Dillards and Citigroup Two Companies that Need Innovation

Dillards and Citigroup: Two Companies that Need Innovation INTRODUCTION The goal of marketing is â€Å"to determine the needs of the market and to assure that the products manufactured by the company correspond precisely to these needs with a competitive advantage and at a profit† (Viardot, p. xvii). In business, proper marketing strategies can mean the difference between success and failure, both of individual marketing campaigns and the company as a whole. In this age of new media and information overload, companies have to struggle to keep up. While many large companies are using these innovations to good use, there are some corporations that are decidedly lacking in these innovations. What’s more, the extent of the appeal or effectiveness of physical media and billboards is still up for debate for retail and financial companies. Dillard’s and Citigroup are two of these companies undergoing substantial change in this new marketing world; in this paper, these corporations will be explored in terms of their environmental factors an d current media strategies. Recommendations of ways to improve their image and their promotional strategies will be offered, and the two companies will be compared and contrasted. DILLARD’S Dillard’s is a major retail department store chain located in America, carrying more than 300 stores in nearly 30 states. They specialize in upscale clothing, jewelry, perfumes, housewares and more, and carry numerous high-brand names. Dillard’s was founded in 1928 by William T. Dillard in Nashville, Arkansas, and it has remained a mainly family operation since that point. The chief target demographic of Dillard’s is consumers in the upper and middle class, and so it tailors its marketing strategies to incorporate these consumer groups, who have the disposable income and interest to invest in high-priced, upscale private label clothing and cosmetics. A vast majority of Dillard’s stores are located as department store branches of shopping malls, though a select few independent stores have opened up in the past few years. Environmental scan POLITICAL – Due to Dillard’s strict domestic market, it does not engage in international trade, which makes export taxes inconsequential. However, high import taxes of outsourced clothing and merchandise are still a factor. ECONOMIC – The slow economic growth of the past few years has made consumers more reticent to invest in luxury products, including a great deal of the fine clothes and upscale housewares that Dillard’s provides. The location of Dillard’s primarily in malls diminishes its visibility as an independent brand, making its customer base purchase clothes from them because they are there, not because of the specific appeal of that company. SOCIAL – Dillard’s’ chief marketing demographic is to upper-middle class households, particularly adult women; much of the consumer base of the United States consists of younger, affluent teenagers and college-age students, which is not the target audience for Dillard’s, and remains an untapped market for such a large, prevalent department store chain. TECHNOLOGICAL – Dillard’s currently carries a significantly advanced online store, which they are using to provide a substantial portion of their business. As online technology and social media increases as a method of purchase, department store chains such as Dillard’s have a higher level of freedom regarding how to sell their products. Automation and outsourcing of clothes creation to independent brands makes production costs lower, as they are merely a retailer of brands created by those specific companies. ENVIRONMENTAL – Environmental situations must be taken into account when creating and distributing clothing products, in order to ensure that animal and worker cruelty regulations are upheld. Department store chains like Dillard’s must take care to not break environmental laws by spending the money on brands and products that are environmentally friendly in order to maintain customer trust and respect. LEGAL – Retail and department stores carry a risk of providing defective products, which leads to more stringent quality assurance practices needing to be implemented. The execution of these practices, as well as the cost of recalls, can cut severely into profitability. Continuing to behave in an ethical manner, as Dillard’s has so far, will lessen the likelihood of breach of antitrust and employment laws, and as such the risks for litigation and legal action are minimal. SWOT analysis STRENGTHS – Strengths of Dillard’s include their competitive pricing, which is typically much lower than other upscale department stores. This makes the cost advantage to shopping at Dillard’s quite high, and is a major factor in its success as a department store chain. WEAKNESSES – The primary weakness of Dillard’s is their limited target market, which extends to little over half the states in America, with little to no international exposure. Their merchandise is not particularly diverse, extending primarily to fine clothes and housewares, as well as perfumes and sundries. OPPORTUNITIES – Dillard’s has the ability to acquire other smaller companies and brands, in order to expand their product line and scope