Marketing Strategy and Analysis for UK Book Retailer

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TABLE OF CONTENT
TITLE PAGE
1.0 EXECUTIVE SUMMARY
2.0 CURRENT SITUATION – MARKETING ENVIRONMENT
2.1 Political
2.2 Economy
2.3 Social-Cultural
2.3.1CONSUMER ANALYSIS
2.3.1.1 Consumer Buying Behaviour
2.3.1.2 Social, Culture & Economic Influence
2.4 Technology
2.5 Environmental
2.6 Legal
3.0 CURRENT SITUATION – MARKET ANALYSIS
3.1 Market Sector
3.2 Market Position
3.3 Market Size
3.4 Market Share
3.5 Market Segmentation
3.6 Porter Five Force Analysis
4.0 SITUATION ANALYSIS – S.W.O.T.
4.1 Internal Strength Matrix
4.2 Internal Weakness Matrix
4.3 External Threat Matrix
4.4 External Opportunity Matrix
4.5 Critical Success Factors in the Industry
5.0 MARKETING STRATEGY – PRICING
5.1 Pricing Objective
5.2 Pricing Strategy (e.g. Skimming & Penetration)
5.3 Discounts & Allowances
5.4 Strategic Options for Increasing Sales
6.0 MARKETING STRATEGY – PRODUCT
6.1 BCG analysis
6.2 Ansoff’s Analysis
7.0 MARKETING STRATEGY – PROMOTION
7.1 Advertising
7.2 Viral Marketing
7.3 Direct Marketing
8.0 FINANCIAL SUMMARY
8.1 Group P/L Account
8.2 Group B.S.
8.3 Group C.F. Statement
8.4 Segmental Analysis of Turnover
8.5 Segmental Analysis of Group P/L
9.0 CONCLUSION & RECOMMENDATION
10.0 REFERENCE & BIBLIOGRAPHY

1.0 EXECUTIVE SUMMARY
The bookselling industry is going through a period of considerable change and there is a
sense in the industry that this change will accelerate. It is being brought about by increased
competition in the high street and from the internet. The bookselling industry serves three
sectors: buyers of professional and academic books, and school librarians and head
teachers. There are number of suppliers to the retail sectors: large high street chains
including WH Smith, Book Clubs, independents booksellers, campus booksellers,
supermarkets and leisure outlets, confectioners, tobacconists and newsagent (CTNs) and
school and library suppliers (Key Note Ltd 2005).
WH Smith and the specialist chains such as Waterstone’s, Blackwell, Ohakais, Books Etc
and Borders account for around 45% of the consumer market. The remaining 35% is shared
by independent bookshops, direct selling and book clubs, plus the small retail outlets of
leisure organisations and businesses such as restaurants, museums and garden centres (Key
Note Ltd 2005).
The academic and professional market is largely supplied by campus bookshops and by
the specialist chains. Schools are mainly supplied by specialist school and library suppliers,
but booksellers are progressively taking a large share of this sector. The ownership of some
of the large chains has changed in recent times. Waterstone’s is no longer part of WH Smith
and is now part of HMV Media Group, while Books Etc is now owned by Border (UK) Ltd,
which is the UK subsidiary of Borders Group incorporated in the U.S.
The internet is making an impact on this market – especially in the academic and
professional sector. How far it is eating into the sales of high street book shops is not clear.
Some booksellers believe that internet sales are taking a growing share of consumer rates
but there are others, such as James Heneage, Managing Director of Ottakar’s who insists that
the internet is not as yet making a significant impact on high street sales (Key Note Ltd 2008).
WH Smith is one of the centre point chosen for this report with respect of a high street
book retailer to be examined in relation to other booksellers. It is one of the biggest book
retailers in the UK , nevertheless it has suffered from a £135m loss in 2004 compared with the
profits of £52m in 2003 (music sales play a key part in Smith’s New Strategy, 2004).
Therefore, an analysis of WH Smith needs to be concerned with understanding the forces
including both external and internal ones which influence its performance, especially in light of
its recent poor performance, and suggest strategic measures which could be taken to rectify
this situation.
2.0 CURRENT SITUATION-- MARKETING ENVIRONMENT ANALYSIS
2.1 POLITICAL PERSPECTIVE:
Retail marketing decisions are substantially impacted by developments in the political
framework. The outcome of political decisions can be seen in the legislation and economic
policies of government. The issue of government fiscal (tax and government spending) and
monetary policy (interest rate & totalisation of money in circulation) could hitherto dictate the
purchasing power of the consumers towards the booksellers.
Many of the legal, economic and social developments in the society and other countries
are nothing more than the result of political decision put in action. For example, in the 1980s
the Conservative Party favoured a monetarist approach to the management of the UK
economy. It attached great importance to the control of the money supply and hence
government public expenditure. The general philosophy of the Conservative was one of ‘self-
help’ and free enterprise, preferring to see business in the hands of private shareholders
rather than owned by the states – its main concern was with the reduction of the level of
inflation which is seen as being vital to long term economic growth and stability. In the UK
political change, suffice to say, is brought about through democratic process. The UK enjoys
a high degree of political stability which instil confidence in overseas buyers and suppliers and
this is good for retailers or business. Unlike in some overseas countries the political situation
is more volatile – change and political power are often obtained through force rather than the
democratic process.
2.2 ECONOMIC PERSPECTIVE:
Retail markets consist of purchasing power as well as people. Total purchasing
power is a function of current income, prices, savings and credit availability. Retailers should
be cognizant of major trends in the economic environment. The changes in economic

conditions can have destructive impacts on business plans of a firm. Economic forecasters
looking ahead through the next decade are likely to find their predictions clouded by the
recurrent themes of shortages, rising costs and up and down business cycles. These
changes in economic condition provide retailers with new challenges and threats. How
effectively these challenges could be converted into opportunities depend on well-thought-out
marketing programmes and strategies.
Some of the major economic trends and change affecting UK retailers recently have
included, a relatively stable interest rates which in turn have led to an extremely strong pound
and hence problems of exporters (for example, the economic situation in the UK can be seen
as positive factor for UK book retailers with low interest rates (2.7%) and high property values
leading to record levels of borrowing. However there are concern over the level of borrowing
as debt levels for have reached more than £1 trillion (BBC E). It is noted that low interest
rates would perhaps dissuade people who are living off investments from spending);
increases in real disposable incomes have also helped fuel consumer retail spending, which
in turn has given rise to fears of return to high levels of inflation; a return of consumer
confidence, particularly in some of the markets where long-term investment is involved, such
as the housing marketing, has helped to boost the prospects of the UK building industry. In
home economy trends – the government states that Council Tax will rise by an average of
4.1% in the next financial year, the lowest increase in more than ten years (BBC B). In the
housing market, figures for changes in house prices vary by source with the Halifax quoting a
0.5% rise and Nationwide a 0.5% fall (BBC A 2005). There is currently no solid evidence of a
crash in the housing market. Should this occur, the impact on the whole retail industry would
be immense.
In overseas economies and trends – oil prices had risen to a high of $56.15 per barrel in
mid March (BBC F). Although they are currently falling, they remain 25% higher for the year
(BBC F). Long term, the situation is likely to worsen as demand for oil increases from
growing economies such as UK , where the economy is growing at 9% and a 10% increase in
oil use is predicted (BBC F). High oil prices will affect both production and distribution costs
for all book retailers and will have to be passed onto the consumer through relatively
increased prices if alternative savings cannot be made in the value chain.
2.3 SOCIO-CULTURAL PERSPECTIVE:
The main factor influencing a society’s attitudes and behaviour is its culture. Core cultural
values are firmly established within a society and are generally difficult to change. Such
beliefs and values are passed on from generation to generation through the family and other
social institutions such as the church, schools and government. Because core cultural values
are difficult to change, they act as relatively fixed parameters within which book retailers have
to operate. Kotler states that culture is the most fundamental determinant of a person’s want
and behaviour. These values are less persistent than society’s core values and tends to
undergo changes over time.
By and large, not so very long ago, society's attitude towards working woman tended to
be chauvinistic. A woman’s place was thought to be ‘in the home’ and the ‘career woman’
was viewed with a certain amount of suspicion. Today, such attitudes have changed and a
high proportion of workers are women. This high proportion of working women has
contributed to the high level of purchasing power of the overall consumer in book retailers.
Changes in social trends can impact on the demands of a retail’s product, and the
availability and willingness of individual to work. In the UK , the population has been ageing.
This has increased the costs for book retailers who are committed to pension payment for
their employees because their staff are living longer – the likes of WH Smith, Blackwell, &
Waterstones. The ageing population also has impact on demands: for example, demand for
consumer’s books has increased, whereas demand for professional and academic books is
falling.
However, Mintel’s annual lifestyle report has found that consumers are shunning the
larger supermarkets and chain stores which they find impersonal, and are much more likely to
frequent local, independent shops (cited in BBC C). The implications of this for UK book
retailers could be positive or negative. To many people, they may be classed as a multi-site
retailer and therefore avoided by the consumer.

