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Lee Valley Segmentation Essay

Background

Lee Valley——a family-owned business which has been providing customers of woodworking and gardening tools since 1978.Their reputation is based on three principles: 1. Customer satisfaction: Any product may be returned within 3 months and no cost to the customer (for shipments within North America, they will refund your return parcel post costs). 2. Integrity: Product descriptions are matched with the product——even if the product is roughly made, they will give you accurate descriptions. 3. Treat the customer like a friend.

“About one third of their total sales volume is in products of their own design. The vast majority of these are Veritas® brand products made by Veritas Tools Inc., their manufacturing arm. They have a research and development team of 11 people and 130 more in manufacturing. And, to reinforce the part about listening to customers, they have a number of customers earning royalties on products that they manufacture based on designs received from them” (Lee Valley).

Objective

Both woodworking and gardening must have a 2.5% increase in total sales in the next fiscal year. To achieve this goal, management has allocated a budget of $500,000—exclusive of the cost of printing and mailing the catalogues. This budget is intended to fund the prospecting activities of both product lines.

Current Situation Analysis

Since Lee Valley launched its e-Commerce site in 2000, internet sales have been an increasing percentage of total sales. When launched, the sitegenerated about 20% of total sales, with phone sales being 70% and sales from mail at 10%.By 2010, Internet sales have reached 70% of total sales, which phone sales at 25% and mail at 5%.

[pic]Fig. 1. Percentage of total orders generated by e-commerce from Lee Valley Tools Ltd. [pic] Fig. 2. Percentage of total orders generated by e-commerce from Lee Valley Tools Ltd.

According to the pie charts illustrate above, Internet sales have already dominated the total sales of Lee Valley since its e-Commerce site launched in 2000.About 70% of the total customers obtain their products online in 2010 which means that new market segmentation and promotion which focus on online shopping must be generated to accommodate the needs of existing customers as well as new customers.

Customer Segmentation——who the firm will serve

Geographic Variables

In views of the database surveyed by Euromonitor International in 2012, Home and Garden reveals emerging markets and are growing in popularity, developed countries remain, by far, the highest spenders on gardening products. Higher levels of urbanization and incomes, combined with greater access to a wider range of goods and services in cities, are key factors underpinning demand.

-All countries with per household expenditure higher than US$1,000 have more than three quarters of their population. -Economic growth and urbanization are the main forces behind the growth in home and garden in developing countries. Demographic Variables

According to the Gardening Market Research, the most popular lawn and garden activities included lawn care (48% of households), growing indoor houseplants (31% of households), flower gardening (30% of households), and landscaping (27% of households).

The customer profile indicated from Lee Valley shows that the average
gardening buyer characteristics are as follows:
-Age: average 47
-Gender: 65% female
-Income: average household income $72,017
-Education: 60% have a college education
-68% are married
-82% are homeowners
Psychographic Variables
In general, gardening enthusiasts also have their distinguishing lifestyles and personality traits, such as:
-Environmental friendly
-Family-oriented
-Seeking freedom and relaxation
-Living a simple and peaceful life
-Retired, enjoy DIY and private time
-Focus on landscaping
Behavioral Variables

1. User status

Regular users are those who have their regular schedule for purchase in gardening, most of whom have their own projects. Potential users are people who are intending to access to the market but still with different reasons of hesitation or lacking of stimulation. Ex-users are those who used to purchase gardening tools in the past or

2. Intensity of use

In the “Pareto’s Law”, 20% of the customers are heavy users but the remaining 80% are only light users. That indicates companies should emphasis on the most valuable group of customers who are come from the 20%.It dosen’t mean the rest parts are non-essential. Frenquency of order in terms of the climate where the customers live as well as the purpose of purchase.

3. Innovativeness

Since 2000, there has been a double-digit growth in the e-commerce sector; statistics have shown that more than 80% of regular online shoppers have used Internet to purchase products or services, while 50% of the online population recorded to have shopped online more than once.

According to statistics from Invesp Blog, shoppers by age group is as follows: 18-30 years (54%), 31-44 years (68%), 45-54 years (64%), 55-65 years (68%), 66 years and up (48%).

Teens and the young generation find entertainment and social networks online, whereas older generations use the internet as a tool for research, shopping and banking. According to statistics researched in 2009, Generation X (internet users ages 33-44) continues to lead in online shopping. Fully 80% of Generation X internet users buy products online, compared to teenage online users between ages of 18-32, the next runner-up, which constitute 71% of online shopping total. However, there is a decline of internet shopping between the ages 64-72, accounting to 56%, and 47% of online users between the age 73 and older.

Global E-commerce sales are growing by more than 19% a year and will be of almost $1.4 trillion by 2015.

Lee Valley has a large numbers of customers (70%) ordering online, which illustrates that customers with these certain characteristics are the key part of gardening market. Most people between 35 and 55 years have their own house and garden, 68% of them are married and they are more willing to live a high quality of life with their families. They prefer to online shopping because it is more convenient and can save most of their time as well as money.

As far as I am concerned, I suggest Lee Valley to build up collaborative relationships with multinational internet corporations like eBay to extend their market size. At the same time, cut the budget on printing the catalogues and put it to social media so as to attract more new customers.

Meanwhile, loyalty program to exiting customers is also indispensable. For instance, gathering different suggestions from loyalty customers and meet their special demands will not only increase the order frequency but also improve the customer satisfaction.

Works Cited

Datagraphics, Home and Garden. “Urban Countries Spend the Most in Home and

Garden.” Euromonitor International. N.d. Web. 21 Sept. 2012.

Khalid. “How Big is E-commerce Industry.” invesp Blog. Web. 21 Sept. 2012.

Lee Valley. “About Us.” Lee Valley & Veritas. N.d. Web. 21 Sept. 2012.

National Gardening Association. “Garden Market Research.” National Gardening

Association. N.d. Web. 21 Sept. 2012.

Pew Research Center. “Generations Online in 2009.” PewResearchCenter

Publications. Pew Research Center, 2009. Web. 21 Sept. 2012.


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