Modern Business Concept of the Oxygen Bar - Case Study Example

Oxygen Bar Oxygen Bar: Marketing Design for Contemporary Business Establishment YOU ORGANISATION Oxygen Bar 2 Abstract This project will focus on the modern business concept of the oxygen bar and determine the factors driving successful implementation of a new oxygen bar on the campus of Andrews Adult School. Contributing literature both heralds and criticises the effectiveness of an oxygen bar, however the presence of these bars is becoming increasingly favourable across the globe; indicating that there is a genuine market for this contemporary service. This work highlights the author's employment by the campus Design Group to identify external factors that might affect the success of the new oxygen bar and explore how these factors might change over the mid-term. It will discuss the appropriate market segmentation strategies, illustrate concepts for increased oxygen bar reliability, and highlight an acceptable pricing strategy and promotional plan for the launch of the Andrews Adult School Oxygen Bar. Michael E. Porter suggests that businesses must search for a sustainable competitive advantage, which comes from developing a distinctive way of competing (Goett, 1999). As part of the marketing strategy for the oxygen bar, methods for setting it apart as a distinctive brand will be addressed. Oxygen Bar 3 Oxygen Bar: Marketing Design for Contemporary Business Establishment Identifying External Factors Affecting Success of the Andrews Adult School Oxygen Bar, Exploring Mid-Term Factor Change Potential & New Entrant Market Attractiveness Population growth and changing demographics are examples of social trends that can have an effect on sales (Nickels et al, 2005). As part of a well-organised PESTLE analysis, the identification of external factors directly affecting the success of the oxygen bar has revealed several relevant issues that could positively impact its survival within the market. It might be argued that oxygen bars are a socio-cultural trend towards better health, as oxygen has been said to boost energy, heighten concentration, reduce stress and detoxify the blood (Davis, 2003). The actual effects of frequenting the oxygen bar are socially independent, meaning that those individuals who have used the bars have found different personal satisfactions regarding oxygen usefulness for health and well-being. However, understanding that oxygen bar popularity has been on the increase globally, similar external social factors towards better, healthy living might well impact a strong customer loyalty to the service. In the mid-term, it is possible that new developments in health-related, professional research might indicate a different social trend towards health initiatives, negating positive consumer perceptions of oxygen effectiveness. It might be argued that consumer preferences fluctuate periodically, however, an individual need only witness extensive literature available on UK health studies to visualise a growing trend in better health awareness. Therefore, in the mid-term, no dramatic fluctuations Oxygen Bar 4 in socio-cultural values regarding customer discontinuation of the oxygen bar concept are anticipated. Economic factors, in the short term, do not necessarily affect the ongoing success of the Andrews Adult School Oxygen Bar as the pricing structure for the service will be kept at competitive levels. Pricing will be discussed later in the analysis, but it has been determined that the bar will be maintained at an affordable level, allowing for a broader market to be targeted for bar advertisements. From a community perspective, the oxygen bar will open new job opportunities (especially for the campus student population) and might be accepted for its positive economic impact on the community. In the mid-term, assuming the oxygen bar maintains a level of business and profit success in the community, advancing economic impacts could include more job opportunities to staff the business due to increasing customer demand for the service. It is determined that the oxygen bar maintains the ability to increase economic growth within the community both at start-up and in the mid-term of business operations; based on expected levels of consumer loyalty. From a legal perspective, bar operators must be careful to not make claims about the medically-related affects of oxygen. As it has been suggested that there are no well-controlled scientific studies supporting healthy living through oxygen inhalation, the bar and its staff must clearly indicate its stand on oxygen use as a recreational activity for relaxation and leisure. From both a legal and political perspective, safe handling and internal physical conditions must be maintained in order to satisfy the health and safety aspects of oxygen. Oxygen is known to enhance Oxygen Bar 5 combustion so the business must recognise hazards related to smoking, fire safety measures, and levels of machine-related sterility to protect the consumer from exposure to contaminants. It is the responsibility of the oxygen bar leadership to understand all of the legal and political processes involving operation of the facility, establish appropriate control measures, and receive the appropriate licensing