GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge Marketing Strategy Analysis & Solution

Marketing & Sales Case Study Analysis and Solution

At Fern Fort University, we use Harvard Business Review (HBR) marketing principles and framework to analyze GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge case study. GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge is a Harvard Business Review case study written by Benjamin Yen, Andrew Leefor the students of Sales & Marketing. The case study also include other relevant topics and learning material on – Supply chain

Strategic Marketing Analysis of GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge case study written by Benjamin Yen, Andrew Lee will comprise following sections –

• GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge Case Description
• Marketing Definition
• Market Potential Analysis of GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge
• Market Share Potential Analysis
• Segmentation and Segment Attractiveness Analysis
• Competition and Competitiveness Analysis of GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge
• Customer Value Analysis of GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge case study

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GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge Marketing Case Description

Sales & Marketing Case Study | Authors :: Benjamin Yen, Andrew Lee

GOME, founded by Wong Kwongyu, had grown from merely a 100-square-metre store in Beijing in 1987 to the industry leader in electrical and home appliance retailing in China, with 259 traditional stores and 4 digital stores by 2006. Its success stemmed from its low-margin, high-volume strategy, which was complemented by its striving for service quality and innovation. In 2006, GOME faced the new challenge of tuangou, or group purchase. In order to amass bargaining power to demand discounts from retailers, consumers with similar needs in China united through the Internet and showed up en masse at retailers at pre-arranged times and dates. They would put relentless pressure on retailers and would press for greater discounts. This emerging consumer behavior had spread like wildfire in China and retailers had different reactions. Some yielded to the pressure and offered greater discounts, some only entertained tuangou that had been pre-arranged and/or pre-registered, while others refused to give in and maintained a fixed-price policy. It was up to GOME to determine how best it could deal with this new phenomenon.

Supply chain

Marketing Definition

According to American Marketing Association – Marketing is a set of activities that a firm undertakes for creating, communicating, delivering, & exchanging offerings that have value for customers, clients, partners, and society at large.

Kotler explains - Marketing is a process by which organizations can create value for its potential and current customers and build strong customer relationships in order to capture value in return.

Market Potential Analysis of GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge

Market potential analysis comprises evaluating the overall market size of the related product that the firm is planning to launch. This will involve defining – Why the target market segment needs the product and how it will provide a solution to full its consumers’ needs. Market potential of GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge products various on factors such as –

• Maturity of the market. In mature markets the profitability is often stable but the market potential is less as most of the players have already taken market share based on the segment they are serving. New players have to go for market share strategies in marketing.
• Technological competence of the existing players and culture of innovation and development in the industry.
• Untapped market sizes and barriers to both enter the market and serving the customers. Often companies can easily see the unfulfilled needs in the markets but they are difficult to serve as there are costly barriers.
• Define the core need that your product is serving and list out all the direct and indirect competitors in the market place. This will help not only in positioning of the product but also in defining or creating a segment better.
• Uncovering the current and untapped market sizes and barriers to serving the larger market. Analyze the areas that you need to sort out while launching the products to wider market and what are the challenges the firm will face in market place.
• Estimate the current stage in product life cycle and its implications for marketing decisions for the product.

Market Share Potential Analysis

• Understanding the buyer behavior model for GOME Electrical Appliances Holding Limited: The "Tuangou" Challengeindustry.
• Identifying the market share drivers relevant to GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge market.
• Segment Attractiveness Analysis – Our analysis will work out which are the most attractive segments and which are the one the firm should go ahead and target. We point out in great detail which segments will be most lucrative for the company to enter.
• Understanding the different needs and relative value of your offering by segment.
• Developing segment priorities and positioning the product based on the product need fit developed by the firm.

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Competition & Competitive Position Analysis

• Uncovering customer-based competitive positions for key rivals and firm’s offering. This will not only help in assessing the strengths and weaknesses of the competitors but also help in defining and positioning of the product.
• Developing a positioning and launching strategy. It will require not only distribution channel analysis but also promotion mix for the product.
• Strategic Marketing Planning — the process of developing and maintaining a strategic fit between the organization’s objectives and capabilities and the ever evolving marketing opportunities for its products.

GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge - Customer Value Analysis

Capturing customer value is essential to marketing efforts as it results in higher return in the form of both current & future sales, greater market share, and higher profits. By creating superior customer value, the organization can create highly satisfied customers who stay loyal and buy more. This, in turn, means greater long-run returns for the firm.

• The crucial role of customer perceived value in acquiring and retaining profitable customers. Product differentiation is often based on building on a value niche that a firm believes that is very important to the customer. This niche contributes to perceived value. If the perceived value is high then customer stay loyal to the product if not then she can switch to the competitor’s product.
• Graphically displaying value differences for deeper understanding and better internal communication. This helps is building a narrative that a customer can identify with. The better the insight more are the chances of connecting with the potential customers.
• Identifying and selecting actionable value creation options. This can help in increasing the customer lifetime value. Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of patronage.

NOTE: Every marketing case study solution varies based on the details and data provided in the case. We write unique marketing strategy case solution for each HBR case study with no plagiarism. The specific case dictate the exact format for the case study analysis.

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