Eco-Tourists as the Customer Segment for the Urban Eco-Shacks - Case Study Example

Marketing the Eco-Shack . Abstract This paper presents an analysis of a case study, where Eco-Shack, an eco-friendly housing facility, has been developed, and where the owners (Paul and Doug) are keen on improving the marketability of the products although they have no marketing experience. The paper discusses for typical bases for market segmentation and identifies the customer segment for the Urban Eco-Shack in Australia. It further describes the business segment that could be interested in standard Eco-Shack. In addition, it discusses how the Urban Eco-Shack product could be branded and positioned in the market. Further discussion on cost-oriented approach is present in addition to customer-based approach as an alternative pricing approach (Sharp, 2013). Introduction In the case study, Paul and Doug are keen on improving the marketability of the Urban Eco-Shack and the standard Eco-Shack, innovative and unique housing facilities that integrate environmental concepts. However, the owners have no marketing experience. In addition, attempts have been made to market the Eco-Shack products to the newspaper and advertisement websites to no success. This paper discusses the possible options that both Paul and Doug should take (Sharp, 2013). Consumer Segment for Urban Eco-Shack in New Zealand The Auckland-based house owners seem to be drawn to standard Eco-Shack than the Urban Eco-Shack on account of its environmental concepts. The prototype Urban Shack advertised in The New Zealand Herald and on Trade and Exchange has not been effective in achieving marketing the product. A possible solution is that a market segment should be performed. Segmenting the market refers to the process of identifying specific groups of customers who share certain characteristics or preferences within the broad-spectrum of the market. The process involves dividing a market into sections or clusters that share a similarity or commonality in the types of customers they attract. The purpose is often to concentrate marketing force or energy on a particular market segment to gain a competitive edge within that segment (Civic Technologies, 2009). Concerning Urban Eco-Shack, market segmentation is an extensively broad concept that pervades the lifestyles, behaviors, economic status and preferences. To identify New Zealand’s market segment that could be interested in the Urban Eco-Shack, it would be critical to first identify and describe the standard bases essential for segmenting the market. Technically, the market can be segmented using four major segmentation bases that include demographic, geographic, behaviorist and psychographic bases. First, behaviorist and psychographic bases are applied in determining customer’s demands or preferences for the Urban Eco-Shack and the marketing content. On the other hand, demographic and geographic bases determine the design of the Eco-Shack and the regional focus of the potential users. More specifically, psychographic bases include examining the potential user’s personality traits, such as interests, attitudes and lifestyles. Towards this end, it can be argued that the consumer segment in New Zealand that would be interested in the Eco-Shack involves those who love travelling and who prefer temporary housing while on trips, such as eco-tourists. Behaviorist bases on the other hand include examining the attitudes of the potential customers towards the Eco-Shack, including the reasons for brand loyalty, the benefits of using the Eco-Shack and the customers’ willingness to purchase the housing. Towards this end, it can also be argued that the consumer segment in New Zealand that would be interested in the Eco-Shack involves those who prefer could be customers who have used such temporary houses and who understand their benefits (Goodwin, 2012). Next, geographic bases include determining the preferences of the potential customers in relation to area factors such as the region the customers live, the climate of the region, whether the customer lives in rural or urban areas and the population density. Here, customers who are interested in Eco-Shack in Australia could be created by natural and unnatural disasters such as tornadoes, hurricanes and terrorist attacks that could destroy the houses, hence the need for transitional or emergency housing facilities such as Urban Eco-Shack. The major objective of buying this kind of house would be to provide instant construction services to provide housing facilities to victims whose houses have been destroyed during disasters. Aside from the victims, another segment of customers that would buy the Urban Eco-shacks include disaster response and recovery contactors (Goodwin, 2012). Demographic bases refer to the personal attributes of the customers, and include their ethnicity, marital status, age, gender and income levels. Potential consumer segments who could be interested in the Urban Eco-Shack could include two distinct market segments of customers who are grouped in terms of their age. Possible segment includes customers who are under the age of 30, and those who are older than 30. This is because temporary houses such as Urban-Shack will be preferred by young couples who do not have children and