Marketing Plan for the Nanoholder - Case Study Example

Marketing report for the Nanoholder Table of contents Table of contents 1 1.0 Background 2 2.0 Innovation 2 3.0 Target market 4 4.0 Marketing location 7 5.0 Advertising and promotion 8 6.0 Manufacture and production 9 7.0 Pricing 13 8.0 The launching 13 9.0 Timescale 14 10.0 SWOT Analysis 14 10.1 Strengths 14 10.2 Weaknesses 14 10.3 Opportunities 15 10.4 Threats 15 References 1.0 Background Madison Inc is a fictitious company involved in developing and marketing a number of utility products in the market. The firm has entered into agreements with other firms to distribute and market a number of gadgets among them game consoles from Microsoft and Sony, video games, board games, toys, among others. The company also manufactures and markets artificial leather and plastic sheaths for a range of mobile phones and other hand held devices. The “Nano holder” is the latest addition to the company’s product portfolio. The Nanoholder is a modified watchstrap which is tied around the wrist and the Ipod nano is attached. 2.0 Innovation Innovation is a key element in marketing for modern companies. Innovation introduces new product in the company portfolio but also implies new ways of strategic marketing and thinking. Ferguson and Ferguson (1994) write that manufacturers of technologic gadgets can expects greater returns as they expect the new innovation and advancement on their existing products to foster their competitiveness. Firms have therefore to safeguard their technology from falling in the hands of competitors and in the process enjoy abnormal profits for longer. Varey (2002) says that fundamental innovation is responsible for meeting latent demand. The author cites the first introduction of microcomputers by Apple Inc as a good example of fundamental innovation. However, in this case, the introduction of the watchstrap as a holder for the iPod nano is just a functional innovation since it is a change of use rather than a new product that never existed before. Incremental innovation has seen introduction of better versions of the original ipod. The recent ipod nano has created an opportunity for fundamental innovation with the watchstrap for the nano. New products/innovations require intensive marketing for them to succeed. “In a 1991 survey of new product development, Product Development and Management Association (PDMA) found that for every 11 serious ideas or concepts, three enter development, 1.3 are launched and one succeeds” (Davis, n.d., p. 18). With these types of odds, marketing becomes about differentiating between items that succeed and those that do not. To be successful, the nanoholder must stand out amongst all the others. It must meet the needs and wants of the customer. The product should be available and easy to obtain. The price must be competitive and accurately priced. Finally, to be successful the product must be distinguishable from all the others that are available in the market. As a well known brand in the market, the company must maintain existing customer relationships and remain devoted to creating a new one with improved features (Curtis 2008). The firm will need to continuously improve the product based on customer feedback. These are all parts of the marketing strategy. Research into any market before the launching of a product is important for its success. Shenkar (2008) says that market research is essential before the introduction of a new product to know whether the market will accept it and assess how profitable the venture is. Market research is like delivering a whole package of your company image by finding out what customers need. In business, marketing is defined as the performance of business activities that direct the flow of goods and services to the consumer such as advertising, communication tools and product development (Godin 2007). The most important marketing role especially for technology products involves the research needed to gain knowledge of the industry environment (Curtis 2008). This information will be used in every aspect of a company marketing efforts and will be critical in influence the marketing strategies adopted by the company. Other decisions such as the design, the packaging and the branding of the product heavily rely on the market research findings. 