Marketing 1000 Case Studies PDF

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These are the case studies that we did in MKTG 1000 in Humber...

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MARKETING CASE STUDY 1 Group Members Erica Kuzmicz Rafael Borges Margaret Clarke Ryan Malas Tenzing Namdhak

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Introduction: How many times have you gotten a gift card to a store or website that you do not like, want, or need? If the answer is even once, then you could have benefitted from the services that the company, CardSwap, has created. The idea for the company was developed in 2008 when Zaheed Poptia had received many gift cards for his wedding, which he deemed to be useless to his wife and him. Searching for a way to turn his unwanted gift cards into cash, he came across a few solutions, such as eBay or Kijiji, but noticed there were more complications using these websites than actual resolutions to his problem. Unhappy with the lack of credible and convenient options, Poptia decided to create his own business to solve his problem. CardSwap was designed to let people either buy gift cards at a discounted price or sell their unwanted gift cards for cash. Alternatively, you could also swap your unwanted gift card for a different gift card of the same value. This is easily done through a user-friendly website.

Understanding The Gift Card Market

When someone buys a gift card, they may not realize they are contributing to an extremely large market! The U.S. National Retail Federation found that gift cards were the most requested item during the 2010 holiday season and it has been the most requested item for four consecutive years. Out of all those gift cards, approximately $1 billion worth of them are unwanted each year. This makes CardSwap’s services very intriguing.

There are many different types of gift cards ranging from online virtual currency to grocery stores and everything in between. However, there are two categories of pre-paid cards: open-loop refers to cards that can be used almost anywhere and act like bank debit cards and closed-loop refers to cards that can only be used at specific retailers. Pre-paid gift cards are not exclusively a physical card either; gift cards can be sent through email once bought online as well as being accessed and scanned on smartphones too.

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The Canadian gift card market was estimated to be about $6 billion in 2009 and the American gift card market was estimated to be about $87 billion that same year. There is no questioning whether or not the gift card market is profitable but there are also many benefits to both the consumer and retailer. Such benefits to the consumer include an easier gift buying experience that allows the receiver to get a gift of their choice. Benefits to the retailer includes: less returns during the holiday season, a more positive cash flow due to not actually having to sell any goods at time of purchase, the likeliness of consumers purchasing more than the value of the gift card thus generating more income, in-wallet advertising, and the ability to create shopping habits, just to name a few.

Some Problems CardSwap Faces CardSwap may sound like a problem-free, profitable business venture based on some of the points listed above, but unfortunately this is rarely the case with any business. CardSwap’s services is comparable to other larger websites like eBay, Kijiji, and other gift card exchange websites in the U.S. There was also problems faced with shipping: while the U.S. could offer pre-paid shipping labels for just $2, no such thing existed within Canada Post, unless you were willing to shell out $7-$10. Other issues include: verification, fraud, and the fact that smaller retailer gift cards would sell for less than larger retail stores (30%-40% discount in some cases).

Quick SWOT Analysis and Ultimate Problems

Strengths: ● Ability to capture a $1 billion market each year ● Convenience and Safety: Allows buyers and sellers to purchase and trade from the comfort of their home without dealing with strangers and no-shows ● Is available across Canada to eliminate currency exchange rates and allow Canadians a broader buying place than just locally ● High Standard verification process allows CardSwap to use a 100% product guarantee to ease customer’s worries ● Secure online payments that are traceable in the unlikely event of fraud 3

● Wish List feature allows notification when a preferred gift card is available Weaknesses: ● Small retail gift cards are demanded at a lower price (30%-40% discount of face value) ● Little access to large advertising budgets ● CardSwap creator does not work full-time ● High demand peak during holiday season only Opportunities ● Become Canada’s leading secondary gift card company by offering competitive prices and services ● Regularly reconstructing the website to make it more user-friendly and convenient based on feedback

Threats ● Canadian retailers not onboard with electronic gift cards ● Other Canadian companies copying the CardSwap idea and creating a competitive market ● Relatively new business model for this niche market Since the business itself is relatively small with little access to large advertising budgets, how could they get their services known to the public? If they used advertising strategies that cost less, such as advertising in a free newspaper, their ads ran the risk of not being seen or noticed. But going with higher cost advertisements, such as radio and television ads, ran the risk of leading the company to bankruptcy if their efforts did not bring in enough customers. So, how can CardSwap get their company out to the public without breaking the bank and still having their advertising strategies worth the cost? As well, is the industry strong enough for Poptia to quit his financially stable job and work full-time on CardSwap?

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Main Problems: The biggest problem that CardSwap faces is not having a large enough advertising budget to finance a proper advertising campaign. They need to focus more on advertising their company to make their brand more known but they will not be able to if they keep their budget so small. The potential customers they are not reaching due to their unwillingness to spend the money on advertising are essentially what they need to raise their business’ profits. Another problem CardSwap faces is the price of shipping. In America, they have the ability to provide registered shipping, which sets a standard shipping price of two dollars. The downfall about Canadian shipping is that CardSwap can get registered shipping, but the price is much higher, averaging at between seven and eight dollars. The mail also poses a large problem when it comes to fraud. After being mailed, someone could easily steal the gift card or misplace it while it is making its way to the purchaser. Some customers would not want to risk the possibility of the card potentially being lost in the mail, especially if the card had a large value, as they would lose their pay out.

