Marketing Strategy 4804, CRN 10214 VRDBest A4 Team Sandra Bloch, Angela Cuartas, Maria Lombana Khaled Aboulnasr April 22, 2013 Srping 2013
Table of Contents 1) Firm background 3 a) VRDBest mission statement.... 3 b) VRDBest Objectives.... 3 c) VRDBest overall competitive strategy... 3 d) Financial projections... 4 2) Situational Analysis 7 a) VRDBest SWOT... 7 b) Competitor analysis... 8 i) List of VRDBest competitors. ii) Strengths and weaknesses of main competitor. iii) Incidents in which decisions were a reflection of our main competitors moves. c) Customer analysis... 11 i) VRDBest main target market/s ii) Characteristics, preferences and shopping habits of target market/s. 3) Marketing Mix strategy. 12 a) Positioning statement... 12 b) Product strategy... 12 i) VRDBest Unique Selling Proposition (USP). ii) Main features of the product and how they changed throughout the eight rounds. c) Pricing strategy... 13 i) Define pricing strategy and give rationale. ii) Describe how price compares to competition. d) Promotion strategy... 14 i) List key messages/themes communicated. 1
ii) List key communication tools and media outlets used. iii) Describe the basis for the promotional budget (Advertising, Personal selling & Sales promotions). e) Place strategy... 15 i) Describe distribution strategy. ii) Justify choice of distribution channels, intensity and number of salespeople. 4) Appendix. 16 a) Market share graph through the 8 years... 16 b) Profitability graph through the 8 years... 16 c) Budget graph through the 8 years... 16 d) Average retail price... 17 e) Performance indices (financial, customer satisfaction, dealer satisfaction, market share, awareness)... 18 2
Firm background VRDBest mission statement: Our mission statement at VRDBest is to create up-to-date technology that is accessible, reliable, easy to learn and use for our customers. VRDBest objectives i) Increase sales by 10 % every year for the next eight years. ii) Increase profit by 15 % within the first year and 20 % by year six. iii) Increase marketing effectiveness by 15% every year for the next eight year iv) By year eight increase VRDBest market share by 35 % v) Sell 45,000 units by year six VRDBest competitive strategy VRDBest overall competitive strategy was low cost leadership. From years one through three we were distributing more heavily in channel one. We noticed that distributing through this channel was not our strategy, therefore from year four through eight we decided to change the distribution intensity to channel 2, to be more consistent. Although we considered ourselves a low cost leadership, the overall prices of our product on average were higher than the rest of the market, so we think that we also have a change from this point on to become differentiation. 3
Financial projections SALES Through these eight years the overall sales exceeded our expectations most of the time, although there was a decline in sales on year 3 of $179,766, in year 4 of $43,656 and finally in year 8 of $257,415. Most of the years VRDBest was profitable, from the first to the second year, there was an increase of sales of $918,951, from year four to five sales increased $838,716 from five to six $887,104, from year six to seven sales increased $406,286. Units Sold Throughout these eight years, the amounts of units that VRDBest forecast for production were not enough for sell to the exception of year four and eight. During year four we requested to produce 40,000 units of the product, but we actually sold were 34,608 units and for year eight 47,000 units were requested, but only 44,060 units were actually sold. 4
Market share VRDBest overall market share was always above the market compared to other markets. As you can see in the graph from year one to two VRDBest earn 3.4% of market share, in year three 9.2% of the market share we were still had the highest market share of the market. In year four there was a modification of the product and although we only lost 5% market shares we were no longer leading the market, yet in year five we were able to get back 6.2%. Years six and seven we kept gaining some market share and lead the market those specific years, and on year eight we lost only 1.1% market share, sweet talk gain 4% acquiring the same market share as VRDBest. 5
Costs & Budget We definitely have quite a budget to work with, and we were given some increments in our budget certain years, not all of them. Compared to our competitor when it comes to costs, we can definitely say that we spend more money in advertising and personal selling than any other company. On average we spend in advertising $406,250. Customer service we spend on average $96,437, salaries which was one of our highest expenditures was an approximate of $497,500 per year. Sometimes we were force to reevaluate how we were going to distribute the budget because we did not want to spend our reserve funds at the beginning. Sometimes we wanted to hire an extra employee, or buy an extra report, but it was not possible because we wanted to use it in advertising in order to create brand awareness. 6
Situational Analysis SWOT Analysis STRENGHTS WEAKNESSES Successful company that maintain its market share for 7 years High brand awareness and dealer satisfaction Distribution strategy Good quality products Product features satisfy customer needs Well positioned brand High price in low cost market segment Not enough budget to hire more sales representatives 7
