Motorola - Consumer Relationship Marketing - Case Study Example

Motorola: Consumer Relationship Marketing December 8, 2006 Executive Summary 3 3 Company 4 Strategic Focus 5 Situation Analysis 6 TheIndustry 6 Company Analysis 7 Competitors 8 Customers 8 SWOT 9 Strengths 9 Weaknesses 9 Opportunities 9 Threats 10 Market Product Focus 10 Marketing Objectives 10 Product Objectives 11 Positioning 11 Marketing Program 11 Product 11 Price 12 Promotion 13 Place 13 Financial Data And Projections. 14 Total 14 Net Present Value 14 Organisation 15 Implementation Plan 16 Evaluation And Control 17 Executive Summary In highly competitive market situations, as is now the case in most business sectors, strong brands cannot be built if they are not supported by excellent services. Indeed, the market entry requirements of most sectors in terms of quality have witnessed upward adjustments in recent times. When the core attributes of a particular product or service category have been satisfied by most service providers, the differentiating yardstick then becomes the additional fringe benefits or value the customer can be provided with. This is where customers' expectations can be exceeded. Companies or brands that focus on such areas can gain competitive advantage. Motorola's strategy, as outlined below, is to deliver a safe customer relationship service, which speaks to the customer's desire for clarity of vision. Motorola places strong emphasis on their ability to provide consistent security in information systems, and also matches the third requirement by maintaining a strong research and development program between all segments. With this approach customers are adequately informed of what the brand is seeking to achieve and benefits that shall accrue to them if they are successfully accomplished. Company Description Motorola is known around the world for innovation and leadership in wireless and broadband communications. Motorola (NYSE:MOT) is a global Fortune 100 leader in broadband, automotive communications, wireless technologies, and embedded electronic products. The company's Government and Enterprise Mobility Solutions (GEMS) business provides integrated radio communications and information solutions for public safety, government, and enterprise customers. Widely distributed sales and system integration teams previously collaborated by improvised phone, e-mail, and paper processes. Motorola consists of three businesses: Connected Home Solutions, Networks & Enterprise, and Mobile Devices. Connected Home Solutions provides a scalable, integrated end-to-end system for the delivery of broadband services that keeps consumers informed, entertained and connected. Mobile Devices designs, manufactures, sells and services wireless subscriber and server equipment for cellular systems, portable energy storage products and systems, servers and software solutions and related software and accessory products. Networks & Enterprise solutions include secure two-way radio, cellular and wireless broadband systems to meet the needs of public safety, government, private, and service provider and enterprise customer's world-wide. The Motorola RAZR cellular phone. The sleek RAZR mobile phone is an innovative product marketed as 'Ultrathin' and light. Razr reported profits of $1.75 billion on sales of $9.42 billion with 750,000 units of the phone to wireless carriers in the first 30 days on the market (Hesseldahl 2005). Strategic Focus Motorola's Web-site states that: "We're scientists. We're artists. Most of all, we are a global communications leader, powered by, and driving, seamless mobility. Motorola is revolutionizing broadband, embedded systems and wireless networks - bringing cutting-edge technologies into your everyday life, with style" (Motorola 2006). A defining characteristic of Motorola's RAZR phone is international use and multi-national business, which is characteristic of a social and cultural worldview. This worldview may be comprised of the group's norms, values and assumptions for how people interact with each other (Distefano & Mavnevski, 2000). This is relative to the need of similarity within a group and self-affirming behaviour mentioned earlier. Motorola is under external pressure to provide a consistently innovative product that can span different languages and cultures. This includes being sensitive to cultural behaviours and language structure in user manuals, product design, and marketing strategy. Motorola states that their segmentations strategy is to "accomplish our strategy by driving our seamless mobility vision, creating valuable differentiation of our products through design, and providing compelling, rich experiences to consumers and carriers" (Motorola pp 2 2005). The RAZR phone was an instant hit, increasing Motorola brand recognition. Brand recognition is a very strong marketing strategy, and Motorola recognises this as a component (Motorola 2005). By using customer relationship building and innovative technology to develop loyal customers and brand recognition, Motorola was able to create brand equity and sustain a certain level of expectation from customers. This is an excellent marketing strategy and one that is increasingly popular amongst high technology manufacturers such as Dell and Nokia. Situation Analysis The way people communicate using technology has become known as the telecommunication industry, and as technology grows and changes, the industry that relies on information management also grows and changes. Some of these changes can be attributed to the Internet and advances in wired and wireless communications as well as network technology and information servers. These developments raise a number of new challenges for information management, especially in regards to customer relationship management. This proposal