2.2.1 CONSUMER ANALYSIS ----CONSUMER BUYING BEHAVIOUR
The features of consumer behaviour consists of the activities involved in the buying and
using of products for personal use. This consumer buying behaviour is often influenced by a
range of outside stimuli – especially in the different form of advertisement of ranges of books
and the pattern in which the books was written & design could trigger consumer to purchase a
particular books for use, for example, in the advent of presidential campaign of Mr Obama for
the seat of US president. He’s eloquent and high speech word – ‘Yes I can’ goes a long way
to caught lot of audience. When he final wrote a book and it was advertise on T.V. Many of
this fans seek to purchase this books irrespective of the credit crunch at that time. Also Harry
Porter’s Book on Magical spilled a lot of stimuli in the children worlds. There was high
purchase on the book due to advertising.
Moreso, the particular nature of sub-culture groups of society with distinct cultural
differences – such as Indian, West Indian, Italian or Irish, who may have individual lifestyles
and values. Religious groups such as Jews, Muslims, Christian and Hindus, are another sub-
culture within the larger cultural group. Blacks, Whites and Asians are examples of broad
racial grouping and geographical groups include northerners, southerners or Scots are
distinct groups. All tens sub-cultural groups mentioned can vary in the books they wish to
buy, the outlets they buy from, the prices paid, the media they watch, etc. Book retailers
would per adventure, ignores this cultural factors, do so at their perils.
The final environment factor affecting consumer behaviour is the marketing effort of
organisations. Much of this concentrates on the planning of decisions aimed at influencing
buyers behaviour. For example, retailers makes decisions concerning products, prices,
distribution and promotional campaigns to cause consumers to purchase the retailers books.
A good example is in the area of marketing communication & psychological pricing. A
psychological pricing, is a pricing strategy used to entice customer to buy a product thinking is
getting something in return. For example, a book sold at £1.99 instead of £2 makes customer
feel it is cheap and he’s saving cost. Or the use of freebies, as buying a books and get free
umbrella.
.
2.4 TECHNOLOGICAL PERSPECTIVE:
Technology is a major environmental influence upon the retailing firm. It affects not only
the firm’s operations and product, but also consumer’s lifestyle, behaviour and consumption
pattern. The growth of e-commerce has provided new strategic directions for retailers. It
provide a channel through which to sell goods and on which customers can research
products, compare prices, order and pay for goods, and as such, there is reasonable
competition to encourage consumers to visit particular website. An extra dimension is the
number of companies who sell only through INTERNET – this provides them with a
competitive advantage of having lower overhead as premises and shop floor staff are not
required. A good example of this is the book retailer
Amazon.com who have diversified into clothing, apparel, DVDs and compact discs following
their success with books.
The most important trend to date concerning book retailers has been the development of
this internet which has shaped consumer purchasing behaviour in various ways in particular
the means and manner in which they purchase books. Due to the development of these
technological innovations the use of the internet has increased rapidly and according to
survey carried out by the Interactive Media in Retail Group (IMRG) half of the total 24.5 million
households connected pay £230 annually to connect to the web which demonstrates a large
financial commitment to the web and a large coverage of internet users demographically
across the UK (lmrg.org 2004)
Mintel’s annual lifestyle report has found that around 75% of those who buy books over
the internet do so out of convenience. Price is a factor mentioned by 54% of those who buy
books online, and speed of delivery is important for 45% of these buyers. The survey also
showed that on line buyers still buy 75% of more of their books from bookshops (Mintel
2006). A second study commissioned by The Bookseller’s owner Whitaker in collaboration
with Taylor Nelson Sofres, showed that internet sales are hitting book clubs rather more than
high street booksellers. However, this survey did not include sales to libraries, universities,
schools or business. Internet sales to universities are thought to have taken a notable slice of
the university book market (Key Note Ltd 2000).

Further channels have yet to be fully utilised including ordering goods through mobile
phone technology and digital television shopping channel.
2.4 ENVIRONMENTAL PERSPECTIVES:
Environmental factors include the weather and climate change. Change in temperature
can impact on many industries including farming, wood and timber as well as paper industry.
The climate changes occurring due to global warming, evidence that if not controlled, the
whole earth will dry up as result of high increase in temperature causing drought where rivers,
streams are drying up and oceans shrinking in size. This has been evidence in a
documentary shown in Kenya towns (BBC 2). This climate change is also caused by a
greenhouse effect as well. The aftermaths of this is that there will loss of nutrient in the soil
and trees will start getting dry up due to infertile land. This might result to desert areas.
Clearly speaking this aspect of the marketing environment touches on. However,
environmental pollution and degrading also affect and threat the natural environment. With
increase in pollution as a result of industries such as oil & gas, the use of cars & heavy duty
vehicles, increases the carbon atom contents in the air in term of carbon monoxide and
carbon dioxide which are not environmental friendly to a forestation and reforestation of trees.
Amid the alphabets soup and baffling procedures of last month’s climate change
conference in Copenhagen , China pledged a reduction, of between 40% and 45% by 2020,
in the level of its “carbon intensity” – the amount of carbon emitted in proportion to output. It
hard to tell how big a change the Chinese promise represents from business as usual; but it
has an impressive ring. Also, for people who see stopping deforestation as the quickest
climate change win, Copenhagen seemed a success. There was a welcome boost on
December 16th
when 21 countries pledged $150 billion a Global Research Alliance on
Agricultural/Greenhouse Gases (The Economist 2010, pg23, 44).
2.5 REGULATORY/LEGAL PERSPECTIVE:
This environment is composed of laws, government agencies and pressure groups that
influence and constrain various book retailers in the marketing environment. Legislation
affecting retail business has steadily increased over the years. The legislation has a number
of purposes – the first is to protect from each others. So laws are passed to prevent unfair
competition such as NBA (Net Book Agreement). The second purpose of government
regulation is referred to as consumer law & protection Act – which protect consumers from
unfair retail practices. Some firms, if left alone would adulterate their products, tell lies in their
advertising, deceive through their package and bait through their prices.
The NBA as earlier mentioned, was a voluntary but legally binding arrangement dating
from around 1910 that allowed publishers to set a recommended retail price (rrp) for their
books. If a bookseller tried to sell a book below the rrp, then they could face potential legal
proceedings. When retail price maintenance for all goods was abolished in the UK in 1964,
two sectors were excluded from the new legislation – books and drugs. In book sectors,
producers were allowed to set the market price for their goods.
In October 1995, the NBA came to an end after the major publishers made it clear that
they no longer supported it. The ending of the NBA has had a significant impact on
bookselling in the UK. It had not been a good year for some publishers, notably Reed
Consumer Books (then part of Reed Elsevier Plc) and Harper Collins. Headline (later Holdder
Headline) had already withdrawn from the NBA. Random House UK, they joined these three
companies in leaving NBA (Key Note Ltd 2000).
Also the Data Protection Act which governs the way consumer’s data are handle by a
retailers or business is significantly considered necessary especially the use of credit cards
and loyalty cards. Book retailers have to request consumer’s consent before his/her data is
shared with fellow retailer (Key Note Ltd 2000).
3.0 CURRENT SITUATION---MARKET ANALYSIS
3.1 MARKET SECTORS
The three main sectors of the UK book market are:
• Consumer books
• Academic and professional books
• School books, including English Language Teaching (ELT).

