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WAL-MART CASE STUDY

MBA

Integrated Global Marketing

Instructor: Johnny Morris

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INTRODUCTION
This case study will give an overview of Wal-Mart Inc. I will be summarizing the

companys marketing mix based on its pricing strategies, examining the companys presence in

domestic and international markets, its vision and execution of strategy that set its direction, and

also its plans for growing and servicing its customer base. I will also be providing an overview of

how Wal-Mart uses its marketing information resources to build their marketing decision support

systems and customer relationship management environment. In addition, I will develop

innovative and sustainable solutions to strategic marketing challenges the company may face.

This paper will identify, describe, and thoroughly analyze the market segments Wal-Mart has

chosen to compete in and support. Finally, I will show the significance of the concept of

integrated marketing communications and its impact on marketing management, identify the

elements of the promotion mix with the pros and cons of each element, show the connection of

the concept of the communication process model to important issues in promotional strategy,

describe the components of the marketing managers role in promotional strategy, and also

explain the key concepts of advertising, sales promotion, and public relations as they pertain to

marketing management.

BACKGROUND

Wal-Mart is an American publicly traded company and the worlds largest retail

company. It offers a variety of general merchandise such as apparel, toys, electronics, small

appliances, health and beauty products, fabrics, lawn and garden, crafts, jewelry, and household

needs. In addition, Wal-Mart also has a pharmacy department, Tire and Lube Express, a Photo

processing center, and a large grocery department. They are the largest grocery chain by sales

and over half of their sales are generated through the sale of grocery items. By the end of fiscal
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year 2011, the company had more than $400 billion in revenue, over $25 billion in operating

income, 8,970 stores, and over 984,949 square feet of space (Walmart.com, 2013).

One of the main pricing strategies incorporated by Wal-Mart is its commitment to lowering the

prices of its products and services in order to attract and retain more customers. Because of its

size and buying power, Wal-Mart is able to purchase huge amounts of products at one time,

which bring discounts from its suppliers effectively keeping prices low. Also, Wal-Mart requires

it suppliers to lower its prices by 5% each year or they will no longer carry that suppliers

products. Being able to receive these discounts allows Wal-Mart to pass on its savings to its

customers. Further adding to their commitment to having the lowest prices available Wal-Mart

advertises the Our Ad Match Guarantee which states if a customer sees any identical product

they sell advertised by any on their competitors Wal-Mart will match it right at the register

(Walmart.com, 2013).

Another marketing strategy Wal-Mart emphasizes is its one-stop shopping availability to

customers. Because of its rapid growth, Wal-Mart Stores Inc. developed into three sizes.

Neighborhood markets at approximately 47,000 square feet, discount stores at approximately

100,000 square feet, and supercenters at approximately 187,000 square feet. These supercenters,

first opened in 1988, provide a variety of goods such as automotive, groceries, general

merchandise, clothing, arts and crafts, toys, furniture, etc. This one-stop shopping experience

provides a convenience to their customers in being able to cut back on shopping time while

saving money. This focus to become a one-stop shopping center continues to allow Wal-Mart to

expand very quickly as people today, more than ever, are rushing and less patient as ever.

Wal-Mart currently has 2,882 supercenters, 608 Sams Club, 31 Wal-Mart Neighborhood stores,

and 1,183 international stores. It also operates more than 10,000 retail units under 69 different

banners in 27 countries (Walmart.com, 2013). Wal-Mart grew fairly quickly as Wal-Mart Stores
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Inc. was incorporated seven years after the first store was opened. Its growth is so widespread in

the United States and nearly all Americans use some subsidiary of Wal-Mart. In a survey in 2005,

176 million people shopped at Wal-Mart each year and 84% of all Americans claimed to have

shopped there (Ferrell, Fraedrich, & Ferrell, 2008). The retail company was able to open its first

international distribution center in Mexico City, Mexico by 1991. The company now has stores

in Brazil, United Kingdom, Argentina, Canada, South Korea, Japan, China, and Puerto Rico.

