EarlyBird Industries
Team 4 11:45 AM Mackin Bannon (Captain) Thomas Bender (Captain) Eric An Michael Darche
Erica Heissler Kiran Ikram Michelle Marshall
EarlyBird Industries
2
Introduction EarlyBird Industries is a small company based in Cincinnati, Ohio. Over the past several years, the Company has been a successful and profitable midsized manufacturer. However, with the recent economic downturn, the Company has faced several pressing issues, which has culminated in a rapid decline in sales. The Company has decided to implement a research effort to find a new product that will attempt to increase the health and profitability of the Company. The Company will focus its efforts on finding a product that addresses a current need in the market and will provide the Company with relative stability over the next 10 years. EarlyBird Industries has determined that it would like to reach a goal of $10 million in sales for the first year, with a gross profit margin of 40%. To reach this goal, EarlyBird Industries has identified the NovaBrew as its product of choice. The NovaBrew is the world’s newest single cup warm beverage dispenser. Along with its N-Cup concept, the NovaBrew offers consumers the ability to brew warm beverages one cup at a time. Unlike older coffee makers, the NovaBrew saves consumers time and money. As will be discussed in the booklet, the NovaBrew will attempt to capitalize on the growing market for warm beverages, such as coffee and tea. 3
EarlyBird Industries
In addition to the aforementioned benefits, the NovaBrew is more versatile than normal warm beverage dispensers. Currently, the NovaBrew offers consumers the ability to satisfy their own individual tastes. This works ideally for a family, because it cuts the costs associated with excess brewing. Essentially, consumers will be able to brew in amounts equal to their desire, rather than being forced to brew an entire pot of coffee or other warm beverage. Using sophisticated marketing matrices and analyses, the Company believes it will be able to develop a compelling argument for its investment in the NovaBrew. The Company will attempt to define a target niche, from which the Company will develop its promotion plan. Once released to public, the Company hopes its analysis of the NovaBrew matches the needs of its to-be-identified target niche, which should ultimately result in a healthy company with satisfied consumers.
All Rights Reserved
EarlyBird Industries EarlyBird Center, 38 Fountain Square Plaza Cincinnati, OH 45263 United States +1-513-534-5300 (Phone)
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Table of Contents Chapter 1: Can We Win With the NovaBrew? 1.1 Introduction ....................................................................................................................... 13 1.2 Product Selection............................................................................................................. 14 1.3 Comparative Product Analysis ...................................................................................... 19 1.4 Utility Bundle Analysis .................................................................................................... 23 1.5 Trend Analysis .................................................................................................................. 28 1.6 Linear Evolution ............................................................................................................... 30 1.7 Summary ........................................................................................................................... 32 1.8 Conclusion ......................................................................................................................... 33 Chapter 2: Can We Win in This Industry? 2.1 Introduction ....................................................................................................................... 37 2.2 Comparative Trend Analysis .......................................................................................... 38 2.3 Competitive Product Analysis ....................................................................................... 41 2.4 Life Cycle Analysis ........................................................................................................... 43 2.5 Legislative Impact ........................................................................................................... 48 2.6 Technology ........................................................................................................................ 51 2.7 Social and Cultural Influences ...................................................................................... 54 2.8 Economic Impact ............................................................................................................. 56 2.9 Summary ........................................................................................................................... 58 2.10 Conclusion ...................................................................................................................... 59 5
EarlyBird Industries
Chapter 3: Where Should We Play the Game? 3.1 Introduction ....................................................................................................................... 63 3.2 Industry Trends ................................................................................................................. 64 3.3 Industry Breakdown ........................................................................................................ 65 3.4 Market Shares .................................................................................................................. 69 3.5 Industry Life Cycle............................................................................................................ 70 3.6 Linear Evolution ............................................................................................................... 72 3.7 Geographical Location .................................................................................................... 74 3.8 Channels of Distribution ................................................................................................. 76 3.9 Summary ........................................................................................................................... 79 3.10 Conclusion ...................................................................................................................... 80 Chapter 4: Why is the NovaBrew Bought? 4.1 Introduction ....................................................................................................................... 85 4.2 Buying Decision Process ................................................................................................ 86 4.3 Type of Decisions Being Made ...................................................................................... 91 4.4 What’s Wrong List ........................................................................................................... 93 4.5 Selective Perception Strategy ....................................................................................... 98 4.6 Current Social Hooks ....................................................................................................101 4.7 Product Positioning Diagrams ....................................................................................101 4.8 VALS Profile ....................................................................................................................105
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4.9 Maslow Needs Profile ...................................................................................................107 4.10 Utility Bundle ................................................................................................................111 4.11 Summary: The Five Ws ..............................................................................................112 4.12 Conclusion ....................................................................................................................113 Chapter 5: Selection of Target Niche 5.1 Introduction .....................................................................................................................117 5.2 Possible Niches ..............................................................................................................118 5.3 Matrix Criteria .................................................................................................................119 5.4 Niche Accessibility .........................................................................................................121 5.5 Macro Niche Analysis ....................................................................................................123 5.6 Micro Niche Analysis .....................................................................................................125 5.7 Niche Analyses Combined ...........................................................................................128 5.8 Top Three Target Niches ...............................................................................................130 5.9 Niche Selection ..............................................................................................................131 5.10 Summary ......................................................................................................................131 5.11 Conclusion ....................................................................................................................132 Chapter 6: The Target Niche 6.1 Introduction .....................................................................................................................135 6.2 Variables for Grids .........................................................................................................136 6.3 Consumption v. Age ......................................................................................................139
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EarlyBird Industries
6.4 Consumption v. Income ................................................................................................141 6.5 Consumption v. Geographic Location ........................................................................143 6.6 Consumption v. Convenience ......................................................................................145 6.7 Summary .........................................................................................................................146 6.8 Conclusion .......................................................................................................................146 Chapter 7: Product Management Plan 7.1 Introduction .....................................................................................................................151 7.2 Goals.................................................................................................................................152 7.3 Strategies ........................................................................................................................154 7.4 Comparative Product Analysis ....................................................................................156 7.5 What’s Wrong List .........................................................................................................160 7.6 Product Positioning .......................................................................................................164 7.7 Product Iterations ..........................................................................................................169 7.8 Utility Hooks ....................................................................................................................170 7.9 Trend Analysis ................................................................................................................172 7.10 Summary ......................................................................................................................174 7.11 Conclusion ....................................................................................................................176 Chapter 8: Product Distribution Plan 8.1 Introduction .....................................................................................................................179 8.2 Goals.................................................................................................................................180
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8.3 Needs Assessment ........................................................................................................184 8.4 Channel Structure ..........................................................................................................186 8.5 Types and Kinds of Middlemen ...................................................................................189 8.6 Functional Allocation ....................................................................................................196 8.7 Policies .............................................................................................................................197 8.8 Summary .........................................................................................................................199 8.9 Conclusion .......................................................................................................................199 Chapter 9: Product Pricing Plan 9.1 Introduction .....................................................................................................................203 9.2 Goals.................................................................................................................................204 9.3 Strategy............................................................................................................................208 9.4 Competitive Pricing Analysis .......................................................................................209 9.5 Break Even Analysis ......................................................................................................212 9.6 Price Flexibility Analysis ...............................................................................................213 9.7 Comparative Product Analysis ....................................................................................214 9.8 Policies .............................................................................................................................217 9.9 Pricing Plan .....................................................................................................................220 9.10 Summary ......................................................................................................................224 9.11 Conclusion ....................................................................................................................224
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EarlyBird Industries
Chapter 10: Product Promotion Plan 10.1 Introduction ..................................................................................................................229 10.2 Goals ..............................................................................................................................230 10.3 Media Budget Plan .....................................................................................................234 10.4 Channel Plan ................................................................................................................241 10.5 Message Design ..........................................................................................................243 10.6 Advertisements ............................................................................................................247 10.7 Summary ......................................................................................................................253 10.8 Conclusion ....................................................................................................................253 Bibliography ........................................................................................................................................255
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Chapter 1 Can We Win With the NovaBrew?
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EarlyBird Industries
Chapter 1: Can We Win With the NovaBrew? 1.1 Introduction ....................................................................................................................... 13 1.2 Product Selection............................................................................................................. 14 1.3 Comparative Product Analysis ...................................................................................... 19 1.4 Utility Bundle Analysis .................................................................................................... 23 1.5 Trend Analysis .................................................................................................................. 28 1.6 Linear Evolution ............................................................................................................... 30 1.7 Summary ........................................................................................................................... 32 1.8 Conclusion ......................................................................................................................... 33
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1.1 Introduction EarlyBird Industries (“the Company�) has decided that it will need to start a new marketing program to increase the fortunes of its shareholders. After several dismal years of business, the Company has decided that it will implement a new marketing program to increase its sales by $10 million over the next year. However, this is only a benchmark; the Company believes it can surpass this number with the right product. After setting this goal, the Company has begun to look for possible products to begin marketing. There have been several setbacks in the search for a winning product. However, the Company believes this will be the hardest part of the product development plan. Fortunately, the Company has been able to narrow the search for products to a list of five possible candidates. These candidates have been run through several analyses to determine their merit. The Company will be looking for a product that can provide it with a stable business for the foreseeable future, without risk of technological obsolescence or competition. One of the biggest problems the Company was running into when it began its search for the initial five candidates was competition. The Company must be particularly careful that they don’t choose an industry that is dominated by several big players that have the ability to bankrupt them overnight. Also, the other big problem that goes along with competition is the rate of technological change that occurs within the industry. The Company found that with any new and innovative product, there will always be someone standing ready to release a product that is twice as good for half the cost. This presents a very big problem on the corporate level, considering the Company must make a profit at the end of day to stay in business. Although the Company has not yet identified a target niche, as it has not even chosen a product, it must also make sure that it can find a product that is differentiated enough to where it would be extremely appealing to a specific 13
EarlyBird Industries
subset of the population. Although the product will be tailored to the niche, it is important to think about this, because when a product is extremely differentiated it is harder for the competition to copy it. The Company will run several more analyses on each of these products to see which one fares the best throughout the different tests. Finally, the Company will choose one product to launch for its next marketing campaign. It must be certain that this product will be the best choice for the future viability of the company, considering a lot rides on this decision.
1.2 Product Selection When choosing products to consider, the Company’s main priority is choosing products that will have a lot of wind behind them. By wind, the Company means that customers are not only going to want this product, but they need it and it will significantly change their life. After researching various products and technological advances, the company has come up with these five product choices:
1. Quench Water-Recycling Shower 2. Livescribe Smartpen 3. Uni-Solar PowerShingle 4. Konarka Power Plastic 5. NovaBrew Single Cup Coffee Maker
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Quench Water-Recycling Shower
Our first choice, the Quench Water-Recycling Shower, will save customers money on their water bill. It recycles water so less water is ultimately being used. It will save 87% of water used in a shower and saves 87% on energy in the home.1 The Company believes that this product will be successful and profitable because it will save customers money, and it is eco-friendly. In order to recycle and save so much water, the water is recycled through the drain and then after the person is done washing, that water is used to rinse off. However, the Company realizes that not a lot of people are going to spend the money to change their current shower, even if it might save them money in the future. Clearly, the economy is in a slump and a lot of people have saving money on their mind, so they may not have the disposable income to make one of these purchases.
http://www.quenchshowers.com/shower/overview.asp http://www.livescribe.com/en-us/smartpen 3 http://www.uni-solar.com/products/residential-products/powershingle-2 1 2
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EarlyBird Industries
Livescribe Smartpen
The Livescribe Smartpen is a pen that will digitize notes. The pen records what a person is writing and later will be able to transfer that data on to a computer. It records notes by audio and what is written so a note taker never misses a word. 2 The Smartpen will also allow customers to save, search, send, and share notes. It is very technologically innovative because there truly is not another product like it. It is not only easy to use, but will also be extremely beneficial to customers because they will not have to retype notes and will not miss anything in a lecture or a meeting, as everything that is heard or written will be recorded. A negative of this product is the increased use of touch screen tablets, smart phones, and of course lap tops to take notes on. It is completely acceptable for someone to take an iPad or a laptop to class to take notes for the most part, and the Company realizes that while this product is technologically savvy and useful, a lot of people are not going to have enough need for it to spend the money.
2
http://www.livescribe.com/en-us/smartpen
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Uni-Solar PowerShingle
The Uni-Solar PowerShingle is a shingle that can be installed on the roof a house, just like standard shingles, and uses solar power to harvest energy from the sun to help power the home, decreasing the customer’s energy bill.3 Solar shingles, even with rainy days, can save more than 20% on an electric bill.4 This product is innovative because unlike other solar panels, these ones are small shingles, which are far less noticeable. The Company thinks that the PowerShingle could be successful because of the fact that it saves money by reducing customers’ energy bill, it is eco-friendly, and it is aesthetically pleasing. However, just like the water conserving shower, the Company realized that in this economy not a lot of people have the disposable income to spend this much money on a home improvement project even if it will save them money on their electricity bill in the future. The Company needs a product that the customer wants enough to use their limited disposable income on. While the solar shingles are a technologically advanced, ecofriendly, and money saving product, the Company has to make sure people will actually buy it in this tough economy. 3 4
http://www.uni-solar.com/products/residential-products/powershingle-2 http://solar.calfinder.com/blog/solar-electric/how-much-money-will-solar-panels-save-each-month
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EarlyBird Industries
Konarka Power Plastic
The Company’s fourth product choice, Konarka Power Plastic, is a thin strip of plastic that takes in energy from the sun to provide solar power. 5 It can be put on almost anything, such as the top of bus stops, backpacks, or the top of an ice chest. This product stands out from its competitors because it is flexible and easy to manufacture. This solar plastic will soak up solar energy so that customers can charge their cell phones, laptops, and other electronics on the go. The Company thinks that customers will buy this product because it is green and is time saving. One downside about this product is that the Company is going to have to figure out what to put the solar plastic on and manufacture it, because the Company is not selling to other companies, but directly to the customers. Backpacks, purses, and laptop bags will produce the most benefits because customers will be able to plug in their laptops and cell phones on the go.
5
http://www.konarka.com/index.php/technology/our-technology
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NovaBrew Single Cup Coffee Maker
The Company’s fifth and final choice that it is considering is the NovaBrew Single Cup Coffee Maker. It can make various types of coffee, tea, or even hot chocolate within one minute, and it only brews one cup so excess coffee isn’t wasted. 6 The main hook that will draw people to this product is the amount of time it will save in the morning, as well as the variety of different drinks that it can brew. This product will be successful because it supports a single life style, is not wasteful, and supports different tastes.
1.3 Comparative Product Analysis The Comparative Product Scorecard provides a logical and insightful method for discovering whether or not the Company can win with a certain product. The data categories of this table cover various important product characteristics that allow the user to sift through weaker products and find a winner that stands out among the rest. For each criterion, the higher the score the more the characteristic applies to the product. All of the products have great potential; however, the NovaBrew stands out above the rest, earning the highest score. 6
http://www.Keurig.com/the-Keurig-story
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EarlyBird Industries
20 Characteristics 1. High value in use/low cost to make it 2. Protection
Quench Shower
Livescribe Smartpen
Uni-Solar Power Shingle
Konarka Solar Plastic
NovaBrew Coffee Maker
6
8
6
10
9
8
6
8
7
10
3. Ease of use
8
9
5
8
10
4. Differential advantage
6
7
8
9
10
5. Rate of technological change
7
6
7
8
7
6. Type and degree of competition
9
7
8
8
7
7. Unique and trendy
8
8
9
10
9
8. Shelf space at retail
4
8
6
7
10
9. Prior use patterns
5
7
7
6
10
10. Affordable
5
7
5
8
9
11. Newness
9
8
10
10
9
12. Divisibility
2
9
5
9
8
13. Rate of use
4
7
10
8
10
14. Durability
10
8
9
10
6
15. Life Cycle
9
8
8
9
10
16. Bankable
6
6
7
9
10
17. Fundamental Trends
8
6
9
9
9
18. Size of market for like products
7
5
7
7
10
19. Consumer Purchase Patterns
5
3
7
9
9
20. Web Friendly
4
9
7
9
10
TOTAL
130
142
148
170
182
AVERAGE
0.65
0.71
0.74
0.85
0.91
After running each product through the matrix, the Quench Shower emerged with the lowest score of 130 out of a possible 200. The main issue with this product concerns its overall sales. The Quench Shower is much more expensive than the average energy efficient shower and is difficult to sell. The product is neither Web friendly or easily integrated into retail shelf space. Though the shower follows the current green trend and is exceedingly unique, its benefits do not outweigh its shortcomings. It is difficult to install and will not appeal to the average consumer. It must be targeted toward a higher income group of individuals. 20
Unlike the shower, the Smartpen is relatively inexpensive and very marketable. It scored slightly higher than the Quench Shower with a total of 142. The problem with this particular product is that its scores on the Comparative Product Analysis are simply too average. This is not necessarily a product that an ordinary consumer would buy (hence the score of 3 in consumer purchase patterns). No characteristic of the Smartpen acts as a dominant feature. This implies that the Company will have a difficult time selling and improving the pen’s design and appeal over the product’s lifetime. Because the green trend has exponentially grown over the last decade, the Company has looked into solar power products as mode of energy conservation. Both the PowerShingle and the Solar Plastic provide new, exciting ways for consumers to save cash over the long term. The solar powered shingles received a score of 148. This product has a very high rate of use (10) and a strong durability (9). However, the solar shingles lack user friendliness and affordability. In order to apply the product to the roof of a home, one must purchase dozens of the tiles, access licensing for use, and find a company who can accurately install the components. This process could potentially turn into a nightmare for the average homeowner. Though the government subsidizes the purchase and use of solar equipment, the Comparative Product Scorecard shows that this product would be difficult to sell. On the other hand, Solar Plastic, which falls under a similar category as the PowerShingles, surfaced as the second strongest product with a score of 170. Unlike its solar competitor, the plastic is easily applied to virtually any surface. It has high value, low cost, great durability, and an extremely unique appeal. This product has the potential to be a great winner; however, the technology used in the solar plastic is likely subject to obsolescence. At this point in time, dozens of green companies seek to maximize the 21
EarlyBird Industries
efficiency of solar power products. New receptor technology poses several problems for the solar plastic. Within an overnight period, another individual could develop a similar yet more advanced and proficient technology. The Company must take this problem into serious consideration when deciding which product to market. In the end, the Company selected an innovative and efficient coffee brewer. The NovaBrew Single Cup Coffee Maker surpasses all of the other products with an overall score of 182. This single serve brewer allows users to choose from their favorite brands of coffee and brew a cup in a matter of seconds. The Comparative Product Scorecard shows that this product scored a perfect 10 in the following categories: protection, ease of use, differential advantage, shelf space at retailers, rate of use, prior use patterns, life cycle, bankability, size of market for similar products, and web-friendliness. Coffee drinkers constitute a significant amount of working Americans; therefore, this product would sell very easily. As evidenced by the matrix, the product received very high scores in nearly all categories. Unlike other coffee makers, the NovaBrew is a versatile and remarkably quick way to get a hot cup of coffee, tea, hot chocolate, or one of various other warm beverages. The most notable issue with this product, as shown on the scorecard, is durability (6). The product tends to last about three years. Despite this setback, the Company is confident that it can improve the product’s design and lifespan. Another foreseeable difficulty is the number of competitors in the industry. There are numerous other companies that produce coffee makers; however, none have the capabilities that the NovaBrew possesses.
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1.4 Utility Bundle Analysis To get an understanding of the Company’s potential products, it decided to do a Utility Bundle analysis to get a better grasp of which product would be the best for it to market. After narrowing the products to a field of five distinctive and niche products, it further used Maslow’s theory to deduce its choice.
