Marketing Limited Capital Resources - Term Paper Example

 «Marketing Limited Capital Resources» Mr. Don Evan, who enjoys extensive distribution and supply experience of food products and beverages, is the founder Newfoundland Company. Indeed, the president and owner of the firm has identified the business opportunity to market a new private labeled tea brand in retail sector, in addition to distributing products of famous tea, coffee and beverage producing companies. Indeed, he has already been the owner of Devon Foods Limited and has a relatively efficient sales and supply network. Moreover, the owner has vast knowledge about tea growing nations, packaging plants, nature of local institutional market; therefore has an inclination to expand business operations through packing and marketing of private labeled brand in the Newfoundland where Per Capita Tea consumption is 3 times higher than Canada’s 2.1 pound consumption in the year 1980. Mr. Evan wants to capitalize his resources and would like to enter in the retail sector by implementing a sound marketing and advertising strategy in highly price sensitive and competitive retail tea market. Initially, the Red Rose brand (share of 20% in boxed tea bags market) offered by Brook Bond was the market leader in Newfoundland; however, the arrival of Tetley (British firm) in 1970 later changed the competition in the market as Tetley has become the market leader with almost 70% share in boxed tea bags market. Besides these two brands, there are 15 other polybag and private labeled low and medium priced tea brands that also enjoy 30% in retail tea sales. Chapter # 2 - Problem definition The major problem, which Newfoundland Tea Company has been facing, is that it is apprehended from entering in retail tea market because of stiff competition and extreme level of price sensitivity. For instance, the polybag producers usually tempt unskilled and miscellaneous occupation groups (particularly with lower incomes and low brand recognition) by charging low prices for their low quality weak brands. Indeed, these 15 different brands with almost negligible market share are only targeting such niches. The brand recognition, awareness and loyalty for Tetley and Red Rose brands are very high and the small tea firms are being unable to attract major consumer segments (professionals, white collars and skilled labor) towards the brand. Hence, in the wake of above, Newfoundland Tea Company does not have any clear strategic, tactical or marketing plans to be applied for growth, sustainability, long – term value creation and profit maximization. Other major problems are insufficient advertising budgets in comparison to Tetley and Red Rose, the lack of retail sales force and channel arrangements (different from supply and distribution) exclusively for tea market and higher costs of entering and establishing in retail sector amid presence of top two producers and sellers. The scope of this problem is strategic in nature mainly because any incorrect decision or marketing blunder would result in immediate failure of the company as there are greater number of competition barriers to entry such as heavy TV and Radio advertising, extensive financial resources of market leaders, managerial expertise, organized sales points followed by Pull Marketing. For instance, Tactical plans are developed to ensure smooth implementation of the practices, strategies and policies specified in the strategic plans, which addresses both short – term and long - run activities. Chapter # 3 - Objectives Develop a strategic plan that would help Newfoundland Tea Company to successfully enter the retail tea sector, enhance sales, and generate revenues and profits. Indeed, the initial aim is to introduce low quality and low priced brands, which will be offered to market niches so that some market share (3-4%) could be captured in first 6 months. To introduce, after 4 months of business operations, top quality new tea brands in excellent packaging for professionals and white collars segments so that demands and desires of these potential customers could be met. In quantitative terms, the initial aim is to create brand awareness and increase market share to 3-5% in first 6 months. Competitive, Penetrative and Promotional Pricing strategies will be adopted to entice maximum customers towards the new tea company. Initial aim is to make some profits from low quality products offered to market niches in first 6 months. Next, to break – even in first few months of operations (No profits – No loss) in extremely challenging market for high and relatively better quality products for professionals, white collars and skilled labor segments. To ensure Utility of Form, Place and Time as they play the most important role in success of new entrants. Smooth supply of products will be ensured and number of areas will be increased gradually. Chapter # 4 - Alternative courses of action: The first strategy is R&D and new product development followed by (Aggressive) Pull Marketing: This strategy is about introducing the new products and innovated existing products to the current target market. For instance, the Newfoundland Tea Company is a new company in the marketplace; hence it should come up with highly differentiated tea products and blends with better value proposition. Indeed, the products should be positioned in an appropriate manner through top quality and creative TV, Print and Radio advertisements in order to obtain a clear, distinctive and unique image in the minds of potential customers. The company should have to organize its Research and Development Department so that it could come up with new blends and tea mixtures at low costs. In fact, customers will become aware of new premium quality tea products and may switch from existing brands to Newfoundland Company’s “Bentley Fresh Brew Tea”. The second strategy is “R& D and greater focus on Push Marketing due to limited capital resources” This is about marketing the company products through an efficient distribution channel. Indeed, the associated retailers, whole sellers, distributors, direct selling agents and business partners would personally influence their customers separately so that sales objectives could be accomplished. In simple words, the company’s marketers have to endorse this R&D through effective Push marketing of these tea brands. Promotional techniques such as free sachets, boxes of teabags, free cups of tea at densely populated public places taste, gift hampers etc. should be used to enhance brand awareness and recognition. Sales incentives such as discounts on bulk buying, periodic purchase schemes, commission on