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[IT1004 Tutorial 2] Case B Presentation

[IT1004 Tutorial 2] Case B Presentation

L.L.Bean Case Presentation prepared by Tan Yeong Sheng, Tan Xiao Xian, Tan Yong Da, Peng Pinhao & Connie Tan for NUS IT1004. Uploaded with kind permission from the abovementioned authors. I do not claim to own any of the creative rights to this document.

Kelvin Tay

March 04, 2013
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  1. Connie Pinhao XiaoXian YeongSheng YongDa

  2. Background  of  L.L.Bean   •  Founded  in  1912  by  Leon

     Leonwood  Bean     •  One  of  the  US  oldest  and  largest  direct  catalogue   retailer.     •  Specialize  in  quality  apparel,  outdoor  equipment          
  3. VALUE  PROPOSITION  

  4. 1.  Superior  customer  service   •  “Superior  customer  service  has

     always  been   and  always  will  be  the  cornerstone  of  our   brand  and  heritage  and  an  aFribute  that   differenHates  us  from  the  rest  of  the  pack.  It   goes  back  to  L.L.'s  Golden  Rule  of  treaHng   customers  like  human  beings.”          ~L.L.Bean  president  Chris  McCormick  
  5. HOW  it  is  made  possible?   •  Knowledgeable,  highly  customer

     focused   employees   – E.g.  L.L.Bean's  Customer  SaHsfacHon  department   operates  out  of  three  customer  contact  centers  in   Maine,  24  hours  a  day,  365  days  a  year.    
  6. 2.  Good  DistribuHon     •  L.L.Bean  fulfillment  centers  

    – Store  over  10  million  units  of  goods   – Process  an  average  of  50,000  customer  orders  a   day  
  7. WHY  it  is  important?     •  MulHchannel  retailing  

  8. Examples:  Retail  stores  (Timeline)   •  1917:  Opened  flagship  store

     campus  in  Freeport,   Maine   –  Open  24  hours  a  day,  365  days  a  year   –  18  retail  stores  outside  Maine     InternaConal  stores   •  1992:  Opened  its  first  internaHonal  retail  store  in   Tokyo,  Japan   •  Sept  2008:  Opened  its  first  store  in  China  
  9. Key  milestones  for  L.L.Bean  

  10. Timeline     •  1995:  created  L.L.Bean  website.   – One

     of  the  first  B2C  e-­‐commerce  websites   – User  friendly  website  &  clean  layout.        
  11. Timeline   •  2002:  launched  its  Japanese  site   hFp://llbean.co.jp/

         
  12. Timeline   •  2008:  Began  uHlizing  social  media    

    –  Engage  with  customers  and  building  brand  awareness  
  13. Timeline   •  2008:  Began  uHlizing  social  media    

    –  Engage  with  customers  and  building  brand  awareness  
  14. Timeline   •  2008:  Began  uHlizing  social  media    

    –  Engage  with  customers  and  building  brand  awareness  
  15. CUSTOMER LOYALTY ISSUES AS L.L.BEAN GROWS ONLINE SALES

  16. GROWING ONLINE STRENGTHENS LOYALTY 1. Ubiquity; convenience 2. Broadens options

  17. 3. Comprehensive information; broaden target segment GROWING ONLINE STRENGTHENS LOYALTY

  18. 4. Stickiness of website; increase branding GROWING ONLINE STRENGTHENS LOYALTY

  19. 1. Deterrence for the less tech-savvy GROWING ONLINE WEAKENS LOYALTY

  20. 2. Loss of personal touch; managing higher expectations “As customers

    become more experienced shopping in a multi-channel world, their expectations for service increase. Our goal is to maintain our leadership position for the best customer service.” - Chris McCormick, President & C.E.O, L.L.Bean GROWING ONLINE WEAKENS LOYALTY
  21. 4. Out of sight, out of mind GROWING ONLINE WEAKENS

    LOYALTY 3. No ‘feel’
  22. 5. Information density, lack of switching costs, and availability of

    substitutes GROWING ONLINE WEAKENS LOYALTY
  23. Growing  online  strengthens  loyalty   Catalog/Store   Online   Strengthens

     loyalty   Not  as  omnipresent,  Going  down   to  store  physically,    no  update  on  new  releases  Hll   visit  store   Ubiquitous:  Buy  anyHme,   anywhere,  especially  for  new   product  releases;  Convenience  of   purchasing  from  the  coach   Saves  Hme,  saves  transport  costs;   Consumers  can  browse  thru   merchandise  at  their  leisure  and   comfort  of  their  home   Incomplete  informaHon,  Only   products  that  are  high  in  demand   are  printed   Complete  lisHng  of  all  products   and  relevant  info  like  stock   availability  and  current   promoHons  (Bean  is  now  able  to   rely  on  Web  to  illustrate  products   that  are  important  to  consumers   but  are  lower  priced  or  less  in   demand)   AFract  and  retain  addiHonal   market  segments;  eases  decision-­‐ making  and  purchasing;  hassle-­‐ free   -­‐   ‘sHckiness’  of  website  (clean,   clear,  crisp,  usable)   (one  of  only  five  firms  that  are   superior  in  terms  of  customer   saHsfacHon)  branding   AddiHonal  channel  broadens   opHons  e.g  buying  at  store  and   going  online  to  change  order  
  24. Growing  online  weakens  loyalty   Issue   Weakens  loyalty  