Utility Bundle
Quench Shower
Livescribe Smartpen
Uni-Solar Power Shingle
Konarka Solar Plastic
NovaBrew Coffee Maker
Form
5
7
6
7
9
Time
5
7
6
7
9
Place
4
6
6
6
9
Possession
4
6
6
7
8
Image
4
7
4
7
9
Information
4
6
6
6
9
26
39
34
40
53
4.33
6.5
5.67
6.67
8.83
TOTAL AVERAGE
The Utility Bundle Analysis returned 53, 34, 40, 26, and 39, for the NovaBrew, Solar Shingles, Solar Plastic, Efficient Shower, and Smartpen, respectively. Although numbers are a good way to turn theory into quantifiable evidence for a decision, it is important to understand the rationale behind these individual numbers listed on the chart below. The lowest scoring product on our list was the Quench Shower. After further investigation of its lackluster design and arduous upkeep, the Company decided it would be fruitless to attempt to market such a difficult product. However, the market for efficient showers is a relatively new market, and currently, consumers are paying about 110% of 23
EarlyBird Industries
the price of the Quench Shower.7 The biggest problem plaguing the success of the Quench Shower is its lack of design and problematic implementation, without too much verifiable savings. There have been several write-ups on energy efficient showers. In fact, one pundit has recently been quoted as saying energy efficient showers are becoming the norm in newly manufactured showers. The Energy Star stamp of approval now gives nearly all newly manufactured showers the title “Energy Efficient Shower”. The Energy Star stamp is a government-sponsored program that gives special designations to products that entitle producers and consumers to special government tax credits. The typical Energy Star shower saves about 60% in total energy consumption.8 Although these numbers sound very appealing, the reality is that this is quickly becoming a very crowded industry, which would make it extremely hard for any new company without a high level of technical diversity to enter. Therefore, it received a score of 26, which the Company believes reflects its decision to refrain from marketing the product. The second lowest scoring product was the PowerShingle concept. Introduced with a very compelling sales pitch, the Company ultimately decided the construction business was not something the Company wanted to have a hand in after the dismal housing numbers that have stifled the housing business for so long. The Company noticed that the amount of new home sales had decreased to about 319,000 from about 1,009,000 in 2007.9 This downward trend initially scared the Company about its growth prospects for the future. Although the Company figured the recent slump in new home sales wouldn’t necessarily be indicative of its success with solar shingles, considering its cost savings was http://www.costowl.com/home-improvement/bathroom-shower-replacement-cost.html http://www.google.com/url?sa=t&rct=j&q=energy%20efficient%20shower&source=web&cd=12&ved= 0CKYBEBYwCw&url=http%3A%2F%2Fwww.energystar.gov%2Findex.cfm%3Fc%3Dproducts.es_at_home_tips &ei=6VLETqDhJ4Xc0QH36IHdDg&usg=AFQjCNGWQoORrtz5mwSaZ3xACvx4IGKe4g&sig2=2MsJjbOK3IQROm6Q_1klQ 9 http://www.mortgagenewsdaily.com/1282008_December_New_Home_Sales.asp 7 8
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measurably greater than the Quench Shower, the Company ultimately decided that it would have to develop significant synergies with some large contractors to become a key player in the industry. Some key players the Company considered were Pulte Homes, Toll Brothers, and Lennar, but the Company ultimately found that many of these contractors had already formed strategic partnerships with other Companies to develop their own solar shingle businesses, which is slated to become a 15 billion dollar industry by 2015.10 Thus, the Company couldn’t justify its existence in the Solar Shingle market, despite its alluring growth prospects and unique opportunity. Coming in at number three on the list was the Smartpen. The Smartpen was a very interesting product to work with. Several interesting trends that are driving the movement to pen digitization include social media and increased computer literacy. These trends have accounted for about 1.5 million pencast views, which are a new way of writing blogs and communicating with people through the Web using a Smartpen.11 The Company really likes the growth prospects that would come with developing this particular product, but the Company is primarily concerned with its technological obsolescence. The industry has about a 24% rate of technological obsolescence, as identified by the National Bureau of Economic Research. 12 Essentially, this means that for every 4 products that enter the market in one year, about one will be obsolete by the next year. This type of industry competition is not something the Company feels comfortable battling. Ideally, the Company would like to find a product with a low level of technological obsolescence. Therefore, the Company has decided not to adopt this product for its portfolio. The runner up to the Company’s final decision was the Solar Plastic concept, which http://www.reuters.com/article/2009/10/05/dow-solar-idAFN0536825520091005?rpc=44 http://www.livescribe.com/blog/press/?p=2130 12 http://www.nber.org/papers/w4370 10 11
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EarlyBird Industries
presented a fairly compelling marketing pitch. Ultimately, the Company would apply the Solar Plastic to other products such as bags and phones instead of just selling the Solar Plastic in its simplest form. This provides the Company with a broader consumer base to market to, and it also keeps it from having to do any business-to-business marketing. Some trends that really helped push this product to the top of our Utility Bundle analysis were usability and trendiness. About 90% of the American population carries and uses some form of electronic gadget on a daily, and mobile, basis.13 The Solar Plastic technology would provide all the power the individual needs to stay connected throughout the day without having to worry about finding a plugin. This is particularly appealing considering 35% of Americans are upset with the battery life on their phones and other electrical devices.14 Eventually, the Company came to find out that there was a considerable amount of competition in this space, and realized that it would be prudent to see if it could find a more differentiated product that couldn’t be easily imitated. Therefore, the Company has decided to not market the Solar Plastic concept. Finally, the Company has decided to choose the NovaBrew as its final product. After a very average product line up, the Company happened to come across a very compelling product that it knew it could win with. The rising demand for warm beverages, coffee in particular, is one of the key driving trends behind the NovaBrew. As of date, about 50% of all Americans drink coffee on a daily basis.15 Although there are many different types of coffee makers on the market, there are none that make coffee, or any warm beverage, as fast and individualized as the NovaBrew. A recent poll showed that more Americans are http://articles.cnn.com/2011-02-03/tech/texting.photos.gahran_1_cell-phone-landline-techgadget?_s=PM:TECH 14 http://techon.nikkeibp.co.jp/english/NEWS_EN/20071109/142155/?SS=imgview_e&FD=1766171540 &ad_q 15 http://www.cbsnews.com/stories/2002/11/14/sunday/main529388.shtml 13
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willing to buy products that work specifically for their most intimate needs, such as that of the NovaBrew.16 Also, the NovaBrew provides unparalleled efficiency and cost savings that other coffee makers cannot compete with. Today, it costs an average of 70 cents per cup of coffee with traditional brew coffee makers, whereas the N-Cups from the NovaBrew cost only 50 cents per cup.17 It also only takes 30 seconds to make on N-Cup, whereas a traditional brew coffee maker may take 15 minutes.18 The bundle of cost savings, time savings, and individuality makes the NovaBrew a formidable player in the warm beverage industry, which should give the Company a chance at regaining financial stability. In conclusion, the Utility Bundle Analysis allowed the Company to flesh out its perceptions of the final five products, which should ultimately lead to the successful implementation of a new era for the Company. Although the Company will be a relatively young player in the mature industry of coffee makers, it believes it can define a very respectable target niche, which will increase the chances of the products success considerably.
http://positiveagers.blogspot.com/2009/04/individualism-boomers-core-value.html http://www.amazon.com/Count-N-Cup-Flavored-CoffeeSampler/dp/B004OAZ36I/ref=pd_sim_k_5 18 http://www.dearcoffeeiloveyou.com/love-Keurig-nope/ 16 17
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EarlyBird Industries
1.5 Trend Analysis The Company performed a Trend Analysis in order to determine how popular market and consumer trends would affect the future of the coffee maker industry.19 By taking into consideration the trends that will have a significant impact on consumer purchasing decisions, the Company will be able to determine whether the NovaBrew, and its competitors, will be able to satisfy consumer desires.
Trends 1. Smaller products are more popular 2. Single serve 3. Consumers place a premium on convenience 4. Product makes everyday task easier 5. Product makes everyday task quicker 6. Product is accessible to all people 7. Variety of uses for the product 8. Premium on simplicity 9. Product is aesthetically pleasing 10. Product doesn’t take up much counter space 11. Product is easily cleaned 12. High-quality manufacturing 13. Appliance is not fragile 14. Money saving 15. Product is affordable 16. Product has more than one use 17. Product is reliable 18. Product is durable 19. Time saving 20. Product is easily stored 21. Product can be used with different lifestyles 22. Single living on the rise 23. Safety is not compromised for convenience 24. Product appeals to multiple classes 25. Different coffee tastes 26. Brand name popularity 27. Multiple places for use 28.At home coffee drinking 29. “Coffee drinks” instead of black coffee 30. Coffee drinking on-the-go 31. Fast-paced lifestyle 32. Non-wasteful, eco-friendly
Bunn Coffee BTX 10-Cup Brewer
Cuisinart DCC-1200™
Mr. Coffee Power Serve™
Senseo Single Cup Brewer™
NovaBrew
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+ --+ --+ --+ + --+
+ ----+ + --+ ----+
--+ + + --+ + + + +
---
---
---
+
+
---
---
---
+
+
+
+
+
+
+
----+ --+
+ ------+
+ ------+
+ ----+ +
+ + + + +
---
---
---
---
+
-------
-------
-------
----+
+ + +
http://www.amazon.com/BTX-B-ThermoFresh-10-Cup-Thermal-Carafe-Coffee/dp/B000FFRYYK http://www.cuisinart.com/products/coffee_bar/dcc-1200.html http://www.amazon.com/Mr-Coffee-BVMC-ZH1B-12-Cup-Coffeemaker/dp/B004T6EKBQ http://www.senseo.us/Products/Appliances/Pages/Personal_Cup_Brewer.aspx http://www.Keurig.com/brewers/platinum-brewing-system
19
28
33. Premium on operational appeal 34. Premium on long-lasting appliances 35. Simulates coffee from coffee shop 36. Convenience of staying in for coffee shop drinks 37. Ease of transport 38. Ready to brew quickly 39. “Coffee drinkers” phenomenon 40. “Tea drinkers” phenomenon 41. Premium on consumer choice – cup size 42. Energy Saving 43. Premium on consumer choice color 44. Quiet Brewing TRENDS PLUS OVER TOTAL TREND RATIO
--+ ---
+ -----
-------
-------
+ + +
---
---
---
---
+
----+ ---
----+ ---
----+ ---
+ --+ ---
+ + + +
---
---
---
---
+
---
---
---
---
+
---
---
---
---
+
---
--10/44 .23
--11/44 .25
--12/44 .27
+ 22/44 .50
42/44 .95
Using the Trend Analysis, the Company found that the NovaBrew is much better prepared than its competitors to meet current and future consumer trends in the coffee maker industry. The NovaBrew scored a trend ratio of .95, while the competition scored between .23 and .50. This extreme difference between the NovaBrew and its competitors shows the advantages of the NovaBrew’s innovative technology. This technology will differentiate the NovaBrew from all other coffee makers, providing consumers with a more efficient and more enjoyable coffee drinking experience. This difference in scores on the trend analysis also predicts the NovaBrew’s future success, as it compares the products’ future profit potential. As demonstrated in the Trend Analysis, the NovaBrew is better able to meet market and consumer trends than all of its competitors. There are several trends that the NovaBrew accounts for that help it stand out from the competition. The NovaBrew provides a variety of uses, as it can be used to brew tea and hot chocolate in addition to coffee. It saves the consumer time, as it brews a cup of coffee in under a minute as opposed to a pot of coffee in five to ten minutes. The NovaBrew also satisfies different coffee tastes, as each person can have an individual cup of coffee in a flavor of their choice from many different name brands. These characteristics allow for the NovaBrew to fill many different 29
EarlyBird Industries
consumer needs. Additionally, the NovaBrew follows the current “green” trend, as it saves energy and is eco-friendly. By identifying consumer trends and adapting to meet these trends, the NovaBrew is already ahead of the competition.
1.6 Linear Evolution Before the Company begins to plan out its marketing campaign, it needs to examine and analyze where the NovaBrew and its competitors lie on the Linear Evolution of products. It is crucial for the Company to sell a product that is in the marketing phase of the Linear Evolution in order for the product to be successful and meet short-term and long-term goals. The Linear Evolution helps examine the stage of a product’s life cycle compared to the stages the product’s competitors are currently in. This will lead to more effecitve marketing techniques and give the Company an idea of which competitors to target in the industry. One important thing to know going forward is that the Trend Analysis, which the Linear Evolution chart is based on, may not take into account all the trends in the market. This could result in a product that does not correspond to a major trend in the industry, which may lead to customers not adapting to the product. If this happens, the product will have less than expected sales and if not changed accordingly, would not succeed.
B C M Production
S 0.4
N Selling
0.8
N = NovaBrew, S = Senseo, M = Mr. Coffee, C = Cuisinart, B = Bunn
30
Marketing
Comparing the NovaBrew with its competitors using the Trend Analysis on the Linear Evolution chart, it is clear that it is the only product among its competitors that is in the marketing stage of its evolution. With a ratio of .95, the NovaBrew is much further along in its linear evolution, as the competitors’ ratios are .23, .25, .27, and .50. The low ratios of the competitive products indicate that these products are in the production or selling modes. Many of these coffee makers have seen little change or improvement over their life cycles. Instead of increasing technology and the research and development process, these companies are looking to minimize costs or maximize sales in order to increase revenues. The Bunn BTX Coffee Maker, the Cuisinart DDC-1200, and the Mr. Coffee Power Serve are all such products.20 These products have not changed and developed to adapt to changing consumer trends and desires, which play significant roles in consumers’ buying decisions. While Senseo’s Single Cup brewer is not productionoriented like the other competitors, it is still a sales-oriented product. The product’s sales rely heavily on Senseo’s sales techniques and the effectiveness of its sales techniques to get the consumer to buy the product. Similarly, Senseo’s Single Cup brewer has not changed and innovated to meet changing consumer desires.21 Because the products in the coffee maker industry are not adapting to consumer desires, they are not focusing on the consumers and will not be able to satisfy all the consumers’ needs. This is significant because this gives the Company both the opportunity to make and market an innovative
http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/drip-coffeemakerratings/models/overview/bunn-nhbx-b-99021275.htm http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/drip-coffeemakerratings/models/overview/cuisinart-brew-central-dcc-1200-99009932.htm http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/drip-coffeemakerratings/models/overview/mr-coffee-bvmc-lmx43-99031377.htm 21 http://www.senseostore.com/detail/SEN+SL7832-55 20
31
EarlyBird Industries
product that better satisfies the needs of the consumers and an idea of which of its competitors it needs to attack. With a trend ratio of .5, which falls under the sales stage of the Linear Evolution, Senseo’s Single Cup Brewer is the only competitor not in the production stage. Therefore, Senseo poses the greatest threat in the market and should be the competitor the Company decides to attack. In addition, because Senseo is under the sales stage, the Company can determine how to tailor its product to satisfy the needs of the consumers better, as well as market a product with high potential to surpass Senseo’s product and the NovaBrew’s other competitors. The new technology offered by the NovaBrew will enable the Company to better satisfy its consumers compared to its competitors. With its new technology and singleserve capability, the NovaBrew offers customers many differential advantages that include variety, ease of use, convenience, and cost-efficiency.22 By tailoring to satisfy consumers, unlike its competitors, the NovaBrew has great potential to meet its high short-term and long-term goals and reach and stay at the top of its market.
1.7 Summary
Product Selection
Comparative Product Analysis
1. Quench Water-Recycling Shower 2. Livescribe Smartpen 3. Uni-Solar PowerShingle 4. Konarka Power Plastic 5. NovaBrew Single Cup Coffee Maker Total Score (out of 200): Quench Shower: 130 Livescribe Smartpen: 142 Uni-Solar PowerShingle: 148 Konarka Solar Plastic: 170 NovaBrew Coffee Maker: 182
http://www.Keurig.com/press-releases/2011/Keurig%20unveils%20newly%20redesigned%20Keurig%20comhttp://www.Keurig.com/brewers/special-edition-brewing-system 22
32
Utility Bundle Analysis
Trend Analysis
Linear Evolution
Average Score: Quench Shower: 4.33 Livescribe Smartpen: 6.5 Uni-Solar PowerShingle: 5.67 Konarka Solar Plastic: 6.67 NovaBrew Coffee Maker: 8.83 Trend Ratio: Bunn: .23 Cuisinart: .25 Mr. Coffee: .27 Senseo: .50 NovaBrew: .95 Mode: Bunn: Production Cuisinart: Production Mr. Coffee: Production Senseo: Selling NovaBrew: Marketing
1.8 Conclusion In selecting a product for the future, the Company looked to new and innovative technology. With a focus on new technology in mind, the research team recognized that the product would not only have to solve a problem that other products were not solving, but also that the product would have to conform with current market and consumer trends. In the quest for a product that fits this mold, the Company decided upon the NovaBrew Single-Cup Coffee Maker. While all five products that were analyzed feature new and innovative technology, the NovaBrew is the one that presents the most opportunities for consumer success. This success will come from the versatility, simplicity and speed that cannot be found in comparable products in the industry. The NovaBrew is best prepared to satisfy Maslow’s six needs. The analysis shows that it is the most polished and marketable product of the five, further supporting that the Company can win with it. The NovaBrew meets 95% of the market and consumer trends, 33
EarlyBird Industries
while the competitors only meet 23-50% of the trends. The fact that the NovaBrew is prepared to adapt to consumer desires shows that it is way ahead of the competition. The NovaBrew is in the marketing mode, meaning it sells a product that is based on consumers’ wants and desires. The competitors are all still in the production or selling modes, meaning that they focus instead on sales volume or minimizing costs. Even though the coffee maker industry is large and features many well-known, brand name products, this analysis has proven that the NovaBrew is a product that the Company can win with, and its uniqueness in the industry should take EarlyBird Industries to the top.
34
Chapter 2 Can We Win in This Industry?
35
EarlyBird Industries
Chapter 2: Can We Win in This Industry 2.1 Introduction ....................................................................................................................... 37 2.2 Comparative Trend Analysis .......................................................................................... 38 2.3 Competitive Product Analysis ....................................................................................... 41 2.4 Life Cycle Analysis ........................................................................................................... 43 2.5 Legislative Impact ........................................................................................................... 48 2.6 Technology ........................................................................................................................ 51 2.7 Social and Cultural Influences ...................................................................................... 54 2.8 Economic Impact ............................................................................................................. 56 2.9 Summary ........................................................................................................................... 58 2.10 Conclusion ...................................................................................................................... 59
36
2.1 Introduction After careful consideration of many products, EarlyBird Industries (“the Company”) has definitively chosen the NovaBrew to become its newest product. Due to the current economic climate, the Company was forced to select a product that offers both substantial value and functionality to its customers, without compromising the fiscal goals of the Company. However, the question to be answered is, “Can We Win in the Industry.” The Company has obviously spent a considerable amount of time analyzing the pros and cons of different products; this was what led to the Company’s selection of the NovaBrew. However, there is a lot more research that needs to be done to make sure that the NovaBrew will be a good fit for the Company. In the past chapter, the Company did a lot of research that will also apply in this chapter. In the following pages, the Company will try to get a better understanding of where the product stands in comparison to its competitors and in general. The Company identified that in its Linear Evolution, it was in marketing mode. In this Chapter the Company will try to determine where this product stands in Comparison to its industry competitors. Once the Company can get an idea of where it stands in the industry, it will be able to better ascertain how the other Companies will react to the introduction of a new product. Hopefully, the Company will find out that its industry competitors are in an oligopoly where its consumers have a high level of cognitive dissonance. This cognitive dissonance is what will provide the opportunity for the Company to gather new customers. Using the matrices for social and cultural trends, the Company should be able to get a sense of whether or not the NovaBrew will be able to satisfy the dissonance that the current producers are inciting. Also, the Company will be faced with one of the most formidable tasks of all, 37
EarlyBird Industries
legislative impact. The Company must make sure that there are no pieces of legislation that could put it out of business over night. There are several things that might affect the Company such as coffee processing laws that could affect the way it is packaged, and thus, the way the Company must account for the its coffee processing operations. Overall, the Company will be able to get a better idea of if it will be able to win in this industry once it has completed this chapter.
2.2 Comparative Trend Analysis The Company looked once again at the Comparative Trend Analysis in order to determine its current life cycle stage in relation to that of its competitors. 23 This knowledge will allow the Company to decide whether it can win against its competitors. Further down the road it will also help the Company to form a successful marketing strategy that will result in the NovaBrew rising above its competitors as the indisputable number one personal coffee maker.
http://www.ncausa.org/custom/headlines/headlinedetails.cfm?id=667&returnto=171 http://www.senseo.us/Products/Appliances/Pages/Personal_Cup_Brewer.aspx http://www.senseo.us/Products/Appliances/Pages/Personal_Cup_Brewer.aspx http://www.cuisinart.com/products/coffee_bar/dcc-2750.html http://www.Keurig.com/brewers/platinum-brewing-system http://www.ncausa.org/custom/headlines/headlinedetails.cfm?id=667&returnto=171 http://www.usatoday.com/news/health/2007-10-07-tea-benefits_N.htm 23
38
Trends 1. Smaller products are more popular 2. Single serve 3. Consumers place a premium on convenience 4. Product makes everyday task easier 5. Product makes everyday task quicker 6. Product is accessible to all people 7. Variety of uses for the product 8. Premium on simplicity 9. Product is aesthetically pleasing 10. Product doesn’t take up much counter space 11. Product is easily cleaned 12. High-quality manufacturing 13. Appliance is not fragile 14. Money saving 15. Product is affordable 16. Product has more than one use 17. Product is reliable 18. Product is durable 19. Time saving 20. Product is easily stored 21. Product can be used with different lifestyles 22. Single living on the rise 23. Safety is not compromised for convenience 24. Product appeals to multiple classes 25. Different coffee tastes 26. Brand name popularity 27. Multiple places for use 28. At home coffee drinking 29. “Coffee drinks” instead of black coffee 30. Coffee drinking on-the-go 31. Fast-paced lifestyle 32. Non-wasteful, eco-friendly 33. Premium on operational appeal 34. Premium on long-lasting appliances 35. Simulates coffee from coffee shop 36. Convenience of staying in for coffee shop drinks 37. Ease of transport 38. Ready to brew quickly 39. “Coffee drinkers” phenomenon 40. “Tea drinkers” phenomenon 41. Premium on consumer choice – cup size 42. Energy Saving 43. Premium on consumer choice color 44. Quiet Brewing TRENDS PLUS OVER TOTAL TREND RATIO
Bunn Coffee BTX 10-Cup Brewer
Cuisinart DCC-1200™
Mr. Coffee Power Serve™
Senseo Single Cup Brewer™
NovaBrew
-----
-----
-----
+ +
+ +
---
+
---
+
+
----+ -------
+ --+ -------
----+ -------
+ + + --+ ---
+ + + + + +
---
---
+
+
+
--+ + ------+ + -----
--------+ --+ ----+
+ --+ --+ --+ + --+
+ ----+ + --+ ----+
--+ + + --+ + + + +
---
---
---
+
+
---
---
---
+
+
+
+
+
+
+
----+ --+
+ ------+
+ ------+
+ ----+ +
+ + + + +
---
---
---
---
+
--------+ ---
------+ -----
-------------
----+ -------
+ + + + + +
---
---
---
---
+
----+ ---
----+ ---
----+ ---
+ --+ ---
+ + + +
---
---
---
---
+
---
---
---
---
+
---
---
---
---
+
---
---
---
---
10/44 .23
11/44 .25
12/44 .27
+ 22/44 .50
42/44 .95
When looking at the Trend Analysis, it can clearly be seen that the NovaBrew can win in the personal brewing industry. The NovaBrew yielded a trend ratio of .95, which indicates that the NovaBrew is in the introduction, or growth stage. This suggests that the 39
EarlyBird Industries
NovaBrew is at the beginning of its life cycle and has the potential to earn huge profits for the Company in the future. In addition, when compared to the trend ratios of the chosen competitors, it can be seen that the NovaBrew far surpasses them. The product with the next highest trend ratio is the Single Cup Brewer™ from Senseo with a trend ratio of .50. This trend ratio suggests that Senseo is in the maturation stage. The trend ratios of the other three competitors, the Bunn Coffee BTX 10-Cup Brewer™, the Cuisinart DCC-1200™, and the Mr. Coffee Power Serve™, are .23, .25, and .27, respectively. These trend ratios indicate that the products are in decline and for that reason will soon abandon the market. They are simply outmoded based on the current trends in the personal brewing industry and will not be able to compete. For this reason, the Company should not focus its marketing strategy on these firms and devote considerable resources to attacking these firms. Senseo is the competitor the Company should attack because it is the only competitor in the maturation stage instead of the decline stage. Despite its offering of a single serving brew, the Senseo fails to offer certain distinguishing features of the NovaBrew that are in line with the current trends, such as popular brand name coffee, multi-use capability, such as tea brewing, and better aesthetical design and various color choices. Because it fails to offer many of the features that the current trends in coffee brewing demand, Senseo will be outcompeted by the NovaBrew and forced to leave the market, at which point the Company will enjoy a monopoly in the market. Through the application of the Comparative Trend Analysis, it is clear that the company can win with the NovaBrew. All evidence points to the fact that the NovaBrew is the personal brewing system that fits best with the current trends and will outcompete the chosen competitors.
40
2.3 Competitive Product Analysis The Comparative Product Scorecard will give the Company insight into whether the NovaBrew can compete in the industry. The data categories of this table cover various important product characteristics that allow the Company to determine whether the NovaBrew stands out from the competition. For each criterion, the higher the score the more the characteristic applies to the product. Bunn Coffee BTX 10-Cup Brewer
Cuisinart DCC-1200™
2
2
2
5
9
4
5
4
6
10
3. Ease of use
2
1
2
6
10
4. Differential advantage
2
1
2
4
10
5. Rate of technological change
3
3
3
6
7
6. Type and degree of competition
4
4
4
5
7
7. Unique and trendy
1
2
1
6
9
8. Shelf space at retail
4
4
4
3
10
9. Prior use patterns
3
3
4
5
10
10. Affordable
3
6
3
6
9
11. Newness
2
5
4
7
9
12. Divisibility
1
1
1
5
8
13. Rate of use
4
3
4
5
10
14. Durability
4
3
3
6
6
15. Life Cycle
2
2
2
5
10
16. Bankable
1
1
2
4
10
17. Fundamental Trends
3
3
5
7
9
18. Size of market for like products
3
3
3
5
10
19. Consumer Purchase Patterns
2
2
2
5
9
20 Characteristics 1. High value in use/low cost to make it 2. Protection
20. Web Friendly
Mr. Coffee Power Serve™
Senseo Single Cup Brewer™
NovaBrew
2
1
2
5
10
TOTAL
52
55
57
106
182
AVERAGE
.26
.28
.29
.53
0.91
From the Comparative Product Scorecard, it is obvious that the NovaBrew has an advantage over the other products in the industry. The qualities of the NovaBrew that 41
EarlyBird Industries
particularly enable it to stand out are a combination of both durability as a product and its attraction in the market as being trendy. The competition does not have as big of a market share as the NovaBrew because they seemed to be either focused on being durable and easy to use or simply trendy and unique. The NovaBrew is especially convenient to use and caters to a big portion of the market due to its single N-Cup system. This system allows it to be marketed to the average user as a daily and efficient coffee machine. Bunn and Mr. Coffee seem to be focusing on the convenience of use and durability, but neither of these provides the single K-cup system. Although Senseo does offer single cup brewing, it does not focus on being heavily durable and does not seem to occupy retail shelf space like the other products. Thus the NovaBrew manages to edge ahead of its competition because it possesses the most qualities the consumer is looking for as well as having the ability to grow in the industry.