Wal-Marts vision statement Saving people money so they can live better is a statement

the company has built upon, which proved to be stable as the company increased in sales y 3.5%

during the middle of the American recession. Because of its huge size and buying power, Wal-

Mart continues to buy its products at rock-bottom prices, exchanging high purchase volumes for

low cost while passing these savings onto its customers. Wal-Mart has also decided to listen to

the customer and their needs more. It has started a program called the Store of the Community

approach in which they use comprehensive data to better understand the various needs of a

consumer base. They use this information to drive decisions in key areas of the business like

store layout, design, and communication. With online shopping at an all time high with no signs

of slowing down, one of Wal-Marts biggest plans to grow and better service its customers is

through Ecommerce at its WalMart.com website (Walmart.com, 2013). Wal-Mart also gathers

information from all demographics to better assist customers with everyday shopping. They are

committed to using the most modern and up-to-date Ecommerce techniques available to provide

consumers with a better shopping experience. Wal-Mart also offers ship-to-store from

Walmart.com for the convenience of online shopping without the shipping charges.

OPERATIONS
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Wal-Marts main objective is to provide their customers with the best value they can find

anywhere while providing friendly and efficient customer service. Its strategies are based on

reducing costs to quality products so they are able to achieve everyday low prices (Wal-

Mart.com, 2013). Wal-Mart has to be able to monitor and analyze all the processes and

information possible in order for them to attain a competitive price advantage, lure in new

customers, and retain faithful and loyal current customers. Information technology is essential

today in helping companies to achieve these goals and Wal-Mart utilizes a great deal of the

available information through systems and operations that the retail business encompasses

(Walmart.com, 2013). Listed in this paper are the many ways Wal-Mart enlists its information

from customers and how it is used by marketing managers to help make marketing decisions

while enriching its customer relationship management environment.

Wal-Mart collects information from its customers in a number of ways. This is done

through the customers interaction, whether by in-store purchase or purchases made via the

internet. Wal-Mart discloses that it gathers information on customers whenever they create an

account on one of their websites, make an online or in-store purchase, use a gift registry, create a

mobile shopping list, or submit personal information to Wal-Mart along with any related content

of the communication. In addition, they also collect information whenever the customer conducts

a transaction that is required by law to be reported by Wal-Mart. This includes, but not limited

too, hunting and fishing licenses, fire arm purchases, pharmaceutical sales, etc. Wal-Mart may

receive personal information from other entities that can help the correct or supplement their

records, improve the quality or personalization of their services, and help prevent or defer fraud.

They may also collect information from consumer reporting agencies or other service providers

if you attain certain other financial products (Wal-Mart.com, 2013).

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MARKET SEGMENTATION
Wal-Mart offers a variety of general merchandise such as apparel, toys, electronics, small

appliances, health and beauty products, fabrics, lawn and garden, crafts, jewelry, and household

needs. In addition, Wal-Mart also has a pharmacy department, Tire and Lube Express, a Photo

processing center, and a large grocery department. Its marketing strategy is continuing to remain

the leader in one-stop shopping and offering quality products at everyday low prices. Many

may be lead to believe Wal-Marts target customers are low income individuals and thats it

but the process is much more difficult than that. Wal-Mart has a very complex task of analyzing

which markets to target and why. This is a marketing strategy that is first executed by market

segmentation in order to uncover, develop, define, and target specific markets. Segmentation is

to find one or more factors about members of a heterogeneous market and divide that market into

smaller, more homogenous subgroups for the purpose of developing different marketing

strategies to best meet the segments distinct needs and wants (Marshall & Johnston, 2011). Wal-

Mart must employ these different strategies through market segmentation in order to continue

sales growth, retain loyal customers, and in order to avoid missing potential key customers

because of a market focus that is too broad. Currently, Wal-Mart collects more data on the

products it sells and its shoppers buying habits virtually more than anyone else does, so much so

that by their own account 10 years ago they had amassed 460 terabytes of data stored on Teradata

mainframes. To put that in perspective, the Internet has roughly half that amount of data (Hays,

2004).