These sectors are by no mean exact. School books, for example – especially
primary school books – overlap with consumer books. Meanwhile, many professional books
are sold into the consumer market. Then there is an overlap between academic books and
school books (Key Note Ltd 2005).
3.1.1 CONSUMER BOOKS: Consumer books come in two forms – hardback and
paperback, sometimes called ‘soft back’. Traditionally, books came out in hardback first and
then later in paperback.
.
3.1.2 Academic and Professional books: Books in this sector include science, technology,
medicine, law, management and business, including computing. These books are sold
primarily by the big specialist book chains such as Water stone, Blackwell, Hammicks and
Borders. University books also sell these books (Simon 2005).
3.1. 3 School Books: School books comprise primarily textbooks. These are sold to
schools either directly by publishers or by specialist school book distributors.
3.2 MARKET POSITION
In its 2008 market report on bookselling, Key Note estimated that books had a 23.1%
share of UK publishing sales. Key Note figure for 2008 suggest that the share has fallen by
two percentage points. This drop is reflected in the comments made by UK bookshops
managers, who say they are finding the market difficult in 2008 (Bookselling Market Report
2008).
3.3 MARKET SHARE
Consumers books represent the major share of all books sold by value (68%), and
this has been true since the late 1970s.The market shares of the different genres of books
have remained relatively constant over the period from 1994 to 2000. School books still take
less than 10% (7.6%) of the market. It is generally acknowledged by education experts that
UK schools spend far too little on books by comparison with schools on the continent. The
share of school books in the total UK market should be much higher than 7.6% (Key Note
2000).
3.4 MARKET SEGMENTATION
Book selling, including sales to schools and libraries, can be
segmented into five sectors.
• Retail outlets for new books – which forms the basis of the strategy
used in this report
• Book clubs
• Second hand bookshops – which sold second hand books
• Antiquarian and rare booksellers, which operate mainly mail order
and the internet.
• School and library suppliers – these are usually called book
distributors or suppliers, rather than booksellers. They are included
in this list because they are selling books and also because, to
some extent, they do compete with high street booksellers.
As already known segmentation form the basis for developing targeted and effective
marketing plan. Furthermore, analysis of market segments enable decisions about intensity
of marketing activities in particular segments.
The reason, therefore why five segments of the book market is chosen for consideration is
that, it generally offers a range of advantage for both business and customers----Key reasons
highlight below:

Better Serving Customers Needs and Wants: It is possible to satisfy a variety of consumer
needs with a limited product range by using different forms, bundles, incentives and
promotional activities.
High Profits: It is often difficult to increase prices for the whole market. Therefore, there is
possibility of developing premium segments in which customers accept a higher price level.
Such segments could be distinguished from the mass market by features like additional
services, exclusive points of sale, product variations and the like. A typical segment-based
price variation is by region. The generally higher price level in big cities is evidence for this.
Opportunities for Growth: Targeted marketing plans for particular segments allow
individually approach customer groups that otherwise would look out for specialised niche
players. By segmenting markets, book companies can create their own ‘niche products’ and
this attract additional customer groups.
Moreover, a segmentation strategy that is based on customer loyalty offers the
chance to attract new customers with starter products and to move these customers on to
premium products.
Sustainable Customer Relationship in all Phases of Customer Life Cycle: Customers
change their preferences and patterns of behaviour over time. Book companies that serve
different segments along a customer’s life cycle to guide their customers from stage to stage
by always offering them a special solution for their particular needs. For example, book
retailers could offer a product range that caters for the needs of all phases of a customer life
cycle: consumer books, school books, children’s books, academic and professional books.
Targeted Communication: It is necessary to communicate in a segment-specific way even if
product features and brand identity are identical in all market segments. Such a targeted
communications allows to stress those criteria that are most relevant for each particular
segment (e.g. price vs reliability as prestige).
Stimulating Innovation: An undifferentiated marketing strategy that targets at all customers
in the total market necessarily reduces customers’ preferences to the smallest common
basis. Segmentation provides information about smaller units in the total market that scare
particular needs. Only the identification of these needs enables a planned development of
new improved products that better meet the wishes of these customer groups. If a product
meets and exceeds a customer’s expectations by adding superior value, the customer
normally is willing to pay a higher price for that product. This profit margins and profitability of
the innovating organisations increase.
Higher Market Shares: In contrast to an undifferentiated marketing strategy, segmentation
supports the development of niche strategies. Thus, marketing activities can be targeted at
highly attractive market segments in the beginning. Market leadership in selected segments
improves the competitive position of the whole organisation in its relationship with suppliers,
channel partners and customers. It strengthens the brand and ensures profitability. On that
basis, book retailers have better chances to increase their market shares in the overall
market.
3.5 MARKET SIZE
According to provisional figures from the Publishers Association, the value of UK
retail market for books in 2008 was £3.26bn. This represents an increase of 6.5% in 2007.
(key Note Ltd 2008)
Book Output: The output of books continues to climb despite annual calls for a reduction.
Even during the recession of 1989 to 1992, output continued to rise. Only once in the last 10
years has the output rose by 5.6%. This was more than in 1998, when the increase was
4.3%, but it remains below the unusually high figure of 6.8% for 1996. The scale of the
output is to a large extent counter-productive in that neither authors, nor publishers nor
booksellers benefit from this huge output.
3.6 MARKET POTENTIAL

In the six months to 29 February 2004, statistical evidence shows that the trading
profit margin of UK High Street Retail was 6.35%, 4.7 percentage points lower than during the
same period in 2003. It was also significantly lower than the operating profit margins of a
number of high street competitors over the Christmas 2003/2004.The majority of key
competitors generate attractive margins and, in spite of a competitive environment and
perceived threat from supermarkets, the Board is convinced (and I right agree) that UK High
Street Retail can significantly improve its margins.
3.7 PORTER’S FIVE FORCE FRAMEWORK
According to Porter (1980) the likelihood of firms making profits in a given UK book
retailing depends on five factors.
The Threat of New Entrants:
The barriers to entry into UK ’s book retail sector are very low. With an investment of
about £40,000, most people can probably set up a shop on a typical high street within 2
month. Go into any city, town or village in UK and one will find a row (or more) of shops.
There are thousands of small retailers all competing against themselves. This tends to occur
because the entry costs are not high. Beside, the likes of WH Smith, Blackwell, Ottaka’s,
there has been a lot of entrants into book retailers such as supermarkets (e.g. Tesco, Asda,
Sainsbury’s, Waitrose, Book Etc, James Thin, Sussex Stationers, Independent Books,
Hammicks, Roadside Restaurants and Service Stations).
The demise of NBA (Net Book Agreement) has attracted Borders Incorporated into the
UK. This would not have been possible if NBA was still in place. UK is the only major
European country not to have some form of price control for bookselling. France, in the late
1970s, abolished its own form of price control, but within a year or so re-introduced it.
Germany, Italy, Spain, the Netherlands, Belgium ad Greece all operates some type of NBA
agreement. The European Commission (EC) wants to see the end of all price-fixing
agreements, but the French and the German government have so far forestalled this. The
French and German publishing and bookselling organisations say that the retention of price
maintenance secures several thousands jobs in their industries.
BARGAINING POWER OF SUPPLIERS:
The bargaining power of suppliers has been much diminished with the development of e-
commerce. Because the vast increase in access of information between potential suppliers
and buyers, the suppliers pricing strategy may be the only way to secure business. This is
likely to increase as more use is made of the internet. One recent development has been the
practice of reverse actions where a retailer specifies what they want and competing suppliers
out of bid each other, via a website by lowering the price rather than by raising it as in the
traditional auction. (Gus plc 2005)
One supplier have been agreed, the large size of this retail sector also ensures buyers
can act from a strong negotiating base, as they have significant control over the future health
of dedicated suppliers. Recently there has been publicity, around the practice of large
retailers setting what are seen as unfair terms with suppliers and of insisting on price
reductions even though the suppliers then operates at a loss (Mintel Report 2005). However,
it is not expected that any legislation will bring about changes in this situation in the
foreseeable future. On the negative side, specialist suppliers such as Bertram’s Group Ltd,
Gardners Book Ltd and THE, have an increasing amount of power due to the demand for
their books. This has made switching cost difficult and expensive. There`s relatively high
price on books especially academic & professional books for example. A retailer would need
to ensure that they have sufficient quantities of books especially for a Christmas market, but
are frequently left in the hands of suppliers who can give preferential service to other
customers.
Threat of Substitutes
Production substitutions can be used in two different ways. Firstly, as in the strategy of
many of the main supermarkets (like Asda, Tesco, Sainsbury’s and Waitrose), own brand
labels are seen as acceptable substitutions for everyday books items. The cost of
substitution is low to the customer i.e. they feel that there is little risk because of the loyalty
they have to the store. The other type is through introducing higher priced new books items.
This strategy can be seen in WH Smith where they market the product as being superior to

