NLV Solutions: The Vend-O-Matic Brand - Essay Example

? MARKETING PLAN: NLV Solutions: The Vend-O-Matic™ Brand EXECUTIVE SUMMARY NLV Solutions operates under the Vend-O-Matic brand, a business model supported by a family-based culture that is, today, ineffective in responding according to market characteristics. Vend-O-Matic provides an array of products ranging from candy and snacks to beverages and non-food offerings. Current economic conditions in the UK market conflict being able to grab more market attention for this brand, creating a need to reposition the business model under a premiumisation model to provide consumers with notions of exclusivity and quality. To launch the new integrated marketing communications campaign, designed to create brand recall in markets with little knowledge of the brand, considerable preliminary market research will need to be conducted to gain perspectives on consumer attitudes and lifestyles that will translate into an innovative procurement model with product emphasis. The logo utilised to make Vend-O-Matic stand out is based on retro-style signage common during the boom in automats in the 1960s to inspire nostalgic-based consumption behaviours. It is estimated that Vend-O-Matic will achieve a 40 percent increase in sales through this brand-building campaign, justified under premiumisation models in pricing and promotion and through establishment of more cooperative partnerships with many supply chain partners. This will be accomplished by devoting more capital and labour into the promotional function and ensuring innovation in product procurement. NLV Solutions: The Vend-O-Matic Brand 1.0 Situation analysis Vend-O-Matic is an established brand serving the United Kingdom since the 1960s. Despite this longevity in the automatic vending market, NLV Solutions has been slow to respond to market changes in a sales environment that is strongly driven by consumer attitude and psycho-social characteristics. The methodology by which the company provides talent management through family-based channels is ineffective for response to changing market conditions that continues to erode profitability for this brand. The generic market needs are for top-quality, innovative vending machines, establishment of competitive pricing structures for price-sensitive buyers, and expression of total product convenience to gain target market interest. 1.1 Market summary NLV Solutions has captured quality information about the market and consumer characteristics that will drive success in this repositioning of the Vend-O-Matic brand. This information will be leveraged throughout the entire business model to understand, specifically, which markets are being served, their tangible and emotional needs, and the most effective methodology to communicate with these markets. 1.2 Target market analysis The dominant market profile in this industry is the 16 to 34-year-old market. The secondary market is the consumer over the age of 55 that contributes profitability through hot beverage vending consumption. 1.3 Mission statement Vend-O-Matic aims to become the most recognisable and innovative vending brands in the UK. Through the establishment of close connections with buyers and renewed focus on customer relationship development, Vend-O-Matic seeks to become a market leader in quality, innovation and responsible product procurement. 1.4 Internal competency analysis Inflexibility under the current family-based management and governance structure is inefficient for achieving market and profit goals. Current management focuses too heavily on the tangibles of service and product and do not focus on the critical dimensions of intangibles required to establish a recognised brand. Consumers are largely risk averse and, to avoid uncertainty, will look for signs and evidence of quality, inferring these perceptions from communications, equipment, pricing, and symbols (Kotler and Keller 2007). Rather than focusing on radical management practices, leadership should be focusing on establishment of a recognised brand in key target markets that requires promotion of intangibles related to the new quality and innovation positioning. A restructuring of management to diversify creative problem-solving will be a critical dimension to establishing brand recognition and brand recall in key target markets. 1.5 Marketing goals and objectives NLV Solutions has not successfully capitalised on the benefits provided through brand-building activities. The goal is to create a significant brand connection with target consumers to ensure Vend-O-Matic is not lost in the dense competitive mix. The marketing objectives for this brand repositioning are: Establish the foundation of brand recall and recognition by October 2013 Increase profitability by 25 percent by 2014. Increase market share from 1% to 3% by 2015. Many vending competitors in this industry focus more on B2B promotion to gain market share, negating the opportunities provided through brand-building activities. Even though the vending market is sporadic and, oftentimes, unpredictable, the most valuable equity will be achieved through development of a familiar and acclaimed brand conception. 2.0 External market analyses To effectively corner this difficult market, it is necessary to understand the fundamentals of what drives competitive activity and consumption behaviour in the external market. 