Marketing Plan in Small Appliance Industry - Essay Example

Marketing Plan March 2009 Contents Sl No Page No Introduction . 3 2. Marketing Plan ... 4 3. Appendix ......... 10 4. Bibliography ....... 11 Section-I Introduction Company G is an established and reputed firm in the electronics market. It has recently developed a line of small appliances, which is expected to perform well in the market owing to its elegant visual design, high reliability, and low cost of production. These factors coupled with the modest initial investment are expected to make Company G the lowest-cost producer in the small appliance industry. The following section contains the marketing plan for this new line of appliances. Section-II Marketing Plan Mission Statement To be the technology leader in the new line of products by providing better value to our customers and maximizing operating profit. Market Objectives The primary target market for this device is the middle class car owner between age 20 and 40. This age group is expected to be more receptive to the new technology. The secondary target market would include the car rental agencies and OEMs (automobiles). Marketing Objectives The product is primarily a portable Global Positioning System (GPS) device, which provides the information in "real-life" three dimensional graphics providing enhanced user experience, and is much easier to use than similar conventional devices. The interactive touch screen provides a video game arcade feel, which is closer to real-life than any other similar product. The device can be mounted on the driver dashboard of a car. Unlike conventional GPS devices, this appliance will be able to retrieve map information even when surrounded by tall buildings during city driving. There will be several add-on optional features to make it a convergence device. It can be detached easily from the car, and can be synchronized with the user's home/ office computer. As a safety measure, the device can be used as an internet browser only when it is removed from its dock on the car dashboard. It uses a revolutionary wireless technology to download internet content at a speed three times higher than other conventional devices, and can be used for playing songs in the car as well. It can communicate with other devices using Bluetooth and infrared technologies to transfer content. Users can subscribe to online services, which will enable them to search and find any geographic location online (e.g., restaurant). The product line has been developed by the product designers as a sleek elegant device in twin-tone colors available in black-red, blue-white, and black-yellow combinations. The product line has been christened by the marketing team as "Rubicon". The product features and benefits are given in the table below. Table 2-1 Features & Benefits Features Benefits 3-D visuals with "real-life" feel Easier navigability Twin tone metallic color Elegant look enhancing buyer satisfaction Three color choices Will match most car interiors Faster wireless No "breaking" of images and songs during travel Online song availability Latest song downloads Internet availability Information on the move Interactive touch screen Easier usage during driving Better signal Can navigate even when surrounded by tall buildings inside the city Distribution The company currently has a wide dealer network. Its existing products are distributed through small retail shops as well as large chains of retail shops. Its distribution network also includes specialty retail shops (electronics shops). The products are also available online through various dealer websites. The existing distribution will be through company's existing distribution network. Additional specialty retails shops (automobile accessories) shall be added to the network for this product. Direct sales efforts shall be undertaken to achieve penetration in the car rental industry, and in the Original Equipment Manufacturer (OEM) industry. Price Rubicon shall be priced at a premium to the existing GPS devices available in the market. A market survey was done, and a price-elasticity graph was developed. It was decided that the Rubicon will be priced at a premium to conventional automobile GPS devices to maximize the operating profit. The retailers will get a 10% margin. Credit period of 30 days shall also be extended to them. Promotion Rubicon shall be promoted through a judicious mix of print and television advertisements. The focus of the advertisement shall be the technological superiority of the product. Kiosks shall be set up at retailer locations/ large shopping malls where customers will be encouraged to experience the product. A loyalty program has also been devised, which will reward buyers of Rubicon while buying other products of the company. Competitive Situation Analysis 3-way consumer product classification system Rubicon can be classified as Shopping Good. The product is expected to be purchased only after the consumers compare Rubicon with other similar products before making a buying decision. It is therefore, customary to locate the product at superstores where customers can compare and buy the product. Extensive advertising will be used to market the product. Competitive Environment (Porter's Five Forces) Bargaining power of suppliers: The company sources components and services from several suppliers, whose bargaining power is not significant as their products are commoditized. Bargaining power of customers: End consumers are individuals and they are not organized into collective bargaining groups. However, they are free to switch or select other similar products with different value proposition. It is essential to create a unique value perception about Rubicon in the minds of the end customers through strong advertising and brand building. The product is proposed to be distributed through its existing and new retailers. Some retailers are large conglomerates and have substantial bargaining powers. Company G proposes to sell to the OEMs and the car rental agencies, both of which are expected to have significant bargaining power. Threat of new entrants: Rubicon is a patented new