QVC
Case Study: The Business Strategies of QVC
Group 2:
Michael Kenlan
Karen Maxwell
Brian McKearney
Tara Murphy
Zach Smith
MIE 480, Spring 2010
Dr. Washington
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QVC
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 $_________ in annual sales.
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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’s 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”. 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.
This customer-centered focus is just one aspect of QVC’s strategy. 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. Furthermore,
they tap charismatic, enthusiastic designers like Isaac Mizrahi, who not only design fashionable
products, but can double as captivating salespeople on-air.
A unique and differentiated product line increases the potential for impulse buys on the
consumer’s part because it is something new that they have never seen before and cannot easily
find at other retail stores. QVC is also constantly evaluating the market and the profit margins
relative to each product category. If a product is not performing as expected, QVC can adapt
quickly, forego the product and replace it with a more popular item in a timely manner.
Their marketing is equally as powerful as the other elements of the company. QVC is
excellent at targeting segments of their market through varying methods. This allows them to be
able to better utilize airtime and make every costly second translate into sales. They break up
their airtime into segments that have like products together so interested consumers know when
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to tune in. They also work tirelessly to ensure that product descriptions are best laid out and
worded to appeal to their specific audience. They even go so far as to work on careful selection
of the sales/demonstration person for the product.
Could still expand upon (but need more articles/info):
-moving in to UK, Germany, Japan
-6 outlet stores
#3
External forces of competition affect all companies and the television shopping industry
is no different. There are many forces than can be grouped into a few categories: economic,
socio-cultural, technological, and political-legal. These forces have had a major impact on the
television shopping industry. QVC’s ability to understand their environment and adapt have
helped them achieve success.
Under economic forces, competition is a major component. The barrier for entry is low,
so there is always the threat of new businesses. Substitute products also directly compete with
QVC’s products and customer dollars. Other potent forces are changes in the supply chain.
QVC must constantly be on the lookout for new products, while maintaining good relations and
contracts with existing suppliers. The rate of growth of the economy will affect consumer
spending which directly relates to QVC’s goods sold. Inflation is always relevant and can cut
into a company’s bottom line.
Socio-cultural forces are extremely important to QVC and the television shopping
industry. Consumer preference and trends are vital to a company trying to meet the needs of its
customers. QVC has adapted to recent trends by promoting its cosmetics, apparel, food, and toys
heavily. QVC also has to consider what will attract customers to their channel. They
incorporated the reality T.V. craze into their programming and it helped attract viewers and
customers. QVC’s in-show appearance of designers has capitalized on designer’s current
popularity. Other forces like growing health consciousness, and changing household
composition, will be important factors for QVC as they try to understand their customers and
improve their shopping experience.
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. 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 to the television shopping
industry. There will always be laws and regulations in place that affect the manner in which a
company does business. From QVC’s standpoint, they might need to follow certain protocol
when describing payment options, or product specifications. Industry regulations are generally
in position to protect the customer, which aligns well with QVC’s no hidden fees policy. QVC’s
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honesty with their customers will bolster their reputation and help them operate well within the
guidelines set by the government.
Challenges Faced by QVC
As an industry leader in the home shopping venue, QVC can contribute a great amount of their
success toward their ability to face challenges head-on. Since the start up in 1986, QVC has
encountered several tests to their business ranging from small routine encounters, to large
corporation advancements. QVC has faced five distinct challenges in the midst of their business,
1) establishing a leading position in home shopping, 2) achieving efficiency in operations, 3)
finding and selling profitable products, 4) expanding customer base, and 5) positioning for future
growth. Confronting each of these challenges with proper diligence and planning has afforded
the continued success for the home shopping network. In the following sections we will discuss
each of these challenges and the measures QVC took to confront them.
Establishing a Leading Position in Home Shopping
As any industry leader can contests, achieving and maintaining a leading position doesn’t come
without hard work and determination to be the best. In order for QVC to become the number
one viewed home shopping network, steps were taken from the beginning to ensure a successful
start up and follow-through. By raising large sums of money for the initial capital and hiring
seasoned television executives to launch the network, QVC was able to extend their reach to
nearly all satellite and cable systems, boosting their ratings above the rest. Using the advantages
of the TV such as sight, sound, and motion to promote sells allowed QVC to retain remarkable
profits. With those profits, QVC was able to acquire Diamonique Corporation and Cable Value
Network Shopping leading QVC to become the leading television shopping channel in terms of
sales and profit, widening the gap to its closest competitor. These actions are proof that QVC’s
initial cost and time investments placed them in a leading position within the home shopping
network.
