Rocks by Request
Strategy and Implementation Summary
The growth strategy of RBR will require an expansion of the current divisions inside the organization, a restructuring of the company. Without the benefits of the restructuring, it is likely that the RBR business will stagnate. The process of restructuring, however, is not without any risk, as the current business practices that had been the foundation of the company will have to be slightly adjusted in response to today’s retail environment.
There will be two phases of restructuring the company. First, changes will be made in the current RBR location. Second, we must revamp the RBR brand to build and strengthen customers’ “emotional” attachment to it.
Transformation Into Corporate Style of Management
Overcoming the issue of total owner involvement in the business is the most fundamental for any diamond retailer today. RBR is still under “centralized” management with Mr. Stone acting as CEO, Business Development Officer, Purchasing Manager, and Marketing Communication Manager. This creates a conflict of interest within the company. For instance, after Mr. Stone finished working on RBR’s marketing program for the year, he hesitated to pursue most of the programs due to his priority involvement in Business Development (making alliances, adding revenue streams). With better delegation, Mr. Stone’s role in the company can be limited to just expanding the business rather than following up on marketing programs.
Positioning Through New Brand Development
Clearly, the current RBR brand cannot support the next level of growth. The brand does not appeal to an increasing Generation X, the savvy and sophisticated demographic in the U.S. But changing the RBR brand does not mean disregarding the existing value of the company (credibility, integrity, hybrid of traditional and technology).
Business researchers have suggested that there are several reasons a small business would need to change their brand image. There is no recognition of the brand and the potential customers are not clear about the message behind the brand. Or the brand is recognized, but the message the company wishes to convey is not being conveyed. In the case of RBR, that could mean that former customers might be confused about the new direction the company is taking. Another reason to change brand names is that the market for the company’s product has changed dramatically. While the change in market for RBR has not been dramatic, it has been a big enough change that the brand needs some updating in order that the company can begin to compete in new markets.
There are two most critical steps in brand development for RBR. First, the company must secure a more prestigious location for its networked jewelers in positioning its new image in the market. Second, RBR needs to start to manufacture a setting design of its own, branded as “RBR Jewelers.” That will strengthen customer awareness and help the company in positioning itself in the future.
The revised brand messaging will suggest the company’s seriousness in increasing its value in serving the customers. Some of the characteristics of the new brand will reflect the sense of:
5.1 Strategy Pyramid
Organizational restructuring is the hardest part in RBR’s growth plan. RBR’s management culture is currently centered on the “one-man-show” model, and as a consequence, employees sometimes feel uncomfortable in the work environment and are less likely to contribute to the overall performance of the company. Although this has given us flexibility, this style of management has limited the company’s growth.
By recruiting non-family members to posts in strategic positions such as CFO and managers, RBR will create more accountability in its performance. Later, RBR as a company must continue to invest in increasing the competency of its people through attending various seminars related to online retailing and marketing high-end merchandise in the connected economy. Through the creation of corporate culture, RBR will become a professional company dedicated to good governance and will one day yield greater performance.
The brand re-development for RBR will include an emphasis on its new marketing campaign, “One Diamond, One Love.” The emotional marketing campaign will appeal to the savvy generation of today. RBR should shift its perception from being the “affordable” diamond retailer/wholesaler toward high-end image (without sacrificing the price) such as Tiffany & Co. However, the dilemma for RBR is to gain this prestigious image and at the same time try to maintain the “mass” market that is currently dominated by other players such as Diamond.com.
5.2 Competitive Edge
The overall concept is to utilize the Internet to connect customers with store inventory, and utilize local jewelers as a mean to support the “high-touch” feature of RBR.
This concept benefits not only RBR, but local jewelers and customers as well. There is no one else in an online diamond retailing industry applying the combination of virtual and traditional brick-and-mortar, except those who utilize the Internet to support their main traditional businesses, so RBR is the only one who has the “high-touch” feature in the competition of online loose diamond retailing.
By working with participating local jewelers, RBR eliminates the obligation to purchase the diamonds before inspection, unlike its competitors. With RBR, diamonds (limit 2 per customer) are shipped to jewelers in the area for free, even if the customer decides not to purchase in the end. In short, it is an absolutely risk-free guarantee!
