Marketing Strategies for Little Pet Shop - Research Paper Example

?Marketing Plan on owning a Pet Store Contents Organizational Overview 5 of the Organization 5 Mission ment 5 Geographic location 6 ProductMix 6 Description of New Product 6 SWOT Analysis 7 Strength 7 Weakness 7 Opportunities 7 Threats 7 Marketing Research 8 A. Consumer analysis 8 Demographics 8 Psychographics 9 Behaviors 9 Geographical considerations 9 B. Industrial Analysis 10 Competitor analysis 10 Segmentation 10 Criteria 10 Target 11 Differentiation and Positioning 11 Product Life Cycle 12 Marketing Mix 13 Product 13 Price 14 Pricing strategy 14 Place 15 Channels of distribution 15 Product location availability 15 Physical distribution 15 Cost 15 Promotion 16 Personal selling 16 Advertising 17 Sales Promotion 18 Public relations 18 Website 18 Budget 19 Control/Monitor 21 Feedback mechanism to monitor progress 21 Evaluation process 21 Performance objective 21 Profit margin 21 Market share 21 Promotional effectiveness 22 Market penetration 22 Reference 23 Organizational Overview Name of the Organization Organizational name is referred to as non personal names which refer to a structured body that exits to perform some common function. Some of the organization includes schools, business, and clubs to name a few. This project would deal in opening up of a pet shop in Arizona. The business would refer to as ‘Little Pet Shop’, as the name indicates the existence of small little pets around the store. The pet industry is one of the growing sectors in the US. According to a survey conducted by American Pet Product Association, in 2010-2011 around 62% of the US households own a pet. Mission statement The mission statement of the company would be to present the buyers with a wide choice of top quality of pet merchandise and pet foods at the best price available. For all your pet shopping needs. Geographic location Geographic location is an important factor in setting up a business. The business should not be set up in an area where there are fewer customers. It should always be located at a place from where the target market is easily accessible. Thus the company ‘Little Pet Shop’ is located in the heart of Arizona. Product Mix Product mix is a combination of products that are manufactured by same business house or the organization. The product mix is based on the popularity of products. The organization will include product mix ranging from food items, accessories, to pet grooming. The organization would go with different product lines this is because having different product lines reduces the risk in the business. If one of the pet is not getting sold than there are other options available for the organization. Thus it would be beneficial to have a multiple product lines. Description of New Product The pet shop would deal in pets and pets’ foods. Pets would include from breed of dogs, different types of birds, cats and also fishes. The shop would have a retail outlet as well as an online site for its business and the mode of payment would be cash and card. The shop would deal in different breeds of pets. The shop is located in the central area of Arizona in Phoenix as location plays an important role in the success of the business and would help the shop to attract its customers and generate goodwill for the company. SWOT Analysis Strength The strength for the organization like ‘Little Pet Shop’ is its wide range of products that it will offer to its prospective customers. The company provides an option of both online shopping of pets along with bricks and mortars way. This enables customers to shop from anywhere they are and accepts all kinds of payments. The company would also provide home delivery of the pets in the respective location of the customers. The company’s strength will also lie in the product line that it is offering. Its product ranges not only pets but also their products which can be anything from the clothing section to styling area. Weakness The company is new and it would take some time for the organization to reach its breakeven point. The company would need some time to establish itself in the market. Thus this is one of the weaknesses for the organization. Financially the company is not sound and would require a year or two to overcome and attain the breakeven point. Opportunities An opportunity for the organization is that the people of Phoenix, Arizona are animal lovers. The pets are highly in demand and consumer wants to adopt them. Thus opening up of a new pet store would help the organization to bring in customers and attract them towards the shop. Threats Threat for a new business is its competitor. It faces a tough competition majorly from the same size of retailers. The big players do not affect much. Some of the pets’ shops in Phoenix, Arizona are custom creatures, animal kingdom, and Arizona animal welfare to name a few. These shops have already marked themselves in Arizona and it would be tough for Little Pets to compete and attain the market share of Arizona. Marketing Research A. Consumer analysis Consumers are the most critical component of a marketing strategy. People do not have the same needs or desire. The objective of consumer analysis is to identify the segments within a population with similar kinds of needs so that the marketing strategy can be targeted at them. For a pet shop it is necessary to identify its potential customers who are interested in pets and why are they interested. Demographics The demographic sector is essential in determining the potential customers that fit the industry, the potential customer in this industry are those customers who have a soft corner for pets, customers who loves pets and wants to give then a proper shelter by adopting