42
2.4 Life Cycle Analysis The Company will be competing against several very established brands in the coffee and warm beverage industry. However, with a careful examination of the industry competitors, the Company knows it will be able to successfully compete in this industry. To examine the industry competitors, the Company will use an Industry Life Cycle curve to model the stages of the individual competitors. By using this model, the company will be able to determine the competitive landscape and ultimately devise a plan to capitalize in the field.
M
B
Sale s
S
C
N
Introduction
Growth
Mature
Decline
Time N = NovaBrew, S = Senseo, M = Mr. Coffee, C = Cuisinart, B = Bunn
As one should notice from the Industry Trend Analysis, there are currently no competitors in the introduction stage. Fortunately for the Company, the coffee and warm beverage industry is extremely mature. Right now about 60% of the companies have been 43
EarlyBird Industries
in the industry for more than 20 years.24 The Industry Trend Analysis returned identical scores to the Product Trend Analysis. Although it may seem suspicious upon first glance, investors and decision makers should understand that the products represented in the Product Trend Analysis served as each company’s best representation in the competitive landscape. Thus, because each industry competitor was represented to its fullest extent in the Product Life Cycle analysis, the numbers are the same for the actual Industry Trend Analysis. Primary industry competitors for the Company include Bunn, Senseo, Cuisinart, and Mr. Coffee. Each of these competitors, respectively, scored .23, .50, .25, and .27. The Bunn Coffee Company has been the most used and respected premium coffee maker in America for the past several decades.25 However, with age comes complacency. The Company views Bunn as a staple in the commercial market place, but it believes Bunn has left a considerable opportunity for growth untapped, namely the individual cup coffee maker.26 With trends toward green technology and sustainability, Bunn has yet to tap into this high growth industry. After reading several consumer reports, many customers are dissatisfied with Bunn’s use of technology. Many of the newer models are simply the same older models without any discernible stylistic or technological change. Although Bunn has score high in reliability and usability, it lack in the aforementioned areas.27 Cuisinart was the second lowest scoring company on the Industry Life Cycle Analysis, with a .25. Like Bunn, Cuisinart also relies heavily on its brand image utility. It is a http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/coffeemaker-buyingadvice/coffeemaker-brands/coffeemaker-brands.htm 25 http://www.bunn.com/ 26 http://www.bunn.com/pages/commercial/ 27 http://www.epinions.com/reviews/Bunn_Coffee_Makers_GR10_Small_Appliances 24
44
very established brand and survives primarily on its image utility. The problem the Cuisinart faced specifically was its lack luster usability. Consumer reports corroborate this problem. Many users have complained that they need less coffee from one pot, and others have complained that they need quicker brew times.28 These weaknesses are where the NovaBrew shines. Like the two aforementioned coffee makers, the Mr. Coffee is a household name that has been passed down through the generations through word of mouth. With a score of .27 on the Life Cycle Analysis, this company also gets most of its revenue from image utility. Although it is similar to the other coffee makers, this particular maker has its own specific set of problems that consumers are faced with every day, considering coffee is an integral part of their daily lives. Quality issues have caused many users to simply return their Mr. Coffee coffee makers, even though they have been loyal customers to the Mr. Coffee brand.29 This also presents the right level of cognitive dissonance that is needed for the NovaBrew to attract customers. Although the NovaBrew may seem to have a monopoly in the individual cup coffee maker industry, it does have one small competitor, Senseo. However, the Senseo is considered a second rate single cup coffee maker by many consumers, as is substantiated by consumer reports.30 Many of the consumers not only complain about the actual brewer itself, but in the case of the Senseo, they also complain about the pods and their lack of selection. Luckily, the NovaBrew will not have these problems because of the vast amount of N-Cups that will be offered, but also because of the exclusivity that comes with the
http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/pod-coffeemakerratings/models/overview/cuisinart-ss-700-99031389.htm 29 http://www.consumeraffairs.com/homeowners/mr_coffee.html 30 http://coffeegeek.com/reviews/consumer/philipssenseo/BrewMe 28
45
EarlyBird Industries
NovaBrew and the N-Cup. The Senseo brand primarily makes customers use their own inhouse manufacturing pods, whereas the N-cups will utilize the flavors of products provided by Starbucks, Nestle, and many others.31 The Senseo scored a .5 on the Industry Trend Analysis. The company would classify this company as being in the Fallout cycle, and with a score of .5, this would fit perfectly with that conclusion. The NovaBrew scored a .95 on the Industry Life Cycle test. This high score is substantiated by the gaps this product fills from the other aforementioned products. Where all the other products fell short, the NovaBrew filled the gap, or problem, that was created by that criterion in the Industry Life Cycle. This high trend ratio can also be substantiated because of the shear amount of features that the NovaBrew has. Since the NovaBrew has so many valuable features, it is only natural that it would have a high trend ratio. Now, the Company is not saying that more features make a better product, but it is saying that the NovaBrew solves the key problems current coffee makers face. To conclude the Industry Life Cycle, the Company would like to reiterate its assertion of the Industry as a whole and each individual competitor. The Industry as a whole is in the Maturation stage, and all of the competitors are in the Decline stage, with the exception of the Senseo, which is in the Fallout stage.
B C M Production
S 0.4
N Selling
0.8
N = NovaBrew, S = Senseo, M = Mr. Coffee, C = Cuisinart, B = Bunn 31
http://coffeegeek.com/reviews/consumer/philipssenseo/BrewMe
46
Marketing
With the NovaBrew, the Company is currently the only firm that is in the marketing mode. Senseo, the closest competitor, is currently in the selling mode. This means that the firm’s main focus in on selling and is vulnerable to a market oriented company like EarlyBird Industries. From the Comparative Scorecard and Trend Analysis, the Senseo does not offer variety to consumers and is not as easy to use as consumers want coffee makers to be. The other competitors’ firms are all in the production mode. These firms focus primarily on making the product and most likely do not even know who eventually buys it. They do not have the differential advantage and uniqueness consumers look for in coffee makers. Opportunity exists for the Company, as there are currently no other firms in the marketing mode. This proves to be crucial to the Company in its ability to accurate identify the target niche and use the most effective methods in carrying out the marketing aspects for the NovaBrew. Firms in the marketing mode tend to be most successful because they adapt their products to align with consumer desires. Based on the Industry Life Cycle curve, it is easy to target the other competitors in the industry. Unlike the NovaBrew, which will be in the introduction stage, the other products are in the maturation and declining stages and will not be able to innovate to adapt to changing trends. The competitors, Bunn, Cuisinart, and Mr. Coffee are all declining, and do not pose much of a threat. The Company could easily target them to attack and force them the exit the industry earlier than their inevitable exit dates. The only competitor that is not in the decline stage is Senseo, which is in the maturation stage. Because Senseo has a relatively higher trend ratio and will stay alive longer in the industry than the other competitors, the Company should target this product to attack. By analyzing the curve, the Company will be able to successfully adapt marketing strategies at each stage of the life cycle and establish a plan of attack on the industry. In 47
EarlyBird Industries
the introduction stage, it will be able to adapt to changing consumer trends as mentioned above and attack its competitors, mainly Senseo, by offering features valued by consumers that its competitors are unable to offer.32 The strategies for its other product life cycle stages will be mentioned later. With its competitors in the mature and decline stages and the NovaBrew in the introduction stage, the opportunity for success with the product looks promising.
2.5 Legislative Impact Since the Company will be engaging in the consumer food industry, it will have to abide by numerous federal laws that protect the consumer. However, in the interest of brevity, the Company has narrowed the field of legislation down to six of the most pertinent laws. These three laws include The Organic Foods Production Act, the Food Allergen Labeling and Consumer Act, the FDA Food Safety Modernization Act, the FTC Fair Packaging and Labeling Act, the California Food Sanitation Act, and the California Milk and Milk Product Act. The state laws are included because the Company believes they might have an effect on its target niche in the future. The Organic Foods Production Act (OFPA) was established by the USDA in 2000 to protect the “national standards for the production, handling, and processing of organically grown agricultural products.” 33 This act protects the consumer by creating “standards” for the unregulated production of agriculture products. The Company will be packaging a substantial amount of organically grown commodities. So, it behooves of the company to comply with the regulations of the USDA, or risk being sanctioned.
32 33
http://www.Keurig.com/brewers/special-edition-brewing-system http://www.nal.usda.gov/afsic/pubs/ofp/ofp.shtml
48
The second form of legislation is the Food Allergen Labeling and Consumer Act. Introduced by the FDA in 2004, this act seeks to protect victims of food allergies from inflicting trauma on themselves involuntarily. This act mandates that all food production companies must label all contents of their product that could potentially cause harm to its consumer.34 The Company must pay a substantial amount of attention to this law because of its potential to incite lawsuits. Due to the numerous food allergies that exist, the Company must make sure that every precaution is taken to ensure the safety of its consumers by labeling its products carefully. The third and most recent form of legislation to be discussed is the Food Safety Modernization Act (FSMA), which was just recently signed into law by President Barack Obama in 2011.35 Among other things, the introduction of this law allows the FDA and the Secretary of Health and Human Services to conduct more inspections of domestic food facilities, increase detection of foodborne illness outbreaks, and recall contaminated food products. As with the OFPA, this act will need to be held in high regard to avoid potential lawsuits, which could potentially jeopardize the health of the Company. The fourth piece of legislation comes from the Federal Trade Commission. The Fair Packaging and Labeling law was enacted by Lyndon B. Johnson to promote product awareness.36 The Company must do everything in its capacity to disclose all of the information the Fair Packaging and Labeling Law requires. Some of the key requirements of the Fair Packaging and Labeling Law include labeling the contents of the product, the location of origination, and the quantity of the products contents. Failure to abide by the
http://www.fda.gov/food/labelingnutrition/FoodAllergensLabeling/GuidanceCompliance RegulatoryInformation/ucm106187.htm 35 http://www.fda.gov/Food/FoodSafety/FSMA/default.htm 36 http://www.ftc.gov/os/statutes/fplajump.shtm 34
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Federal Trade Commission’s act could result in legal action by the state against the company, which would result in a serious financial detriment to the Company. The fifth piece of legislation comes from the National Association of State Departments of Agriculture. The California Food Sanitation Act was chosen from several state laws for a variety of reasons.37 Primarily, the Company believes it will ultimately choose California as its target niche. However, the Company will need to be in accordance with this Act when it enters the California market, so it is worth looking into. Essentially, this Act requires routine inspections of the Companies manufacturing facilities as well as its final products. These routine quality checks will ensure that the Company keeps its liability to a minimum, considering it is one thing to only be fined by the NASDA, but it is another thing to have a lawsuit from an unsatisfied customer. Either of these situations would be problematic for the Company’s image. Therefore, the Company will stay in line with the requirements outlined in the California Food Sanitation Act. The National Association of State Departments of Agriculture also initiated the sixth and final piece of legislation the Company identified. The California Milk and Milk Product Act will primarily affect the Company’s marketing plan for its N-Cup concept.38 Since most of the N-Cup concepts will be using some form of carnation milk, the Company will need to pay close attention to the details of the Act. The Act primarily calls for the inspection of the Company’s production facilities. Although this Act may seem small in the overall scope of the Company’s actions, it is extremely important that the Company stay in accordance with this Act.
37 38
http://www.nasda.org/nasda/nasda/Foundation/foodsafety/California.pdf http://www.nasda.org/nasda/nasda/Foundation/foodsafety/California.pdf
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Legislation
Content
Effect on the NovaBrew
Impact
Source
Organic Foods Production Act
Mandates standards for organic food production
Must keep its N-Cup contents in pristine condition
8
USDA
Food Allergen Labeling and Consumer Act
Mandates the labeling of potential food allergen ingredients
Must correctly label all contents of the N-Cup content
9
FDA
Food Safety Modernization Act
Gives greater authority to the FDA and SHHS to perform routine surveys of production quality.
Must routinely make sure all steps of the manufacturing process are in pristine condition
9
FDA
Fair Packaging and Labeling Act
Requires Companies to identify the product, name the place of origin, and net quantity of contents
Must continually make sure that its products are properly labeled in accordance with the Act
9
FTC
California Food Sanitation Act
Requires food packaged and sold in the state of California to be inspected routinely
Must keep products and manufacturing plants within the codes delineated in the Act
9
NASDA
California Milk and Milk Product Act
Requires dairy products to be inspected an processed according to the guidelines delineated under the Act
Must make sure the N-cup concepts are kept in line with the specifications of the Act
8
NASDA
2.6 Technology The Company’s advanced coffee system implements a brand new technology into the everyday coffee brewing experience. Its patented design renders the traditional coffee pot entirely obsolete. The product utilizes a new, patent protected method called the N-cup to deliver a fresh cup of coffee to each user in 20 to 60 seconds. Each N-cup is a specially designed pod, or coffee shot, that allows the individual user to choose his or her favorite brand of coffee. The consumer no longer has to brew a full pot to attain their favorite cup of coffee. The Company has teamed up with 22 of the industry’s most popular coffee brewers including Starbucks, Dunkin Donuts, and Folgers to allow users to enjoy the speed 51
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and convenience of their favorite coffee in N-Cup form. Currently, the product holds dozens of design and packaging patents. These vacuum-sealed, roasted ground coffee containers are protected by law thus granting the Company a significant advantage over its competitors. The exclusive patents specific to each coffee partner for the N-Cup expire at some time from 2012 to 2021.39 As the Company prepares to launch the NovaBrew and its bundled N-Cups, this expiration poses a few concerns for the company’s future. However, the popularity of these partnerships merit very likely contract renewals. Market data suggests that brand loyalty in coffee consumption is critical to the success of many companies.40 Customers form a bond with their favorite brand of coffee that is not easily broken. Over time, brand loyalty deters consumers from switching both coffee bean and brewer. The ease and accessibility of the NovaBrew will enable users to maintain this loyalty, whereas competitors like Senseo experience a disadvantage. The product’s success will drive companies to renew their contracts with the Company and therefore promote company sales for another extended period. This process is of the utmost importance to the company goals. N-Cups are the future of coffee brewing and one can anticipate an impending dominance in this particular area of the market. Upon activation of the appliance, the product’s serving unit pierces the N-Cup from the top, releasing heated water into the coffee. Simultaneously, another nozzle located below the N-Cup, pierces the tin from below to allow for the brew’s discharge. This process involves a water tank with a standard temperature of 192 degrees Fahrenheit; however,
http://edgar.brand.edgaronline.com/DisplayFiling.aspx?TabIndex=2&FilingID=7600789&companyid =3184&ppu=%252fdefault.aspx%253fcompanyid%253d3184%2526amp%253bformtypeId%253d7 40 http://money.cnn.com/2010/11/23/news/companies/Green_Mountain_coffee_troubles.fortune/ index.htm 39
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the product’s LED monitor grants each user freedom to choose his or her temperature of choice. After each N-Cup is used, the machine automatically positions the waste byproduct into a disposal receptacle located within the machine. The entire process is quick, efficient, and extremely user friendly.
The Company’s revolutionary coffee maker includes all of the technology necessary for the creation of other hot beverages. The user can easily produce tea, hot chocolate, hot soup, and various other drinks. This technological advantage sanctions the possibility of numerous new markets to emerge for use in accordance with the machine (for example, the growing popularity and dominance of the N-Cup and other coffee pods). In addition, the product shows great potential for positive technological change. Most competitors in this industry are mature and have not drastically changed technologies in the last several years. The NovaBrew is on the frontier of technological change in relation to the vast majority of competitive coffee machines. While the home coffee appliance industry is 53
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relatively mature, the Company looks forward to adding new innovation to the coffee brewing experience. The potential for add-ons, new applications of the device, a more personal touch, and the use of SMART technology suggests a very promising future for the product. As consumers continue to seek the convenience of quick and efficient products on the go, the Company aims to increase its presence in the coffee industry.
2.7 Social and Cultural Influences The Company chose to produce and sell the NovaBrew because it believes that it there will be enough support behind it that will make it a success. This is a product that will bring people enough benefits that they will be willing to spend their limited disposable income on. There are several social and cultural trends from the Trend Analysis that will prove to be a major factor in the success of the NovaBrew. Social and Cultural Trends 7. Variety of uses for the product 19. Time saving 22. Single living on the rise 32. Non-wasteful, eco-friendly
One major feature that makes the NovaBrew stand out from all other coffee makers is the variety of flavors it can produce. There are over 200 flavors of hot chocolate, coffee, and tea.41 This variety makes the product perfect for families because it appeals to all different taste buds. Even people who don’t like coffee can enjoy this product and drink other types of hot beverages. Another trend that will cause people to buy the NovaBrew is time efficiency.
41
http://www.Keurig.com/shop/N-Cups/all-N-Cups
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Obviously, people drink coffee in the morning, usually before work when they are pressed for time. With the NovaBrew it takes less than a minute to brew a large cup of coffee.42 This saves a lot of time compared to conventional coffee makers: time that people can use in the morning to get prepared for their day. Americans like to be instantly gratified and this product will not disappoint. It is a fact that in today’s society there are more and more singles. Around 40 to 50% of marriages will end in divorce, and people are waiting later and later to settle down. Also, over 40% of the adult population is single.43 There is no need for a single person to brew a whole pot of coffee in the morning when they can just brew a single cup, saving the time and saving the waste. The NovaBrew is a more practical product than other coffee makers, especially when so much of the population is single. Brewing a whole pot of coffee for one person is irrational when an individual can enjoy one premium cup of coffee for less time, all without leaving their home. One of the negative impacts is that the NovaBrew may not be as green as conventional coffee makers because of the pod that makes the coffee. The pod contains three main components: the cup, a filter, and an aluminum foil top.44 One of these must be used for every cup of coffee made. One thing that makes the NovaBrew green, however, is the fact that because it brews only one cup and therefore coffee is not wasted. After analyzing all the social trends that support the NovaBrew, the Company believes that the key hook is the fact that it saves so much time. Obviously, coffee is a morning drink, and in the tough economy there is more and more stress to work and be productive. Workers are in a rush to get to work to get as much done as possible, so they http://www.Keurig.com/the-Keurig-story http://www.unmarried.org/statistics.html 44 http://www.Keurig.com/social-responsibility 42 43
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need a fast coffee brewer. Also, the NovaBrew makes sense for a single dominant population. There is no reason to brew a whole pot of coffee when so much of it will be wasted.
2.8 Economic Impact Economic Trends
Good or Bad?
Interest rate
Good
Consumer Confidence Index
Bad
GNP trends
Good
Employment trends
Good
Stage of business cycle
Good
Stock market performance
Good
Exchange rates
Good
Employment
Bad
Debt levels
Good
Credit card debt
Good
Housing crash
Bad
The economic condition of the United States will play a crucial role as to whether the Company can win with the NovaBrew. The Company has determined that the country’s current economic trends favor the introduction of the NovaBrew. The current interest rates, which are very low, will encourage households to borrow more. As of August 2011 the benchmark interest rate was at 0.25%, a record low for the United States.45 These low rates mean consumers will be more willing and more able to borrow and take on debt, as they will not have to pay significant interest, so they can 45
http://www.tradingeconomics.com/united-states/interest-rate
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purchase more products and services, such as the NovaBrew. This same concept applies to debt levels and credit card debt. As opposed to the constant increase in government debt, private household debt levels have actually been falling in recent years due to individuals losing their households, and the debt that accompanies them, and an increase in saving.46 Another important trend is the GNP trend. The United States’ Gross National Product has been increasing over the last eight quarters as the economy has slowly improved.47 An improving economy means a more productive and strong economy, which leads to more jobs, more income, and more spending, key factors in the sale of the NovaBrew. The current business cycle is in the recovery phase after the 2008 recession, which is reflected in stock market performance and currency exchange rates. While the stock market has fluctuated throughout 2011, it has slowly been rising since 2008, a sign that the economy is improving. Also, companies are beginning to adjust their marketing plans, but are still employing recession marketing. This gives the Company a great opportunity to employ a strong advertising campaign, as the competition is still holding back on advertising while it recovers. Despite these positive trends, there are still a few negative trends hindering the Company. Consumer confidence is still at a lower-than-desired level, standing at 45.2 as of September 27.48 This is a bad sign, as consumers are not confident in the economy, leading them to save more and spend less. The housing crash had a significant impact on this decrease in consumer confidence, and with the housing market still down it is doubtful that confidence will increase anytime soon. Also, unemployment is still very high, and has http://curiouscapitalist.blogs.time.com/2011/07/18/surprise-u-s-debt-is-falling/ http://www.data360.org/dsg.aspx?Data_Set_Group_Id=321 48 http://www.conference-board.org/data/consumerconfidence.cfm 46 47
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not shown many signs of decreasing significantly. Without jobs, consumers do not have the money to spend on products other than the bare necessities. However, if the Company can promote the NovaBrew as a quality product that will give consumers a return on their investment, it should sell. Additionally, as the economy continues to recover these trends will reverse themselves, even further strengthening the NovaBrew’s success.
2.9 Summary
Comparative Trend Analysis
Competitive Product Analysis
Life Cycle Analysis
Linear Evolution
Legislative Impact
Technology
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Trend Ratio: Bunn: .23 Cuisinart: .25 Mr. Coffee: .27 Senseo: .50 NovaBrew: .95 Scorecard Average: Bunn: .26 Cuisinart: .28 Mr. Coffee: .29 Senseo: .53 NovaBrew: .91 Stage: Bunn: Decline Cuisinart: Decline Mr. Coffee: Decline Senseo: Maturation NovaBrew: Growth Mode: Bunn: Production Cuisinart: Production Mr. Coffee: Production Senseo: Selling NovaBrew: Marketing Impact (1-10): Organic Foods Production Act: 8 Food Allergen Labeling and Consumer Act: 9 Food Safety Modernization Act: 9 Fair Packaging and Labeling Act: 9 California Food Sanitation Act: 9 California Milk and Milk Product Act: 9 Innovative technology in N-Cups Patents through 2021
Social and Cultural Influences
Economic Impact
Single living Time saving Variety “Green” trend Good: interest rate, GNP trends, employment trends, stage of business cycle, stock market performance, exchange rates, debt levels, credit card debt Bad: Consumer Confidence Index, employment, housing crash
2.10 Conclusion With the conclusion of Chapter 2, it is clear that the NovaBrew can win in the current market. The product is very innovative, and easily stands out from all competing products. The fact that the NovaBrew saves the consumer time, is not wasteful, and is very versatile caters to the modern coffee drinker, and it is the clear choice for any household. In addition, the NovaBrew follows the “green” trend, as it eliminates excess coffee and the need for filters. The NovaBrew is backed by many patents, and features innovative technology that the competition cannot match. It scored very highly on the Comparative Trend and Competitive Product Analyses, which provides a positive outlook for both the Life Cycle and Linear Evolution. In addition, technological, social, and economic factors all point to the NovaBrew’s success. However, there are several challenges that the Company will face in winning with the NovaBrew. The many patents on the NovaBrew and N-Cups will run out in the next decade, and there are several negative economic trends that will challenge the Company. Nonetheless, with all the advantages it has over the competition, the NovaBrew will enter a maturing market and become the leader.
