Adaptable Computer Desks to Suit the Varying Needs of Students within the UK - Case Study Example

1. Proposed Idea A furniture company has designed a new product that will be launched in the coming month. We propose to launch this product by producing a Marketing Strategy plan to give us scope for a successful launch (Brooksbank, 1999). The main target in the beginning will be students at university and college. 1.1 Mission statement Provide adaptable computer desks to suit the varying needs of students within UK, which can be supplied to schools colleges and universities. 2.1 Background The furniture company Total Concept Furniture Company has 8 years of history and experience of producing furniture for the UK market. They are located in London (UK). They have about 125 employees working for them and have their own manufacturing arm. They are a medium sized company. The owner, Martin Smith has designed a new product and is willing to launch it on 25th of March 2010. As the world is currently experiencing a recession, consideration will need to be paid to the price and dynamics of the product. This will be achieved by the marketing and strategy plan. 2.2 Product Having experience for eight years in producing furniture, Mr. Martin has come up with the idea of producing a computer desk that can be used to study as well. What makes this product different from other computer desks in the market is the ability to adjust the size and adapt to the room size (Bennington, 2004). To have a bigger room means to pay more money but having a computer table that can be adjustable according to personal needs and according to the room space has big advantages. The product design is attractive and can be ordered in different colors. The non-adjustable part of the desk is 75cm (horizontal). There are extensions on either side of the desk that can be extended by 40cm. Its height is 72cm and the legs are metallic. Both sides of the desk have drawer space which can contain CDs, books or the PC case. The total weight will be 67.5Kg. 3. Analyses 3.1. The SWOT analysis SWOT analysis is a strategic planning method and is very important in finding out the strengths, weaknesses, opportunities and threats of a business (Fine, 2009). Strengths The product can be adjusted according to personal needs This product can have a large return on investment if its marketed the correct way, such as targeting students in schools, universities and colleges The cost of the desk is affordable to the majority Since there are some value added features in this product there is bound to be greater demand for this desk Weaknesses Since there are many similar products in the market there will be a stiff competition Since this is a new product the people would be reluctant to buy it Opportunities Since computers are used by the majority of the public at homes, offices, universities and colleges there is a greater demand for computer desks. Product placement strategy related opportunities. Company can place the product in well researched market segments like universities and colleges in London. It can make use of its manufacturing division and technical control division to enhance efficiency by reducing costs. Threats Market penetration pricing strategy adopted by rival furniture manufactures is a threat. Total Concept also has to adopt a similar strategy. The bigger rivals have a better supply chain advantage. They buy products at cheaper prices thus can afford to sell it at cheaper prices 3.2 PEST Analysis PEST Analysis is a strategic analysis method that is used to understand market growth and the business position potentials and directions. Political The current UK legislation may have a negative impact due to increase in taxes. If taxes increase this increase may have to be passed down to the customer. Thus price of the product will increase. This will affect the business. Transport costs too would be affected. Social Because of credit crunch many students from different cultural backgrounds will be reluctant to register in universities. This will have a negative effect on the business, as the demand for computer tables from universities will drop. ( According to the Daily Mail, Friday 24 April 2009) Economical Credit crunch may have impact in customers, so they may avoid buying computer desks in order to save money and use less comfortable computer desks Technological The business environment increasingly depends on technology. Therefore the company is highly influenced by the need to go online. However it is not limited to Information Technology only. Even its manufacturing processes depend on highly sophisticated and expensive technologies. 