5.3 Marketing Strategy
The concept of e-marketing is similar to a traditional marketing, which is the process of planning and executing conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy the company’s objectives. Marketing does not necessarily mean forms of advertising of products, but fully utilizing all of the company’s resources into getting the customers to buy our products. In this case study, we will explore the three marketing strategies for RBR that are involved in e-commerce marketing, including posting and positioning, and traditional marketing, including advertising and the combination of all.
5.3.1 Promotion Strategy
The most challenging facet in marketing for RBR is the combination of both electronic and traditional publication. In here we are focusing on the aspects of push and pull method to attract customers in buying the diamonds from RBR.
The pull approach is what RBR does in its website to attract customers to buy, not look, as to educating themselves about diamonds (lookers versus bookers). Pull strategy may include a reverse promotion such as special deals, values, and incentives, but limited to logistical activities, such as free settings for the holiday seasons or on special occasions, such as valentine’s days. Both positioning and posting the website are part of the pull strategy, also with web optimization process that we discussed before in the earlier segment of this case study.
Now, the push approach is more exciting where RBR puts out a combination of programs to push the customer into the site, whether by advertising campaign, direct mail, promotion / in-store promotion, publicity, and strategic alliance with other firms to support RBR’s competitive advantages.
The upside in doing a major advertising campaign is the efficiency for reaching many potential buyers simultaneously; it is effective in creating image of the brand, and the variety of media to choose from. However, the downsides are the cost and it reaches random targets that might not be our potential buyers. The only way to do this is to find out from our exact demographic and psychographic profile from the SRI data to target which media, unless we have an unlimited amount of money to spent on advertising. The SRI data will provide the name of subscription magazines of our target customers, so we can prepare when to launch the advertising publication into these media. Men’s magazines, television and radio ads are not completely out of the option if we know specific time before hand. For instance, we can focus our advertising campaign around January and February when Valentine’s Day is near.
These activities include special deals to stimulate demand. Sales promotion is proven effective in changing the short-term behavior of buyers. However, sales promotion whether it is been done online or in-store, could hurt the brand image, as we noted on the vision part, that diamonds is about exclusivity and recognition, and how we as the diamond seller are not going to cheapen the image of our company.
The upside in publicity is the low cost and the messages seen more credible than marketer-sponsored messages. Barriers such as uncooperative media, heavy competition, and less control over the message seem to be the downside in this activity.
However, we can still bench-mark other companies like our competitor, Mondera.com, in endorsing our product in the celebrity events. Maybe not big celebrity exposure as Mondera.com with A list stars such as Elizabeth Hurley and Britney Spears, but we can always find B celebrities to wear our diamonds into the events, such as the Emmys or on MTV. After all, diamonds are about superficiality and vanity, and if the customers see something that their famous stars wear, for instance one TV star got engaged with the US $20,000 diamond from RBR’s inventory, who would not follow?
Who does not like getting a catalog in the mailbox, especially the ones from Tiffany’s or Cartier? We will use the same methodology as the traditional upper diamond retailers’ approach in catalogs where they create an image of exclusivity of their brand. Although this method is going to cost some amount of money, it is yet still powerful in getting our brand recognized by potential customers.
5.3.2 Positioning Statement
For discriminating diamond purchases who prefer to shop online, Rocks by Request offers a unique combination of high-tech and high-touch shopping. Unlike other online retailers, we work with local diamond merchants to let you inspect your chosen stones in person before buying.
5.3.3 Pricing Strategy
RBR implements standard pricing from the Rappaport. For instance, a 1 carat VVS1 loose diamond is priced between $5,900 to $6,200. RBR’s settings are priced from $100 to $800, depending on the design complexity. All of RBR’s settings will be made of 18k yellow gold or 14k white gold.
In the expansion plan, RBR will outsource the manufacture of accessories made of 14k white gold decorated with small-carat diamonds ranging from 0.01 to 0.3 carat. The pricing of RBR’s signature accessories will range from $90 to $200 to attract the emerging young female audience.