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60
Chapter 3 Where Should We Play the Game?
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Chapter 3: Where Should We Play the Game? 3.1 Introduction ....................................................................................................................... 63 3.2 Industry Trends ................................................................................................................. 64 3.3 Industry Breakdown ........................................................................................................ 65 3.4 Market Shares .................................................................................................................. 69 3.5 Industry Life Cycle............................................................................................................ 70 3.6 Linear Evolution ............................................................................................................... 72 3.7 Geographical Location .................................................................................................... 74 3.8 Channels of Distribution ................................................................................................. 76 3.9 Summary ........................................................................................................................... 79 3.10 Conclusion ...................................................................................................................... 80
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3.1 Introduction The Company must now ascertain where it will “play the game�. To understand where its niche markets are, the Company must perform several analyses to assess the particular market niche, who to attack, the geographical location, and the retail outlets to use. Until now, the Company has primarily concentrated most of its efforts on determining the product and why the Company can win with the product. Now, the Company is shifting its gears a little. There are several other variables that the Company must take into account when thinking about the where the Company will play the game. Two major factors that the Company will have to take into account are geographical location and which company to attack. The Company must take into account that it must closely align its target niche with where it chooses to actually operate business. Although the Internet is going to be a revenue driver for the Company, it must take into account the image of the brand when it determines where it chooses to locate its retail outlets. The other question about which company to attack will be a function of the competitive landscape. Since many companies that are in maturation are more worried about maintaining their market valuation than actual production, the Company will try to identify these companies that are in maturation to attack. Although the Company is not worried about image utility as a primary form of utility for its product, it is important that the Company keep its products in store of high quality that are in line with the target niche. The NovaBrew is a very high quality product, which should result in a store of similar quality. Ultimately, the Company will have to decide how it wants to place its product in the market place. Through the use of several matrices and analyses in the subsequent pages, the Company should be able to get a good idea of where it will ultimately play the game. 63
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3.2 Industry Trends The Company will be assessing how to target customers by taking a look at market and industry trends and how much of a share it can hold. These trends also make clear which companies are the best to attack and compete with, ensuring that the NovaBrew succeeds in being sold. In further assessing industry trends, the Company will be able to decide which sector of the market to best begin in. After much assessment the Company has decided to go into the Coffee Maker Industry, which comes under the Vacuum, Fan and Small Household Appliance Manufacturing Industry. Within this industry there are a number of trends that can affect the way the Company decides to market its product. Vacuum, Fan and Small Household Appliance Manufacturing Industry Trends Technology Brand name recognition On-the-go usage High value in use
Technology is becoming more superior every day, and newer, more efficient technology is becoming a regular part of life. In addition to this there is currently a very strong trend for buying “morning coffee,� from companies such as Starbucks. One of the results of this trend is the need for a morning cup of coffee. A simple and easy way for people to get their morning cup of coffee is to own a coffee maker. The technology of the product is such that it becomes a forerunner in the industry and thus represents a significant part of the market share. The technology of the product is unique in that it is very efficient in providing one cup of whatever the consumer wishes. The product itself is non-wasteful and eco-friendly, 64
which helps its ability to be marketable as it manages to address the trend of going green or owning more eco-efficient products. Probably the most unique aspect of the product is the single cup, in that it prevents wastage and can brew exactly one cup of different types of either tea or coffee. Due to this technology, the consumer can drink brand name coffee. Recently coffee companies such as Starbucks or Green Mountain Coffee have become very popular and trendy. The technology of the product is such that the consumer has access, via their home-owned coffee maker, to consume these brand name tea or coffee via the single cup server. The trend of on-the-go coffee has also become extremely popular. In this context the product will be extremely marketable because of its simplicity in usage. There are a variety of coffee and tea types available and the product functions very quickly, and is thus extremely time-saving. In addition to this the NovaBrew can be placed and used anywhere, functions simply, and can be easily cleaned. The product also has a high value in use. This is due to the fact that it is both easy to use and durable. Consumers can rely on it for their morning cup of coffee. It is a long lasting appliance and can be used in any setting. Its functionality is simple and efficient. The NovaBrew also provides an option for staying in and getting a brand-name drink. Thus relative to its cost, the product provides great value to the consumer.
3.3 Industry Breakdown The Company is selling to the Vacuum, Fan, and Small Household Appliance Manufacturing in the US industry, ISIC code 335211.49 The firms in this industry
49
http://www.naics.com/censusfiles/ND335211.HTM
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manufacture household appliances including coffee makers, vacuum cleaners, polishers, and blenders. This industry includes small appliances and does not include larger ones like ovens, washing machines, or refrigerators. Our product fits in with this industry because it is considered a small household kitchen appliance.
The chart above shoes how the industry is growing because of increased imports.50 Much of this is attributed to selling overseas, and manufacturing has also been outsourced in the recent past to reduce operating costs. It is beneficial for the Company that the industry is growing so we have more people to sell to and it is easier to enter into the market. When an industry is declining it is hard to enter into the market.
50
IBISworld.com
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Although growth has been declining, demand is forecasted to boost in 2010 because of economic recovery. The major company in this industry is Jarden Corporation, which has 13.6% of the market share.51 One of its products is Mr. Coffee, which directly competes with the Company’s product. However, our product differentiates from this product in many ways in that ours accommodates more tastes plus takes up less time.52 Another factor that could hurt the Company is cheap imports, mainly from China. However those products are not as well-known and do not have all the different flavors like our product. One key success factor that the Company has that will set us apart is that our product is a premium good. The single cup coffee maker gives customers a product that they cannot find elsewhere.
51 52
http://clients.ibisworld.com/industryus/lifecycle.aspx?indid=786 http://www.mrcoffeestore.com/?trk_src_ss=COFPAYPCWEBMACSS%7CPPC%7CADW%7Cmr%20coffee
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Sales
Jarden (13.6%)
Whirlpool (2.7%) Other (83.7%)
Number of Firms The Company is attacking the Small Electric Household Appliances Segment, which consists of many different companies with small market shares. Even though many of the companies in the industry are large and have significant brand recognition, they typically hold less than 5% of the market. Jarden Corporation is the exception at 13.6%. 53 Information about our industry:
Revenue: $4.2 billion
Profit: $191.1 million
Businesses: 111
Annual Growth: -1.0%
53
http://clients.ibisworld.com/industryus/Majorcompanies.aspx?indid=786
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3.4 Market Shares
1 2.4 1.6
27.1 67.8
Non-Beverage Products Espresso Makers Juice-Making Products
Coffee, Automatic Drip Coffee Grinders
The Small Electric Household Appliances segment of the Vacuum, Fan, and Small Household Appliance industry can be broken up into two groups: non-beverage products and beverage products. Automatic drip coffee makers, such as the NovaBrew, make up the majority of the beverage product group, 27.1% of the entire Small Electric Household Appliances segment, and 12.3% of the entire industry.54 Therefore, to get even more specific, the Company will attack the Automatic Drip Coffee Maker industry. Having such a large and specific segment to attack will benefit the Company, as it will not be difficult to identify competitors and determine how to go after them.
http://academic.mintel.com.proxy.library.nd.edu/sinatra/oxygen_academic/search_results/show&/ display/id=482436/display/id=503146?select_section=503150
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3.5 Industry Life Cycle The Company will be competing against several very established brands in the coffee and warm beverage industry. However, with a careful examination of the industry competitors, the Company knows it will be able to successfully compete in this industry. To examine the industry competitors, the Company will use an Industry Life Cycle curve to model the stages of the individual competitors. By using this model, the company will be able to determine the competitive landscape and ultimately devise a plan to capitalize in the field.
M
C
B
Sale s
S
N
Introduction
Growth
Mature
Decline
Time N = NovaBrew, S = Senseo, M = Mr. Coffee, C = Cuisinart, B = Bunn
As one should notice from the Industry Trend Analysis, there are currently no competitors in the introduction stage. Fortunately for the Company, the coffee and warm beverage industry is extremely mature. The Industry Trend Analysis returned identical 70
scores to the Product Trend Analysis. Although it may seem suspicious upon first glance, investors and decision makers should understand that the products represented in the Product Trend Analysis served as each company’s best representation in the competitive landscape. Thus, because each industry competitor was represented to its fullest extent in the Product Life Cycle analysis, the numbers are the same for the actual Industry Trend Analysis. Primary industry competitors for the Company include Bunn, Senseo, Cuisinart, and Mr. Coffee. Each of these competitors, respectively, scored a .23, .50, .25, and .27. The Bunn Coffee Company has been the most used and respected premium coffee maker in America for the past several decades. However, with age comes complacency. The Company views Bunn as a staple in the commercial market place, but it believes Bunn has left a considerable opportunity for growth untapped, namely the individual cup coffee maker. With trends toward green technology and sustainability, Bunn has yet to tap into this high growth industry. Cuisinart and Mr. Coffee are also established names in the brewed coffee industry. With scores of .25 and .27, respectively, they are also in a similar situation with Bunn, because they too have left the individual cup coffee maker industry untapped. Although the NovaBrew may seem to have a monopoly in the individual cup coffee maker industry, it does have one small competitor, Senseo. Senseo scored a .5 on the Industry Trend Analysis, but there is no need to be fearful of this competitor. Since the NovaBrew was the first to enter this market, and even single handedly invented this industry, it has firmly established itself in the lexicon of everyday coffee drinkers. Senseo has merely tried to capitalize on the trend being ridden and created by NovaBrew. Due to Senseo’s second-rate image, consumers are unlikely to purchase their product when given 71
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the option of purchasing the NovaBrew instead. There is little knowledge of this company, and consumer sentiment is neutral at best. The company would classify this company as being in the Fallout cycle, and with a score of .5, this would fit perfectly with that conclusion. To conclude the Industry Life Cycle, the Company would like to reiterate its assertion of the Industry as a whole and each individual competitor. The Industry as a whole is in the Maturation stage, and all of the competitors are in the Decline stage, with the exception of the Senseo, which is in the Fallout stage.
3.6 Linear Evolution When the Company compared the NovaBrew to its main competitors using the Trend Analysis, the Company found that it was the only product among its competitors currently in the marketing stage of its linear evolution. There is great potential and opportunity because there are no firms currently focusing on the consumer.
B C M Production
S 0.4
N Selling
0.8
Marketing
N = NovaBrew, S = Senseo, M = Mr. Coffee, C = Cuisinart, B = Bunn
Bunn, Cuisinart, and Mr. Coffee, have trend ratios of .23, .25, and .27, respectively. Furthermore, as mentioned above, these products are all in the decline stages of their product life cycles. Senseo has the highest trend ratio with .50 and is currently in the maturation stage of its product life cycle, approaching decline. From the competitors’ trend
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ratios, life cycles, and stages of linear evolution, the coffee maker industry is clearly vulnerable.55 Bunn, Cuisinart, and Mr. Coffee have settled into the production mode, and so far have been satisfied staying there. These firms are focused primarily on the product they are selling. They focus on the quality and quantity of offerings while assuming that customers will seek out and buy reasonably priced, well-made products. Since their product works and their brand is well known, selling as many of their products as possible is all that the firms have needed to do to keep the shares of the market they currently have. There has been no real threat that might have forced them to upgrade their product systems, and they are part of an oligopoly in the coffee maker market. 56 Senseo is in the selling mode and is further in the linear evolution than the other competitors. Senseo relies heavily on promotional activity to sell its product and persuade consumers that their Single Serve Cup brewer is the best choice of coffee makers. While Senseo’s coffee maker offers the single-serve capability that its competitors do not, it has many other pitfalls, as mentioned earlier and shown in the Comparative Product Analysis and Trend Analysis.57 After analyzing the product evolutions of the NovaBrew compared with each of its competitors, it is evident that the Company has a strong advantage over each of the leading competitors in the industry that have similar products. Instead of focusing primarily on production, distribution, and sales of the product, the Company will be able to spend most of its time answering those questions that are critical in marketing. The Company can identify what the customers want and tailor the NovaBrew to satisfy those needs as efficiently as possible. Because the NovaBrew is in the marketing stage, it 55
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can grow and thrive as it capitalizes on consumer trends and interests. This is extremely beneficial to the Company because it is crucial that the Company be able to accurately identify the target niche, identify the correct and most effective mediums to connect with the target niche, and utilize the most efficient methods in marketing its product. The Company should look to attack Senseo, which poses the most competition. All the other competitors are in the production stage and are declining. By attacking Senseo, which is the only main competitor in the selling stage of the linear evolution, the Company can decrease Senseo’s sales and send its product in decline by marketing a more favorable product that satisfies the consumer trends the Senseo does not. The Company has great potential to succeed, meet its performance goals, and continue to grow in the industry. By continuing to market the NovaBrew to future consumers, it is likely that the NovaBrew will become the leader in the coffee making industry and be able to stay on top.
3.7 Geographical Location Where to play the game? This is the question the Company now faces. In seeking to answer this question, the Company must consider where the primary market for the NovaBrew lies, what the target niche is and where the preponderance of the niche is located, as well as determine a geographical region in which the NovaBrew is relevant and will be able to make a splash. The Company must find a region in which the NovaBrew can compete. In this vein, the Company first looked at distribution of coffee production in the US, reasoning that in the states with the highest coffee production consumers will be more prone to receptively respond to the NovaBrew with it being made around them. 58 The
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Company found that a considerable amount of the coffee production in the US occurs in Washington, Oregon, and California.
Coffee Production in the U.S.
Wanting to affirm its previous assumption that the amount of coffee production will positively correlate with the amount of coffee consumed, the Company then looked at the states in which the greatest amount of coffee is being consumed. The Company found that it was indeed correct in its assumption. The 10 cities with the highest coffee consumption are:
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1. Seattle, Washington
6. Chicago, Illinois
2. Portland, Oregon
7. Phoenix, Arizona
3. San Jose, California
8. Los Angeles, California
4. Denver, Colorado
9. New York, New York
5. San Francisco, California
10. Boston, Massachusetts
As can be seen in the table, 5 out of the 10 cities with the highest coffee consumption are located in either Washington, Oregon, or California. 59 At this point, the Company concluded that because coffee production and coffee consumption are both high in these three states, the NovaBrew will be able to compete in this geographical location. The consumers in this region will clearly have a need for the NovaBrew. Because of their high frequency of use, they will also be more likely to place a high value on the quality of their coffee machine and thus more likely to take the time in their purchasing decision to discern that the NovaBrew’s elite brewing capabilities far surpasses its competitors and will better meet their needs.
3.8 Channels of Distribution The NovaBrew is designed for consumers who desire the speed and convenience of single-cup brewing without the sacrifice of coffee quality. This product, in correlation with our patented N-Cups, allows users to enjoy the taste of their favorite brands at any instant. The Company prides itself on specialty coffee machines that come at an affordable price; therefore, the Company aims to sell to its customers by means of upscale specialty shops and numerous retail store locations. While the Company employs one primary manufacturing location, it uses several warehouses in the target locations where sorting
59
http://filterfresh.com/blog/2010/coffee/which-cities-drink-the-most-coffee/
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and distribution of the product are carried out. The Company utilizes various common carriers to deliver its products from the distribution centers to retailers and specialty shops. These include but are not limited to the United States Postal Service, United Parcel Service, and FedEx Corporation. In this process of distribution, the company aids smaller non discount stores in competing with larger entities that operate at lower profit margins.
Manufacturer
Specialty Shops
Retailers
Consumers
Web Sales (25%)
In order to further tackle the “At-Home� coffee brewing industry, the company plans to launch a very user friendly website. This channel of distribution provides a direct link to the consumer. By means of the web, any domestic consumer can request information, research the product, contact customer service, and order their own NovaBrew coffee brewer and N-Cup packs. The Web is a valuable resource not only for sales, but also for the purposes of market research, data analysis, and potential advertising strategies. It allows the Company to add better communication to each transaction and improve customer relations. In addition, the Company hopes to collect valuable information about the product’s target niche through this interaction. Consumer buying patterns and social trends 77
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become much more apparent and are easily monitored through Web sales. Even though this channel is still in development, it is extremely important to the health and success of the company. The Company estimates that the website will generate roughly 25% of sales revenue over the product’s life cycle. Over time, management aims to shift many more sales to the Web in order to increase profit margins beyond the initial company goals. The online shopping cart will enable customers to purchase their NovaBrew coffee machine and to buy N-Cups in either 24 packs or 50 packs. Upon checkout, customers will be granted the option to select N-Cups from their favorite brands. This process cuts out wholesale and retailers, allowing greater returns and an easier transaction for the consumer. In contrast to retailers, specialty shops, and Web sales, the Company has decided to eliminate the need for wholesale distribution. This extra layer may be helpful to firms who seek widespread distribution of their products; however, as the Company aims to attack a target niche located in a specific location, an extra channel of distribution will only decrease profit margins. Wholesale accounts for a large portion of the price increase as products pass from the manufacturer to the consumer. Some data suggests that wholesalers for small size businesses can achieve up to a 30 to 40% profit margin from the resale.60 The Company can distribute to retailer and specialty shops directly from company warehouses without the obligation to sell to wholesalers and wholesale clubs beforehand. In spite of this, however, the Company understands the nature of consumer buying habits with regards to coffee. It is unreasonable to strictly carry the product at retailers and specialty stores specific to a particular hobby or occupation because most
60
http://smallbusiness.chron.com/average-profit-margin-wholesale-12941.html
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consumers purchase their coffee products at supermarkets or other FDMx stores. 61 Regardless of the niche, market research concludes that coffee drinkers will purchase their coffee alongside all of their other food necessities.62 Therefore, the sale of N-Cups will not be limited to specialty stores. In the company distribution mix, a select number of larger stores like Target and Sears will be considered. This decision is primarily for the promotion of the patented N-Cup due to its exclusive partnership with many of the coffee industry’s leading brands (Dunkin’ Inc., Starbucks Corporation, Folgers Coffee Company, etc.). The Company understands the minimal decrease of margin in dealing with these discount outlets, but sales to these locations account for a much smaller portion of the overall distribution. The Company will thrive on the specialty aspect of the NovaBrew and maintain the image of a superior quality home coffee brewing system. This specific variety of distribution grants the customer options in their purchase of NovaBrew and N-Cup products as well as an overall easy transaction.
3.9 Summary
Industry Trends
Industry Breakdown
Market Shares
Technology Brand name recognition On-the-go usage High value in use Jarden: 13.6% Whirlpool: 2.7% Other: 83.7% Attack “Other” More specifically, the Company will attack the Automatic Drip Coffee Maker industry, which makes up 27.1% of the Small Electric Household Appliances segment.
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Industry Life Cycle
Linear Evolution
Geographical Location
Channels of Distribution
Stage: Bunn: Decline Cuisinart: Decline Mr. Coffee: Decline Senseo: Maturation NovaBrew: Growth Mode: Bunn: Production Cuisinart: Production Mr. Coffee: Production Senseo: Selling NovaBrew: Marketing Percentage of U.S. Coffee Production: California: 14.2% Washington: 8.9% New York: 7.4% Oregon: 5.9% Percentage of Sales: Retailers and Specialty Shops: 75% Web: 25%
3.10 Conclusion With the in-depth analysis of this chapter, the Company now knows where to play the game. Current trends that will influence how the Company markets the NovaBrew include technology, brand name recognition, on-the-go coffee drinking, and high value in use. If executed correctly, following these trends will significantly increase sales. The Company will look to attack Senseo, as they are the only competitor that has not passed through maturation and into decline. However, they are already in maturation and are still stuck in selling mode. The NovaBrew, on the other hand, is still in the growth stage and is in the marketing mode, catering its product to consumers’ needs, which will have a positive impact on sales. Geographically, the Company will target the West Coast, where there is a high amount of coffee production and consumption. The NovaBrew will be sold primarily in 80
retail and specialty stores, avoiding wholesalers in an effort to cut costs and have more control over price and marketing. The Company also aims to increase Web sales, taking advantage of the current boom in sales online. The NovaBrew has numerous advantages over its competitors, and as long as the Company keeps in mind the current trends in the industry, it will have much success. It is crucial that the Company continues to monitor these trends, as its primary advantage over the competition is that the NovaBrew is in the marketing stage, focusing on consumer needs. After considering all of the significant variables, the Company is confident in entering the Small Electric Household Appliances segment of the Vacuum, Fan, and Small Household Appliance Manufacturing industry, as the current oligopoly in the industry sets the stage for the NovaBrew to take off.
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Chapter 4 Why is the NovaBrew Bought?
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Chapter 4: Why is the NovaBrew Bought? 4.1 Introduction ....................................................................................................................... 85 4.2 Buying Decision Process ................................................................................................ 86 4.3 Type of Decisions Being Made ...................................................................................... 91 4.4 What’s Wrong List ........................................................................................................... 93 4.5 Selective Perception Strategy ....................................................................................... 98 4.6 Current Social Hooks ....................................................................................................101 4.7 Product Positioning Diagrams ....................................................................................101 4.8 VALS Profile ....................................................................................................................105 4.9 Maslow Needs Profile ...................................................................................................107 4.10 Utility Bundle ................................................................................................................111 4.11 Summary: The Five Ws ..............................................................................................112 4.12 Conclusion ....................................................................................................................113
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4.1 Introduction While having a good understanding of the Company’s newly established industry is vital to the success of the NovaBrew, the Company must now switch its focus to the buying behavior of its niche market. As with any product, the ability to carve a niche in the fabric of society will ultimately lead to lasting product success. In order to obtain the appropriate information necessary to ascertain the aforementioned requirements, the Company will introduce several analyses analogous to models of previous chapters, as well as qualitative assessments. The Company will define the buying decision process, the type of decisions made in choosing a product, what is wrong with the existing products, the selective perception strategy, a hook, a VALS profile, the Maslow bundles, and the utility bundle. EarlyBird Industries will define the buying decision process with decision mapping statistics, such as buyer, influences, gate keepers, gender, family life cycle, peer group, key industry spokesperson, and ethic aspects. With this empirical evidence, the Company will be able to better answer the question, “Who is our customer?” By determining the type of decisions made in choosing a product, the Company will be able to understand the thought process of its ideal customer in its product niche. This information is particularly valuable, especially when determining the design, marketing, and positioning of the product. Without this information, the product would be susceptible to a number of unforeseen challenges, such as a customer’s dislike for a particular design. Understanding what is wrong with the existing products on the market will allow the Company to product a new and superior product to its competitors. Many people believe larger corporations will be able to usurp our market share, and over power our marketing abilities. However, with a superior product, in a extremely well defined growing niche, the Company is positioned much better than its old-fashioned competitors, as was shown with 85
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the Industry Outlook in the previous chapter. The selective perceptions strategy chart will provide a detailed look into the understanding of what is wrong with the current products and what the industry is trending towards. Once this information is obtained, the Company will attempt to use this trend as a tailwind to launch its product into the stratosphere. Once the aforementioned information and data is obtained, the Company will prepare a hook. The hook will flesh out the previously obtained data into a simple and concise game plan for product launch. Finally, the Maslow and Utility bundles will be used to measure the consumers’ needs for the Company’s product. As with the hook, the aforementioned data collection will serve as the basis for these matrices, from which the company will be able to form a coherent thesis on its objectives for product launch.
