Marketing Strategy and Implementation Plan - Essay Example

Executive Summary Absorb Rite Tissues and Towels, Inc. is a successful manufacturer of dairy paper products, enjoying for many years the loyalty of its customers. Competing in the private labels industry for many years, the company is currently facing a down-ward slope in its sales and overall profits due to the shift in customer (retailers) demands. The emergence and development of grocery and super store chains have ultimately pushed prices down; a fact that has caused a lot of pressure to Absorb Rite as it merely produces ‘on the line’ of breaking even. In addition to that, a loss of some of the major clients has considerably further reduced the profits gained. The company has been focusing on manufacturing an innovative product that has a dual utility (traditional use of toilette paper and odor absorbing features); the products have already gone through the R&D department and have been tested to sample markets with positive feedback and reviews. To this extend, Absorb Rite needs to redirect its strategy and objectives towards promoting this new line and eventually penetrating the market while capturing largest portions of the market. This marketing plan effectively offers a complete action plan for the necessary activities that need to be implemented towards restoring the position of the firm and increasing total sales. Marketing Strategy a. Scope of the strategy The overall strategy of Absorb Rite Tissues and Towels, Inc. should be directed towards marketing and promoting the innovative new products that have already been designed in the R&D department and researched in test markets. Since there is a general down turn in the market of private label tissues and toilette papers, the company needs to invest in strategically introducing the new products as well as find alternative means of sustaining the development of already existing lines. This means that the various departments must integrate towards achieving to maintain or even increase sales of the traditionally manufactured goods on the one hand, and promoting the new innovative papers and tissues. Resources should be combined under the scope of gaining economies of scale through increase in the overall production processes (manufacture volumes) and reduction in the per unit cost. b. Goals and Objectives The goals that Absorb Rite Tissues and Papers, Inc. needs to target are: Maintain its already existing customers through providing incentives and promoting brand loyalty Re-gain the ‘lost’ customers by effectively introducing the innovative products and offering better price deals Create a new customer base for both the existing and the new product lines (penetrate the grocery and supermarket chains market) The specific objectives that the company must attain in order to serve the overall strategy towards further growth in sales and profits are: Increase the share of the market for the existing product lines by 4% within a period of one year Increase the overall sales by an estimated 10% (so as to gain profits that are higher than those reported during the last year) Restore and increase the production volume to the estimated 85% in order to reduce the per unit costs and be able to sell the products at lower prices that will be competitive and enable Absorb Rite to keep up with the intense rivalries. c. Principal strategy The principal strategy must focus on gaining “competence and competitive advantage over rivals in delivering high quality, innovative products at reasonable and competitive prices”. This will enable the company to become a major player in the market and eventually dominate the industry and achieve greater shares. d. Resources required The marketing strategy needs to be implemented on a holistic basis; this means that all departments of the corporation must focus on achieving the objectives and goals in order to pursue sustainable development and overall growth with regards to sales and profits. For this very reason, the marketers should cooperate with the production and the R&D departments so that efficiently and effectively coordinated efforts can eventually provide the desired results. This marketing plan must be fully supported by every department (including the Financial, R&D, Production and Manufacturing) in order to provide the desired outcomes and eventually build upon customer loyalty and increased market share. Therefore, there should be clear objectives and goals set, a structured and predetermined marketing budget as well as an estimated level of production volumes that can ultimately support and enable the reduction in price sales. e. Sustainable advantage over competition to be achieved Absorb Rite Tissues and Papers, Inc. will build upon its competitive advantage on the basis of the new innovative products that feature actually a dual utility. Differentiation, thus, will be leveraged in order to gain competence and eventually become the leading company in the private labels market. To that extend, the firm will also invest in its reputation and reliability in delivering high quality store brands based on the past records and on the high technological advancements (embedded odor absorber) attached to its products. f. Synergies to be utilized Synergies are essential in achieving effective results underlined by integrated and consistent efforts directed to virtually aspects of targeting the customer base. For this very reason, the company will explore alternative ways of cooperating with large grocery or super store chains in order promote its new products. More specifically, Absorb Rite will proceed to strategic