involved in satisfying governmental regulations. Mid-term, it is somewhat logical to assume that health and safety restrictions may grow "tougher" and demand more control measures when it comes to customer safety. Therefore, for regulations to lessen is not expected in the mid-term and the oxygen bar proprietors must be continuously up-to-date on changing trends in legal and political expectations regarding the operation of the bar. In fact, posting safety or certification literature within the bar (in the customer's clear view) will satisfy the external demand for an environment that is certified safe and well-maintained. Harrods, the privately owned Knightsbridge department store, is set to go global in the first significant expansion of the world's most famous shopping brand (Steiner, 2006). As part of its expansion project, the retailer's convenience concept includes new and trendy ideas including staffing Chinese herbalists, offering beluga caviar and oxygen bars. As one component to making the market attractive to new entrants, witnessing Harrods' adoption of the oxygen bar as an acceptable market risk indicates that oxygen bars maintain the potential to increase profitability as a business strategy. Because the concept is on the rise, and not decreasing, adoption of a somewhat trendy business idea by a major "player" in global business might make company strategists look towards oxygen bars as a wise investment. Oxygen Bar 6 Some might argue that Harrods' adoption of the oxygen bar concept will drive increased domestic competition, in the long-term, however domestic competition is seen as lowering costs, improving quality and creating new products and processes as companies compete for market share. The more intensive the rivalry, the greater the beneficial effects (Bretherton, 2004). Increasing competition, in the case of the relatively newly-emerging oxygen bar, will only help to sustain changes in oxygen infusion technology or new aromatherapy additives that give greater variety on the market to sustain a profitable oxygen bar business. Since oxygen bars have not made it, yet, to the corner of every local community, this gives the Andrews Adult School Oxygen Bar (and others in the broad market) an opportunity to establish a recognisable brand name in the hopes of expansion; while the concept is relatively young it allows for a brand-recognition that may well carry consumer loyalty towards each expansion of the oxygen bar. Further, in the local community, a lack of competition makes this an attractive market in the short-term as geographically, the oxygen bar maintains singular distinction as a locally new service concept. In addition, the term bar promotes the idea of congregating for social activities and the campus oxygen bar would provide students with a forum to socialise. In this case, during the start-up phase, an oxygen bar offers the proprietor a unique service operation that can corner the local market for individuals who might desire to frequent the establishment. As part of market attractiveness, value chain analysis can be used to ensure that all activities in the oxygen bar are in line with its pursuit of value, which is Oxygen Bar 7 simply the reason why consumers prefer one company's product over that of its rivals (Taylor, 2005). In reference to Porter's five forces, entering the market for the sake of promoting value can offer significant buying power for the oxygen bar. Suppliers, who may not be offering oxygen-related equipment in excess, would be wise to negotiate supply agreements with the new oxygen bar that favour the business' pursuit of value. With the assumption in mind that suppliers are not being bombarded by overwhelming demand for oxygen bar equipment/supplies, it offers leverage to an emerging market entrant to substitute its own expectations of value in contract agreements rather than the supplier dominating equipment prices. In the mid-term, as more oxygen bars open their doors, supplier power (especially in pricing) would increase and drive down value. This is a significant reason why early entrants could view the investment as attractive. Segmenting and Evaluating the Market - Target Market Recommendations and Customer Psychographic Profile for Potential Facility Users Market segmentation in this case involves geographic, benefit, and psychographic segmentation. Geographically, the location of the oxygen bar on campus divides the market audience into three specific groups: Students, staff and the general public. It is likely that students and staff will make up the majority of the oxygen bar business based on its location. Students and staff are the most realistic target market for the bar and advertising to this group can be accomplished somewhat cost-effectively as promotional literature can be distributed/posted on campus. Student lifestyles generally consist of similar interests such as study habits and Oxygen Bar 8 socialisation desires amongst peers. When establishing the appropriate methods to reach this audience, these factors must be taken into consideration. A survey or opinion-based study can be conducted about student lifestyle behaviours or upfront opinions about their perceptions of a potential oxygen bar would serve to create an analysis