Market Segmentation of Eco Shack and Urban Eco Shack - Coursework Example

Case Study Report - Introduction to Marketing Executive Summary In this report we make a research on the market segmentation of Eco shack and Urban Eco shack made by Doug and Paul in New Zealand market. Considering the basic behaviour of the inhabitants and their changing needs they have come up with the ideas of making Eco Shack and Urban Eco shack. They are efficient in their own term of making the product efficiently, however they did not have any proper marketing knowledge to launch their product. Here we try to help them by considering different issues to evaluate the market. What types of customers are able and like to buy the urban shack product is discussed by consumer segmentation. Here we try to find the group of customers, who will be their target customer. Next we try to identify the business segmentation of Eco Shack. Irrespective of the individual customers, in terms of B2B business that can be approached also the findings in this sector. The branding and positioning of the product also discussed here. What strategies will maximise the customer attraction is the main motto here. In pricing approach, the company is likely to use the cost based approach. What are the basic advantages and disadvantages of this approach is also discussed here. Again we try identifying the strengths and weakness of the company will have if they priced their product under value based pricing. In the conclusion part it is discussed about the future prospect of the company. What threats and opportunities they will have is likely to mention over here. Table of Contents Introduction 5 Consumer segmentation 6 Geographic 6 Demographic 6 Psychographic 7 Behavioural 7 Business segmentation 7 Different Tourism Company 8 Government 8 On rental basis 8 Corporate hub 8 Export 9 Branding and positioning 9 Branding 9 Positioning 11 Advantages and disadvantages of cost oriented pricing approach- 11 Advantages 11 Disadvantages 12 Other Pricing Approach 12 Value Based Pricing 13 Advantages 13 Disadvantages 13 Evaluation 14 Conclusion 14 References 16 Introduction The people of New Zeeland love to own houses. To save money for their first home is the first priority in case of most of them. As the family grows and evolve the living requirements also changes. Some may needed a spare room for their business, or accommodate study or for the older parents or children. As the New Zealander also love to go summer vacation in different destinations like sea beach or mountain, most of them are situated in remote areas, where they need accommodations. A shack which is a type of small, often primitive shelter can use for these type of needs. As the environment is changing one should consider the environment factor while considering the accommodations. As it authorised by the Efficiency and Conservation Authority (EFCA) new building developers increased the usage of insulation rating requirements. Mr. Dough who holds a diploma degree from National Diploma in Architectural Technology (NDAT), and Mr. Paul, who is a qualified welder have come up with two Eco products – Eco shack and urban eco shack. Eco –Shacks are 2.4 to 3 meters wide and varying length from 3.6 meters long transportable building. This can be easily transported by an Herb truck or by Helicopter. It also maintains the NZS3604 standard. With a minimum50 years of life, it has several features like it built on timer framing, eco-ply cladding, wind turbine, battery storage, composting toilet, phone and data connection, long run colour, steel roofing and many other features. It will cost around NZ$35,000 to $40,000. The Urban Eco Shack is having some more features like wool carpet, Sensor light, smoke alarm. It sized about 3.6*2.4 meter floor area with 0.9*2.4 meter deck. The unit cost will be NZ$12,500. However this has been advertised on Trade &Exchange and in The New Zealand Herald, the owner is unable to find any response. In the following areas we try to find different market segmentation. Consumer segmentation Consumer segmentation is the way to understand the consumer orientation and differentiation. It helps to divide the market into groups of customers with same type of needs and features. This segmentation helps to identify the small group of consumer with basic differences yet are viable to target (Paul, 2008). The four bases of market segmentation are Geographic, Demographic, Psychographic and Behavioural. On basis of these four groups we try to identify the consumer in New Zealand for urban Eco shack. Geographic This country is basically consisting of two main islands and number of small islands. The main two islands are separated by the Cook Strait. The fascinating landscapes with the rolling green pastures make this country appropriate destination for adventure. The natural caves have its magical attraction among the tourists. However Most of the places are unable to provide appropriate accommodation to the tourist or it became too costly. So the adventurous people by purchasing the Urban Eco shack will get one time solution for their accommodation and will able to enjoy the beauty of the nature (Schiffman, 2005). Demographic The population of New Zealand is about 4.4 millions. Among which 69% are women. The majority of the population is from European descents. The rest part is divided between Maori and Asians. As the population of the country is continuously increasing within the North Island as well as the South Island it is needed to provide accommodation within short place. Also the maximum of the population consider so for the cause of safety the Urban Eco shack also can make its target to the urban people. Psychographic The basic economy of the country depends upon dairy and farming. Near about 60% of the people depend upon wages and salaries, 16 % are self employment and the less 24% is from different interest and investments. Due to unemployment the ownership of home decline from 73.8% to 66.9% in 2006. Above rental places the urban Eco shack will be a good idea for one time investment, for this type of people. Behavioural The standard of living is high in this country. With 100% literacy rate, the state is willing to provide extensive services for the betterment of the society. As most of the population range within 75miles from the ocean, and the weather is so pleasant, it attracts the people to participate in hiking, fishing, sailing and other competitive sports. As the temperature is not tropical but temperate one need to carry raincoats