The author of this article has considered the following assumption – B&Q’s European timber buying department have employed him as a consultant to report on the current situation in the industry and to make specific recommendations for their future marketing mix for timber.
The terms of reference are as follows:
- Outline the current issues in the global timber industry
- Identify key organisations involved in putting forest/timber industry-related information into the public domain, give their name and their perspective on the industry. Prioritise these in order of influence.
- Explain carbon rights and carbon emissions, and how ownership/trade of these occurs with examples.
- Summarise current developments in timber branding, and communications, give examples from our competitors
- Recommend an optimum marketing mix for B&Q timber Europe, for the following 5 years, given the target market, provide evidence to justify your decisions
- Write a press release which would announce this new development.
- Current issues in global timber industry
The issues that have affected the timber industry are explained using the PEEST analysis of its macro-environments.
Macro Environment – PEEST analysis.
Political and Legal forces: Combating illicit logging is a global concern. The government departments and agencies actively seek to buy timber from legal and sustainable source. Legal timber is the minimum standard condition of contracts for companies (Howarth Timber website)
The UK Government has commissioned an Impact assessment of its timber procurement policy. This policy requires Central government departments, their executive agencies and non-departmental public bodies only to procure timber and wood-derived products originating from either legal and sustainable or FLEGT licensed or equivalent sources. Local government is encouraged to comply. (CPET website)
Global timber have developed a report analysing the trends in production, imports, exports and consumption of timber in the USA accusing USA and China with their involvement in illegal timber logging.
20% of the 27-country European Union’s timber imports could be illegal. Europe is one step away from a 2012 ban on illegally harvested timber, Reuters reported (Reuters website).
Economic forces: The recession that had hit in 2008 and continued in 2009. This adversely hit many sectors, including timber.
The sales of deciduous timber dropped with almost no demand for oak for cooperage and the structural crisis affecting beech, the price of which has dropped below that for spruce and fir tree.
In spite of stable supply of the species taken together, the logging volumes have decreased 4 %. The average unit price has gone down 23 %. Consequently, the turnover from wood logged in French state forests has dropped 26 %. A slight upswing in the demand for softwood timber and industrial roundwood occurred at the end of the year. However, the fuel timber market was undamaged. (Anonymous, 2010)
Altough the harvesting in 2009 showed an increase of 4% for softwood and 24% for hardwood, the deliveries to industries and others decreased by 17% for woodbased panels and 1% for integrated paper and pul mills (http://www.forestry.gov.uk/pdf/trprod10.pdf/$FILE/trprod10.pdf). This was probably because the demand has reduced due to the global economic conditions. The most affected areas with regards to timber trade were Africa, Cameroon, France and USA (Author(s): Conrad, Joseph L.; Bolding, M. Chad (email@example.com); Aust, W. Michael; Smith, Robert L.
Ecological / Physical environmental forces: Global warming (discussed in detail in section 3) is causing the forest growth patterns to change slowly due to the rising temperature. This shift in timber production could have serious ramifications for growers in temperate regions, such as China, North America, Australia, New Zealand, the former Soviet Union, and parts of Europe, areas that currently supply 77% of the world’s industrial lumber (USA Today – Society for the Advancement of Education website).
Socio-cultural: Wide-ranging changes in forest tenures have occurred globally in recent decades, and the changes in developed countries and transition economies have been dominated by market forces. Market-based forest tenure changes are discussed in 4 categories
- Forest management by a state-owned company (Sweden)
- Commercialization, corporatization, and privatization of plantations (New Zealand, South Africa and Australia)
- Creation of forest enterprises within state forestry agencies (the United Kingdom, Germany, and transition economies), and
- Changes in forest tenures in economies in transition (Kant, 2009)
Technology: New technologies like Supply Chain Management System, e.g. shared database, are implemented in forestry industry. The lack of knowledge, however, has resulted by only limiting the effect of colaborative planning (Günter, 2006).
- Forest Stewardship council (FSC) – It is an international, non-governmental organisation. It was founded in response to public concern about deforestation and demand for a trustworthy wood-labelling scheme. It aims to promote responsible management of the world’s forests (www.fsc-uk.info).
- Central Point of Expertise on Timber (CPET) – It aims to provide detailed information and advice to public sector buyers and their suppliers, to meet the UK Government’s timber procurement policy requirements in practice (http://www.cpet.org.uk/).
- WWF-UK Forest and Trade Network – Founded with a vision to ensure that all commercial wood come from well-managed forests, this organisation aims to achieve this by using the purchasing power and influence of UK businesses (http://www.wwf.org.uk/what_we_do/safeguarding_the_natural_world/forests/responsible_forestry_and_trade/forest_trade_network/).
