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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Situation Analysis

During the year 1965, in the city of San Diego, California, the company UPCO was founded.  UPCO (United Pharmacal Company Inc.) was a mail-order company for veterinary supplies.  While a reliable and young merchandiser, for the first decade of UPCO's existence, they found themselves struggling amongst competition against the major supermarkets.  When supermarkets realized that they could bring in more consumers and ultimately increase profits by creating more variety in their inventory, it because more difficult for specialized retailers, like UPCO, to find their place in the market.  In the year 1979, UPCO decided to change their company name to PETCO Animal Supplies Inc.  Following that change, a year later the first Petco store was born, located in Tigard, Oregon.  As the retail industry was changing, Petco was able to rise among the competition because of their strategy.  Under the ideology of specialization, supermarkets began to decline in popularity because owners desired new and improved products for their pets.  This provided specialized retailers, including Petco, the opportunity to rise in the market, and they took advantage of it.  Instead of simply providing the popular pet supply brands like Purina and Alpo, Petco differentiated themselves by selling premium brands like IAMS and Science Diet, which were both known to be healthier options for pets.  Since the specialized retailers were the only ones who could supply those products, they were able to rise in popularity among consumers.  This gave Petco a great opportunity for company expansion, and also led to a decrease in the level of power from the all-inclusive “supermarket”.  At this time within their history, Petco was doing well with their traditional stores, yet needed something else to continue their climb towards success.  With the establishment of superstores, they were able to provide more variety to their customers, as well as increase their number of locations and credibility within the market.  By the year 1992, out of the 208 operating Petco stores, 76 were considered superstores.  By the next year, superstores outnumbered traditional stores 132 to 107, showing their increasing popularity.  

By the next year, Petco was providing much more than your typical supplies.  Enticing animal enthusiasts with new products like tuna flavored cat treats, peanut butter dog biscuits, and pet-inspired greeting cards, it was clear that Petco was different from the average store that sells products for animals.  It was clear that Petco didn't just want to provide their customers with products that they needed for their pets, but a variety of products that would increase the livelihood of pets and their owners.  Using the marketing strategy of variety, Petco was able to find many of their customers leaving the store with much more then they came for.  For example, let's say a family comes into the store with their dog looking to purchase more dog food.  Along with the large selection of brands to choose from, right next to the packages of dog food lies the stand for squeaky dog toys.  The family then realizes, upon seeing the toys next to the food, that the toy got messed up in the washing machine and they need a new one.  Now, even though they initially came for just the dog food, they ended up purchasing the food and a toy as well.  Giving the customers an experience unlike any other store selling pet supplies soon became Petco's specialty.  Implementing innovative ideas such as a treats bar for dogs and cats (similar to the salad bar at the grocery store) was also one of the ways that the retailer was able to differentiate themselves amongst the competition and rise in the market.  In the late 90s, Petco began to see difficulties with the rise of PetSmart, even as there was room for expansion between both companies.  

Petco's vision is “Healthier Pets. Happier People. Better World.” Contrary to some of the other leading pet companies, what makes Petco's vision stand out is that it is clear, concise, and states exactly what goals they hope to achieve through their company.  A prime example of the impact can be seen in another popular company, PetSmart.  Their vision states, “We love pets and we believe pets make us better people.  PetSmart will be the trusted partner to pet parents and pets in every moment of their lives.”  While this vision does showcase how PetSmart plans to impact the lives of its customers, it lacks the abridged, slogan-style delivery that Petco has mastered.  When reading the Petco vision, I simply understand that healthier pets lead to happier people, which in turn leads to a better world.  The short and sweet slogan approach is easy for customers to remember, can be used effortlessly in normal conversation, and ties into the company values.  

Petco's parent organizations are CVC Capital Partners, CPP Investment Board, and Petco Holdings, Inc. CVC Capital Partners, a global private equity firm, merged with Petco in 2016.  Chief Executive Officer James M. Myers stated the following, “We are very excited to partner with CVC and CPPIB to further drive our strategic goal of being the trusted partner of choice for pet parents," said James M. Myers, Chief Executive Officer. "As the North American pet industry continues to grow, Petco is well positioned with a strong brand, differentiated engagement model, and Omni channel strategy. Both CVC and CPPIB have outstanding track records and deep retail experience and resources that will help support our growth initiatives.”  Also, TPG stated the following regarding Petco's status within the retail market, “Petco has a well-known brand and a strong position in the U.S. pet sector. The company has long-term relationships with leading pet food vendors and a significant presence in the fast-growing ecommerce channel, we look forward to working alongside one of our long-standing partners, CVC, to leverage our collective retail expertise in helping to build further value in the business."  The previous quote speaks to the status of Petco amongst other organizations within the retail space.  

Marketing Strategy

The integrated marketing strategy that helps Petco continue to evolve is to evolve with the needs of pet owners.  Conducting research amongst consumers lets Petco know how to better service their customers now and in the future.  Petco understands that their customers want more than just a place to buy pet supplies, because they can do that anywhere.  Therefore, they provide things such as increased service capabilities like bathing, grooming, training, and vaccinations.  In addition, research into pet nutrition allows Petco to give their customers the proper information to support why they are buying the pet food that they do, or why they should be buying a different food instead.