focuses on innovating and specifying technologies that are software and service related to accompany the current hardware cellular phones. The Industry Robert Rycroft (p 6 2002) examines the impact of changes in the telecommunications industry as creating more global research and development to involve a multitude of organizations, and the telecommunications industry has "witnesses the explosion of cooperative innovation agreements involving firms, universities, other research institutions, as well as 'intermediate organizations.'" This shows that as the business environment changes the telecommunications industry must focus on building relationships between innovations, technology, and the consumer. This is especially imperative to the telecommunications industry, which relies heavily on the exchange of information and constantly improving technology. Company Analysis The use of information systems infrastructure by industrial and service companies may be a source of competitive advantage for innovative and knowledge-based companies. Motorola specialises in the commerce of innovative communications technology, and therefore must maintain a contemporary approach to strategic management, which guides attention toward the understanding of the organisational learning process and the management of a firms knowledge base (Conner and Prahalad, 1996) The management of knowledge plays an outstanding role in any interdisciplinary theory of entrepreneurship (Ripsas, 1998) and in the development of technology-based companies. Motorola must be prepared to address new technologies, innovate old technologies, while maintaining high quality of product. Cellular technology constantly changes the way global consumers communicate, relate, inform, and entertain. The sheer success of the RAZR phone shows that Motorola seized a significant opportunity in the ability to deliver a product of innovative designs. The impact of technology changes is the most significant for Motorola RAZR, first to maintain the level of innovation consumers expect and second to deliver consistent product innovation that changes the way consumers use technology to create a need for the technology. Competitors The power of new entrants is fierce for global competitors, and Milner (p 22 2006) explains that "competition in the telecommunications industry is increasing which creates the need for operators to realise fully all potential revenue and to extract the best value from their customer base," which shows how the telecommunications industry is impacted by new entrants, thus creating more rivalry, and this in turn creates more buyer power. The value the information system creates is that it allows the telecommunications industry to compete with a strong consumer database that allows for management to realize the potential of the customer base. Customers Mobile and wireless providers are under constant scrutiny from their consumers. The industry itself is under continuous innovation, and providers make substantial investments in research and development (Brown and Latour 2004). The zone of tolerance has been sited as an important concept in both the service management and consumer behaviour literature, and has been employed to model the relationship between different expectation levels (Zeithaml, Berry, Parasuraman, 1996) and has been used to supply a range, or scale upon which to place a particular outcome. According to Zeithaml, Berry and Parasuraman, (1996): Desired expectations represents: "the level of service the customer hopes to receive, consisting of a blend of what the customer believes can and should be delivered." Adequate service represents: "the second, lower level of service is adequate service which is the level of service the customer will accept." The consumer's zone of tolerance in the telecommunication's industry is in upheaval. New products are introduced, and old products no longer provide an adequate service. Therefore, to meet the customer's zone of tolerance, the telecommunication's industry must be willing to constantly re-invent itself (Brown and Latour 2004). SWOT Strengths Engaged in a high growth market and possesses advanced technical know-how and years of experience. Established brand name. Weaknesses Buyer confusion exists about technology and about technological change in the near future. Similar technologies are offered through competitors. Opportunities Incorporating a customer-relationship model with the brand-product strategy Threats Non-diversifiable risk: further downslides in the economy and additional decreases in consumer spending will have inherently negative effects on the sales of medium and lower end consumer electronics Other market risks include competition, vendor distribution and consumer confidence Common threats in high-tech area often include entrance of new competitors. Market Product Focus Marketing Objectives The implications of consumer studies to business relationships and processes are relative to the measurements and foreseeing consumer trends in purchases. Nasir and Nasir (2005) note that as firms improve on their loyal customer base by retaining current consumers, the identification of satisfaction becomes important as one of the components of measuring and relating to consumers and improving perceptions of branding. Furthermore, Simms (p 1 2005) notes that []premium brands promise a lot, but they are failing to deliver against rising consumer expectations of all products and services. Premium brands, once aspiration, have lost their sheen, as the public looks instead for quality and clear value for money in a single purchase. Product Objectives In relation to Motorola's RAZR business goals to retain more consumers, it becomes important to look at the improvements and continuations of the company's strategy. The