Target Market Segment Strategy - Case Study Example

1 Objectives As a start up business, our aim is to manage the risk with reward and continue to evolve a business that can generate consistent value for our stakeholders. (Rice & Mathew, 1995). Our key business objectives include the development of a business that can offer our customers an opportunity to rent or purchase the high quality videos and audio services through our stores as well as through our online store. We aim to grow our business gradually by targeting households as well as students living in our target market area i.e. Holloway Road by offering them convenience and ease with which they can obtain the high quality movies and other entertainment stuff. We aim to grow with the passage of time and believe that our profitability will increase as we improve our brand image and quality of service over the period of time. Our ultimate objective is therefore to become the number one supplier of the movies in the region. 1.2. Mission Our mission is to offer convenience and ease with which our customers can enjoy their movie watching experience by offering them a 24/7 service at relatively affordable cost. 1.3. Keys to Success There are many critical aspects of success in our line of business however we believe that suppliers hold the key in our business. Though we will be relying on creative and innovative marketing as one of the key to our success however, leveraging through our suppliers is the critical for the survival in this industry. Apart from this, our success will also depend upon as to how our customers reach us and as such our round the clock presence will play critical role in deciding our position in the industry against our competitors. 2 Company Summary Our company will be a small company at the initial stage of its development as due to lack of the capital we may not be able to start a public or private limited company. For this purpose, we intend to form a partnership which will comprise of different partners who will be contributing their capital as well as skills in the business. The organizational structure of the business will be relatively simple with few employees, managers as well as the owners of the firm. The employees will be both responsible for managing the affairs of the stores as well as ensuring the shipment of the products to our customers whereas managers will have the overall responsibility of the liasioning with our suppliers, customers as well as looking after the finance matters. The owners of the business however will be looking after the whole business and their role will also be more of strategic in nature as they owners will be engaged into forming strategic alliances with the suppliers. Since suppliers holds the key to our success as we estimate that over the period of time our competitors will lure back our suppliers to offer them the same rates therefore formation of strategic alliances will be the key to our business and as such the overall role of owners in the firm will be to formulate relationships and build networks in order to ensure that we continue to grow strategically and retain our competitive advantage. 2.1 Company Ownership As discussed above that our proposed business will be a partnership in nature wherein there will be five partners that will be contributing their capital as well as the skills in the business. We estimate that the capital injunction from partners will be GBP 5000 whereas the profit and loss sharing will be based on the equal sharing of each partner in the business. It is also critical to note that the we are also contemplating upon taking our company to the public once we gain enough market recognition we will aim to go public. 2.2 Start up Summary Our initial target will be to open one store at Holloway Road and also launch our website offering 24/7 service to most of our customers. Our customers comprise of the students as well as households living in that area and we will offer them premium services round the clock. An initial estimated capital investment will be GBP 5000 that will be utilized into completing the initial legal formalities as well as the hiring of third party professionals such as accountants. All the clearances from the local authorities as well as tax registrations shall be done through legal consultant who will be hired at the beginning to complete the start up formalities. Our partnership will be a registered partnership with the registrar of the firms and we aim to register ourselves at the initial stage in order to give our business more credibility. Further, we also aim to negotiate with the different bankers to secured funding lines to meet our future requirements. 3 Products As discussed above that the major products and services will include selling and renting of movies through our store as well as online. We aim to offer high quality HD movies and audios to our customers round the clock. Apart from that we will also be offering business software and that too will be offered through traditional channels. Generally our products will be sold at premium as we will be offering 24/7 service to all customers which is not provided by our competitors. 4. Market Summary Analysis Our primary market will be based in the Holloway Road area where we will be targeting students as well as the households. Due to the lack of a service that can offer 24/7 service in the area we believe that we will be able to cater to the demands of the customers from that area. It is critical to understand that the customers are offering the same services in the area but they at least lack either technological sophistication or does not offer the services round the clock. We will aim to combine the both and offer our customers an opportunity to buy high quality audio and video all day long from the convenience of their home. Nirvana Audio and Video will therefore aim to tap that segment of the market which is willing to pay premium for the extra services such as round the clock availability. 4.1. Market Segmentation The market will be primarily segmented on two classes of customers i.e. young students and households. Accordingly our market segmentation will be based on the social status of the customers as well as their psychographics. Households belonging to middle income level group will be our primary customers whereas the students of either age will be our second group of customers. Initially however, we will be focusing on the development of our business by tapping household families as 70% of our customers will be households. Market Analysis   2009 2010 2011 2012 2013 Potential Customers Growth 1,000 1,050 1,155 1,328 1,594 7.39% Households 0% 700 735 809 930 1,116 7.39% Students 0% 200 210 231 266 319 7.39% Other 0% 100 105 116 133 159 7.39% Total 0.00% 1,000 1,050 1,155 1,328 1,594 0.00% 4.2 Target Market Segment Strategy The segment strategy underlying our chosen market will include the offering of bundled services to our customers. Since our target market segment is based on households therefore the initial segment strategy will be to tailor made our offerings for this segment according to the bundled services to be offered. For this purpose, we will be offering recurring membership benefits to those of our customers who will purchase our loyalty cards or monthly or annual billing schemes. 