Reasons and Dynamics of Shift of Voice X's Marketing Position - Case Study Example

Marketing Game Report Past Performance: Though Voice X, after being the market leader in sales for 4 consecutive periods, right from the beginning, the performance went down thereafter. But due to its focussed strategy in period 7, Voice X has managed to pull itself back up and gain the 2nd position in the market share for sales (see figure 1 & 2). Figure 1. Market Share (Sales) Figure 2. Net Contribution From figure 2, it is clear that the performance of Voice X has improved to a great extent and has successfully reclaimed its market share of sales. In terms of the number of units sold, the past performance of Voice X is shown in the figure 3. Figure 3. Units Sold Comparing the figures 2 and 3, clearly indicate that over the period, Voice X has developed its marketing strategy and has resulted in focussing on a niche market with a quality product and hence has succeeded in acquiring high contributions. Strategies Pursued: From the start up, Voice X decided to position its brand as a product for the high end users namely, Managers, Creators and Assistants. Hence the product features were enhanced to meet the needs of these users, by investing highly on research and development. Since Voice X had set its focus on these three target segments, the marketing mix was designed for all the periods with the requirements of these three segments in mind, with minimum variations. The price was not changed for a long time after the second period, in order to provide a value added, feature rich product to the target segments and to overrun the price competition from the other brands (see figure 4). Year Wholesale Price Channel 1 Channel 2 1 319.90 115.38 2 299.88 183.60 3 299.80 182.98 4 299.86 183.97 5 300.00 184.61 6 299.58 184.08 7 310.00 307.69 Figure 4. Voice X Price Vs. Period The main strategy followed was to generate high revenue by focussing on the premium segments. As the market share in the other segments were being taken up by competitors, initiatives were taken in the fifth period to focus on distribution in channel 2, so as to capture a part of the student market. Also additional sales resources were put into force in channel 2, to take up the interested market. A part of the rationale for choosing this distribution strategy was that about one-third of the high end consumers shopped through Channel 2. After the decline of sales in the fifth and sixth periods, a focussed strategy was adopted to regain the market share and to reap profits, by targeting the Managerial segment by tailoring the product and the distribution strategies to meet their requirements. High spending behaviour of the managerial segment and their preference for quality of service were the rationale behind this decision. This change in the strategy proved fruitful and Voice X re-positioned itself as a Premium product and gained its market share of sales. This strategy if followed for the next few periods, will put Voice X in a better financial position to start a new low priced product with minimum features to capture the low spending segments and become the market leader for this product. Recommendations for the next period: Before taking the marketing decisions for the next period, it is very essential to understand the current position of Voice X in the market and also the market trends. Target Segment: Currently, Voice X is feature rich (Special Commands – 15, Error Protection – 6 and Ease of Learning – 5) which closely matches the requirements of Managers. In the recent past (during periods 5 and 6), Voice X’s main distribution was through channel 2 targeted at gaining a share of the Students and Home Users segments. From the past experience it is clear that the product exceeds the expectations of these users and is over priced for these segments, at least with the current customer preferences. There are two options to be followed and from the analysis below it is clear that the second strategy will best suit Voice X. Downgrade the product and shift focus on students and home users. This would mean that the existing distribution and sales strategies are followed, but the product specifications are downgraded. This would also lead to reduction in prices to match the preferences of these segments. So, overall it is not a profitable solution. Continue to focus the current product on the managerial segment. The reasons being: Managerial segment forms about 22% of the market in terms of size (31080 out of 146194 from period 6). The total revenue (potentially) generated from this segment is also high as it is shown in the calculations below. Percent of Shopping: Channel 1 = 71% (from period 1 Market Report) Channel 2 = 29% Revenue: Channel 1: (0.71*31080*313) = £6,906,908 Channel 2: (0.29*31080*238) = £2,145,141 (From period 6 – customer preferences) Hence this segment alone accounts for approximately £ 9 million which forms about 27% of the total industrial revenue. So, the target segment for the next period has to be the Managers and a proportion of high spending Assistants and Creators. The objective for the next period is to win at least 50% of Managers, 30% of Assistants and 30% of Creators (who shop via. Channel 1). In addition to this, Voice X also spends heavily on its distribution in channel 2. This has to be carried on for the next few periods as well, in order to take up the entire target segments who shop via. Channels 1 and 2. Marketing Strategy: Product: As stated earlier, the product closely matches the requirements of the target segment – managers (see figure 6). Figure 6. Preferences of ‘Managers’ over Time Hence it is clear that it will be better to continue with the same product for the next few periods, so that Voice X can successfully compete against VRD_Pro, because from their product specifications and marketing strategy, it is obvious that they have taken the managerial segment as their main target. Distribution: Target Market Segment Percent preferring Channel 1 Managers 71% Assistants 78% Creators 57% As majority of the target market’s main purchase is through Channel 1, it is very essential to focus majority of the sales force on this channel. Also, this will take some sales rep work load off of this channel and increase the dealer satisfaction level. However, Channel 2 also has to be given importance, as it is a high revenue generating channel (because of reduced costs). As said earlier, focussing on channel 2 will help cover the part of the target segments that prefer high priced quality products from channel 2. This also has another advantage. Gaining and sustaining the dealer satisfaction level in channel 2 is essential as it will prove to be fruitful when Voice X decides to focus on the other segments in the future. Promotion: As the advertising budget is comparatively lesser, direct competitive strategy will not yield satisfactory results. Hence the advertising dollars should be spent on corporate and service based advertising. This will also be appealing to the target market segments and hence help focus on the niche market, Voice X is aimed at. Corporate advertising is better than direct competitive for Voice X, as it is a premium product and is highly priced. Voice X is very particular about product quality and features. Hence opting for mass advertising in terms of Direct Competitive will not yield satisfactory results and might even result in affecting the Brand Image. When advertising dollars are spent on corporate advertising, the brand image among the target market segments will be improved and it will have a cause attached to the product. Hence businesses and customers in managerial positions will prefer Voice X over other products because of its brand image, quality and also its Corporate Social Responsibility (CSR). The number of Sales staff in Channel 1 can be increased (at the compromise of the sales staff being reduced from Channel 2) and also the commission can be increased to meet the market rate (at about 11% or 12%). Customer Support spends can be increased by about $20,000 as it will improve customer satisfaction and help retain the existing customers. This will give an edge over the other companies and existing customers will opt for Voice X when they have to upgrade their products. Price: A compromise has to be made when the prices are set, similar to period 7. As the target segment consists of high spenders who look for product features and accuracy, it is essential to set a high price to sustain the brand image and quality. But this will result in the loss of market share of other segments, especially the ‘students’. However, the revenue generated will be high, when the product price is high and is targeted on the ‘high spending’ segments. Channel 1 price can be set to around $310 - $320. This will ensure that the price is competitive as far as the target market segments are concerned. Channel 2 price can be raised to around $300, so that the ‘Creators’ segment who prefer channel 2 are covered. Long Term: The comparative position of Voice X, in terms of the number of units sold is specified in the figure 7. It is clear from the figure 7 that Voice X has a number of opportunities in the future to target the low priced segments. As the learning curve of the users improves, they will require more features and options from the products and also the purchasing power of these segments would have increased to a great extent (with inflation and economical changes). Hence it is clear that Voice X should consistently follow its current pricing strategy. Figure 7. Market Share (Units) - Comparison In the long term, once sufficient revenue is generated and the marketing budget is increased by a significant amount, Voice X can focus on targeting the other segments and gaining monopoly in the market, by tailoring the product to meet specific customer requirements. Read More