product objectives are to develop a strong customer relationship by offering real-time cellular phone connection to necessary home and business functions with live technical support available, and a specific web-based application solely for these customers. Positioning The Motorola RAZR has identified with innovation, being one of the highest selling products in mobile communications history. It is now time for Motorola to innovate again, and the company has with the upcoming release of the Q, a phone similar to the RAZR that will be released in November of 2006. Motorola should continue to plan for innovation strategy that meets the standards outlined. Using naming as a marketing strategy has also worked well, however, Motorola must also maintain a connection with customer culture and time the release of new products to meet customer's expectations. Marketing Program Product The service product proposed here is customer-relatioship and service oriented, based on the following offerings to be implemented into the Q and Razor products. In-house hosting with IT support In-house hosting based on a "monthly fee" In-house design allows for complete control Designed for business needs and home consumer, virtual businesses Online Catalogue with content management in E-Commerce Optimization for Google, Froogle, MSN, etc Back office features such as order tracking, customer order status notification, printing of invoices and packing slips shopping basket and secure credit card ordering Business to consumer (B2c) design Business to business (B2B) design Ensure accessibility for consumers Price Competitive marketing strategy in this segment includes the technology offered and the payment terms as well as performance. Of special importance is the price and time-to-market for technology (Motorola 2005). Price is a major area of competition and often impacts margins for initial system bids, particularly in emerging market (Motorola 2005). This recognition of price as a significant impact on strategy shows that Motorola maintains an amount of empathy towards the customer's need for individual attention and relationship. Time-to-market has also been an important competitive factor, especially for new systems and technologies (Motorola 2005). This is the tangible component of Motorola's service strategy, in particular the release of a technology product must be timed accordingly, and especially before the usefulness of the product has expired. Promotion Motorola can create a brand name differentiation over other mobile technology distributors. Location is a strong customer value offering, as Motorola sells the mobile technology product, the system will also assist customer in mobile service set up and contracting through the manufacturer, as well as provide assistance in product knowledge. This will allow customers in the market for new telecommunications technology to have a 'one-stop' shopping experience. For service differentiation, on-line chat will be available for customers instead of only looking and reading about a product, the customer can receive up to date advice on the specifics of a product. This is a method that has been used by Dell Computer Corp. also. The third customer value offering is the product mix. Marketing plans to offer all mobile communication devices, from cellular telephones to hand held devices and have accessories available. "Customer's who prefer one-stop shopping or variety would find such product mixes valuable" (Afuah and Tucci p 57 2000). Place Motorola's Mobile segment strategy is to increase the overall market share in 2006 and solidify its hold on the second-largest world-wide market share of wireless handsets (Motorola 2005). The segment experiences intense competition in worldwide markets from numerous global competitors, including some of the world's largest companies. The segment's primary competitors are European and Asian manufacturers. Currently, its largest competitors include Nokia, Samsung, LG and Sony Ericsson. Financial1 Data And Projections.2 Projected Costs Annual Salary/Cost Server / Liscencing $ 13,800.00 DatabaseServer $ 5,000.00 Networked Software $ 12,000.00 Client Setup $ 7,600.00 Content Creation $ 16,500.00 Web Site (Estimate based on capability and usage, only for the CRM service) $ 5,000.00 Training Costs (www.intrack.com) $ 21,000.00 Program Coordinator/Head IT $ 69,000.00 Programmer 1 $ 55,000.00 Program $ 32,000.00 CRM-Policy Creation $ 2,200.00 Marketing Budget at 10% $ 60,000.00 Total $ 299,100.00 Net Present Value Assuming the annual revenue of 600,0003 and total costs of implementation at 300,000, the net present value based on future values can be forecasted over a five-year project plan timeframe. The NPV investment begins one period before the date of the investment and ends with the project conclusion (this is based on the estimation that technology is viable for five years). The NPV calculation is based on future cash flows. NPV is similar to the PV function (present value). The primary difference between PV and NPV is that PV allows cash flows to begin either at the end or at the beginning of the period. Unlike the variable NPV cash flow values, PV cash flows must be constant throughout the investment. The following chart measures the expected NVP and PV based on the dimensions of the financial analysis above. With a discount rate of 3.00% and a span of 5 years, projected cash flows are worth $582,524.27 today, which is greater than the initial $300,000.00 paid. This is true at increased discount rates as shown in the following table, Intranet/Database: Intranet/Database 3% 5% 7.50% 10% Investment--5 yr -300,000 -300,000 -300,000 -300,000 NVP $282,524.27 $271,428.57 $258,139.53 $245,454.55 PV Cash Flow $582,524.27 $571,428.57 $558,139.53 $545,454.55 The resulting positive