4.2 Buying Decision Process To get a clear understanding of the niche market, the Company has decided to look into two distinct consumer groups: coffee, and small appliances. Since the NovaBrew is a small household appliance, and the cartridges used in the appliance are designed primarily for coffee oriented consumers, the Company has decided to combine data from these two sources to substantiate their product launch thesis.
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Buying Decision Process Parameters
Conclusions
Race:
Caucasian
Gender:
Male
Age:
45-53
Marital Status:
Married
Familial Status:
Household of 4, 2 Children
Influencers:
Family
Gatekeepers:
Coffee shops
According to Mintel, the percent of ownership for coffee makers among Internet users above age 18 is 9%. Although these statistics may seem to be low, the Company views this as a seemingly unimaginable opportunity. Fortunately, the company currently only has a market share of less than 5% of the total home brewed coffee industry, which provides opportunity in two ways.63 Statistically, the total amount of individuals, obtained from the aforementioned sample, who own coffee makers, has increased at a rate of about .2% annually. From this data the Company has deduced that it will be able to not only organically grow its company on a competitor market share basis, but also on an aggregate market size basis. This means that the company will continue to increase its market share in comparison to its competitors, and also add more value to the overall market for individual coffee makers. By both increasing its competitor market share and aggregate market size, the Company will have a double advantage, which should provide an extremely bullish scenario for entering the market.
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To obtain the necessary data to substantiate the aforementioned scenario, the Company used Mintel to understand the ideal owner of a coffee maker. Currently, the top owners of individual coffee makers are Asians and Hispanics with 16% and 14%, respectively. Trailing the leaders were Caucasians and African Americans, with 8% each. However, it is vital to understand that these statistics, taken as a whole, are not entirely representative of the total coffee market potential. Although there may be a greater penetration of coffee makers in the Asian population, there is a substantially greater absolute amount of American coffee owners than Asian or Hispanics. The evidence for this is very apparent from the population distribution of the country. To understand why these statistics are the way they are, the Company looked at the influences behind consumer purchases. At the top of the list was the influence from friends and family to purchase the coffee maker. Not surprisingly, Asians scored a 23% on that test. This shows us that, at least for the Asian populations, familial affairs tend to dictate their purchasing decisions. As for the other populations, 9% of Caucasians tended to adhere to the same familial decision making habits of the Asians, and 12% the African American population tended to make decisions based on what they read online or in product review guides. Thus, we can determine the influences for purchasing coffee makers.64 The gatekeepers for this industry tend to be other competitors in slightly differently defined niches. Specifically, most people preferred to go to a coffee house such as Starbucks, as only 32% of the people said that they would cut down on this habit. Now, this isn’t a fear for the Company, because it views this trend as positive. Since more people are shopping at stores that sell individual cups, the NovaBrew can provide this service in the
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comfort of the consumers’ own home, with the same branded products like Starbucks. Furthermore, these statistics can be defined to an even greater degree. There is a quantifiable trend that shows that the older the consumer is, the more likely they are to stay indoors and make their coffee in their house. Consumers of ages 18-24 and 65+ show that there is a 19% increase in the likelihood that consumers of age 65+ will opt out of going out for a cup of coffee, and rather, they will stay inside the confines of their home to make their coffee. However, this data only concludes that as of current, our product could be more widely accepted among people 65+ than ages 18-24. The Company firmly believes that the combination of both of the previously mentioned statistics will allow people of all ages to participate in the advantages of having a personal individual cup coffee maker, despite the fact that the market penetration of ages 65+ could possibly exhibit the most growth for the Company.65 To further define the positioning of the products launch, the Company has discovered very valuable evidence indicating that the size of the family also has a very strong impact on the purchasing habits of consumers. Contrary to the Company’s preconceived notions, families with 4 people have the highest ownership of individual coffee makers, with 10% of 4 person households owning an individual coffee maker. However, the Company understands the logic behind it. Although the Company initially thought more individual households would own “individual” coffee makers, the Company now understands the diversity of household tastes takes precedent over amount served. The Company has deduced that families of 4 are the most fiscally rewarding familial group to penetrate due to the idea that families of more than one have a diverse array of tastes,
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which the NovaBrew provides for.66 As if the Company hasn’t already illustrated a detailed vignette of its ideal customer, the company has found strong evidence that supports the downfall of its other industry competitors. The primary motivation for purchasing a new household appliance is because the consumer needed to replace an old or existing product, with 42% of adults aged 45-54 citing this as their primary reason for purchase. As previously mentioned, the Company prides itself on its innovativeness in the old fashioned industry of coffee making. To abet this data, there is a slight bias towards men making the decision to buy a new product, with 38 percent of men cited as making the ultimate decision on whether to upgrade or not. Therefore, the Company has provided an incentive for the consumer to purchase its new and innovative product to replace the consumers’ old and outdated product.67 From this data, one can draw a very detailed portrait of what the Company’s ideal consumer would look like in a demographic sense. Using the data from the ownership percentage, the Company has chosen to market to Caucasians. From the analysis of decision influences, the Company has chosen to assume that family has the greatest impact on the consumers’ purchase of a new product. Using data obtained from the analysis of gatekeepers, the Company has chosen to market the product as a more efficient and cost effective alternative to buying individual cups of coffee. Adhering to the data obtained in the familial analysis, the Company has chosen to market to families of 4. After figuring out the primary decision makers, the Company has chosen to market to adult
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males of ages 45-54. Therefore, the ideal candidate would be the Caucasian father of two children, age 45-53, and thus, this candidate would be marketed to using strategies that contain a strong focus on familial connections and advantages of product.
4.3 Type of Decisions Being Made The decision process that customers will go experience when purchasing the NovaBrew is complex. This is due to the fact that many considerations go into purchasing a coffee maker. It is this complex decision making process that essentially provides the NovaBrew with an edge over its competitors. The biggest advantage that the NovaBrew has is that once the initial complex decision has been made, for most customers, the decision becomes programmed. This is due to the fact that the product is extremely convenient to use and customers come to view it as reliable. The decision making process is divided loosely into two major parts, the first being the decision to purchase a coffee maker, and secondly the type to purchase. These two decisions combined provide a good basis to form a target niche and to be successful within that niche. According to Consumer Reports, what buyers most appreciate about the product is that it brews quickly, is easy to clean, has multiple settings, has a high quality coffee, and there is a consistent brew. There are many coffee maker buying guides that lay out the most significant factors to look at when purchasing the product. The first is to decide how many cups one might drink in a day, especially at one specific time such as in the morning. Similarly, the length of user’s interval between each cup of coffee is significantly important to the buying process. Another factor is how alert one is in the morning and whether there is the possibility of an automatic switch to start the brewer. A customer also considers whether 91
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or not they can brew espresso within the machine.68 The Consumer Reports also reveal that a majority of buyers and consequent users prefer single cup brewers due to their ease of use, durability, reliability, their convenience, and quickness. Consequently, many consumers will prefer the NovaBrew. Once consumers have experienced the product, their decision type shifts from complex to programmed. This programmed decision then boosts sales even further. 69 One of the biggest advantages to EarlyBird Industries is that purchasing and utilizing coffee is an attractive form of consumption to people both due to the fact that coffee is enjoyed and needed as a drink and that consuming coffee has become trendy due to the outburst of both local and branded coffee shops and coffee brands. This growth of coffeeconsuming culture promotes the possibility of customers investing in the NovaBrew. Since the growth of this consumer buying process, its consumption has grown. Most people have now become accustomed to their morning cup of tea or coffee. In addition to this branded coffee types are becoming commonly appreciated in the market. The product provides customers with a practical and simple option to produce this coffee every day, within their homes. The target market would be people who prefer a cup of coffee in the morning but in addition prefer the simplicity of it being available at home or close by. For avid coffee drinkers it also becomes the choice between investing in a coffeemaker once over or spending at the coffee shops every day for their regular coffee needs. Thus it becomes a complex decision, before a programmed one, to invest in a coffee maker or not.
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The second part of the decision is the type of coffee maker to produce. The product has an advantage as it appeals not only to the practicality and simplicity of having a cup of tea and coffee at home, but it also has the ability to produce a single cup of a large variety of brand name tea or coffee types. This too, is a complex decision process, and the extra benefits that the NovaBrew provides make it more marketable than its competitive products. EarlyBird Industries’ research indicates that there is a significant market for the NovaBrew because the decision making process involved is complex on more than just one level. In addition, once the initial complex decision to purchase the product has been made, consumer reports show that the decision actually becomes programmed as the consumers grow to appreciate the factors of the product that make it sellable and usable.
4.4 What’s Wrong List For the What’s Wrong List, the Company researched consumers’ attitudes toward coffee makers in order to pinpoint the flaws in the competitors’ products. The Company will use this research extensively in marketing the NovaBrew, tailoring the product to avoid the biggest flaws and advertising the fact that the competition is inferior.
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What’s Wrong 1. Product is difficult to start. 2. Product is difficult to clean. 3. Product requires careful upkeep. 4. Product requires assembly. 5. Poor quality materials are used. 6. Product requires significant start-up time. 7. Product is not user friendly. 8. Replacement parts are hard to find. 9. Product is unstable. 10. Product produces excess coffee. 11. Product must descale frequently. 12. Too complicated. Too many buttons/knobs. 13. The product leaks. 14. Heating tank is not firmly situated on product. 15. Product temperature control is poor. 16. Defective light signals. Does not work consistently. 17. Programming functions do not always work. 18. Difficult to change the product's filter. 19. Product is expensive. 20. Coffee grinder frequently clogs. 21. Does not produce enough coffee. 22. Product is unreasonably loud. 23. Product's display is difficult to read. 24. Product can be dangerous. 25. Product tends to shut off/ start up on its own. 26. Product is large and bulky. 27. Water pump fails. 28. Product is durable. 29. Heating element does not always fully work. TOTAL AVERAGE
Bunn BTX 10-Cup Brewer
Cuisinart DCC-1200
Mr. Coffee Power Serve
Senseo Single Cup Brewer
2 5 5 0 9 3 2 8 0 6 0 2 9 6 0 3
0 4 6 0 2 6 4 7 0 2 8 4 7 0 6 8
3 7 4 3 6 8 6 3 3 0 5 8 9 3 7 0
6 0 5 2 5 4 3 1 0 0 8 2 0 0 4 1
0 0 4 2 2 0 0 4 0 0 0 0 0 0 0 2
4 3 6 0 2 0 2 5 2 4 5 7 6 106 3.66
7 4 3 5 7 0 4 2 6 3 4 8 7 124 4.28
5 1 4 0 7 4 0 7 4 6 8 5 4 130 4.48
7 0 8 0 9 6 2 0 4 2 2 3 5 89 3.07
1 0 7 0 2 3 0 0 3 2 3 5 0 40 1.38
NovaBrew
The data compiled from consumer opinions in the What’s Wrong List indicates a general dissatisfaction with many of the Company’s competitors. 70 While the small kitchen appliance industry certainly plays an important role in the maintenance of many households, consumers believe that there is plenty of room for improvement. The data
http://www.consumeraffairs.com/homeowners/bunn.html http://www.fixya.com/support/p114908-cuisinart_dcc_1200_coffee_maker/solutions/page-10 http://www.epinions.com/review/Cuisinart_Brew_Central_12_cup_Programmable_Coffee_Maker_1/ content_84386549380 http://www.consumeraffairs.com/homeowners/mr_coffee.html http://www.aromacup.com/guides/pods-coffee/common-problems-with-senseo-coffee-makers-and-quickfixes http://www.all-about-coffee-makers.com/Keurig-coffee-machines-what-is-wrong-with-this-product.html 70
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shows that Mr. Coffee lags behind the most in this selected sample of competitors with an average of 4.48. Cuisinart’s 12-cup coffee brewer communicates similar discontent among consumers at an average of 4.28. These numbers point to a variety of factors that leave customers unsatisfied and wanting to abandon the brand. First, perhaps the most recurring complaint about the competition all across the board concerns the presence of frequent leaking. A product leak can result from a variety of different situations, both design and manufacturing defects. For example, Mr. Coffee’s product commonly overfills via water pump due to a poor seal design in the brewer’s water and filter tank. Other competitors, such as Bunn and Cuisinart, experience water leaks and coffee leaks that result from defective liquid gauging during the brew process. Regardless of cause, consumers absolutely hate messy leaks. When a customer is in a hurry and desires a quick cup of coffee, the last thing that he or she wants to deal with is any form of a messy clean up. Leaks are not only troublesome for cleanup but also hazardous. The heat of the liquid could potentially burn the user or it might start an electrical problem with other nearby appliances. This potential poses a large liability for coffee companies that might even result in product recall. Another common problem with the competitor coffee brands is the amount of coffee that is actually produced after the product’s use. Many consumers complain that their machine either produces too much coffee in some situations (thereby potentially leading to a leak) or not nearly as much as advertised by the competitor. Mr. Coffee and Cuisinart advertise their product as 12-cup serving machines but many customers are disappointed with the average 8-cups that the brewers actually produce. Even the Company’s strongest competitor, Senseo, utilizes the single cup pod approach much like the NovaBrew but fails to deliver the accurate amount of coffee. The root of this problem 95
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can usually be attributed to manufacturing flaws; however, when the issue is widespread enough, one might conclude that the design plays an integral role in the shortcoming. Dependability is a characteristic of coffee brewers that is favored above many other factors. Consumers are willing to pay for a consistent and reliable brand that will cause them no shock or disappointment. Despite the user friendliness of a given coffee machine, customers are tremendously concerned with the temperature of their coffee. Complaints about a machine’s inability to maintain a consistent temperature are very common in the industry’s Consumer Reports. This defect results from a problem with the heating element. Usually the display will indicate a specific temperature, but the actual heat applied to the brewer’s water is not as high. Cuisinart and Bunn are the primary offenders in this area as many of their customers believe that their coffee machines steadily decrease the amount of heat applied over each use. On the other end of the spectrum, consumers sometimes complain that their coffee is too hot. Even though this possibility is less common than the previously discussed temperature control malfunction, overly heated beverages deter customers from remaining loyal to the brand. Reliability of temperature is an absolute necessity to coffee drinkers. Poor quality materials are usually to blame for mechanical defects like this. Coincidently, Bunn is known for using very weak and shoddy materials in its design with a high score of 9 in this category (e.g. a lot of plastic components). Weak and inferior materials lead to other complications that will continue to disappoint customers. When fundamental problems with the product’s design occur, customers are forced to repair their machines by sending them back or searching for replacement parts. Often times in this industry, replacement parts are hard to find. This is an added hassle for the 96
consumer who simply desires a quick and easy brewing experience. Typical coffee consumers are not necessarily versed in mechanics or engineering; therefore, some of the more serious repairs for coffee brewers are not easily performed. While some products require special parts that are hard to replace, others undergo the need for repairs that only the manufacturer can complete. Consumer reports indicate that Bunn and Cuisinart products suffer the most complaints about replaceable parts with What’s Wrong List scores of 7 and 8 respectively. This is an issue that can only be resolved with an overall product redesign. The strongest competitor of the selected companies, Senseo (score of 3.07), provides a product similar to the NovaBrew. This brewer does not utilize a coffee grinder, large filter, and a big water tank but it has opened up a great deal of room for error in design. Senseo customers complain about frequent programming problems within the user interface that begins the product’s single brew operations. Unlike the capacity of the NovaBrew, many customers argue that the pods do not produce nearly enough coffee. This is a very large issue, especially since the product is only designed to make one cup at a time whereas other competitors with the same complaint are at least producing multiple cups. In addition, consumers scorn Senseo for the expense of the brewing experience. Though the machine may not be as expensive as other models, the cups that the machine uses can be very costly. Senseo customers must find specialty shops and Internet stores just to buy the cups that they wish to use with the product. The long-term cost of use is a variable that many coffee customers consider when they become loyal to a brand. The Company combats this exact issue through its alliance with a multitude of popular brands that have partnered with the N-Cup design.
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4.5 Selective Perception Strategy In evaluating the NovaBrew, the Company decided to identify existing trends and customer attitudes and use them to further define its role in the marketplace. After gathering customer attitudes and making a What’s Wrong List, the Company will take advantage of the customer concerns to help ensure the success of the NovaBrew. In order to create a large scale analysis of factors affecting the NovaBrew, the Competitive Product Scorecard, Trend Analysis, and What’s Wrong List were combined in order to generate the Attitude Scale. The Attitude Scales shows the superiority of the NovaBrew over its top competitors in the industry and how favorable it will be to consumers in relation to its competitors. Bunn BTX 10-Cup Brewer
Category Product Scorecard Trend Analysis What's Wrong List AVERAGE
Cuisinart DCC-1200
3.95 2.3 6.34 4.20
3.45 2.5 5.72 3.89
C MB 0
Negative
Mr. Coffee Power Serve 3.70 2.7 5.52 3.97
Senseo Single Cup Brewer 6.00 5 6.93 5.98
S 5
NovaBrew 8.65 9.5 8.62 8.92
K Positive
10
0 K = NovaBrew, S = Senseo, M = Mr. Coffee, C = Cuisinart, B = Bunn As seen in the Attitude Scale, no product comes close to matching the NovaBrew in terms of all three categories. The low scores of the other products indicate that they are far
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into their lifecycles. This provides a great opportunity for the market to increase its market share and eventually be the leader of the market. By looking at the existing attitudes of the customers, the Company can enhance the popularity and sales of the NovaBrew through selective perception strategy. Based on the Company’s results from the Product Scorecard, What’s Wrong Analysis, and Trend Ratio Analysis, the Company placed the NovaBrew and its main competitors on the Attitude Scale. The products with really low scores, the Bunn BTX Coffee Maker, the Cuisinart DDC1200, and the Mr. Coffee Power Serve, are placed on the negative side of the Attitude Scale because consumers have negative attitude towards the pitfall features of these products in addition to the lack of positive features these products offer. The only competitor that does not have below average scores is Senseo’s Single-Serve Cup brewer, which is slightly on the positive side of the Attitude Scale. The single-serve capability of Senseo’s product plays a significant role in pushing the product from the negative side to the positive side. One major negative attitude customers feel towards coffee makers is that they are difficult to clean.71 EarlyBird Industries, with the easy-clean NovaBrew, can focus on its easy-clean characteristic that is unlike any other coffee maker in its advertisements. A second major negative attitude towards coffee makers is that they require significant startup times. Thus, the Company can take advantage of the customers’ attitude and increase sales of the NovaBrew by advertising its fast start-up time to consumers.72 This is significant because from the What’s Wrong List, all of NovaBrew’s competitors have a
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significantly long start-up time according to the customers. Once the short start-up time of the product is advertised to the consumers, the NovaBrew’s sales would increase dramatically. There are many negative customer attitudes towards coffee makers in general. From the What’s Wrong List, the innovative NovaBrew takes into account most of the negative attitudes and has a solution to most of the customer concerns. Therefore, the Company can take advantage of the customer’s attitudes by advertising the NovaBrew and focusing on how it solves many of the customer’s concerns while its competitors do not. 73 While the NovaBrew solves many of the customer’s negative attitudes, the product still has some unsolved.74 One such customer negative attitude is that replacements are hard to find. The product, as well as its competitors, has replacements that are hard to find. The Company can learn from this customers’ concern by offering replacements that are not hard to find. By learning from the customers’ attitudes, the Company can greatly increase the sales of the NovaBrew in the future by developing solutions to solve these negative concerns. With its advancements in technology, the NovaBrew better satisfies the customer than its competitors. Because it aligns itself with consumer’s thoughts and concerns, the NovaBrew satisfies the needs of the customers and will therefore be the most favorable product for customers in the market. The NovaBrew excels in all of the three Attitude Scale categories. It has the best score on the Product Scorecard, which shows that the NovaBrew is the best product available on the at-home coffee brewing market. It scores the highest http://www.Keurig.com/shop/brewers/allbrewers?hdnCategoryFacets=Features%20|%20Options:Adjustable%20Temperature&hdnBaseFacets=Featu res%20|%20Options 74 http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/pod-coffeemakerratings/models/overview/Keurig-b40-brewing-system-99012274.htm 73
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on the Trend Analysis, which shows it is most suited to current market trends. Lastly, it scores the highest on the What’s Wrong List, which indicates that it is the product that solves the greatest number of problems and concerns customers have towards coffee makers. The combination of these scores, the Attitude Scale, shows that the Company will have a substantial market share with the NovaBrew.
4.6 Current Social Hooks In order for the Company to succeed it must have several supporting trends behind its product. The Company must to target specific trends in order for the product to excel in the industry. The single cup coffee brewer will succeed because there are social influences that support this product. The main social hook that will cause people to buy the single cup coffee brewer is the fact that it saves so much time and saves excess coffee. It takes less than a minute for the single cup coffee brewer to make a cup of coffee. This fact alone will cause a lot of people to buy this product. Drinking coffee is a morning activity usually before work. This time period when people get ready is always pressed for time and the single cup coffee brewer will support a fast-paced lifestyle. Additionally, the NovaBrew is less wasteful as a standard 10- or 12-cup brewer, as there is no excess coffee wasted. This coincides with the current eco-friendly trend.
4.7 Product Positioning Diagrams Product Positioning Diagrams show which main factors are considered when a customer is deciding to buy the product. Using these diagrams will allow the Company to visually display the perceptions and decisions of customers. The product is shown on the diagram relative to its competitors in order for the Company to see what they have to accomplish for the product to be advantageous over competitor’s products. Our 101
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competitors include the Bunn BTX 10-cup Brewer, the Cuisinart DCC-1200, the Mr. Coffee Power Serve, and the Senseo Single Cup Brewer.
Eco-friendly 5
K
4 3
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K = NovaBrew, S = Senseo, M = Mr. Coffee, C = Cuisinart, B = Bunn The first Product Positioning Diagram is based on the two trends that the Company’s product is more eco-friendly than other coffee makers and that the Company’s product also allows for different tastes. Because the NovaBrew only brews one cup of coffee, it is more eco-friendly than its competitors. Also, the Company’s product can brew different types of coffee, tea, and even hot chocolate, so it allows for different tastes to be satisfied. As shown below, EarlyBird Industries fills a large gap in the diagram. Most other coffee makers cannot only brew one cup. However, there are still experienced competitors
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with loyal followings, like the Mr. Coffee.75 The Company plans to perform better than these companies by decreasing the amount of time to produce a cup of coffee and offering more flavors. These factors will make the product superior to those of the competitors.