of influence. Dillard’s has yet to delve into the international market, providing an unparalleled opportunity to provide products on a global scale, rather than merely domestically. The youth market also has an incredible amount of disposable income to benefit from if Dillard’s were to expand into trendier, more affordable clothing. THREATS – Threats include competitors from other major department store chains like JCPenney’s, Macy’s, Nordstrom, et al., who also carry a significant market presence and provide the same kinds of merchandise at similar prices. The economic downturn of recent years has made people less likely to buy luxury products, which comprise much of Dillard’s product line. External changes in taxation, and business politics also have the ability to threaten any plans for expansion of product line or pricing changes. Choice of media The primary means of advertisement for Dillard’s is through local advertisement in magazines, billboards, and television commercials. They do not maintain a significant national marketing presence, instead focusing their efforts on suburbs throughout the Midwest and South, with a lighter emphasis on the West and East Coasts. Much of its online promotion is through its website, Dillards.com. Its primary locations being in malls, a lot of the target customers for Dillard’s are people who are not specifically looking for Dillard’s as a destination, but for clothing in general. Their brand has also expanded through an expansion to include a yoga-based active wear company, Tranquility, providing a slightly expanded and specialized customer base (Plunkett, 2008). Location is a large factor in Dillard’s marketing strategies – as it chooses its locations in suburban malls primarily, it attempts to find markets that are missing substantial upscale clothing and cosmetics, and moves in, beginning a large physical marketing campaign through mailers and newspapers (â€Å"History of Dillard’s, 2011). Its mall expansion remains aggressive, attempting to siphon off existing business and location as a shopping center, requiring less knowledge of where a specific Dillard’s location is. All one has to know in order to shop at a Dillard’s is where the nearest mall is, making their locations much more centralized and open to random foot traffic. It also makes it more likely for those consumers who are not strictly shopping at Dillard’s to stop there, which is the primary appeal of a shopping center in the first place. In terms of social media, Dillard’s also takes advantage of services such as Facebook and Twitter, with pages and feeds for each of them. In these, they provide unique deals and offer a sounding board for customers to field complaints or provide endorsements to their business. Providing a direct link from their website to their Facebook feed, with a button that says â€Å"Join the Conversation† allows the customer to feel like a part of the company, which is an effective method of gaining consumer trust and investment in Dillard’s products. At this time, however, Dillard’s Facebook and Twitter presence is somewhat limited, with a small number of followers of both compared to their total consumer base. Understanding the upscale audience that Dillard’s primarily invests in, there are several incentives used to market to specific demographics. Dillard’s specializes in providing a location for wedding registries, streamlining the process so that people can give wedding gifts to those who set up a registry at the company. This provides a simplified, streamlined way to get business from married couples and those who will attend their weddings, as their products will be funneled through the company and a select few other stores. There is also, like many department stores, store credit cards that can be issued in order to purchase products that cannot be afforded by consumers at the time – this can increase the number of sales the company gets in a visit. Dillard’s still produces catalogs, which it sends out to recurring customers in order to show them their product line. This is meant to show them a more comprehensive look at new products, as well as emphasi ze markdowns they provide on existing products. The online presence, as well as its physical media efforts, are also substantially well-used avenues for coupons and other discounts. Dillard’s places a huge emphasis on markdowns, providing a real or perceived discount on many products in their line. This creates the perception of private labels being taken down in price to appeal to the normal customer, a tactic that permits lower-middle class consumers to purchase from Dillard’s as well. In addition to that, it captures those in the upper-middle class market who still want to maintain that look, but feel they can do so at a more affordable price. Compared to Macy’s and JCPenney’s, Dillard’s prices are somewhat more competitive (â€Å"History of Dillard’s†, 2011), making the discount culture it participates in somewhat more legitimate. Dillard’s is taking small steps to revamp its marketing strategy to de-emphasize physical media and attempt to bring their business more and more online. In 2004, they opted to begin phasing out the extent to which it took out ads in newspapers for the markets it had stores in – it