INTRODUCTION
Wal-Mart Stores, Inc. ... Walmart has come to dominate the discount retail sector since being founded in 1962 and is generally credited with transforming the practice of retailing over the subsequent 40 years. In this paper we argue that much of Walmart’s success has come from its ability to identify and serve a very specific segment of the consumer market. Walmart’s intimate understanding of its segment coupled with operational excellence means that the Company has been able to turn marketing insight into competitive advantage.
This paper will explore the segmentation approach taken by Walmart and the way that it has been supported by branding, pricing, promotion and positioning. We will conclude with some thoughts on the challenges faced by Walmart as a result of its strategy.
Theory
Arthur Kotler describes market segmentation in the following terms:
“…the subdividing of a market into distinct subsets, where any subset may conceivably be selected as a marketing target to be reached within a distinct marketing mix. ... By taking a segmentation approach one can then use the tools of marketing (product, pricing, distribution, promotion, advertising and communications) efficiently.
The Walmart approach
At the heart of Walmart’s success lies its successful segmentation strategy. Across geographic and socio-economic lines Walmart has identified and served its segments with unparalleled success. The key to understanding how Walmart has been able to achieve such remarkable success is to understand how the Company’s brand, its product, its pricing strategy and its promotion have interacted with the market segment it has chosen to serve. ...
SEGMENTATION
Walmart’s segmentation strategy operated on two dimensions. ... Like most discount retailers Walmart focused on a price sensitive economic grouping at the lower end of the disposable income spectrum. Unlike most discount retailers Walmart had a second, geographic dimension to its strategy. ... The identification of this bounded segment allowed Walmart to grow very quickly and very successfully. By offering people a wide selection of goods at low prices in locations conveniently near them Walmart built up a large base of stores in the American South which allowed it to gain substantial economies of scale. Walmart consistently focused on cost control as a basis for keeping prices low. In the 1980s Walmart had essentially saturated its core Southern markets and began to branch out to more urban areas in direct competition to other major retailers. Within urban areas Walmart simply focused on the price sensitive lower income consumer. ...
SERVING THE SEGMENT
Pricing
Walmart has chosen to serve a highly price elastic core segment. As such, while other factors are important if Walmart is to be successful a low price will remain at the heart of its strategy. Walmart’s operation is almost entirely constructed to allow it charge low prices – from its distribution, its negotiations with suppliers to the design of its stores. From a segmentation perspective what is most impressive is the decentralized approach Walmart has taken to pricing.
To link to this page, copy the following code to your site:
All Papers Are For Research And Reference Purposes Only!
You may not turn these papers in as your own! You must cite our web site as your source!