Geographic

In order to expand its geographic coverage, Wal-Mart has adopted the domestic strategy

of backward expansion. This strategy consists of opening stores in small towns that surround

larger targeted metropolitan cities and saturate each area before moving into new territory.
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Internationally, Wal-Marts expansion strategy involves entering foreign markets with new store

construction and acquisitions of smaller companies. They will target where people seek cheaper

and one-stop shopping centers and then remain local through the employment of local

managers. Although Wal-Mart has very few geographical restrictions, one such restriction is the

limited commercial space in metropolitan areas for its supercenters that require a lot of space.

This keeps the company from becoming an inner-city mainstay. The company may consider

using its neighborhood market and convenience store extensions into these areas. Wal-Mart also

uses demographics to segment its products.

Demographic

Wal-Marts marketing management has effectively reached its customers through careful

strategic market segmentation. Demographically they have put themselves in market position by

offering products that meet the needs of all population segments.

Age

- Wal-Mart serves products and services aimed at all age groups. Statistically, 3 out of every 4

retail shoppers above the age of 18 have shopped at Wal-Mart in any 3 month timeframe (Dixon,

2006). They stock toys and video games aimed specifically at children and young adults. Their

influence with these two age groups has at times angered its competitors Best Buy and Toy r Us

(Reagan, 2013). Wal-Mart also target older adults as well by offering prescription services and

accepting Medicaid but also by offering many vitamins and anti-aging products that appeal to the

increasing national age average segment. This is probably because Wal-Mart-only shoppers skew

slightly older than the general population with 43% being 50+ years of age (Scarborough, 2005).

Gender

- Wal-Mart has the diversity of products to target both genders. Wal-Mart target marketing

recognizes the multi-faceted shopping behaviors and patterns of female shoppers. Management
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has aggressively sought out the womens market by offering alternative product ranges for

female teenagers, youths, young adults, middle-aged adults, and seniors. These strategies are

aimed at meeting the needs of a selective segment as well as definitive groups of female

shoppers (Dixon, 2006). Wal-Mart has more male shoppers than its competitor Target since it has

made an attempt to attract more male shoppers by expanding its fishing and game, mens

apparel, hunting, and firearms departments as well as the past recent years the addition of the

Tire and Lube Center.

Race/Ethnicity

- Wal-Mart is currently working on a new and ambitious marketing strategy to make its U.S.

stores more relevant by setting aside its cookie-cutter past, and instead positioning stores to

custom-fit its merchandise assortments to reflect for specific demographic groups, depending on

market characteristics. Among those groups are African Americans and Hispanics (McTaggart,

2006). This is already apparent by the number of aisles dedicated to Hispanic cultures and also

the different fruits and vegetables primarily grown in Hispanic regions that have been added to

Wal-Marts grocery section.

Income

- In an interview Wal-Marts chief merchandising officer, John Fleming, and chief marketing

officer, Stephen Quinn, said that after a year of intense research, the retail giant is seeing that its

200 million customers belong to three groups. These are brand aspirational (people with low

incomes that are obsessed with name brand items), price sensitive affluent (wealthier shoppers

who love a bargain), and value-price shoppers (people with low incomes and cant afford

much more). With these consumers in mind, Wal-Mart is creating teams, each with a marketing

executive and a merchandising executive, to tackle the so-called 5 power product categories-

food, entertainment, apparel, home goods, and pharmacy (Barbaro, 2007).