  From an integrated marketing perspective, Petco advertises its brand and creates a seamless experience for its consumers to be able to get exactly what they need out of it.  Instead of simply offering pets and pet food, they offer: grooming, pet services (including sitting), pet adoption, and even health insurance.  Having a wide range of services to offer their customers makes Petco a very competitive corporation within the pet industry.  Having an integrated marketing campaign is important to having a successful business because using the same series of communication tools allows for each tool to build on the next.  Instead of having a separate campaign for advertisements, direct marketing, sales promotion, etc., integrated marketing improves effectiveness by putting them together.  The American Association of Advertising Agencies defines integrated marketing communications by “recognizing the value of a comprehensive plan that evaluates the strategic roles of a variety of communication disciplines including advertising, public relations, personal selling, and sales promotion and combines them to provide clarity, consistency, and maximum communication impact.”  In analysis of that definition, integrated marketing communications basically works to combine the different methods of reaching a target audience into one, singular facet.  

Implementing the steps of the communication process are effective for Petco because it allows for them build a relationship with their audience.  Understanding how to exchange the right message between the sender and receiver can be the difference between making a sale and losing a potential customer, so this process is very important to ultimate business success. Petco does this well by having customer support services for anyone who needs assistance with how to operate with them.  Having a functional and effective customer service department is essential to building trust amongst your customers.  People will only really stay loyal to your business if they have a good experience shopping at your store.  Due to the fact that there are multiple options for pet owners to shop at, Petco's customer service cannot afford to be subpar.  Many consumers would argue that they would rather pay a higher price for better service, than a lower price for a bad customer experience.  Understanding that allows Petco to really get the advantage in being able to charge more for their products and services, yet still retain their same level of revenue.  Having good customer service simple reduces problems in general.  While problems are inevitable within business, having a good customer service department can decrease their likelihood of reoccurring.   

The use of various types of media within the Petco company helps them reach new audiences and expand their market.  As of 2017, one successful ad that highlighted Petco's objective was their brand campaign called “All About Pets.”  The purpose of that campaign was to highlight their singular focus, which is in fact, pets.  In the campaign, they push the idea that pet parents will agree with their mutual passion for animals, and that's why they should trust them with their own pets.  The “All About Pets” campaign featured a national television spot showcasing people and pets interacting together.  The overall message in the television spot, that Petco understands pets in a way that no other competitor can, is a strategy that proved to be successful.  

For any company or organization to be successful and have a solid rapport with its employees and customers, there must be a strong system of values.  Petco's Code of Ethics, known as the “Buster's Guide to Good”, defines seven core values that shape their organizational culture.  Those values are: Integrity, Teamwork, Learning, Fun, Continuous Improvement, Recognition, and Results.  The seven core values structure the way that employees treat the animals, staff, their work, and the environment.  Each value is essential to maintaining the organizational culture that makes Petco what it is.  These values are not just maintained by employees, but also customers, suppliers, partners, associates, etc.  Maintaining a healthy relationship between all positions within the retail organization is what makes it flow smoothly.  Establishing a code of ethics is so important because if one part of an organization slips, the whole system could collapse.  Integrity is probably one of the most important elements to any work environment.  Employees and higher authorities must be honest and clear when exchanging ideas.  The quality of teamwork is important to have in any environment, because you never know when you will need to collaborate with other individuals, that may or may not have similar qualities.  Learning is synonymous with growth, so for Petco to grow as an organization, they must be able to learn and adapt accordingly.  Probably my favorite of the seven values, is fun.  From what I have seen in my research, the corporate culture at Petco is a fun, collaborative, loose environment that encourages creativity and a healthy exchange of ideas.  Employees are encouraged to share ideas with others, and engage with as many people and pets as possible.  The fifth core value that shapes Petco is continuous improvement.  Petco believes that its employees don't have to be perfect, but simply continuing to strive towards getting better each day they come to work.  That is important in a corporate culture because putting too much pressure on staff can make the work experience a toll, and ultimately risk losing work efficiency and quality.  Petco sees recognition as a value of importance because similar to the way that animals are trained, recognizing employees for a job well done will encourage them to keep exceeding expectations.  Lastly, results are the proof that the marketing strategy and corporate strategy is successful.  Results in terms of increase consumer behavior, increased work efficiency, and an increase in monetary performance level are signs that the marketing process is successful.  Overall, the Buster's Guide to Good, and an analysis of their corporate culture is important because it affects how their audience views the company, and ultimately will influence whether they will continue to support their mission.3

Financial Analysis

The Petco brand is still growing.  Between 2014 and 2015 Petco saw an increase of $6,369,688 in net assets at the end of the fiscal year.  It also saw in increase of $7,419,461 in revenue during that year. Between 2017 and 2018 Petco saw a $3,965,519 increase in total assets and a total of $14,639,491 in net assets at the end of their fiscal year, in May.  Overall, Petco is one of the most powerful global pet retailers on the market and is continuing to improve with time.   

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