consulting project final report

Consulting Project: Final Report 1

Consulting Project: Final Report

Lisa Torres

Grand Canyon University: MKT-345

Professor Stephensen

December 2nd, 2015


There has been no other book seller that has surpassed the magnitude of Barnes & Noble.

They remain standing as the largest book seller chain in the United States (Kozlowski, 2012).

They had left questions up in the air of when they would introduce their own electronic reader. In

November 2009, they decided to take the plunge and jump into a competitive market that was

dominated by the Kindle. In this final report, I will cover the Nook product in great detail, from

the its background information and its competitors, to its consumer behavior issues and flawed

tactics, ending with my recommendations.

Meet the Nook

Barnes & Noble released their first Nook e-reader in November 2009, for $259

(Kozlowski, 2012). Straying away from the typical e-readers, featuring an LCD color screen and

an e-ink display, it was described to, as stated by B&N.com president William Lynch, “serve as

the centerpiece of our customer-centric digital strategy” (Milliot, 2009). The Nook surpassed the

expectations of an e-reader and instead of selling it through ads and media, B&N decided to have

their stores sell the product, which many found to be the most impressive thing about the new e-

reader (Milliot, 2009). It was put on display at some of their biggest locations, including 17 of its

college bookstores. Once it was displayed in bookstores, its Wi-Fi capability allowed potential

customers to view any e-book B&N had and also exclusive content to Nook users (Milliot,

2009). As with many brands, the Nook has big competitors, which will be discussed next.

Barnes and Noble knew the competitive market they were going into the e-reader with the

Nook, but were willing to take that risk. Apple’s iPad and Amazon’s Kindle are the Nook’s

biggest competitors. In addition, since these e-readers hit the market, they have all had upgrades,

even the Nook, with the Nook Color, raising the bar on the quality of e-readers. The Amazon

Kindle, was the first of the e-readers to hit the market. The first generation was released on

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November 19th, 2007 for $259 (Stern, 2010). After being released, the Kindle sold out in just

five hours and remained out of stock for the next eight months until late April 2008 (Stern,

2010). To this very day, it still remains the top best-selling digital e-reader. The next e-reader to

release was from the world-renown company, Apple, with its iPad. Their first generation hit the

market on April 3rd, 2010 for $499 (Stern, 2010). On the first day of release, over 300,000 iPads

were sold and by May 3rd, 2010, Apple had sold a million (Reid, 2012). In just half of the time it

took for Apple to sell the exact same number of their first iPhone. Once Apple surpassed one

million sales, they continued to sell iPads rapidly, making 3 million in sales after only 80 days

(Reid, 2012). We now know the Nook’s competitors, we can take a look at the marketing

segmentation that was involved.

Marketing segmentation is defined as the sorting of potential buyers into groups that

have common needs and will respond similarly to a marketing action. There is geographic

segmentation (based on location), demographic segmentation (age, race, gender, etc.), behavioral

segmentation (knowledge of, attitudes, etc.), physiographic segmentation (interests, opinions,

etc.), occasional segmentation (having dinner or going out), segmentation by benefits (sought by

the consumer or customer), and finally cultural segmentation (cultural origin) (Schiffman &

Wisenblit, 2015, pg. 24-53). For segmentation of the Nook, the marketers mainly focused on

demographic (age, race, gender, etc.), physiographic (interests, opinions, etc.), and segmentation

by benefits. They focused on the general age, gender, common interests, and many other factors

of people who would be willing or interested in buying the e-readers. Just as knowing the type of

market segmentation that would be best for a product, it also important to know the benefits the

product or each product has to offer.

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Every product that goes out into the marketplace needs to have benefits in order to compete

well and get a sufficient amount of sales. The Nook, just like many other products, has a variety

of benefits for its customers. First, the Nook allows users to let their friends borrow their digital

e-books for 14 days, which is known as the LendMe feature, and download books wirelessly

(Rich, 2009). Secondly, there are 50,0000 books available from Barnes & Noble.com that can be

downloaded for free, through a deal from Google that contributes electronic versions of public

domain books that Google has scanned through from university libraries (Rich, 2009). These

editions are not available with the Kindle or iPad. It also saves battery and is easy to read indoors

and outdoors (Rich, 2009). This meets the needs for those that like to conserve energy and want

the ability to read wherever they are. We will now take a look at the Nook’s marketing tactics.

