Marketing and Design of products Marylebone Oxygen Bar - Case Study Example

Marketing and Design of products – Marylebone Oxygen Bar ABSTRACT This paper performs marketing plan for a new venture creation, namely the Oxygen Bar in the campus of Westminster Business School. It does it through three parts: the first part of the paper includes the product, its equipments and its features evaluate the target group, sufficient for this business. The external factors influencing the success of the Oxygen bar The ways of segmentations, such as demographics, geographics, psychographics and behaviors were applied in order to define the target group. The second part designs a market research study and establishes possible demand and consumer needs for the proposed Oxygen bar. This includes the type of data to be collected, the target population, sample size and method of data collection (quantitative, qualitative). The third part evaluates how the demand patterns for promotional (advertising, direct sales promotion) and marketing mix (the 4 P’s – Product, Price, Place and Promotion), the pricing strategies and recommendations were given how those variations can be managed effectively. Finally, the paper makes short conclusion, by highlighting the hazards or effects which can be caused in the usage of Oxygen bar. INTRODUCTION : OXYGEN BAR: The oxygen bar is a trend among night clubs that started in the late 1990’s .Patrons inhale 50 – 99% oxygen through a tube for 1 – 20 minutes at typical rates varying per minute. (The composition of the atmosphere we normally breathe is 78 % Nitrogen (N2), 21 % Oxygen (O2), and less than 1 % of other gases and particulate matter.) Oxygen bars have gusted rapidly across many continents as a social alternative in the health – conscious industry. Professional athletes inhale oxygen before competition to boost energy levels; promoters claim that for the lay person, regular inhaling sessions of oxygen not only increase energy but can relieve all kinds of maladies, from allergies to hangovers. Oxygen Bars create a really great place where people can come in and actually do something good for themselves Components : There are four main components to a full Oxygen Bar System ; Oxygen Concentrator System Aromarizers ( Infusors) and Bar The oxygen concentrator system takes ambient room air and turns it into O2 by filtering it through a molecular filter, compressing the oxygen and expelling the nitrogen.  It provides an amber light on the front panel that illuminates if the unit's oxygen purity is below 85%.Nowadays one can find the most attractive aromarizers which can sit on top of a bar, table or shelf. Simply put these units hold water and aroma and they act as an infuser and humidifier for the Oxygen. Each Aromarizer base has a high powered florescent fixture contained inside which lights up the unit like neon sign. This light shines through the standard blue face-plate and colored slide cut-outs, to light up the bottles themselves. This makes these Aromarizers extremely attractive, sexy, and a real "People Magnet" for optimum exposure.  The blue standard Aromarizer face plate can be upgraded and customized with a choice of different colors and/or your company logo or message for a small additional fee. The bar should be designed in a way which must make it the most optimal, durable, practical and hottest looking portable oxygen bar. The more attractive the bar the more the consumers it have. In order to make the bars more attractive modules can be added on to any oxygen themed based unit to provide any of the functions. STRATEGY: As Marylebone Road reputedly suffers some of the most polluted air in London, the Dean of the Westminster Business School has decided to diversify an open an Oxygen Bar on the campus as a new service to be sold to the students, staff and the general public. 1) Using appropriate analytical frameworks, identify and analyse the external factors which might effect the success of the Marylebone Oxygen Bar, and explore how these factors might change over the mid- term. Specify any factors that make the market attractive to new entrants. The following are the key factors influencing the success of the Oxygen bar ; Here we will be discussing about the external factors, their influence upon the success and the changes which they may acquire over a period of time. The first and the foremost external factor is the ; -> Market potential (Size and Growth): The whole concept of focused marketing is based on gaining major market shares while expending minimum resources. A market’s size and growth potential depends on the current and projected demand for a given product. Both the current status of a market and its future potential should be recognized as basic criteria for continuing or expanding market penetration. Never equate the customer demand with customer need when launching something new. It may be logically argued that customers need a new product or service, but if they are unwilling to buy it, their need for it is irrelevant. As such in the case of Oxygen bars, the market has tremendously increased in the last decade. The consumer need is increasing whereas the demand is constant as many people are not aware about the existence, usage and benefits of the oxygen bars. Clearly, customer need is not sufficient reason to launch it in the campus, there must also be a substantial consumer demand and in order to have this it is highly required to make people aware about the idea of launching it and taking a feed back will prove to be highly effective in formulating further strategies. -> Competition: Generally speaking, if the objective of entering a new market niche is