3.3. Five force Analysis 3.3.1 The Threat of New Entrants The threat of new furniture companies coming to the market is mitigated to a great extent by the fact that investing in the furniture industry is an expensive deal. Investing in sophisticated technology is expensive, thus this is a barrier against new companies entering the market. 3.3.2 The Power of Buyers Buyer power is limited. Unless one is an expert in the type of wood, chemicals used to treat the wood and so on knowledge among buyers is limited. The buyers are usually a disorganized lot. They have much less influence over organization pricing and quality assurance policies. 3.3.3 The Threat of Substitution There is always the threat of low price low quality substitutes being introduced in to the market. Customers might be lured to buy these substitutes. 3.3.4 The Threat of Suppliers The suppliers have control and in fact determine the direction of the furniture industry. Latest tools, chemicals and materials used by furniture manufactures are determined by suppliers. For example Melamine supply market is controlled by few suppliers. Melamine tableware has become very popular in recent times. 3.3.5 Competitive rivalry Furniture manufactures target niche markets. Therefore much bigger companies could come up with highly sophisticated and fancy computer tables using the latest technology, which a medium sized company such as Total Concept would not be able to afford. Time has an impact on technology (Gordon, 1989). 4. Market Analyses The furniture market is not hard to determine because it is a constant market that is in demand all the time. There are particular times of the year that furniture market varies but in general it can be determined even despite the recession (Grover, & Srinivasan, 1987). Figure 1: shows the growth rate in furniture sale According to Mintel report furniture retailers have been hit by a slowdown in consumer spending growth. Yet despite the fact that furniture industry has been hit we have found that computer desks and living room furniture are growing up in scale steadily. Statistics have indicated that about 2,396,055 students are studying in higher education institutions in different parts of UK as of statistics available in 2008/09, and is bound to increase. Therefore there is a great demand for computer table ware. Despite the fact that furniture companies have been hit hard there is increase in sales in furniture that are needed by companies (Schuler, Taylor, & Araman, 2001). Since computer desks are essential for students and is a product that is worth going for. Taking in to consideration our biggest competitors IKEA and Argos we need to spend more time on advertising and geographical movement on sale. This product has several value added features which gives it a competitive advantage over other similar products in the market. Recent statistics have indicated that London has the largest student population of any city in UK. Therefore efforts should be made to market this product on London particularly the largest and well known universities such as The University of London. 4.1.1 Segmentation and Targeting Ansoff in his Product-Market Growth Matrix has recommended that in introducing a new product into an existing market, it is vital for a business to come up with innovative value added features in order to penetrate the market with the new product (Kamakura, & Russell, 1989). Constant development of new products is crucial for a business to stay ahead of its competitors because new products attract new customers. 4.1.2 Regions In spite of the fact that UK market is vast and can bring huge income we will be targeting the student population in London initially (Frank, 1967). 4.1.3 Primary Consumers Students that are studying in universities in London (such as the University of London) will be the primary consumers. 4.1.4 Secondary Consumers Secondary consumers will be students in colleges, schools and offices in London. But this group of consumers will be targeted after 18 months of successfully launching the new product. From segmentation and targeting above we can see the main target will be students in London universities. After 18 months of success there will be expansion on targeting which requires a new marketing strategy involving e-business (Gupta, 2005). 4.1.5 Trends Furniture sales are popular any time of the year but the demand for our product will vary from year and from semester to semester. The peak period for the product will be in the registration period at universities or the opening days. Open days at universities run throughout the year. 4.2 Positioning 4.2.1 Customer Perception As our Furniture Company is a medium company and not very well known, many customers have already become loyal to bigger furniture companies (like IKEA or ARGOS). This will change by enlightening the customers about the value added features in this product and its advantages (Kotler, 1976). 