3.0 Target market Madison Inc benefits from segmenting the market to appeal to a number of people and meet their needs very well by having a wide product portfolio. This idea of segmenting the market will also apply to the Nanoholder. “In general, it’s usually safer to be a segmenter—that is, to try to satisfy some customers very well instead of many just fairly well” (Perreault and McCarthy, 2004, p. 94). Offering a line of products that works for a variety of people is what Madison Inc aims to do; altering the idea of a watch strap to hold the iPod nano in a way that is centrally located on the wrist and the strap in a way that to satisfies the needs of the consumer. It is important that Madison Inc does not define its market in a way that excludes an important target market. The firm takes the “multiple target market approach—segmenting the market and choosing two or more segments, then treating each as a separate target market needing a different marketing mix” (Perreault and McCarthy, 2004. p 95). The firm will use different aspects to categorize the market. The Nanoholder has been specifically developed for those who own the latest iPod multi-touch screen generation. While everyone has the need for storing music in an ipod, not all of them need the convenience of a watchstrap to help them access the touch screen with ease. The nanoholder will only function with the new iPod nano. The introduction of this gadget in the market by Apple Inc has provided a new market for Madison Inc. Adner and Levinthal (2000) explain this opportunity by saying that “technical developments are a function of the opportunity structure that firms perceive. This opportunity structure, in turn, is a function of the firm’s current set of capabilities” (p. 611). The capabilities of Madison Inc in this instance come out clearly as opportunistic. The idea of using a strap watch with iPod is as new the new ipod model in the market. A number of consumer review sites and blogsites on the internet acknowledge the fact that the idea of using a watch strap to mount the iPod was borne seconds after the launching of the new ipod. Unfortunately, Madison was not the first to identify the new opportunity is watch straps for ipod and hence the idea is open to anyone. Market segmentation is a response to different consumer needs. Because consumers are unique, it is only proper to segment them into groups where majority of the needs match. Perreault and McCarthy (2004) write that “each person is unique; many of these people are similar in terms of how much status and dependability they want.” Many consumers continue to depend on other bards from Madison Inc because it is well trusted and meets the needs that the consumers have. According to (Perreault and McCarthy 2004, p.93), a good market meets these 4 criteria: Homogenous, Heterogeneous, Substantial and Operational. There is a strong belief at Madison that the target market has these 4 criteria because everyone is similar enough to have the urge to own the new ipod and thoughtful enough to think of a watch strap to hold the ipod conveniently. Nonetheless, all the watch straps from different marketers cannot be the same neither would all consumers love to have similar straps. Each individual consumer would love to have strap that expresses his/her style and sense of style. This way, Madison Inc will have to group the different tastes into segments and design the nanoholder accordingly and probably market them differently. The Ipod is more popular among the younger generations hence the Nanoholder will target the younger generation too. This implies that the company needs to put into consideration the tastes and preferences of the younger generation. It would also be important if the product was designed differently for the different genders. This would affect the design of the strap with a wide strap for example targeting males and a relatively narrow strap targeting females. Later consideration in the design of the strap will have to incorporate some themes such as music and art. The choice of music among consumers will generally guide the possible themes. For instance, there could be rock themes, hip hop themes and classics themes. Such themes will be best expressed through symbols and illustrations on the strap. Such considerations would also mean considerations of a wider range of colors for the strap. The diagram below gives a graphical representation of the same (Adner & Levinthal 2000). 4.0 Marketing location The Nanoholder is a complementary product of the iPod as it is an accessory to this gadget. This implies that the movement of the Naonoholder in the market will be greatly influenced by the demand of the iPod nano and the level of competition. This therefore implies that the product will have to be aligned with the tastes and preferences of the iPod nano. It is with this in mind that Madison Inc should also study the strategies used by Apple Inc in segmenting markets, distribution and marketing tactics. Madison Inc should make arrangements with distributors of iPods to also stock the Nanoholder (Godin 2007). As a complementary product with the iPod nano, it would be wasted marketing opportunities and wasted resources in stocking the product where the nano has not been introduced. In this respect, any future considerations of expansion into new markets will be directly dependent on the presence of the iPod nano in that particular market. 