    Bulk  of  Bean  customers  are  catalog  proponents   and  are  50  years  old  on  average   Less  tech-­‐savvy,  not  adept  in  using  IT  (Year  1999),   deterrence       Tough  to  translate  superior  customer  service  to   online  site   Personal  touch  is  greatly  reduced   H,  Bean  offers  online  chat  service  and  has  personnel   responding  to  emails  personally  within  24  hours.  Thus,   lifeHme  value  of  online  customers  is  sHll  30%  greater   than  industry  average.   Bean  sells  high-­‐involvement  products  that  are   best  physically  tried  out  before  purchasing   Site  is  unable  to  provide  real  ‘feel’  of  quality  of   products   H,  long-­‐term  customers  are  perfectly  willing  to  use  the   Web,  and  comfortable  with  taking  chances     Passive  markeHng  vs  acHve  markeHng  (sent  to   households  directly)   Out  of  sight,  out  of  mind.   InformaHon  density,  lack  of  switching  costs  and   easy  availability  of  subsHtutes   Easy  comparison  of  prices  and  switching  over  to  lower-­‐ price  compeHtor  
  25. 2.  How  can  L.L.  Bean  best  pursue  a   mulC-­‐channel

     retailing  strategy?  
  26. Having  all  3  channels   complementary  to  one  another  

    •  Physical,  online  and  catalogue  retail   mutually  supporHve   •  Provide  seamless  experience   •  Adapt  to  different  customer  profiles    
  27. Consistent  operaHng  principles   throughout  all  3  channels   • 

    Level  of  customer  service   •  CoordinaHon  of  prices   •  Make  use  of  well-­‐developed  back-­‐ office  operaHons  
  28. Maintain  balance  among  all  3   channels   •  Reduce

     dependence  on  catalogues     •  More  effort  in  forHfying  online   and  physical  stores  
  29. Right  judgment  about  developing   online  capabiliCes  slowly  over  a

     long   period  of  Cme?      
  30. None
  31. None
  32. Reasons   Thoroughly  evaluate  the   impacts  of  online  sales

      channel  on  its  business   model  and  the  rest  of  its   sales  channel.     IdenHfy  online  trends  and   boost  its  relevant  business   funcHons  so  as  to  beFer   support  the  online  channel.   Conduct  market  research   to  understand  online   customers’  demographics   so  as  to  beFer  tailor  to   their  demand.      
  33. Results   •  Integrate  online  sales  channel  seamlessly  into  

    its  business  model   •  Reduce  customer  dissaHsfacHon  and  improve   customer  experience.   •  Translate  to  stronger  branding  and  improved   sales.  
  34. Main  CompeHtor   •  Bought  over  by:  SEARS   Bought

     over  by  
  35. 3.  CriCcs  argue  that  L.L.  Bean  should  be  expanding  its

      total   retail   operaCons   including   stores   at   a   much   faster  rate  in  order  to  meet  the  compeCCon.  Do  you   agree?  Why  or  why  not?   •  Yes,  agree.     Complementary  3-­‐channel  strategy   •  Physical  stores  are  supporHve  of  catalogue  &   Internet  channel   •  Discrepancy  in  sales  volumes  between  channels   results  if  all  3  channels  do  not  expand  at  same  pace   •  E.g.  Sears  and  Lands’  End  merger  where  in-­‐store   sales  was  lesser  than  catalogue  &  online  sales   •  Mismatch  in  operaHon  size  à  Customers  cannot  be   directed  to  physical  stores  to  try  out  goods  
  36. 3.  CriCcs  argue  that  L.L.  Bean  should  be  expanding  its

      total   retail   operaCons   including   stores   at   a   much   faster  rate  in  order  to  meet  the  compeCCon.  Do  you   agree?  Why  or  why  not?   Increasing  number  of  compeCtors   •  Most  compeHtors  lack  physical  stores  &   internaHonal  stores   •  Needs  to  expand  physical  store  presence  to   compete  &  expand  internaHonal  stores  to  enter   global  market  
  37. 3.  CriCcs  argue  that  L.L.  Bean  should  be  expanding  its

      total   retail   operaCons   including   stores   at   a   much   faster  rate  in  order  to  meet  the  compeCCon.  Do  you   agree?  Why  or  why  not?   Merger  of  compeCtor  companies   •  CompeHtors  merge  to  form  bigger  companies   with  greater  operaHons   •  E.g.  Sears  &  Lands’  End  merger  à  enabled  Lands’   End  to  use  mulH-­‐channel  retailing   •  Needs  to  expand  retail  operaHons  in  order  to   match  up  to  bigger  compeHtors  
  38. 3.  CriCcs  argue  that  L.L.  Bean  should  be  expanding  its

      total   retail   operaCons   including   stores   at   a   much   faster  rate  in  order  to  meet  the  compeCCon.  Do  you   agree?  Why  or  why  not?   Economies  of  scale   •  Economies  of  scale  can  be  achieved  through   expansion   •  Results  in  lower  costs  that  can  drive  out  compeHtors   Physical  stores  allows  compeCCon  on  other  factors   besides  price   •  Online:  large  number  of  compeHtors  having  about   the  same  prices  à  compete  on  equal  fooHng   •  Physical  store(offline  compeHHon):  compete  on   other  factors  like  ambience,  store  display,  store  size,   locaHon  à  able  to  leverage  on  these  advantages  to   charge  premium  prices  
  39. Food  for  thought…   •  Do  you  think  L.L.  Bean

     would  achieve  the   same  success  if  it  moved  from  online  sales  to   catalogue  sales  instead  of  the  other  way   round?