Ease of Use 5
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S
2 1 0 -6
-4
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K = NovaBrew, S = Senseo, M = Mr. Coffee, C = Cuisinart, B = Bunn Ease of Use and Time Saving are the axes for the second Product Positioning Diagram. The Company’s single cup coffee brewer is the best in this category because it is extremely time saving in that in takes less than a minute to brew a cup of coffee and it is very easy to use.76 Brewing a cup of coffee with the single cup coffee maker is a virtually mindless task. Basically, all customers must do to create their drink is to load an N-Cup 75 76
http://www.mrcoffeestore.com/?trk_src_ss=COFPAYPCWEBMACSS%7CPPC%7CADW%7Cmr%20coffee http://www.Keurig.com/about-Keurig
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into the product and press the start button so the coffee will commence its brewing function.77
Fundamental Trends 5
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K = NovaBrew, S = Senseo, M = Mr. Coffee, C = Cuisinart, B = Bunn A product high in Fundamental Trends is one that is new and different and of course, trendy, meaning that it has many social hooks. A product that has Differential Advantage is one that is better than other products because it better fills their needs. 78 A product has differential advantage over other products in the viewpoint of the customers if it better satisfies their needs. The Company’s product scores high in fundamental trends because it has social influences and also scores high in having advantage over other 77 78
http://www.Keurig.com/customer-service/brewer-registration-and-support/user-guides-and-help http://www.businessdictionary.com/definition/differential-advantage.html
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products because it saves time and is less wasteful.
4.8 VALS Profile By using the Values, Attitudes, and Lifestyle analysis, the Company will be able to determine which niche is right for the NovaBrew within the industry. There are eight potential segments in which the niche of the NovaBrew could fall under.79 After much research, the Company determined that there are few segments that work well for the NovaBrew, but that the best niche for the product falls under the Thinkers segment.
79
http://www.strategicbusinessinsights.com/vals/ustypes.shtml
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Upon studying the Innovators segment, the Company found that Innovators would be a good category to market to. The Innovators have abundant resources to purchase products, and this works well for the NovaBrew because the product is more expensive compared to its competitors. Furthermore, the Innovators are most receptive to new technology and ideas, which benefits the NovaBrew and its new technology that it offers.80 Another segment that would work well for the NovaBrew is the Achievers segment. Achievers have many wants and needs and therefore, are active in the consumer marketplace. Because of their busy lives, they are often interested in a variety of timesaving devices. This works well for the NovaBrew because the product is very time-saving and convenient and will attract the Achievers segment.81 While the Innovators and Achievers segments would work well, the Thinkers segment is the best fit for the NovaBrew. By definition, Thinkers are motivated by ideals. They have a moderate respect for social decorum but are open to consider new ideas. While they have many choices with their high incomes, Thinkers are practical consumers. They look for durability, functionality, and value in the products that they buy. 82 This fits the market just right for the NovaBrew. The comparative advantages of the NovaBrew in comparison to its competitors do not include its cost, which means it is not cheaper than its competitors. However, Thinkers’ high incomes allow them many choices, and Thinkers do not focus on cost in buying products. Thinkers mostly focus on durability, functionality, and value in the products they buy. The NovaBrew is perfect for Thinkers,
http://www.strategicbusinessinsights.com/vals/ustypes/innovators.shtml http://www.Keurig.com/press-releases/2011/Keurig%20unveils%20newly%20redesigned%20Keurig%20comhttp://www.Keurig.com/brewers/special-edition-brewing-system 81 http://www.Keurig.com/press-releases/2011/Keurig%20unveils%20newly%20redesigned%20Keurig%20comhttp://www.Keurig.com/brewers/special-edition-brewing-system http://www.strategicbusinessinsights.com/vals/ustypes/achievers.shtml 82 http://www.greenmountaincoffee.com/Accessories/Keurig-B60-Single-Cup-Brewer 80
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since the new technology of the NovaBrew gives the consumers much more functions than its competitors do. The NovaBrew will give them a variety of functions other products will not, while saving them time and money with its fast, efficient, single cup servings.83 The NovaBrew is an ideal product for any consumers who fall under the Thinkers segment of the VALS framework.
4.9 Maslow Needs Profile By applying Maslow’s Hierarchy of Needs, the Company can observe how well the NovaBrew is able to meet consumers’ needs. The Company recognized that the consumer’s purchase is complex and there are often multiple motivations behind it. The Company also recognizes that each consumer is unique; therefore, there will inevitably be discrepancies in these motivations from consumer to consumer. In order for the NovaBrew to be successful, it will be important for the Company to draw attention to the various levels of needs that can be satisfied by the NovaBrew.
http://www.greenmountaincoffee.com/Accessories/Keurig-B60-Single-Cup-Brewer http://www.strategicbusinessinsights.com/vals/ustypes/thinkers.shtml 83
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Self-Actualization Knowing that the NovaBrew is the best way to get a hot beverage gives the buyer the satisfaction of making a good purchase. Esteem Owning a NovaBrew and drinking its products will be seen as a status symbol amongst the buyer’s peers. Belongings & Love The NovaBrew allows the buyer to gather with friends and family over hot beverages personalized to their own tastes. Security/Safety The NovaBrew is a safe way to brew hot beverages without leaving one’s home. Physiological Needs The buyer is able to enjoy hot, nutritious beverages and stay hydrated. As can be seen in the figure above, the NovaBrew can be said to satisfy each level of Maslow’s Hierarchy. This will prove to be integral to the success of the NovaBrew because each consumer is looking to fulfill at least one of these levels of needs by purchasing the NovaBrew. Many consumers, even if subconsciously, will be looking to fulfill multiple levels of needs. The Company plans use the fulfillment of these needs in its marketing strategy and advertising in order to increase the likelihood that the consumer will rightly perceive the NovaBrew as the coffee maker that will best accomplish his or her purchasing motives. Having identified that the NovaBrew fulfills Maslow’s Hierarchy of Needs, the Company next sought to analyze how well the NovaBrew’s competitors fulfill those needs 108
in an effort to better gauge how well the NovaBrew stacks up against its competitors. This knowledge will factor into how the Company ultimately decides to market the NovaBrew to the consumer. The Company will decide to highlight the areas in which the NovaBrew clearly is a winner and seek to maintain that superiority over its competitors throughout the duration of its lifecycle. In any areas in which the NovaBrew may be weak, the Company can decide to improve the NovaBrew so as to push the product even further ahead of the competition. Bunn BTX 10-Cup Brewer
Cuisinart DCC-1200
Mr. Coffee Power Serve
Senseo Single Cup Brewer
NovaBrew
Belonging and Love Needs: Bankable Divisibility Shelf Space at Retail Web friendly Total
6 5 7 8 26
5 5 6 7 23
5 5 6 5 21
7 6 8 4 25
10 10 9 10 39
Esteem Needs: Competition Consumer Purchase Patterns Life Cycle Total
6 4 5 15
7 5 5 17
6 5 5 15
7 7 8 22
10 9 10 29
Physiological Needs: Affordable Differential Advantage Ease of Use High Value Total
3 5 6 5 19
6 6 6 4 22
7 4 5 4 20
10 7 8 10 35
9 10 10 10 39
Safety Needs: Durability Fundamental Trends Prior Use Patterns Total
8 4 7 19
7 6 8 21
5 4 8 17
3 7 6 16
10 10 8 28
4 3 7
4 4 8
3 4 7
6 7 13
10 10 20
86 5.4
91 5.7
80 5
111 6.9
155 9.7
Factors
Self-actualization Needs: Rate of Technological Change Unique and Trendy Total Scorecard Grand Total Scorecard Average
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As demonstrated in the figure above, the Company scored the NovaBrew against its competitors based on factors that influence how well each of Maslow’s needs are met.84 The Company found that the NovaBrew outclasses its competitors with an average of 9.7. The next highest competitor is Senseo with an average of 6.9. The rest of the competitors all have averages around 5. Because these competitors scored so low, the Company decided that they would not have a great chance of competing with the NovaBrew in fulfilling consumer needs as a whole and decided to focus on Senseo as its main competitor in fulfilling consumer needs. The Company did note however that overcoming prior use patterns may be an issue if consumers decide to prioritize the familiarity of the traditional coffee maker over the advantages of the single, customized, quick brew that the NovaBrew offers. When looking at Senseo in particular, the Company noticed that high value and shelf space at retail are two areas that could present a problem. Shelf space at retail will increase through good negotiations with the retail stores. High value in use might be harder to gain over the Senseo because it and the NovaBrew do offer the same single serving of coffee. The Company recognized this challenge and decided that the best way to convince consumers of the NovaBrew’s high value of use would be to focus on the other qualities of the NovaBrew that will cause the consumer to want to use the product more often. The Company determined these qualities to be the durability, ease of use, and the trendiness of the NovaBrew.
http://www.ncausa.org/custom/headlines/headlinedetails.cfm?id=667&returnto=171 http://www.senseo.us/Products/Appliances/Pages/Personal_Cup_Brewer.aspx http://www.cuisinart.com/products/coffee_bar/dcc-2750.html http://www.Keurig.com/brewers/platinum-brewing-system http://www.ncausa.org/custom/headlines/headlinedetails.cfm?id=667&returnto=171 http://www.usatoday.com/news/health/2007-10-07-tea-benefits_N.htm 84
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4.10 Utility Bundle Bunn BTX 10-Cup Brewer
Cuisinart DCC-1200
Mr. Coffee Power Serve
Senseo Single Cup Brewer
NovaBrew
1. Form Differential Advantage High Value in Use Unique and Trendy Average
5 5 3 4.3
6 4 4 4.7
4 4 4 4
7 10 7 8
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2. Time New to market Fundamental Trends Technological Change Average
2 4 4 3.3
3 6 4 4.3
2 4 3 3
8 7 6 7
10 10 10 10
3. Place Divisibility Size of Market Shelf Space Average
5 6 7 6
5 6 6 5.7
5 6 6 5.7
6 7 10 7.7
10 10 9 9.7
4. Possession Ease of use Affordable Rate of use Average
4 3 5 4
6 6 5 5.7
5 7 5 5.7
8 10 9 9
10 10 10 10
5. Image Unique and Trendy Value for use Average
3 4 3.5
4 5 4.5
4 5 4.5
7 10 8.5
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6. Information Web Based Ease of Use Average
8 7 7.5
8 6 7
5 6 5.5
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Total Average
4.69
5.25
4.69
7.81
9.94
Utility Bundle
The figure above analyzes the utility created by the NovaBrew in relation to its competitors.85 This analysis will prove useful by giving insight into how the consumer will
http://www.ncausa.org/custom/headlines/headlinedetails.cfm?id=667&returnto=171 http://www.senseo.us/Products/Appliances/Pages/Personal_Cup_Brewer.aspx http://www.cuisinart.com/products/coffee_bar/dcc-2750.html 85
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perceive the NovaBrew and what it can accomplish in his or her life. The NovaBrew creates form utility by featuring superior brewing technology that will increase the value of the NovaBrew to the consumer. The only effort the consumer needs to put forth is to pour in some water and place an N-Cup in the top. The NovaBrew eliminates the hassle of having to use filters and measure coffee grounds, while at the same time producing a greattasting cup of coffee. Time utility is created in the amount of preparation and brewing time saved by using the NovaBrew over the competitors. Place utility is created by the NovaBrew’s availability to the consumer. Possession utility is created when the consumer is able to take ownership of the NovaBrew and be confident in his or her purchasing decision, having low post-purchase cognitive dissonance. Image utility is created by the uniqueness and trendiness of the NovaBrew. Lastly, information utility is created by the consumer’s awareness of the NovaBrew and its features through advertising and the web.
4.11 Summary: The Five Ws Who Buys the NovaBrew?
According to the Buying Decision Process, the niche market for the NovaBrew is the Caucasian father of two children, age 45-53.
The primary product that is bought alongside the NovaBrew is the N-Cup pod, obviously, as the machine What is Bought With the uses them to brew drinks. Consumers may also buy NovaBrew? coffee mugs and/or tea sets to drink their NovaBrew coffee or tea from. Because the NovaBrew is more of a luxury item than a necessity, it is most likely to be bought either when it is on sale or during the holiday season as a gift. Also, it is When is the NovaBrew Bought? more likely to be bought in fall or winter, when the weather starts to get colder. Therefore, the NovaBrew earns the most sales during late November and December. http://www.Keurig.com/brewers/platinum-brewing-system http://www.ncausa.org/custom/headlines/headlinedetails.cfm?id=667&returnto=171 http://www.usatoday.com/news/health/2007-10-07-tea-benefits_N.htm
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Where is the NovaBrew Bought?
According to the Channels of Distribution, the NovaBrew is bought primarily from retail and specialty stores, with a smaller percentage of sales coming from the web.
Why is the NovaBrew Bought?
Consumers buy the NovaBrew to replace their broken or inadequate coffee makers. The What’s Wrong list highlights these issues. A consumer may need to replace a leaky product, and it is hard to find replacement parts. Also, many consumers complain about inconsistent temperature and serving sizes. The NovaBrew does not have these problems, and therefore provides an excellent alternative. Additionally, the NovaBrew provides high value in use and high differential advantage, both qualities that complex buyers consider.
4.12 Conclusion This chapter was centered on the reasons why a consumer would buy a NovaBrew, and the information presented suggests that potential customers have strong reasons to do so. After determining that the target demographic is the middle-aged, Caucasian father of two, the Company was able to focus on the reasons why such a person would buy the NovaBrew. The target demographic consists of complex decision-makers, who look for the product with the best value and compare products based on which has the fewest flaws. After compiling the What’s Wrong List, the Company found that the NovaBrew has far fewer flaws than the competition, and the primary features of the NovaBrew solve the primary complaints about coffee makers. Additionally, the NovaBrew better fulfills consumers’ needs than the competition, another major factor in complex decision making. While the NovaBrew does have flaws of its own, it has far fewer than any other coffee maker on the market, and when paired with features that cater to complex decision makers and current trends, it is clear that the Company is in great shape with the NovaBrew. 113
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Chapter 5 Selection of Target Niche
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Chapter 5: Selection of Target Niche 5.1 Introduction .....................................................................................................................117 5.2 Possible Niches ..............................................................................................................118 5.3 Matrix Criteria .................................................................................................................119 5.4 Niche Accessibility .........................................................................................................121 5.5 Macro Niche Analysis ....................................................................................................123 5.6 Micro Niche Analysis .....................................................................................................125 5.7 Niche Analyses Combined ...........................................................................................128 5.8 Top Three Target Niches ...............................................................................................130 5.9 Niche Selection ..............................................................................................................131 5.10 Summary ......................................................................................................................131 5.11 Conclusion ....................................................................................................................132
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5.1 Introduction After a considerable amount of time devoted to ascertaining the strengths of the Company’s product, the Company has now determined that it would like to get a better understanding of its target niche. The Company knows it would ideally like to find a product that its consumers would use regularly to the tune of about 30 to 40 hours a week. Fortunately, the Company has found that there are several hobbies and occupations that lend themselves to drinking coffee or other warm beverages about 30 to 40 hours a week. In the last several chapters, the Company used several different types of matrices to analyze the different product scenarios. Like the past chapters, the Company will also attempt to narrow down the potential list of hobbies and occupations using different matrices. By determining the hobbies and occupations of its consumers, the Company will be able to better position its product in the market place, which will hopefully result in an increase in marketing efficiency. To determine the hobbies and occupations, the Company enlisted its researchers to find the top 40 hobbies and occupations in its industry, warm brewed beverages. After the 40 hobbies and occupations are determined, the Company will develop criteria to test them. These criteria will be used to narrow the prospective field of potential niche hobbies and occupations to roughly 14. By reducing the number of prospective hobbies and occupations, the Company will be able to focus its resources on a more defined and select range of hobbies and occupations. After this first round of cuts, the Company will apply another test with more criteria to even further deduce the remaining 14 hobbies and occupations. These criteria will pertain to items from the What’s Wrong List and Trend Analyses. After applying the appropriate criteria to the remaining 14 117
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hobbies and occupations, the Company will narrow the prospective field down to 5 hobbies and occupations. Finally, the Company will further reduce theses 5 hobbies and occupations to 3 by choosing the top 3 scoring hobbies and occupations. Ultimately, the Company will need to make sure it does its due diligence when narrowing the prospective field of hobbies and occupations, as one small misjudgment could prove to be detrimental to the success of its marketing effort.
5.2 Possible Niches The Company has chosen 40 possible hobbies and occupations that are the best candidates for selecting a target niche. They are as follows: Hobby/Occupation 1. Physicians 2. Medical assistants 3. Teachers 4. Luxury Campers 5. Financial Services professional 6. Designers/Architects 7. Truckers 8. Attorneys 9. Engineers 10. Marketing/Public Relations professionals 11. Scientists 12. Skiers 13. Writers/Journalists 14. Government workers 15. Cycling 16. Hikers 17. Hotel workers 18. Students 19. Walkers 20. Runners
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21. Stay at home moms 22. Stay at home dads 23. Book clubs 24. Editors 25. Retirees 26. Machine operators 27. Personal caregivers 28. Professors 29. Taxi drivers 30. Newscasters 31. Real estate agents 32. Chefs 33. Food preparers 34. Cooking 35. Police officers 36. Pilots 37. Woodworkers 38. Quilters 39. Social networks 40. Musicians
The list was formed on the basis of hobbies and occupations in which the participants frequently drink coffee, and in which a single cup is desired. 86 The Company also looked at expensive hobbies and jobs with lucrative pay, as well as stressful jobs.87 The list is by no mean final though; it was created to get ideas out and have a master list to work from.
5.3 Matrix Criteria The target niche with the highest probability of success will be chosen through target niche analysis. The factors that contribute to choosing the most effective niche will come from earlier analysis in the project. The matrix criteria will be used by the Company in order to assess and maximize this effectiveness. The key tools that this matrix has been calculated from are the Competitive Scorecard, the Trend Analysis, and the What’s Wrong List. Further details have been added to the matrix for their importance and contribution to efficient analysis via the matrix.
http://www.abc15.com/dpp/news/national/who-drinks-the-most-coffee-wcpo1285764906240 http://www.huffingtonpost.com/2011/04/25/top-ten-most-stressfuljobs_n_852722.html#s268565&title=10_Real_Estate 86 87
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Criteria 1. High Value 2. Ease of Use 3. Differential Advantage 4. Prior Use Patterns 5. Affordable 6. Web Friendly 7. Rate of Use 8. Single Serve 9. Convenience 10. Time Saving 11. Accessibility 12. Brand Name Popularity 13. At Home Coffee Drinking 14. Fast-paced Lifestyle 15. Versatile 16. Cost Efficiency 17. Significant Start-up Time 18. User Friendly 19. Inconsistent Output 20. Complicated Interface 21. Upkeep 22. Durable 23. Clubs 24. Specialty 25. Stress Level
Source Comparative Product Scorecard Comparative Product Scorecard Comparative Product Scorecard Comparative Product Scorecard Comparative Product Scorecard Comparative Product Scorecard Comparative Product Scorecard Trend Analysis Trend Analysis Trend Analysis Trend Analysis Trend Analysis Trend Analysis Trend Analysis Trend Analysis Trend Analysis What’s Wrong List What’s Wrong List What’s Wrong List What’s Wrong List What’s Wrong List What’s Wrong List Other Other Other
This matrix effectively displays the criteria that will be most useful for the Company in terms of a target niche. Certain criteria on the list are similar to each other, and these together form a group to determine the niche that the Company will focus on marketing the NovaBrew toward. What stands out about the product is the brand name popularity in terms of ability to consume brand name tea or coffee, the durability and versatility of the product, the value of money in terms of cost, and what the product provides to the consumer. These priorities were taken from the Competitive Scorecard, the What’s Wrong List, and the 120
Trend Analysis and were rated as high on level of significance in earlier examination of the product. These factors help confirm the target niche as they make clear the needs and preferences of the consumer. The consumer wants a coffee brewer that is efficient in functioning and provides their daily needs for consuming either tea or coffee. In addition to this the brand name specialty of the single cup brewing system is very attractive to consumers who recognize brand name tea or coffee. In addition to the above criteria, significant priorities that have stood out from the three lists are convenience, ease of use and usage relative to a fast paced lifestyle. This makes the target niche ever more evident as it displays the context and demand in which the product will most likely be used.
5.4 Niche Accessibility In order to select a target niche, the Company rated each of its top 40 hobbies and occupations in seven different criteria of the NovaBrew’s niche accessibility. The criteria used were 40+ hours, Specialty Magazines, Clubs, Licenses, Involvement, Conventions, and Passion. These criteria were chosen because the Company determined them to provide the most valuable insight into the target niche. They indicate the availability of the niche to be reached by the Company’s advertising by representing established groups of the hobby or occupation that the Company can direct information towards. This will increase information utility for the least possible amount of resources, as the Company will be able to concentrate on getting information about the NovaBrew just to a specific group that will be most likely to have a need for one. Many of criteria provide obvious channels through which the Company can get the information to the members of the hobby or occupation.
121
122
Clubs
Licenses
Involvement
Conventions
Passion
Total
Average
1. Physicians 2. Medical assistants 3. Teachers 4. Luxury Campers 5. Financial Services professional 6. Designers/Architects 7. Pilots 8. Attorneys 9. Engineers 10. Marketing/Public Relations professionals 11. Scientists 12. Skiers 13. Writers/Journalists 14. Government workers 15. Cycling 16. Hikers 17. Hotel workers 18. Students 19. Walkers 20. Runners 21. Stay at home moms 22. Stay at home dads 23. Book clubs 24. Editors 25. Retirees 26. Machine operators 27. Personal caregivers 28. Professors 29. Taxi drivers 30. Newscasters 31. Real estate agents 32. Chefs 33. Food preparers 34. Cooking 35. Police officers 36. Truckers 37. Woodworkers 38. Quilters 39. Social networks 40. Musicians
Specialty Magazines
Hobby/Occupation
40+ Hours
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10 7 9 6 9 10 9 9 9 10 8 5 10 7 4 4 7 6 3 4 9 8 3 3 6 8 7 7 8 8 8 7 7 4 10 10 7 4 5 4
8 9 10 10 7 10 10 6 7 10 10 9 5 4 9 8 2 10 2 9 6 1 8 5 7 4 5 9 1 3 9 7 10 10 6 3 7 4 5 10
4 3 5 10 2 3 5 5 5 3 6 8 6 4 10 10 1 9 10 10 10 7 10 3 8 3 2 6 2 7 4 6 2 10 2 6 9 10 9 8
10 10 8 7 10 8 10 10 9 5 8 2 3 5 1 2 4 1 1 1 1 1 2 6 1 9 5 9 6 6 9 6 5 3 8 4 4 1 1 2
8 9 9 8 8 10 10 9 8 8 10 6 10 6 8 7 3 9 6 8 10 8 7 10 7 5 9 7 9 6 7 7 6 5 9 10 8 6 7 8
9 7 8 9 10 9 7 7 5 10 9 7 9 6 6 5 2 8 4 4 1 1 10 9 4 2 4 8 3 2 6 10 4 8 2 3 8 7 10 6
8 6 9 10 4 9 9 4 7 8 9 10 7 4 10 10 1 9 10 10 9 7 10 7 5 2 9 7 3 8 6 9 4 8 6 3 9 7 8 10
57 51 58 60 50 59 60 50 50 54 60 47 50 36 48 46 20 52 36 46 46 33 50 43 38 33 41 53 32 40 49 52 38 48 43 39 52 39 45 48
8.14 7.29 8.29 8.57 7.14 8.43 8.57 7.14 7.14 7.71 8.57 6.71 7.14 5.14 6.86 6.57 2.86 7.43 5.14 6.57 6.57 4.71 7.14 6.14 5.43 4.71 5.86 7.57 4.57 5.71 7.00 7.43 5.43 6.86 6.14 5.57 7.43 5.57 6.43 6.86
After rating each of the hobbies and occupations, the Company then took the average score of each. As can be seen in the figure above, luxury campers were tied for the highest score with an average of 8.57. Luxury campers are likely to subscribe to specialty camping magazines, be a part of camping clubs, perhaps require camping-related licenses such as an RV license, and be highly passionate and involved in the camping community. These facts will allow the Company clear channels through which it can increase awareness of the NovaBrew. The Company will be able to get lists of subscribers to specialty camping magazines such as Camping Life Magazine.88 Additionally, the Company will get lists of people involved in camping clubs, and lists of people who own RVs and may have special licenses.89 The Company will also be able go around to various camping sites to access the niche directly, which will prove to be invaluable. It is a well-known fact that people are more prone to believe what they see than what they hear or read. Today consumers are so bombarded with advertising they have the tendency to either not pay due attention, or disregard it as “too good to be true” and just another attempt to swindle them into buying a substandard product. The Company will be able to prevent this by going around to campsites and performing demonstrations in front of the campers own eyes. They will be able to see that the NovaBrew is in actuality just as good as the Company claims it to be.
