The Rainbow Bottle - Research Proposal Example

Project report on the Rainbow Bottle Introduction: This is a marketing plan for the rainbow bottle. In a nutshell the rainbow bottle is temperature sensitive bottle for babies. If the temperature of the liquid in the bottle is too hot for the baby, the bottle turns red. If the temperature is too cold the bottle turns blue and if it is just right, it turns green. It is designed for mothers and mothers to be. It clearly results in a lot less stress for the mothers, who have to ensure the perfect temperature for the baby. This would eliminate guesswork, constantly using the thermometer while waiting for the liquid to cool down for the baby. Target Retailers and Customers: While the direct customers are mothers and mothers to be the target retailers are Mothercare, Sainsburys or any retailer that stocks baby products. The aim of this project report is to create a market plan for the project report and structure applications, promotions price and distribution of this product. Structure of the Market: "The current baby bottle market in the United States is estimated at $154 million. Of this amount, reusable baby bottles hold 55.2 percent, $80 million of the market, while the remaining 48 percent is held by disposables. Disposables are defined as baby bottles that are designed for bottle liners and the liners are discarded after each use. The disposable market had grown to a peak of 53 percent of the baby bottle market in the United States, but had shown a steady decline as a percent of the total market over recent years. The average customer for a baby bottle product is a female in her late twenties who is, or will be again, employed outside the home. Because the majority of customers of baby bottles work outside the home, time and convenience is heating bottle accurately are of the essence" Market Size and Trends After peaking at a post-baby-boom of 4.16 million in 1990, the number of births in the United States is expected to stabilize at approximately 4 million and remain at that level through the turn of the century. The current baby bottle market in the United States is approximately $154 million, or 73 million units a year. Currently, reusable bottles constitute 52 percent of the baby bottle market, or 38.6 million units a year. Reusable bottles have increased their market share over disposable bottles by an average of 2 percent a year over the last years. The trend of reusable bottles capturing a larger share of the baby bottle market is expected to continue over the net several years.i Competition and Competitive Advantages Although there are several major competitors in the baby bottle industry, none of these are currently marketing a product that indicators the temperature of the liquid in the bottle. Researching the Marketplace Before embarking on the path to retail sales, companies should fully understand the consumer market and how their product might fit into it. That is true for the rainbow bottle as well Differentiation. "If the product category already exists on retail shelves, then the new product should be differentiated from existing competition. A me-too product is unlikely to unseat established brands already selling well. However, if the me-too product has a price advantage, there is an opportunity to displace an established product. Increasingly, private labeling for the retail store is an available option."ii Successful companies seek to differentiate their product by giving it features that are desired by consumers. Also, they make sure that consumers are willing to pay any resulting difference in price. In retail sales, conducting research among potential consumers of a product is necessary for understanding the marketplace and ensuring success. There is a clear cut differentiation with the Rainbow Bottle. It is different from the other baby bottles and satisfies a genuine need for mothers New Product Category If a company seeks to market a new product that is not in an established retail category, its need to conduct market research is even greater. The company essentially will be defining a product category and thus will have to convince channel partners-such as pharmacies and chain stores-to carry the product. Key items to research are the following: - The size of the potential market. - Remedies currently used to treat the condition addressed by the new product. - Places where consumers would likely seek such a product. - Prices the market would bear. - Sources of influence on consumer product purchasing decisions (such as their doctors). Many companies recognize also that retail stores are a good source of information on consumer purchasing behavior. Seeking appointments with the category buyer for the product line is a good way to initiate dialog with a potential channel partner. Buyers are more likely to accept appointments to discuss a product concept if the manufacturer is prepared to show product drawings or prototypes, and perhaps mock-ups of the packaging. While retail buyers will not reveal information about specific competitors in a product category, they generally will provide solid information about their experience with the category and share informed opinions about product features, pricing, and market positioning. The size of the market is already known. The remedies such as heating, cooling and measuring the temperature of the liquid in the bottle are also already known. The retailers where the customers go to earlier has also been explored earlier, the prices which the market will bear, in other words how much premium would mothers pay for the extra convenience and safety for the rainbow bottle needs to be figured. And finally how would the end customers be convinced that this is a legitimate product which will benefit them, needs to be answered and will be answered in this project report. Current Alternatives for Mothers There are bottle warmers in the market. bottle warmer sometimes heat the milk unevenly. Some model of baby bottle warmers only heated the very bottom of the bottle. The steam covered the bottom and never had a chance to really heat the top. Boiling is an option , but that is worse , since you are not