OPORTUNITIES Increase market share Increase sales Product features meet other segments preferences THREATS Competitive market Customer s preferences change frequently Technology changes Competitor analysis Since the first year started for VRDBest competition was very visible in the market. Competitors for our company are VIC, SweeTalk, and Explore. Some of the companies are stronger competitors than others due to differences in the target market selected by each as well as the different strategies used. However, the overall market share was very competitive since the first year. The main competitor for VRDBest is VIC. VIC is one of company using similar strategies in the business. It was the second largest market share after our company for the first four years. VIC is after the home users market segments for at least the first five years on business. The company also shows the importance in the advertising field by keeping a competitive budget in this section each year. Up until the fifth year on production VIC was the second company producing a high percentage in sales. It was after several years when SweeTalk marked their presence in the market. SweeTalk became one of our main competitors because of the success they starting having in the industry. SweeTalk started with the lowest market share and smallest percentage of sales. Nevertheless, the company gained momentum by changing their strategy and everything else went to place. Even though SweeTalk is after a different market segment, the industry during its fourth year became number one holder of market share and market share percentage of sales, leaving VRDBest and VIC competing for second place. Nether less to say VRDBest fought its way back to first place in the market. 8
9
Strengths and Weaknesses of Competitors Strengths Weaknesses VIC Advertising budget Dealer satisfaction Product features Customer service Number of sales reps Sales promotion EXPLORER Product features Advertising budget Customer service Dealer satisfaction Sales promotion SweeTalk Product Features Advertising budget Sales promotion Customer service Dealer satisfaction Competitor s Moves VRDBest observes competitors moves as closely as possible, in such a competitive market any small moves will make a different in the market share. Although we made sure that competitor myopia was not created, we did follow our competitors steps throughout the eight years of business. One incident during our second year was 10
dropping two special features of the product because our target segment only wanted eight instead of ten. Hence, VIC had had a closer amount of product features to the customer s preferences; they had a higher percentage of market shares in the Home Users segment. Making this decision based on our competition affected VRDBest, since we had to gain back those two extra commands we had dropped, which were somewhat costly. During the forth year of business SweeTalk changed their strategy and shook things up in the market for the voice recognition devices. SweeTalk became the company with the most market share leaving VRDBest in second place for the first time in years. During the following year VRDBest requested less production than the previous year, yet sold 7,000 units were actually produced and sold. VRDBest used part of the remaining funds to keep a similar budget for advertising and increase awareness. Also 5,000 extra were added to customer service in order to increase customer satisfaction and an eight percent commission was included to our employees to motivate them. Customer Analysis The Home Users The home users market segment represents a mix of households who would use the Voice Recognition Device as a practical fun product. Hence, the market segment represents a family that uses the VRD for different purposes. For Example, our customers are usually using the VRD for daily purposes such as searching online, leaving notes, calendar, recipe files, and so on. As said previously home users usually use the voice recognition device for entertainment and to have fun. This market segmentation prefers aproduct with a high ease of learning, since for the most part it would not be utilized for complicated tasks. The home users are not much concerned about the error protection of the VRD either, due to the fact that it is a product used for enjoyment. On the other hand, it could become a problem if the product starts having constant errors that will lead to waste of 11
time. This market segment is not very interested in high priced products for the most part. Although home users segment only accounts for fifteen percent of total sales in the industry, it has a lot of market potential growth. Home users is only a small section of market however, their popularity continuous through the years and unit sales increase drastically from year to year. Marketing Mix strategy Positioning statement VRDBest: The best voice recognition device that enhances life Product strategy VRDBest Unique Selling Proposition (USP) We satisfy consumer needs. According with marketing research our target market the Home Users prefer software that is easy to learn, and are moderately concerned about error protection. During the first year of production the product s features were: 4 error protections rating, 7 ease of learning rating, and 9 special commands; for the second year the target market preferences changes and we decide to increase ease of learning rating and special command by one. On year three, special commands decrease by two. From year four through eight the product features were: 4 error protection rating, 8 ease of learning rating and 10 special commands. 12