2.1 SWOT Analysis Strengths A flexible business model that allows for diverse procurement needed for fluctuating market preferences and lifestyle demands Market research focus in management Competencies in diversification of business model Weaknesses Rigid senior governance No existing brand conception and market position Leadership instability Opportunities Establish non-foods procurement strategies Develop more interactivity with consumers through social media More effective use of promotion as a strategy tool Threats Strong competitors with established brands The UK regulatory environment (i.e. cigarette ban, etc.) Instability in local economy leading to less disposable income for convenience purchasing 2.2 PESTEL analysis The political environment in the UK is one supportive of commercial activity, with qualitative research indicating little risk to the business model stemming from political actors and legislative systems. The economic environment in the UK is one that is currently unpredictable and somewhat unstable (Elliott 2012; Sachdev 2012). A recent survey of 1500 workers in the UK indicated that 52 percent of employees feel depressed amid this difficult economic slump (Sachdev 2012). This and other emotionally-based attitudes stemming from current recessionary environments add a dimension of risk to the business model associated with price sensitivity. The social environment is one favourable for redevelopment and repositioning of this business model. Studies have indicated that the majority target market for Vend-O-Matic is happy with their personal and professional lives (Executive Digest 2008). This market is self-confident and tends to gravitate toward premium products that can help them affirm their social identities (Executive Digest 2008). Teenagers in this market are also highly focused on achieving material gains and, too, look toward brands to help with identity formation (Executive Digest). This translates into a variety of opportunities for expanding procurement models to include top-quality products with a premiumisation strategy and tools by which youths can expand their materialism needs (e.g. pre-paid gift and telephony cards). The technology infrastructure in the UK is well-developed with a vast multitude of industry-relevant talent and expertise to facilitate innovation in equipment design as well as distribution. The average wholesale price for modernised food and beverage vending machines range from ?3500 to ?12,000, depending on the market, specific technological innovation included in the vending equipment, and level of talent required for tangible production. The depth of knowledge available in the UK can be observed in such organisations as Franchise Direct, Rondo Vending, and Seaga UK (among countless support and assembly organisations). Because Vend-O-Matic operates in a diverse market, ranging from outdoor vending opportunities to commercial environments, the brand must be considerate of the impact of environment on sales. Threats include weather conditions as well as aesthetics of urban development in regions where place marketing is a major consideration toward profit achievement. Research did not identify any legal concerns that would impose significant risk to the business model. 2.3 Five Forces Analysis Porter (2012) identified five critical, externalised forces that impact business strategy and development of innovative product deliverables. There are limited barriers to new competitor entry in this market, as many vending franchisers offer very low cost rental of vending equipment, making this an affordable market opportunity for independent investors. Unfortunately, NLV Solutions is not in a position to establish barriers to new market entry. Capital costs to simply enter this market are not significant. Though there is a vast network of competitors throughout the United Kingdom, there are limited risks of rivalry. The majority of vending competitors have not established powerful brand reputations and thus are not positioned well in this market. Competitors make limited use of consumer-centric promotions and tend to get lost in the competitive mix without having brand-building conceptions worked into their business models. Consumers and suppliers, unfortunately, have a great deal of bargaining power in this industry. Price-sensitive buyers can reject a multitude of vending products and switch to other competitors offering lower-cost products. Suppliers have very low switching costs in the supply chain as there are throngs of vending equipment buyers that continue to provide ample profitability to product distributors. There are considerable threats of substitutes in this industry, (e.g. tea versus coffee, salty snacks versus sugar candy). Vend-O-Matic must consider this risk and diversify offerings in important markets to avoid competitor defection by consumers. 2.4 Critical success factors Ongoing and aggressive market research to identify real-time consumer sentiment and attitude that will impact procurement and development of innovative vending technologies. A flexible and competent maintenance team to ensure proper functioning of all Vend-O-Matic branded equipment to ensure quality and convenience. Development of an internal Brand Steering Group to analyse effectiveness of branding strategies and new market opportunities. Revamping and re-contracting of existing supply chain to include more innovative product offerings so as to inject adaptability into the procurement model. 