was a difficult transition, as Dillard’s had been the largest advertiser in newspapers for its relevant markets, representing a dramatic shift in priority towards digital media (Arkansas Business, 2004). While they still remain a presence in these newspapers and mailers, it is reduced by nearly $20 million in ad costs, opting for inserts in newspapers in lieu of run of press (ROP) ads, which can get lost in the shuffle. Recommendations Dillard’s continues to experience rapid expansion, adding more and more stores outside of shopping malls, making it necessary to increase its public image. A greater social media presence, and a slight marketing change towards a younger demographic, will help increase its image visibility in teenagers and college aged individuals, many of whom are not aware of Dillard’s due to its typical appeal to older consumers. Due to Dillard’s already substantial discount culture, it would be easy to translate that to a younger, more budget-conscious audience, especially through the use of more innovative marketing media. One way in which to grab their younger audience and gain more mileage out of their marketing efforts is to work harder on their social media platform. Currently, mobile phones are becoming more and more of an ongoing presence in consumer’s lives, with applications provided by many companies in order to provide continual access to their products and services. If Dillard’s were to provide a mobile app that allowed customers access to their products, new promotions, or mobile-specific coupons, that would provide an added incentive to shop at Dillard’s. What’s more, the amount of money spent on catalogs could be saved by cutting out that practice and allocating it toward more fervent social media marketing and mobile applications, both of which will not be thrown away, and can be constantly updated. Gaining a higher number of followers on Twitter and Facebook would go a long way towards providing a persistent presence in consumer’s social media lives – this can be performed by sponsoring third party applications that other people want to purchase, which can enhance visibility. Also, providing a higher number of promotions and social media-only coupon codes will offer a financial incentive to shop at Dillard’s – these can be administered through the company’s Facebook fan page and Twitter feed. Revamping the website to provide more of a persistent connection to these social media platforms would create greater interconnectivity between the entirety of the consumer experience, and invest them further in the company itself. CITIGROUP Citigroup is a large financial services company that operates worldwide, providing banking and credit card services in 140 countries. At one point, it was the largest company and bank in the world, factoring in total assets; after the economic downturn of 2008, it became the 24th biggest company in terms of assets, after receiving an economic bailout from the US government. Citigroup, as it stands now, is the product of a merger of banking company Citicorp and the financial group Travelers Group, forming Citigroup in 1998. It is a global service exporter, meaning that it provides international support for finances on a worldwide scale, gaining a substantial profit from them, as well as a large global image as a provider of financial services (Boone and Kurtz, p. 207). Environmental scan POLITICAL – The political structure of the United States is quite favorable to corporations; Citigroup was recently given a government bailout as a result of the economic downturn of 2008, which allowed the company to avoid insolvency. In terms of appealing to customers, the majority of Americans possess a mild to moderate skepticism of large corporations and its activities; in the case of Citigroup, the corporate scandals of the early 2000s prompted distrust of Citigroup, being a key banker in Enron, who then paid out a settlement for the Enron case. ECONOMIC – The current economic state of the country is relatively dire, but slowly improving; economic growth is slow, but interest rates are high, meaning that banking and investment companies such as Citigroup can gain substantial interest on loans that it provides to its customers. However, they also negatively affect the cost of capital, making expansion difficult. SOCIAL – The social environment of the United States is capitalistic and consumerist, making a spending environment somewhat favorable, despite the economic downturn. As a result, loans and banking will continue to be in high demand for many years to come. However, there is also a growing sense of social and fiscal responsibility, leading to a relative backlash against large corporations, especially banks and loan companies; this can lead to a negative public image against companies such as Citigroup. TECHNOLOGICAL – Technological advancements have made electronic banking and credit card monitoring extremely easy; this makes it more convenient than before for consumers to operate their bank accounts. Increasing use of the Internet and electronic banking is making physical locations increasingly obsolete. ENVIRONMENTAL – Companies such as banks and lending agencies often have a minimal impact on adversely affecting the environment, given