5.4 Sales Strategy
RBR sales strategy will not differ from its previous operating model: the local jewelers. Local jewelers (mom-and-pop shops partnered with RBR) are the sales-savvy people with an already long term relationship with their existing clients. RBR’s network of local jewelers will receive 10% commission fee depending on the amount of sales they made, and this will go to other cost of good sales in RBR’s projected profit and loss table. Settings will not be included in the commission, for the reason that the local jewelers also need to sell their own design.
Usually, after customers view the perfect loose diamonds, they will select the local jewelers in the area to actually examine the merchandise. Then, customers select their preference of setting, and pay for the merchandise. Local jewelers act as the real time “front-end” for our customers, and credibility associate in our business. This sales strategy has been proven to work for the last three years of RBR’s operation.
5.4.1 Sales Forecast
As we are adding two additional categories, settings and accessories, RBR will expect a boost in revenue for the years ahead. However, the forecast is rather conservative, due to fierce competition that offer similar product categories. In order to boost the volume of sales, RBR is now projecting a 10% decrease of its margin from 40% to 30%. This strategy is necessary to attract potential local jewelers, as well as maintaining current partners in distributing RBR’s merchandise.
Due to the difficulty in valuing loose diamonds in units (4Cs characteristics and relationship-based business model), RBR’s sales forecast is based on values rather than units. Please note that when the merchandise is at local jewelers’ hand, bargaining takes place. Customers who already had a long relationship with their local jewelers tend to bargain the price of the diamonds or if sales are down, usually local jewelers tend to lower their margin in order to expand their client base by offering cheaper prices than other jewelers.This is how local jewelers can still compete with big brand names, because of the relationship-based business model. RBR set the average 30% margin for all of its loose diamonds sales to simplify the reporting. However, the numbers are relative ranging from 25% to 50% margin in the diamond retail industry.
|Direct Cost of Sales||2006||2007||2008|
|Subtotal Direct Cost of Sales||$3,752,000||$4,502,800||$5,400,400|
5.5 Strategic Alliances
Strategic alliance has one significant impact in creating brand image. It is sometimes proven more powerful than the image created by advertising campaigns alone. As noted earlier, I propose an alliance (s) with financing firms such as Visa, American Express, and Master Card to boost the image and customers’ spending power. In addition we will join Shop@AOL, which is slightly different from posting the website on AOL, but to include our diamonds into AOL’s selection of engagement diamonds. This will have a great impact on our image as well, as we are in the same place as AOL’s endorsed online diamond retailers, such as Blue Nile and Diamonds.com.
Yahoo! and Amazon are now entering high-end retailing. RBR must be able to become one of their endorsed merchants to expand the brand awareness of the company.
The milestones program shows the detailed implementation schedule for RBR’s expansion in its product portfolio and distribution strategy. Mr. Stone himself will lead the project in finding potential upscale jewelry stores in the area, and control the budget in several strategic areas.
|Milestone||Start Date||End Date||Budget||Manager||Department|
|Website Redesign||11/20/2005||2/12/2006||$500||Jay Pegg||IT|
|Annual Marketing Program||11/16/2005||1/2/2006||$48,000||Buzz Wird||Marketing|
|Finding Potential Jeweler Partner||10/28/2005||6/6/2009||$1,200||Rock Stone||Business Dvpmnt|
|Establish Alliance With Internet Vendors||12/15/2005||2/10/2006||$1,200||Rock Stone||Business Dvpmnt|
|Establish Relationship With Outsourcing Workshops||12/2/2005||2/12/2006||$1,200||Rock Stone||Business Dvpmnt|
|Revamp Logo Design||11/20/2005||6/6/2009||$800||Rock Stone||Business Dvpmnt|
|Establish Relationship With Banks For Co Branding||11/22/2005||1/17/2006||$1,200||Buck Pound||Business Dvpmnt|
|Upgrade Existing Warehouse||12/2/2005||3/20/2006||$12,000||Chip N. Storage||Operation|
|Update List of New Local Jeweler Partners||1/5/2006||1/9/2006||$0||Jay Pegg||IT|