- Greenpeace – They claim to investigate, expose and confront environmental abuse by governments and corporations around the world. They aim to master environmentally responsible and socially just solutions, including scientific and technical innovation (http://www.greenpeace.org.uk/about/how-we-make-change-happen).
- TRADA – internationally recognised not-for-profit organisation which provides specification and use of timber and wood products (http://www.trada.co.uk/about/index.html).
- UNECE – Timber Committee: The Timber Committee is a subsidiary body of the UNECE working together with the FAO European Forestry Commission to promote sustainable forest management in Europe, Central Asia and North America. It provides member countries with information and services needed for policy and decision-making regarding their forest and forest industry sector, including trade and use of forest products and, when appropriate, formulates recommendations addressed to member governments and interested organizations (http://www.unece.org/trade/timber/).
- FAO Forestry Department: The FAO Forestry department supports a number of statutory bodies specifically designed to provide neutral fora for discussion in the field of forestry. The Committee on Forestry (COFO) is the principal body among the FAO Forestry Statutory Bodies. The biennial sessions of COFO brings together heads of forest services and other senior government officials to identify emerging policy and technical issues, to seek solutions and to advise FAO and others on appropriate action. Other international organisations and non-governmental groups participate in COFO. The work of the statutory bodies is a combination of problem identification as well as policy and technical advice toFAO, its members and others as appropriate (FAO website).
- Forestry Commission – They aim to provide research services relevant to UK and international forestry interests. They inform and support forestry’s contribution to UK governmental policies. They also provide the evidence base for UK forestry practices and support innovation (http://www.forestry.gov.uk/fr/infd-5txhaj)
- FAO Forestry department – http://www.fao.org/forestry/index.jsp
Carbon Rights – Carbon Trading
Carbon Sequestration means the absorption of carbon dioxide, from the atmosphere, by vegatation and cultivating soil; and the storage of carbon in the vegetation and soils.
Carbon release occurs where vegetation is cleared. It is the opposite of carbon sequestration.
The right to the benefits and risks that arises from carbon sequestration and carbon release on a specified parcel of land is known as carbon rights. (Government of western Australia – website)
Carbon trading which took off after the Kyoto Protocol was signed in February 2005, intends to tackle global warming.
Under Kyoto Protocol, industrialised countries were obliged to reduce total greenhouse gas emissions by an average 5.2% compared with 1990 levels; between 2008-2012.
The key idea behind carbon trading is controlling the total carbon dioxide on the planet rather than, where it comes from. This creates a choice for the country, or company to either spend the money to cover the costs of cutting pollution (emissions), or else continue polluting (emitting), and pay someone else to cut their pollution.
Hence, the companies with excess carbon rights can trade it to those with fewer.
This is done is two ways:.
- Cap-and-trade scheme: Here emissions are limited and can then be traded. Developed countries can trade between each other.
The European Trading Scheme (ETS), which includes 12,000 sites across the 25 European Union member states, is a cap-and-trade scheme and the largest companies-based scheme around.
Trading carbon through credits from projects that compensate for or “offset” emissions. (BBC News – http://news.bbc.co.uk/1/hi/business/4919848.stm)
2. Timber Branding and Communication
Timber has been offered by different multi-billion pound retailers. Timber has sold as multi product range like ‘planed timber’, used in construction where extra finish is needed and its cheaper substitute ‘unplaned timber’ which is unfinished wood (http://www.focusdiy.co.uk/company-information). This option is displayed on the product. It helps the customer take an efficient and cost-effective decision.
Some companies like Richard Burbidge have been selling high quality timber with innovative timber designs (http://www.richardburbidge.com/home/about-us/). Their timber has been distictively named as ‘Richard Burbidge’ timber and the brand name has been so well communicated that it has become so popular among the customers that other companies like Home Base also retail their products in their store with the same brand name. For instance, you will find ‘Richard Burbidge Stripwood’ as a product sold under the ‘Planed wood’ product line (Home base website).
Focus DIY has recognized that more and more people are getting environment conscious. It has used green marketing as a tool to brand its timber and communicate it to its customers. It claims that it has recognized the need to conserve natural forests and have become environmentally responsible by using timber from legal and well-managed sources. These ‘timber’ are FSC recognized. Focus marks its timber with the ‘FSC recognized’ logo and displays it (http://www.focusdiy.co.uk/timber). Focus is not the only company who uses FSC recognized, as acquiring timber from legal and organized sources. However, Focus has smartly branded its timber with making its customers feel like it’s something that only they offer.
Companies like Home Base have an inhouse production unit to produce the packaging for its timber. They used recycled products to produce it. Its unique environment friendly packaging is communicated to people (http://www.focusdiy.co.uk/company-information).