5.5 Macro Niche Analysis Next, the Company performed a macro niche analysis. Once again, the 40 hobbies and occupations were used, but this time they were compared to 25 important criteria gathered from the Product Scorecard, Trend Analysis, and What’s Wrong List. A few other 88 89
http://www.campinglife.com/ http://changingears.com/rv-sec-state-rv-license.shtml
123
EarlyBird Industries
criteria were also used that did not come from previously mentioned sources, but were deemed important by the Company and for this reason included in the analysis. Some of the most important criteria used were Differential Advantage, Rate of Use, and Time
1. High Value
2. Ease of Use
3. Differential Advantage
4. Prior Use Patterns
5. Affordable
6. Web Friendly
7. Rate of Use
8. Single Serve
9. Convenience
10. Time Saving
11. Accessibility
12. Brand Name Popularity
13. At Home Coffee Drinking
14. Fast-paced Lifestyle
15. Versatile
16. Cost Efficiency
17. Significant Start-up Time
18. User Friendly
19. Inconsistent Output
20. Complicated Interface
21. Upkeep
22. Durable
23. Clubs
24. Specialty
25. Stress Level
Total
Average
Saving, among others.
10
8
4
10
8
9
9
9
9
9
10
9
7
9
7
8
8
9
7
9
7
8
8
9
10
210
8.40
2. Medical assistants
7
9
3
10
9
7
10
9
9
9
9
9
6
8
9
7
8
9
6
8
9
7
8
9
8
202
8.08
3. Teachers
9
10
5
8
9
8
9
9
9
10
9
8
9
6
8
7
9
9
9
6
8
7
9
9
7
206
8.24
4. Luxury Campers 5. Financial Services professional 6. Designers/Architects
6
10
10
7
8
9
8
10
10
8
9
10
6
6
10
9
9
9
6
6
10
9
9
9
4
207
8.28
9
7
2
10
8
10
9
9
9
8
9
9
7
9
8
9
10
9
7
9
8
9
10
9
10
213
8.52
8
10
3
8
8
9
10
9
9
9
8
9
8
9
8
9
10
9
8
9
8
9
10
9
10
216
8.64
7. Pilots
9
10
5
10
10
7
10
9
9
9
7
8
6
9
7
7
9
7
6
9
7
7
9
7
10
203
8.12
8. Attorneys
9
6
5
10
9
7
9
8
9
7
9
9
8
8
5
7
8
8
8
8
5
7
8
8
10
195
7.80
9. Engineers 10. Marketing/Public Relations professionals 11. Scientists
9
7
5
9
8
5
9
9
8
8
8
9
8
7
5
7
8
7
8
7
5
7
8
7
8
186
7.44
10
10
3
5
8
10
9
9
9
8
9
10
7
9
6
8
8
10
7
9
6
8
8
10
7
203
8.12
8
10
6
8
10
9
10
9
8
9
7
8
8
8
6
7
7
8
8
8
6
7
7
8
10
200
8.00
5
9
8
2
6
7
9
6
7
6
6
7
5
9
8
6
8
7
5
9
8
6
8
7
4
168
6.72
10
5
6
3
10
9
6
8
9
10
6
7
8
9
7
7
8
10
8
9
7
7
8
10
7
194
7.76
14. Government workers
7
4
4
5
6
6
9
9
9
8
8
8
7
8
6
7
8
8
7
8
6
7
8
8
8
179
7.16
15. Cycling
4
9
10
1
8
6
6
6
7
4
6
7
6
9
7
6
8
7
6
9
7
6
8
7
1
161
6.44
16. Hikers
4
8
10
2
7
5
8
6
7
3
7
7
2
6
8
6
8
7
2
6
8
6
8
7
5
153
6.12
17. Hotel workers
7
2
1
4
3
2
7
8
5
5
8
6
5
8
9
8
9
9
5
8
9
8
9
9
7
161
6.44
18. Students
6
10
9
1
9
8
9
9
10
10
9
3
10
9
8
8
9
9
10
9
8
8
9
9
7
206
8.24
19. Walkers
3
2
10
1
6
4
7
8
6
8
5
6
6
2
6
7
8
6
6
2
6
7
8
6
1
137
5.48
20. Runners
4
9
10
1
8
4
5
6
6
5
6
5
3
7
6
7
8
6
3
7
6
7
8
6
1
144
5.76
21. Stay at home moms
9
6
10
1
10
1
9
4
5
9
7
8
10
6
8
8
9
9
10
6
8
8
9
9
6
185
7.40
22. Stay at home dads
8
1
7
1
8
1
9
4
5
9
6
6
10
5
8
8
9
9
10
5
8
8
9
9
6
169
6.76
23. Book clubs
3
8
10
2
7
10
6
9
7
8
7
7
10
5
7
7
7
9
10
5
7
7
7
9
3
177
7.08
24. Editors
3
5
3
6
10
9
9
8
8
8
8
7
7
9
7
7
8
9
7
9
7
7
8
9
6
184
7.36
25. Retirees
6
7
8
1
7
4
8
7
4
6
5
4
10
3
6
7
8
9
10
3
6
7
8
9
1
154
6.16
26. Machine operators
8
4
3
9
5
2
8
7
7
8
6
5
6
6
5
6
7
7
6
6
5
6
7
7
5
151
6.04
27. Personal caregivers
7
5
2
5
9
4
7
7
6
6
7
7
7
7
7
5
7
7
7
7
7
5
7
7
4
156
6.24
28. Professors
7
9
6
9
7
8
9
8
9
9
8
8
9
7
6
6
8
9
9
7
6
6
8
9
7
194
7.76
29. Taxi drivers
8
1
2
6
9
3
7
8
7
8
6
5
2
8
5
6
6
6
2
8
5
6
6
6
5
141
5.64
30. Newscasters
8
3
7
6
6
2
6
8
3
10
7
7
6
9
5
5
6
6
6
9
5
5
6
6
6
153
6.12
31. Real estate agents
8
9
4
9
7
6
6
8
5
7
8
8
7
8
6
7
8
7
7
8
6
7
8
7
6
177
7.08
32. Chefs
7
7
6
6
7
10
5
7
6
9
7
6
8
6
8
8
8
6
8
6
8
8
8
6
7
178
7.12
33. Food preparers
7
10
2
5
6
4
6
7
6
8
5
4
6
6
7
8
9
5
6
6
7
8
9
5
6
158
6.32
34. Cooking
4
10
10
3
5
8
4
7
7
7
7
7
10
6
9
9
9
6
10
6
9
9
9
6
1
178
7.12
35. Police officers
10
6
2
8
9
2
8
9
8
8
6
6
4
8
6
8
8
7
4
8
6
8
8
7
9
173
6.92
36. Truckers
10
3
6
4
10
3
9
10
8
5
9
6
2
8
5
7
8
3
2
8
5
7
8
3
7
156
6.24
37. Woodworkers
7
7
9
4
8
8
6
7
5
5
6
5
6
6
3
7
7
7
6
6
3
7
7
7
5
154
6.16
38. Quilters
4
4
10
1
6
7
7
7
4
4
6
6
5
4
4
5
5
5
5
4
4
5
5
5
1
123
4.92
39. Social networks
5
5
9
1
7
10
6
7
10
6
8
8
9
6
5
5
5
7
9
6
5
5
5
7
3
159
6.36
40. Musicians
4
10
8
2
8
6
7
7
6
8
7
7
8
5
4
5
5
8
8
5
4
5
5
8
6
156
6.24
Hobby/Occupation
1. Physicians
12. Skiers 13. Writers/Journalists
124
As with niche accessibility, luxury campers scored very well, with a score of 8.28. This result offers strong evidence that luxury campers are a strong possibility for a target niche. Next, the Company will narrow its hobbies and occupations to 14, to be able to
1. High Value
2. Ease of Use
3. Differential Advantage
4. Prior Use Patterns
5. Affordable
6. Web Friendly
7. Rate of Use
8. Single Serve
9. Convenience
10. Time Saving
11. Accessibility
12. Brand Name Popularity
13. At Home Coffee Drinking
14. Fast-paced Lifestyle
15. Versatile
16. Cost Efficiency
17. Significant Start-up Time
18. User Friendly
19. Inconsistent Output
20. Complicated Interface
21. Upkeep
22. Durable
23. Clubs
24. Specialty
25. Stress Level
Total
Average
better compare the most likely target niches and weed out those that will not work.
10
8
4
10
8
9
9
9
9
9
10
9
7
9
7
8
8
9
7
9
7
8
8
9
10
210
8.40
2. Medical assistants
7
9
3
10
9
7
10
9
9
9
9
9
6
8
9
7
8
9
6
8
9
7
8
9
8
202
8.08
3. Teachers
9
10
5
8
9
8
9
9
9
10
9
8
9
6
8
7
9
9
9
6
8
7
9
9
7
206
8.24
4. Luxury Campers
6
10
10
7
8
9
8
10
10
8
9
10
6
6
10
9
9
9
6
6
10
9
9
9
4
207
8.28
5. Financial Services professional
9
7
2
10
8
10
9
9
9
8
9
9
7
9
8
9
10
9
7
9
8
9
10
9
10
213
8.52
6. Designers/Architects
8
10
3
8
8
9
10
9
9
9
8
9
8
9
8
9
10
9
8
9
8
9
10
9
10
216
8.64
7. Pilots
9
10
5
10
10
7
10
9
9
9
7
8
6
9
7
7
9
7
6
9
7
7
9
7
10
203
8.12
8. Attorneys
9
6
5
10
9
7
9
8
9
7
9
9
8
8
5
7
8
8
8
8
5
7
8
8
10
195
7.80
9. Engineers
9
7
5
9
8
5
9
9
8
8
8
9
8
7
5
7
8
7
8
7
5
7
8
7
8
186
7.44
10
10
3
5
8
10
9
9
9
8
9
10
7
9
6
8
8
10
7
9
6
8
8
10
7
203
8.12
Hobby/Occupation
1. Physicians
10. Marketing/Public Relations professionals 11. Scientists
8
10
6
8
10
9
10
9
8
9
7
8
8
8
6
7
7
8
8
8
6
7
7
8
10
200
8.00
10
5
6
3
10
9
6
8
9
10
6
7
8
9
7
7
8
10
8
9
7
7
8
10
7
194
7.76
18. Students
6
10
9
1
9
8
9
9
10
10
9
3
10
9
8
8
9
9
10
9
8
8
9
9
7
206
8.24
28. Professors
7
9
6
9
7
8
9
8
9
9
8
8
9
7
6
6
8
9
9
7
6
6
8
9
7
194
7.76
13. Writers/Journalists
Again, luxury campers scored very well, with an 8.28. Others that also scored well include physicians, financial services professionals, and designers/architects. However, more analysis must be done in order to definitively decide on a target niche. The Company will do so in the Micro Niche Analysis that follows.
5.6 Micro Niche Analysis After working through a considerable amount of proprietary research, the Company has narrowed its target niche of hobbies and occupations to five. These five hobbies and occupations include physicians, teachers, campers, financial services professionals, and 125
EarlyBird Industries
designers/architects. The preceding list of hobbies and occupations were derived from an analysis of roughly 30 to 40 criteria derived from the Company’s research team. However, it is important that prospective investors and management understand the rationale
1. Physicians 3. Teachers 4. Luxury Campers 5. Financial Services professional 6. Designers/Architects
Average
Total
15. Versatile
10. Time Saving
8. Single Serve
7. Rate of Use
Hobby/Occupation
3. Differential Advantage
behind the Company’s decision to focus its resources on cultivating these target markets.
4 9 9 9 7 38 7.60 5 9 9 10 8 41 8.20 10 8 10 8 10 46 9.20 2 9 9 8 8 36 7.20 3 10 9 9 8 39 7.80
Campers ended up on the top of our list with an average score of 9.20 on the optimization matrix. Based on our most relevant criteria, campers tend to be more inclined to purchase products that are time saving and versatile. These criteria are what helped push the campers to the top of the optimization matrix. By definition, campers are looking for adventure and extremely dislike inhibition. These two primary traits of campers provide the theoretical framework for why the NovaBrew would be a perfect fit for their lifestyle. Once the Company discovered the lifestyle tendencies, they utilized the marketing concept to align the Company’s objectives with consumer needs. In this case, those needs were for an affordable alternative to the standard coffee maker. With the NovaBrew, campers can 126
now enjoy their favorite hot drinks wherever they are. The second highest scoring occupation on the list was teachers. Teachers scored extremely high on the optimization matrix for several reasons. Most importantly, teachers obtain a considerable level of marginal utility with the NovaBrew's time saving. With the busy lifestyle of a teacher, they need a product that will be able to satisfy their need for a variety of warm beverages, such as tea and coffee, while being fast enough to adapt to their fast paced lifecycle. With a score of 8.20, they scored in the same range as the campers, but for the aforementioned reasons. The third highest scoring occupation on the list was the segment containing designers and architects. With a score of 7.80, they made the list for several reasons. First, designers and architects possess some of the most demanding occupations a person can have. With this in mind, it would only follow that these individuals would need a way to satisfy their need for a warm beverage, coffee in particular. Needless to say, the designer/architect segment scored a 10 for the “Rate of Use” criterion. Secondly, designers and architects embrace the idea of individuality, and thus, have a variety of tastes. For this reason, the Company’s researchers granted a score of 9 for the “Single Serve” criterion. With the fourth highest score on the list, the Company identified physicians as being an important target niche. With the hectic schedules of many doctors, they need a product that is fast, efficient, and personalized. The Company recognized these needs upon the initial search for hobbies and occupations, and subsequently, the Company’s optimization matrix ranked them fourth. With the NovaBrew’s ability to brew warm beverages individually, quickly and efficiently, its characteristics align well with the values of Physicians. The fifth and final occupation on our list is financial services professionals. The 127
EarlyBird Industries
stress and demand of financial services professionals is second to none. With the aftermath of 2008 still looming in the back of everyone’s minds, this era is and will continue to be a very stressful and demanding industry to work in. Scoring a 7.20 on the optimization matrix, the NovaBrew demonstrates the necessary attributes that financial services professionals need. The NovaBrew offers time saving, which is of utmost importance to financial services professionals, individuality, which gives each individual a beverage of their own, and efficiency, which is a result of the NovaBrew’s ease of use. In summation, the values of Financial Services Professionals are uniquely aligned with the attribute of the NovaBrew.
5.7 Niche Analyses Combined The Company used the first matrix, Niche Accessibility, to identify which target niche would be the easiest and most probable to access. The Company used the second matrix, Macro Niche Analysis, to see which target niche would be the best to focus on based on trends and which target niche we would want to target to best satisfy customer’s needs. These trends were from the What’s Wrong List, Competitive Product Scorecard, and Trend Analysis. Combining these two matrixes will show the Company which target niches are the best to focus on based on the amount of needs it will satisfy and how accessible the target niche is. The values in the third column of the Niche Analyses Combined Grid show the average of the two scores. A high score that means that the target niche is both accessible and the product will satisfy a lot of needs.
128
Hobby/Occupation
Niche Accessibility
Macro Niche Analysis
Average
1. Physicians
8.14
8.40
8.27
2. Medical assistants
7.29
8.08
7.69
3. Teachers
8.29
8.24
8.27
4. Luxury Campers
8.57
8.28
8.43
5. Financial Services professional
7.14
8.52
7.83
6. Designers/Architects
8.43
8.64
8.54
7. Pilots
8.57
8.12
8.35
8. Attorneys
7.14
7.80
7.47
9. Engineers
7.14
7.44
7.29
10. Marketing/Public Relations professionals
7.71
8.12
7.92
11. Scientists
8.57
8.00
8.29
12. Skiers
6.71
6.72
6.72
13. Writers/Journalists
7.14
7.76
7.45
14. Government workers
5.14
7.16
6.15
15. Cycling
6.86
6.44
6.65
16. Hikers
6.57
6.12
6.35
17. Hotel workers
2.86
6.44
4.65
18. Students
7.43
8.24
7.84
19. Walkers
5.14
5.48
5.31
20. Runners
6.57
5.76
6.17
21. Stay at home moms
6.57
7.40
6.99
22. Stay at home dads
4.71
6.76
5.74
23. Book clubs
7.14
7.08
7.11
24. Editors
6.14
7.36
6.75
25. Retirees
5.43
6.16
5.80
26. Machine operators
4.71
6.04
5.38
27. Personal caregivers
5.86
6.24
6.05
28. Professors
7.57
7.76
7.67
29. Taxi drivers
4.57
5.64
5.11
30. Newscasters
5.71
6.12
5.92
31. Real estate agents
7.00
7.08
7.04
32. Chefs
7.43
7.12
7.28
33. Food preparers
5.43
6.32
5.88
34. Cooking
6.86
7.12
6.99
35. Police officers
6.14
6.92
6.53
36. Truckers
5.57
6.24
5.91
37. Woodworkers
7.43
6.16
6.80
38. Quilters
5.57
4.92
5.25
39. Social networks
6.43
6.36
6.40
40. Musicians
6.86
6.24
6.55
129
EarlyBird Industries
The top three scores on the Combined Niche Analysis belong to designers/architects, luxury campers, and pilots. A high score in this table represents a niche’s desire for the NovaBrew and the ability of the Company to target the niche, both of which are important in determining the target niche.
5.8 Top Three Target Niches Hobby/Occupation
Niche Accessibility
Macro Niche Analysis
Average
4. Luxury Campers
8.57
8.28
8.43
6. Designers/Architects
8.43
8.64
8.54
7. Pilots
8.57
8.12
8.35
Of the fourteen possible niches the Company considered targeting its product to, the top three are designers/architects, luxury campers, and pilots. Of our list of possible niches, these three are the most likely to buy the NovaBrew, as they are the most accessible and their needs line up perfectly with the features of the NovaBrew. After combining the scores of the Niche Accessibility and Macro Niche Analysis Matrices, the Company determined that the average scores for designers/architects, luxury campers, and pilots are 8.54, 8.43, and 8.35, respectively. The company believes that in targeting designers/architects, luxury campers, and pilots it will be able to find and reach out to consumers who have a desire for a product like the NovaBrew. The top three niches selected agrees with the prior research in our Micro Analysis of possible niches, except for pilots, who were absent in the Micro Analysis. The top three niches the Company has identified seem to consist of different types of individuals that the Company feels will be very inclined to buy the NovaBrew. Furthermore, all three niches are very accessible. This fact will make it hard for the Company to choose just one niche to target. 130
5.9 Niche Selection After evaluating and analyzing the possible niches, the Company decided to select luxury campers as the main target niche. While designers/architects scored higher on both the Niche Accessibility Matrix and Macro Niche Analysis Matrix, luxury campers scored highest on the Micro Niche Analysis, which rates the niches based on the most relevant criteria to the NovaBrew. The Company values this analysis the most, which validates the decision. Luxury campers will benefit from the NovaBrew for several reasons, especially the fact that it is versatile and produces single servings. When the middle-aged, Caucasian luxury camper takes his family camping, the NovaBrew will allow him to brew a different hot drink for each family member, and there will not be wasted pots of coffee.
5.10 Summary
Possible Niches
The Company chose 40 possible hobbies and occupations to market the NovaBrew for. The 40 options were chosen based on high coffee consumption within the niche, as well as high income jobs/expensive hobbies.
Matrix Criteria
In determining what criteria to use in analyzing the 40 possible niches, the Company looked at prior chapters. Criteria were taken from the Comparative Product Scorecard, Trend Analysis, and What’s Wrong List.
Niche Accessibility Matrix
T1. Luxury Campers: 8.57 T1. Pilots: 8.57 T1. Scientists: 8.57 4. Designers/Architects: 8.43 5. Teachers: 8.29
Macro Niche Analysis Matrix
1. Designers/Architects: 8.64 2. Financial services professionals: 8.52 3. Physicians: 8.40 4. Luxury Campers: 8.28 5. Teachers: 8.24
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Micro Niche Analysis Matrix
Combined Niche Analysis
Top Three Target Niches
Niche Selection
1. Luxury Campers: 9.20 2. Teachers: 8.20 3. Designers/Architects: 7.80 4. Physicians: 7.60 5. Financial services professionals: 7.20 1. Designers/Architects: 8.54 2. Luxury Campers: 8.43 3. Pilots: 8.35 4. Scientists: 8.29 T5. Physicians: 8.27 T5. Teachers: 8.27 1. Designers/Architects: 8.54 2. Luxury Campers: 8.43 3. Pilots: 8.35 The Company will target luxury campers. While designers/architects scored higher on the majority of the matrices, the Company values the Micro Niche Analysis the most, which luxury campers ran away with.