deals with retailers (lower prices for its traditional products) to an exchange of retailer promotion over its new innovative lines. g. Expected results and benefits The results and benefits expected by this marketing plan are basically highlighted by the increase in the total sales volumes and the overall profits gained. The introduction of the new products is expected to boost the markets and eventually build customer loyalty and preference. Marketing Analysis One of the most up-dated mechanisms and tools that enable organizations to pursue and achieve financial growth is the development, the production and the sale of Private Label goods; that is products that are produced by, or on behalf of retailers and eventually sold under the retailers’ own brand or trade mark through their own outlets. The expansion and the intense presence of private label goods throughout the world is a fact that merely describes a new era in consumer products, constituting at the same time a new trend in doing business. Own – brands are expected to dominate the medium priced consumer goods, delivering quality and simultaneously reduced price offerings to the buyers. a. Marco environment analysis The evolution of private labels is evident. From own brands, the market has shifted towards extended own brands. Own brands present the evolution point that underlines the necessity for providing high quality goods (comparable to national and leading brands) at medium price charges. The introduction of ‘value for money’ is credited to the development of the third generation, in an attempt to establish the fundamental factors and criteria (both quality and price) that enhance and promote consumer behavior. The strategy was developed and designed around the “me-too” operational procedures entailing mainly activities and processes committed to mimic the product leaders. Own brands were indeed targeting the higher revenues and sales generated accompanied with the higher profit margins that would provide the basis for successful business. This generation, furthermore, allowed for expansion of product assortment as the technological infrastructure suggested own brands existing for big category lines. (Wulf et al, 2005) The Extended Own brands, which constitute the fourth generation of private label goods in their current existing form indicate a rather more complete approach to producing and delivering ‘real’ products; with all the implications comprised in the term. The ultimate strategy adopted is actually the production and sale of quality products that feature value added attributes. With regards to objectives, Extended Own brands aim at increasing and retaining the client base, enhancing category margins and improving the retailers’ image through differentiation. The technology used is up-dated with innovative elements and aspects apparent throughout the entire manufacturing and production process; a fact that merely sets the price levels equal or approximate to the charges of established and well-known brands. Retailers now invest more in quality issues rather than on price ranges; quality becomes equal in importance to the nominal value of each product marketed. Additionally, new lines in categories of goods are supplemented, providing the supermarkets and chain stores the ability to pursue even higher growth margins. It is more than clear that the evolution of private label products has been an integral part of the entire development process of manufacturing, producing and distributing store brands. Although own labels in their early appearance were perceived as rather inferior and cheap versions of national brands, they have gradually upgraded their range and offer high quality/value for money products (Pauwels and Shrinivasan, 2003). For this very reason, the creation and the maintenance of retailer brands is becoming more important in today’s highly competitive environment. b. Competitive analysis The competition in the private labels is intense; a fact that is validated by the constant pressures on price reductions by retailers. Manufacturers and producers that have managed to achieve economies of scale through increasing production volumes and reducing per unit cost are prevailing the industry. With specific regards to the competition faced by Absorb Rite Inc, it should be noted that the rivals are pushing down sales price at an estimated 12%. This critically stresses the fact that there is a general shift on the part of grocery retailers towards suppliers that offer ‘cheap’ or low priced products. c. Industry analysis Today, private label goods have emerged into significant players in the overall scheme of product competition. Academics argue that consumers steadily show less interest in manufacturer brands, while their attitude towards store brands has become positive mainly due to the upgraded featured quality. (Verhoef et al., 2002) The AC NIELSEN Research conducted in 2003 aimed at exploring the development process and the actual growth of store brands around the world. Examining and investigating the current situation in 36 countries globally in Europe, Asia, North and Latin America the findings and conclusions indicate rather interesting results. The global market share of private labels amounts to an estimated 15% with an increasing rate of approximately 4%. This clearly implies a steady though prominent growth rate, characterized by a constant up-warding trend. (Appendix A) d. Success factors analysis The rapid growth rate is attributed to the following factors: 1. Substantial price increases by national brand manufacturers. The private labels are perceived as alternative choices to a wide selection of goods, featuring quality and low price. 