who are below the age of 30, or older couples beyond that age who have younger children (Kotler, Armstrong, Saunders & Wong, 1999). In the present case scenario, it is interesting to note that segmenting the customers who can buy the Urban Eco-Shack would not be an easy task unless a standard criteria is used as the four bases provide many options, some of which may not provide a lucrative business. However, there are four criteria that could be applied in order to select a segment that is effective. At this point, it is important to remember that the purpose is often to concentrate marketing force or energy on a particular market segment to gain a competitive edge within that segment. In the case scenario, it would be crucial to select a market segment that is accessible, substantial, identifiable and stable (Rasoava & Russell, 2003). Identifiable means some indicators should exist that show that the segment can be quantified and defined. Accessible, meaning the segment should be possible to target using available distribution and communication channels. Substantial, meaning the segment should be large enough to be considered as lucrative. Lastly, it should be stable, meaning the segment should provide a stable market in addition to enough time to profit on the investment (Baker, 1995). Overall, through the segmentation process a feasible and profitable market for Eco-Shack can be perceived. Of the four approaches, the psychographic base is selected since eco-tourists segment satisfy all the four aforementioned criteria. For instance, potential demand is perceived from the ecotourism industry, and where business that offer eco-tours participate in the market. In summary, the selected segment (Eco-tourists) has been reached through weighting the four bases of segmentation, including demographic, psychographic, behaviorist and geographic, based on the four criteria for selecting segments. Since the Urban Eco-Shack is a new product introduced into the market, positioning it in the competitive housing market is critical, thus the benefits and attributes of the selected market segment must be considered (Sabah & Alrubaiee, 2012). In conclusion, eco-tourists have met the criteria for effective market segmentation since they are easily identifiable as Eco-Shacks comprise all their eco-friendly needs. They are also accessible as they can be targeted using the existing distribution and communication channels (Kotler, Armstrong, Saunders & Wong, 1999). Business segment interested standard Eco-Shack A business segment is a subsection of the company or an independent unit that operates own operations although they are still part of the main company that may often deal in multivariate products. A standard Eco-Shack is easily modifiable depending on the needs of the customers. They are also designed for low-impact off-the-grid living. They are also easy to transport and install. Basing on these characteristics, the business segment for the Eco-Shack product can be identified using the four philosophical approaches, which include demographic, psychographic, geographic and behaviorist, as earlier used in determining the segment of Urban Eco-Shack (Sharp, 2013). Therefore, the business segments interested in standard Eco-Shack would comprise subsections of companies that focus on selling eco-products and distribution of eco-products across New Zealand. A possible business segment is one that offers sales and hires options for eco-friendly products. The segment should have a distribution channel and should have invested in the field of logistics to distribute the standard Eco-Shack across New Zealand and beyond. This is particularly because the standard Eco-Shack is ideal for off-the-grid living. This also means that the business segment should have advanced infrastructure facilities for handling cargos and heavy shipments. The business segment should also have the means for mass marketing, so that the Eco-Shack product would not be restricted to the local market, rather, it should be able to focus on the international market to achieve milestone in sales. Branding Eco-Shack Product Branding is a critical aspect of any enterprise, either small or large, that enhances the visibility of the product in the eyes of the consumers. A brand strategy that is efficient will increase the sale of the Urban Eco-Shack in the eco-tourism industry. In the present case scenario, the Eco-Shack brand would be a promise to the customers in the eco-tourism industry that informs them of what they should expect from the product, and whether it differentiates the product from competitor products. The foundation of a brand is a logo, packaging, a website and other promotional materials, all of which are intended to integrate the logo to communicate the brand. The brand is therefore “how, when, to whom, and how the Eco-Shack product should be communicated and how the brand message should be delivered. Since advertisement is intended to be part of the brand strategy, the distribution channels will also be incorporated in the strategy. In addition, what is communicated to the eco-tourists verbally or visually will also be part of the brand strategy (Kotler, Armstrong, Saunders & Wong, 1999). Strategic branding will enable strong brand equity, meaning the added value