Menards Inc. customer base is from low, middle and upper income shoppers. Customers shop at Menards because of low prices and excellent advertising schemes. Menards prices give the Company a competitive advantage over Home Depot and Lowes. They have employees in each market to shop at Home Depot and Lowes to make sure Menards is the lowest price in that market. Menards advertising scheme is to keep the song, “You save big money when you shop Menards,” alive in the customers mind.
The Company remodeled their stores with lower shelving, added lighting, more displays and expanded the aisles in order to accommodate the women shopper. Then Menards, Inc. upped its advertising costs to gain more female shoppers and boost customer satisfaction. Menards reasoning comes from a customer focus study done by Vertis Communications found that “73 percent of female home improvement advertising insert readers between ages 35-49 read advertising inserts from various stores and then decide where to shop (Increase). Market Structure Menards Inc. is an oligopoly because it has little competition, differentiates its products and the Company has control over prices. Menards has few competitors because of the high barriers to entry, mainly the costs of building and merchandise. The costs for store set up are 17 to 19 million for the property and building depending on the location and price of property. Menards Inc. costs for inventory for a new store are 5. 8 million dollars (Long).
Another reason Menards is an oligopoly is The Company sells differentiated products to gain an advantage over its competitors. For instance, Menards Inc. carries some personal care items, food items, and a full supply of cleaning products. Lowes and Home Depot do not carry personal care items, food items or cleaning supplies. Furthermore Menards Inc. is the price leader because the Company is extremely innovative. The Company has three Manufacturing plants and Distribution centers in Wisconsin, Iowa, and Ohio this helps the company save money in shipping cost and manufacturing costs.
The products Menard manufactured in its plant accounted for about a quarter of items sold. In-house production cut an estimated ten percent off the cost of going through a middleman for a steel door. Among others items, Menards stores offered its own line of Formica countertops, dog houses, and picnic tables. (Menards Inc. ). Competition Menards major competition is The Home Depot Inc. and Lowes Inc. Menards has advantages over these companies because Menards is a privately run company and uses very aggressive business practices.
Menards has one owner and one decision maker, John Menard. He does not have to follow the strict rules of companies in the stock market, runs his business military style and hires employees that usually do not have college degree but move up within the Company (Van de Kamp Nohl). According to Milwaukee magazine, “John Menard earned his college degree in business, but he once told a top Menards officer that his minor in psychology was far more important, because ‘how you treat people’ was the key to his success. His belief for how to run the company comes from a pamphlet called “Grow with Menards” the pamphlet written by Larry Menard, who is John Menards brother, is based on his Army experience during the war in Vietnam (Van de Kamp Nohl ). If the Company cannot beat a price, Menard would order his managers to buy up a competitor’s entire supply of that product. (Van de Kamp Nohl). Legal and Regulatory Environment Many legal and regulatory laws govern Menards Inc. The Robinson Patman Act assures the goods of different buyers are at the same price when all costs are the same, except in certain circumstances (Perreault).
This act prevents Menards Inc. from receiving huge discounts for buying in bulk. Menards has an advantage over Home Depot and Lowes because Menards manufactures some of its products so it can prevent the middleman to gain more profit. Menards follows The Occupational Safety and Health Act (OSHA), which require Menard Inc to furnish a place of employment free from hazards that can cause death or serious harm to employees (Greenaugh). Menards does a great job at protecting employees when compared with home depot, Home Depot had nine deaths between 1999 and 2003 and by not following OSHA standards, Menards Inc. ad no employee deaths (Lovell). Menards has to follow the Environmental Protection Agency (EPA) rules because they do manufacture their own pressure treated lumber and the Company sells treated lumber, paints, glues, and other chemicals (Van de Kamp Nohl). The EPA fined Menards for illegal dumping hazardous waste dumping and for polluting a river in Sioux Falls, SD that ran through the Company’s property (Risner). Because Menards carries food products, the Food and Drug Administration also regulate them (Keeping).
Besides all the federal agencies listed above each store has to follow local and government laws of the city and state the business operates. Managerial Variables Menards offers both products and services they sell many items from food to lumber in the stores and rent trucks, installation blowers, dollies, rug doctors, and floor sanders. The Company is also testing a tool rental program in Eau Claire, Wisconsin. The Company carries over 750,000 different products (Ramsey). Lowes and Home Depot do not carry any food products and have fewer products in other departments.
Menards carries convenience, shopping, specialty products, which give them an advantage that makes sales higher, and customers get a convenience of shopping at one store. The Company carries staples impulse, emergency homogeneous, heterogeneous and specialty products. By offering product differentiation and having a large product assortment, the Company has an advantage over Lowes and Home Depot. Price Menards pricing is very low because they hire shrewd buyers, buy in bulk, and take advantage of discounts and manufacture some of their own products.
This makes Menards the price leader in the markets the stores are located. Menards store managers shop the competition to price check items and most of the time the Company’s price are so low that Menards Inc. can actually raise the prices to meet the markets price. When Menards cannot beat a competitor’s price or buy the product cheaper than the competitor price, the store managers will buy the entire product in order to get the product cheaper and make the competition out of stock of that product (Long). Promotion
Menards low prices already give the Company promotion. The jingle “You save big when you shop Menards,” is strategic marketing plan that keeps the Company in a person’s mind by playing the song every fifteens inside the stores and in advertisements on the radio and television and printing it in print ads. This made people memorize the song, which is why they think of Menards Inc. when needing some home improvement products. Home Depot and Lowes do not have a song that gives them instant recognition. Physical Distribution Menards Inc. as manufacturing plants in Wisconsin, Iowa and Ohio today. The Company hires many semi drivers to transport the products they produce in these manufacturing plants and distribution centers. Menards Inc. lowers the cost of shipping by having vendors has many vendors who ship the product directly to the store or distribution center. This lowers the cost of shipping the product to the store and making more profit. The Company’s Customer service level is low because of out of stock merchandise and special orders not arriving in a timely manner (Dave).
This is an industry problem because Lowes and Home Depot have the same problems. Marketing Strategy Menards inc. can improve the Company’s Marketing plan by following EPA regulations better in order to show consumers the Company cares about the environment. Menards Inc. can gain more customers by adding they are green in the Company’s ads for television, radio and print ads. Menards Inc. can improve the channel of distribution by training employees better, better communication with vendors, and hiring more employees to manufacture products faster.