really in control of the temperature. Microwave heating has both the above disadvantages. IV. ECONOMICS OF THE BUSINESS The innovative Rainbow bottle costs $.35 per unit more to produce than a standard baby bottle. The new feature, however, will allow the Company, and retailers, to market the product at prices comparable to other premium bottles currently available. At a suggested retail of $6.99, a cost to the retailer of $5.19, and a cost to manufacture and deliver the product of $.92, projected gross margins and the retailer are 58 percent and 45 percent, respectively. Initially, the Company will produce a clear, quality plastic bottle to enable the customer to see the difference in this product and other bottles. A decorated bottle would obscure the feature that the Company has developed and result in the appearance of "just another baby bottle." Once the Company and its bottle have achieved recognition and acceptance in the marketplace, it will then consider adding graphics to the product which results in little additional cost but is perceived as value added by the consumer. Continued profit potential and durability exist as births in the United States continue at approximately four million annually. In addition, these four million births comprise only two percent of the world's births. Rainbow bottle plans to secure patents in all countries where there is a market for the produce once final approval of the United States patent is obtained and full production begins. Fixed costs for the Company will be low as the product will be manufactured by currently existing plastics manufacturers and shipped directly to the retailer. The main fixed costs will be for office and limited warehousing space. The company will initially employ three personnel to manage and operate a small office to service the needs of consumers and retailers as well as staff a small warehousing operation to fill small or emergency orders. The use of brokers and sales representatives will significantly reduce the amount of fixed labor cost to the Company Competition and Competitive Advantages Although there are several major competitors in the baby bottle industry, none of these are currently marketing a product that indicators the temperature of the liquid in the bottle. The Safe-Temp bottle provides this key feature with only a minimal increase in manufacturing cost over standard bottles. Only one other company has attempted to market a temperature sensitive baby bottle. Ansa Bottling manufactured such a product under the trade name Heat Sensitive and later Comfort Temp. This product was being produced and marketed when the current owners, according to John Iodise, President of Ansa Bottling, purchased the company. The Bottle Ansa designed neglected one major fact of baby bottle usage; sometimes bottles are heated from the outside in (boiling water) and sometimes from the inside out (microwave). Their design simply used the bottle's surface plastic to indicate the temperature. An opaque blue or pink plastic would turn white when the contents were too hot. This neglected the fact that microwaves heat from the center so only after the bottle was shaken would it provide an accurate indication. Due to its inaccurate operation, it was withdrawn from the market. Despite their disappointing results, Ansa's efforts confirmed that based on market surveys, there is market for a bottle with a temperature sensor. In addition, Iodise felt their lack of success was the result of a design flaw and not a lack of market. The Safe-Temp bottle overcomes this shortcoming in its design of the temperature indicator device. MATC Baby bottle is another competitor: To use the MATC Baby Bottle Temperature Indicator, you have to apply the the strip in the most appropriate manner on the outside of your baby's bottle so that the "OK" or green liquid crystal temperature area is slightly below the middle of the baby bottle (at approximately the 4 oz. or 120 ml mark). Fill the bottle, and heat it any way you prefer, and shake the contents to ensure that the contents are evenly heated. Then watch the Encapsulated Liquid Crystal strip for an image to appear after a few seconds. A "Snowflake" indicates that the content inside the bottle is too cold; a "Flame" indicates that it is too hot; the word "OK" indicates that it is within the optimal temperature range for feeding. Once this simple-to-use device is placed on the baby's bottle it can be washed, placed in the dishwasher, and it can even go in the microwave without damaging the product. MATC's Baby Bottle Temperature Indicators, as with all items in the MATC Encapsulated Liquid Crystal product line, can be custom printed or die-cut into any shape to create a high impact promotional or premium item tailored to suit individual customer requirements. TECHNICAL SPECIFICATIONS The MATC Baby Bottle Temperature Indicators utilize innovative Encapsulated Liquid Crystal (ELC) technology. The standard Baby Bottle Temperature Indicators incorporate a 4.4 cm Wide X 6.1 cm High ELC strip with three temperature indicators, each measuring 4.0 cm Wide X 1.9 cm High. When the ELC displays a "Snowflake," this represents the baby bottle contents as being "Too Cold," and has a specific temperature range of 28.5 - 33.5 (contents 30-35) degrees Celsius . If the ELC displays "OK," this is the most suitable generally accepted temperature for serving, and has a temperature range of 34.5 - 36.5 (contents 35-38) degrees Celsius. When the ELC displays a "Flame," this represents the baby bottle contents as being "too hot," and has a temperature sensitivity range of 37.5 - 45.0 (contents 39-46.5) degrees Celsius. Please note that we have applied a variance curve based upon extensive testing in our development labs so that the actual temperature of the contents in the baby bottle will always be approximately 1.5 degrees Celsius above the specific temperatures being measured by the MATC BABY BOTTLE TEMPERATURE INDICATOR on the liquid crystal area at each of the three levels. MATC again requires a certain degree of expertise in placing of the label and it may not always be very clear. And it is definitely to miss the color of the entire bottle as opposed