Marketing Challenges Facing Warby Parker - Case Study Example

Marketing Challenges Facing Warby Parker Table of Contents 3 Introduction 4 Challenges 4 Strategies for Competitive Advantage 7 Recommendations and Implications 9 References 13 Abstract This paper will discuss the strategic position of Warby Parker in respect to one of the major challenges the glasses manufacturing is facing. The Challenge discussed is the threat of competitors who are also copying its business model, marketing strategy and to some extent its products. The paper the briefly discusses competitive advantage in the context of Warby Parkers current situation and proposes several recommendations that the firm can take as remedial action and the implications. Essentially, these actions point towards the creating and maintaining competitive advantage through strategic marketing and improving the brand name and product quality. This way Warby Parker stands to retain its market dominance even in the face of more affordable products from the competition by distinguishing itself a quality supplier and vendor. However it also recommends that in the long run, the firm should work towards vertical integration so as to reduce the overhead costs and maintain control of the production process. Introduction Warby Parker is one of America’s fastest growing brands dealing in the manufacture and distribution of prescription eyeglasses and sunglasses, and was founded in 2010 with only $2500 as seed money. The founders were Neil Blumenthal, Andrew Hunt, David Gilboa, and Jeffrey Raider all who were students at the Venture initiation program in Wharton School. The company’s main selling point is that they design in-house glasses and sell directly to the customers without going through a retailer. This way they are able to reduce the cost of their glasses by as much as 15% of the average competitor’s price. The glasses cost on average $95 dollars, as they have few mortar and brick stores and rarely use third party distributors. By avoiding these mark ups, they can sell for less and still make significant profits (Marquis and Villa 2012, p.413). They primarily sell eyewear online and they allowed clients to try as many as five frames free, they have 27 designs of glasses and one signature monocle. In addition, they are very innovative and their trendy glass and frame designs attract customers who wish to use their glasses as a fashion accessory as well as medical eyewear (Wong, 2010). Challenges Despite the seemingly perfect business model, the firm is facing it fair share of challenges in its business practice and social commitments. Ultimately this has an effect on its productivity and ability to sustain its activities while making profit which the cardinal objective of every business. Their idea initially was an innovative one and it proved very attractive to customers; it managed to make inroads into the market of other eyewear firms. Due to its; attractive offerings, aesthetics options and innovative marketing strategy, it gradually became a dominant force (Warby Parker n.d). However, with time the very strengths the firm leverages on have proven to be capable of becoming weaknesses which have either being exploited by the competition or negatively impacting on its business strategies. One of its main strengths was in the fact that it did not incur very high expenses due to low expenditure on physical stores, this however poses distribution. The firm is very active in charity work and runs a program known as buy a pair give a pair one. Under this program, whenever a client buys as pair of glasses another pair is donated to someone in need through the program. However, the firm’s CEO has recently admitted that they are having a considerably hard time keeping the program running because of distribution problems (Mochari, 2014). The main one is the fact that the needy clients are often in far off places as opposed to their regular customers. As result, the firm is experiencing problems in delivering the glasses resulting to higher expenses and at times failing to live up to the pledge. Evidently, despite the fact that online marketing has proven successful in reducing the expenses, it marginally cuts down on their potential to expand in the poorer countries where online business has not caught up yet. In addition, there are millions of clients who may be interested in their products but cannot access them owing to inability or reluctance to do so online. After consideration of the potential for harm posed by these problems, the conclusion was that inasmuch as they endanger the business, their impact is not a major threat to the firm’s existence. However, the next challenge, which will be the subject of this paper can, in conjunction with the rest or even in isolation posit a substantial threat to its very existence. This is the challenge of competitors and imitators; in a conventional business setting, this would not appear overly complicated since every business with the exemption of a few monopolies have some competition and most manage to coexist (Barney 1991, p.102 ). However, in Warby and Parker, the case is unique as the competitors are also copycats. They have not only adapted to but in some cases blatantly reproduced the products and employed the Warby and Parker business model undercutting their already low prices and taking over a huge chunk their customer base. Among Warby Parkers most distinguish features is the fact that it lets customers “design” the glasses for themselves, by giving them as many as 5 frames to try out for 5 day and then returning them after picking the one they want all for free. One of the start-ups competing with Warby and Parker is Made Eyewear; it has borrowed heavily from the Warby Parker’s friendly marketing model and even made significant improvements. Like Warby, it allows customers to take home three pairs of glasses, however when they try them out they only need to send back the ones they do not want as all of them have been fitted with the prescription lenses. Furthermore, unlike Warby, clients have may more leeway when it comes to changing the design on their frames. They are allowed to pick the colour and can even engrave their name on the stems should they so wish. How? One will wonder how they can afford this, given the cost they incur