STRATEGIC MARKETING MANAGEMENT

Kinko’s

Taiseer S. Subaihat
EMBA-Class 7

1. Describe Kinko’s value proposition in the 1970’s.

Value Proposition illustrates why a target consumer should choose to buy or

consume a product or a service over other alternatives, and which makes a customer
confident that this product or service will add more value and benefits to him or
better solve his problem than other similar offerings.

Orfalea started Kinko's in 1970 near UCSB by selling school supplies and
photocopying services to college students when he noticed that the only place for
getting photocopying service was at school library and realized that photocopiers
were not easily accessible to many people. He observed that there was an
increasing demand on these services and decided that this business is going to
exist for long time.

Orfalea decided to offer his customers, who were college students, products and
services they need, he decided to provide his customers with a consistent high
quality services in a timely and reliable helpful manner, at a reasonable price.
Moreover orfalea made this service available and handy for his customers, which
was of a high value to them.

2. What were the reasons for the brand’s success?

There were many reasons for the brand’s success and the most important were:
• The location of Kinko’s stores near schools which was easily reached to get
the needed service or product was of the most important reasons for the brand
success.
• Kinko’s started to expand its services and to provide a much needed services
which gave another incentive for customers (students) and increased their loyalty
to Kinko’s.
• Lack of competition.
• Taking initiative to meet customer needs and expectations.
• Developing a long term relationship. Kinko’s was a “Cool” company had Fans
not only customers, they were in a business of solving customer problems that
customers couldn’t solve for themselves and relieving their anxiety. Workers at
Kinko’s were university graduates and experience of making business so they
Kinko’s were considered as a business resource as the worker were talking with the
customers and students about their experiences, students get the benefit of
sharing experience and communication which creates a fun relationship building
and developing a counter-culture experience.
• Encouraging employees to take care of customers and to build emotional bonds
with customers and managing customers emotions.

3. How has the value proposition evolved over time?

Kinko’s value proposition evolved over time by expanding their services and
expansion of business to serve new customer segments. Kinko’s continued opening
new stores and increased its retail footprint and broadened its focus to serving
small office/ home office market. Kinko’s enhanced their value proposition by
introduction of self-service computers and photocopiers working areas, in addition
to the introduction of 24/7 service. Kinko’s built a reputation for providing its
customers access to the latest office technologies, introducing public
teleconferencing rooms, Fed-Ex drop boxes, color copiers and printers, high-speed
internet and email access. Later in 2001, they incorporated online and in-store
services and introduced “Print to Kinko’s” and “DocStore” which enabled customers
to store, edit, and print their documents at Kinko’s.

4. Who was the target market in the 70’s? Who is the target market in 2003?

Kinko’s target market in the 70’s was college students.

Kinko’s target market in 2003 grew into three distinct segments:
1. Consumer Segment: consumer customers used Kinko’s for personal use,
including anything from printing posters for lost pets to generating banners for
birthday parties to photocopying tax returns.
2. Local Business Market: walk-in clients Kinko’s have no formal business
relationship they used Kinko’s as a second office to satisfy their copying,
printing and other document needs.
3. Commercial Solutions Segment: comprised of business customers, who were
served by Kinko’s via a direct sales force.
5. Why were these customers confused and satisfied as observed by Kinko’s
market research firm?

Kinko’s offered its customers a wide range of services and products, and to
provide these services and products, Kinko’s stores were divided into a variety of
discrete areas. A staffed service desk and other self-service working areas which
were stocked with the needed stationery and office supplies, self-service
computers and photocopiers and areas for other machines… etc, these self-service
areas at the stores where crowded with customers with almost nobody helping them,
while the retail areas were the least crowded with customers and Kinko’s sales
associates habitually located themselves heavily around the staffed service
counters. Customers were uncomfortable with the self-service areas and they found
these areas complicated and they couldn’t figure out how to use Kinko’s self-
service machines without the help of the sales person so they have to wait for
long time to get help. Obviously it was difficult to get help and direction when
customers were uncertain to how to navigate through Kinko’s store. Even though
there was a plentiful signage at Kinko’s, it was poorly designed and did little to
direct customers. Self-service areas were understaffed which led customers to
spend long time searching for solutions for their problems. All these experiences
made the customers unsatisfied, confused and frustrated of the service and
treatment they encountered inside the store which was clearly confirmed by the
market research, as despite that the customers rated their overall experience at
Kinko’s store very high, “ease of process “ was the quality least positively
regarded. Moreover, the frustration existed among employees as well as they were
unable to get their work done because of the frequent interruption by confused
customers.
The commercial customer segment was often extremely loyal to Kinko’s. Level of
loyalty was uneven and highly dependent on account manager, service quality, and
in some cases the price. When customers experienced excellent service they speak
positively about their experience and continued business conversely poor service
quality caused customers to defect to competition or to bring their printing
operations in-house.