Gift Cards are mainly seasonal, which poses a problem for CardSwap. Many people use them as gifts for birthdays throughout the year, but CardSwap must make most of their money during the holiday season when the majority of gift cards are purchased, gifted, and often not enjoyed. The money they make throughout the year (not including the holiday season) is not enough to grow the business or finance enough advertising.

Lastly, CardSwap has competition in the niche market of gift card selling/trading. There are many other companies doing the same thing, which makes it even harder for CardSwap to turn a profit. For example, Cardpool and eBay have card trading options that pose as a threat to CardSwap, as their shipping cost is lower and eBay is worldwide. With the gift card market being so small, competitors pose a very large problem for CardSwap.

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Solutions: Even though Card Swap faces several issues, they also are a very advantageous and profitable company. Card Swap’s main issue is attracting customers to their business. To solve this problem, the company must think of themselves as a marketing solution rather than a business that needs advertising.

Gift cards are sold by companies to get consumers into their place of business with a guaranteed amount of money already spent on the card. Card Swap could benefit from the sale of gift cards by making exclusive deals with companies, so that Card Swap gets more exposure and business, and the client companies will get more business through offering discounted gift cards. The client company would refer all clients looking for gift cards to the Card Swap website, and the customer would spend more money on discounted cards for the client company in return. This solution is beneficial because there is no additional money being spent by Card Swap for advertisements, just a trade of goods and services between Card Swap and the client company. This deal is also favorable for Card Swap because this could increase their online traffic significantly, and it looks good to have an established company supporting a smaller start-up, giving it credibility. The deal also has an advantage for the client companies, as they not longer have to deal with the no return policy on gift cards.

A disadvantage to this solution would be that it’s hard to get the attention of bigger companies, and therefore hard to make clients out of them. Card Swap is a small start up, without even one full-time employee, so it may look illegitimate to larger corporations. This means that before this idea was presented as an option to important companies, Card Swap may want to make deals with smaller businesses to build up credibility. Another disadvantage to this solution is that Card Swap would have to convince the client companies that this non-monetary deal is beneficial for them as well as Card Swap. The second solution is to use a social media to advertise the company and the advantages for the client. Since Card Swap is targeted at younger generations, and younger generations are the ones using social media, this solution seems like the perfect match. One advantage o social 6

media is that there are so many platforms on which you can use to advertise. Card Swap can use whatever social media best fits their brand image and customer demographic. Social media would help Card Swap’s points of pain because it advertises their company to the masses at a low cost. People post online reviews about goods and services on social media constantly, and this is essentially counted as free advertising. As mentioned previously, using social media is relatively cheap for companies, and this is especially true when it comes to how much advertising a company can do. Card Swap could post as many updates as they like at no charge, and they can choose how much they want to spend on advertising their message. The final advantage is that social media can be run from anywhere, just like the Card Swap website, and this business model works with the highly mobile lifestyle of the couple who started Card Swap. However, there are some disadvantages to this solution, one being that it can be hard to gain traction as just another company on the internet. It’s hard to stay relevant and to get people interested in what you have to say. Although most of the time customers post positive reviews online, there will be negative reviews about Card Swap, and the disadvantage to using social media is that nothing leaves the Internet fully, especially when using social media, so it may be hard to get rid of the negative review. The final solution is for the company to have a physical presence at select times throughout the year. During busy times like the holiday season, or graduation time, the company could go to malls or other popular holiday shopping destinations and advertise with a booth shop. It would be best to advertise during the busy times in the year when people spend more because the customers will be more likely to see the value of discounted gift cards in the midst of spending large amounts of money, and because of this, people may remember the name after the holiday or graduation season. This idea is advantageous because it has minimal costs, but is still effective because it gives customers the chance to put a name to the business.

A disadvantage to this idea would be that it would time time-consuming to set up a booth and advertise to people all day when you could possibly be more effective working online at home. This idea may also cost the most out of the three, as the mall or shop would expect either

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rent or a cut of the sales made, which is a problem for Card Swap specifically because their profit margin is already so small. These three ideas all present solutions and problems for Card Swap’s existing issues, but overall, any of the three would improve their current situation with wanting more customers but having limited funds to advertise.

Best Solution The best solution to Card Swap’s issues of finding, maintaining and expanding a solid customer base is for the company to utilize the online market. Social media matches the company’s brand image, fits the customer’s needs and wants, and it doesn’t take obscene amounts of money to have an impact on the popularity of the business.