in customizing the products one would expect their product will be very expensive, at least by Warby’s standards. Surprisingly, their glasses are even cheaper; evidently, Made Eyewear has taken Warby Parkers home marketing techniques and refined them such that they have not only bettered them but are gradually beating them down. The only way Warby can afford to compete with Made Eyewear would be to significantly lower their prices or spend more on the customer service which would likely result in high risk if not losses. As for how Made Eyeglass can afford the same risk, the answer is very simple, it pays very little for the glasses. Made Eyewear manages to offer such friendly terms because it is vertically integrated into the manufacturing and sales, the firm has a lens lab in China, which is directly connected to their production line. As a result, they control virtually every aspect of production and in unlike Warby Parker that has only managed to cut out the retailer, Made Eyewear has essentially eliminated everyone from the production chain, making itself the manufacturer, distributor and retailer. This way it can make comparatively higher profit margins without having to charge much for the products, on average a lens goes for as low as $5 except when the client has special needs like bifocals, which still cost significantly less. Another copycat competitor is classic glasses, which it is even claimed have received a cease, and desist letter from Warby Parker .Apparently, they not only copied the company’s business model of online marketing but also went ahead to copy their web interface, and a variety of other aspects of the latter business’s techniques and products and quite overtly too. These two are just the most visible competition; there are several other upstart companies providing the same products and services as Warby Parker and the situation has gotten to a point where they are casually referred to as the “Warby Clones”. Strategies for Competitive Advantage When it comes to dealing with competition, there are several tactics a firm can employ, in Warby’s case where there seems to be a directed infringement in copyright by the competition, a possible resources would be to take legal action (Bhattacharya & Korschun 2008, p.113 ). This was recently done by apple Inc. which sued Samsung it main competitor for copyright breach in some of the technology the latter was using to manufacture its gadgets. The international business court found for the plaintiff and Samsung was heavily fined, and the money awarded to Apple (Min-Jeong, 2013). This is a suitable precedence, which Warby could pursue, and given the extent to which the models and concepts have been copied, it stands a good chance of winning. However, this is not a necessarily the best recourse, even after Apple won the case against Samsung, it still trails behind it in the smart phone market. In fact, some have postulated that the case was positive publicity for Samsung which was seen as being evenly pitted against the traditional giant Apple. At the end of the day, suing may work but it is not a sustainable solution since in most cases it will only force the other firm to alter its modus operandi albeit slightly. In addition, given the many copycats, Warby may expend a lot of time and resource, which it could be better used in concentrating on innovation and setting up strategies in order to create a competitive advantage. Warby must have clearly learnt by now, being the first to come up with an innovative idea or products does not guarantee profitability or sustainability. Someone else will in all likelihood come it to the market, emulate the original reproduce the strengths and improve on weakness, in many cases, they will also have a bigger budget. Given the diversity and resources available to the competition, Warby’s best chance of asserting its dominance lies in creating and sustaining a competitive advantage in the glasses business. Quintessentially, when a firm has competitive benefit, it is in a position to create economic rate for its products than its rivals are. Economic value in turn means the difference between the cost of production of a firms goods and the perceived value of the same which customers, which is a reflection of what they are willing to spend on it (Priem 2007, p.223). For Warby Parker to create and sustain a competitive advantage, they needs must understand the firms internal strength and weaknesses as well as opportunities and threats. This is done by carrying out a SWOT analysis, whereby in essence, Warby’s internal weakness pertain concerns such as quality of product and the firm’s core capabilities and competencies. This way, it will be able to build itself by capitalizing on its strengths and core competences that improve its value in the eyes of customers, while at the same time mitigating on their weakness (Tomas et al 2011, p.56). Furthermore, they could build on their weakness and convert them to strengths through either strategic placement or acquisition of new capabilities and competencies (Dawar 2013, p.103). The aim of the analysis is to allow the managers to formulate a strategy that enables a coherent fit between the firm’s resources, capabilities and resources as well as the external environment (Rothaermel & Hess 2007, p.981). To create a competitive advantage, a firm must have a set unique of core competencies that allow it to create a higher perceived value than the completion or possess resources that enable it to produce identical or similar products at a lower cost (Rothaermel and Hill 2007, p.61). Eyewear, has evidently achieved the latter and this way it has been able to undercut Warby on the pricing front. To explicate this, an example can be derived from the motor vehicle industry, take Honda motors; their core competence is the creation of high-powered and reliable engines that in the customer’s minds reflects a perception of superior quality (Berman et al 1999, p.492). As a result, even when other motor firms manufacture vehicles with similar if not identical engine specification, for lower prices, Honda has been able to maintain profitability and competiveness. Core competencies are created through the interplay between the firm resources and its capabilities, resources can be classified as tangible such as