Marketing Management of Phoenix Energy Company - Case Study Example

1 Introduction Phoenix Energy is a market leader in design, development and sale of energy systems based on solar panels. They were pioneers in designing industrial systems that have an average payback of 15-20 years. For domestic systems this period can increase to 30-40 years. This is the main reason for their not being able to make a breakthrough in this market. Phoenix have been researching on a new panel which is more economical as it works with lens and mirrors that concentrate the sunlight on to the energy generation areas of the panels. This will replace the photovoltaic cells and substantially reduce the payback period to 8-13 years and is a more palatable idea for the domestic consumer. But there are other buyers concerns like risks involved, aesthetics and the affect on property valuations that inhibit sales efforts and the question is how to find more about buyer behaviour and the segments that have the best potential for its products. It is prudent at this stage to first understand the market dynamics and the theories that prevail in the market on the subject before working out a marketing strategy. 2 Five Forces Analysis An important method of finding the competitiveness and acceptability of a product is by using the Five Force Analysis devised by Porter M.E. (1985), often called the Porter’s five force analysis. This will help the management to formulate appropriate marketing strategy to take care of vital issues. Porter divides the competitive environment into five forces of ‘powers’, these are Power of buyers, Power of suppliers, Threat of new entrants, Threat of substitutes, Intensity of rivalry between existing firms. (Porter, M. E.1985)1 In fact the Five Force Analysis provides the answer to the problem question posed earlier and therefore can be stated to be a critical constituent of any purposeful marketing strategy. In the present case the power of buyers is the main concern. Power of Buyers Four different reasons influence a buyers’ decision. They are also known as 4Ps as explained by McCarthy (1964)2. This needs careful study to understand customer behaviour. 1 Product. The buyer is greatly influenced if the product or service is perceived as useful for him. Sometimes it may not be of immediate use but its uniqueness and log term value is the attraction. Future valuation is also a decision making factor. 2 Price. The price is not usually a stand-alone factor. It has to be comparable with other products or services but with weight given to factors like product life, quality and after sale service it may become more attractive. He also considers price in context of the privileges attached to it. 3 Promotion. Image plays a very important role. Whether it is the image of the product which enhances value or status or the image of the buyer when he acquires a product or service, both factors are extremely important for the buyer in arriving at a purchase decision. 4 Place or Time of offer. It is of great value to the buyer if a product or service is offered to him at a place and time where the product is deemed most useful. This is more applicable when individual customers are involved for high value items that are usable under specific conditions. In recent years the 4Ps concept has come under criticism and as a result different marketing mixes have been put forward by Kotlet P,. (1986)3; Mindak and Fine (1981)4; and Nickels and Jonson (1976)5. But the one put forward by Booms and Bitner (1981)6 to include another 3Ps viz., Process, Physical Evidence and Participants has gained the most acceptability and popularity in marketing literature. 5 Process Marketing and Sales policies are important factors that attract a customer to a product. Warranties offered, after-sales service support and guarantees, quick response from employees are comfort levels that promote a product’s marketability. 6 Physical Evidence This is the defining of the environment where the marketing activity is to take place and is concerned with layout. Aesthetics, acoustics and fitting the environment are of importance and great concern to the customer. 7 Participation Largely neglected earlier, but by far the most important aspect of marketing is the adequate training of the employees that are involved in the marketing process. Their knowledge and confidence builds up an image of robust product and enthuses the customer. The whole attitude and behaviour of involved personnel reflects the concern of the marketing organization in offering a quality product or service and the personal touch is perhaps the final point that concludes a deal successfully. A satisfied customer is the company’s best brand ambassador and word of mouth publicity is the most precious campaign that any company wishes for and this 7th P is no doubt the most important of them all. 3 Segmentation Market strategies depend upon segmentation of the markets to determine the ideal group of customers demographically for best results. Markets are heterogeneous and are created by reasons of different values, needs wants, constraints, beliefs and incentives. Customers differ in their values and perceptions and want to purchase things that have value for them. Value is not just the monetary part, but also the usefulness and emotions that with go with it. The need and want play a great role in determining this value. Therefore a market segment is a set of customers that have a common approach to above questions and have a common desire to purchase a common set of goods and or services. They also respond to such offers in a common way. Marketing segmentation would therefore cover the process of locating customers who have a common need for common variety of products whose preferences vary in very narrow bands for these items. There are many variables of demography and geography that help to determine segmentation. The company needs to consider if the segment is large enough to support its intended sales by price and quantum. Then, is there a growth possibility or is it restricted or even declining by nature. It consists of variables that can be easily identified through demographics (i.e., statistics that describe a population), geographics (i.e., location issues) and financial information.  