Place, Promotion and Price Strategies. ZTE Computer Tablet Market Entry in the US - Research Paper Example

? Place, Promotion and Price Strategies ZTE Computer Tablet Market Entry in the US Table of Contents Introduction 3 Market Introduction Stage for ZTE 3 Product Strategies 4 Price Strategies 5 Place Strategies 5 Promotion Strategies 6 Event Marketing 6 Growth Stage for ZTE 7 Product Strategies 7 Place Strategies 7 Promotion Strategy 8 Price Strategy 8 Maturity Stage 9 Product Strategy 9 Place Strategy 9 Promotion Strategy 10 Pricing Strategy 10 Decline Stage 10 Product Strategy 10 Place Strategy 11 Promotion Strategy 11 Price Strategy 11 Conclusion and Recommendations 13 References 14 Stark, J. (2011). Product Lifecycle Management:21st Century Paradigm for Product Realization. Springer, p.23 14 Introduction Every product goes through a life cycle. It starts from the product’s launch into the market and until it is withdrawn from it. Marketers need to constantly determine the performance of the product—which is generally depicted by sales. The behavior of the product at each stage is very different, so there is need to design strategies in accordance with the stage that the product is in their life cycle (Kominos, 2002). This makes the product life cycle management a very important function of the business. The ZTE Corporation is a global company; they are providers of telecommunication equipment and networking solutions. The company was founded in 1985 and has come a long way to become China’s largest listed telecom equipment provider (ZTE official website). ZTE has a very comprehensive product portfolio that provides “end-to-end” solutions. They aim at providing high quality innovative products that are also affordable. They have operations in more than 140 countries globally. The tablet market is a fast growing one; some even predict that soon tablets will take over the PC market too. But that day is not very close for the general masses because tablets are expensive and the greater the offering, the higher the cost. ZTE has a devised a very successful approach towards tapping this market. They aim to product economically feasible tablets and make them accessible and available in everyone’s reach. The company started off with the ZTE Pro Light and Light and now aims to offer the ZTE Light Plus. Market Introduction Stage for ZTE ZTE Corp, China’s second-largest manufacturer of cell phone and related equipment is expected to launch their tablet in the United States the following year (Kharif, 2011). Presently the key players in the tablet market are Apple Inc. and Amazon. They intend to sell the tablet through the US phone company Lixin Cheng. ZTE has an already established image in producing low-cost devices. The market segmentation of the tablet PC is very complex because everyday someone discovers a new and innovative way to use the tablet PC. The introduction phase of the product primary involves it launch into the market, the aim at this stage is to ensure that the marketing is most impactful. ZTE believes that by 2015, it the tablet users will grow from the present users of 26 million to 82.1 million markets (Market Watch, 2011). The US market is expected to be the biggest market for tablets and smart phones, and they expect to sweep the market with their affordable prices. Product Strategies This is currently challenged by Amazon’s Kindle Fire whose recent performance in the market is predicted to dethrone Ipad’s leading position in the market. “According to leaked screenshots by an Amazon source of its internal inventory management system Alaska, and published by the Cult of Android, the Kindle Fire is on its way to outselling even the Apple iPad” (Barbara, 2011). This can also come as good news to ZTE, to depicts that the market is rip for affordable tablets. However, for proper execution at this stage, they need to conduct market research. They need to understand the customer requirements of product features, design, servicing and pricing. According to Liu the backside of the tablet supports the Google logo depicting that the product supports Wifi and 3G-connectivity and a rear facing camera too (Liu, 2011). Price Strategies Their ability to sell at lower prices, poses a huge challenge to Apple’s market-leading iPad at $499 and Amazon’s affordable tablet Kindle Fire at $199 (Kharif, 2011). ZTE tablet’s immediate competitor would be Kindle Fire which is in the affordable category too. Although exact prices have not been disclosed, if ZTE decides to follow its usual market penetration strategy of entering the market and attempting to gain market share based on price, it will need a strong marketing campaign emphasizing the customer perceived value (CPV). ZTE’s American launch can be very promising with a collaborative partnership with Verizon Mobile. Verizon’s market share offers ZTE access to two key market segments, America’s middle class households, smart phone users and college students. Place Strategies In the introductory phase establishing the distribution network and ensuring that the product is readily available is one of the major expenses. For ZTE this can be accomplished relatively easily due to their affiliation with Verizon and international collaborations. For distribution they can either by hiring an external contractor or outsourcing. For ZTE to successfully enter the US market, ZTE has to capitalize on its existing marketing channels. Currently, it has a partnership with five majore carriers in the US that includes Verizon, the dominant US mobile phone carrier. Capitalizing on the existing network of this mobile phone carriers provides ZTE an easy penetration in US the market. ZTE’s collaboration with Verizon can be mutually beneficial to both the companies. Promotion Strategies Promotion at this stage of the product lifecycle represents a major chunk of expenses. Although the American market is very well aware of teh functionality