that would be brought to the Eco-Shack products enabling Doug and Paul to charge more for the brand than what unbranded products would charge. The added value inherent to the brand equity is often viewed as perceived quality or the emotional attachment that the customers would have to the product. Defining the brand would require consideration of the company’s mission, the benefits of Eco-Shack, what the customers already perceive of the product, and what desirable qualities intended to be associated with the product. The next stage would be researching the needs, the desires, the habit and preferences of the eco-tourists in New Zealand. The target market can be researched using questionnaires and surveys. Examples of areas to be investigated include their income levels, their predominant occupations, their holidaying habits, the reasons they would consider purchasing the Urban Eco-Shack among other information. This means that Doug and Paul should discover what the prospective customers think rather than what the company thinks they think. Once the brand is defined, Doug and Paul will have to consider communicating the brand to customers and prospects. At this stage, the company will get a great logo that will be placed on the Eco-Shack products. The key message to be communicated about the brand should then be written down so that every employee is aware of the attributes of the brand. The next stage would be integrating the brand to ensure that the branding is extended to every aspect of the business, such as the email signatures and what the sales workforce wears. Doug and Paul’s company should then create a ‘voice’ for the company that depicts the brand. The voice would afterwards be applied to the entire written communication of the company, as well as included in the visual imagery of materials, both offline and online. The next stage would be developing a tagline. Here, Doug and Paul should write a meaningful, memorable and brief message that portrays the essence of the Eco-Shack brand. It would also be critical to design templates as well as create standards for the marketing materials. At this point, the logo and color scheme would be used consistently. Inconsistency will fail the brand. It is also important to be true to the brand. For instance, since the brand is basically a promise to the customers, Doug and Paul’s company must deliver on the brand promise (Kotler, Armstrong, Saunders & Wong, 1999). Positioning the Eco-Shack Product Once Doug and Paul achieve product differential through establishing a brand, they will have to consider positioning the Urban Eco-Shack product in the eco-tourism segment market. To create a distinctive place in the eco-tourism market segment, the company will have to choose a niche market as well as create a differential advantage in their perceptions. Here, brand positioning will serve to indicate to eco-tourists what the company wants to achieve for them. Basically, brand positioning should command the customer’s opinions and views as it helps to position a product in the minds of the customers. An effective position of the Urban Eco-Shack will ensure that it increases sales and profitability of the company once it gains market dominance. To ensure this, since the Eco-Shack is a new product in New Zealand, the company should use the first-mover strategy, which established the product as a market leader. The company should therefore portray the product as a leader in the market. Naturally, customers perceive the premier product in the market as the market leader. Once the Eco-Shack product is positioned as the market leader, the company will have to deliver quality products that depict the status of a market leader. For instance, since the product is the first in the market and the product is criticized by the initial users for being of poor quality, then the company would risk corrupting the image of the brand. This has the potential to have an enduring negative impact on Eco-Shack sales (Kotler, Armstrong, Saunders & Wong, 1999). Next, the company should select marketing and promotion strategy by determining how the eco-tourists can be reached, such as through tours and travel websites and magazines, as well as using billboards at the tourism sites. Positioning the product will be effective in enabling the company to gain market share. Using the right pricing strategy is important for gaining market share. If the Eco-Shack product is not prices for the right perception, then the company stands a risk of losing the market share, if the market segment is of the general opinion that the product is expensive. Conversely, if the price is too low, the Eco-Shack may be considered as inexpensive hence bringing the quality of the product into question (Kotler, Armstrong, Saunders & Wong, 1999). Cost-oriented pricing approach Determining the price of the Eco-Shack is a critical matter that deserves careful analysis to ensure that once the product has been positioned in the market, it can consolidate as well as maintain its market share. The cost-plus approach is currently applied in pricing the Eco-Shack. This method of determining prices takes into consideration the goals of the company to gain profits in addition to covering the company’s cost of production. This means that cost of business