Case Study: The Business Strategies Of QVC

CASE STUDY: THE BUSINESS STRATEGIES OF QVC 1

Case Study: The Business Strategies of QVC

Group 2:

Michael Kenlan

Karen Maxwell

Brian McKearney

Tara Murphy

Zach Smith

MIE 480, Spring 2010

North Carolina State University CASE STUDY: THE BUSINESS STRATEGIES OF QVC 2

Abstract

John Segal founded QVC in West Chester, Pennsylvania in June of 1986, two years behind the launch of its predecessor, the Home Shopping Network. Despite this later emergence onto the cable scene, QVC surpassed its competitor quickly and has maintained a dominant position in the television-retail industry ever since. Never relinquishing its strong commitment to quality, value, and convenience, the company has strategically gained consumer confidence, brand loyalty, and a competitive advantage in the market. Today, QVC has shipped over a billion packages to customers worldwide, and generates an estimated $6.5 billion in annual sales (Maffei & Malone, 2006). CASE STUDY: THE BUSINESS STRATEGIES OF QVC 3

The Business Strategies of QVC

Becoming an Industry Leader

There are many reasons that led QVC to become the industry leader in televised shopping. Entering the market in the shadow of The Home Shopping Network actually proved to be advantageous to the new company. The founding management of QVC was wise in examining its competitor’s strengths and weaknesses, and learning from these mistakes. QVC set out to break the existing mold and capture a larger audience with quality products. Another wise decision on the part of leadership was to employ experienced TV producers with expertise in the field, which resulted in a professional and well-produced show from the start. Acknowledging his own talent gap and then taking steps to fill this need accordingly granted John Segal a greater probability of success. Unlike the perceived image of many QVC competitors, the company is avidly committed to three core values—quality, value, and convenience. It is upon these core principles that QVC has focused its efforts, making sure to incorporate them fully into all elements of the business. For example, in order to gain consumer loyalty, the home-shopping channel employs an in-house quality assurance lab. The management at QVC realized that selling products without brick-and- mortar stores and tangible products meant they would have to win over customers’ trust and loyalty. In the words of Mr. Hamlin, VP of iQVC, “What customers are looking for is trust” (Williamson, 1999). Therefore, each product promoted by the channel undergoes a stringent quality satisfaction test before ever reaching the television screen. QVC also offers a 30-day, 100% money back guarantee with zero hidden fees which serves to reassure first-time buyers and retain repeat customers. Further emphasizing its commitment to quality and value, QVC welcomes customers to call in during live broadcasts to offer their personal testimonials to other viewers.

QVC Strategy

This customer-centered focus is the foundation of QVC’s strategy. For example, in 1996, the company launched its internet division known as iQVC to capitalize on its commitment to convenience. Over the past 14 years, the site has been redesigned to become more user-friendly, and to integrate the TV channel with the internet site and QVC distributors. Logistically this has allowed the company to keep pace with television orders placed 24 hours a day, 7 days a week. The increasing integration of information systems and operations enables QVC to process orders efficiently and ship most orders within 48 hours. QVC has also managed to stay ahead of the curve by diversifying its product mix and incorporating brand names and designers. Products offered now include not only clothing, jewelry, and accessories, but also electronics, food, and appliances—to name a few. Choosing to incorporate top designers has paid off immensely as well. QVC knows its demographic (80% female) and targets that demographic strategically to optimize sales. The channel stays relevant to the consumer by selecting popular designers that will resonate with its audience. In addition, QVC launched a major national ad campaign in 2007 to help differentiate its brand from that of competitors. Upon learning that many consumers were experiencing brand- confusion, the cable retailer developed a new logo and tagline, “iQdoU?” (Haugsted, 2007). They also decided to incorporate charismatic, enthusiastic designers and celebrities like Isaac CASE STUDY: THE BUSINESS STRATEGIES OF QVC 4

Mizrahi and Whoopi Goldberg, who not only design fashionable products, but also double as captivating salespeople on-air. Ultimately, QVC’s strategy has been one of controlled growth and expansion. The company has expanded exponentially, but not recklessly. Only after cornering the US market did QVC venture overseas to the UK, Germany, and eventually Japan (Glyn, 2003). Undertaking such ventures without the appropriate resources and logistics could have proven fatal, but QVC wisely navigated the expansion one step at a time.