The use of social media would complement the brand image of Card Swap for many reasons, the first being that the company is always focused on what’s new. The company was started by young professionals, is an online company, uses an innovative idea, and uses a product that wasn’t popular in the way that many of us know it to be until the 1980’s. All of these aspects work together to create a brand image of youth and modernization, and so does the world of social media. Society has moved from e-mails, to MSN, to Facebook and Twitter in less than 30 years. Technology is the pinnacle for all things new and exciting, and that is why the millennial have been flocking to it. However, Card Swap wouldn’t become white noise in the sea of companies jumping on the technology bandwagon, as they already have an established consumer base, and their idea is groundbreaking. Card Swap has already established a cool factor, as young people, for young people, run it. Although young people are on the internet all of the time, to make themselves known, Card Swap should go where the consumers are going to go anyways, so that the consumers seemingly come to them. It’s especially easy for Card Swap to take advantage of the age of social media because they are an online-only business. The consumer doesn’t have to find a store nearby, or worry about something not fitting because the concept of selling gift cards is simple and general. It is clear that the concept of social media marketing and the brand image of Card Swap fit together in more ways than one. 8

Another reason to make the move into the social media market is because of the low costs. In the study, it was mentioned that to remain advantageous to the consumers, Card Swap must maintain razor-thin profit margins, leaving very little money for advertisements, so the idea of cheap ads with big results seems like a good match for the gift card company. The social media page already establishes the advertisement setup, so Card Swap simply has to select what plan works best for them. Many social media pages also try their best to give you optimal business. For instance, the ads on the right hand column of one’s Facebook always look appealing because they are designed to appeal based on previous “likes” and frequently viewed pages. Although the advertisement setups aren’t customizable, their price points are. Card Swap can put in any amount they feel comfortable with, and yield results, no matter the amount. This is because the company gets to choose who they advertise to based on demographics, so Card Swap will get to choose their ideal consumer at no extra cost. Another way that social media contributes to cheap advertising is through word-of-mouth. Twitter and Facebook are designed for people to speak their minds, and although most of the content doesn’t matter, people’s online reviews can give companies a lot of insight at no cost. Some of the reviews may be bad, but as long as Card Swap responds and maintains an online presence, many consumers will be pleased to get a response of any sort from the company. The good reviews will make a huge difference as well, as the company is so new that people are likely unaware of it’s existence or are stragglers who are timid to try a new idea. Once a friend of a friend says they tried Card Swap and loved it, that review becomes more valuable than any advertisement. Through the use of social media advertising, Card Swap will make the most out of their small advertising budget.

Social media is also the best option for Card Swap to expand its consumer base because it involves participatory and manipulative communication, as many online ads do. It involves participatory communication because once someone decides to hit “share”, “retweet”, or “like”, the viewer is now deciding to engage in the advertisement, and therefore, the company. Although they probably are doing this out of self-interest to get a deal, or to get their friends to think they’re funny, the intention behind the participation doesn’t matter as long as the advertisements are spread around. Social media advertising is also manipulative advertising because even though the viewer chose to share the advertisement in some way, the company still manipulated 9

the viewer so that they would benefit in some way. Examples of this would be sharing a photo of a new product in return for a 15% off coupon, or the viewer commenting on an advertisement with their opinion so they can feel that their opinion has value and worth. Since social media uses both participatory and manipulative communication, companies such as Card Swap can use the most effective communication methods all in one place. Overall, using social media to uphold and expand Card Swap’s customer base is the best solution to their issues because it matches the brand personality, it works with a low budget, and it’s effective.

Conclusion

In early 2011, Zaheed Poptia and his wife started CardSwap. CardSwap is a Canadian’s user friendly website for discounted gift cards, it is a market where people sell and buy unwanted and unused gift cards or even swap gift cards with other people. Poptia started this business because he saw the value and potential in the gift cards market as there was an average of $1 billion of unwanted gift cards circulating in Canada and the gift card market was a growing market. The Canadian gift card market was estimated to be about $6 billion in 2009 and American gift card market was estimated to be about $87 billion. There are many kinds of gift cards and it was stated that gift cards were the most requested item during holiday seasons as gift cards give benefits to both the consumer and retailer.

So in order for Poptia to start the business, there were many problems he had to face. They were low advertising budget, price of shipping (Pricey and who is going to pay it?), security of the mails (Frauds or lost on the way), seasonal market, customers and lastly competition. These are some big problems but they could be solved, but their biggest problem is advertisement, getting people to know about CardSwap. The best and the most effective way to solve the problem is to utilize the social medias that are out there. CardSwap have to enter the social media market. They can make a page for CardSwap on Facebook, open up a twitter account or even set up a new Instagram account to promote the business. The benefits of entering social medias are great, 10

social medias are free, cheap advertisements, word to mouth system, the more the likes the more popular and it is easy, but they have to stay true to the customers. There are over more than 2 billion people using social medias, which means 2 billion free workers, to get those people CardSwap have to come up a unique and catchy ideas to get the attentions of the social media users and social medias are like magic. They just have to get the attentions of few peopl...