of a tablet, ZTE needs to promote the concept that ZTE’s value proposition would be to offer functionality and design at a price which is way below the existing value proposition for increased marketability. The content of its promotion should convey the message that functionality and design does not have to come at a hefty price. The main purpose of advertising at this point in time is o create awareness for the brand. Since the American market is well aware of the developments in the cell phone and tablet market, they are already familiar with the ZTE brand name. Furthermore, in the US established tablets like iPad and Kindle Fire are pre-ordered weeks in advance. This indicates that the consumer is willing to pay the price in advance if they perceive the brand to be worthy of it. In this regard teasers can be used on broadcasting channels and internet to create demand for the product prior to its arrival. Advertising enables ZTE to reach a large and geographically dispersed consumers. It should utilize the print, broadcast and internet media to be able to reach a wider audience. Event Marketing ZTE engaged in several event management, sponsorships and public relation campaigns in Europe and China. They sponsored tours of rap artists, entire prime shows and celebrity endorsements (4traders.com). Growth Stage for ZTE During the growth stage, the ZTE tablet will be moving towards establishing itself in the market and facing tough competition. ZTE would now be focusing towards grabbing a bigger chunk of the US market, since the pricing is going to appeal to the larger audiences; there is high probability that ZTE can increase their market share. Growth is the stage when revenues start to come (Grieves, 2006, p.217). Product Strategies ZTE will attempt to establish their unique selling proposition (USP) which in their case would be high quality tablet at an affordable price. They will need to make product offering which can make them stand out from their key competitors: iPad and Kindle Fire. However, noticing the profits that the ZTE tablet will have started making at this stage, would encourage competition to intensify and as there will be more entrants into the market. ZTE needs to create barriers by means of licenses and copyrights for their unique design or features. Place Strategies During the growth phase, they would need to focus on enhancing the efficiency of their supply chains, because by now they demand would be increasing. ZTE needs to ensure the product is readily available. They would also need to invest extensively in creating a user-friendly website that the consumer can order from and have the product delivered with ease. For example Amazon.com managed to create demand and provide 50,000 Kindle(s) through their website alone. Promotion Strategy Promotion at this stage continues to be a significant expense. ZTE’s entry into the market will not be taken lightly by the competition and they would invest extensively in advertising. Design is also factor in terms of customer’s perceived value of the computer tablet. The Android tablets, Windows tablets and Research in Motion tablets are not necessarily technically inferior compared to the Ipad. In fact, many of Ipad’s competitors more than match its specifications. Only that it does not have the sleek and intuitive design of the Ipad so it cannot compete if it will price its computer tablets similar to Ipad. ZTE will have to counter that with extensive advertising. However, at this stage advertising will not be used to create awareness but to gain market leadership through creating brand loyalty. Price Strategy At this stage the price would be competitive; ZTE needs to look at its standing in the market and how much the consumer is willing to pay. The case of Kindle Fire Tablet also demonstrates how a strategically price computer tablet can encourage sales. Amazon knew that it cannot price the Kindle at $499 because consumers do not perceive it to be an equal of Ipad. Neither did Amazon price the Kindle Fire Tablet in the $200+ range knowing that a netbook which have a better feature than a Kindle can be had for $250. What it did was to price the Kindle Fire Tablet at $199, way below IPad and indirect netbook competitors. The result was phenomenal. In its first two weeks of pre-launch in October 2011, Kindle is already registering 50,000 preorders. Maturity Stage Eventually the tablet market will become saturated the several versions of basic product. The key players in the market will have similar offerings and distinct market share (Drypen in.,2011). Growth or expansion at this stage would be at the expense of the competition. However, in the technology business there are rapid changes because of continuous innovation which enables the companies to increase the size of the pie. ZTE takes innovation very seriously and had invested 100 million Chinese Yuan (approximately $15.5 million USD) in an “Innovative Fund”, which will ensure continual innovation within the company (Global Telecom Business). Product Strategy In terms of revenue, the product is expected to yield starts declining as each competitor focuses on their unique offering, this is a tough time for the products in the market because the weaker ones start to be pushed out( Pride & Ferrell,2011). In case ZTE falls behind in their market share, they need to reposition their product in order to stay in the market. ZTE should also consider providing complete solutions rather than just the product, although providing complete solutions can be very challenging and costly (Stark, 2007, p.31). Place Strategy By the maturity stage, the brand has established distribution channels; effective distribution channels can function as a barrier to entry for new comers and also can extrapolate a brand’s maturity phase. For example, Tide washing powder has reached its maturity stage but still continues to grow (Kominos , 2002). Promotion Strategy Advertising