XYZ Art Gallery - Case Study Example

Introduction: Galleries and art exhibitions have a wide appeal to all age groups and especially to those in the 35-44 age groups, in the US. Whilst visits to galleries in America increased by 1% in 2003, 2005 saw an estimated 492 million visits to over 2700 galleries in the US. With financial objectivity fast replacing the anecdotal concerns of art, major US banks and pension funds are gearing up to invest between one percent and three percent of their value in artworks as a hedging measure. Sources within the industry claim this could inject an estimated $5 billion pounds into the US market over next three years, making London the epicenter of a new age, for better or worse, when art becomes an asset class. For all the above, our company has decided to take the challenge and penetrate the art market and establish a strong foothold in the industry and gain a major market share of this highly profitable sector. Mission Statement “Our mission is to maintain our reputation as an energetic, outgoing and accessible art gallery in London that inspire, interest and sell art work to an increasingly diverse audience and collectors. Not only do we have classified ourselves as a gallery but also as a brand in selling out artwork and products. We aim to acquire, collect and present to our customer the finest works of art available on the market scene in a variety of media and concepts as well as supplying art materials to our customers.” Vision Statement “Our vision is to expand our business into promoting a strong arts education and arts appreciation for our customers, the general public and educational institutions with interest in art. We aim to develop and integrate our brand (XYZ) into a household name in the art market.” Objectives The objectives of XYZ in the first few years after start up are as follows: Reach target sales of 2000 products in a term of 2 years Attain an turnover of over 1 Million in the first year Annual sales growth to be 10% for the next two years Gain a considerable market share through a differentiation strategy Maintain healthy terms with the Artists working for the company to ensure long term relationships Create and sustain an effective and aggressive marketing, which will be the main key to the company’s success Return on Investment of at least 20% A fully interactive and real time website to be developed gradually from the basic eCommerce website Market Analysis Market research Prior to designing the marketing mix for the company, it is essential to do a thorough market research and analysis to gain knowledge about the current trends and the profitability of the business. Primary research: A few of the Galleries were visited in the region of Colorado before taking this decision. The galleries visited include: a. Art & Soul Gallery b. Smith Klein Gallery c. Buffalo Mountain Gallery d. Hayden Hayes Gallery e. Indigo Gallery f. Adagio Art Glass The primary research carried out over the past few months and this gave valuable insights into the information regarding the potential sales per month, operational plan and staffing requirements. Information was also gathered on the different prominent media through which advertising can be easily done to target the potential market segments. Target Market Segments Laissez-Faire Buyers: Not all consumers who buy art are avidly devoted fans. A profile of customers tends to visit art galleries and exhibitions when they are easy to get to. These consumers, who tend to go to these social gatherings because they are close by, also tend to be frugal spenders which would imply a laissez-faire type of consumer who will visit out of convenience more than avid following. Urban Prosperity: A major target segment will be the Urban Prosperity group, consisting of a high proportion of Prosperous Professional and Educated Urbanites. They form the Class B Social group in the society. These people are interested in sophisticated forms of artwork and a high percentage of this segment is techno savvy. They prefer Internet transactions and are also keen to take a time off from their hectic work schedules. Hence these people can be targeted by personalized marketing using the Web and also by invitations to the exhibitions held by the gallery. Wealthy Achievers: These people form the Class A of the Social groups. About 48% of the Class A people feel that the social gatherings, like art exhibitions are very interesting and they are also ready to spend huge amounts on artworks. These people prefer to place orders in exhibitions and art fairs, and high value paintings can be easily marketed to these people. Private Banks: As a result of changing demographics along side the changes in the world’s wealth, private banks across the world are positioning themselves in an increasingly congested market place. Art tactic, which is an independent art market research agency to established collectors, did a research on private bank and investments. Almost every private bank that Art Tactic has been talking to is considering art as an attractive part of their wealth management product portfolio, rather as an investment product or as a service to their client. Overall View: In a nutshell, we have come to understand that no market can be fully understood without an appreciation of the behaviour of groups and the influence of social factors on the individual. Our study of ‘herd behaviour’, a well-researched area within the evermore-popular field of behavioural studies has offered us more insight into what we see in the contemporary art market today. We have not learnt that humans do not act independently but are often directly influenced in their decisions by the behaviour of others. There is growing empirical evidence of the existence of ‘herd’ or ‘crowed’ behaviour in speculative market such as art as documented by Yale professor, Robert Shiller in ‘Irrational Exuberance’. In case of the art market bubble, the optimal behavior for an individual may be to do what everyone else is doing because even though everyone knows they are in the bubble; until it bursts staying in the market makes most profit. This creates an irrational ‘collective behavior’ emerging from uncoordinated individual choices. It is said that most ‘herd’ behavior in the art market creates fashion rather than serve bubbles. Controlling the herd is an important strategy in the art market and could be described as creating market consensus around particular artists or segment of the market. Strategy Process Strategy Clock: Aggressive marketing is the basic strategy of XYZ Ltd. As far as the customers are concerned, our company will operate on the points 4 and 5 of Cliff Bowman’s strategy clock. 