other brands. For the variety of retailers, the concept of substitution doesn’t seem to have
been fully exploited and it is a possible strategy for securing market share in future.(Smith
2004)
The competition engendered by a threat of substitute comes from product outside the
industry. The price of a design companies like Sampson Tyrell is constrained by the price of
Wolff olins, Weaver Associates, RSCG Conran Design. These designers are substitute, yet
they are not rivals in the book retailing industry. The ease of switching depends on what cost
would be involved (e.g. redesigning all the stores, create a new shops, retraining staff could
be expensive) and how similar customers perceive the alternatives to be. It also involves –
(a) product-for-product substitution, school books for children books, consumer book is based
on the substitution of needs; (b) generic substitution (book suppliers compete with video
suppliers or travel companies); (c) substitution that relates to something that people can do
without (posting letter, office equipment & stationery).
Today, the threat of substitute has been the used (i.e. second hand) books. People tend
to go for used books than buying new books which the consumers feel it helping to cut down
expenses for them. Thus, in a book retailing market, used books especially in school,
academic and professional books remains a viable substitute industry.
BARGAINING POWER OF CONSUMER
The high level of competition amongst book retailers had led to a position of power for
the consumer. Having moved from seasonally driven sales events to permanent deals, the
aggressiveness of these approaches has also increased. Customers now expect to be able
to get three for two offers, ranges of discounts and vouchers throughout the year. This puts
the retailer at a disadvantage, as they will lose the potential benefit of targeting marketing
promotions.
Looking at the UK book selling retailers, there are quite a numbers of retailers such as
WH Smith Plc, HMV Media Group Plc and large specialist chains (e.g. Waterstones’,
Ottakars, Blackwell) and small specialist chain (e.g. Book Etc, Hammicks, James Thin,
Sussex Stationers, Independents), supermarkets; confectioners, Tobacconists and
newsagents, Book Club, Amazon, Le Foyles, corner shops that sells old books etc. Thus,
there are a few, but big buyers, and each can easily switch to other retailers, with relatively
low price. That is, switching cost is low between the buyers. Thus, making the bargaining
power of consumer high and therefore, influence the price of the booksellers. And if the
retailers can not afford the price demand of buyer, it probably could lead to the buyers taking
over the retailer if the buyers are financially buoyant.
.
DEGREE OF RIVALRY:
This is the extent to which degree of competition between existing book retailers. The
higher the degree of rivalry the more difficult it is for existing firms to generate high profits. In
the UK book retailing there has been a high level of competitors in the industry. Since the
advent of the likes of WH Smith Plc in 1792 there has been an inclusion of other major, large
and small specialist and so many. This means they are competing for the same market
shares and consumers that WH Smith has enjoyed over past millennium. In the late 1980s
and early 1990s Dillons and Waterstone’s had doubled in size, each having more than 80
outlets. These two booksellers changed the face of UK bookselling with their massive stocks
and clearly laid-out stores. They were so unlike most of their competitors in that their orderly
and beautifully designed stores made book buying easy. Indeed Dillons even had
advertisement knocking one of its famous competitors, which ran ‘Foiled again? Then try
Dillions’
However, in 2000, amidst fierce competition, the independents still remain in the
majority, but they are facing more competition from the chains which have grown so much in
the last 15 years. Another factor is the supermarkets. In 1985, supermarkets did not sell
books. Now they do and they are now another market force in the bookselling market. On
top of all this change, internet-based suppliers have entered the market. Retailers such as
Amazon.com and Barnes & Noble have invested huge amounts of money in improving their
security and privacy performance in terms of e-shopping and operate successfully by offering
lower price and time flexible products that respond dynamically to the new demands of e-
aware consumers (Kaarst-Brown & Evaristo 2004).
4.0 SITUATION ANALYSIS: S.W.O.T--- FOR UK BOOK RETAILER

In determining the strength for UK book retailing industry. The strength of & weakness of
the industry is considered and compared these with the external opportunity and threat
identified by PESTEL analysis.
4.1 STRENGTH:
These are internal factors that a firm may build on to develop a strategy. A strategy may
be developed by using a firm’s strengths to exploit the opportunities that exist. Example, a
strong brand name may be used to extend a firm’s product into new market. It may also use
these strengths to protect itself against threats.
A book retailer may use its finance to acquire key location to prevent a
competitor buying them. The use of strength matrix is employed to determine
whether UK book retailing is ENTERPRISE OR RISK ADVERT.

Success Probability
High Low
Attractivenes
s
High • There’s high profit of the
business
• High demands due to
customer’s changing lifestyle
• Strong brand from long
history
• Internal competence in
supply chain
• Internet, e-retailing e-
books
• Publishers to customer
distribution channel
• Potential expertise skill &
acquired experience
• Relationship marketing
• Discounting & allowance
• Specialist chains stores
• Customer orientated
service
• Offensive & aggressive
marketing
• Customer retention
• CRM & MKIS
• Targeted market audience
• Out of specialisation (i.e.
core business) into other
diversifying key sectors
• Intensive & extensive
distribution system
• High street retailing
• Characteristic wealth of
titles
• Transaction marketing
• Staff motivation &
incentives
• Feedback mechanism
• Product segmentation
• Investments of new
product
• Adoption of new market
• Forecasting method
• Stock/inventory control
management
• Re-designing of stores
• Packaging

Low
• Viral marketing
• Profit/business control
policy
• Employer-ee relation
• Direct marketing
• Reliable customer return
policy
• Access to loan/share
capital from shareholders
• Competitive advantage
(due to high demands and
supply)
• Pricing options
• Strategic positioning &
number of stores
• Downsing
• Better product life
• Market size
• Market shares
• Availability of funds from
financial institutions
• Direct delivery capability
• Market position
• Re-imaging, re-branding &
re-structure of products
WEAKNESS:
The use of WEAKNESS MATRIX is used in this case
Probability of Occurrence
High Low