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INTEGRATION OF MARKETING COMMUNICATIONS

The definition of communication is the transmitting, receiving, and processing of

information. Communication occurs when a message or idea is transferred by a person or group

and is received and comprehended by another person or group. Every advertising or marketing

program utilizes the communication process. Integrated marketing communications is the

coordination and integration of all marketing communication tools, avenues, and sources within

a company to communicate the brand and the companys message to targeted customers in a

clear, concise, and consistent way that is also able to be customizable as needed to maximize the

impact on a particular audience (Marshall & Johnston, 2011). The framework for the integrated

marketing communications originally came from the marketing mix components of Price,

Product, Promotion, and Distribution. I will go further and describe promotion and its relevancy

to the modern day integrated marketing communications. The traditional view of promotional

activities included advertising, sales promotions, and personal selling and treated them as

separate entities. The need to integrate all promotional efforts also expanded it to include public

relations, direct marketing, and interactive marketing. Wal-Marts marketing consists of flooding

the market with its presence. Wal-Mart has had to incorporate promotional strategies about which

combination of elements in the promotion mix will likely best communicate the offering to the

marketplace and achieve an acceptable return of investment for the marketer. We will define and

analyze the various elements of the promotion mix in which they use for marketing planning.

ADVERTISING

Television is primary example of mass media communications is television, which is a

primary source of delivering Wal-Mart messages. There are many ways Wal-Mart develops

strategic marketing through television. Some of the ways include determining the times of day
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when the most members of the target market are likely to be watching, the times of day certain

target markets watch television, which shows are most popular within the market, and what

channels are most often watched. Another method the company uses is the distribution of

magazines and newspapers. Wal-Mart carefully chooses how and where it uses its magazine

channels because niche media has limiting use among companies developing a larger target

market base.

PUBLIC RELATIONS

Wal-Mart takes extra precaution to take care of its image as it has found itself on the

wrong end of the publics perception several times in recent years. Censorship, for example,

came up as an issue. Wal-Mart publicly believes in "Family Friendly" products; therefore, if a

movie or CD contains "mature content" the company will not carry the product for sale.

Recently, it has been a conscious effort by Wal-Mart to be more involved in the community. Wal-

Mart's community outreach focuses on the goals of providing customer satisfaction, becoming a

part of local community services, and providing scholarships. Its emphasis is on children and

environmental issues (Walmart.com, 2013). The strategic and tactical advantage of Wal-Mart

when pursuing a political and public affairs strategy is the use of its financial resources. It can

buy an army of the top lobby firms, lawyers, and public relations specialists if needed. Since the

company has a history of fighting back, and winning, when it is challenged, this may result in

keeping larger groups away from fighting the retail giant.

DIRECT/INTERACTIVE MARKETING

Internet, postal mail, and telephone" are forms of addressable media that enable a

company to reach consumers through a communication that can be directed individually. This

method allows companies to identify target markets more completely. Direct mail or postal mail
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strengths include them being highly selective, having measurable results, and they can be

personalized. Currently Wal-Mart primarily focuses marketing communications as addressable

media through Internet and direct mailings in the form of weekly advertisements. Wal-Marts

online store uses strategies to pull customers by attractive slogans like Grab it before its done

which pushes customers to make a purchase decision immediately before the deals expire. They

also have added weekly sales to the top of the home page in a bold text so it pops out at the

consumer and shows how many people shop from the site (Minds, 2011). Wal-Mart has tapped

into the expanding online advertising market and optimizing IMC strategies by including online

ads and utilizing holiday commercials to further promote the companys objective. Part of its

online strategy has expanded to online bloggersthe everyday consumer who has the potential

to review products and criticize or endorse a companys products or image. Wal-Mart has also

jumped into the social media aspect in a groundbreaking way. During Thanksgiving season of

2012 Wal-Mart bought 2 billion Facebook ads with 50 million of them popping up on Black

Friday alone. Wal-Mart was also able to shut out virtually all competition by pre-purchasing the

ads and buying up all the available space (Tuttle, 2012).

CONCLUSION
We defined the communication process and analyzed how it is related to the promotional

mix and the integrated marketing communication strategies. We also looked at the promotional

mix tools Wal-Mart uses such as advertising and public relations directive and interactive

marketing, and sales promotions.

Doing so we analyzed the fundamental principles of their marketing mix, assessed how

technology adds value to the marketing process, including understanding market decision
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support system and customer relationship management strategies, analyzed their segmentation

process, and finally analyzed the tools available for marketing communication and effectiveness

of their usage in promoting their company.

REFERENCES

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