Marketing Analysis Report
This paper provides a marketing analysis report for the company called Boo.com. There are several reasons for selecting this enterprise. First, E-Business is becoming increasingly popular in the modern world. It offers people freedom to operate from practically any place in the world, while having the ability to change in the dynamic environment. Second, it is important to remember that not all E-Businesses are successful (just like brick-and-mortar ones) and that proper marketing strategies are to be used for a company to prosper. Keeping these factors in mind, a negative example was specifically selected in order to illustrate that a wrong approach towards selecting a marketing strategy may result in big troubles and even business closure.
Boo.com company managed to launch after five failed attempts, squandered £90 million in investment capital and then went into receivership after only six months of trading (Kuo 2001). Boo was positioned as a leading site in fashion, selling premium designer sportswear collections through the concept of ‘geek chic’. The site was over-ambitious, operated in various countries, including the USA, and contained ground-breaking innovations such as a virtual hostess, 3-D imaging and a virtual magazine called Boom. Launching a highly complex international project on time and within budget is a huge task. It takes more than entrepreneurial flare to start and maintain a business, and this is key to the failure of Boo.com (Kuo 2001).
To be objective in this analysis, one must also consider the macro-environment at the time of Boo. The whole of the UK was buzzing with talk of ‘net millions’ and the fantastic opportunities of the new economy. The people behind the new internet companies were being hailed as the pioneers who could lead Britain into the information age (Cellan-Jones 2001). As a result, the first valuations for dotcom start-ups were ridiculous, as business credibility was measured through site traffic, click-through and page views rather than purchases and profit (Tunick 2001). Boo’s biggest mistake was to misconstrue the new economy as a ‘get rich quick’ scheme. This attitude meant that valuable knowledge and experience accrued in traditional bricks and mortar retail were insulted.
For example, Boo’s founders, Ernst Malmsten and Kajsa Leander, had little business experience but were very inspirational characters (Tunick 2001). Before Boo they had demonstrated their ability to obtain finance for high-profile events and business ventures by organizing the Festival of Nordic Poetry in New York, sponsored by Ericson, Saab, Carlsberg and Absolut. A good concept, however, is not enough in itself. Although charisma is an essential part of entrepreneurial management style, Malmsten and Leander lacked the “the ability of the manager to perform a number of tasks including planning, organising, budgeting, staffing, controlling and coordinating” (Carr 2000, p. 24). They also began to consider product diversification at a very early stage.
The international aspect of the site’s growth was problematic, although many of the issues involved could have been resolved with careful planning. For example, Boo discovered only through experience that Portugal required every delivery package to be hand-stamped with serial numbers, and in Canada all returns were taxed. Language translations were also a problem. A generic invitation by email was sent to all Scandinavian site members and it was described by insiders as ‘gobbledygook’. Internationalization should also have been approached as part of gradual expansion, once the site was established. Progressive strategies are used by many traditional retailers when setting up overseas operations to ensure co-ordination and focus, thus increasing the chances of success (Tunick 2001).
Boo’s culture was centred on the concept of youth, exuberance and creativity. The founders insisted that Boo was a lifestyle and not just a company. The company encouraged extravagant alcohol-fuelled nights out at top nightclubs and celebrity parties. This lifestyle drained capital and was not compatible with day-to-day business operations. One hundred per cent commitment was demanded: “High living masked the reality of a company that had always expected a super-human degree of commitment” (Malmsten, Portanger, and Drazin 2001, p. 41). Many of the staff were young and inexperienced yet were expected to perform well with little guidance. For example, the founders hired an ex-club DJ to coordinate the opening of their new Paris operations.
This section depicts how Boo.com practiced (or failed to practice) socially responsible behaviour in its use of the 4Ps.
The company products made it difficult to make good management decisions regarding staff. For example, the founders discovered that it was difficult to make over 300 members of staff redundant, as many were viewed as friends.
Paradoxically, however, the concept of a culture of friendship and camaraderie was heavily contradicted by political undertones. Departments seen as ‘cool’ such as advertising and promotions created psychological barriers with teams involved in the site’s technical development or in finance, which were deemed ‘uncool’. Such childish behaviour meant that important communication channels were impaired, seriously compromising the site’s co-ordination and development.
Boo managed to spend $30 million even before the site launched, five months late, in November 2000 (Tunick 2001). Company finance paid for the founders’ executive apartments, first-class travel, expensive business trips and hotels, holidays and living expenses. At this point it was realized that “sales would be less than 10% of the promised target” (Malmsten et al. 2001, p. 85). This revelation meant that Boo needed another $20 million to enable it to continue trading until February 2001. It was only after investors declined to release more capital in March that Boo management started to discuss spending cuts. Despite the fact that the company managed to save $27 million in cutbacks and that its weekly revenue was higher than that of Amazon, it failed to secure further funding and Boo went into receivership (Tunick 2001).
If they had received proper scrutiny from their financial advisers and prospective investors, Boo’s founders would have been forced to be more realistic and substantiate their amateurish business plan with suitable research, costs, checks and balances. Any business start-up needs a strong plan complete with a business and marketing strategy, objectives, financial co-ordination, and resource allocation. Full environmental, competitive and customer analyses are essential components of such a plan. It is clear from the founders’ behaviour that they had no budgeting skills and seemed to concentrate their efforts on brand-building rather than careful resource planning and allocation.
A misunderstanding of what constituted good marketing was also a large factor in Boo’s demise. Boo’s brand strength was no accident. Leander and her team went to great lengths to ensure that Boo built an extremely strong brand in only six months as a result of a dedicated and creative promotional campaign. External promotion was also complemented by Boom, the online fashion magazine which they hoped would transform Boo into a ‘lifestyle choice’ rather than just a place to shop.