of the services offered to cater to the campus student. If a significant portion of student response indicates they would prefer a comfortable, social environment, this would create a chartable psychographic representation of student expectations for an oxygen bar. Staff psychographic profiles is likely less socially-oriented and are more interested in the relaxation, therapeutic effects of the oxygen bar. With staff as a considerably large portion of the target market, similar survey analyses can be done to indicate trends in lifestyle and opinion regarding the layout of the bar. Staff may wish to keep a professional distance from excessive socialising with students and may consider a short trip to the oxygen bar as an acceptable release of stress. For this group, with this potential profile in mind, sections of the campus oxygen bar must be equipped for immediate service, or "in and out" therapy. The general public is a more difficult market to reach, simply because of the on-campus location for the oxygen bar. More intensive literature must be distributed if the business wants to gain increasing patronage from this group. As part of benefit segmentation, the business should highlight the psychological effects of aromatherapy. Attempting to avoid niche marketing for the sake of increased profitability through high customer volume, it is important to make the target market Oxygen Bar 9 a broader objective. The overall benefits of the oxygen bar vary from potential health benefits, to socialisation, to sanitary objectives, positive psychological effects and even to simply satisfy the human propensity to be "hip" or "trendy". With this in mind, the campus oxygen bar has the potential to appeal to a wide variety of individuals and should be marketed accordingly. The return on advertising investment can be witnessed by analysing the majority of the frequenting patrons and adjusting marketing to fit specific market segments based on this information. Through a variety of approaches, (the oxygen bar) will be able to identify how best to talk to customers, and then translate the information across all marketing activity (Scott, 2003). Oxygen Bar Reliability and Key Quality Characteristics for Customers - Establishing Quality Management Techniques and Implications Providing a service is fundamentally different from manufacturing a product (Burke et al, 2005). Products entail significant investments and cost of goods sold, whereas service industries rely on establishing relationships with customers in order to generate repeat business. Whereas relationship marketing is usually focused on ensuring the relationship with existing customers is the best it can possibly be, the goals of brand-building are more often associated with marketing to new customers (Precision Marketing, 2003). In the case of the Andrews Adult School Oxygen Bar, brand-building involves customer perceptions about reliability. In order to ensure a quality customer experience, the business must ensure that its staffing needs are fitted appropriately to customer volume. Adequate management and bar staff have been allocated for the initial launch of the oxygen bar, designed to Oxygen Bar 10 meet university regulations and salary-payment capabilities of the emerging business. If the business sustains unexpected growth in its early operational stages, to ensure a reliable experience, the bar will need to reassess its employee volumes to satisfy a timely and effective oxygen experience for the customer. Reliability, in this case, means adequately available, working equipment, rapid staff response to customer concerns, variety of aromatherapy products, and an absolute guarantee of safety precautions. Quality management techniques, designed to satisfy the reliability aspect of the customer experience at the oxygen bar, involves continuous monitoring of the business to ensure that all of the factors affecting quality are addressed; primarily, ensuring the safety of the customers. In spite of the fact that oxygen is not combustible, high amounts of pure oxygen need to be handled carefully and staff must ensure that anyone who enters is not carrying cigarettes, matches or lighters. Further, safe-handling procedures must be communicated to the entire staff to ensure compliance. Posting safe-handling literature, in clear view of the customer, will add a sense of a safe, reliable experience. As previously mentioned, costs of staffing employees directly affects the reliability of the oxygen bar customer experience. It is important for the management staff to recognise any breakdowns in response time due to staff shortages and express to the proprietor any needs for increased labour. Of course, budget restraints will definitely impact the feasibility of staffing so continuous analysis of process might simply indicate a restructuring of the service process to eliminate service response breakdowns. For instance, if customer volume exceeds expectations, there is the Oxygen Bar 11 possibility that staff shortages will affect the disposal of the nasal cannullas prior to a new customer's desire to utilise the equipment. Also, because the bartender controls the valves which regulate oxygen/aroma flows in the infuser, this is a manually-intensive operation that