NPV of the above project is $282,524.27, which indicates that pursuing the above project may be optimal. The NVP chart shows the incremental percentage of revenue increase based on initial investment and forecasted sales: The life-span of this project is 5 years, and the present cash value is based on that assumption at variable discount rates of 3%, 5%, 7.5% and 10%. Organisation Motorola's Network segment provides end-to-end cellular networks, including radio base stations, base site controllers, associated software and services, mobility soft switching, application platforms and third-party switching (Motorola 2005). Connected Home Solutions is a service segmentation that designs manufactures and sells a wide variety of broadband products. the segment provides interactive digital set-top boxes and Internet gateways that provide access to entertainment and two-way communications services (Motorola 2005). These segments have similar strategies and function as service products. Motorola's Network and Connected home solutions segment focuses on a strategy to enable reliable mobility across multiple access technologies, including cellular, PON and wireless broadband (Motorola 2005). Motorola's strategy in this segment is highly based on developing better technology and maintaining a strong level of competitiveness, showing a strong tendency towards responsiveness towards the customers' needs and assurance of knowledge management and service continuity (Motorola 2005). Implementation Plan Table 4: Media Flow Chart shows the expected implementation timelines. Table 4: Media Flow Chart Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Network Magazine Retail Mailers/In Store Internet Evaluation And Control Ongoing market communication plan tests will show the effectiveness of the marketing campaign. The market testing should occur in phases along with the advertising campaign. Funds from the marketing budget should be allocated to research and campaign testing in an amount determined by the cost of researchers. This generally runs a few thousand dollars, although prices can exceed tens of thousands. The deeper the market research, the more data intense the results are. Conducting ongoing MC test will enable Motorola to find more effective ways to use the marketing campaign. It is recommended that the research encompass the multiple media channels and target markets in relationship to the campaign objectives previously outlined by examining what percentage of the media budget is spent on the media vehicle and the resulting analysis of the data to reveal what avenue produces the greatest brand awareness (Moorey-Denham 2005). A marketing database will track where media exposure is conducted in relationship to the number of consumers exposed to the advertising. The outcomes of the project will be benchmarked against companies that use similar applications in their business function to determine if revenue increases are consistent with major competitors in the same industry. The outcomes will be compared with industry standards in: Technology usage E-business Innovation Customer/quality metrics Inventory Control Marketing/sales Servicing/support The purpose of the benchmarking is to identify areas that require process improvement by verifying and measuring performance against similar organizations based on trends and performance data. The process of benchmarking outcomes first requires the identification of the benchmark. This ensures that information is correct. In many cases, benchmarking involves partnerships with similar or consolatory organizations to develop a set of common operational definitions, characteristics and statistics. The collected information is the examined using several analysis techniques, such as a gap analysis to define holes in order processing. References Afuah, A. And C. L. Tucci (2000). Internet Business Models And Strategies: Text And Cases. Burr Ridge, IL, Mcgraw-Hill Irwin Brown, Ken And Latour, Almar, (2004) Phone Industry Faces Upheaval As Ways Of Calling Change Fast. The Wall Street Journal, August 25, 2004, P. A1. Conner, KR And Prahalad, CK (1996) A Resource-Based Theory Of The Firm: Knowledge Versus Opportunism, Organization Science,Vol. 7 pp 477-501 Distefano, J. J. And Maznevski, M. L. (2000). Creating Value With Diverse Teams In Global Management. Organizational Dynamics, Vol. 29, 45-63. Hesseldahl Arik (2005) Motorola's Razr Thick Profits. Business Week Online. [Online] http://Www.Businessweek.Com/Technology/Content/Oct2005/Tc20051018_039341.Htm] Hirst, Paul And Grahame Thompson. (1996). Globalization In Question. London: Polity Press. Milner, Nick (2006) Waste Not, Want Not Telecommunications - International Edition; Jul2006, Vol. 40 Issue 7, P22-28, 3p Moorey-Denham, Suzanne (2006) Take A Holistic Approach To Channel Evaluation. New Media Age; 1/20/2005, P7-7, 2/5p Motorola (2005) Annual Report. Motorola, Inc. 1303 E. Algonquin Road Schaumburg, Illinois 60196 U.S.A. [Online] [Www.Motorola.Com] Nasir, Suphan, Nasir, V. Aslihan (2005) "Analyzing The Role Of Customer-Base Differences In Developing Customer Relationship Management Strategies." Journal Of American Academy Of Business, Cambridge Vol. 7 Issue 2, P32-38, 7p Ripsas, S. (1998) Towards An Interdisciplinary Theory Of Entrepreneurship. Small Business Economics 10, 103-15. Rycroft, R. (2002, October 7). Technology-Based Globalization Indicators: The Centrality Of Innovation Network Data. Retrieved July 10, 2006 From Http://Gstudynet.Com/Gwcsg/Publications/OPS/Papers/Rycroft.Pdf. Simms, Jane (2005) "Promises, Promises" :Marketing (UK) Haymarket Business Publications P30-32, 3p, Zeithaml Valarie A., Parasuraman A., Berry Leonard L. (1996): Problems And Strategies In Services Marketing. Journal Of Marketing (Spring 1985), Pp. 33-46 Read More