Seriousness
High
• Low average market shares
(due to overcrowded retailers)
• Low staff morale (due to
internet service or online
marketing)
• Consumer rapid change in
lifestyle
• Low level of education
patronage as to training
• Reactions & attitude of the
labour market on graduate jobs
• Unemployment rate (due to
recession & depression)
• Over-dependence on social
group
• Low capital start up
• High debt rate
(characterised form
liquidity/credit crunch)
• Disappointing sales (due to
wrong forecast)
• Government interest rate
• Monetary policy (tax &
expenditure of government)
• Changing status of the
economic activities (affecting the
purchasing money of consumer)
Low
• No price control
• Insufficient promotions
• Cash problem
• High level of borrowing
• PooR decision making at
management level
• Customer changing needs &
wants
• High rate of labour turnover
and industrial price war
• Over-expansion, led to
over-crowded markets
• Lack of corporate website
development (due to high cost &
high growth rate of internet
technology)
• Low level of efficiency in
operating in the market (due to
high competition resulting to high
bargaining power of buyer
OPPORTUNITY MATRIX

Success Probability
High Low
Attractivenes
s
High
• Joint partnership
• Education & training,
campaign & explorations
• Online market
• Globalisation (foreign
market)
• Reducing & minimizing
trade barriers (low or no tariff &
VAT)
• Market research (on new
entrants to a foreign market)
• R&D for new product (that
will appeal to existing & new
customer)
• Diversification
• Market development
• Seeking better supplier
deals
• Affordable & low
housing rate
• Government subsidizes
• Huge net cash flow (from
cutting down expenses &
improve maintenance policy)
• Secure (online) payment
services e.g. paypal etc
• Taking customer
feedback (seriously &
responsibly)
• Total quality
management
Low
• Appropriate forecasting for
future market trends
• Children’s books, toys &
wears
• Exploring
publisher/customer distribution
links (through call centres)
• Merger & acquisition
• Attract investors
• More cash fund & capital
intensive
• Marketing mix – 4 P’s
• Low switching cost
• Product development
• Market penetration
• Copyright law (because
of piracy) & Intellectual
property law should be
strengthen
• Afforestation &
Reforestation of trees
• Sales promotions
• Use of loyalty scheme

THREAT MATRIX
Probability of Occurrence
High Low
Seriousness
High
• Rapid development of
internet
• Direct selling
• Low barrier of entrants
• Discounters & category
killers
• Tear of big boys in the
house (i.e. large retailers like WH
Smith, Waterstone, Blackwell etc)
• Demise of Net Book
Agreement
• Low consumer income &
purchasing power
• Government support & legal
development in new e-retailing
form
• Easiness to compared
retailers
• Government legislation
• Environmental pollution
(from industrial waste, car
exhaust pipe with CO & toxic
gases)
• Increased in oil prices &
demand for oil
• Global warming &
greenhouse effect on the climate
• Competitor’s intentions
• Population shifts
• Fiscal policy (budget
decisions on taxes & government
spending)
• Epidemic outbreak e.g.
SARS & flu etc
• Internet – crime & hackers
• Over-dependent of IT
(might make people redundant) &
the job unethical
• Fear of uncertainty &
unknown of future market status
e.g. recession, depression,
inflation
Low
• Cost of living & exchange
rates
• Online shopping
• High competitive market
• Demands/supply (DD/SS)
• Fear of price war from top
& large UK book retailers e.g.
Amazon.co.uk, WH Smith,
Waterstone etc)
• Eco-political effect resulting
from industrial civil unrest,
aggravated political disputes
resulting to conflict
• Terrorist attacks
• High level of business
mismanagement, failure & theft
• Level of corruptions &
bribery among business managers
• Fear of monopolistic
market (from big players within
the industry)
• Wrong timing of entrants
• The availability of books in
library & e-books on internet
• High budgetary control
• Low market shares (due to
large size of the market as well as
competitors)
• Difficulty of exit from the
market (as result of large capital
invested from shareholders)
• Deforestation of trees
• Risk of incurring high debt

Analysis gathered from the SWOT MATRIX above, it is evident that the entrants of an
investor into UK book retailing industry depends on how the business involve in good decision
making, better management system, leadership styles options taking as well as forecasting
on the market trend daily. The potential & economic factor as well as the socio-cultural
change, technological advancement, ecological/eco system and legal system all change
periodically within a pace of time. Therefore, the UK book retailing business is ENTERPRISE
provided, the management control system keeps monitoring PESTEL factors to improve on
their SWOT analysis. More so, there is better chance for book retailers in UK, since the
environment is friendly, level of disruptions of the economic activities is always well taking into
action by the UK government. The level of vandalism from civil unrest & political conflicts and
wars are not part of UK environment. It is a more peaceful environment to operate, except
care as to be taken on government monetary policy as well a environmental pollutions, which
always took the surrounding we live in by surprise.
PROBLEMS OF UK BOOKSELLERS
• Low level of share capital –
• The sudden occurrence of pandemics resulting – from
environmental pollutions and the global warming & greenhouse
effect of the climatic change.
• High growth interest in Tourism & Travel, as well as in
Entertainment Industry – as endanger retailers who only trade with
books & stationeries.
• Over-expansion of the retailing marketing environment of book
industry in UK –
• The adventure of IT – development and advancement that keep
changing and improving everyday has been a problem to UK
bookseller.
• Fear that the business could ultimately go bust – business could
run out of cash,
• The high rate of increased discounters, category-killers and
category-base retailers that has recently over-flooded the retail
market.
• The adverse implication of devaluation of pounds, if UK finally
joined Europeans single currency adoptions
• The availability of books in the UK libraries promoted by
photocopying & borrowing of the books being allowed result to
low level of patronage of consumers in the high street
• Lack of price control, has led to loss of market share of UK
Booksellers to their outside supplier (Key Note Ltd 2008).
• Poor marketing effort & inadequate marketing communication
campaign.

• Poor decision at management level from lack of forecast,
feedback & low level of consumer participant.
• The bookshops managers to whom ;Key Note spoke, all said
that too many books are being produced. And shoppers are
bewildered by the sheer number of titles that are on offer in any
one interest sector of the market, and they are often non-plussed
as to how to choose between similar- looking books
• The fact that booksellers were often uneasy about the market.
There was a realisation that bookseller’s stocks had been rising
much faster than sales, and a belated recognition that
bookseller’s retail space had greatly exceed market demand.
• Key problem for booksellers is that the consumer
spending on
books has been increasing at a much slower rate relative to the
money spent on other leisure activities statistics presented at the
bookseller conference in 2005 illustrate this. Between 1995 and ]
2003 consumer spending on books rose by 38%, whereas
spending on magazines went up by 53%,videos by 55%, records
by 58%, cinema tickets by 69% and video game by 78 %
• The problem for the industry, according to the The Bookseller,
was that the market was sluggish and that sales ‘in the general
retail market’ were below those of the previous year.
4.5 CRITICAL SUCCESS FACTORS
The critical success factors for a UK book retailer has been on the issue of the use of
INTERNET and associated IT infrastructures. The extent to which this has gone far is quite
alarming and it has open doors to a new market where globally individual can be reached &
product and service could be reached (Forrester Research 2002).The use of online shopping,
e-retailing and online marketing has created a new markets for the retailing worlds. Many
books are advertised online and purchasing are made at a speed of light making transaction
more efficient. This is a marketing environment that are obviously the key to sales.
Booksellers have utilised this dominant online marketing area to monitor their customer’s
needs, purchasing behaviour and in effect, they anticipate how these will developed so that
they can meet their customer’s requirement in the future (Fraser 2004).
To better foster customer’s relation, the IT evolution has significantly assist booksellers
to hugely gathered information of their customer’s through a loyalty scheme such as loyalty
cards, nectar cards and credit cards, with the use of EPOS system. By gathering data on the
individual shopping patterns and matching this data on the individual shoppers, book retailers
have able to build up detailed pictures of their buyers and then offer them appropriate
deals.More so, it has successfully helped to develop a relationships with customers, that has
resulted to customer coming back and patronize their other related books. The easy to which
customers could compared prices quickly as enhance increase and fast sales of products
online (Wilkinson 2004).
5.0 MARKETING STRATEGY – PRICING
5.1 PRICING OBJECTIVES
A critical part of a company’s overall strategic planning includes the establishment of
pricing objectives for the products it sells. A UK Booksellers should have several objectives
from which to choose – the three most commonly adopted pricing objectives are:
Prestige Pricing: A Book Retailer may chose to promote, maintain and enhance the image
of its books through the use of prestige pricing, which involves pricing a product high so as to

