Founded in 1962, Mary Kay (marykay.com) has about 1.8 million consultants selling its cosmetics and fragrances in 34 countries. In 2008, the company had about $2.4 billion in wholesale sales. As a company that has based its reputation on personal contacts in door-to-door visits and home gatherings, one might think that Mary Kay would not benefit from EC. Actually, the opposite is true. Currently, more than 95 percent of Mary Kay’s independent salespeople place orders via the Internet.
The Problem The cosmetics market is very competitive, but it’s growing rapidly, especially in developing countries. Mary Kay is trying to capitalize on this trend. The Mary Kay business model enables rapid growth into new markets. By the early 2000s, consultants found that more and more customers wanted to shop online. With a long and global supply chain and the need to manage almost 2 million consultants, it was clear that automation was needed, but Mary Kay’s existing computer system was old and lacked Web or e-commerce applications.
Therefore, a major overhaul of the information system was needed. Finally, it became clear that emergence of social computing might provide a golden opportunity for Internet marketing by the company.
The Solution Mary Kay’s IT department is now split into three divisions: e-commerce, supply chain, and back office support. Because of pressure from the consultants, the restructuring focused on e-commerce. The company’s goals and objectives were set based on industry best practices. Mary Kay’s EC solution included the creation of an electronic service desk that supports consultants in 30 countries in a standardized way. Mary Kay also introduced global electronic ordering system, called Atlas that allows the consultants to communicate with company warehouses, an intelligent data repository that dynamically maintains a logical model of the EC environment that can be accessed by Mary Kay IT staff.
Mary Kay and its consultants are also making extensive use of social computing. The following are some representative examples of how Mary Kay uses social computing: * The company posts a job opening announcements on several sites, including MySpace Jobs. * Movies and videotapes are available on YouTube and movies.com * Several blogs are available, both for and against the company * Auctions and fixed price items are available for sale on eBay * Mary Kay provides a consultant locator on the Internet
All of these developments are supported by an extensive hardware and software infrastructure, including a wireless remote management system at the 760, 000 square-foot corporate headquarters, an extensive wide area network (WAN) and large data center. Some of the EC systems are used enterprise wide (e.g.: ticketing system) and functional (accounting, finance). The company uses an intranet for internal communications as well as dozens of other EC applications.
In addition to providing better support to consultants, the EC initiatives produces other benefits, such as greater efficiency, reduced costs and downtime, and improved service. In terms of human resources, it enabled the company to handle its rapid growth without a substantial increase in staffing. The changes also have allowed EC personnel to focus on strategic tasks. Mary Kay found that its engineers and technical people now have time to spend on new innovations.
1. List the drivers of EC at Mary Kay. (5 Marks) 2. What new EC models did Mary Kay implements? (5 Marks) 3. What social networking activities is Mary Kay involved in? (5 Marks) 4. Draw appropriate supply chain for Mary Kay productions. (5 Marks) 5. What types of EC transactions is Mary Kay involved in? (10 Marks) 6. Discuss FIVE decision-aids for online purchase that can be implemented by (20 Marks) Mary Kay in their EC website.
Section B – Case Study (20 Marks)
TOYOTA SCION GOES SOCIAL FOR ADVERTISING AND MARKET RESEARCH
The automotive industry is a global multibillion-dollar business where competition is very intense. Both General Motors (GM) and Toyota are competing to be the world’s car manufacturer. At stake are not only how many cars can be sold, but also how much profit can be made and how to survive in economic downturns.
Toyota has been known for decades for its manufacturer innovations. Now it’s taken an innovative lead on the Web. Here, we look at one of its newest brands, the Scion, geared toward generation Y (Gen Y), which includes those born between 1980 and 1994. As of 2009, Gen Y and Gen X (the generation before Gen Y) combined are expected to account for at least 40 percent of vehicle sales. The problem faced by Scion is how to reach Gen Y and Gen X people.