them. Analyzing the market of Arizona, pet food products were expected to grow at a rate of 5.7% in the year 2006. The country spends almost $36.3 billion on their pets. Since the consumption rate of pet food is growing it can be further assumed that the sale of pets are positive and tend to grow in near future. The average income of the people in Arizona is around $46,500 as per 2010/2011 salary survey (Arizona indicators, n.d). Since pets are not cheap, buying and maintaining would cost the prospective buyers, thus depending upon the salary; people with a salary range of $40,000 to $46,500 are the organization potential customer. Psychographics Psychographic analysis usually group’s individual into categories based on their lifestyle, attitudes, needs and values. This analysis would help the company to get knowledge about which pets are in demand and which they should deal with. Arizona with its growing economy enjoys a lavish lifestyle. Arizona also known as valley of sun has been regarded as the best place to live and work. It is the fifth largest city in the country with a population of 1.3 million. The people of Arizona enjoys a good lifestyle and having a pet boosts up to the standard of living. Behaviors According to a report of APPMA, about 63% of US households own a pet and almost 45% of them own more than one pet. Dogs and cats are the most saleable pets. Pet’s ownership has increased with a ratio of 7% in the past few years and along with it almost 300% of pet spending has increased (APPA, 2011). The purchase behavior of the people of Arizona for pets has also increased. Geographical considerations The geographical consideration must be favorable for setting up a business. Since the business deals with pets, therefore extra care must be taken for their conditions. There are many pets which are not suitable to the hot and dry weather of Arizona. But the company would deals in three kinds of pets those are dogs, cats and fishes. The latter one would require a proper care as all fishes no not survive in hot climate. The company should chose a favorable location for its store as the success of these stores depends on the choice of a favorable and up market location. B. Industrial Analysis Competitor analysis Michel Porter has presented an analysis which helps in analyzing the competitors. The framework focuses on the key aspect of the competitors (Choo, 2002, p.90). Competitor’s objective: In order to know the competitors objective, few pet shops have been analyzed. One of the pet shops was Animal Kingdom; its objective is to create an emotional bond that exists between a pet and the family. It has been operating for the past 40 years (Animal kingdom, 2008). Competitor’s assumption: all the companies assume it to be the best and provide with all the necessary features. Some of its competitors are among the top pet shops in Arizona thus this is what the company believes about its competitors. Competitor’s strategy: The Company’s strategy is to promote the highest standard in the welfare of animal, nurturing the animals while they are in the care of the company. Also providing knowledgeable service to its customers. Competitor’s capabilities: Animal Kingdom is a 40 year old company it capability lies on providing the customers with the best service and protection for the pets. Segmentation Criteria Segmentation is the process of identifying the groups of users in the market who probably are the potential targeted audience (Croft, 1994, p.1). The pet and pet product market can be segmented by age as the spending varies on the age group. Older members of a family are the biggest spenders on pets and their products. Apart from the older section of the family couples without children at home also forms a part of pet shoppers. The best customers in the pet industry are married couples with adult children at homes. They tend to spend a huge amount of money on pets and pets product. The young crowd within the age group of 35 years spends less than the average household on pets. Target The market for pet is increasing with demographics driving the demand for pets. The target market for “little pets shop” would be the older family members, married couples with adult children and couples without children. They are very much committed towards their pets and they would prove to be potential target audience for the organization. Differentiation and Positioning The product will be positioned as a luxury to its prospective customers. Pets are usually seen as a way of luxury for the people residing in Arizona. Therefore when the organization positions itself in that field it’s surely to get in more customers. Also the company would deal in different variety of pets along with pet products. Its differentiation strategy would lie on pet products. It would deal in all kinds of products of pets from food to clothing to accessories. There are few retail outlets that tend to keep a product line of so many variants for pets. Thus it would be feasible for the customers who come to purchase pets. Along with its retail outlet it would provide facility to shop online. Both online and brick and mortar way would be a differential strategy as customers who are far away or most of the older people can place order through the internet and get their pets delivered at their doorsteps. The shop would deal only in pets which are in demand and which are preferred by upper class. As the positioning statement of the company is ‘pets for people who love to enjoy’. People with high standard of living usually enjoy the company of pets thus targeting the upper class of people. Positioning is creating an image in the minds of the customers. It brings out the perception of the product within the target market group. Positioning