product with a unique value proposition, and Company G has an established brand equity. It will difficult for any new entrant to build similar brand equity and work around the patents. The threat of new entrants is low. Threat of substitute products: This is technology driven product. It is possible for other competitors to develop newer and more value added product at a later date. Threat of substitute product is high. Competitive Rivalry within the Industry: The competitive rivalry within the industry is very high. SWOT Analysis Strength Innovative Product: Company G has established a strong reputation for offering quality products and has consistently offered innovative solutions to its customers. This has been its core competency, which the company is re-inventing using Rubicon. Strong brand equity: Company G has established strong brand equity over a period of time, which is one of its key strengths. Aggressive advertising: The marketing plan of Company G includes aggressive advertising, which is required for promoting a shopping good like the Rubicon. Weakness New product: This is an entirely new product being launched by Company G. Though it has experience in introducing new innovative products, launching such a breakthrough product is always risky. New market sub-segment: Company G is not present in the automobile accessories segment of the market. This is an entirely new and unknown market segment for Company G, and is a potential risk. First time production: There could be several technical problems associated with the manufacture of a new product line for the first time. Opportunity Unexplored market niche: Automobile accessory is a market niche that has not been explored by Company G so far. It presents new growth opportunities to the company. High entry barrier: The entry barriers are high owing to Company G's brand equity and Rubicon's patent. Low bargaining power of suppliers: Bargaining power of suppliers is not very high as they supply commoditized products. Threat High bargaining power of customers: The bargaining power of some customers is high, which threat to reduce the profitability of the company. Low switching cost: The barrier to switching to other competitors is low, as it is not a very high value product. High competitive environment: The competitive environment is tough; there is a potential for competitors to launch "me-too" products. Marketing Strategies (Kotler, Armstrong, 1995) The marketing strategies to be used by Company G are summarized below. Product Product quality The product quality has two dimensions, viz., level and consistency. The company should decide the level of quality it strives to achieve. It may be noted that the desired quality level need not be the highest quality level as few customers would be able to afford the highest quality. The target level of quality should be the one desirable by the target consumers. However, once the quality level is established, it is important to achieve a high consistency in the level of the quality. This can be done by having a definite quality policy and by adopting processes like Total Quality Management (TQM). Product design Product design is very important to the success of a product. Product design creates a positive perception in the consumers' mind. Product design includes not only aesthetics but also functionality and overall packaging. Brand extension Brand extension involves using the existing brand awareness/ visibility of a company/ product for promoting new products from the same company. It has been seen that advertising based on brand extension gives better efficiency. Distribution Multi-channel marketing Products are distributed using distribution channels; several types and sub-types of distribution channel exist. The common channels used are those that involve marketing using retailers, those that use distributors and retailers, and that those use direct marketing channel. There can be several levels of parties involved in some channels. When a company uses several types of channels for distribution, it is termed as multi-channel marketing. Selective distribution Some companies use as many outlets as possible for distributing their products, while some companies use very few exclusive outlets for stocking their products. The former method provides wide reach, while the latter method provides better control. Selective distribution involves a distribution strategy somewhere intermediate between the two other strategies described above. This enables fairly wide reach while retaining adequate control over the middlemen. Response based supply chain In this method, production is not done based upon anticipated sales; response based supply chain involves manufacturing according to actual sales, and reduction in stock. This reduces inventory build up in case of mismatch between predictions and actual. Price New product pricing: Market penetration pricing Market penetration pricing involves setting a lower initial pricing to capture a large portion of the market to establish a leadership position quickly. This will further reduce the costs thus enabling it to lower prices further and maintain its position. Product mix pricing: Product line pricing Often one single product may not satisfy the consumers' requirement. Also it is often important to "plug" the price points of several competitors. A product line pricing strategy involves creating the product with several variants; each variant will have different features. This helps cover a wide market range. Price adjustment: Quantity discounts Many companies adjust their basic pricing to reward consumers' for different responses. Discounts may be extended for behaviors like cash payment, quantity (or bulk) purchase, seasonal purchases, etc.. Promotion Non-personal communication channel Personal communication channel involves word-of-mouth influence. Non-personal communication channel involves media which carry messages without personal contact. Such channels could include print media, broadcast media, or display media. Such messages may be reinforced by using atmospheres and events. Promotion budget: Objective-and-Task Method