Industry Forces

Even the best-laid strategies are not immune to external factors. A declining economy will inevitably affect the consumer’s purchasing power, especially when it comes to the retail industry in which many purchases are considered luxury items. In 2007, QVC revenue increased 5% over the previous year, whereas average annual growth for the previous five years was around 12.3% (Petrecca, 2008). The existence of more money-cautious consumers has left competitors fiercely vying for the remaining market percentage. Socio-cultural forces are influential since much of our pop-culture is relayed via television, and QVC is a retailer living in the television environment. For instance, the increasing popularity of reality television left QVC competing for viewers’ attention. Smartly, QVC incorporated the reality T.V. craze into their programming by bringing in experienced producers and utilizing designers like Chloe Dao, winner of reality show ‘Project Runway’ (Petrecca, 2008). Dao’s namesake popularity with reality T.V. has helped QVC bring fans to their channel. QVC has also responded to health-conscious trends by expanding on existing product lines with weight-loss and exercise products (QVC.com, 2008). Technological forces are important to the television shopping industry for many reasons. In the internal environment, new technology can help improve infrastructure, reduce costs, and improve efficiency. The consumer’s convenience of purchase is crucial to people who shop off of their couches. Harnessing new technology will also help QVC stay in touch with the customer. QVC has renovated its website several times in order to stay up to date with the growing amount of internet sales. With the evolution of mobile browsing, social media, and other media outlets, these forces represent a large opportunity to communicate with customers. Technological forces are also important to the shopping industry because firms will look to stay up-to-date on the latest products. If QVC can identify the next iPod-like product then they will reap the benefits of a massive consumer response. Finally, political-legal forces represent laws and regulations that affect the television shopping industry. Industry regulations are in position to protect the customer, which align well with QVC’s no hidden fees policy. A major component of the legal environment is the FTC. The FTC strictly regulates the manner in which QVC describes product attributes and demands scientific backing for all claims. The FTC’s goal is to inform and protect the consumer from deceptive claims (FTC, 2004). QVC’s honesty with their customers has bolstered their reputation and has helped them achieve 95% of revenues from repeat customers (Petrecca, 2008). CASE STUDY: THE BUSINESS STRATEGIES OF QVC 5

Challenges Faced by QVC

Since QVC has established itself as an industry leader, the challenge now is to maintain a competitive advantage and focus on future growth and technology. To ensure that QVC continues to maximize profits, management is challenged with continually discovering new products that will yield high profit margins. After all, in order to turn a profit in any business, you must sell items that the customer desires and is willing to pay top dollar for (Williamson, 1999). However, this can be complicated; the search for new and unique merchandise is long and tedious, requiring time and resources. Once a product is found, it must then meet a set of criteria set forth by the network based on research results and trending analyses of the characteristics of past profitable goods (Wall Street Journal, 1994, p. b7). QVC will need to continuously evolve in order to find diverse products which can be mass-marketed successfully through television interaction, and it must do so without sacrificing quality and efficiency. As a mature company, QVC is also faced with the challenge of attracting new audiences and expanding their customer base to avoid falling into the decline phase. QVC has penetrated almost all cable television and broadcast satellite homes in the U.S., and has ventured into new markets including the U.K., Germany, and Japan. However, the expansion does not stop here; QVC is currently making efforts to expand into other countries such as England, France, and parts of Canada (New York Times, 2007, p. 6). It is QVC’s hope that this growth investment will result in an expanded customer count, additional business, and repeat buyers. Furthermore, QVC is now incorporating products that reach out to thrill-seeking and leisure activity audiences. Studies have shown that the popularity for these items is on the rise (Wall Street Journal, 1994, p. b7). For QVC this means adding additional customers that would not ordinarily be consider customer of products found on QVC. Like many other companies today, QVC must keep tabs on the tech industry. For instance, modernizing their retail website in terms of usability, systems integration, and interactivity as these improvements become available will not only please its nearly forty-five million customers (New York Times, 2007, p. 6), but increase the efficiency of its operations. The company has already made strategic decisions of this nature and must continue to do so. For instance, QVC has tapped into the emerging mobile internet capabilities by teaming with Apple to create an iphone application. This service provides convenience to mobile buyers, a competitive advantage not yet utilized by competitors.

A Look to the Future

It is always difficult to predict the future business environment, and for this reason much of the current planning will not be relevant for long. To ensure that QVC does not fall to the wayside, management must constantly evaluate the internal and external environment to protect and promote the wellbeing of QVCSome key technological devices which could impact QVC in the future include the Droid cell phone manufactured by Motorola, the development of upcoming 3D-picture television sets, and body scan technology which aims to accomplish custom fit clothing for shoppers. . Incorporating such developments as they become available increase QVC’s chances of improving operating and cost efficiencies, customer satisfaction, and growth potential. Lastly, QVC will need to consider its customer demographic; currently, the majority of QVC viewers are female with an average age of 50 years and older. As this population continues to age, QVC will need to capture the preceding age group’s attention and business. CASE STUDY: THE BUSINESS STRATEGIES OF QVC 6

Employing new technologies will help with this issue as well since the millennial generation is extremely tech-savvy. It is always difficult to predict the future business environment, and for this reason much of the current planning will not be relevant for long. To ensure that QVC does not fall to the wayside, management must constantly evaluate the internal and external environment to protect and promote the wellbeing of QVC. While doing so, it will be essential for QVC to remember its core identity since a company can easily lose sight of their vision and mission while attempting to evolve.

While doing so, it will be essential for QVC to remember its core identity since a company can easily lose sight of their vision and mission while attempting to evolve. CASE STUDY: THE BUSINESS STRATEGIES OF QVC 7

References

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Haugsted, L. (2007). Multichannel News. QVC Campaign Asks: 'iQdoU?'; Shopping Service Tacks Away From Pack. Retrieved (2010, January 30) from Academic Search Premier database.

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