would be difficult to satisfy with high customer volumes. The manager must then be responsible to document service failures relating to the customer experience in order to track changes to process or indicate any need for higher staff levels. Also related to reliability is in the availability of the different varieties of aromas available for the customer experience. As part of the quality management technique, adequate inventory levels must be stocked, tracking the popularity of particular fragrances in order to meet customer demand. If a trend is indicated highlighting peppermint as the most widely requested flavour, steps must be taken to ensure an adequate supply. If a customer returns more than once and requests a particular scent and is met with zero supply, he/she will likely find the establishment unreliable and fail to return in the future. The oxygen concentrator consists of an amber warning light that indicates when oxygen purity falls below 85%. An alarm then chimes if impurities last for over five minutes. As part of the quality management technique, staff and management must not allow the customer to perceive continuous interruptions to oxygen purity. It is logical to assume that a frequenting customer will be aware of the alarm's implications and if he/she feels "slighted" by ongoing impurities, the business reputation as a reliable service will suffer. As has been mentioned, most of the quality Oxygen Bar 12 techniques performed to satisfy the customer must be accomplished with staff capabilities or a workable operational process. Implications for the quality management techniques, primarily, affect the operating budget of the oxygen bar. If it becomes indicated that more staff needs to be hired to address customer concerns, and the budget cannot allow for the overage of labour, then a process reorganisation should be considered. This is quite important, then, for continuous analysis of the process to be conducted to highlight discrepancies in service and how to address the issues with minimal staff. Recommended Marketing Strategy - Pricing Strategy - Promotional Plan - Evaluating the Success of Strategy in Marketing Mix The marketing strategy for the campus oxygen bar will be the distribution of intensive advertising both to the staff and student population and to the general public highlighting the upcoming arrival of the Andrews Adult School oxygen bar. For staff and students, literature suggesting the therapeutic effects of oxygen inhalation will be illustrated along with social capabilities of the informal, open feel of the business; along with "in and out" service for busy professionals. Social lounges, with appropriate oxygen paraphernalia, will be established in all marketing literature. Targeting the student and the socially-minded individual will be the focus of most poster, pamphlet, and print media advertisements; designed with operating budget in mind. The traditional bar stool and surface bar will be established for the busy professional, while the deeper interior will be lain out with sofas and a more contemporary, social d'cor. In all distributed literature, the comfort and convenience Oxygen Bar 13 of the campus oxygen bar will be highlighted to offer potential consumers that ability to choose which section of the bar works best for their needs. For the staff, student and general public, the variety of environment will be tailored to fit the needs of the entire target audience and advertised accordingly. Public relations objectives can be satisfied specifically on-campus as assigned members of either the design group or campus volunteers will spontaneously meet with students commuting from one section of the campus to another, hand out staff and student printed pamphlets highlighting the grand opening, and distribute "punch card" coupons for a free three minute inhalation visit after purchasing three at regular price. As a one-time promotional campaign, this would not be an ongoing expense at operating budget, but would promote staff and students to simply try out the service with the promise of a free visit as a reward. Approximately four weeks before the grand opening, newspaper advertisements in local community papers will also offer the "buy 3, get 1" offer, along with a description of ambiance and variety of oxygen services will lure the general public (regardless of segment desire to patronise) into trying the new oxygen bar. Further, with the advent of increasing reliance on the internet as a tool, the oxygen bar website will promote the grand opening of the business along with an inexpensive virtual tour of the facility layout; satisfied by digital web-posted photography of the business interior. This website will be printed on all available literature. As a factor affecting the entire target audience, the oxygen service itself will be explained in detail in promotional literature with a description of oxygen's proposed health effects, commentaries from individuals who "swear by" the service, Oxygen Bar 14 and the literature about oxygen purity's effects on overall well-being. Being certain to satisfy legalities, liability commentaries indicating that the oxygen bar in no way guarantees the validity of health statements will be pre-printed on all advertisements