their focus on strict capital and not the selling of products. Citigroup has remained a leader in sustainability for several years, using environmentally viable paper sources and consumer recycled paper in its operation (â€Å"Sustainable Paper Initiatives,† 2011). LEGAL – United States regulations on consumer and employment law place strict regulations on companies to avoid discrimination and antitrust practices in its hiring and maintenance of employees. SWOT analysis STRENGTHS – Citi has a substantial piece of the market, as one of the Big Four companies issuing credit in the world. It is the largest credit card issuer in the world, and provides a wide variety of financial products, including retail banking, investment and commercial banking, e-commerce, and consumer finance. Its global infrastructure allows it to maintain a strong foothold in many countries, and remain stable as a company. WEAKNESSES – The subprime mortgage market holds significant sway over their profitability, as they are the ones who provide the majority of these loans. As a result, any downturn in that market can lead to substantial losses for them. The debt obligations they carry to both their consumers and the US government for their economic bailout in 2008 lead them to carry significant debt that they need to pay off. OPPORTUNITIES – Due to the large number of services that Citigroup carries, they are able to cross-sell significantly in order to get through hard times in the financial market. Online and mobile banking are large incentives for consumers to work with them, due to the increasing use of the Internet and smartphones to do business and interact with the world; further opportunities in these markets are increasing. The acquisition and integration of the Automated Trading Desk has also provided them with many opportunities to expand and provide electronic trading of stocks (Stempel, 2007). THREATS – The liabilities inherent in lending credit cards and loans to individuals and companies are great, especially to the world’s largest issuer of these debts. If people default or foreclose on these loans, that money is lost. The weaker financial markets experienced in the past few years have made for slow economic growth, of which Citi is not immune. Consolidation has become rampant in the banking industry, making for larger competitors to work against for the trust of consumers. The mortage market in the United States is currently weak, making the liabilities even larger for this company, and the return on investment nearly negligible. Choice of media Citicorp offers a substantial, diverse array of media marketing outlets, including television, radio, newspapers, billboards and social media, among others. They maintain a large, diverse website (citi.com), wherein individuals can log in to their online banking, apply for loans, check on the status of their credit cards and investments, and nearly any function that could be performed at a normal physical Citi location. This allows any online advertising or marketing to lead directly to the next step in gaining a consumer’s business – linking to the website and beginning a business relationship through applications, consultation, and the like. One of Citigroup’s major strategies, like many other financial companies, is set to sponsor athletes and sports starts in order to enhance their image, offering them endorsement deals in order to expose fans of these athletes to Citigroup as a company. One innovative strategy they have been trying, however, has been to â€Å"help sponsor rookies, amateurs and others around the world in multiple sports who may never dent the record books. The goal is to show off Citi’s skill as a trusted financial adviser, particularly among clients who may – or may not – be right on the cusp of hitting it big† (Quenqua, 2008). By going against the grain and using a twist on a tried-and true marketing practice to emphasize its mission statement, Citi has created a very strong outlet for portraying its new message. Their primary markets for athletes have been golfers, having chosen four rookie golfers to represent their campaign. This is meant to provide a link to Cit i’s target audience, which is upper-middle class whites with interest in investment and banking, typically the market most engaged in the game of golf. Citigroup spent $268 million dollars in advertising in 2009, making it the 98th biggest advertiser in the world (Adbrands.net). Nonetheless, it is struggling to regain the traction that it had experienced in 2005 and 2006, and the economic downturn of 2008 exacerbated that struggle. Lisa Caputo was put in charge of global marketing and communications in 2008, seeking to globalize the company’s marketing efforts and create new advertising and branding campaigns for Citigroup (Janoff, 2008). In 2000, â€Å"Citicorp was widely regarded as a very strong marketing and planning organization, but it was viewed as weak operationally and on execution of business plans† (DePamphilis, p. 323) – this attitude remains somewhat to this day. Use of social media was implemented by Citigroup not long after the $300 million bailout took place – the company sponsored a Facebook app called â€Å"Magnetic Lyrics† in order to appeal to the younger demographic. This