The Marketing Strategy of Kmart Australia

Introduction

The business environment of the 21st century can be characterized by increasing competition in all areas. The tendency has emerged due to globalization and new technological advancement, altering the processes. Consequently, organizations must make considerable efforts to withstand the pressure and remain in the business. Effective marketing has become a matter of paramount importance for modern companies, as it allows them to ensure stable growth despite significant competition. Various theories aim at providing a comprehensive framework for organizations’ marketing strategies. The Circle of Satisfaction is one of such models, and it encompasses all stages of customers’ engagement with the product. This case study aims to analyze how the Circle of Satisfaction is applied in practice based on the example of Kmart Australia.

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Kmart Australia Background

This organization’s nature serves as an area of intense interest within the context of the present study. Kmart is a globally recognized chain of retail stores focusing on the affordability of its goods. The first store belonging to the chain appeared in Australia in 1969 (“Kmart mission, benefits, and work culture”, n.d.). In the following fifty years, the company gradually earned its customers’ love across Australia and New Zealand. Nowadays, the number of Kmart stores in both countries is over two hundred, making it one of the key players in the retail market. The organization’s headquarters are based in Mulgrave, Victoria, counting more than eight hundred employees. Simultaneously, the number of people working at Kmart Australia’s numerous facilities exceeds thirty hundred thousand (“Kmart mission…”, n.d.). The company values its positive corporate culture, emphasizing the importance of a good workplace environment for the business outcome. In other words, its approach dictates that content employees allow for satisfied customers and better financial results for the management.

Marketing Philosophy and Mega-Concepts

The 21st century has introduced an unprecedented level of globalization and competition across markets. New companies emerge rapidly, attempting to conquer their shares of the industry, but a large number of them do not manage to cope with modern challenges. In addition, older organizations that have been in the market for a considerable amount of time also find it difficult to maintain continuous growth. The reasons for such a tendency lie in the fact that today’s society quickly evolves, and new values are introduced. Accordingly, organizations must adjust their image and operations to remain relevant in the modern business environment. Overall, business activities comprise three primary concepts, which are production, selling, and marketing. Each of them reflects a particular stage of the process, which accounts for an organization’s general success while highlighting the primary focus of the company’s operations.

The production concept is closely connected to an organization’s cost advantage or the lack thereof. If the production requires relatively low costs and the goods meet customers’ needs, it is possible to increase its volumes significantly, thus conquering larger segments of the market. This concept is generally applied by smaller organizations entering the industry, as it offers them substantial advantages. Nevertheless, operating costs tend to increase over time, making it less desirable to maintain such volumes. Additionally, low-cost production is only available for a limited number of companies and industries. If the described advantages are not present, it is possible to opt for the selling concept instead. In this case, a company may try to compensate for the lack of cost or value advantages by aggressive selling techniques. Therefore, its operations encompass a large number of clients, focusing on quantity over quality. Simultaneously, such a model entails poor customer feedback and decreased loyalty. Indeed, when product quality is neglected in favor of greater sales volumes, the number of returning customers is expected to be below. In addition, aggressive selling causes concerns about fair competition.

On the other hand, there is the marketing concept, which focuses on the customer as the cornerstone of business activities. Its primary purpose is to ensure clients’ satisfaction following their experience with the product. At the same time, the marketing-oriented model does not dictate the secondary role of an organization’s needs. On the contrary, its main principle is to enable continuous development of the company through effective interaction with its clients. The nature of this interaction forms the fundamental difference between the marketing concept and other models. While production and selling-oriented companies view their customers as a means of achieving their objectives, marketing-focused organizations see clients as the goal itself. Accurate assessment of the market allows firms to determine their target audience, along with its needs, values, and demands. The results of such assessments provide organizations with a unique opportunity to adjust their operations by the actual customers’ desires. Consequently, the chances of good sales levels and positive feedback become higher, thus increasing the number of returning clients and contributing to the overall success of an organization.

In the vast majority of cases, successful companies can be characterized by one of the three concepts discussed above. While the first two models are characterized by several important limitations, the marketing-oriented model proves to be the most efficient one in terms of enabling stable development and a company’s positive image. Steven Fanning refers to it as the giga-concept of marketing, prevailing in developed countries. In light of modern views and values, the marketing concept promotes the importance of people, ideas, and experiences in business, instead of having them occupy a secondary position compared to the product and financial results. In a way, this model supports the person-centered ideas of business adopted nowadays in a variety of spheres.