Using Social Computing
Scion is using segmented advertising as its major media-based strategy in social networks. The company also uses search engines marketing, mass advertising, and one-to-one targeted marketing, all of which are aimed at increasing brand recognition. Here are some representative activities:
* Scion uses display ads that reach urban audiences via sites such as blasto.com and hiphopdx.com. Scion works with these sites to develop ad content in a way to make it attractive to the sites‘s membership. This ranges from photo galleries to social networking profile pages to offering interactive features. * In august 2007, Scion launched Club Scion, a three-story virtual nightclub with dance floors, music, and hot tubs. Each level of the club reflects a different Scion model, which includes the A hatchback and B SUV, and TC sports coupe.
* Scion maintains a presence in several large virtual worlds, including secondlife.com, whyville.com, there.com and gaia.com. Each virtual world lends itself to a different marketing strategy. In Whyville, where users tend to fall between ages 8 and 15, the company launched a virtual driver’s education program. Since there.com is populated by older teens, Scion made sure to create a more provocative social environment. * Toyota made effective use of Internet by using live chat to attract the 18 to 24 year old audience. The campaign includes the use of microapplication ads that allow consumers to stencil design over the picture of the Scion.
To capitalize on wireless technology, in 2004 Toyota launched a mobile advergame (game to advertise a product), called “Scion Road Trip”. Players earn virtual miles they send e-cards to friends and get back response. The campaign lasted for several months. * For the 2008, Scion created a special Web site (want2bsquare.com). Visitors to the site can earn e-mailing others about the site. The site features eight micro sites, including user community features; each has a unique theme and its own design. There are micro sites that focus on music; resemble a Monty Phython set; feature a haunted house; and include a town square and an urban zoo.
* Toyota targets children as a means to influence their parents. In April 2007, Toyota began placing its Scion on whyville.net, an online interactive community populated almost entirely by 8 to 15 years old. Toyota hopes Whyvillians will do two things: influence the users’ parents’ car purchases and grow up to buy Toyota themselves. The power of younger consumers has grown stronger in recent years.
According to MediaBuyerPlanner.com (2006), a study by Packaged Facts showed that 39 percent of parents of 10 and 11 years old say their children have a significant impact on brand purchase. * Finally, like several other automakers, Scion is creating its own broadband channel. These channels are a way to move from push to pull marketing, where the consumer decides what materials to view and when. A content-rich, broadband-friendly site is an always-on marketing channel to which people return.
* Toyota created its own social network site called Scion Speaks, where Scion lovers can socialize, communicate and play. Scion owners can choose from hundreds of symbols and create customized logos for their cars. They can then download the logo and make window decals, or have them painted onto their cars (for a fee).
According to MarketingVox.com (2007a), Scion has 80 percent brand recognition, a very high value. As of April 2007, Scion was the number one brick-and-mortar e-tailer among consumers 35 years old and younger. Scion had not even made it into the top 25 sites in 2006; the amazing jump to the number 1 ranking was due to the interactive and community-oriented nature of the Scion online experiences.
The Scion website is highly personalized. Sophisticated customization tools allow people to build their own virtual cars on the site. This online information is then integrated offline-a local dealership locates the desired or similar vehicle for each virtual car builder and social network for Scion car buyers and a Web site that plays music and lists concert information create superb brand experiences. Let’s look at some of the specific advertising activities. * The brand’s Scion City in Second Life generated 10,000 blog posts between April and June 2007 and is the third most recognized brand behind Reuters in Second Life awareness.
* The on-site chat feature gets hundreds of conversations per week. Prior to the chat, users are asked a few questions, one of which is where they live. Interestingly, Toyota found that many of the chatters reside in areas where Scion is not even available, providing valuable information for dealer expansion plans.
* The New York Times reported that visitors to the site had used the word “Scion” in online chats more than 78, 000 times; hundreds of virtual Scions were purchased using “clams”, the currency of Whyville; and the community meeting place “Club Scion” was visited 33,741 times. * SMS (short messaging service or text message) is being used to alert players of their accrued virtual miles and weekly contest events.
1. Identify all activities that can be considered market research. (5 Marks) 2. What can increase loyalty? (5 Marks) 3. Identify personalization methods provided by Scion. (10 Marks)
Section C – (30 Marks)
Answer all the questions below.
1. Discuss THREE factors that affect consumer satisfaction with Internet shopping.(10 Marks) 2. Draw the structure of E-Commerce trust model. (10 Marks) 3. Define personalization and list some benefits of personalization in E-Commerce. (10 Marks)