app would feature music and lyrics by popular artists such as Mary J. Blige and Nickelback in order to increase the exposure of the company to new, younger, tech-savvy audiences with more disposable income. This deal involves them spending a small amount of money to reach a wider audience through Facebook, while paying ad revenue to the company for each user who plays with the application (Kafka, 2008). Citi also has its own dedicated iPhone and iPad apps, from which one can access their online banking and credit card services, providing convenient control over their finances and an added incentive to remain with the bank. Other forays into social media includes their CEO, Vikram Pandit, starting a blog in order to provide a more personal connection with the executives of the company. This is known as relationship marketing; the aim is to put a face on Citigroup and humanize it further, appealing to a wider swath of people. By doing this, the consumer can form a relationship with the executive, thus linking them emotionally with the company and making them more likely to do business with them. However, the CEO and executive blog (new.citi.com) has yet to pick up significant steam compared to its shareholders and customer base, with no comments on many of their posts, thus failing in their attempt to build an audience and a follower base. Recommendations Citigroup, despite its high visibility and deep investment in the world’s finances, still needs to do a great deal of image control in order to shake its image among many as one of the Big Four banks whose lackluster risk management led to the subprime mortgage crisis that cost many people their jobs and stock options. Advertising campaigns that appeal more to the common man or small businessman can go a long way towards engendering trust in the company, offering a more down-to-earth, approachable company that will look out for those who have been especially hurt by the economic crisis of recent years. Citi can also stand to increase its presence in social media, offering a more comprehensive portal from interest to closure of sale. As it stands now, their Facebook and Twitter feeds are somewhat understaffed, and their executive blog attempts to build relationship marketing have been met with resistance and a small, mostly negative group of followers. In order to curry greater favor with customers and clients, Citigroup must work to improve its image as a company that protects the interests of all of its customers – not just the golf-playing, affluent ones. Also, greater exposure to unique deals on loans and interest rates could be advertised through social media feeds, and further incentives could be created and activated by mobile apps. While the strategy to make a more humbled, innovative twist on athlete endorsements through sponsoring rookies is inspired, the efforts must extend beyond upper-middle class sports like golf – with more high-profile endorsements in sports such as baseball and basketball, a greater section of the country can have more involved exposure to Citigroup, and consider them when making their next banking or loan decision. By taking that strategy of sponsoring up-and-comers and applying it to a greater variety of sports, the lower-middle class and minority market can also be targeted. CONCLUSION The two companies, Dillard’s and Citigroup, have a great deal of marketing strategy changes that they must make in order to increase their visibility and improve their public image; however, while Dillard’s needs to focus on expansion and alterations to their primary demographics, Citigroup needs to perform damage control on the negative perceptions of their company. Further expansion of social media outlets will help to increase exposure of both companies, and relationship marketing can also provide a needed level of consumer trust to these corporations. For both companies, they would do well to have an increased presence in their social media outlets. Their Facebook and Twitter feeds could use substantial expansion and improvement, bringing in more and more followers to create a streamlined process to lead them to buy, from online-only coupons to sponsoring applications that consumers find useful. What’s more, their demographics could be expanded to include more affordable, varied options that extend beyond the upper and middle class – extending their advertising to make them more relatable to middle America and minorities would help to increase a customer base and provide a more diverse array of customers. This can, in the end, increase sales and provide avenues for expansion. References Arkansas Business, 1996. Dillards rethinks newspaper ad strategy. Goliath: Business Knowledge On Demand. Retrieved August 19, 2011, from http://goliath.ecnext.com/coms2/gi_0199-697145/Dillard-s-rethinks-newspaper-ad.html Citigroup, 2011. Adbrands.net. Retrieved August 19, 2011, from http://www.adbrands.net/us/citigroup_us.htm. Citigroup’s Sustainable Paper Initiatives, 2011. Citi.com. Retrieved August 19, 2011, from http://www.citi.com/citi/environment/paper_inits.htm. DePamphilis, D. M., 2008. Mergers, acquisitions, and other restructuring activities (4th ed.). Amsterdam: Academic. 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