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To provide a clear reference framework, Doctor Fanning divides the giga-concept of marketing into three major constituents, known as the mega concepts. First of all, it is important to consider the buyer decision process, which comprises three major time zones. Doctor Fanning draws a clear line between consumers and customers, adding that the transformation from the former into the latter occurs during the described stage. Naturally, the duration of decision-making depends on the importance of purchase and the scale of expenditures. First, each individual considers whether the product is worth their attention and money before purchasing. Second, customers evaluate the process of buying the product and interacting with the organization. Finally, there is another important stage that describes customers’ opinions after the purchase. The third zone is crucial in ensuring customer loyalty to the company, distinguishing this model from two others. According to this mega-concept, an organization needs to influence this process positively to attract customers through obvious advantages.

The second mega-concept is connected to the product itself, and Doctor Fanning devotes particular attention to it. It is important to remember that customers have a different perspective on the goods offered since they do not see the majority of efforts made by producers. Spoken differently, a large part of production happens “behind the scenes”, and clients do not see it. At the same time, customers cannot be expected to value said efforts, as their primary concern is the final offer. Therefore, they evaluate the product from a particular point of view, which does not necessarily correlate with the organization’s vision presented in Figure 1. In this case, the essence of the marketing concept and person-centered models lies in the company’s ability to examine the market from the other perspective and draw meaningful conclusions. In the end, positive results are achieved through a correct evaluation of customer satisfaction factors and appropriate adjustments to the product.

Total product scheme by Doctor Stephen Fanning
Figure 1. Total product scheme by Doctor Stephen Fanning

Similar to the previously described elements of the marketing concept, the Circle of Satisfaction (CoS) is a key component of successful business operations. Within the context of the present study, the CoS is the primary framework used to assess the marketing strategy of Kmart Australia. This mega-concept is directly connected to the other elements of the discussed model, serving as the cornerstone of the whole process. Its stages begin in the first time zone mentioned above and continue through the second and the third ones. As Doctor Fanning says, post-purchase reflections and evaluations play a key role in the CoS mega-concept. There are four types of satisfaction considered by the model: episodic, cumulative, aggregate, and collective. Generally, the results evolve from one to another, and the collective satisfaction reflects the overall effect of the product and organization on their market segment. The CoS comprises nine elements, and all of them serve to provide the company with a competitive advantage (Figure 2). An accurate examination of each step will allow an organization to improve its position in the market and overall results.

The Circle of Satisfaction by Doctor Stephen Fanning
Figure 2. The Circle of Satisfaction by Doctor Stephen Fanning

Kmart Australia Marketing Strategy

As Kmart Australia is a major player in the country’s retail market, it is important to examine its marketing approach to distinguish particular patterns within the framework of CoS. As mentioned above, Kmart Australia has the image of an affordable retailer with a broad choice of goods. Sorini (2016) states that the company’s approach to marketing positively affected its performance and created a modern, reliable image. As far back as the year 2008, Kmart was not in a leading position, losing the market to its primary competitors, Target and Big W (Sorini, 2016). Moreover, the brand faced bankruptcy before its new Chief Executive Officer Guy Russo managed to revive the brand. As a result, by the end of 2014, Kmart reported 289 Billion Dollars in profits, which became a staggering result for a company that barely managed to survive previously. Sorini (2016) attributes a large portion of this resounding success to Kmart Australia’s approach to marketing. If it is the case, an in-depth examination of the company’s strategy is required to determine the key factors that led Kmart to success.

The primary role of marketing in the new strategy of the company is evident. According to Sorini (2016), Kmart revised its approach in this area and completely redesigned the marketing model. Previously, the company attempted to maintain the image of an accessible store for every person. While it is natural to want to encompass as many customer groups as possible, Kmart soon realized that its marketing lacked concentration. Accordingly, the company managed to choose a specific target audience and focused on women and mothers, in particular. This view corresponded well with Kmart’s offers, as the stores offer a wide variety of homeware and clothes. At the same time, the organization wanted its public image to be up-to-date with modern standards. It introduced a new approach to advertisement in the industry, accompanying videos with popular songs, which demonstrates a substantial level of market research. In addition, the new vision of Kmart relies heavily on modern technological advancements, namely, social media. It allows the company to be closer to its customers and maintain a sufficient level of an online presence. Overall, this paradigm corresponded with modern tendencies and enabled Kmart’s extraordinary revival.

The Circle of Satisfaction for Kmart Australia

Quality

The Quality of components of the CoS resides in the 1st time zone of the buyer decision process. At this stage, a potential customer selects the product that would meet all the requirements and provide them with the best results. In other words, each individual practically conducts a cost-benefit analysis to determine whether the product will be worth the expenses. Quality is an important component of this selection process, and it influences the buyer’s decision-making to a substantial degree. Kmart Australia’s offer demonstrates excellent functional qualities, as its products are cheap, reliable, and useful. In addition, there are no evident social implications from shopping at the companies stores. On the contrary, its fresh, up-to-date marketing techniques make it attractive for the public, thus increasing the social qualities of its products. Therefore, the customer’s perception of Kmart’s qualities is favorable, which turns the buyer’s decision-making in the right direction.