5.0 Advertising and promotion Once the market has been identified, the market must be informed about the new product through advertising and promotion. Madison Inc must communicate the value of the new product to the target market. It should use multiple avenues to promote the product and its qualities through advertising, slogans, sales promotions in store, and other tools. Online advertising of the product will best suit the company’s preferred mode of marketing; permission marketing (Varey 2002; Godin 2007; Grant 2000). The company’s catalog will be boldly displayed in the company’s webpage. Consumers will be required to register and identify their preferred color among the two, red and black. Consumers may out of choice fill in their information such as email with a reward of receiving regular updates on our range of products. This type of permission marketing discourages recipients of such emails from spamming them as consumers have the option of unsubscribing to such email notifications. Contemporary marketing methods tend to be interruptive in nature as they are not welcomed by the target market. Madison Inc can also consider endorsement by a celebrity. According to Varey (2002) endorsements by third parties are more convincing to potential consumers than conventional advertising. While advertising is a promise of quality and performance from the manufacturer, public relations in most cases is advice to the potential consumer explaining the advantages and opportunities that lay in consuming the particular product or service being discussed. As such, consumers tend to be reliant on public relations message other than advertising (Verburg, Ortt & Dicke 2005; Krishnamurthy 2001). In short, consumers become curious and interested in a product and seek to verify the promise in the advert through advice from friends and other sources such as online product reviews. 6.0 Manufacture and production The place of manufacture and design of the Nanoholder will a have a great bearing on the final product in terms of pricing and its movement in the market. Madison Inc heavily applies the pricing strategy in pushing many of its products in the market. Given that the company deals in simple gadgets which are easily copied, the company strives to keep its cost of production very low in order to compete well in the market. China has emerged as the preferred manufacturing hub for the firm due to the comparative advantages of China mainly due to labor. China provides cheap labor for the manufacture of simplified gadgets. Furthermore, China’s toy manufacturing industry is highly developed and specialized. Madison Inc has in the past entered into contract manufacturing with two firms in China and it is only proper that transactions be retained with these two companies only in order to simplify operations. Benefits of such an arrangement include lower costs, flexibility, and lower capital requirements, no need for production units and there is access to external expertise in selling the product. China retains production advantage over the UK mainly due to the cost of labour. Nowak-Lehman et al (2008) propose the Ricardian production advantage model below to explain this. a = L /Q a = number of units of labor required to produce a unit of value added Q= unit of value added L = labor employed when producing a product in the home country Comparative advantage (A) using labor as the only variable is compares efficacy of labor at home (a) and abroad (a*). A ≡ a * / a In order to make fair comparison between home and abroad labor costs, a common currency must be used. This is because countries with low labour productivity are better placed to compete if their wages are adequately low while countries with high labour productivity might be unable to compete in international markets due to relatively high labour costs. If ci is the relative unit labour cost, then to relate cost/price competitiveness is, ci = w*i a*i e / wiai where ci =relative unit labour cost w*i =labour cost abroad wi = labour cost at home e = bilateral nominal exchange rate between abroad and at home If ci > 1then Madison Inc should produce at home but if ci < 1, the nanoholder should be produced abroad. Past calculations for Madison Inc’s labour costs for other products have often have given ci < 1 hence production is abroad in China. The rapid economic development of china implies that there is better efficiency in all factors of production. Operating in China will thus allow Madison Inc to enjoy such benefits. Assumptions UK set up R & D 2 research heads £15 600.00 Pilot product £25 650.00 Subtotal £46 850.00 Premises £105 675.00 Licenses & approvals BSEN 60054- Fire safety £3 000.00 BSEN 60089- employee safety £2 500.00 Premises safety £2 500.00 Subtotal £8 000.00 Equipments Power £15 205.00 Melting machine £65 000.00 Recycler £45 000.00 Firefighting equipment £2 500.00 Subtotal £127 705.00 Grand total £241 380.000 China set up. R & D 2 research heads £15 105.00 Pilot product £2 625.00 Subtotal £17 725.00 Premises £75 600.00 Licenses & approvals BSEN 60054- Fire safety £2 500.00 BSEN 60089- employee safety £3 000.00 Premises safety £1 500.00 Subtotal £7 000.00 Equipments Power £10 200.00 Melting machine £55 000.00 Recycler £40 000.00 Firefighting equipment £1 500.00 Subtotal £106 700.00 Grand total £132 425.00 The China option will the most suitable option for Madison Inc the cost of doing business in China is relatively low as compared to UK. The total cost of operating in the UK is £241 380.000 as compared to China’s £132 425.00. 