Different methods are used for setting the promotion budget. The most logical method of setting the promotion budget involves Objective-and-Task method. In this method, the production budget is calculated to complete a set of tasks which when completed will achieve a specific objective. Pull strategy Pull strategy involves marketing activities targeted towards its end consumers inducing them to buy the product. The consumers will demand the product from channel members and generate a "pull". The Product-Distribution-Price-Promotion strategies described above generate the most optimum "mix" for achieving the necessary objectives. This is a new generation product, which can use the brand equity of an established company for conveying its reliability. Company G needs to focus on the product quality and design to launch a mew generation product like this. This is not a convenience good and need not be marketed using intensive distribution. This is neither a specialty good and need not be marketed using exclusive distribution. This is a shopping good, and selective distribution suits the marketing ideally. There are two types of customers (car owners, and car rental agencies) for this product, and different types of channels are suited to each of them. Response based supply chain would help reduce inventory costs as the market could be unpredictable for a new product like this. Company G is known for its low cost; it is advisable to focus on this core competency and embark on a market penetration pricing. Product line pricing would enable Company G to extract more value from a range of similar products, while extending quantity discounts to its corporate customers, who have a better bargaining position. This is a shopping good, and accordingly non-personal communication channel is more suited for this product. The Objective-and-Task oriented budgeting is a more scientific method of establishing a budget. Substantial investment is required to generate a sustainable "pull", which makes Company G less dependent on its retailers. Tactics & Action Plan Action Plan Company G will focus on superior product quality to establish itself as a technology leader in this product line. The product line will symbolize reliability and quality. The product will be designed by an internationally acclaimed design house, which will add distinctiveness to the product. Company G enjoys a brand value in the market. The new product line will use brand extension to leverage its existing brand. As described earlier, multi-channel marketing will be used to reach the end consumers. The end consumers shall be reached through retailers while the institutional buyers like the car rental agencies and car manufacturers shall be contacted directly. Selective distribution will be carried out while reaching out to consumers; the product shall be distributed using specialty retailers and select superstores spread all over the country. The supply chain shall be response based; products shall be shipped out to the retailers whenever the stock falls below the re-order level. Market penetration pricing strategy will be used to price Rubicon aggressively to establish itself in the market quickly. The "no-frills" base product shall be modestly priced, while there will be additional price for the add-on features as per their perceived value thus creating a Product Line Pricing structure. Price adjustment shall be made for bulk buyers during direct sales by giving quantity discounts. The promotion mode will primarily include non-personal communication channel; advertisements, print media and other first time production promotions shall be used. The promotion budget shall be determined by Objective-and-Task Method; the budget will be developed on "bottoms-up" basis to achieve the target sales. The advertisements and other promotional strategies shall generate the necessary "pull" to generate the sales. Timeline The timeline for the strategy implementation plan is given in Appendix-I. Monitoring Procedures Action Plan At the outset, measurable marketing goals need to be established. This can include the number of new sales, the number of potential customers Company G would like to reach, or the amount of income Company G would like to generate from this new product line. The next step is to monitor the results. Monitoring would determine which of the marketing strategies are working and which are not. This involves gathering feedback on each marketing strategy. Feedback on the different aspects of the marketing strategy shall be obtained from three primary sources as detailed below. Feedback from external customers and retailers shall be obtained through advertisement firms specialized in doing such work. Feedback shall be collected over internet and through print media at retail outlets. Feedback questionnaires will be structured to include typical questions such as - Which media was most effective in reaching out to the customers What percentage of customers was aware of the product before and after the launch of the marketing plan What percentage of customers really understood the product What percentage of customers actually bought the product Feedbacks would be obtained from actual customers during the sales process (over internet during product registration) and during after-sales service calls (using print media), which customers will be required to fill. The other feedbacks to the marketing plan would include internal data such as sales data, overhead and inventory costs. The strategy will be fine tuned on the basis of such feedback. Once decided, it is important to commit to the marketing plan for a definite duration; the plan should not be tweaked unnecessarily at short intervals. Often it is advisable to launch a limited marketing plan, and then roll out the actual marketing plan after receipt of feedback from the test marketing. Timeline The timeline for the feedback receipt and implementation plan is also given in Appendix-I. Section-III Appendix See enclosed Bar Chart (Appendix-I) Section-IV Bibliography Kotler, P., Armstrong, G., 1995. Principles of Marketing, Prentice-Hall Inc., Englewood Cliffs. Read More