2.5 Market growth projections This market has recently undergone decreased growth, largely attributable to the current recessionary environment and the regulatory environment. In 2009, total industry sales slumped by four percent (Research and Markets 2010). By 2010, sales in this industry fell another two percent (Report Buyer 2011). At the same time, household and family expenditures in foods increased 5.9 percent in 2010 (Report Buyer 2011). This indicates some market opportunity to gain revenues by translating convenience products as a substitute for at-home foods purchasing in supermarkets and hypermarkets. Despite this opportunity, this market is still expected to maintain flat or moderately decreased sales volumes year-on-year. Sales declines in this market started in 2004 and have crept downwards slowly to 2012 (Caterer & Hotelkeeper 2012). 3.0 Marketing strategy This section identifies the dimensions of the marketing mix that will be most crucial to fulfilling mission and objectives, along with discussion of in-depth branding strategies and market positioning tactics to achieve greater brand visibility in this industry. 3.1 The marketing mix Place marketing is a major consideration for the business, with emphasis on convenience preferences in consumption behaviour. Areas that will support Vend-O-Matic products, whether outdoor or commercial, must maintain aesthetic appeal in order to gain market attention. In the vending industry, tangibles of equipment and logo presentation are critical success factors to achieve positive brand sentiment and incentive to make purchases (Kotler and Keller 2007). Retro-Style Logo Design for new business model Nostalgia is a powerful motivator toward consumption behaviour (Rutherford and Shaw 2008). Vend-O-Matic will be retrofitting existing vending equipment and later brand all upcoming innovative equipment to sport the nostalgic and easy-to-recognise logo. Product will be a critical dynamic of whether the new Vend-O-Matic business model attains market success and profitability. Hot drinks are the most favoured product, consisting of 60 percent of total vending sales in the UK (Hickman 2011). On coffee products, the estimated profit margin for vending sales is 70 percent (Hickman 2011). On a single bar of chocolate or packet of snack crisps, the profit margin is between 30 and 40 percent under most convenience models. The tangibles of product must have consideration in the marketing plan and have inclusion in all integrated marketing communications. Profit margin for product is substantial if the consumer markets can be motivated and incentivized to choose Vend-O-Matic. NLV Solutions will be working in close partnership with a variety of supply chain vendors to improve product variety and establish innovations in product deliverables. Development of strategic alliances with supply chain partners and involving these vendors in early stages of product development will ensure a more cost efficient and responsive supply chain network (Copacino 1996; Ragatz 1997). Executive-level visibility within the supply and value networks will ensure alliances can be developed and mutually-beneficial distribution networks established to meet with ever-changing consumer dynamics and behaviours. Pricing is a significant consideration in the marketing plan, especially during a period of recession that continues to linger in the UK market. However, the goal of this marketing strategy is to ensure that the Vend-O-Matic brand is positioned in terms of quality under a premiumisation model. The branding slogan “There’s Nothing Like it” will serve as the foundational justification for a moderately-higher-than-average pricing structure on select products, including foods, non-foods and beverages. Managers at NLV Solutions will conduct regular external competitive analyses to determine what pricing structures are being utilised by competition and then incorporate pricing strategies to outperform these models. Pricing will be adjusted based on quantitative analyses of actual sales volumes as well as that pending on results of establishing brand recognition and recall in selected target markets. Promotion is the most vibrant tool for building a solid brand identity and personality. The goal of the brand strategy is to create positive perceptions in consumer markets that Vend-O-Matic is a top quality leader with supplementary focus on responsible procurement. Vend-O-Matic will utilise a blend of billboard marketing, guerrilla marketing, social media and direct marketing to facilitate interest in this innovative brand. One of the most effective marketing tools for the vending industry is direct mail (Anderson, Hastings and McFadden 2002; Beemer and Siegel 2000). Direct mailing will have impact on the distributorship target market, including information about sweepstakes that will be developed to incentivize consumers to visit the Vend-O-Matic brand in social media. Direct mailing literature sent to consumers will consist of a developed brand loyalty catalogue which will provide consumers with promotional codes that can be entered on Vend-O-Matic equipment keypads for free or reduced products. The guerrilla marketing promotion will be concurrent with all other promotional functions, which will include street vending presentations and scripted lifestyle-oriented scenarios to gain instant consumer attraction. Samples of healthy eating products, snack items, and other promotional merchandise bearing the Vend-O-Matic brand logo will be distributed to consumers in commercial and professional environments. An “enter to win” contest will be part of this allure, allowing one consumer to win a Vend-O-Matic machine for household entertainment. Entry into this contest will also provide