7.0 Pricing The new Nanoholder shall be made from a new revolutionary but cheap bio-degradable and reusable plastic. This will be important in targeting the environmentally conscious market which mainly comprises the older generation and also the price sensitive consumers. However, give that the older generation is not very much of a target by the new ipod model, it will help in attaining the company’s corporate social responsibility targets of conserving and protecting the environment. In contrast, use of leather may seem to be the better option for the environmentally conscious market. However, such an option would make the price of the strap prohibitive which contrasts with the company’s policy of price competitiveness. The price of the strap will remain the same in the early stages of the product. Varey (2002) advices that price entry strategies are useful where there is established competition. Given that there are no established competitors in this market, entry price strategy might not be effective. 8.0 The launching The Nanoholder is expected to ride on the popularity of the iPod nano. However, the company should also engage a compelling marketing message. This will ride on the brand recognition of Madison Inc which is based on simplicity convenience, safety and enjoying life to the maximum. The gadget shall be stocked by distributors of apple products and more so the iPod nano in order to make the product more visible. Online marketing is also very convenient as it is cheaper and reaches out to the technology savvy iPod consumers. The new nanoholder will strengthen the corporate brand of the company as a consumer brand dealing in simple gadgets needed for day-to-day-use. 9.0 Timescale Timescale Hiring research team 2 days Data collection in the filed 7 days Data analysis 2 days Data presentation 1 day Labour costs comparison 1 day Profitability assessment 1 day Launch 1 day Promotion and advertising Continuous 10.0 SWOT Analysis 10.1 Strengths Innovative by developing new relevant products such as the Nanoholder Experience in the consumer utilities industry Experienced personnel 10.2 Weaknesses Targets the lower income earning market Relies on the success of partners brand recognition for distribution 10.3 Opportunities Has potential to completely dominate the market through added products Relatively new and young hence associated with creativity and innovation 10.4 Threats Competition Lack of strong dominating products in the market Madison Inc will only succeed in the market if it seeks to protect it strengths in the market and work on the weaknesses. Opportunities will have to be explored and the threats managed. References Adner, R. & Levinthal, D. (2001). “Demand Heterogeneity and Technology Evolution: Implications for Product and Process Innovation.” Management Science, 47(5), 611–628 Curtis. T. (2008). Marketing for Engineers, Scientists and Technologists. London: Wiley Davis, D. (n.d.) Rx for New Product Success: A guide to successful innovation for media executives. Retrieved from http://www.mediamanagementcenter.org/publications/data/Rx%20for%20New%20Product%20Success.pdf Ferguson, P. & Ferguson, G. (1994). Industrial economics: issues and perspectives 2nd ed. New York: New York University Godin.S. (2007). Permission Marketing. London: Pocket Books Grant. J. (2000). Permission Marketing. London: Texere Publishing; Kelby.S. (2010). Generation Watch Strap – Black. 6th ed. London: Mr.Gadget's Solutions. Krishnamurthy, S. (2001). “A Comprehensive Analysis of Permission Marketing.” Journal of Computer-Mediated Communication, 6 (2), 1-19 Mohr, J., Sengepta, S. & Slater, S. (2010). Marketing of High-Technology Products and Innovations. London: Jakki Mohr Shenkar.O. (2008). International Business. 2nd ed. New York: Sage Publications Varey, J. (2002). Marketing communication: principles and practice. 2nd ed. London: Routlegde Verburg, R. Ortt, J. & Dicke, W. (2005). Managing technology and innovation: an introduction. London: Taylor & Francis Perreault, W. D. & McCarthy, E. J. (2004) Basic Marketing: A Global−Managerial Approach (15th ed.) The McGraw−Hill Companies. Nowak-Lehman et al (2008). Does Comparative Advantage Make Countries Competitive? A Comparison of China and Mexico. Retrieved from http://wwwuser.gwdg.de/~lstohr/cege/Diskussionspapiere/74_Nowak_Vollmer_Martinez.pdf Read More