is the basis of all communications such as advertising, naming, promotions, packaging, publicity and sales (Hiebing, et.al, 2004, p.146). Product Life Cycle The product life cycle is based on the assumption that all life forms have a finite time in the market. The product from the initial stage or the introduction stage enters the growth stage and then goes into the maturity stage where the product becomes a cash cow. Then it enters a declining stage and eventually dies. The product life cycle includes Introduction Growth Maturity Decline (Stone, 2001, p.43). The organization, little pet is in the introduction stage. Since the company is new it would fall under the introduction stage. If we look at the pet industry, it would fall in between growth and maturity phase. This is because the pet industry is growing at a constant rate and few of its organization have achieved a mile stone. Therefore the industry is entering a maturity phase. Little shop, being a new company would be first introduced in the product life cycle curve. It would take some time for the product to enter the growth stage and slowly when the product is able to capture the market share it would enter the maturity stage. But many products tend to die after a certain stage. Marketing Mix Product The product in this project is a pet shop in Arizona. This company deals in all types of pets and pet’s products along with its accessories. The company would sell all breeds of animals but special attention would be given to dogs, cats and fishes. The idea is to provide the customer with high quality of pets and their products. The company would target mainly to the high end users as the major portion of pets are adopted by them. It showcases the status and standard of living of the people living in Arizona. Little pet would deal in different kinds of pet products ranging from clothing to its accessories. Customer’s likes to dress up the pets and give them a cooler look with the help of the accessories. This is very much in demand and customers are willing to spend on the pets. This would be a differentiating point which separates little pet from rest of its competitors. In order to stay ahead and enhances its brand name the company needs to be different. The product is identified through its brand name, label and packaging. The product is named ‘Little Pet Shop’. Packaging plays an important role in the success of a product; when the packaging is attractive people tend to go for the particular product at a higher rate. Thus the packaging of the product would show its name along with its logo. The mode of delivery would be both cash and card and since the company also deals in online shopping, therefore home delivery is also available making easier for the customers to purchase from little pet shop. Price Pricing strategy Profit oriented or the profit margin sales strategy aims at setting a product’s price to attain a specific net profit. The price is set to achieve the maximum profit. Profit margin of little pet shop would depend upon the price at which it sells its pets. The rate of puppies would fall in between $250 to $2500, depending upon the breed. Cats would range from $300 to $1500 and its products would range anything in between $7 to $25. Thus a product which costs $100 would be sold for $200 to generate a profit of $100 or 50% net profit. But the company cannot be profit oriented as they cannot be over expensive, they need to match up with the competitors pricing, as the competitors are highly competitive. Sales oriented aims at increasing the sales volume and market share. When the company increases its sales volume it is indicated that the company can achieve growth in the industry. Little pet shop aims to increase its sales volume by attracting customers and lowering the selling price. The company would cut down the production cost in order to reach the economies of scale. Thus the company little pet shop would take into consideration small profits margins. Sales quo is basically meant for those companies whose products are standardized and the big players set the price. They do not compete in terms of price but other marketing elements. Therefore, little pet store would go for sales oriented strategy, which would help it to capture the market share. Place Channels of distribution The company would have three channels of distribution; they are manufacturer, wholesalers and retailers. Since it’s a retail outlet, the company would buy products from its wholesales or in some cases directly from the manufacturers. The company will have its manufacturing unit in Phoenix; its wholesalers would be in four states, in California, Nevada, Utah and New Mexico. Retail distributors would be within the region who would supply it to the end users. Product location availability The pets and their products will be available in the stores of little pet shop and also on their website as they would deal in online business to. The website address is www.littlepetshops.com. Those customers who places order through online, the pet would be delivered to them. The products will be available throughout the year. Physical distribution The movement and handling of pets would be done through the carrying and forwarding agents. The pets from Phoenix would be brought in by road to the C&F agent and these agents would take the pets and deliver it to the respective wholesalers. The wholesaler would deliver it to the retailers. The means of transportation is by road. Since Arizona is not surrounded by any water bodies the roads will be the means of communication. Cost Cost plays an important role in developing a business. The retail outlet would cost more than just an ordinary shop. The business here talks about the pet store. The