the business with significant volumes of demographic data that can translate into future procurement and promotional opportunities after analysing trends, opinions and sentiment, and generic economic demographics of viable consumer markets. Conceptual Billboard Layout for Brand Recognition Establishment 3.2 The market position Vend-O-Matic strives to establish a powerful brand identity and reputation, however in order to capitalise on the long-term advantages of quality positioning, the business must penetrate new markets and develop existing markets. As illustrated by the Ansoff Matrix diagram, Vend-O-Matic is positioned for new product development as well as diversification of existing product focus to include more innovative and lifestyle-focused product offerings. There is no singular category in which Vend-O-Matic must emphasise managerial and research focus. In order to capture additional market share, all four dimensions of business strategy must receive equal consideration and analyses. 4.0 Controls and Evaluation In order to make this integrated campaign a success, NLV Solutions must establish appropriate controls and evaluation tools to ensure that all objectives are meeting with appropriate and expected return on investment. The business must, internally, establish a corporate culture that is dedicated to achieving quality focus, under a total quality management system. Research and development will construct regular, bi-weekly reports related to product sampling, product development, and information technology capacity for innovative vending equipment launches more in-line with convenience models of marketing. Reports will be assessed for accuracy and viability of new product prototyping that can be piloted successfully in new market environments. A balanced scorecard and other appropriate measurement tools will ensure quality controls are established in one of the most critical areas of business development. Members from the information technology support will perform data mining to extract valuable data on suppliers, consumers and distributor markets. Management will conduct routine and regular assessments of which markets are showing the most promise for profitability and which are under-performing. Market success factors based on finance will serve as a foundation for understanding whether traditional or non-traditional products are being favoured by certain markets, allowing the business to be more flexible in procurement to transform under-performing sales regions. On a monthly basis, internal staffing experts with fundamental knowledge of marketing research will begin providing the business management with valuable, intangible consumer data ranging from lifestyle preferences to convenience purchasing behaviour. In conjunction, they will be assessed for their favourable or non-favourable attitudes toward the Vend-O-Matic brand and its business model. These evaluations will serve as the control systems needed to ensure success in the integrated marketing campaign and also as a tool to enhance product variety throughout the value network. 5.0 Financial forecasting According to the new business model, a cash flow analysis has been developed projecting potential sales volumes and expenditures occurring between January and December 2013 (See Appendix A). Revenue increases aligned with the branding campaign and success expectations for promotional activity are reflected, illustrating a potential cash flow position in December 2013 of ?7,415,500. Periodic revenue increases occur in-line with brand recognition establishment, changes to innovation in procurement, and more tangible equipment deliverables distributed throughout a variety of UK markets. These capital expenditures representing depreciable asset procurement is reflected in the cash flow analysis as well as the labour payments required to fulfil all business and marketing objectives. Projected revenue increases from current ?1 million to ?1,400,000 represent a 40 percent increase in total vending sales across the entire business spectrum. This would equate to an increase in market share of an additional one to two percentage points based on total industry sales figures, thus fulfilling the marketing objectives of this integrated rebranding and repositioning campaign. Expenditures on promotion are estimated, for the year 2013, at ?190,000 for the entire campaign, to include billboards, guerrilla marketing service payments, tax-deductible losses from sweepstakes and contests, and direct mailing literature. These are reflected also in the sales forecast and cash flow analysis provided in Appendix A. The cash flow analysis illustrates periodic increases in promotional costs that will occur with each brand-building effort and new innovation provided in the business model. Expenditures are higher during periods where new merchandise and equipment have been purchased to facilitate innovations for Vend-O-Matic. 6.0 Milestones To achieve the marketing objectives, the majority of marketing occurs early in the year, ensuring adequate training is accomplished and all integrated promotional efforts launched. Equipment prototyping is expected to be completed by April in which all innovations in technology and procurement have been identified and are ready for launch in new and current vending markets. 