Out of its biggest competitors, the Nook is one of the most affordable e-readers (besides

Amazon’s Kindle (also priced at $259). At $259, it has two screens: a six-inch monochrome

screen and right below that, a 3.5 inch color touch screen that can be used for multiple things

such as surfing the internet, looking at books, and adding bookmarks (Stern, 2010). Even though

the Nook was mainly designed for e-reading because of the e-ink screen, users can also use it for

Facebook, Twitter, and playing Sudoku (Stern, 2010). As mentioned earlier, it also includes 1

million B&N e-books, 50,000 of those being free and a borrowing feature. The most unique

difference about the Nook, was B&N’s plan of how it was to be sold. As stated earlier, instead of

selling the product to big chain stores, such as Walmart and Target, it was marketed and sold

exclusively from the B&N stores (Milliot, 2009). In addition, selling it at 17 of their largest

college bookstores, most having Wi-Fi so customers can browse any book and exclusive content

(Milliot, 2009). These elements play an important role in influencing and encouraging customers

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with the Nook’s affordability, key features, and benefits. Finally, we will see how the Nook

compares to its competitors.

The competitors focused on pretty much the same type of segmentations, such as the

demographics and common interests of potential customers. The Apple iPad is the most

expensive, at $499, however, it does have a range of features such as multi-touch display, a 9.7

inch screen, can play videos, browsing the internet, and can also enjoy color-filled children’s’ e-

books, art, and even comics (Stern, 2010). In addition, users can also download apps to get

access to even more books and magazines. However, weighing at 1.5 pounds, it is the heaviest

out of the Nook and Kindle. With Amazon’s Kindle, it is also priced at $259, it weighs only 10.2

ounces and has a six-inch display, making it great for both indoor and outdoor reading. It has

over 540,000 e-books offered through Amazon, including both classics and modern books, New

York Time best-sellers, blogs, newspapers, and even magazine subscriptions (Stern, 2010). It

also includes a read-to-me feature that converts text to speech and supports audio books.

Critique

There is no doubt that Barnes & Noble is the most competitive book store in the country.

They have surpassed expectations, sold millions of books, have several stores across the country,

and still remain at the top. However, their Nook e-reader has been not as successful and

continues to follow behind its biggest competitors such as Amazon and Apple in the e-reader war

(Trachtenberg, 2013). Why exactly is this the case? Is it overpriced, not have enough features, or

just simply not popular enough?

Barnes and Noble’s losses on the Nook continued to become more and more apparent

over the years since its release in 2009. Due to the trend of book-buying and in retail, there is not

much surprise that Barnes & Noble prestige has been simmering down. However, their biggest

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obstacle hurting their success has been their Nook. For many that do not know, the Nook is

B&N’s white knight. Their CEO, William Lynch, said to his investors that it was supposed to

help B&N from losing money, however, all the Nook has apparently been doing for the past

several years, is being a nine-figure money-losing venture (Greenfield, 2013). E-reader sales

started to decline for the first time ever in 2012-which greatly affected Nook e-readers

(Greenfield, 2013). Regardless of the booming tablet sales in 2012 and an improved product line,

B&N sold fewer tablets in its holiday quarter than in previous years (1 million in 2012 versus 1.4

million in 2011) (Greenfield, 2013). Even its competitors, such as Amazon sales had plunged

from originally 4.6% to 1.9% (Greenfield, 2013). The Nook has not only fallen behind

financially, also behaviorally as well. Why? Mostly due to B&N’s retail experience. There has

been negative word-of-mouth, such as people saying “it sucks” and how it is inferior to the retail

experience of Amazon and Apple (Greenfield, 2013). Barnes & Noble was the highest rated

retailer for customer service in 2010, according to Forrester’s 2010 Customer Experience Index,

then jumped to one of the fastest failing retailers on the exact same list in 2012 (Greenfield,

2013). Now that we know as to why the Nook is falling behind its competitors, it is important to

support these critiques with a survey.