operation will have to be considered, including the cost of wages, raw materials, transportation, rent and advertising. Once the base cost is determined, then the profit level desired for the company is added to the product cost subtotal to determine the product of the Eco-Shack product (Chaneta, n.d). Cost-oriented pricing has several advantages, including the fact that is a fair method of fixing prices as the business is assured that the fixed price covers the cost of operation. In addition, the business is also assured of making profits, since the price is greater than the cost. Technically, setting price that is more than the cost covers the risk. An additional advantage is that cost-oriented pricing approach reduces risks and uncertainties. The business has to make decisions despite the many uncertainties, thus, the company may consider accepting a formula of pricing that can reduce uncertainty. The cost-based approach also considers market factors, thus ensuring that market forces are not overlooked. When the mark up is added to the cost, the price guides the company towards a competitive price (Management Accounting, 2011). Cost-oriented pricing also has several disadvantages such as ignoring the demand. The approach does not consider the needs of the buyers as well as their ability to pay prices that match their incomes, or willingness to pay prices that determine the sales volume achieved with each sequence of price set. Further, the approach does not take into consideration competition as it does not use competitive pricing but rather pricing is based on the costs. The approach is also characterized by random cost allocation. For instance, it overlooks the fact that the costs have been approximated with precise accuracy (Management Accounting, 2011). Another disadvantage associated with the approach is that it does not consider the opportunity cost. For instance, the approach ignores the fact that incremental costs are more practical for making many business decisions rather than the full cost. In addition, concerning the relationship between the price and volume, since the fixed overhead costs are allocated based on the volume of production, the cost is likely to be high if the volume of sales is less. In the same manner, the cost is likely to be less if the volume of sales is higher. The rise and fall in the volume of sales also depends on the price. Therefore, cost-oriented pricing is a vicious circle-cost. In addition, the price is based on volume of sales and volume of sales on price (Thomas, 2007). Customer-based pricing From the above analysis, it is perceivable that the cost-oriented pricing strategy is not effective for pricing the Eco-Shack products. An alternative approach that Doug and Paul could use is the customer-based approach. Customer-based approach depends on the customer’s demands or desire to have the product (Chaneta, n.d). The approach is particularly appropriate since the company’s objective to determine the customer segment, brand its products as well as position itself in the market demonstrates that it has to take a more customer-focused approach in its decisions. Since the Eco-Shack product is innovative and unique, the price determined by the approach may significantly increase the demand for the product. Towards this end, it should be conceived that customers’ purchasing habits depend on the price of the product (Chaneta, n.d). This will particularly be effective as the company has positioned its product and how the customers perceive the product (as earlier explained). Customer-based approach will enable Doug and Paul to leverage the price to support the image of the Eco-Shack product, increase the sale of the product, set a price range that can attract more consumer segments aside from eco-tourists, set prices that can increase the volume of sales and lastly, determine a price range with the sole objective of exciting customers. For instance, customers who seek to bargain are often drawn to products that offer good value for their money (Rasoava & Russell, 2003). Conclusion In conclusion, through market segmentation, eco-tourists are conceived as the customer segment for the Urban Eco-Shacks. Doug and Paul can therefore concentrate their marketing forces and energies on the segment. To increase sales of the Eco-Shack product, Doug and Paul would also have to consider branding and positioning the product in the market segment. On the other hand, standard Urban Eco-Shack would be suitable for business segments that deal in hire and sale of eco-friendly products that have established distribution chains to sell the products in off-the-grid areas. Lastly, since the cost-oriented pricing is less effective given its various disadvantages, since Doug and Paul should take a more customer-focused approach, they should consider using customer-based pricing instead. References Baker, M.J. (1995). Marketing: Theory and practice, 3rd edn, Basingstoke, Hampshire: Macmillan Press Ltd Chaneta, I. (n.d). “Cost-Oriented Pricing.” Journal of Comprehensive Research, Vo 8, pp1-12 Civic Technologies. (Nov 2009). Using Market Segmentation for Better Customer Service and More Effective Strategic Planning. A White Paper for Public and Academic Libraries. 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