additional sales etc. should also be disbursed among distribution channel members so that they would use Push Marketing strategy to attain desired outcomes and accomplish sales targets. Chapter # 5 – Evaluating each alternative: Alternative one: product development and Pull Marketing: Advantages: Customers will welcome innovated and differentiated tea products in top quality packaging with excellent taste. Once, they become satisfied from trial or introductory packs, they will start switching from existing tea products to Newfoundland’s Bentley brand. In addition, the satisfying and happy customers will also increase awareness in their social networks, which will of course be called as ‘marketing for free’. Indeed, the research has shown that peers may influence the buying behavior. The launch of new tea flavors and seasonal blends may attract new segments, especially, customers from elite, upper – middle and lower – middle households with relatively high purchasing power. Also, consumers from these classes usually do not compromise over taste and quality, convenience, comfort etc. as well as they endorse the new ideas and innovations. The long – run benefits of this strategy in terms of value and relationship building will be higher because this will certainly help increasing market share and future expansion. The Tetley’s policy regarding product development and aggressive advertising, which later enabled it to defeat Red Rose and become market leader, is the evidence that any company could succeed if follows the right strategy in external environment with utmost dedication and commitment. As a result, the sales and monetary gains will be maximized. Disadvantages: The short – term costs over investment, introducing a new product, induction of new processing and packaging machinery will be higher to smoothly conduct Research and Development. Extensive financial resources are required to compete with Tetley and Red Rose, the two market giants. Sales results are not guaranteed even after R&D because brand loyalty is high. However, consumers may switch to new brands if and only if marketing campaign is designed and implemented in an effective manner. High TV, print and radio advertising costs Alternative two: product development and Push Marketing: Advantages: The strategy is quite beneficial to increase brand awareness and recognition among market niches such as consumers with miscellaneous occupations and from unskilled labor groups. No need for having extensive financial resources in first few months of operations. Since, the initial target will be customers from above mentioned groups. Costs of marketing and advertising are lower as incentives will be offered and disbursed on accomplishment of predefined sales targets. Disadvantages: The strategy will not be beneficial to effectively market products to tea consumers from top three market segments such as professionals, white collar and skilled labor as they are tilted towards Tetley and Red Rose brands and have high brand loyalty. They will not just switch to “Bentley Fresh Brew” brand upon advice of retailer, whole seller or marketing agent. Rather, these customers usually learn from electronic, print or radio media about new products and tend to judge their credibility themselves. Obviously, it will be ineffective in the short – run to immediately reach mass market because establishment of retail network and distribution arrangements will take some time. The best alternative to consider: Blend of two alternatives Indeed, both alternatives presented above are quite useful in different situations. Nevertheless, the company has aim to expand in near future by producing and marketing both low and high quality products. Market Segments: Newfoundland Tea Company has decided to first market its products to low income groups such as unskilled labor and people with miscellaneous occupations who do not have inclination for any specific brand. The total retail tea sales account for 30% to these segments. Second, the company will also market its products to professionals, white collar and skilled labor segments after 4 months of operations. Recommendation: The researcher will offer the company to use the blend of both alternatives so that they could develop an effective marketing mix and increase profits from these business operations. Indeed, the reason behind the choice is the fact the Research & Development has to be conducted to produce and offer differentiated products in the marketplace. For instance, the company should focus heavily on ‘Push Marketing’ in first few months when it will solely offer products to low income groups. Later, when company decides to offer brands to high income groups from 5th month of operations, it could start using aggressive informative and persuasive advertising followed by Pull marketing strategies. The latter should also be adopted in order to compete with top two Tetley and Red Rose brands, which have already captured most of the market share in retail tea sector and they mainly attract consumers from higher income groups. SWOT analysis: Strengths: Substantial past experience of Mr. Evan in food and beverages industry will enable him to establish brand name of his company as well enhance reputation and goodwill in the marketplace. High standards of quality for tea products. R&D will enable the company to offer new blends and tea mixtures in the marketplace. The Newfoundland Tea Company was opened a year back and its previous business products have already become a success. Opportunities: Per Capita Tea consumption in chosen Newfoundland market is three times the average consumption in Canada. Hence, there is huge potential of sales. Top quality differentiated brands will attract attention of buyers in the market. Similar was happened in past (in 1970) when Tetley joined the business arena and broke the monopoly of Red Rose brand. Weaknesses: The company has fewer financial resources in comparison to Red Rose and Tetley brands. Hence, it may face problems in inducting state-of-the-art-machinery for processing and packaging. The company lacks retail channel arrangements and networks as it is new in retail sector of private labeled tea boxes and tea bags. The company does not have sufficient advertising and marketing budgets unlike two main competitors. Threats: Highly price sensitive industry. The existing firms will retaliate that may lead to price wars. Changing buyer tastes. Consumers may shift to coffee in near future, which may reduce per capita consumption of tea. Competitors have extremely strong management, distribution networks, financial resources, sales staff etc. Read More