4 – Differentiation: As disposable income rises in US, the customers will be ready to spend more on various products. Also the research shows that, a heavy proportion of the US population is ready to spend heavily on art and cultural products. Hence acquiring the customers at this point of the clock is the main strategy of XYZ Ltd. 5-Focused Differentiation: The customers at this point on the clock require a customized product or service and are prepared to pay a price premium for that ‘privilege’. XYZ will serve this segment by operating a ‘make-to-order’ channel. The customers can get specific pictures or portraits, painted and delivered to their houses. For this service, the customers will be ready to pay an above average price and will also be ready to wait for longer periods. Figure: Strategy Clock Marketing Plan Location: Our main gallery will be situated in Colorado Spring. We aim to reach our customers who will be mostly working and upper class citizens. We will hold exhibition at different regions of the country on different days and build-up a database of customers. Product: Our products will be fine contemporary painting in different media and photography. We aim to meet our customers’ need by selling order to buy products. We will offer brilliant artist to reflect the business of the bank by tailoring art to meet customer requirements. E.g. painting for a banking hall will reflect their business hence the new $40 note will be painted by our most brilliant artist to reflect the business of the bank. Price: The price will range from $400- 25000 depending on the media, style, quality and artist. Price for materials e.g. brush, painting, labels, scalpels etc, will be matched comprehensively to competitors price and a lower price fixed will be ascertained. The director with vast knowledge in contemporary art will price the art works. People, Process & Physical Evidence: We believe that the people involved in the business also form part of the service and play an important role in instilling a positive customer experience. Our website will serve a back up for advertising and marketing. Customers can order their own style media of paintings. Customized work such as the painting of family events e.g. Weddings, portraits etc to the customers taste will be one of our competitive advantage strategies as compared to our competitors. The Physical Décor of the gallery is also important, as the AB class prefer a very elegant and rich atmosphere. Promotional Mix: It is critical that we communicate what we have to offer to our target audience through the appropriate tools of getting the message across. We aim to promote and advertise as well as market our product via the Art Magazine, which is the biggest selling Art magazine in the country. We will advertise through magazines and art centres. Our logo will flash on their website listing us as a corporate member. This will boost our publicity and enable us to reach a wider variety of audience. We will hold two exhibitions every week, one which will be held in gallery and other in the public space, such as a hotel conference room. Here we will invite our customers and potential buyers. These exhibitions will be made different from normal ones, as we plan to hold events with it such as wine toasting, continental delicatessen, parties and other planned attractions. The use of radio, advertising will form an important aspect of our promotional mix. Local radio stations in Colorado Springs radio will be used to promote the gallery. Also we are planning to put key hocks in subways, on roads, near big shopping malls for initial 3 months when the gallery is opened. This will bring our gallery into the eyes of our customer. Later on we will be having ads on bus stops, on buses, in cinema hall, and also in opera centres (halls) where most of the art lover public is been expected to visit. This will enable us to connect with our clients and customers on personal levels and know how to quickly find out what matters most to them. Having conducted the market research company (marketing) they will offer us the service of door to door marketing to target our segmented market in Colorado. The use of flyers and leaflets through well known news papers will also give us the opportunity to reach to wide audience for our exhibition and to our gallery. Internet will be our main source of information. We will continuously update our site post paintings and the information about the painters and also the information about the art materials. We will send the e-mails, invitations to our customers for visiting our gallery and exhibitions. Human Resources needs: Secretary Shop (Gallery) Assistant The additional resources required for the marketing activities will be hired on a part time basis as per the requirements by the Directors of Marketing and HRM. As one of the main lines, the gallery sells different kinds of art products such as painting brushes, colour pigment, easels, canvas, palettes, etc, with its own brand “XYZ” from April 2010. The additional HR needs for this part will be recruited by March 2010. An additional resource is required to coordinate, to track the orders and to supervise the overall procedure. The job of the coordinator includes, communicating with the exporters, forwarders and customers and also to document the processes. Financial Plan Start up costs and Operating Expenses: Capital Expenditure: The start up cost includes the following, which are spent in the first month of the business start up, April 2010. Furniture Desk sets (X2) 75 Chairs (X5) 175 Reception Installation 250 Mounting Frames (X3) 400 900 Electrical Installation 500 IT & Communication Computers - Packages (X 2) 1400 Website Hosting & Development 1250 Software Licenses 7500 Search Engines Registration 750 Telephone & Other Utilities 250 11,150 Legal Registration – Company Name 20 Copyright Logo (for 5 years) 30 Embossing Tool 50 Legal Expenses 500 600 Van 750 Total Capital Expenditure 28,260 Initial Purchase of Paintings (x 10) 11,100 Bibliography Beynon-Davies, P., 2004, e-Business, Palgrave Macmillan, NewYork Ferguson, R. and Hlavinka, K., 2006, ‘Loyalty Trends 2006: Three Evolutionary Trends to transform your Loyalty Strategy’, Journal of Consumer Marketing, Nov 5, 2006, Vol. 23, p292-299 Fisk, R. P., Grove, S. 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