4.2.2 Advantages of competitions The main advantages in our competition are that they have loyal and regular customers. Also they are e-business companies. Nevertheless our product should focus upon its advantages over current computer desks, such as high quality and appropriately priced. 4.3 Marketing Mix Strategy To maximize computer desks sales we need to adapt the 4Ps of marketing. These are Product (product characteristics), Promotion (channeling and promotion), Place (stocking and distribution) and Price (pricing strategy). All these Ps are linked together and must work in unison to achieve success (Hiam, & Smith, 2006). 5. Marketing Plan 5.1 Objectives Having the market share of 9% by the end of December 2010. Provide the best design and fancy computer desks for the students To provide desks with the best quality To launch the ecommerce website after 18 months form the launch of the new product 5.2 Strategy A business can only plan where it is going if it knows its beginnings. Realizing where a business is at the moment involves a Marketing Plan. This analysis of the plan involves internal and external factors which affect a business's performance (Kalyanam, & Putler, 1997). 5.3 The Marketing Strategy Our Marketing Strategy will involve a 3 stage approach and will be based on the division into the 3 target segments. The main aim is to generate awareness and interest for our new product within our target segment with the help of an integrated approach towards marketing communications. The three stages are as follows: Stage 1: Focuses on building credibility and links with Universities and Colleges through marketing of our product and word of mouth. Step 2: To increase interest amongst consumers through providing further information about our product and by creating a dialogue with the help of e-marketing by knowing what they prefer and by getting feedback to know which region or universities like our products (McDonald, & Dunbar, 2004). Step 3: To increase our customer base by raising awareness and interest for our product amongst our existing and future customers. Strategy Target Positioning of brand & product Strategy Outcomes FIRST Market Penetration Pricing Strategy Students at College and University and then Offices Improvement design Space Saving Capable Create awareness by having an advertising and promotional campaign Adopt a low pricing strategy initially Product can be targeted to a wide range of customers Can have high profits and low costs to manufacture SECOND Product Diversification/ Differentiation Customers Trendy Affordable Well-designed Space-saving Direct the message to customers about the special value added features of the product and the wide range of options that they can select from Raise interest A wide range of options for customers to select from THIRD Quality Improvement Competition Introduce the product in a fun way E.g.: using entertainment to promote the product Giving free issues with the product e.g.: giving a free penholder with the table Use public relation tools to create awareness of product Actively seek customer feedback to develop further Helps survive in the market and capture a sizable portion of the market Can aspire to become the market leader in computer tables in the future 5.4 Target Customer Our target customers will be initially students of London universities. The target later on (after 18 month) will expand to colleges and high schools in London in order to widen the market. The potential customers would be students from the more affluent and middle class universities. The reason is because they are fairly well off are more likely to purchase our product (Kahn, Morrison, & Wright, 1986). Foreign students that come into the UK to study have support from their families and want to have comfortable tableware such as computer tables. They are willing to pay for an innovative product of this nature. 6. Action Plan 6.1 Product Strategies The product will reach the students by a push strategy. That is a direct marketing strategy will be adopted. Trade promotions such as giving a free pen holder with every computer table will be done. Special offers will be made if a group of students purchase five tables or more at once or if a student decides to buy the product within one month from the launch date of the product. 