costing of pets would vary accordingly. Pet dogs would cost more than kitten and fishes and in some cases fishes may cost more. The production cost of setting up of a business would be $50848 approximately. There would not be any distribution costs as it’s a retail outlet. The total amount of Sales and marketing would amount to $ 1280 as the company would not spend much on its marketing features. The company would promote basically through internet where the cost involved is much less as compared to other forms of marketing communication. Also it would go for personal selling and a minimum amount would be spent on radio and others like hoarding to attract the customers. The markup cost for Little Pet Shop would be 50% of its selling price. The selling price suggested to ‘Little Pet Shop’ is $199632 on its total start up cost. The profit margin would account to 20% of its sales. The price would be accordingly to the quality of the pets. The better breed the cost will be high for that pet and similarly a regular pet would not cost more. Therefore the company of pet shop would maintain the relationship of price and quality. Promotion Personal selling Personal selling is the oldest form of promotion. This means of promotion involves the use of sales force as a push or pull strategy. Personal selling is a form of oral communication. The little pet shop would use this form of promotion. It can spread word of mouth about the pet store. The company can hire sales person to do the job if not for a longer time but for at least three to four months. This would help the company to spread awareness about its pet shop. Advertising Advertising is an essential tool in creating awareness. All big and small company advertises about their products and services. Advertising includes many forms of promotional technique. Direct mail: the company can send printed ads or other forms of promotional letters through mails to a large group of consumers. Bulk mailing reduces the cost of mailing and it helps in generating awareness. Internet: Internet is the best means of promotional techniques. An internet can be used very effectively. Advertising in some social networking sites would help the company to promote its brand without any heavy investments. Also the company can advertise about its shop in Google such as ad sense and ad word. Internet is the fastest way of promoting a brand. Telemarketing: Telemarketing would be effective as the target audience is not the entire crowd. The target audience in this case is the older people and couples with adult children. Therefore telemarketing is usually not liked by many customers. Television: Television is another effective form of promotional tools. The cost of advertising through television is quite high. Therefore little pet shop being a new company the cost of promotional would be high and it would be difficult for the company to achieve its net profit. But to attract the target group, it is necessary to include advertisement in television. This would bring enable customers get emotionally attached with the brand and its products. Radio: Promotion through means of radio is quite popular. Advertisements made through radio are slightly less expensive than the television. Since radio has created a buzz, the company can go for radio. Radio would target the audience as well as the ongoing customers. Others: Other means that the company can use are hoardings displaying its brand name and few of its characteristic along with the range of products. Apart from it, the company can distribute pamphlets. Sales Promotion The company can promote its product by way of sales promotion. Sales promotion includes sales price, discounts, coupons etc. The company can allow some discounts as a way to promote its product; it can give discounts of 10% to its first ten customers. Also it can issue coupons, conduct contest in some shopping complex which would help in promoting the brand and create awareness about the shop and its products. It can conduct tradeshows displaying its pets and pet related product which the company would deal with. Public relations The company can conduct shows displaying the variants of pets which the company would deal in with and along with it display few of its items related to pets like its clothing and accessories. When the company conducts a tradeshow there are chances of getting publicity through media. This would affect the company reputation in a positive way. Publicity is much more effective than advertising. It helps in spreading the message to its concerned target audience. Website The company, ‘Little Pet Shop’ can upload its features and unique qualities to its websites and help people gather knowledge about the company. The company would also operate as online, thus uploading more information about the company would be beneficial to the organization and help it acquire the market share. Budget The US pet industry is growing at a rapid growth. It has shown a growth of 20% in the year 2007-2010. The pet industry sells over to about 71 million household in US. The average sale of pets in the current year is expected to grow at 5%. For establishing a new retail business, a significant amount of investment is required. In this process, the primary task is to estimate initial budgets required. Budget related planning is quite crucial for starting up a new venture. The capital required for the investments can be defined as life-blood for any business. In case of new startup business, realistic and viable financial projection is remains the first priority. Therefore, depending on the nature of the new business to be formed, the necessary variable for which the expenses need to be incurred (Brigham and Gapenski, 1994, p.207). The Little Pet