and umbrellas. So the people who are going for outdoor sports may become a potential customer for the urban eco shacks. Business segmentation When a company’s individual division, subsidiaries or other segment have separate accounts it is known as business segment reporting. Like when a bank uses its business segment by reporting to different separate accounts for its banking like credit card, financial services segments and others. Here we consider the B2B aspect of the Eco Shack in New Zealand (Meloy, 1988). Several ways are there to make a good business for the Eco shack which are shown below- Different Tourism Company The Eco Shack Company can approach to different tourism company situate in New Zealand. As tourism and outdoor sports are very popular in this country, the Eco shack will be able to provide a good accommodation in different spots, as well as it will match the recent concept of going green. Tourist companies like “Tourism Holding Ltd”, “Relaxing Journeys”. The “Green” concept with the advertising of Eco shack will attract the tourist to experience something new (Wedel, And Kamakura, 2008). Government The New Zealand Government also can be approached to run this type of business. As the government has its own travel and tourism agent. So the eco shack company also can approach them for selling their product. To make the travel more enjoyable and safer the government will love to join the Eco shack company. As the company also maintain the standard for their product, so it will not face many difficulties to get the tender from the government. It will make the citizen aware about the environment. On rental basis Different companies are there who provide the equipments for the outdoor sports. People used to rent the necessary equipments from them during the time of hiking, trekking or going for any other adventure. The Eco Shack company can also approach these companies, as the traveller do not need to buy the it, on behalf of them the rental company will buy and can make profit over the rental price. These will improve their businesses and attract more customers. Corporate hub Different corporate hub or giant, who may own its own hotel or guest house in different tourist spots, where they offer their employees to spend quality time. Now the Eco shack company also can approach them as it will bring a “Green” concept within the company. The Corporate Social Responsibility of these companies will get better dimensions. Export Countries from outside New Zealand also can be approached for the business purposes of Eco shack. As the company will able to identify the need in the outer world, the range of profit will increase. As well as the company will generate its brand value, and it will improve their goodwill. Branding and positioning 1. To launch a new product ain the market, and to make the buyer aware about the product branding and positioning is highly needed. An in depth understanding among the customer is needed during the process of branding (Pride, and Ferrell, 2007). Branding One definition of a brand is as follows: “A name, term, sign, symbol or design, or a combination of these, that is intended to identify the goods and services of one business or group of businesses and to differentiate them from those of competitors”. Inter brand is a branding consultancy which defines brand as it is the combination of intangible and tangible factors symbolised within a trademark that generates value and creates influence if properly managed. (Franzen and Moriarty, 2008). There are different steps are need to be taken during the time of branding of Eco shack. The branding could be done in the following ways- Quality- The buyer and the customers are needed to know the project as a eco friendly product. Considering the current environmental scenario, it will be very appealing to the consumer as a “Green” factor is included in the product. The consumer will consider its environmental factors over its cost. Communication- A good communication should be maintained between the customer, supplier, and also with the government. To sustain the customer a good promotional mix is need to be maintained t. To make the people aware about the product advertisement can be making in TV, internet, social sites, and News paper. As well as what the customer wants can be implemented in the product by analysing different market survey (Sengupta, 2005). Credibility- It is the psychological aspect of the buyer which is needed to be understood by the company. Why should one purchase this product, what needs drive them to purchase it will help them to understand about the product. Internal Marketing- internal branding is the concept, where the company changes its brand by implementing different strategy internally. Here the eco concept will help the company to maintain its internal branding. Long term perspective- branding should be create over the customer for long term possibility, where they will understand the Eco shack product by taking time and continuous advertisement will let them remember about the product. Positioning Positioning is all about the position a brand acquire in the market in the thoughts of the consumers. In the target market it will often found that a brand will have s its unique and clear position. Positioning can be done in two basic ways like in quality wise and by cost wise ( Ries,2003). Eco shack can be positioned as high quality with an average price. As the company have very few competitors like “Portable Rooms” and “Cabin Fever”, they need to apply different innovative strategies other than these two companies for making their position in the competitive market. Advantages and disadvantages of cost oriented pricing approach- Cost oriented pricing approach is a method, where the prices are set to takes into account the objective of the company’s profit and also covers the production cost. Like when the retailers are involves a simple adding to a constant percentage mark-up which is paid for each product. The advantages and disadvantages of the cost oriented pricing approach are followed down. Advantages It is a fair method to fix the price, as the management of the company are ensure about the price as it is fixed to cover the cost. The profit is assured. The risk will cover as the price is greater than the cost. It became natural when the cost is estimated depending on the capacity of the company. The management will face different uncertainties and risk , while taking a decision, as he accept the pricing formula, the uncertainty and the