7.0 Contingency Plan In the event that this integrated marketing campaign does not achieve its intended results, Vend-O-Matic has developed a contingency plan. It may not be feasible to position this business under a premiumisation strategy due to both the price sensitivities in key markets and many attitudinal components of key markets outside of the control of NLV Solutions. As such, the business will be prepared with a new positioning strategy focusing on product attributes. This will include development of mock layouts of billboard advertisements as well as industry- and consumer-relevant magazines. If consumers do not accept Vend-O-Matic as a premium brand, emphasis on product will need to be the new promotional campaign in order to position this business properly and maintain a visible and recognised brand personality. It will require a total repositioning of the business if, by December 2013, no significant changes in brand sentiment or sales revenues justify the quality and responsible procurement positioning strategy. The new product focus will also take non-food offerings to a new level in the event of quality positioning failures. Research indicates that the male grooming and beauty market is explosive with growth as changes in social attitudes and needs are reflected in a variety of younger male buyers. Male grooming is a multi-billion dollar industry reflecting growth rates of approximately 30 percent annually (CBS 2011; Hairstyles-7.com 2004). To capture this market, product emphasis will include procurement of moderately-priced, convenient men’s grooming products including moisturizers, conditioners, skin creams, aftershaves and colognes, as well as anti-wrinkle creams. The contingency plan will target the 16-35 year old male consumer, using lifestyle-relevant marketing communications to promote Vend-O-Matic’s new focus on satisfying male psyche. 8.0 Critical review Customer relationship management is crucial to gaining brand recall and ultimately brand loyalty in the long-term. “CRM is the array of processes that help a company to understand the preferences or dislikes of individual customers in order to build lasting relationships” (Buttle 2005, p.4). Vend-O-Matic has not, historically, maintained close connection with customers which contributes to why the brand is not easily recognisable in the UK market. It will represent a significant change to the management model at the organisation to ensure that the business is equipped to provide effective CRM in the social media environment and directly to consumers. With CRM being critical to establishing brand loyalty (Buttle 2005), Vend-O-Matic must be more proactive in performing market research and promoting integrity (as well as quality) to desired consumer markets. References Aaker, D.A. (1996). Measuring brand equity across products and markets, Management Review, 38(Spring), pp.102-120. Anderson, S., Hastings, G. and McFadden, L. (2002). Strategic marketing in the UK tobacco industry, Lancet Uncool, Issue 3. pp.481-486. Beemer, L. and Siegel, M. (2000). Tobacco marketing and adolescent smoking: More support for a causal inference, American Journal of Public Health, 90(2), pp.407-411. Buttle, F. (2007). Customer Relationship Management: Concepts and technologies. Oxford: Butterworth-Heinemann. Caterer & Hotelkeeper. (2007). Projected UK vending market trends, 197(4495). CBS Chicago. (2011). Men’s grooming industry growing, January 3. 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Appendix A: Cash Flow and Sales Forecast Twelve-month cash flow NLV Solutions Fiscal Year Begins: Jan-13 Pre-Startup EST Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Total Item EST Cash on Hand (beginning of month) 1,000,000 458,800 938,100 1,427,400 2,031,700 2,635,800 3,319,900 4,019,200 4,673,500 5,317,800 5,992,100 6,676,400 7,415,500 7,415,500                               CASH RECEIPTS                             Cash Sales 1,000,000 1,000,000 1,000,000 1,100,000 1,100,000 1,200,000 1,200,000 1,200,000 1,200,000 1,300,000 1,300,000 1,400,000 1,400,000   TOTAL CASH RECEIPTS 28,500 1,000,000 1,000,000 1,100,000 1,100,000 1,200,000 1,200,000 1,200,000 1,200,000 1,300,000 1,300,000 1,400,000 1,400,000 0 Total Cash Available (before cash out) 1,028,500 1,458,800 1,938,100 2,527,400 3,131,700 3,835,800 4,519,900 5,219,200 5,873,500 6,617,800 7,292,100 8,076,400 8,815,500 7,415,500                               CASH PAID OUT                             Purchases (merchandise) 250,000 250,000 250,000 250,000 250,000 250,000 250,000 300,000 300,000 350,000 350,000 400,000 400,000   Supplies (office & oper.) 200 200 200 200 200 200 200 200 200 200 200 200 200   Advertising 40,000 30,000 10,000 5,000 5,000 25,000 10,000 5,000 5,000 15,000 15,000 20,000 5,000   Car, delivery & travel 25,000 0 0 0 200 200 0 0 0 0 0 200 200   Accounting & legal 2,500 0 0 0 0 0 0 0 0 0 0 0 0   Rent 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000   Telephone 400 100 100 100 100 100 100 100 100 100 100 100 100   Utilities 1,600 400 400 400 400 400 400 400 400 400 400 400 400   Labour Payments 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000   SUBTOTAL 529,700 490,700 470,700 465,700 465,900 485,900 470,700 515,700 515,700 575,700 575,700 630,900 615,900 0 Loan principal payment 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000   Capital purchase (specify) 20,000 10,000 20,000 10,000 10,000 10,000 10,000 10,000 20,000 30,000 20,000 10,000 20,000   TOTAL CASH PAID OUT 569,700 520,700 510,700 495,700 495,900 515,900 500,700 545,700 555,700 625,700 615,700 660,900 655,900 0 Cash Position (end of month) 458,800 938,100 1,427,400 2,031,700 2,635,800 3,319,900 4,019,200 4,673,500 5,317,800 5,992,100 6,676,400 7,415,500 8,159,600 7,415,500 Read More