Shop will establish its retail store in Arizona. Based the requirement, the following table shows the start-up cost for the pet retail store. Table 1: Startup Cost Setting up the premises Cost in $ Lease deposit and advance rent 26880 Telecommunication and Electricity connection 2400 Furniture and equipment   Furniture 5120 Furniture for keeping pets 4000 Decoration and lighting 4000 Computers and other telecommunication goods (TV, Landlines, Music System) 2400 Starting operations   Monthly salary for managers and other employees 3360 Marketing expenses 1280 Direct cost for first month 50848 Insurance 800 Working capital 16000 Initial Legal and Registration Charges   Licenses 10400 Vat Registration 3200 Other Legal Charges 2400 Total Startup cost 133088 For staring a venture, major initial startup cost includes the capital expenditures, legal charges and for starting operational process. The capital expenditures and legal charges are one time cost; whereas, operational cost for regular. For initial periods, Little Pet Store will not be able to generate significant amount of revenue that will back the operational cost and hence, the above table has also considered the operational cost for next six months. A startup venture is highly exposed to a number of risk including business risks and financial risk. In case of financial risk, more amount of capital invested leads to expose higher risk and hence, to avoid such intensified risk, the Little Pet Shop has tried to minimize its overall startup cost. In this regard, the pet store will lease the retail store instead of buying and it has reduced significant amount of capital expenditure. Besides, the pet store has also considered other one time legal cost that will reduce the risk arising due to legal obligations. Apart from these, there are certain capital expenditures for furniture, necessary electric equipments, and decorations for retail store, and telecommunication & electricity connections. The cost for each variable has been considered based on market value. The premises cost will be around $29280; total capital expenditures will be around $15520; initial operational cost for six months is around $72288; and initial legal cost is around $16000. The total startup cost will be around $133088 and the Little Pet Store must aim to assure the source of required capital. Control/Monitor Feedback mechanism to monitor progress The feedback that the company will follow is through management information system. The MIS section will have a database which would handle cash, payrolls, inventories, surveys, customer purchase, and complaints and also handling accounting. The result will be monitored weekly and will be settled by the end of the month by the database manager and marketing department. Evaluation process Evaluation will be performed by the audits of the firm both internal and external, by the monitoring officers and database manager. The main motive to conduct audit is to compare the company goals on a monthly basis and also annually. Performance objective Profit margin The profit margin of ‘Little Pet Shop’ is to establish a net profit of 3% in the year to come for the next two years. And thereafter also increase the profit margin from 3% to about 5% in the coming years or so. Market share The company would try to capture at least 20% of the market share in Arizona by the end of the financial year. Initially it strategy would be create awareness and build a brand name for its organization and when it thinks that it had achieved the stage, the company can gradually increase the market share and obtain a decent market value. Promotional effectiveness The promotional effectiveness would be determined through public relation, analyzing customer through survey distributed through each sale of products and also through emails and telephonic survey. The company would also examine the sales trend monthly and if any changes to be made because of seasonal variation, the company would implement it. Market penetration The company would try to penetrate in other states, by way of internet or through retail store. Though online is an effective means costing the company much less than setting up of retail outlets. The company would make internet penetration in California, as internet penetration has reached 70% in America. Therefore the target for “little pet shop” would be to penetrate at least near about to 40% of the residents and then slowly expand in the markets of Nevada and Utah. Subsequently after about 2 to 3 years of operation the company can expand into other towns and cities. The key to success lies in effective analysis of consumer behavior and delivering the right set of product mix so as to attain maximum strategic advantage. Reference Animal kingdom. (2008). about us. Retrieved on October 21, 2011 from http://www.animalkingdomaz.com/cgi-bin/cpi/aboutus.html?id=sWujZxU6 . APPA. (2011). Industry Statistics & Trends. Retrieved on October 22, 2011 from http://www.americanpetproducts.org/press_industrytrends.asp . Arizona indicators. (No Date). Per capita personal income. Retrieved on October 22, 2011 from http://arizonaindicators.org/content/capita-personal-income. Brigham, E. F. and Gapenski, L. C. (1994). Test bank: financial management: theory and practice. 7th ed. Atlantic Publishers & Distri. Choo, C.W. (2002). Information management for the intelligent organization: the art of scanning the environment. Information Today, Inc. Croft, M.J. (1994). Market segmentation: a step-by-step guide to profitable new business. Routledge. Hiebing, R.G. et.al. (2004). the one-day marketing plan: organizing and completing a plan that works. McGraw-Hill Professional. Stone, P. (2001). 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