6.1.1 Place Strategies The students from the biggest universities in London will be targeted as there is a sizable student population in London (Johnson, 1971). 6.1.2 Price Strategies A lower pricing strategy will be adopted. The price shall be the lowest average of the leading competitors' prices all put together, so as to attract more customers to the product (Jarvis, Rungie, Goodman, & Lockshin, 2006). 6.1.3 Advertising and Promotion It is hoped to launch an advertising campaign targeting university students in particular in London. Advertisements will be published in newspapers and magazines popular among youth in London. Special emphasis will be laid in targeting the more popular universities in London such as University of London, London Metropolitan University, and London South Bank University and so on. Prime time advertising slots will be bought in the television and the radio to promote the product (Belch, & Belch, 2004). It is also suggested to put up billboards and posters close to universities and their hostels. Viral marketing methods- the sending of multiple e-mails to students could also be done. Advertising on educational web sites and other sites that are popular among students is another way of reaching the target market. Typing leaflets and free CDs regarding the new product and distributing them to students near universities and hostels will also a good way of reaching out to university students. Giving of special offers such as special discounts within the first month of launching the product or discounts offered if a group of students buy more than five products at once and so on is also a good way of promoting (Nash, 2000). This apart special concessions will be offered to university students in general. 6.2 Collecting Feedback This will be one of most important parts of the process. Getting feedback from students that have already bought our product will allow us to analyze and see the product from the customer's point of view. Methods such as posting or e-mailing a questioner to the customers can be done a few months after they have brought the table. Telephoning the existing customers directly and getting their feedback is also vital. These methods can be used to further customize the product according to the customer needs. 7. The Budget Although Total Concept LTD has 8 years of history the cost that needs to be spent is to be carefully analysed. The main expenses will be for manufacturing and promoting. Item Quantity Price Total Fancy Computer Tables 500 14.00 7,000 11,200 Wood Type (Oak) 600 (3 x 3 ) 7.00 4,200 Advertising on Google 500 0.50 250 2,150 Promotion Leaflets 2000 0.20 400 Posters 2000 0.75 1500 Others (Travelling, TV time and other expenses) 3,000 Total 16,350 Table 3. Shows that expenses that are estimated only for one year starting on 1st March 2010. Table above shows estimated expenses on manufacturing a computer desk and marketing it. The above table is based on the breakeven analysis and the company at least needs to produce 400 computer tables per year to break-even. Sales & costs () Sales Total Cost 14.00 12.00 Breakeven point 8.00 Fixed Costs Margin of safety Quantity 400 500 This is based on the fact that the margin of safety for the company lies on to the right of the breakeven point given on the diagram below. The margin of safety is 500 desks. The company break-even when it sells 400 units of tables at 12 per table. However the company should reach breakeven point within the financial year with the unit cost of 14 per table. The following tables will show most likely scenario, worst scenario and best scenario. 7.1 Most Likely Scenario Most Likely PROMOTIONAL ACTIVITY COSTS SALES ACHIEVED (Most Likely CASE) ACTIVITY 2009 RATES MAY JUN Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr TOTAL Computer Desk (1) Starts May 25 Ends Sept 15 ACTIVITY Computer Desk 7,000 Leaflets 2000 Advertising on Google 250 Posters 1500 Travelling 3,000 TOTAL COST 16,350.00 16,350 % Increse in Sales 6% Computer Desk (2) 7,000 Starts 02 Oxct 2009 Ends Dec 05/2009 ACTIVITY Computer Desk 7,000 Leaflets 2000 Advertising on Google 250 Posters 1500 Travelling 3,000 TOTAL COST 16,350.00 17331 % Increse in Sales 6% Total Sold Computer Desk (3) Start Oct 2/2009 Ends App 18/2009 ACTIVITY 250 Computer Desk 7,000 Leaflets 2000 Advertiting on Google 250 Posters 1500 Travelling 3,000 TOTAL COST 16,350.00 18,370 % Increse in Sales 6% COST OF ALL ACTIVITY 52,051 Nb Computer desk 48 856 854 160 1384 65 89 62 173 884 62 4637 Average Rate of Sale pm 70 Average Sterling profit per desk 23.00 BASE BUSINESS 4,152 216 488 1,152 344 556 40 3,216 60 416 1,488 28 56,688 POST PROMO SALES(1) 692 200 892 POST PROMO