to looking at a small labeliii VI. DESIGN AND DEVEOLOPMENT PLANS A preliminary prototype of the Safe-Temp bottle has been manufactured. The prototype provides a functional model of how the final bottle will look and operate. A secondary prototype (Stage 2) will be developed for completion of testing. The initial prototype's spring was manufactured using a cold forming process. This process involves heating the plastic rod a formidable state and then cooling it into a spring shape. The process is slow, costly and produces inconsistent springs. The secondary prototype's spring will be made using an injection molding process. The process is utilized to manufacture 90 percent of all plastic parts. The process provides high production capabilities, low cost, consistent properties and low maintenance. The main advantage of an injection-molded spring is the consistency in the manufactured product. This same process is presently utilized to manufacture baby bottles. The initial cost of each mold is approximately $25,000 to $30,000. These same molds will be used for the initial manufacturing stage of the project. Experts in the plastic injection-molding field advise that no manufacturing problems are foreseen at this time in light of the simplicity of the molds. Several weeks will be required to perfect the molding process and optimize production. Since an injection molded plastic spring has not been utilized before, adjustments may be required in the plastics composition to obtain the correct properties. In light of the more than 500 commercially available plastics on the market a substitute for the existing polymer will be available if needed. Testing will require the new spring to be operating in environments replicating overheating and microwaves, exposure to detergents and extended heating and cooling cycles. Each test will subject the spring to extreme conditions. The present plan is to utilize plastic polymers presently used in baby bottles and microwavable containers (i.e., Tupperware). The injection molding and testing of the thermostat spring is the only technical hurdle for the product. No other moving parts exist in the very simple design of the Safe-Temp bottle. The manufacturing of this critical component will be performed first to limit risk. The other components will follow sequentially. No delays are expected in the manufacturing of other components as several plastic molders are currently producing them. Over time, the Company plans to work in proving the aesthetics of the product with colored plastics, varied bottle shapes and bottle graphics. These changes will increase product variety resulting in increasing sales. The overall schedule (Section IX) details the cost for bringing the bottle to market. It is broken down into stages to show cost during each stage and the milestone to be achieved during each stage. The schedule shows the capital required at each stage and is a tool for illustrating the level of risk throughout the project. The majority of the "funds sought" will be required only after a fully functional product has been developed and tested. To date no product exists on the market that provides the functions of the Safe-Temp bottle. In light of this a patent application has been made and there is a current patent pending. VII. MANUFACTURING AND OPERATIONS The Rainbow bottle during the initial four years will be most likely manufactured in the Far East, where most bottles for the United States market are produced today. The component manufacture will be contracted only through manufacturers identified as quality injection molders. Firms experienced in providing service worldwide will also perform the assembly, packaging and shipping. Alternative suppliers have been identified in the United States, although manufacturing costs are expected to be higher. These sources would have the advantage of shorter delivery time due to its closer proximity. The United States manufacturers will be kept as a secondary source in case supply problems occur. Since the investment castings (molds) will belong to the Company, injection molding can actually take place anywhere worldwide where injection-molding capabilities exist. Manufacturing will occur year round. When manufacturing reaches sufficient levels, bulk purchasing of plastic will be performed during seasonal price drops. This should lead to a materials cost savings of at least five percent. Operations during the initial years will be based in Northwest Florida. This area, having both an international port and airport, will be sufficient during the early years. The area also provides a location base with low labor and warehouse costs. The initial warehouse space selected has ample space for growth and is available at fixed, long-term, low rates. The initial staff will consist of only three permanent employees to operate the office and warehouse. Other employees with needed expertise will join the Company in year two of operations. When sufficient qualities justify the relocation of warehousing, a more central nationwide location will be selected. Initially distribution will occur only in the United States. However, since only two percent of the births worldwide occur in the United States, an incredible potential for future expansion exists. The Company plans to seek foreign patent protection within one year of obtaining its United States patent. To date, no conflicting patents have been identified on the worldwide cross search though the United States Patent Office. Developing a Channel Strategy The company pursuing a marketing strategy must get its product into the hands of the consumer by selecting one or more sales channels. The available choices are either to sell directly to consumers or to use channel partners. Mimi San Pedro recommends following a channel strategy that reflects "where consumers shop and where they prefer to seek products." Companies that pursue direct sales to consumers typically set up e-commerce Websites, since most lack their own brick-and-mortar stores. Because Internet consumers are easily persuaded to report their experiences via the Web, online sales efforts can produce enhanced consumer feedback for the company. Another