Every company tries to distinguish its timber from its competitors with their product offering. They use distinctive names, packaging and designs to achieve this. This is the process of creating a brand (Jobber, 2007, pp327); Timber Brands in this case.
This timber branding communicates a sense of ownership in the customers and the customers are able to associate the brands with their perceptions.
The marketing mix planning strategy for the following five years will follow the flow as shown in the figure 5.1 below.
No one product or plan will work for everyone in the market (Kotler, 2004). We will therefore begin with segmentation to figure out the needs of our target market.
For each chosen target market, a market offering will be developed, which will be positioned with some central benefit.
The 4 Ps – Product, Price, Place and Promotions, are designed to deliver the respective
4 Cs – Customer Solution, Customer cost, Convenience and Communication to the customers.
If our marketing mix meets the customer’s needs economically and conveniently, with effective communication; then we will consider it a success. Else, we will modify and re-design the appropriate ‘P’ to deliver the corresponding ‘C’ successfully.
We will now discuss the marketing mix of B&Q, in detail.
The product marketing of B&Q has to emphasize the benefits of their combination of technological expertise, ergonomics, and fine furniture craftsmanship. B&Q will need to recognise and respond profitably to unmet needs and trends of the customers (Kotler, 2004: 159).
We need to sell pride of ownership and workmanship, to encourage the ‘Lets do it’ concept. That has to come out in our packaging, finishing, shipping, and collaterals (B&Q website).
B&Q must have a unique collection for each segment of customers. The products should also display variation throughout the year, as no customer would, probably, want to buy an identical set of timber, for instance staircase parts, to replace the existing one. Hence, B&Q should have a wide range in its product line (Jobber, 2007: 327).
It is important for B&Q to maintain the number one position in the Europe and maintaining high quality throughout its products is vital, to achieve this (Jobber, 2007, pp337). There is an intimate connection between the quality delivered by a company and the corresponding customer satisfaction and company profitability. This is because higher levels of quality support higher prices while delivering high satisfaction at lower costs. Quality is the totality of features and characteristics of a product that bear on its ability to satisfy stated or implied needs (Kotler, 2004).
As discussed in section one, illicit logging is an important challenge. B&Q should only trade legally obtained timber and communicate this to get recognized as an ethical and eco-caring brand. This will make B&Q powerful and distinguished brand (Jobber, 2007: 327).
B&Q’s should ensure that the customer get enough support with its product with well and sufficient illustrations and good customer service.
The other important global issue that we discussed in section one was global recession. We should consider this which pricing our products. Home base launched more than 150 products during recession in 2009, which were priced below £5 (http://www.focusdiy.co.uk/timber).
The optimum pricing strategy should be to build a strong customer base with competitive pricing, because our competitors like Focus DIY attracts customers advertising itself as being economically competitive (Focus website).
Once we have a strong customer and have successfully increased our market share, then we can charge a premium. This can help us maximize long-run profits.
Though it is important for B&Q to stay competitive with its pricing, it should be balanced to avoid price-war as it happened earlier (focus DIY website).
To maintain price leadership, it is not necessary to price the products less than its competitors. There can be schemes and offers introduced to achieve this. For instance, Focus had an offer where they offered lower prices by additional discounts, on the less busy days of the week (Focus website). This increases the monitory sales and the turnover.
In an economic condition like the one we are facing right now, even if the sales decrease, it is important that our market share increases.
One important feature that needs to be considered that our customers should always feel that we are price competent and are offering them the best deal. Like Asda does (Asda website), we can introduce ‘price-matching’. It means that we can claim that if any of our competitors offer a price lower than ours then we will return the difference. This generates a sense of trust, about the price of the product, in the customers.
B&Q stores play a very important role because they are the direct point of contact of our customers and potential customer. At our stores we are closer to our customers than any other channel (Reynolds, Cuthbertson and Bell 2004: 3).
Most retailing is carried out in the store, as the customer often demands a local touch which is possible at the store (Jobber, 2007: 925). Having considered and analysed that the stores are responsible the most to increase the sales, B&Q should expand its network of stores in new geographic locations, where it is not present yet, or where the demands are increasing.
We should, however, also focus on other channels as they are equally responsible for the sales revenues. For Home base 43% of its sales were across more than one channel, in 2009. Home base also introduced ‘check and collect’ service in its store, which added to its revenue (http://www.focusdiy.co.uk/company-information).
It is very important that all pur channels of sale to maintain a pleasant design, colour theme and layout consistently everywhere. Both exterior and interior design affect atmosphere, (Jobber, 2007: 928). Colour, sound and smell can affect mood and hence customers may perhaps spend more time in the store and a potential customer may eventually end up buying, hence increasing sales.