Achieving Efficiency in Operations
In order to run an effective business and make money doing so, companies must ensure a high
level of efficiency in their operations. This will keep expenses as low as possible, in turn
yielding higher profits. In order to be cost efficient QVC has developed and acted upon several
principles: provide shopping care and convenience to all customers, selling products that cater to
intended audiences, and quick processing and shipping of goods sold. QVC’s idea of taking care
of the customer’s aids in keeping operations cost low. By allowing twenty-four hour service
with no hidden charges, credit program for buyers, and a thirty day money-back guarantee, QVC
has lowered their amount of items returned. Using well defined markets, targeted to the intended
audiences has prevented unnecessary spending on advertising and trying to push out items that
are less appealing and harder to sell. QVC also ensures efficiency in the processing of the goods.
With enormous floor space for storage and distribution, QVC can ship more than ninety percent
of orders within the first forty-eight hours after purchase which correlates back to consumer
happiness resulting in repeat buyers.
Finding and Selling Profitable Products
To make money in a business you must sell the items people want and are willing to pay top
dollar for. In order to maximize their profits, QVC has to fine and sell products that have high
margins. To do so, they have moved away from product categories such as electronics and
appliances because of low margins, and have replaced them with new products with high
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margins such as cosmetics, apparel, food and toys. In addition to high margins, QVC focuses on
products that can be mass marketed successfully through television interaction. The strictest
element in the search and sell of products by QVC is their stringent selection and test of potential
products to air on television. The selection and testing phase at QVC on average only passes
fifteen percent of product tried. Such a stern process promotes only the most sought out and
profitable items to be sold.
Expanding Customer Base
Aiming to be the leader in the home shopping network, QVC has the constant challenge of
attracting new audiences and expanding their customer base. In order to pull in new markets
QVC has penetrated almost all cable television and broadcast satellite homes in the U.S. and
entered new markets outside the U.S. including the U.K., Germany, and Japan, which has
resulted in the addition of new customers that turn into repeat buyers. Also, by reaching out to
thrill-seeking and leisure activity audiences as the popularity for those items rise has added
additional customers that would not ordinarily be consider customer of products found on QVC.
Lastly, by taking advantage of environmental forces QVC has increased their customer base by
using technology, launching a retail website to expand their audience. In addition, QVC has
benefited from the growing percentage of women entering the workforce, taking advantage of
the now dual person family income. All of these tactics together has expanded QVC’s customer
base to nearly forty-five million customers who are spread over a few different countries.
Positioning for Future Growth
With successful efforts to become the world largest home shopping network, QVC has been
charged with the challenge of positioning themselves in a way that they can effectively and
efficiently grow in the future. In doing so QVC has deployed aggressive marketing campaigns to
create more publicity for the firm and attraction of new audiences in the future. With technology
now a large proponent in business, QVC has ensured efforts to continue looking toward the
future by focusing on improving the internet based sales site, streaming videos to improve
customer interaction, and addressing the possibilities of retailing on the mobile phone. The most
important component towards growth however, is QVC’s commitment to continue interactivity
in all aspects of the business, making them more pronounced and easier for the customers of the
future. From the actions taken it is conclusive that QVC has taken significant measures to ensure
their own future and growth in home shopping and beyond.
Maintaining Competitive Advantage
OVC has done a great job of reaching the position of top competitor is the home shopping
market and has successfully maintained this position by staying on top of new products and
ideas, whether it is outlets for sales or new items they can market to their customers. The best
way for QVC to maintain their competitive is to keep doing what they are doing. Don’t loose
sight of their mission for Quality, Value, and Convenience and continue with their focus on
excellent customer service. When a new technology comes out they should embrace it like they
have the internet and iphone apps, with the recent growth in popularity of the Droid maybe this is
an outlet of sales to look into. As time passes it is hard to predict what will happen in the
business environment for this reason planning now most likely will not be relevant in a year. It is
also very easy for a company to steer away from their vision and mission. In order to ensure that
QVC is maintaining its mission and vision and to make sure they are up to date on what is
happening in the environment QVC should hold quarterly meetings to go over changes. QVC
has done well at rolling with the punches and as long as they can uphold this pattern they should
be able to keep their competitive advantage.