4.3. Industry Analysis This industry is segmented by the large as well as smaller players who serve the markets according to the regional segmentation basis. Some of the firms are offering such services online also however; very few services are offering the service that is round the clock. The overall emphasis in the market is on the recovering of fixed cost as it is the major chunk of the cost thus firms often develop marketing strategies that help them to recover the costs. It is also critical to note down that this industry is dominated by the firms that are located at the large malls i.e. most of the audio and video services offering quality contents are located in the malls and there is general dearth of the stores that are located in the town centers. 4.3.1Competition and Buying Patterns The recent credit crisis has resulted into the decline in the buying activity of the consumers however as the recessionary impacts are getting over the customers are increasingly becoming more involved in the buying activity. It is critical to note that the competition is fragmented in this industry as there are smaller as well as large players scattered across the country. Further the online competition is relatively more critical as there are many firms that are offering the services at relatively cheaper prices and with much more convenience. 2. Strategy and Implementation Summary Our strategy will be based on the market skimming as we are offering service that is not being offered by anyone in the industry i.e. 24/7 service. A critical analysis of our strengths and weaknesses is given below: 5.1.1Strengths I. 24/7 Service II. High quality III. Customer convenience 5.1.2 Weaknesses I. Smaller firm size II. Restricted market 5.1.3. Opportunities I. Larger market to tap as online presence can offer us different opportunities. II. Opportunity to divert into other segments including offering computer softwares 5.2. Competitive Edge Our competitive edge will be based on the development of a service that is offering 24/7 services which are not being offered by our competitors. Further our competitive advantage is based on the development of services that are easily available to the customers thus offering convenience is our most important competitive edge that we hold over our customers. This is critical due to the fact that we have comprehensively assessed the competitive strengths of our competitors through comprehensive market intelligence.(Folsome,1991). 5.3. Marketing Strategy Our marketing strategy will be based on the development of marketing techniques including viral marketing and following a brick and mortar model. (Lin,1998). Our marketing strategy will be based on three broader marketing strategies including viral marketing, regional as well as national marketing. It is also critical to note that we will be making an effort to directly market our services by personally dropping our advertisement leaflets at the post boxes of the individual homes in our neighborhood. This will allow us to understand our customers in closer context to further customize our offerings. Advertisement as well as personal selling therefore will be our main emphasis to tailor made our marketing strategy 5.4 Sales Strategy Our sales strategy will be based upon offering the premium services round the clock therefore our pricing will be premium based. Since we will be offering this services through different channels therefore we believe that charging premium will be justified based on the quality of our services. As defined above that we will be targeting our neighborhood through personal selling therefore it is critical to note that the selling strategy will be tailor made according to our neighborhood dynamics and we will fully customize our different offerings according to the market perceptions in the area in which we are operating the overall nature of our customers and their individual preferences. Milestones             Milestone Start Date End Date Budget Manager Department Opening of store 23/11/2009 23/12/2009 £1000 ABC Department Purchasing of inventory 23/11/2009 23/12/2009 £2000 ABC Department Purchasing of racks and furniture 23/11/2009 23/12/2009 £1500 ABC Department Online web development 23/11/2009 23/12/2009 £500 ABC Department Totals     £5000     6 Management Summary Our business will be a partnership in nature offering high quality audio and video services in our neighborhood. The Nirvana Audio and Video services will offer round the clock services to rent and buy from a large collection of videos and audios at the convenience of the customers. Our unique selling proposition will be to offer unique and high quality contents through our store as well as through our online website at premium price. We believe that within two years after the opening of our services we will be able to overcome our competitors as none of our competitors is offering the kind of services that we are offering. 7 Financial Plan Initially we aim to invest smaller sum into this business which will be utilized in securing the space as well as purchasing initial inventory. We aim to grow our sales steadily over the period of time as market is currently dominated by the large players enjoying first mover advantage. Our financial strategies will be focused on recovering the fixed cost with lesser emphasis on the recovery of variable cost. This is because of the typical dynamics of our business. 7.1 Projections Following tables will indicate the final projections made. Financials   FY 2010 FY 2011 FY 2012 Beginning Balance Opening Balance Cash & Current Account £0.00 6000 18800   Plus Money Received New Investment 5000 £0 £0 New Loans £0 5000 £0 Sales 10000 15000 20000 Other £0 5000 5000 Subtotal Money Received 15000 25000 25000   Less Money Spent   Direct Costs Direct Costs of Goods 5000 6000 7000 Other Costs of Goods £0 £0 £0   Normal Operating Expenses Payroll and Payroll Taxes, Benefits, Etc. 1000 1000 1000 Rent and Utilities 1000 1000 1000 Sales and Marketing Expenses 2000 3000 3500 Other Operating Expenses 500 1000 1500   Other Outflows Payments of Taxes 50 100 200 Debt Payments £0 100 100 Purchase of Assets 500 £0 £0 Other £0 £0 £0 Subtotal Money Spent 9000 6200 14300   Ending Balance Ending Balance Cash and Current Account 6000 18800 10700   Profit Before Interest and Taxes Sales 20000 21000 23100 Less Cost of Sales 5000 6000 6600 Gross Margin 15000 15000 16500 Less Operating Expenses 7000 7000 8500 Profit Before Interest and Taxes 8000 8000 8000   Net Cash Flow 14000 26800 18700 References 1. Rice, M & Matthews, J (1995) Growing New Ventures, Creating New Jobs. London: QUORUM BOOKS. 2. Lin, B (1998) Internet commerce for small businesses. Industrial Management & Data Systems. 98 (3) 113 – 119 3. Folsom, D (1991) Market Intelligence in Small Businesses. Marketing Intelligence & Planning. 9 (2) 16 - 19 Read More