6. What will it take for Kinko’s to be successful in 2008?

For Kinko’s to be successful in 2008 the following should be considered:

• Develop a new signage system which allows better utilization of resources.
Management should consider re-designing Kinko’s stores to be more convenient and
comfortable to the customers.
• They have to halt the “one size fits all” model, and start to differentiate
treatment between customers according to their needs, as each segment has its own
needs and requirements, and they have to start providing a tailored experience to
its customers.
• Take initiatives of cutting cost and reduce expenses to improve their
margins.
• Increase the utilization of machines and decrease the fixed costs of
machines, labor costs and improve productivity of employees by re-locating them to
other more busy locations, and by introduction of training programs on customer
service for their employees as needed.
• Effective vendor negotiations and realize economies of scale especially with
hardware vendors.
• Introduce a consistent pricing strategy and reduce variation of prices
between different branches to maintain credibility among their customers, and
continually compare prices with competitors. Introduce a loyalty program to reward
frequent customers.
• New marketing and advertising plans, reduce prices for certain jobs, offer
discounts to which will increase market share and provide opportunity for growth,
introduction of new services and products.
7. What do Kinko’s 3 segments have in common? What are the differences?

The 3 segments have in common:

• The three segments valued convenient location, speed, price, quality and
customer service.
• Competitors in the 3 segments are the same and consisted primarily of Mom
and Pop stores and superstores except for FM sub-segment of commercial solutions
segment where the competition was including Xerox Global Services, IKON…etc.

Differences:
Consumer segment
Needs: Personal use including anything from printing posters for bake sales and
lost bets, generating banners for birthday parties to photocopying tax returns.
Purchasing criteria: customers spent less than $50 per visit and Average No. of
visits 15 visits per year.
Size: Industry wide market was estimated between “$3-$5” billion, declining by 2%.
Decline factors technology substitutes and share loss to competition.
Profitability: 2003 generated approximately $600 mil, equivalent to 30% of Kinko’s
revenues declining by 6% yearly.
Customers served by branch personnel in 1200 locations.
Local Business Market
Needs: Walk-in clients used Kinko’s as a second office in order to satisfy their
copying, printing and other document needs.
Purchasing criteria: customers visited Kinko’s over 45 visits per year.
Size: Industry wide market was estimated between “$5-$7” billion, declining by 4%.
Decline factors technology substitutes and share loss to competition.
Profitability: 2003 generated approximately $1 billion, equivalent to 50% of
Kinko’s revenues declining by 5% yearly.
Customers have no formal sales relationship depend on branch manager who establish
contacts with local business.

Commercial Solutions Segment

Needs: Business customers, the set of customer needs fell into two distinct lines
of business each having different products, competitors and financial
characteristics:
a. Facility management business (FM): suppliers managed the firms’ duplicating
and printing requirements directly on the customers’ premises.
b. Non facility management business (Non-FM): consisting of large and small
branch jobs and drop-in projects requested by smaller nearby smaller businesses
and by large firms’ mobile professionals.
Size: Market for FM was estimated to be between “$12-$15” billion and was growing
between 1-3%. Commercial Non-FM industry was estimated to be between “$2-$5”
billion.
Profitability: 2003 generated over $350 million, equivalent to 20% of Kinko’s
revenues was growing by 5% yearly. Kinko’s revenues from FM were less than $30
million and from commercial Non-FM were over $300 million.
This segment was served by a sales force of over 500 reps.

8. Which option should Kinko’s choose? Why?

Kinko’s should choose the second option as they have to consider the type of
people working with them. Kinko’s was not equipped to deal exclusively with the
commercial solutions segment with the staff it had since Kinko’s branch managers
were used to developing relationships with their own environment, same levels and
cultures, not with a Fortune 100 companies. Besides Kinko’s was not sure of how
would FedEx interpret this move to reduce Kinko’s investment in retail footprint.
Another important issue the culture of Kinko’s was based on it is a cool company
and a business resource it has a culture of encouraging building relationships and
exchange experience with its customers which built Kinko’s reputation as a
culture-counter company. So to maintain its culture, values and identity and
despite the facts that it customer segments are project to minimal growth or
remain flat over the coming years, Kinko’s can expand and grow via new products
and services in its branches and expand into new industries.
Kinko’s could re-invent its retail value proposition to realize share gains which
would entail the following improvements and developments re-engineering the store
experience from the top to bottom which will include re-design signage realignment
of in-store personnel and self-service areas to be more user friendly and
relocating self-service help desk so that employees can greet and direct customers
upon arrival and help customers to do their work.
Kinko’s could also add value by introducing loyalty program and reward those
frequent customers to encourage them to be loyal for them or by revamping its
pricing policies which might help to increase its market share and provide an
opportunity for growth.

9. In general, can firms with mature products re-invent themselves? Explain.

Generally, yes firms with mature products can re-invent themselves. To make it
clear we should admit the fact that every product has to pass through a life-cycle
of four stages, introduction, growth, maturity, and decline stages. The majority
of products are in the maturity stage of their life cycles which makes the
marketers’ job a night mare as they have to find out the correct ways by which
their company can reinvent itself at this stage. Marketers usually look for the
reasons behind the decline of a superior product, and they found that when a
significant market shift occurs allowing other alternative solutions to generate a
value in new different manners than the firms product and the product lose appeal
due to social, economic, or technological trend changes.
Marketers assure that there are lots of ways for companies to re-invent themselves
and these include:
• Recommending a new product aspect that increases its appeal to an existing
segment.
• Give your mature product a new position in the customer minds by carefully
and correctly introducing changes in its attributes. Reposition existing mature
products to create new segments.
• Sometimes you need to make radical modifications and enhancements in the
product, or migrate the product to another segment.
• By re-inventing mature product the firm can confirm and improve loyalty of
the existing customers and/or attract new customers and allow this product to re-
emerge with a new presence, a fascinating promise and a new approach.
• Propel a new product segments based on customer needs.
• Expand a product segment based on technological development.
• Create a new segment by using changing technology.
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