to gain a controlling share, picking a niche that already has a market leader could be a very expensive proposition. But then it is not the case with oxygen bars. As it is still in its pre – growth stage there is no monotony of any one or as such there is no market leader. This could prove to be a good benefit to us and would prove to be beneficial both in monetary and non – monetary terms over a period of time. ->Ease of entry: As a corollary to competitive saturation, ease of market entry determines to a large extent how long a company can remain in control to a niche market. In this case it can be compared to the effects on the launch of oxygen bar on its consumers, i.e., how long can it attract and satisfy its consumers. It requires good service, low cost, good promotion, innovation and all such related things which would make it possible to maintain the existing consumers and attract the new consumers. All the strategies need to be formulated is it related to financial or non financial matters. Resource requirements: Of the four major criteria, the resources required to capture new market niches can often be the most difficult to achieve. By developing a comprehensive forecasting model based on cost/sales/ asset functional relationships we would be in a good position to determine with a high degree of certainty those resources that must be obtained and when they must come online to meet strategic plans. Besides these there can be few other external factors too. These external factors might change over the meet term based on the variations in the consumer needs and consumer demands. It is highly essential to make the people or the target market aware about the benefits of the product and at the same time it is also highly required to maintain providing good service and get in innovations in order to satisfy the existing customers needs and attracting the new customers. 2) a) On the assumption that an opportunity exists for the Marylebone Oxygen Bar, and setting your answer within the context of theory on segmentation, advise the Design group on the way in which the market could be segmented and how these segments could be evaluated. Once the external factors have been identified and analyzed now it is required to evaluate the different segments and decide how many and which one to target. While evaluating segments, three factors should be considered. They are segment size and growth, segment structural attractiveness, and our objectives and resources (N. Sangameshwar, 2003). There is no single way to segment a market. We have to determine different segmentation variables, alone and in combination to find the best way to view the profitable structure. Here the three types of segmentation can be followed :- Demographic segmentation: It indicates dividing the structure based on variables such as age, gender, family size, income, education, religion, race and nationality. Demographic factors are the popular bases for segmenting customer groups largely because consumer needs, wants and usage rates often vary closely with demographic variables and these are easier to measure than most other type of variables. Psychographic segmentation: It refers to dividing a market into different groups based on social class, life styles or personality characteristics. A large number of personality variables that may be used in psychographic segmentation are : self – image, impulsiveness, sociability,masculinity,self confidence, conservativeness, prestige consciousness and sentiments. Behavioral segmentation: It refers to the division based on consumer knowledge, attitude and use or response to a product. It requires determining the major benefits that people look for in the product class like intensive preference. E.g., taste, level of performance, snob appeal, price, reputation etc.the kinds of people who look for each benefit and the major brands that delivers each benefit. It is highly advisable and would prove to be beneficial to the design group if they follow the above discussed segmentation strategies either solely or in combinations so that a clear picture can be withdrawn as of to understand which one would prove to be highly profitable in the long run. b) Recommend a target market and create profiles for the types of people that are likely to use the facility. The profiles should include characteristics such as gender, life style and other relevant socio-economic and behavior criteria. It is highly impossible to appeal all the buyers in the same way. Buyers are too numerous and too varied in their needs and consuming practices. As the Oxygen bar would be launched with an aim to attract a large number of masses in the groups of students, staff and general public it is required to follow different strategies to attract a different mass. The following steps must be followed in target marketing : Identify bases for segmenting the market Develop profiles for resulting segments Evaluate the attractiveness of each segment Select the target segment (s) Develop positioning for each target segment Develop marketing mix for each target segment. Thus target your market, focus your efforts on that market, and prosper. Besides customer focus forces strategies to succeed. There are two ways to view customer focus. First, adopt your customers (actual or prospective) focus on your product and services. Second, all your efforts would be based on meeting your customer needs. If we target our market effectively, we will have a manageable number of customers who we can learn a great deal about – how they think, why they buy, when they buy, what their preferences might be. We will be able to know what benefits they seek and so we