Pricing strategy The price strategy that VRDBest used was the Market Based pricing strategy since it looks at all aspects of the market. VRDBest used a full cost pricing strategy, specifically a mark-up price based on cost. This strategy uses a fix amount to the cost of the product, which is a percentage of the total product cost. From year one through four, the mark up price was 50% for both channels of distribution, and from years five through eight we used a 50 % mark-up for channel 1 and 35% mark-up for channel 2. The product line pricing VRDBest used was Price Differentials for products in the line, which consist that [price] make sense to customers and reflect differences in their perceived value of the products offered, in which we believe we succeeded as a company. Through the eight years, VRDBest prices were higher than the overall market prices. We have reason to believe that the prices that we had definitely enhance our product and led consumers perceive that our product was more valuable and better quality than the rest of the products offered in the market, we have reasons to believe that market that our competitor were targeting could have been charged higher prices than VRDBest. Although our prices where usually higher and our main target was home users, follow by students and the parents segment, we did not exceed the amount of price our consumers were willing to pay for our product. Promotion strategy VRDBest used Push promotional strategy through the eight years in order to increase sales and brand information marketing the product to resellers. In addition, through the eight years we used one-third f our budget on indirect advertising to provided information about the brand; since year five we decide to advertise on TV and we assigned more of our budget to sales promotions. Sales promotion were distributed on the last four years as follow: 13
Year 5 we use $100,000.00, $40,000.00 for channel 1 and $60,000.00 for channel 2 Year 6 we increase sale promotion to $115,000.00; $45,000.00 for channel 1 and $70,000.00 for channel 2 Year 7 we decrease the amount to $97,000.00; $38,500.00 for channel 1 and $58,500.00 to channel 2 Last year we spent $80,000.00; $30,000.00 for channel 1 and $50,000.00 for channel 2 Due to the sales promotions offered during the last four year the sales and the market share increased. On the other hand, we considered that personal selling was a key for our success; as a result we hired more people when convenient, we started with 20 sales representatives and for year two we haired 3 representatives and the number of units sold increase from 32,643 to 36,227. However, on year four our sales decrease so we decided for year 5 to increase sales commission to 8% and give the employees non selling time that can be used on calls and out-store job duties. Due to the success of year five we increase sales commission to 10% on year 6 and we keep this percentage until year 8. Place strategy VRDBest distribution strategy was based on the product lifecycle. Since VRDBest is a low cost voice recognition system targeted mainly for home users, the price of the product is significant for our target market. However, being a new product it was more convenient for our product awareness and increase of market share to distribute through channel one ( Full service dealers). For the first few years of VRDBest distribution, channel one was the main channel used in our company. As the years continued the industry shift more towards channel two (Discount Dealers) since it was more consistent with our overall strategy. 14
VRDBest chose channel one as main distribution channel for the first few years based on the distribution strategy. The main idea was to create awareness among customers and create value provided through well knowledgable sales representatives. Moreover, customers could go in stores and compare the differences among different voice recognition devices and see all the great features that VRDBest has to offer. Hence, one channel one offer more value to our product by also offering the extended "insurance" that would cover the vrd for a year and provide a "same day" replacement. As VRDBest gained product awareness after its first two years, we contributed with a slow process of shifting from channel one to channel two. We did not want to create a drastic move that would confused our customers and change the position of our company. We shifted slowly but by our 5th year of production channel two was selling double the units of channel one and still providing us with a great profit. We applied the same "slow" change with our sales representatives. We started with the majority of our sales people working on channel one, as needed with the strategy in places. after penetrating the market we transfer sales people from channel one to channel two. During this last year we currently have the majority of our sale representatives working through channel two, however channel one still yields a profitability to our company. 15
Appendix Market share graph through the 8 Years Profitability and Budget graph through the 8 years 16
Do not use this page it is for retail price graphic 17
Product features and prices graph through the 8 rounds. Performance indices (financial, customer satisfaction, dealer satisfaction, market share, awareness) 18
19
Work Cited Mason, C. H., & Perreault, J. W. (2002). The Marketing Game. New York: McGraw-Hill/Irwin. 20