The following survey questions are focused on the Nook itself, its competitors, and

B&N’s customer service. There are a total of 4 questions that were given and answered by

12 respondents. The questions have a rank scale from 1 being excellent to 5 being very

poor.

How would you rate the quality of Barnes & Noble’s customer service vs.

Amazon and Apple?

Amongst its competitors, how would you rate Barnes & Noble’s Nook?

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How would you rate Apple’s iPad?

How would you rate Amazon’s Kindle?

From the four questions given and 12 responses, 9 out of 12 chose “average” for

questions 1 and 2. For question 3, 11 out of 12 chose “excellent” for Apple’s iPad, and for

question 4, 10 out of 12 chose “good” for Amazon’s Kindle.

The biggest consumer behavior issue with B&N’S Nook is the customer service at

B&N’s stores. As much as I personally like the brand, their retail experience is not up to par with

its competitors, such as Amazon and Apple. According to Donaldson, “Barnes & Noble comes

from the world of brick-and-mortar retail experience, an environment of physical connection to

the customer, not the digital” (Donaldson, 2013). It does not matter they sell books, what really

matters is the experience they agree to give in their stores. In order for book stores to survive,

like Barnes & Noble, needs to redefine itself as customers change how they receive content

(Donaldson, 2013). The biggest resource Barnes & Noble has is their retail stores, however, what

are these locations associating their buyers to (Donaldson, 2013)? As they always say, it’s about

location, location, location! These aspects greatly influence both their marketing strategy. Next

to be addressed, is some examples of specific tactics that B&N used or uses that show their

flawed strategy.

Their retail experience has been B&N’s biggest issue overall and specifically influencing,

their Nook. Barnes & Noble has been open since the 1970’s and has become one of the biggest

book retailers in the United States (Donaldson, 2013). However, this has changed dramatically.

B&N has never really focused on the “content” experience. In other words, they need to ask their

customers what they really want and what would make them buy it? Barnes & Noble has over

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5,000 locations and has never reinvented themselves into more than just a bookstore. In spite of

this flawed strategy, there are ways to correct the shortcomings/deficiencies.

For Barnes & Noble to become successful with their stores and the Nook, they key is

figuring out how to enhance their stores with what the customers are looking for in addition to

just books-reeling their attention and getting them to come into the store (Donaldson, 2013). A

café is great to have, however, they need to rethink it. Loyal customers are everything and it is

important to continue to build and grow with their customers and what B&N could do differently

than other places (Donaldson, 2013). For example, once customers walk in and log on to the

store’s Wi-Fi, have instant access to a wide variety of exclusive content to capitalize on a better

B&N experience (Donaldson, 2013). Another example, is to always keep offering what will

bring in more customers and that is exclusively only at Barnes & Noble.

Recommendations

In order for both Barnes & Noble and their Nook be on top again, there are

recommendations that they need to take action on.

Unlike its competitors such as Apple and Amazon, Barnes & Noble’s ranks pretty low.

Barnes & Noble’s tablet was previously seen has a huge contender for other tablets, such as

Amazon’s Kindle or the iPad, today however, it has now basically become irrelevant (Lutz,

2014). B&N still has a lot going for it, yet they seem to be handing over their prestige to others

because they have not yet done anything to address their biggest issue, or they are just simply

unable to address-their retail experience/customer service. This is backed up by the survey I

conducted asking four questions varying from their customer service compared to its

competitors, the e-readers, etc. The answers revealed that the participants also agreed that B&N’s

customer service was below sub-par and preferred Amazon or Apple. With its competitors, you

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are allowed to call almost 24/7 and get help or ask questions, however, this is not possible with

B&N. B&N has the dreaded, banker hours. This means that if you try to call after a certain hour,

they will not answer because they are closed (Adin, 2012). On top of that, B&N does not give

refunds even when it does not deliver a purchased item (Adin, 2012). This automatically allows

B&N’s paying customers another reason to switch to Amazon or Apple. It does not seem like

they are losing that much money because of these issues, yet since they do not seem to care, it

really effects their integrity as a brand which also effects the sales of their Nook. Anything B&N

automatically links to the Nook. When they first introduced it, B&N refused to give club

members the 10% discount, stating that, even at $259 per Nook, it was still losing value. Not too

long after that, the price decreased to $150 before dropping even lower in price (Adin, 2012).