The synergy can be created by integrating the channels. Home base increased the product, that can be bought online, by 400% in 2009. The optimum channel strategy would be to integrate online with stores. B&Q can allow the customers to feel the products in the stores and if they do not buy it there, then they can be handed a brochure which directs them to their website where the purchase can be completed if the customer wish to buy it at a later stage. Similarly, a customer can be given an option to make a purchase online and reserve its product. Then he may go to the pre-decided store and pick it up. If he is not satisfied with the product while at the store then he may cancel his purchase made online and qualify for a refund.
As discussed in section one, the decrease in the natural resources is an area of concern. As we use legal timber for organized sources, it should be promoted and the customer should be made aware. This will deliver a clear, consistent, credible and competitive message about B&Q and its timber (Jobber, 2007: 532).
B&Q needs to use a wide range of channels to promote, as its target audience is not limited to a certain segment. It should use tools like advertisement, press releases, direct marketing, and personal selling.
Offering discounts, loyalty points and store cards can also be considered for the promotional activities.
Evaluating and controlling:
The 4Ps discussed above sounds too general for a five years plan. The proportion of each component of this marketing mix must be tuned according to the market and the response of the same.
After the first year of delivering this market mix the sales and the turn-over in different area must be calculated. The marketing mix must then be altered depending on the response of the same. This analysis of the feedback must be fed back to the planning and re-consideration of each component, as shown in the figure 5.1.
This does not mean that the marketing mix must show a huge variance across regions. For instance, if a certain range of product does not arract customers in a certain part of Europe, it is quite possible to attract a huge customer in another part. The product selection must be hence done after analysing this.
Its time to go green.. Lets B&Q it
- 100% legal.
- Unmatched low prices.
- Online stores re-vamped.
Europe’s no.1 timber retailer has just got better. The care for the nature and environment have made B&Q stopped trading with any timber whichis not completely legal and acquired from organized sources.
Also, Its timber launches ‘price match’ for their customers. If any of their competitors offer a price lower than B&Q then they will match it, or refund if the purchase is already made.
The B&Q online stores now offer an option to buy timber online and have it ready at any store to have it collected.
Jobber, 2007, D (2007). Principle and practice of marketing. London: McGraw-Hill.
Kotler, 2004, P (2004). Marketing Management. Upper Saddle River, N.J: Pentice-Hall.
CPET website: http://www.cpet.org.uk/uk-government-timber-procurement-policy –
Global Timber website: http://www.globaltimber.org.uk – accessed on
Forestry website: http://www.forestry.gov.uk/pdf/trprod10.pdf/$FILE/trprod10.pdf –
USA today website – www.usatodaymagazine.net –
FSC website: www.fsc-uk.info
WWF wesbite: http://www.wwf.org.uk/what_we_do/safeguarding_the_natural_world/forests/responsible_forestry_and_trade/forest_trade_network/).
Greenpeace website: http://www.greenpeace.org.uk/about/how-we-make-change-happen.
TRADA website: (http://www.trada.co.uk/about/index.html)
FAO Forestry department: www.fao.org/forestry/en/-
Forestry Commission: (http://www.forestry.gov.uk/fr/infd-5txhaj
Government of western Australia – http://www.agric.wa.gov.au/objtwr/imported_assets/content/sust/carbon_rights.pdf
BBC News – http://news.bbc.co.uk/1/hi/business/4919848.stm
Richard Burbidge website – http://www.richardburbidge.com/home/about-us/).
Homebase website – http://www.homebase.co.uk/webapp/wcs/stores/servlet/Browse?storeId=20001&langId=-1&c_2=2|cat_16849207|Timber+supplies|14113517&c_1=1|category_root|Building+and+Hardware|16849207&c_3=3|cat_14113517|Planed+Timber|14113532
Focus DIY: (http://www.focusdiy.co.uk/company-information).
Kant, S. (2009). global trends in forest tenures. FORESTRY CHRONICLE.
Reynolds, J, Cuthbertson, C and Bell, R (2004) – Retail strategy: the view from the bridge
Anonymous. (2010). Revue Forestiere Francaise. Off Natl Forets Source. 62 (1), 43-54.
Günter, H. (2006). Information technology in supply networks: Does it lead to better collaborative planning?. Journal of Enterprise Information Management. 19 (5), 540-550.
Principle and practice of marketing – Fifth Edition – 2007 – By David Jobber, 2007
Marketing Management – Eleventh edition – 2004 – By Philip Kotler, 2004
Retail strategy: the view from the bridge – 2004 – By Jonathan Reynolds, Christine Cuthbertson, Richard Bell
Websites and others:
Howarth Timber website: http://www.howarth-timber.co.uk/timber -engineering/environment-government – Accessed on 20th December 2010