risk became reduced. These pricing approaches do not ignore the market factors, which help them to established customs of trade. Disadvantages As it ignores demand, it will unable to understand the needs of buyer, and their willingness about payment. This will govern the volume of sales obtainable in each series of pricing. By ignoring the competition, they will unable to reflect the competition in an adequate manner. As the common costs are allocated arbitrarily, the cost estimation will taking for granted, for multi product. As a general price has been made for all the types of the products. The opportunity costs are ignored, which made many decisions unsatisfactory, as the full cost plays a vital role than the incremental costs in term of pricing. On the basis of the volume of production, as fixed costs are appointed the cost will move high if the sales decrease, and in will get down when the sales volume will high. Again the changes in the sales volume depend on the price. So it will create a vicious circle between the interrelation of sales and price. Other Pricing Approach There is no one right way to calculate the pricing. At first the management is need to identify various factors, which are related to the pricing, now they have to choose the pricing strategy. There are five basic ways to calculate the prices, which are followed down- Cost based pricing Value based pricing Target return pricing or ROI (Return On Investment) Psychological pricing Fair Pricing As we discussed the cost based pricing before, now we are trying to describe the Value based pricing (Mills, 2002). Value Based Pricing In this method of pricing approach, the price of the product or services will be determined according to the perceived value to the customer. The market price as well as the cost of the product or service does not consider in this approach. As the customers are agreed to the price, this type of price approach method will create high profit, as the value of the product or services is also high (Mills, 2002). Mostly in cases of specialized services like product design, Bankruptcy workouts, cost reduction analysis, Lawsuit defence, pharmaceuticals companies. At the executive level, where the pricing is made on customer’s approval, rather than the procurement department, value based pricing is more appreciable there. As the buyers are more efficient to evaluate price, so it will be less likely to accept such pricing (Wilkinson and Mavdivitt 2011). Advantages Increases profit- as the highest possible price is charged to the customers, it increases the profit also. Loyal customer- However the price is very high, one can achieve the most loyal customers. This will help to create business in future. For creating goodwill and generating referrals this will help a lot. Disadvantages Niche market- As the price is very high, only a small number of customers only can be approached. So the mass customers are stay away from the projection. Not scalable- Small, highly specialized organisation can only approach this type of pricing method. In large organisation, where the employees are not that much highly skilled cannot be approached, this type of pricing method. Competition- The companies, which are applying this type of pricing method, leave a great space, open for the customers, where they can approach same service or product in fewer prices and can take away the market share of the previous one. Labour costs- As the labours are skilled in specialization factors, the company need to pay them high. There is another risk, as the competitors may take them with offering higher salary or wages. Evaluation Many investment bankers and attorneys are using this type of pricing for decades, however in normal businesses , where the market is competitive make it impossible to apply value based pricing. This approach will be highly appreciable in the niche areas, where the companies are offering premium services, which are highly valued to the buyer. Conclusion On the above research we try to make market segmentation for Dough and Paul for their product Eco Shack and Urban Eco Shack. Our findings were positive, as those fully depend on practical implementation and further research and development process. In case of the customer segmentation the high price of the product may unable to attract the mass customers. However the product quality and innovative approach to the product may make profit. In terms of branding and positioning, the company need to make an attractive advertisement, which will able to attract the target consumer. Proper branding will make the whole work half. However they also need to aware about the competitors like portable rooms and cabin fever. The management is needed to apply the proper strategies to attract the consumers. In case of value pricing the company is using cost based pricing, which is having its own advantages as well as disadvantages. It will be better if the management make an research on the other pricing method, and apply the best. For the start up the company will be need huge money, which may not be fulfilled by the investment of the owner. They may need to apply different bank and financial sectors. For which a proper market research, with the future prospect is needed to be identify. Before setting up the company and starting making production, the management is needed to do SWOT (Strength, weakness, Opportunity and Threat) analysis as well as PESTEL (Politics, Economic, Social, Environmental, and Legal) analysis over the company. References Franzen, G, and Moriarty, S. (2008). The Science and Art of Branding. US: M. E. Sharpe. Meloy, M. (1988). A segmentation analysis of consumer attitudes and usage of grocery coupons. US: Cornell University. Mills, G. (2002). Retail pricing strategies and market power. Australia: Melbourne Univ. Publishing. Paul, J. (2008). International Marketing: Text and Cases. US: Tata McGraw-Hill Education. Pride, W, and Ferrell, O. (2007). Foundations of Marketing. US: Cengage Learning. Ries. (2003). Positioning: The Battle for Your Mind. US: Tata McGraw-Hill Education. Schiffman. (2005). Consumer Behavior, 9/e. India: Pearson Education India. Sengupta, S. (2005). Brand Positioning: Strategies for Competitive Advantage. India: Tata McGraw-Hill Education. Wedel, A. And Kamakura, W. (2008) Market segmentation: conceptual and methodological foundations International Series in Quantitative Marketing Series. US: Spinger. Wilkinson, M and Mavdivitt, H. (2011). Value –Based Pricing. US: Tata McGraw-Hill Proffesional. Read More