The little things like this end up causing much frustration with customers and should be taken

care of right away. With their poor customer service, banker hours, and having the perception

that the customer is to blame, is very irritating and discouraging (Adin, 2012). This why many

are leaving B&N in the dust. There is no reason for customers to be holding back from giving the

eBook market over to a big, single, gorilla eBook store (Adin, 2010). If B&N does not start

taking drastic measures to restore their integrity as a brand, it could not look good for their

future. As mentioned before, B&N needs to step up in how to enhance their stores with what

customers really want, get creative with the Wi-Fi throughout the stores, and giving exclusive

offers to B&N members that are only sold at B&N. There are at least four big reasons why B&N

has crashed and burned: 1. Their reputation as a bookstore got in the way-customers could not go

beyond B&N being a place for something they did not want nor care for, books; 2. The company

did not illustrate the Nook’s full value-while Amazon and Apple marketed their tablets as

devices for reading books, streaming TV shows and movies, and reading the news, B&N only

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showed the book feature of the business; 3. The Nook did not have a place-they made the Kindle

seem to be a cheaper version to an iPad, in the meantime, the Nook, according to Brian Sozzi, a

chief equities strategist at Belus Capital Advisors, “had no foundation to stand on to speak to

consumers” (Lutz, 2014); 4. B&N dropped their prices at the worst time-due to the Nook tablets

not selling, B&N lowered their prices while they were putting all this money into the product.

According to Sozzi, “this is lethal recipe for an entire division going up in smoke as the Nook

has” (Lutz, 2014).

As a final recommendation for Barnes & Noble, they need to reinvent themselves as a

brand and need to know how to please their customers in order to give them the ultimate B&N

experience. Even something as small as stating that the company really does care about their

customers, will make a significant difference.

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References

Adin, R. (2012). And Then There Was One: Barnes & Noble’s Lack of Customer Service.

Retrieved from http://the-digital-reader.com/2012/05/16/and-then-there-was-one-barnes-nobles-

lack-of-customer-service/

Donaldson, S. (2013). BARNES & NOBLE: RETAIL STORE OR NOOK?-THE VALUE OF

LOCATION. Retrieved from http://www.radiantbrands.com/barnes-noble-retail-store-or-nook-

the-value-of-location/

Greenfield, J. (2013). Barnes & Noble’s Big Problem—And What to Do About It. Retrieved

from http://www.forbes.com/sites/jeremygreenfield/2013/02/06/barnes-nobles-big-problem-and-

what-to-do-about-it/

Kozlowski, M. (2012). The History of the Barnes and Noble Nook and EBook Ecosystem. Retrieved from http://goodereader.com/blog/electronic-readers/the-history-of-the-barnes-and-noble-nook-and-ebook-ecosystem

Lutz, A. (2014). 4 Reasons Barnes & Noble’s Nook Crashed and Burned. Retrieved from

http://www.businessinsider.com/reasons-barnes-and-noble-nook-is-failing-2014-1

Milliot, J. (2009). The Nook Arrives. Publishers Weekly, 256(43), 6.

Rich, M. (2009). Barnes and Noble to Introduce Its Own Electronic Reader. Retrieved from http://www.nytimes.com/2009/10/20/technology/20reader.html?_r=0

REID, C. (2012). TALE OF THE TABLETS. Publishers Weekly, 259(46), 22-24.

Stern, J. (2010). Among E-Readers, Competition Heats Up. Retrieved from http://www.nytimes.com/2010/06/10/technology/personaltech/10TAB.html?_r=0

Trachtenberg, J. (2013). Barnes & Noble’s Nook Falls Behind. Retrieved from

http://www.wsj.com/articles/SB10001424127887323478304578332003476565508

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