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Value

Value is another crucial aspect of CoS, referring to the correlation between the customer’s expenditures and returns. According to the general understanding of value, it is determined by the relation between the total qualities of the product and its total costs, which strengthens its connection to the previous stage. Spoken differently, in the course of the decision-making process, a customer evaluates the qualities within the context of their perception and weighs them against the costs. Kmart Australia easily meets the expectations of its customers within the “predictive-equitable” range. This way, people receive exactly what they expected, and the company is deemed reliable. Product and service predictability is a positive factor, allowing Kmart to form a large returning customer base, as each client is sure that the value will not be negative.

Satisfaction

The satisfaction aspect is based on the assumption that every purchase is driven by a particular need. This stimulus launches the buyer decision process in an attempt to find a fitting means of having this need met. Satisfaction derives directly from the product expectations formed through the cost-benefit analysis described in the previous sections. During the 2nd time zone, as the client interacts with the product, they compare their actual impressions with prior thoughts. Customer satisfaction (or lack thereof) is not a fixed parameter, as it may vary depending on the pre-purchase expectations. In the case of Kmart, the company prefers to keep those expectations to a medium level, which leaves clients with overall positive impressions. The growing customer base of Kmart Australia, along with its substantial profits, signals that the aggregate and collective satisfaction levels of the company’s products are sufficiently high.

Trust

In the case of the CoS, customers’ trust is inseparable from satisfaction. Following several experiences with the product, a client is capable of forming an attitude based on their level of cumulative satisfaction. If the impressions are generally positive, meaning that the customer remained satisfied by the relation between their expectations and actual results, trust is formed. Doctor Fanning refers to trust-building as a calculative process, in which experience is compared with future needs. The results image of Kmart Australia reflects that the company is, indeed, trusted by its customers. The organization values its reputation among clients, and its image of an affordable company contributes to it. As people always leave the store with what they wanted to purchase, they are more likely to return to Kmart to have their further needs met.

Loyalty

As described earlier, the CoS spans across all three time zones of the buyer decision process, connecting to the total product itself. Loyalty is built in the third zone, which is crucial for the marketing concept. At this point, customers reflect on their experience with the product and may decide to provide positive services in return for being satisfied. Customer loyalty has many forms, meaning that people may simply return to the store or recommend it to their acquaintances. Simultaneously, the company’s financial results improve, ensuring continuous development. Kmart’s marketing model promotes customer loyalty through referral programs and bonuses, providing the stores with a stable flow of clients. The positive public image of the organization encourages people to speak of their positive attitude toward Kmart, which is also an important aspect of customer loyalty.

Competitive Advantage

According to the CoS framework, the aspects, which were described earlier, have the primary purpose of forming a competitive advantage. In addition, all the elements are interconnected, as good perceived quality ensures positive value, which entails customer satisfaction, turning into trust, and, later, loyalty. One of the primary objectives of the marketing concept is to enable an enduring involvement, which consists of large amounts of return purchases. However, clients are likely to compare the product with its rivals even if they remained satisfied by the first experience. As Doctor Fanning states, intense advertising can attract customers in the short term, but enduring involvement is unlikely to develop. On the other hand, focusing on the product’s quality, value, satisfaction, trust, and loyalty is an effective instrument for building lasting relations with clients. Kmart Australia struggled against its competitor before the new strategy was implemented but eventually became the market’s leader. This fact implies that the company managed to develop a competitive advantage through the accurate implementation of the marketing model principles.

Summary and Conclusion

In conclusion, the marketing concept focuses on the organization’s customers as the center of all activities while not disregarding production and sales. It comprises the buyer decision process and total product, which are connected by the Circle of Satisfaction. The CoS allows the companies to analyze their operations at each particular stage, starting from the initial quality of the product and leading to enduring loyalty on behalf of the clients. Kmart Australia was in a difficult position by the end of the 2000s, but it was able to revive the business by forming a competitive advantage within the CoS paradigm. The company correctly evaluated the market, discerning a target audience with its values, views, and expectations. As a result, Kmart’s approach proved to be fruitful, leaving customers satisfied and enabling trust in and loyalty to the brand.

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References

Kmart mission, benefits, and work culture. (n.d.). Indeed. 2020, Web.

Sorini, M. (2016). Cut-price chic: Six strategies that made Kmart cool. Creative Revolution. Web.

The Marketing Strategy of Kmart Australia within the Circle of Satisfaction Framework.

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NerdyRoo. (2022, February 21). The Marketing Strategy of Kmart Australia. Retrieved from https://nerdyroo.com/the-marketing-strategy-of-kmart-australia/

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