2. Increase in the number of distribution outlets. The continuous development of new supermarkets and chain stores around the world have constituted the grounds for the development of private labels. More and more corporations are entering the retail business structuring the form of convenience stores or multiplex departments, engaging into offering product ranges under their own brand or signature. (Sheinin and Wagner, 2003). 3. Increased power of retailers. During the last decades mergers and acquisitions are actually a usual scenario to the retail business context. Most corporations – multinationals – are taking over small distributors in markets in order to formulate a powerful chain store that serves and covers a large portion of the potential customer base. This situation itself clearly fosters the dominance of 4. Reduced quality differences between private labels and national brands. The investment in both technology and “know-how” on the manufacturers account in order to deliver value for money products, has normally eliminated the gap between established producers’ brands and private labels with regards to perceived quality. This filled gap between the quality differences has been well received by the potential buyers who on the basis of price sensitivity are willing to purchase more and more own labels. 5. Increased interest on behalf of retailers. The private label products constitute a major advantage on the retailers’ part. The efficiency gains as well as the high profitability margins that are established by the lower manufacturing and advertising costs, stimulate outlet stores to proceed into doing business on the basis of their own brands. Strategy implementation a. Organization and staff required The implementation of the strategy and the marketing plan designed needs to be coordinated at all levels of the organization. Therefore, the marketing department will utilize its entire staff towards this end. In addition to that, individuals from the Finance and Production departments are necessary in order to cooperate on a ‘synergy’ level and eventually have the best possible results. Finally, for the production of the innovative tissues and toilette papers there will certainly be an additional production unit (added to the already existing one) that will require alignment with current production. b. External resources required The funds required for the implementation of the strategy include besides the marketing plan and activities the establishment of extra equipment estimated to cost 90000$. Given the fact that the company is currently facing a down slope in profits, there should apparently be a focus on external funding. For this very reason, Absorb Rite will search over alternative methods of external sources such as vendors or bank loans. c. Market selection steps and priorities Absorb Rite Tissues and Papers, Inc. is already competing in the private labels industry and specifically in the papers market. Its target groups consist of grocery stores and super markets offering own brands to their customers. The new marketing direction of the company will basically prioritize the grocery chains that have emerged during the last years and have taken over a lot of competition. However in order to properly address the issue of market selection there should be an analysis of the current clientele as well as the target market that is to be exploited: Thus, it is decided that the segments that the firm will focus upon are: small and medium local grocery stores for the traditional products local super store and super market chains for the innovative products international grocery chains for the new products d. Market positioning The company must position its products as quality, reasonably priced innovative tissues and toilette papers offered for being sold under retailers’ own brand. Absorb and Rite Inc will invest in the new lines that are to be produced and will set its overall market position to the high end technology manufacturers in the specific industry. Its USP (unique selling proposition) will basically lie upon the pioneering goods featuring high technology, high quality and added value characteristics. Appendix A Global Private Label Shares and Growth Rates by Product Area (Based on Value Sales) Product Area Private Label Share PrivateLabel Growth 1 Refrigerated Food 32% 9% 2 Paper, Plastic & Wraps (PPW) 31% 2% 3 Frozen Food 25% 3% 4 Pet Food 21% 11% 5 Shelf-Stable Food 19% 5% 6 Diapers & Feminine Hygiene 14% -1% 7 Health Care 14% 3% 8 Non-Alcoholic Beverages 12% 3% 9 Home Care 10% 2% 10 Snacks & Confectionery 9% 8% 11 Alcoholic Beverages 6% 3% 12 Personal Care 5% 3% 13 Cosmetics 2% 23% 14 Baby Food 2% 13% Source: ACNielsen Study 2003 < http://th.nielsen.com> References AC Nielsen (2003). The Power of Private Label – A Review of Growth Trends Around the World. Retrieved on October 8, 2008 Pauwels, K. and Shrinivasan, S. (2003). Who Benefits from Store Brand Entry. Marketing Science. Vol. 23, Issue 3 pp. 364-391 Sheinin, D.A., and Wagner, J. (2003) Pricing Store Brands Across Categories and Retailers. Journal of Product & Brand Management. Vol. 12 No. 4 pp. 201-219 Verhoef, P.C, Nijssen, E.J. and Sloot, L.M. (2002). Strategic Reactions of National Brand Manufacturers Towards Private Labels: An empirical study in Netherlands. European Journal of Marketing. Vol. 36 No. 11/12 pp. 1309-1326 Wulf, K., Odekerken-Schroder, G. and Van Ossel, G. (2005). Consumer Perceptions of Store Brands versus National Brands. Journal of Consumer Marketing. Vol. 22 No 4 pp. 223-232 Read More