that highlight these factors. Pricing should take into account costs, but it should also include the expected costs of product updates, the objectives for each product, and competitor prices (Nickels et al, 2005). In order to compete on price, a firm has to be low cost. Often, all frills have to be sacrificed in the interests of delivering the lowest-price product available (Scott, 2003). The "no-frills" approach to the "in and out" customer will be represented by the low cost pricing structure. Research into existing oxygen bars indicates that '1 per minute "hits" is the industry norm for competitive pricing. In order to satisfy the campus oxygen bar's objectives for increased profitability and to assist staff budget constraints, the '1 per minute is an acceptable pricing strategy for the service. Once a significant customer loyalty to the service has been established, if the need to slightly increase pricing becomes necessary to assist budget guidelines, this can be done in small increments to avoid customer distaste around pricing. These objectives satisfy product, price, place and promotion. People, as part of the seven P's, will be satisfied with a humanistic approach to marketing. Testimonials of individuals who have established romantic relationships, long-standing friendships, or simply social characteristics of oxygen bars will be highlighted in the distributed literature. Individuals who might look towards the oxygen bar as an alternative to the traditional alcohol-serving bar might look towards the business as a location for dating potentials. As time progresses, this type of Oxygen Bar 15 promotional literature can be supported by testimonials from those who have frequented the Andrews Adult School Oxygen Bar. Physical evidence, as supported by the ambiance of the oxygen bar, will be supported by the pictorial representation of the internal d'cor of the business, as well as the high-tech colours of the "dancing" lights, in order to attract individuals who are drawn to club or dance hall environments. Process, as established by brief statements of staff activities and attitudes, will be marketed by engaging customers with the operating employees of the company and their objective to make the customer experience an enjoyable one. Extensive Pricing Effectiveness It is the projection that the oxygen bar will sustain 150-200 patrons in a normal operating day. With the price in place of '1 per "hit", and an average inhalation period of 5 minutes, the potential to generate, minimum, '1,000 in customer revenue is forecasted. In a six day operating period, that is '6,000 weekly in service fees. Some loyal customers, who will likely exceed the five minute "standard projection" will likely increase service income by a significant margin. As part of the quality management process, monitoring sales and customer average inhalation times is crucial to establishing a mid-term pricing structure. As with all of the factors involved in the seven P's, continuous monitoring of income generation and customer demographics is vital to improving and increasing marketing effectiveness. Any noticeable trends must be immediately considered to drive changes to the oxygen bar business policy. As with any business, failure to recognise potential opportunities for Oxygen Bar 16 growth, both in business and in advertising strategy, is a failure to maintain a quality business that drives profitability and creates a strong impact on the community. If the bar realises that its marketing is not drawing, for instance, the health-conscious individual, the likely steps are to change the method of advertising or to focus a heavier objective to target a different audience. The Andrews Adult School Oxygen Bar's success will be driven by its initial attempts at gaining a consumer audience, establishing a reliable brand, and allocating marketing funds according to any noticeable changes in customer perceptions, customer demand, and business process. Oxygen Bar 17 References Bretherton, Phil. (2004). 'National Competitive Advantage as the Context for Marketing Strategy'. International Journal of Wine Marketing. Patrington: 16 (1), p.36. Burke, Ronald J, Graham, James & Smith, Frank J. (2005). 'Putting the Customer Second'. The TQM Magazine. Bedford: 17 (1), p.86. Davis, Robert J. (Aug 5 2003). 'Personal Health -Aches & Claims: Are Oxygen Bars Just Hot Air'' Wall Street Journal. New York, NY: p.D8. Goett, Pamela. (Sep/Oct 1999). 'Michael E. Porter (b.1947): A Man with A Competitive Advantage'. The Journal of Business Strategy. Boston: 20 (5), p.40. Nickels, William G., McHugh, James M. & McHugh, Susan M. (2005). Understanding Business. 7th ed. McGraw-Hill Irwin. United Kingdom, p.447. Precision Marketing. (May 30 2003). 'Claritas to Boost its File with Psychographic Data'. London, p.5. Precision Marketing. (Oct 31 2003). 'Special Report - CRM: Thrill of the Chase'. London, p.24. Scott, Mark C. (2003). 'Bullet Proof: How to Make Yourself Indispensible". Career Development International. Bradford: 8 (5), p.242. Steiner, Rupert. (March 12 2006). 'Harrods Goes Global with Concept Stores'. Sunday Business. London. Taylor, Martin. (Nov 2005). 'Management Accounting - Business Strategy'. Financial Management. London, p.38. Read More