How To Leverage Walgreens’ Strategic Position To Work For Them

At The Intersection Of Several Types Of Retailers
From a strategic perspective, Walgreens has a unique position in the marketplace, sitting at the intersection of Wal-Mart, small discounters, Target, and grocery store chains. The medium size and neighborhood-centric locations of typical Walgreens make them akin to small discounters. Walgreens’ scale allows it to offer low prices à la Wal-Mart. The uniqueness of some of Walgreens’ merchandise is similar in ways to Target’s offerings. And Walgreens’ offering of some staple groceries put it in line with grocery stores. The “trick” for Walgreens is to leverage some of these aspects of its offerings into targeting buyer groups which value a significant combination of many or all of them. If they can locate large pockets of these profiled consumers within given geographic locations, they will be hugely successful in this recession and in any economic climate, no matter how terrible.

How To Use Its Position To Gain Buyers
In sitting at this strategic intersection, Walgreens can gain buyers by:
1. Keeping Low Prices For Many Merchandised Items
2. Maintain and Develop Relevant Signature Brands (Non-Staples)
3. Stock Need-To-Have Grocery Items (Staples & Certain Non-Staples)

Prescription Savings Card Is A Winner
A bright spot for Walgreens is its prescription savings card which is increasing in usage and members. This offers people savings on the purchase of prescription drugs, which can be a substantial expense especially for people on a fixed income. Walgreens has a recession-proof winner here and should put more resources behind increased marketing to targeted groups. Here, they can utilize the advantage of their scale to move returns beyond other investment of resources.

Match Position With Informed Strategy And Right Tactics
Walgreens’ positioning and strategy must be “in-synch” especially during this economic downturn. They need to build solid links to key buyer groups through understanding their demographics and lifestyle preferences. This needs to be turned into pinpointing geographical locations where groups with desired demographics and lifestyles are located. Bets need to be placed in these areas – whether with a new store or upgrading an existing store. Simple line extensions of “stripped-out” non- or less value-added features will yield ultra-value private label product lines – which can counter-intuitively be branded boldly by wrapping these items into a special designated section or store-within-a-store. This is a marketer’s dream: being able to brand generic low cost items! At the intersection where Walgreens sits, what would you do?

Small Retailers on the Brink: Slower Sales Even Beyond the Holidays

Current Bad Situation
Although retailers everywhere are expecting bad holiday sales, small, independent businesses are being hit particularly hard. They typically don’t have the cash cushions or price-slashing abilities of the major chains. These independent retailers don’t have the margins to compete on price, as many shoppers gravitate toward large discounters like Wal-Mart to purchase lower-priced goods. This effect is especially devastating given the lack of growth in the market. According to the Wall Street Journal’s December 16th, 2008 issue, holiday sales are expected to rise 1.2% which is the worst year-over-year increase since 2001. Many of these smaller retailers are trying to find an effective competitive model to maintain business for not just the holiday season – but, as importantly, well into the year.

Find New Channels of Potential Business – Blue Ocean Spaces
Small retailers are going to have to look for Blue Ocean Spaces, and find new channels of potential business. While these businesses are too small to own a marketspace, they can certainly carve out profitable niches. There are three areas which small retailers can focus on to develop new business: geographic, demographic, and usage (both occasion and type). They can carry merchandise and services centered around a locale – and have offerings which are highly relevant to a given community. This is a Blue Ocean which large national chains will find very difficult to follow because many are very centralized in structure. As a smaller craft in the Blue Ocean Seas, local businesses can more adeptly cater merchandising, marketing, and operations to uniquely fit communities, towns, cities, and regions.

Look Beyond Current Buyers Demographics
Small businesses can also look outside of the demographic profile of current buyers to target additional customer groups. This can be done effectively by evaluating alternative or complementary industry buyer groups. Small retailers can look for synergic “hooks” to fulfill the needs for either of these groups. A business mentioned in the WSJ article, Charles Mayer & Company, is an up-scale boutique seller of china, crystal, and decorative accessories in Indianapolis. An example of them targeting a complementary buyer group would be to develop an interior design service which shows home- and condo-owning customers the appropriate matches of various pieces to rooms and homes being re-modeled or built. This look across industries would also yield very synergistic opportunities to bundle with partner companies. To further extend our previous example, Charles Mayer & Company could join with an interior design firm outright to provide pieces for a price discount or items which are exclusive to the given designer.

Blue Ocean Spaces Through Alternative Usage For Product Or Services
The third way a small retailer can discover or create a Blue Ocean Space is through alternative usage for their goods or service offerings. This can take the form of different types of usage for their offerings, or different or varied occasion usages for their goods and services. Possible variations on usage fit well with the previously mentioned opportunities to bundle with other goods and services. Alternative uses for a small retailer’s goods or services can be uncovered by looking at a buyer’s experience with related products or services. These retailers should observe and evaluate these buyer’s experiences before, during, and after a given product or service is used. This will yield rich insight into how to extend, alter, or retract their offerings in terms of recommended uses for their given products and the services they offer around them. For example, small auto repair shops have observed the success of “oil change only” shops such as Jiffy Lube, and now include even more discounted oil change services of their own as a front-end bundled offering when repairing other parts of a customer’s car. In this case, the usage occasion was changed from a scheduled maintenance item to an upfront service and opportunistic sale for a small retailer.

Even In Recession – The Key Elements of a Good Strategy

Three Keys to The Lowering Price Strategy
If the Chanels, Versaces, and Chloes of the world really feel compelled to lower prices as a response to the economic downturn, they need to incorporate three elements into their strategy. First, they need to focus on the lower price customers who have “traded down” to target critical masses of strategic consumer groups which have shifted their behaviors away from higher price points. Secondly, they must diverge from groups completely out of the lowered price range. Avoid wasting effort targeting groups buying at substantial lower price points, and ultra-premium buyers purchasing items above their products’ offerings. As mentioned before, it is advantageous to differentiate the product features when lowering the price. Lastly, to capitalize and leverage the brand – which is critical for luxury items – develop a unique new tagline.

Use A Functional Orientation Shift To Differentiate Your Product
A great way to differentiate a product when lowering costs is to use the Blue Ocean Strategy of more functional orientation in less important features of the product or brand. Do not reduce the features and benefits for which customers have strong emotional ties or reactions. This a slight variation of Mike Bolden’s “selective feature reduction” strategy in which less important items are chosen to take costs out along with the elimination of unimportant extras. Although the lower-priced item is differentiated, it’s still associated with the brand, so it is key to determine the right price point “prestige threshold” level. To gauge this point, observe and access:
1. Competitors in the same marketspace
2. Competitors above and below your product/brand’s marketspace
3. Range of spending for like items by your customer base

Downward Shift To A Different Marketspace
In lowering the price point for a luxury-goods item, it is critical for a manufacturer to avoid shifting its market position in the price-performance vertically “straight south” without differentiating the product, and moving laterally “left” or “right.” By shifting downward to the left by reducing or changing product features or to the right by adding or altering features, a goods-maker is entering a different marketspace, and the Blue Ocean strategy means the water’s fine!