limit its availability to the higher-end user. This limited availability enhances the product’s
image, causing it to be viewed as prestigious. Although a Book Retailer that uses this
strategy expects to have limited sales, this is not a problem because profit is still possible due
to the higher mark up on each items. Examples of books that could use prestige pricing are
professional and academic books, that are newly published into the market.
Profitability Pricing: The basic idea behind profitability pricing is to maximise profit. The
basic formula for this objective is that profits equal revenue minus expenses (P = R – E).
Revenue is determined by a books’ selling price and the number of units sold. A Book
Retailer must be careful not to increase the price of the product too much, or the quantity sold
will be reduced and total profits may be lower than desired. Therefore, a Retailer should
always monitor the price of its products in order to make sure it is competitive while at the
same time providing for an acceptable profit margin.
Volume Pricing: When a Book Retailers uses a volume-pricing objective, it is seeking sales
maximization within predetermined profit guidelines. A Retailers who uses this objective
should prices a product lower than normal but expects to make up the difference with a higher
sales volume. Volume pricing can be beneficial to large retail bookshops because its
products are being purchased on a large scale, and large scale product distribution helps to
reinforce a company’s name as well as to increase its customer loyalty. A subset of volume
pricing is the market-share objective, the purpose of which is to obtain a specific percentage
of sales for a given product. A Retailers, however can determine an acceptable profit margin
by obtaining a specific percentage of the market with a specific price for a product.
5.2 PRICING STRATEGIES
A Book Retailers can chose from a variety of pricing strategies, or can adopt all the
pricing strategy on the different aspect of the segmentation of the product to ensure sales.
While each strategy is designed to achieve a different goal, each contributes to a company’s
ability to earn a profit.
Penetration Pricing Strategy: A Retailer that wants to build market share quickly and obtain
profits from repeat sales generally could adopt the penetration pricing strategy, which can be
very effective when used correctly. This can be used by small specialist chain from large
retail bookshops. For example, James Thin may provide consumers with free samples of
their books and then offer it at a slightly reduced price. Alternatively, a Retail Marketer may
initially offer significant discounts and then slowly remove the discounts until the full price of
the product is listed. Both options allow a retailer to introduce a new product and to start
building customer loyalty and appreciation for it. The idea is that once consumers are familiar
with and satisfied with a new product, they will begin to purchase the product on a regular
basis at the normal retail price.
Price Skimming Strategy: a price-skimming strategy uses different pricing phases over time
to generate profits. In the first phase, a company launches the product and targets customers
who are more willing to pay the item’s high retail price. The profit margin during this phase is
extremely high and obviously generates the highest revenue for the company. Since a
company realizes that only a small percentage of the market was penetrated in the first
phase, it will price the product lower in the second phase. This second phase pricing will
appeal to a broader cross-section of customers, resulting in increased product sales. When
sales tart to level off during this phase, the consumers, will price the product even lower. This
third phase pricing should appeal to those consumers who were price-sensitive in the first two
phases and result in increased sales. The book company should now have covered the
majority of the market that is willing to purchase its product at the high, medium, and low price
ranges. The price-skimming strategy provides an excellent opportunity for the book company
to maximize profits from the beginning and only slowly lower the price when needed because
of reduced sales. Price adjustment with this strategy closely follows the product life cycle,
that is how customers accept a new product. Price skimming is frequently used strategy
when maximum revenue is needed to pay off high research and development costs
associated with some products.

Competition Based Strategy: This is another major strategy. A Book Company’s
competitors may either increase or decrease their prices, depending upon their own
objectives. Before a company responds to competitor's price change with one of its own, a
thorough analysis as to why the change occurred needs to be conducted. An investigation of
price increases or decreases will usually result in one or more of the following reasons for the
change: a rise in the price of raw materials, higher labour costs, increasing tax rates or rising
inflation. To maintain an acceptable profit margin for a particular product, a company will
usually increase the price. In addition, a strong consumer demand for a particular product
may cause a shortage and, therefore, allow a company to increase its price without hurting
either demand or profit.
When a competitor increases its price, a company has several options from which to
chose. The first is to increase its price to approximately the same as that of the competing
firm. The second is to wait before raising its price, a strategy known as price shadowing.
Price shadowing allows the company to attract new customers and those who are price-
sensitive – away from the competing firm. If consumers do switch over in large numbers, a
company will make up lost profits through higher sales volume. If consumers do not switch
over after a period of time, the company can increase its price. Typically, a book company
will increase its price to a level slightly below that of its competitors in order to maintain a
lower-price strategy advantage.
Promotional Pricing: With this type of pricing strategy, book companies could temporarily
price their books below list price and sometimes even below cost to create buying excitement
and urgency. For example supermarket and department stores will price a few products as
loss Leaders to attract customers to the store in the hope that they will buy other items at
normal markup. Also, supermarkets often sell some books especially as sales at less cost in
order to attract family buyers who make larger average purchase per trip. A Book Retailers
could also employ the use of special-event pricing in certain seasons to draw more
customers.
5.3 DISCOUNT AND ALLOWANCE
Most companies adjust their basic price to reward customers for certain responses,
such as early payment of bills, volume purchases, and off-season buying. These price
adjustments – called discounts and allowances. The many forms of discounts to buyers who
pay their bills promptly. A typical example is “2/10, net 30”, which means that although
payment is due within 30 days, the buyer can deduct 2 percent if the bill is pay within 10
days. The discount must be granted to all buyers meeting these terms. Such discount are
customary in many industries and Book Retailers could equally employed this type of discount
to help to improve the seller`s cash situation and reduce bad debts and credit-collection costs.
A quantity discount is a price reduction to buyers who buy large volumes. A typical
example, discounts might be £10 per unit for less than 100 units, and £9 per unit for 100 or
more units. By law, quantity discounts must be offered equally to all customers and must not
exceed the seller’s cost savings associated with selling large quantities. These saving
include lower selling, inventory, and transportation expenses. Discounts provide an incentive
to the customer to buy more from one given seller, rather than from many different sources.
A functional discount (also called at trade discount) is offered by the seller to trade-
channel members who perform certain functions, such as selling, storing and record keeping.
Large bookstores may offer functional discounts to different trade channels because of the
varying services they perform, but this large retail marketers must offer the same functional
discounts within each trade channel.
6.0 MARKETING STRATEGY – PRODUCT
6.1 Boston Consulting Group Approach:
Using the Boston Consulting Group (BCG) approach, a company classified all its SBU
(Strategic Business Units) according to the growth shown in figure 1.3. On the vertical axis,
market growth rate provides a measure of market attractiveness. On the horizontal axis,
relative market share serves as a measure of company strength in the market. The growth-
share matrix defines four types of SBUs:

The BCG Box shows above is that of WH Smith for the case study. The four main
categories of retail operation for WH Smith are books, entertainment division, stationery and
its news division. Figures have revealed that the DVD sales for the company jumped up 20
percent which can be defined as a cash cow sector for the retailer according to the Boston ’s
model (Bradley 2003). However both the music segment of the company and its multimedia
products both dropped in terms of sales figures quite rapidly thus it appears that these
segments should be cut down or Smiths should exit this market due to the intense
competition in particular from specialist provider and low competitive capability which now
exists in these markets. In this sense, then in a strategic sense the onus is on Smiths to
concentrate on those parts of its business which are performing well and to move away from
what might be considered traditional segments of its operations even if such moves might be
controversial.
The e-retailing could be feasibly be developed as a star division for Smith if these twin
elements can be combined into a successful strategic policy committing the company to
online retailing. In addition, the main customers for WH Smith are middle class therefore a
focused differentiation strategy would also be useful in regaining its competence both online
and offline. Based on the analysis of the main retail divisions the focus of WH Smith should
be to concentrate on their core business, book retailing and stationary sections. The cash
generating DVD section should be supported through cutting the poor performance divisions
such as music and this could be a successful online venture for the company.
The reason for this is that it is difficult for WH Smith to achieve authority across all
entertainment categories. So, space was shifted towards areas where a competitive position
can be achieved. And that space was towards the faster growing DVD category (Smith
2004).
6.2 ANSOFF’S MATRIX ANALYSIS
Ansoff’s product/market growth matrix suggests that a business attempts to grow
depend on whether it markets new or existing products in new or existing market. This model
gives organisation five strategies business options
MARKET PENETRATION–
This generally seen as the easiest strategy to adopt, increasing market penetration
involves increasing the sales of existing products and gaining further shares of the market
through aggressive promotions or price reductions to increase sales. Other ways include
attracting non-users of a product or convincing current clients to use more of the company
product/services (by advertising etc). It might add new stores in current market area to make
it easier for more customers to visit. In fact WH Smiths is doing well in this area.
Moreso, increasing usage by existing customers – for example by introducing loyalty
schemes. A market penetration marketing strategy is very much about “business as usual”.
The business is focusing on markets and products it knows well. It is likely to have good
information on competitors and on customer needs. It is unlikely, therefore, that this strategy
will require much investment in new market research. An alternative would be to concentrate
on penetration by introducing specialists stores for some of the products. This was the
strategy followed by the business in the USA which developed the specialist area of athletic
footwear. The UK Book Retailing Business may wish to consider developing their books and
stationeries image in this way, as they seem to have identified this as an area that has market
potential. This would be a low risk strategy for them.
PRODUCT DEVELOPMENT

This involves introducing new products within the existing ranges. This strategy may
require the development of new competencies and requires the business to develop modified
products which can appeal to existing markets. For example McDonalds is always within the
fast food industry, but frequently markets new burgers like Chicken Supreme, Chicken Bacon
Onion, Big Tasty etc) to attract new and already existing customers. Also, Starbucks has
increased its food offerings in an effort to bring customers into its stores during the lunch and
dinner hours and to increase the amount of the average customer’s sales ticket.
However, a UK Book Company could adopt this strategy to boost their market
shares. The introduction of new books written by a popular and well known author about his
historic life, or about new strategy in profit making etc. for example, the recent books written
by President Obama sold almost 6.5% more of the book sales in the retail market, since it
was a new books that came out at the time he became US President 2009.
MARKET DEVELOPMENT:
This can be through either appealing to a larger proportions of the domestic market or
through exploiting a new foreign market. There are many possible ways of approaching this
strategy, including: new geographical markets – for example, exporting the product to a new
country; new product dimensions or packaging; new distribution channels; different pricing
policies to attract different customers or create new market segments. It is important to
mention major trend that has had a significant impact on the book retailing industry which can
be defined as the continued growth and emergence of a global economy that provides new
global markets for expansion of Smith.
However, according to Pitcher (2004) the US interests acquired by Smiths as part of its
expansion plans have been disposed of at the cost of £61m to the retailer due to their failure
to penetrate the US market effectively. In terms of overall strategy then WH Smith’s appear
from these indicators to have serious problems in responding to new social, cultural and
economic levels in the successful conduct of its business. However the development of WH
Smith.co.uk is the key part of future strategy to build on the strength of WH Smith brand,
making the internet service available to a millions of customers who the visit the shore and to
regular web used.
DIVERSIFICATION:
This is a move away from the existing core activities to a new products. It involves
buying business outside of its current products and markets. This is an entirely more risk
strategy because the business is moving into markets in which it has little or no experience.
For a book company to adopt a diversification strategy, therefore it must have clear idea
about what it expects to gain from the strategy (for e.g. economic of scale and more of
increased profile on large number of customers database for target market) and an honest
assessment of the risks (e.g. Eco-political risk). For example large UK Book Retailers like
WH Smith, it is evidence that the failure of its post strategies has had the result of growing
corporate weaknesses in terms of continued poor performance of its business units and their
continued low levels of efficiency in operating in their markets. The management team
recently boldly decided to employ a diversification strategy which was accompanied by the
slogan ‘more of what you really want’ (Smith 2004).
However as illustrated above what consumers seem to really want as evidenced by the
research has not been met by provision of the retailer’s strategy. Its diversification strategy it
would seen has not been enough of a radical change, a change which it can be argued it
necessary for the retailer to adopt to the massively altered retail context and environment in
which it find itself today.(UK Essay.com 2010). The failure of this diversification strategy can
be clearly seen in large losses ranked up by the retailer following the introduction of the
strategy. Continued weak trading up until last Christmas, the inability of the retailer’s
management team to offer responses and strategic options for the company raises serious
questions about the efficacy then of the current management team (Smith 2004)
CONSOLIDATION:
Companies must not only develop strategies for growing their business portfolios but
also strategies for downsizing them. It involves reducing the scale of operations to specialise
in core activities. There are many reasons that a firm might want to abandon products or
markets. The market environment might change, making some of the company’s product or
markets less profitable. This might happen during an economic recession or when a strong

competition opens next door. The firm may have grown too fast or entered areas where lacks
experience. This can occur when a firm enters too many foreign markets without the proper
research or when a company introduces new product that do not offer superior customer
value.
For example, the management errors of WH Smith can be seen additionally in the
lack of corporate website development which can be contended to have damaged the brand
image among consumers turning to the internet for their book retailing needs. However book
retailers in general and not only WH Smith have struggled with the decision of when and how
to adopt an internet presence and others have been more successful than others. WH
Smith’s in particular has not been a success in entering the online market successfully and
the more this form of retailing emerge and develops the more this weakness will grow in
terms of inhibiting the good and healthy performance of the company (UK.Essay.com 2010).
In the light of these criticism and weaknesses, the Board of WH Smith Plc is providing
an update on its plans to delivers value to shareholders. These involves refocusing the group
on its core retailing and news distribution activities and implementing laws to improve the
profitability of UK High Street Retail. Key highlights – (i) Refocused and simplied group
• Exit from US retail business and ASPAL
• Proposed sale or demerge of Hodder Headline underway
• Strongly performing news distribution and UK travel retail businesses
• Opportunity to improve High Street Retail performance substantially
7.0 MARKETING STRATEGY – PROMOTION
The purpose of promotion is to communicate directly with potential or existing
customers, in order to encourage them to purchase the product or service and recommend it
to others.
7.1 ADVERTISING – This is of great importance in the world of competition, like an old
slogan puts it ‘Advertising, your right to chose’. It helps to keep the consumers informed
about whatever new product or services are available in the market at their disposal.
Essential, it is a means of increasing sales. Many advertisement are designed to generate
increased consumption of those product and service through the creation and reinforcement
of “brand image” and “brand loyalty”. Every major medium can be employ to deliver a
message including television, radio, cinema, magazine, newspapers, video games, the
internet and billboard. Evidence from statistical records as suffice to say, that most UK book
companies have not fully explore this strategic area, that’s why any foreigner into the UK
however, known only few retail bookshops, like the WH Smith for example. Bookshops like
Water stone, Blackwell are not well known of their service they rendered.
More so, advertisement could be enhanced by placing them strategically on the seat
of shopping carts, on the walls of an airport walk away, on the sides of buses, and are heard
in telephone hold message and in-store public address system. According to Key Note Ltd
(2000), advertising by Bookshops has slumped since 1999 as Water stone’s and Book Etc
have cut back sharply on their advertising budgets. However, the major advertisers and World
Books, QPD and the Folio Society, World Books & QPD are owned by BCD in the year to
December 2005. BCD accounted for 41% of total advertising.
7.2 VIRAL MARKETING: The term ‘viral marketing’ was gained by Tim Draper, a Harvard
Business School graduate and use extensively to describe the emails that aided advertising
of product. Viral marketing or chain marketing optimises the extent to which social networking
can benefit sales. Depending on the quantum of sales, the strategy may also include video
clips, interactive forums, advergames, newsletters, e-books, and images accompanied by
dedicated text messages. The good of viral marketing program if employ by UK Book Retail
Marketers is that it will help the business identify people who can contribute to sales via
quality social networking potential. This marketing strategy enables business propositions to
reach out to global audiences, by effectively putting the internet connectivity to play. Viral
marketing is capable of generating high product credibility at low cost. The advertising
technique is great in the endeavour of marketing a particular product or service available
across physical boundaries with dedicated internet marketing and shows high efficiency in
generating the opportunity for consistent promotions and commissions.
(Buzzle.com 2005).