can choose to address those demands. In a wider sense customer focus would help us to make strategically helpful decisions in all aspects. As an example : putting the consumers preference first for quick location by launching the Oxygen bar on the campus would prove to be very beneficial in attracting those sect of consumers who have less time to locate for their needs . Here is an example of a target market profile : 1. Geographics : Lives within the campus ( including hostel accommodates and daily visitors) 2. Demographics : Gender Between the ages of 17-35 Married Education experience beyond high school Earning a combined annual family income of 50,000 pounds or greater 3. Psychographics : Values time and considers it their single most limited resource Excited about accepting and using innovative ideas and products. Highly health conscious. 4. Behaviors : These groups defend the decisions under most any circumstances and will adamantly “sell” those that ask why they use the product and why the choice they make they did. These groups can be a powerful, unpaid sales force resulting from the referral network they build and use. The more detail you know about the “ ideal” customers , the better you will be able to make them aware about their products and services. Target marketing allows you to reach, create awareness in, and ultimately influence, that group of people most likely to select your products and services as a solution to their needs, while using fewer resources and generating greater returns. 3) a) Using reasonable the assumptions outline the number of customers the bar needs to attract to achieve a healthy return on investment. As a result of your analysis indicate what level of resources will be needed in terms of equipment and staffing to ensure the bar is in operational use from midday until 10 pm? Include details of tools and techniques. As per the cost estimates which have been mentioned the total cost involved in the setting up and operating cost of the Oxygen bar is ₤ 15,016 and the staffing expense amount to ₤16,000 and miscellaneous expenses would be ₤ 2000. Thus totally it would be costing up to ₤ 33,016 per annum. The different levels of profit to be generated could be estimated in the following manner : Profit % Cost incurred per annum Working hours ( 2.00 pm – 10.00 pm) 8 hr Cost per hour ( ₤ 33,016 / 2920 hours) Cost to be gained per hour for estimated profit levels : 100 % ₤ 33,016 *2920 hours ₤ 11.3 ₤ 22.6 50 % ₤ 33,016 2920 hours ₤ 11.3 ₤ 16.95 30 % ₤ 33,016 2920 hours ₤ 11.3 ₤ 14.06 * 365 (days in a year ) 8 ( daily working hours) total working hours = 365 * 8 = 2920 hours Thus it depends upon us to select the profit percentage level to incur in the long run and based on it the number of customers required varies. Depending upon the decision of targeting which income level people it would be easy to estimate the number of customers required in order to acquire a specific profit percentage level. Sales force sizing analysis should consider the likely value derived (sales) and cost to cover an account Thus by considering the above given factors it would be easy by the design group to understand and evaluate the expenses to be incurred on the equipments and the staffing required in operations. b) With the simple trigger of starting an Oxygen Bar on the Marylebone road, the Design Manager has to consider many things in the design process. What specifically should the design manager ensure has been considered in the process from the sales to the service? Indicate at what point in the design process these should be considered . Starting a new Oxygen Bar requires the design manager to consider many things in the design process. The product life cycles are shorter today than ever before and customers are becoming increasingly more selective, product design managers are having a difficult time meeting their company’s expectations. It just proves that success in today’s marketplace requires more than just a good product. In order to bring any product to market successfully, product design managers need to consider five key steps that can make the difference between a product that takes off and one that flops. - > Put the customer first Very often product developers create a new product based on the company’s current interests. They neglect to research whether the product is something their customers actually need or even want. While the new product may indeed be very innovative and timely, if customers don’t have a desire for it, it’s useless. So it is highly essential that the design manager must know the demand of the consumer before hand itself. -> Promote the product’s benefits An old business adage says, “Features tell; benefits sell.” This is especially true when it comes to new product launches. Very often product design managers focus their marketing message around all the bells and whistles the new product offers. However, unless they explain to their customers the benefits those features deliver, customers will have little interest for the product. Thus it is required that by various means the design manager make the people on the campus aware about the Oxygen bar – its benefits and its services. -> Tie the message results : No matter what your background, whether it’s marketing, finance, or operations, when it comes to creating a message for a product launch you must shift your mindset so that the product message you create is tied to one specific result you want to achieve. Before considering the ways to promote your message it is required that the design manager first solves the queries like – determining the precise results of what you want to achieve, Do you simply