SALES(2) 176 203 739 781 828 739 3,464 CUMULATIVE SALES 54444 4637 Figure 4 Shows the most likely Scenario where the growth would be 6%.This estimation is for one year. 7.2 Worst scenario 7.3 Best Scenario 7.4. Forecast Future market growth forecast The current market for fancy computer tables shows that the market is growing at a rate of 7.5% per year (Oliver, JL 1966). The best scenario cited here is based on hypothetical data and therefore cannot be relied on to predict a fairly accurate outcome in the future marketing plan. However the current trends would permit an extrapolation of data to establish a trend-setter curve of good positive growth. Current market trends suggest very good prospects for growth in this particular market segment though technology might act as a constraint on many new entrants as well as the existing firms because technology is expensive and borrowing capital from banks is difficult due to the current economic downturn. Assuming that the TCFC captures and retains some successful niche market segments there would be much less trouble by way of product life cycle maturities and further developments because prices of computer desks are rising at a fairly higher rate. Though the demand for computer desks is price-elastic other variables like tastes and substitutes play a very important role. For example laptops and notebooks are getting smaller and they might not need a desk. Foreign students who stay at hostels and in private rooms tend to save money on such extra equipment. Finally the TCFC needs to focus attention on the fast outgrowth of imported furniture sellers in London. These small time importers source their products from very cheap sources. In fact they depend on margin sales. Couriers like China, Malaysia and India export quite a lot of furniture including fancy computer desks at very low cost to the EU. Thus future prospects are not as rosy as they first seem to be for the TCFC. REFERENCE 1. Belch, G & Belch, M (eds.) 2004, Advertising and Promotion: an integrated marketing communications perspective, McGraw-Hill/Irwin, New York. 2. Bennington, RR 2004, Furniture Marketing: From Product Development to Distribution, 3. Brooksbank, R 1999, 'The Theory and Practice of Marketing Planning in the Smaller Business', Marketing Intelligence and Planning, vol. 17, no. 2/3, pp. 78-91. 4. Frank, RE 1967, 'Is brand loyalty a useful basis for market segmentation', Journal of Advertising Research, vol. 7, pp. 27-33. 5. Fine, LG 2009, The SWOT Analysis: Using your Strength to overcome Weaknesses, Using Opportunities to overcome Threats, Create Space, California. 6. Gordon, I 1989, Beat the Competition: How to Use Competitive Intelligence to Develop Winning Business Strategies, Basil Blackwell Publishers, Oxford. 7. Grover, R & Srinivasan, V 1987, 'A simultaneous approach to market segmentation and market structuring', Journal of Marketing Research, vol. 24, pp. 139-53. 8. Gupta, S 2005, Managing Customers as Investments, Wharton School Publishing, Pennsylvania. 9. Hiam, A & Smith, C 2006, Marketing for Dummies, UK edition, John Wiley & Sons, New Jersey. 10. Jarvis, W, Rungie, C, Goodman, S & Lockshin, L 2006, 'Using polarization to identify variations in behavioral loyalty to price tiers', Journal of Product & Brand Management, vol. 15, no.4, pp. 257-64. 11. Johnson, RM 1971, 'Market segmentation: a strategic management tool', Journal of Marketing Research, vol. 8, no.1, pp. 13-18. 12. Kahn, BE, Morrison, DG & Wright, GP 1986, Aggregating individual purchases to the household level', Marketing Science, vol. 5, no. 3, pp. 260-8. 13. Kahn, KB (ed.) 2005, The PDMA Handbook of New Product Development, 2nd edn, John Wiley & Sons, New jersey. 14. Kalyanam, K & Putler, D 1997, 'Incorporating demographic variables in brand choice models: an indivisible alternatives framework', Marketing Science, vol. 16, no. 3, pp. 166-81. 15. Kamakura, WA & Russell, GJ 1989, 'A probabilistic choice model for market segmentation and elasticity structure', Journal of Marketing Research, vol. 26, pp. 379-90. 16. Kotler, P 1976, Marketing Management, 3rd edn, Prentice Hall, New Jersey. Manufacturers, University of North Carolina Press, Chapel Hill. 17. McDonald, M & Dunbar, I 2004, Market Segmentation: How to do it, how to profit from it, Butterworth-Heinemann, Oxford. 18. Nash, E 2000,Direct marketing: strategy, planning, execution,4th edn, McGraw-Hill, New York. 19. Oliver, JL 1966,The Development and Structure of the Furniture Industry, Pergamon Press, London. 20. Schuler, A, Taylor, R & Araman, P 2001, 'Competitiveness of US wood furniture', 2nd edn, Fairchild Pubns, North America. Read More