7.3 DIRECT MARKETING: This consist of direct connections with carefully targeting
individual consumers to both obtain an immediate response and cultivate long lasting
consumer relationships. Direct marketers communicate directly with customers, often on a
one-to-one, interactive basis. Using detailed databases, they tailor their marketing offers and
communications to the needs of narrowly defined segments or even individual buyers.
Beyond brand and image building, they usually seek a direct, immediate and measurable
consumer response. For example, Dell Computer interacts directly with consumers, by
telephone or through the website, to design built-to-order and efficiently delivers the new
computers to their homes or offices (Fraser 2008).
However, Most UK Book Retailers have not fully utilised this area of marketing
because of their logistics problem in the area of e-retailing & internet shopping. The likes of
WH Smith need to employ this area more. Amazon.com is the only UK Book Retailers that
has been so far successful in this area (Fraster 2008).
The major forms of direct marketing that could be employ include personal selling;
telephone marketing, direct mail marketing; catalogue marketing, direct response television
marketing, kiosk marketing and online marketing. (James et al 2005).
7.4 STRATEGIC OPTIONS FOR INCREASING SALES
Companies have several options available when attempting to increase the sales of
a product, including coupons, prepayment, price shading, seasonal pricing, term pricing.
Coupons :Almost all companies offer product coupons, reflecting their numerous
advantages. First, a book retailer might want to introduce a new product, enhance its market
share, increase sales on a mature product, or revive an old product. Second, coupons can be
used to generate new customers by getting customers to buy and try a company’s product –
in the hope that these trial purchases will result in repeated purchases. A variety of coupon
distribution methods are available, such as Sunday newspaper and point-of-purchase
dispensers.
Prepayment : A prepayment plan is typically used with customers who have no or a poor
credit history. This prepayment method does not generally provide customers with a price
break. There are, however, prepayment methods that do reduce the price of a product. For
example, the prepayment strategy is widely used in the magazine industry. A customer who
agrees to purchase a magazine subscription for an extended period of time normally receives
a discount as compared to the news stand price.
Purchase of gift certificates is another example of how prepayment can be used to
promote sales. For example, a company may offer discounts on a gift certificate whereby the
purchaser may only pay 90 to 95 percent of the gift certificate’s face value. There are several
advantages of using this strategy. First, consumers are encouraged to buy from the company
offering the gift certificates rather than form other stores. Second, the revenue is available to
a
company for reinvestment prior to the product’s sale. Finally, receivers will not redeem all gift
certificates, and as a result, a company retains all the revenue.
Price Shading: One way to increase high street book retailer sales is to allow salespeople to
offer discounts on the product’s price. This tactic, known as price shading, is normally used
with aggressive buyers in industrial markets who purchase a product on a regular basis and in
large volumes. Price shading allows salespeople to offer more favourable terms to preferred
industrial buyers in order to encourage repeat sales.
Term Pricing : A company has another positive reinforcement strategy for use when
establishing product price. For example, a book retailer may offer a discount if the customer
pays for the product promptly. The definition of promptly varies depending on company
policy, but normally it means the account balance is to be paid in full within a specific period
of time; in return, a retailer may provide a discount to encourage continuation of this early
payment behaviour by the customer.
This term pricing strategy is normally used with large retail or industrial buyers, not with
the general public. Occasionally, a company will offer a small discount to customers who pay
for a product with cash.

Segment Pricing : Segment pricing is another tactic a company can use to modify product
price in order to increase sales. Everyday examples of segment pricing discounts are those
extended to children, senior citizen, and students.
These discounts have several positive benefits. First, the high street retailer is appearing
to help those individuals who are or are perceived to be economically disadvantaged, a
perception that helps create a positive public relations image for a company. Second,
members of those groups who ordinarily may not purchase the product are encouraged to do
so.
Therefore, a book retailer’s sales will increase, which will likely result in increased market
share and revenue.
10.0 CONCLUSION & RECOMMENDATION
Previous periods of economic depression have suggested that the UK market for
bookselling is recession-proof. However, the current situation presents a series of different
problems that may have a negative impact on the book trade.
The UK book market is still one of the largest in Europe , with strong book sales.
Although it is unclear whether these sales are growing faster in the UK than elsewhere in
Europe , UK sales figures for 2007 suggest that this might be the case. It is estimated that, in
2007, the total UK retail book market (including online sales) was worth £4.4bn, a rise of
4.5% on 2006. In 2007, consumer books accounted for more than two-thirds of the total
market by value.
Despite the good performance of the market, every high-street bookseller comments that
the market has been difficult. By this, they mean that competition to sell the highest number
of bestsellers is tough, as high-street bookshops are being undercut on price by supermarkets
and online booksellers. Publishers appear to be offering supermarkets and online booksellers
the highest discounts on their highest-profile books, allowing lower prices to be offered in
these outlets.
In 2007, the successful retailer Borders (UK) Ltd was sold by its US parent because it
had made a loss for 2 years running. Both Waterstone's and WH Smith have also struggled in
the market, although both companies reported very healthy Christmas sales. Meanwhile,
independent booksellers are remaining in the market and the number of these outlets actually
appears to be increasing. The independents are adopting a strategy of limited price cuts, plus
an enhanced service, and they are also making greater efforts to reach out into their local
communities. Even so, some independents did
close in 2007.
The industry's major booksellers include: WH Smith, Waterstone's, Amazon.co.uk,
Borders, Book Club Associates and Blackwell. Supermarkets are also active in this sector,
who, along with online booksellers, have increased their share of the market, especially in
bestsellers. There are also a sizeable number of independent bookshops. In the academic
sphere the booksellers certainly feel threatened by online sales.

A new development is the arrival of e-books and e-book reading machines. It is not yet
clear whether e-books will supplant printed books or whether they will expand the
market.The digitisation of books is presenting a major challenge to the bookshops: The
Booksellers Association (BA) believes that booksellers and publishers need to work together
to devise a strategy to exploit this new technology. The BA argues that both parts of the book
trade will suffer unless they collaborate more closely, and many experts and observers of the
book trade (and I rightly) agree with this conclusion.
There are still constants, that will continue to benefit the book trade. Books are popular
presents, and people appear to cut back less on book buying than on other leisure items when
budgets become tight. A significant number of people buy roughly a book a month, and most
of them will probably continue to do so.
It is estimated, therefore that the value of retail book sales will rise by just 5% between
2008 and 2013. This may be a little over-cautious, but the outlook for 2009 certainly looks
negative, and 2010 may also be disappointing. However, 2010 should be the year when the
book trade begins to notice a recovery.
Bookselling Market Report 2008
(Key Note Publications Ltd, April 2008, Pages: 88)
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