at this stage is reminder because the market is already aware of the product offering. The advertising is aimed at promoting brand loyalty and highlighting unique product offerings. In case of ZTE, they would be channeling efforts towards creating brand loyalty and engaging in aggressive competitive advertising. At this stage sales promotions also play a role as ZTE will try hard to retain their market share by attempting to increase their sale volumes. In the US great many brand engage in sales promotions close to Christmas and Thanksgiving as consumers are willing to spend on tablets as presents for loved ones or for personal use. ZTE should utilize the high traffic of consumers in malls and shopping areas during that time of the year. Pricing Strategy Since there is lesser competition, there is a possibility that they may engage in price wars. For ZTE to stay clear of price wars, they need to highlight their unique offering for a very affordable price. In addition ZTE can also offer price flexibility for various versions of their tablets so they can target multiple segments in terms of affordability ( Pride & Ferrell, 2011). Decline Stage The declining stage of a product is inevitable too. ZTE needs to prepare itself when that stage comes. In case of the tablet market, they need to consider issues such as the high maintenance of the product, the ready availability of related applications and spare parts, after-sales service and introducing a newer better tablet to replace the existing one. Product Strategy Since the maturity stage of the ZTE tablet is expected to generate considerable profits, facing a decline in sales would not be easy. ZTE needs to be objective at this stage and remove versions from the market that are not performing too well, they will only be adding to the cost of operations. At this stage the consumers are indifferent to minor difference between the competing products and have huge switching rates, so for ZTE there is no point in investing in changing product designs ( Pride & Ferrell, 2011,p. 208). Place Strategy At this stage ZTE might consider shutting down outlets that are not performing well and focusing more on factor outlets and internet selling to sell out the remaining inventory of the declining product. The might even consider to shut down distribution channels that are not contributing significantly to profits. The loyal buyers who still want to purchase the ZTE tablets would still consider the factory outlets and the internet and a 0800 telephone number that encourages customers to order the product and pay delivery charges can be retained. Promotion Strategy Investments in advertising of the brand are curtailed at this stage, the loyal customers who are still interested in the ZTE tablets would still be motivated without the advertising. Sales promotion however can be used extensively at this stage to push the product to the consumers. Advertising special offers and coupons will enable ZTE to gain temporary attention from the consumers. Price Strategy The prices are made attractive so the consumers are attracted to the product; this is also facilitated with sales promotion. ZTE needs to assure the customer that they are getting the same good quality at a reduced price. Here is a chart depicting the pricing strategies of ZTE key competitors. Source: Smith, T. (2002). The Wiglaf Journal Conclusion and Recommendations This new development in the computer tablet industry may result to Kindle Fire Tablet’s increased market share with a possiblity of dethroning Ipad as the market leader. When ZTE finally enters into the computer tablet market in the US, it may be possible that the Kindle Fire Tablet would be the market already given the rapid phase of its preorder sale in the computer tablet market. This development is favorable to ZTE because it proves that the computer tablet market responds to price which is a strong competitive advantage of ZTE. When consumers responds to price, ZTE is in a better position to compete either with Ipad or Kindle Fire Tablet because price is ZTE’s comparative advantage over its competitor due to its lower production cost (being made in China and has the advantage of scale being the number two largest manufacturer). When competition redounds to price, it is highly probable that ZTE will prevail and would be able to realize its marketing objective of being a dominant player in the computer tablet industry by 2015. It should also support its product with a strong customer service and apps availability which made made Apple’s Ipad to be a leader in the computer tablet market. This will guarantee customer satsifaction among its clients that would entrench ZTE’s position in the computer tablet industry by having a loyal customer base. References “ZTE to unveil Android tablet and smartphone.”Global Telecoms Business; Apr2011, Issue 124, p72-72, 1p Grieves, M. “Product lifecycle management: driving the next generation of lean thinking.”(2006) Edition illustrated PublisherMcGraw-Hill, 2006. P. 217 Kharif, O. (2011). ZTE to Sell Tablet in U.S. Next Year to Challenge Apple, Amazon. Bloomberg BusinessWeek. Retrieved from 9 December 2011 from Kominos, I. (2002). “product Life Cycle Management.” Urban and Regional Innovation Research Unit. Aristotle University of Thessaloniki. Retrived 11 December 2011 from < http://www.urenio.org> Liu, R. (2011) ZTE Smart Tab 7 Android tablet visits the FCC. Retrieved 9 December 2011 from < www.slashgear.com> Pride, W & Ferrell, O. C.(2010).“Product Decisions-Foundations of Marketing.” Cengage Learning. 4 Ed pg. 207-212 Smith, T. (2002) “Prices and Product Lifecycle – Must All Prices Fall? An examination of Amazon Kindle, Sony Reader, Barnes & Noble Nook, and Apple iPad. The Wiglaf Journal. Retrived 11 December 2011 from < http://www.wiglafjournal.com> Stark, J. (2011). Product Lifecycle Management:21st Century Paradigm for Product Realization. Springer, p.23 Read More