The company’s own skills and those of its workers are important too in being able to service the segment being carved out. Both knowledge and communications skills have to be developed and training must be carried out for improvements. Finally it must also be borne in mind that such segmentation must be within the scope of the company and stakeholders policy. Marketing success depends largely upon the ability to divide the segments of different class of customers and catering to their particular and peculiar requirements at the lowest cost. For an effective and efficient Marketing strategy, segmentation is an important tool, but segmentation research data precedes selection and segmentation methods models and procedures are based on customer profiles. Profiling requires certain pre-conditions and they are that a group of customers need specific products and there is nominal variance in their expectations. This will result in effective and profitable Targeting. Customers, by nature are of three distinguished types and a company needs to handle each with great care. They are purchase decision makers and they must be cultivated according to their outlook and preferences. There is the ultra-conservative type. This segment is highly consistent with their way of doing things. In their case any deviation might alienate them therefore it is very important to cater to them repeatedly in the same form and manner as the previous time. Once established they seldom change preferences. They become wary if discounts are offered or premium charged as for them it translates into loss of consistency. Cost effectiveness is acceptable if it does not disturb the status quo. They are very negative towards complex offerings. Then there are the conservative ones who will veer towards the new or unknown only if it involves low risk and competitive pricing. They are neutral to complex offerings and prefer to stay within a wide band of preferences, making few experiments. Lastly the Liberals who would like to try anything new and willing to take up a challenging offer. For them the price is secondary and the end result is foremost. They are the daring types who will experiment with new offerings. 4 Recommendations Following the above explanation the best course of action for Phoenix is to first determine the market it wants to make its offer. Ideally it should look for markets which have long periods of sunlight available throughout the year. This will ensure maximum use of the panels and give service and satisfaction to the consumers. This will also result in quicker payback time since the customer will realize value in a shorter period as a result of high usage time. A suggested area would be India where the sunlight is available throughout the year. There is also short supply of electricity even in urban areas. There is also a 300 million strong middle class and a 50 million upper middle class that can afford to buy and install solar panels only if they are affordable. There is also considerable construction activity all over the urbanized areas of the country both in the large cities as well as tier 2 towns with a population of 10 million and above. Having chosen an appropriate market the next step should be segmentation. Normally demographic data is available through government agencies like the census boards, and this should be procured and analysed. The residential areas should be demarcated based on affluent class of population as the panels will be costly and can be afforded by higher income groups. Among them too the choice should be for the age groups of 25- 45 as usually they are new home makers and also have a rising pay scale or are part of an escalating income group. The older age groups have usually settled down and are no longer in the mood for heavier additional investments to their properties. These younger people are more likely to invest in solar energy as a viable alternative to normal electricity provided by government or private sources. Another reason for this choice is that this group is more comfortable with new and modern gadgets which require a high amount of electricity and they look for cutting cost of energy through alternative means. These people also need energy constantly and for them power outages or short supply is another concern; which can be solved by uninterrupted supply, or alternate supply, through solar energy. The viability of the marketing effort must be judged from a comparison of the number of households required against the number available in the area. It should be considered that not all will opt for a new product, so the number should be adequate to launch the product in the area. Fewer sales will also mean higher cost for establishing a service and maintenance centre therefore great attention should be paid in arriving at the optimum number required to establish a presence. Many customers think that the panels on rooftop not only take up useful space but also cause an additional load for the roof. Besides they look out of place and are incongruous and spoil clean aesthetic looks. They can be satisfied with the explanation that modern panels are well hidden by slightly raised cornices and that they are not heavy on the roof nor are they unattractive in appearance. In fact they can be made to blend with the architecture to give a pleasant appearance. It is further suggested that for selection of an area for marketing a sample survey should be made by circulating a questionnaire amounts the potential clients. This will serve the dual purpose of making the targeted segmenting aware of the availability of the product and hence raise their interest. The second benefit would be that it will provide an insight to customer needs and aversions. The questionnaire should be direct, simple and short enough to encourage response. A sample questionnaire is attached for use by the company. 5 Questionnaire 1 Are you interested in an Energy solution that is cheaper than the electricity you are being supplied with now? 2 Are you interested in getting uninterrupted power supply with no outages? 3 Are you interested in increasing the load factor of your energy supply at no additional cost? 4 Are you interested in getting power supply without fear of escalation in cost in the future? 5 Are you interested in power supply without voltage fluctuations? While these are simple questions but they are informative enough to arouse the interest of the customer. An analysis of the data thus collected will assist the company to decide the issues of selection of the Target customer and define the area of operation. References 1 Porter, M.E. (1985) "Competitive Advantage", The Free Press, New York, 1985. 2 McCarthy, E.J. (1964), Basic Marketing, Richard D. Irwin Homewood, IL. 3 Kotler, P., Armstrong, G,. Principles of Marketing, Prentice Hall & Pearson Education. 4 Mindak, W.A. and Fine, S. (1981), “A fifth ‘P’: public relations”, in Donnely, J.H. and George, W.R. (Eds), Marketing of Services, American Marketing Association, Chicago, IL,pp. 71-3. 5 Nickels, W.G. and Jolson M.A. (1976), “Packaging – the fifth P in the marketing mix, Advanced Management Journal, Winter,pp. 13-21. 6 Booms, B.H. and Bitner, M.J. (1981), “Marketing strategies and organization structures for service firms”, in Donnelly, J.H. and George, W.R. (Eds), Marketing of Services, American Marketing Association, Chicago, IL, pp. 47-51 Read More