reason for selling direct is enhanced margins. Companies typically price a retail product with a double margin-the margin the company requires plus margin for potential channel partners that may later sell the product. Until the product begins to be sold through those retail partners, the manufacturer takes both margins through online sales. Companies commonly choose to use retail channel partners because those stores have expertise in reaching consumers. When the product category is already established in mass merchandizing, the manufacturer is likely to start distribution with the big chains. For product innovations, there is often a progression of retailers. The manufacturer may begin with small-scale distribution through small specialty stores, independent retailers and pharmacies, catalogs, and online e-tailers, where the product positioning and associated messages are fine-tuned. "Specialty retailers want to be the first with a novel device, and they expect rich margins to cover the marketing they provide," says Brian Packard. Distribution then is typically broadened to include retail chains, once the product has become a proven seller. While Rainbow bottle can start with the normal retail channels. Eventually it has to explore DTC ( Direct to customer model as well) as numerous baby products are now sold over the internet nowadays. What Retailers Look For The retailer's goal is generally to maximize its total margins per square foot of the store (with similar calculations made for the catalog or Web page). A retailer makes stocking decisions based on whether a new product, relative to the products already carried by the store, would help achieve greater profits. Gross margin for a product is defined as in-store retail selling price minus the cost charged by the manufacturer. The retailer often will look at net margin as well, a figure reached by subtracting the cost of consumer returns and defective units. Margins vary among retailers. In general, specialty retailers look for margins of at least 50% (often called keystone margins), whereas chain retailers expect 40% or more. Retailers will ask the company to provide a sales forecast to help them determine if it makes sense to stock the product. Obviously, when the product has not been sold in a chain retail environment before, it is difficult to forecast sales and that is the case with the rainbow bottle. If the manufacturer has sold the product previously through e-tailers or in specialty retail, these sales data can serve as a starting point for projecting revenues. Companies often aggregate sales data from several e-tailers or specialty retailers when providing this information to retail chains, in order to maintain confidentiality for the individual entities. Sometimes, to quantify a sales forecast requires a test. By offering the product for sale in a limited environment, perhaps in a few stores or through its online store, the retailer can achieve the confidence it needs to stock the product across all stores. The initial order from a retail chain can be very large, especially if a national retailer is ramping up inventory for a couple thousand stores. The manufacturer should plan in advance for such initial orders, in order to be able to obtain ample raw materials, build and package the product, and stage the fulfillment process. Subsequent orders by the retailer will not be as large as the rollout order. The ability to negotiate terms with the retail partner can be inversely proportional to the size of the retailer. It is not unusual for national chains to ask the manufacturer to sign a prepared vendor contract in which very little is negotiable. Creating Retail Packaging Having the right product packaging and messaging is critical for retail success. However, packaging with a retail look and feel is often a foreign country to medical product manufacturers. Successful retail packaging helps drive consumer sales and differentiates one product from the competition. This is very different from the role of typical medical device packaging, which mainly serves to protect the product, and sometimes explains its clinical use. Consumer marketing research is an important part of the package development process. Checking the reaction of consumers during the various stages of development ensures that the message and packaging finally selected are those that will resonate with consumers most effectively. Oftentimes, consumers are asked to help identify the best type of physical package-for instance, a box or a clear plastic package-and to express their preference among alternative versions of written copy. They might also be asked to share their preferences among existing competitive products in the category. Companies conduct this research in order to ensure that their product doesn't get lost in the thicket of choices presented in the competitive retail environment. Notes Natasha Lopoukhine, marketing director at Product Ventures: "One person might see the advertising for a product, but every purchaser sees the packaging." Retail partners can provide informed input on packaging choices. They should be consulted early and throughout the process. Retail buyers can tell the manufacturer whether the product needs to hang on a peg or stand on a shelf. They can also relay experience regarding which package types are subject to damage or tampering. Sometimes, they will share stories of success and failure in package design that involve other companies. Retail Market Launch The retailer looks to the manufacturer to create consumer demand that will generate product sell-through (turnover). Consumer product companies typically create demand for their offerings at launch and through periodic promotions after launch. Oftentimes, they advertise in consumer media, develop in-store promotions with the retailers, such as coupons or a free gift with purchase, or develop Web-based or direct-mail campaigns. Companies, too, should consider some of these traditional strategies, especially at launch, to ensure that their products sell. Retailers typically expect some sort of in-store promotional allowances to be funded by the manufacturer. They may expect a percentage