land and structures while intangible ones include brand name reputation technical skills as patents. The capabilities are the management skills that are critical in the synchronization and organization of the assorted resources, which need to deployed in a strategic manner (Teece, Pisano & Shuen 1997, p.511). The interplay amongst resources and capabilities are the building blocks for core competences and which can be leveraged towards the formulation and implementation of strategic goals with a view to achieve competitive advantage and profitability. Recommendations and Implications Given the resources that Made Eyewear appears to have at its disposal including a manufacturing plant in China, one may assume that Warby should do the same to lower its costs as well, this is however not necessarily prudent given the circumstances. One way through which Warby Parker could improve its core competencies is by working on improving the quality of their products (Marquis and Villa 2012, p.415). Contrary to popular assumption, customers are not automatically attracted to lower prices; they are actually more concerned about quality and if they perceive that a product is worth more, they will be happy to pay. As a result instead of engaging in a price war, Warby needs to work on new innovations and market its products as premium by making them more durable for instance. They can also work on improving its brand images so as to create loyalty from customers. For example; apple Inc’s. products are markedly more expensive than those of its main rival Samsung and even when the latters are just as good and in some cases better, nonetheless, apple’s customer base has not been significantly eroded. This is because apple’s customers do not just buy the products, they but the brand and believe it must be better because it is apple. This has been achieved through years of brand marketing as well as a consistency in producing high quality goods prioritizing the needs of the customer. Warby can also assume the same approach, this can only be achieved if they first ensure they make higher quality goods, in addition they should be more interactive with their costumer through follow-ups on the sales and offering constant upgrades and free repairs. This way they create a rapport and a sense of loyalty such that the customer will no longer be buying glasses but “Warby” and thus shield the firms from competition even when the prices are lower. Warby by virtue of the fact that it has been around for longer than most of the competition can play the experience card. Given they are selling medical items this could have a major impact on potential clients who may be indirectly manipulated into associating the other upstarts with experimentation. However, while not recommending it in the short run, Warby should consolidate its resources and pursue vertical integration so that it may be better placed to control its production. This is because innovation is a key to achieving competitive advantage, however is often very expensive and a firm cannot resonantly expect to have a practical research and development strategy unless they invest heavily (Ringold & Weitz 2007 p.253). Through improving the quality of the products, Warby Parker stands not only to maintain its market dominance but also to make higher profits even with the competition selling at lower prices. Customers will often associate low prices with low quality, which explains why Made Eyewear irrespective of their lower prices has not managed to catch up with any of the bigger companies yet. In case Warby can manage to manufacture better quality standards, say by making them more durable even if it means increasing the price albeit by a small fraction. Customers will likely prefer them as long as the improvement is overtly and distinctly missing in other brands. The most important aspect of acquiring brand loyalty is by having ones customers believe that the product they are buying or the service they are getting is of better quality in one way or the other than the others. The firms’ core competences include the manufacture or medicated lenses could partner up with a fashion firm that has no interest in glasses but has influence in the fashion arena. For example Gucci, despite being a landing manufacturer of sun glassed has no interest in medical ones; if Warby was to partner up with such a firm its economic value would substantially improve. Customers would associate it with the fashion brand and even if it were to raise its prices, the brand name would still attract more customers. Finally, if Warby could develop and integrative production and marketing strategy, its production costs would be significantly lower and this may allow it to either reduce the retail prices to make money for product promotion and R and D. Furthermore, if they are in control of the production, they will provide customers with more customized products such as labelled stems and different colour. Conclusion In conclusion it is evidenced that despite the fact that Warby Parker was one of the first firms to provide online marketing and customer friendly services not to mention lower than prices, its competitive advantage on these grounds is clearly being threatened. With new upstarts that have more resources at their disposal copying their model and seemingly bettering it, Warby Parker stands to lose ground if it does not take remedial action. However, contrary to popular layman belief, responding to lower prices is by lowering ones prices as well is rarely a sound strategy and it could result in a full-fledged price war which could lead to the ruin of all the firms involved. In Warby Parkers’ case, the best option is to work on its marketing strategy by enhancing brand loyalty. Alternatively, it could collaborate with other firms that may complement it in order to sustain the competitive advantage by projecting a picture of efficiency, quality and experience to its consumers. References Barney, J. 1991. Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. Berman, S. L. et al. 1999. Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance. Academy of Management Journal, 42(5), 488–506. Bhattacharya, C. B., & Korschun, D. 2008. Stakeholder marketing: Beyond the four Ps and the customer. 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