s public relations approach, as Sports Authority has done an excellent job of promoting positive public relations through various community and national programs. These programs include a national fitness campaign with the Boys and Girls Clubs of America and the “Be a Sports Authority” program with local schools. The company may consider additional event sponsorships such as the Olympics and national sporting events (e.g. Super Bowl, NCAA, Little League).
With this alternative, Sports Authority will be required to maintain their brick and mortar stores and Internet distribution channels. Ensuring that their Internet site offers the same large quality merchandise selection, as the retail stores is extremely important to the success of e-commerce. The Internet retail site must be distinguishable from competitors’ sites with regards to selection and ease of use. Brick and mortar store locations will need to be evaluated with this strategy alternative, and mall based stores may be considered. The 2001 objective of refurbishing existing stores to include product information and in-store television networks is consistent with the differentiation strategy.
2. Growth Alternatives
One of Sports Authorities current objectives is to discontinue their expansion policy and concentrate on refurbishing existing stores. This non-growth policy has two alternatives that include store expansion in a limited or aggressive manner. Expansion of store locations would include the West and Mid-West regions of the United States. Previous expansion policies have not been very effective; however, Sports Authority needs to remain competitive with other large format stores such as Dick’s Sporting Goods, whose expansion policy has included opening 20 new stores per year.
With a no-growth strategy, Sports Authority’s distribution focus would more heavily rely on promoting sales through the Internet. In addition, rather than open new stores, the company would continue to refurbish existing stores in an effort to provide an easier shopping environment to customers.
A no-growth strategy will also require for the company to rely heavily on in-store sales promotions. Although Sports Authority currently does not offer any sales incentives to employees, this is an important change the company would have to make in order to help motivate their sales force. Today, store employees are solely compensated on an hourly rate. An alternative is to implement an employee recognition program to reward employees who are successful in executing sales. Such incentives such as non-monetary product points allow an employee to select merchandise from a pre-selected catalogue. This would help to improve customer service and simultaneously motivate employees to make additional sales. Assuming satisfactory employee performance, pay increases will occur every six months to improve the company’s high employee turnover rate. In addition, the company can expand their compensation structure to include benefits such as tuition reimbursement.
Limited advertising efforts would be executed for a no-growth strategy. Rather than attempting to attract new customers, the store’s advertisements would aim to maintain the current customer base keeping in line with the company’s present theme. Advertisements would promote the refurbished stores and attempt to attract customers based on these improvements.
b) Aggressive Growth
In order to promote an aggressive growth objective for the company, Sports Authority would have to open additional stores in growing markets and in areas with saturated competition (such as the West and Mid-west states of the U.S.). Concentrating on U.S. expansion would be sufficient for the time being; however, international markets (with the exception of Japan where there are currently 28 stores in operation) may be a possibility for future growth. At present, world markets favor smaller sporting goods outlet types; however, with the growing popularity of “Mega” stores in Europe, the potential for a large format retailer such as Sports Authority may present itself in the future.
The current advertising mix for Sports Authority includes billboards, newspaper inserts, and limited television ads. These tactics have proven to be relatively successful; however, an alternative advertising vehicle exists due to technological advances, namely Internet advertising. With an aggressive growth strategy, this vehicle would allow the Sports Authority to reach a wide range of potential customers from the young sports enthusiasts to the mature leisure population. The extended market will be targeted by search engines so that customers will be more frequently exposed to Sports Authority’s message when inquiring about sporting activities or merchandise. Another advertising vehicle that Sports Authority can utilize in a more aggressive manner is television ads. This form of advertising has a wide reach potential, as does the Internet, and will help promote the company’s aggressive growth objectives.
Sales promotions will also need to be very intense with an aggressive growth objective. At the consumer level, this can be exemplified through shopping incentives such as coupons for frequent customers. An additional sales promotion activity would be to create a contest or promotional sweepstakes to increase store traffic. This would include autograph signings by highly recognized local and national athletes.
With the opening of new stores, the company would need to provide sales training for new employees on a mass level. Training can either be provided through corporate or regional staff that will be relocated to the opening store locations during the critical opening months.
c) Limited Growth
With both a limited and aggressive growth objective, no significant price changes would occur. The company would want to maintain their current pricing structure in order to maintain market position.
For a limited growth strategy, the company would continue to utilize its current advertising vehicles and extend their reach to new customers on a small scale. The same is true for sales promotions and training, which would be required for new store openings, but not at the same capacity as an aggressive growth schedule.