of sales to be given back in the form of a co-op advertising fund. Sometimes they have in-store promotions, store advertising circulars, or other vehicles in which companies can pay to have their products featured. It's not uncommon for retailers to expect the new manufacturer to buy out the inventory of an existing product in order to open up shelf space. Companies sometimes are asked to fund store fixtures. The manufacturer should discuss with the buyer in advance the possibility of such allowances in order to get a feel for what is expected. Many companies consider such promotional allowances a cost of doing business, and they plan for such spending when they price their products. However, it is important to keep in mind the need for price parity across a variety of sales channels. . V. MARKETING PLAN Overall Marketing Strategy The overall marketing strategy for the Company is to offer our baby bottle as "safe, convenient and worry-free". Our unique temperature-reading indicator will give bottle a strategic competitive advantage over other baby bottles on the market. After final development and testing of the product, we will secure the services of a master broker who will concentrate on selling our product in the United States in the retail channels that sell baby bottles. After significant penetration in the United States market, the Company will aggressively purse patents and distribution in foreign countries. Pricing Retail pricing for reusable bottles averages $5.99 for premium bottles and $6.99 for standard bottles. Premium bottles are equipped with a heavier plastic material than standard bottles and may also include a silicone nipple versus a rubber nipple and color graphics on the bottle. The Rainbow bottle will be equipped with heavier plastic and the silicone nipple. Those features, along with our temperature indicating device, will allow us to retail our bottle at premium prices, or a suggested retail of $6.99. Our cost to retailers will be at $2.19, freight included, which allows the retailer to earn a 45 percent gross margin, comparable to the margin on other baby bottle products. Sales Tactics The Company expects that the unique attribute of its bottle will encourage consumers to purchase the product. We will design and develop packaging that emphasizes the temperature indicator on the Rainbow bottle and market the bottle as "safe, convenient and worry-free". Initially, the Company will distribute the product as a floor shipper in as many retail accounts as possible to expose the consumer to our product as quickly as possible. To help achieve this objective, the Company will offer price discounts to retailers who purchase these shippers. To avoid the costs of recurring, training and employing a full-time sales force, the Company will select a master broker to set up an established, experienced sales force comprised of other sales representatives. The master broker will establish sales territories within the United States for each sales representative and add additional sales representatives as the need arises. The master broker will be compensated ten percent of gross sales and five percent of the sales from the broker's sales representatives. In addition, the sales representatives will earn five percent of the sales from the broker's sales representatives. In addition, the sales representatives will earn five percent on their sales. These sales costs have been included in the projected income statements. Warranty Policies The company will offer a money-back guarantee to any customer who is not satisfied with the performance of its products. To assist its customers, Rainbow bottle will provide a 1-800 number on all packaging. In addition, the Company will guarantee to retailers reimbursement for any returned bottles. Advertising and Promotion The Company expects to advertise on a regional, then national basis, in the United States after the first year of sales. Advertising during the first year of sales will be five percent of sales and include point-of-sale materials to place on or near the product in the retail store. For years two and three through five of the plan, the Company projects that advertising expenditures will by four percent and three percent of sales, respectively. The Company expects to use the services of an outside advertising agency to assist in spending advertising dollars as effectively as possible. Distribution Shipping of the Rainbow bottle will be primarily from the manufacturer to the retailer, which will require the Company to provide only minimal warehouse space. Only minimal inventory will be maintained on hand at the Company's warehouse facilities for emergency shipments. This process will eliminate the need for the Company to finance large amounts of on-hand inventory. In addition, the process will keep shipping costs to a minimum. Entry and Growth Strategy The company's entry strategy is to enter the United States market via a master broker who specializes in servicing the mass merchandisers, food stores and drug stores. The current reusable baby bottle market in the United States is estimated at $80 million. The master broker and their reps will earn a commission on the product sold to these retail channels. By utilizing the master broker network, the Company will gain access to retail accounts without the fixed cost expense of developing our own sales force. The Company expects that the unique attribute of the bottle will gain placement in most accounts. The growth strategy for the Company is to begin expanding to foreign markets by acquiring foreign patents in those countries with the highest sales potential. The potential for global sales is immense as 98 percent of the births in the world occur outside the United States. The Company will utilize a broker network within each country to sell its product. Conclusion There is no doubt that Rainbow bottle will be a successful product, for many reasons. It satisfies a need in the market now of convenience for mothers. There is no competition which does what rainbow does better and finally the product is priced in a manner , which gives the extra convenience without a lot of additional financial burden. Read More