want a one – time sale? Do you want customers to request an info pack? Is it for the purpose of recreation or luxury? and so on, once design manager solves these queries, then can evaluate the message to be sure that it’s the most effective to get the job done. -> Take control of the message Once they create the precise product message the product design managers must send it to the authority for various approvals. This is often when the message falls apart. Because the higher-ups and other authority are not aware of the specific results that need to be achieved, they tamper with the message to make it more sensational or image-oriented. While the new message may indeed be good, if it’s not tied to the initial results, then it simply won’t work. Product design managers must take steps to enlighten those in the approval process as to the results to achieve. -> Prepare your front line people: Finally, product design managers must educate the staff and other customer service representatives and other front line people who will have direct contact with customers. These front line people need to be aware of the benefits and usage and the working of the Oxygen Bar and must be in the position to answer all the questions which might be posted by the consumers. “By doing preliminary work such as assessing customer needs, analyzing product benefits, creating a product message based on results, and educating executives and front line people about the product launch’s objectives, you can have a successful product roll out that will prove to give solid results both in the long – run and short- run.” ( Lawrence W Toller ) 4) Recommend a suitable marketing mix to reach your selected target market , including details of the prices it would change. Once the design manager is done with the design process emerges the concept of marketing mix. It includes the four P’s – Product, Price, Place and Promotion. 1. Here product activities include policies and procedures relating to : Oxygen bar equipments, quality of the equipments, design of the product and all other related things. Consumer sales – whom, where and in what quantity 2. Here pricing activities include policies and procedures relating to List prices ( listed per usage time ) Consumption time ( 5 min – 20 min ) 3. Here promotional activities include policies and procedures relating to Publicity and public relations Campus promotions ( hoardings, sign boards, pamphlets etc) 4. Lastly comes the 4 P – Place, needless to say it would be on the campus. The pricing strategy that is to be adopted can be any one of the following : Product value pricing Optional product pricing Captive product pricing Product-bundle pricing The best pricing strategy could be the product value strategy whereby the price is being amounted on the consumption usage of the product. In this case the more the use of inhaling the Oxygen the more the amount it would cost to the consumers. 5) Draw up a detailed promotional plan to launch the Marylebone Oxygen Bar , specifying and justifying the appropriate media and promotional tools you would use , an outline budget and a timeline for the first six months . Indicate how the manager could evaluate the effectiveness of each element of the campaign. Launch success can be enhanced with early, systematic feedback to diagnose performance drivers and identify appropriate course corrections : “Promotion involves two broad aspects – firstly communicating marketing information to consumers, users and resellers and secondly persuading and convincing consumers to use it” (David H Bangs, 2002). The promotional strategy which can be adopted by the design manager to promote the Oxygen bar on the campus can be through different ways. The best way to promote it on the campus is advertising by using print media – i.e., brochures, pamphlets, hoardings, personnel and all such direct activities. Creating the awareness among the people about the launch and existence and about the usage and benefits and about the prices though hectic still highly required in order to gain new consumers. All the miscellaneous expenditure involved could be recover in the long run. But the main emphasis is on the first six months whereby a good expenditure is likely to be incurred. Thus it is highly essential to provide capital stability in the first six months. Good strategies should be adopted in order to gain complete profitable advantage by launching the Oxygen bar in the campus. Conclusion: Launching and Promoting the Oxygen bar on the campus is a good idea and seems to be very profitable. It is highly advised that its demerits and effects should also be considered. As such it can be dangerous for people with certain medical conditions or if it is inhaled for periods of longer than 60 minutes. There is also concerned about the use of oily based aromatic solutions where the inhalation of the oily droplets may lead to inflammation of the lungs. Moreover improper maintenance of the oxygen equipment could present a potential danger. Oxygen cylinders can be hazardous if not kept in a well ventilated area. (3717 words) REFERENCES : -> American Psychological Association (1983). Publication manual of the American Psychological Association. -> David H Bangs – (2002) -The Market Planning Guide: Creating a Plan to successfully Market your Business, Product or Service -> David Rainey – 2004 – Product Innovation: Leading change through integrated product development. -> Easterby-Smith, M., Richard Thorpe and Andy Lowe (2002) .Management Research and Introduction. -> Girden, E.R. (1996).Evaluating Research Articles: From start to finish. -> Hart, C. 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