5.11 Conclusion The Company has finally chosen its niche, luxury campers, after using the Macro and Micro Niche Analysis matrices, which were based on information from the Comparative Product Scorecard, Trend Analysis, and What’s Wrong List. While the NovaBrew could certainly fit into other niches because of similar interests, the Company believes that luxury campers are the best target for the NovaBrew. Not only did luxury campers score high on all of the matrices, including a 9.20 on the important Micro Niche Analysis, but they also fit into the niche from Chapter 4: middle-aged, Caucasian fathers of two. According to a 2010 study by Coleman, 55.5% of campers are male, 85.9% are Caucasian, and 55.9% are either 45 and older (the father) or between the ages of 6 and 17 (the children).90 With luxury campers as the target niche, EarlyBird Industries is poised to dominate the competition in the coffee brewer industry. 90
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Chapter 6 The Target Niche
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Chapter 6: The Target Niche 6.1 Introduction .....................................................................................................................135 6.2 Variables for Grids .........................................................................................................118 6.3 Consumption v. Age ......................................................................................................119 6.4 Consumption v. Income ................................................................................................121 6.5 Consumption v. Geographic Location ........................................................................123 6.6 Consumption v. Convenience ......................................................................................125 6.7 Summary .........................................................................................................................128 6.8 Conclusion .......................................................................................................................130
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6.1 Introduction Over the past couple chapters, The Company has begun to develop an idea of what its target niche looks like through research it has found from several reputable sources. Now, the Company will attempt to further define its target niche. Thankfully, the Company will be able to use matrices to analyze all the potential demographic, geographic, physiographic, and use variables. As was discussed earlier, the Company has determined that its primary gatekeeper is a 45- to 54-year-old male father with a wife and 2 kids. Using this research as a background, the Company will use LUV and PRIZM to further define the target niche. After being advised by a Company advisor, the Company will use the technique of holding one variable constant amongst the four grids. There are several pros and cons to this approach, but the Company feels it is much better than its alternative. The alternative would be to make one grid for each of the four types of variables. By choosing to hold one variable constant for all grids, the Company will simplify the process of determining how its target niche should be defined. Until now, the Company has spent a considerable amount of time looking at why the product will win amongst a slew of competitors. Fortunately, the Company has identified several reasons for why it should be produced. However, the Company will ultimately have to justify its investment in the product by not only finding reasons why it will win against other competitors, but it will also have to show why customers will actually buy the product. The best case scenario for this problem is to identify a product that already has an unsatisfied user base. Since most of the Company’s competitors have caused a high level of cognitive dissonance in the minds of its users, it feels there is a need
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base for its product. In this chapter, the Company will try to not only find a target niche, but it will also attempt to justify the need for the product with in the target niche.
6.2 Variables for Grids In order to determine which variables to use in the grid analysis, the Company looked at the Trend Analysis from Chapter 2, the Buying Decision Process from Chapter 4, and the What’s Wrong List, also from Chapter 4. The Company focused each of these exercises down to the variables most important to the NovaBrew. A variable was deemed important if its score on the analysis showed that it has certain significance to the consumer when deciding to purchase the NovaBrew. It was critical that the Company choose the correct variables with which to perform the grid analysis so that greater insight into the target niche could be gained. Trends that Relate to the NovaBrew: 1. Consumers place a premium on convenience 2. Durability 3. At-home coffee drinking 4. Non-wasteful, eco-friendly 5. Premium on consumer choice 6. “Coffee drinkers” phenomenon 7. Product has more than one use 8. Product makes everyday task easier 9. Product makes everyday task quicker 10. Smaller products more popular, doesn’t take up much counter space
Key Variables in Decision Process: 1. 2. 3. 4. 5. 6. 7.
Race Familial Connections Age Gender Familial Structure Income Geographical Location
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Key Variables from What’s Wrong List: 1. Difficult to start 2. Difficult to clean 3. Poor quality materials, not durable 4. Poor product temperature control 5. Difficult to change filter 6. Too complicated, too many buttons/knobs 7. Product requires careful upkeep 8. Amount of coffee produced (too much or too little) 9. Product leaks 10. Replacement parts are hard to find
Potential Demographic and Use Grid Axis Variables: 1. Coffee consumed 2. Age 3. Income 4. Gender 5. Family makeup 6. Race 7. Background 8. Time 9. Education 10. Profession A breakdown of the variables that the Company determined to be integral to the purchase of the NovaBrew can be seen above. The Company ultimately decided to hold constant on the x-axis the use variable which it deemed to be the most important, which it concluded could only plausibly be amount of coffee consumption. A consumer is highly unlikely to buy the NovaBrew, which is primarily a coffee maker, if he or she does not drink coffee. No demographic variable, race, gender, or age would factor more. The y-variables against which the Company chose to analyze coffee consumption were age, income, geographic location, and convenience. Age was deemed important because there is a social stigma against people under a certain age drinking coffee and 137
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there is a definite age when a person becomes a capable purchaser and a veritable candidate for a gatekeeper.91 When looking into the buying decision process, the Company found that the ideal aged consumer was aged 45-54. At this age, it is socially acceptable and common for one to drink coffee, and one is fully capable of deciding and having the means to purchase the NovaBrew. Income was also deemed important because of the quality with which the Company plans to manufacture the NovaBrew. From the What’s Wrong list, the Company found that one of the major complaints against coffee makers is their lack of durability and tendency to leak. With this in mind, the Company plans to ensure that the NovaBrew is a durable product in order to satisfy the consumers. This will require that the price be higher to account for this quality. A person’s income will come into play during the buying decision process when they are determining whether they can afford the product. Geographic location was also chosen as one of the variables. Although the coffee culture can be found across the US, there exists a discrepancy in the amount of coffee consumed between regions. (from geographic location) The Company concluded that the NovaBrew will be more likely to be successful if the target niche is located in an area where coffee consumption is high. This will allow the Company to benefit from consumers’ past preferences instead having to attempt to change consumers’ preferences. The last variable chosen was convenience. The NovaBrew’s convenience can encompass many of the complaints on the What’s Wrong List, as it is easy to start and clean, it is simple, and it produces a single cup, which is the perfect amount. Convenience is also a major factor for complex buyers, who are the people that will buy the NovaBrew.
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Also, because convenience is one of the Company’s points of emphasis in marketing the NovaBrew, it felt that is was important to factor it in when deciding who to market the product to. The grid analyses that follow allowed the Company to more clearly see where the best correspondence lies between each of these variables so it can better define the target niche.
6.3 Consumption v. Age Age
<1.5 cups/day
1.5-1.75 cups/day
1.75-2 cups/day
2-2.25 cups/day
2.25-2.5 cups/day
2.5-2.75 cups/day
>2.75 cups/day
18-24 25-34 35-44 45-54 55-64 65+
In order to better understand how to sell and market the NovaBrew, the Company considered the age of consumers over the chapter’s constant variable, consumption, for its first grid. Based on a 2011 survey by Mintel, among coffee drinkers, as age increases coffee consumption increases.92 This supports the Company’s plan to market the
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NovaBrew towards middle-aged people in their mid-forties to mid-fifties. While the survey shows a high coffee consumption for people of ages 65 and over as well, other research shows that most luxury campers are between the ages 45 and 54. Thus, the Company’s targeted niche encompasses mostly people between their mid-forties and mid-fifties. In addition, further studies from Mintel show those aged 45 to 54 are more likely to say that there is a big difference in quality between coffee brands. 93 This is significant because targeting people in this age group will not only mean higher sales for the Company’s NovaBrew, it also means that the Company’s N-cup sales are expected to grow with the increase in sales of the NovaBrew for consumers in the age group of 45 to 54, for they will highly value the coffee the Company’s N-cups offer them over other coffee brands. The age group of 45 to 54 with high coffee consumption perfectly matches the age group that participates most in luxury camping, the Company’s specific target niche, as well as the age group that highly values coffee brands. Therefore, the Company’s decision to target middle-aged people of ages 45 to 54 is confirmed and supported.
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6.4 Consumption v. Income <2.4 cups/day
Income
2.4-2.5 cups/day
2.5-2.6 cups/day
2.6-2.7 cups/day
2.7-2.8 cups/day
2.8-2.9 cups/day
>2.9 cups/day
<$25K $25K$49.9K $50K$74.9K $75K$99.9K $100K$149K $150K+
For its second grid, the Company considered consumer income over consumption. Market research suggests that coffee consumption increases as disposable income decreases. In its June 2011 survey, Mintel reported that among the 73% of the sampleâ&#x20AC;&#x2122;s respondents that conveyed active coffee consumption, those making less than $50k per year drink the most cups of coffee per day. The average amount of coffee consumed by individuals in this group rounds to 2.63 cups per day. 94 While this may seem to contradict the Companyâ&#x20AC;&#x2122;s plan to market toward higher income households, the report also states that higher proportions of coffee drinkers exist among those with incomes over $75k.95 Likewise, another study concluded that coffee drinkers earning more than $75k per year are more interested in the convenience of a single cup coffee brewer. These higher income http://academic.mintel.com.proxy.library.nd.edu/sinatra/oxygen_academic/search_results/show&/ display/id=542987/display/id=596923#hit1 95 http://academic.mintel.com.proxy.library.nd.edu/sinatra/oxygen_academic/search_results/show&/ display/ id=542987/display/id=596923#hit1 94
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individuals present the following reasons for their use of pod-style coffee machines: convenience, coffee freshness, variety of pods available for use, cheaper long-term purchase compared to coffee shops and pot coffee, consistency of output, taste, and quality.96 All of these factors drive consumers to put aside their old coffee machines in order to upgrade to the new pod-style technology. Overall, higher income coffee users prefer the efficiency of a single cup machine. Side by side, these two studies provide significant evidence that the bulk of EarlyBird Industriesâ&#x20AC;&#x2122; target niche encompasses higher income individuals. As consumers with larger cash reserves spend money on coffee each day, one can reasonably conclude that the NovaBrew has the potential to clench a significant presence in the market. Higher income consumers are slowly improving the pod-style brewer trend; therefore, the companyâ&#x20AC;&#x2122;s product should be marketed to a group of individuals with an above average yearly salary. The companyâ&#x20AC;&#x2122;s target niche must not only focus on the hobby and occupation that might utilize the product most, but also the buying power of each individual user. Income is a very important aspect of each NovaBrew consumer. The product will be sold as a luxury coffee machine thereby limiting its scope to customers who can afford a higher end bundle. The data presented here indicates that this limitation is not necessarily a disadvantage, but more so an accordance with coffee consumption trends.
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6.5 Consumption v. Geographic Location Geographic Location
<1.5 cups/day
1.5-1.75 cups/day
1.75-2 cups/day
2-2.25 cups/day
2.25-2.5 cups/day
2.5-2.75 cups/day
>2.75 cups/day
West South Midwest Northeast
For its third grid, the Company considered geographic location over the constant variable, consumption. The June 2011 Mintel survey suggests that those living in the Northeast and West consume the most cups of coffee per day, at 2.81 and 2.29 respectively.97 This makes sense, as there are higher populations and more large cities on the East and West coasts, and coffee production is highest in these areas. Because they drink so much more coffee than the rest of the country, it seems that the Company should target those living in the Northeast. However, while those living in the Northeast may drink the most coffee, the West, especially California, Oregon, and Washington, produces the most coffee, as mentioned in Chapter 3.98 To determine which region to target, the Company looked at the target niche, luxury campers, specifically.
http://academic.mintel.com.proxy.library.nd.edu/sinatra/oxygen_academic/search_results/show&/ %20display/%20id=542987/display/id=596923 98 http://clients.ibisworld.com.proxy.library.nd.edu/industryus/productsandmarkets.aspx?indid=272 97
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0-3%
3-6%
6-9%
9-12%
12-15%
15-18%
18-21%
Pacific Mountain West South Central West North Central East North Central East South Central South Atlantic Middle Atlantic New England
To balance out the research on coffee consumption by region, the Company assessed the â&#x20AC;&#x153;consumption of,â&#x20AC;? or participation in, camping in the context of geographic regions. According to a 2010 report by Coleman, the West has the highest percentage of all camping participants in the United States, at18.6%. 99 On the other hand, New England and the Middle Atlantic, where coffee consumption is highest, have two of the lowest percentages of camping participants. This disparity is much greater than the disparity between the East and West in coffee consumption. The combination of respectable coffee
99
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consumption, high coffee production, and very high participation in camping leads the Company to believe that the West coast is the geographic region to target.
6.6 Consumption v. Convenience Another key element that must be considered when constructing the segmentation grids is overall convenience. This variable functions as a psychographic aspect of coffee consumption. The type of coffee and brewer that consumers typically purchase depends heavily on psychographic factors. Consumer buying trends indicate that convenience of the product emerges above all other psychographic determinants. 100 Of the roughly 17% of single cup pod users within the market study, 79% of consumers cite convenience as the driving motive for their single cup brewer purchase.101 This is especially true of women who are notably more likely than men to name convenience as the reason for the productâ&#x20AC;&#x2122;s use. Convenience, in this sense, covers a very broad array of reasoning. This is often considered the ability to brew a fresh cup of coffee without having to reheat a previously full pot from earlier in the day. Likewise, convenience includes fewer waste products and therefore easier cleanup, quick production time, and a very implicit interface for controlling the machineâ&#x20AC;&#x2122;s functions. Unfortunately, convenience cannot be measured using any quantitative unit; however, through extensive market research, EarlyBird Industries concludes that consumption will increase relative to convenience of the product. This does not mean that coffee consumption in general will increase, but rather the use of single cup brewing machines will rise. If the company can produce a product that provides enough 100http://academic.mintel.com.proxy.library.nd.edu/sinatra/oxygen_academic/search_results/show&/displa
y/id=542987/display/id=596924#hit1 101http://academic.mintel.com.proxy.library.nd.edu/sinatra/oxygen_academic/search_results/show&/displa y/id=542987/display/id=596924#hit1
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palpable convenience for the user, then sales should increase among a wide variety of coffee users.
6.7 Summary
Variables for Grids
Consumption v. Age
Consumption v. Income
Consumption v. Geographic Location
Consumption v. Convenience
Constant: Coffee Consumption Grid 1: Age Grid 2: Income Grid 3: Geographic Location Grid 4: Convenience Ages 45-54: >2.75 cups/day Ages 55-64: >2.75 cups/day Ages 65+: >2.75 cups/day Target: Ages 45-54 $25K-$49.9K: >2.9 cups/day <$25K: 2.8-2.9 cups/day $50K-$74.9K: 2.5-2.6 cups/day Target: $75k+ (based on additional data from report) Coffee Consumption Northeast: >2.75 cups/day West: 2.25-2.5 cups/day Camping Participation (percent of total U.S. campers) Pacific: 18-21% East North Central: 15-18% Mountain: 12-15% Target: West Coast Of the roughly 17% of single cup pod users within the market study, 79% of consumers cite convenience as the driving motive for their single cup brewer purchase
6.8 Conclusion This chapter helped the Company further narrow its target niche. After determining that the NovaBrew would be marketed toward luxury campers, the Company needed to find out what type of people luxury campers are. This was done using grids that compare different variables to a constant variable. In order to determine which variables to use in the grid analysis, the Company looked at the Trend Analysis from Buying Decision Process, and the Whatâ&#x20AC;&#x2122;s Wrong List. The 146
Company decided to hold coffee consumption constant, comparing it to age, income, geographic location, and convenience. In comparing coffee consumption and age, the Company found that the older a coffee drinker is, the more coffee he or she consumes. This is a good sign for the Company, as it previously planned to sell to middle-aged men. In comparing consumption and income, the Company initially discovered that, in general, as income increases coffee consumption decreases. However, higher proportions of coffee drinkers exist among those with incomes over $75k, which supports the Companyâ&#x20AC;&#x2122;s decision to sell to more affluent consumers. In comparing consumption and geographic location, the Company found that those on the East coast consume the most coffee, but there are many more campers on the West coast. Because there was still significant coffee consumption on the West coast, the Company decided to sell to that area of the country. While the Company was not able to create a matrix to compare consumption and convenience, it did discover that among single cup coffee maker users, convenience was the primary reason for buying a single cup brewer. This supports the Companyâ&#x20AC;&#x2122;s earlier analysis, which listed convenience as a major selling point for the NovaBrew.
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Chapter 7 Product Management Plan
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Chapter 7: Product Management Plan 7.1 Introduction .....................................................................................................................151 7.2 Goals.................................................................................................................................152 7.3 Strategies ........................................................................................................................154 7.4 Comparative Product Analysis ....................................................................................156 7.5 Whatâ&#x20AC;&#x2122;s Wrong List .........................................................................................................160 7.6 Product Positioning .......................................................................................................164 7.7 Product Iterations ..........................................................................................................169 7.8 Utility Hooks ....................................................................................................................170 7.9 Trend Analysis ................................................................................................................172 7.10 Summary ......................................................................................................................174 7.11 Conclusion ....................................................................................................................176
150
7.1 Introduction Over the last half of the presentation, the Company has focused its efforts on proving why the product was chosen and why it will win. Now, the Company will switch gears and attempt to show the Product Management Plan. This chapter will include the goals the company has for its product, the strategies it will implement, an examination of the comparative product analysis, the application of the What’s Wrong List, how the product will be positioned, how the trend analysis will be used for exploitation, and how the product will be designed. The Company has had some very ambitious goals for its product launch. However, after a meeting with the Company’s consultant, the Company has decided that it would be best to stay more focused on niche concentration and domination, rather than on total industry domination. The theory is that once the initial target has hit its saturation point, the Company can reevaluate its strategy on a broader basis. For now, however, it will stay uniquely focused on its current niche. The strategies that the Company plans on implementing are going to be developed with the intention of attaining the goals defined in this chapter. Using the extensive research gathered over the last several months, the Company believes it can develop a sound strategy for attaining its goals. The Company will take another look at its Comparative Product Score Card to develop a thesis about the Company’s edge in the market place. As the Company has learned, it is extremely important that the numbers reflected on the Comparative Product Scorecard be accurate. Otherwise, there is no real way of determining the accuracy of the Company’s analysis of the representative numbers.
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The Company will also take another look at its Whatâ&#x20AC;&#x2122;s Wrong List to develop a new list with the Companyâ&#x20AC;&#x2122;s competitors in mind. This list will be substantiated by a considerable amount of research. Its primary purpose is to allow the Company to figure out how it will design its product to meet its desired niche. This section will allow the Company to understand where the weakness of the other Competitors lies, and where the opportunity for the Company lies. Product positioning will play a large role in the future success or failure of the product. This section will allow the Company to look for where the holes in the industry are. Using the research and data gained from the aforementioned sections, the Company will be able to determine where the best place to play the game is, and how the product could be designed to take full advantage of the target niche. The Trend Analysis will be a substantiated thesis on how the Company plans to adapt to the ever-changing trends in the marketplace. This will be a vital section that will be used to aid in the ultimate design of the product. The final section of the chapter will be a culmination of all the aforementioned research. This section will show how the Company plans of designing its product to take full advantages of the target niche. If there is even the slightest error in the Companyâ&#x20AC;&#x2122;s analyses, it could result in the failure of the product launch. So, a considerable amount of precaution is needed when making the final decision to add or subtract features from the product.
7.2 Goals After a considerable amount of preparation, the Company has decided that it will need to delineate its goals to management, so that their ideals are in line with that of the entire corporation. The Company has identified two primary goals and two secondary goals 152
to guide the development of the Company’s strategies, which will be discussed in the next section.
Primary Goals 1. $10 million in sales with a profit margin of at least 40% 2. Achieve product differentiation in the market place
Secondary Goals 3. Obtain exclusive licensing rights with influential brands 4. Develop relationships with other corporations to get the NovaBrew in niche market retail stores The most important primary goal is to reach a minimum of $10 million in sales with a profit margin of at least 40%. Although the Company had expressed interest in becoming a dominate player in the warm beverage industry, researchers and consultants have expressed a considerable amount of contempt on such plans, so to heed their advice, the Company will be undergoing a niche domination strategy versus an industry domination strategy. This will provide the Company with a very realistic projection of sales and profit margin. The second most important primary goal is to continue its product differentiation in the market place. Although there are several warm beverage makers in the industry, none of the other products, as shown in previous chapters, are as differentiated as the Company’s. Since the Company’s primary target niche is luxury campers, brand loyalty will be a considerable contribution to the Company’s goodwill. To attain the aforementioned primary goals, the Company’s primary secondary goal is to obtain exclusive licensing rights with the likes of Starbucks and other influential brands to create a strong presence in the single cup warm beverage industry. The 153
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Company will seek out several strategic partnerships that will benefit both of the Company’s images. This strategy has been implemented successfully before. For example, Caribou Coffee has recently entered into a strategic partnership with several corporate sponsors such as The Coca-Cola Company to maintain market penetration in their respective niches.102 The Company will be doing essentially the same thing. Another secondary goal is to develop relationships with other corporations to get the NovaBrew in niche market specialty stores such as Dick’s Sporting Goods, REI, and Camping World.103 Other corporations have also seen very strong results when using this product placement strategy. One researcher estimates that product placement increases brand recognition 29% per year.104 This would be a highly coveted growth rate. The Red Stripe Beer Company recorded an increase in sales of 40% after its product placement initiative, which included, among other things, supermarket placement. 105
7.3 Strategies Introduction Stage Product: The basic NovaBrew model will be introduced, as well as the N-Cup pods. Competitors will immediately try to replicate the plastic pods that are used to make a drink in 40 seconds. There is however a patent on the single cup server. The weakness with this is that the NovaBrew’s patents of single cup servers expire next year. Thus it is essential to
http://gre.academia.edu/MJReid/Papers/252232/Caribou_Coffee_a_strategic_analysis_of_the_firms_ internal_capabilities 103 http://www.dickssportinggoods.com/home/index.jsp http://www.rei.com/ http://www.campingworld.com/ 104 http://www.nextmedium.com/news/statistics.html 105 http://www.sutherlandsurvey.com/Columns_Papers/Why%20Product%20Placement%20Works_ Feb05.pdf 102
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introduce the single server feature at this introduction stage before other single server pods hit the market and form an even level base of competition for the NovaBrew. Growth Stage Product: The NovaBrew will continue to be used. In order to keep a competitive advantage at this stage the Company would have to ensure that the quality and efficiency of the product is far higher than other producers. Other companies at this stage will be imitating the single cup system, but in order to maintain an edge the NovaBrew will have to have a higher quality product specific to the demand for the single cup. Crash Stage Product: The Company will stay on course with the NovaBrew rather than slash prices. Defying most recession trends, the NovaBrewâ&#x20AC;&#x2122;s sales are actually on the increase, and they seem to be steadily increasing to do so. The edge that the NovaBrew is managing to maintain is due to the fact that it provides a good quality product while at the same time maintaining a steady price. However, to match its competitors and gain a greater share of the market, the Company will offer a less expensive version of the NovaBrew with fewer features to satisfy those consumers who are not willing to pay the price for the original NovaBrew. Maturation Stage Product: In order to keep up with technological advances the company will have to focus on ensuring continued excellence of quality with regards to the NovaBrew. Such possibilities include quiet brewers and the introduction of iced coffee as well. Since it is the essential concept of the single serving that contributes to the growth of sales of the NovaBrew then that design and purpose should be maintained to ensure continued growth in sales. Improvements should be focused towards quality enhancement. 155
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New Life Cycle Product: A completely revamped version of the NovaBrew will be introduced, keeping its original purpose, but introducing factors such as energy efficiency, portability, and possibly solar power. Also, the previous standard model will be reduced in price, replacing the basic model.
7.4 Comparative Product Analysis The marketing definition of a product is simply “a set of basic attributes assembled in an identifiable form.” The attributes of a product are product quality, physical characteristics of the product, price, brand, packaging, design, product warranty, color, seller’s reputation, and seller’s services. Examination of how well the product currently performs within these attributes is crucial. It allows the Company to observe the areas of the product in which the product is strong and the areas in which the product is weak, so that the Company can discover where there is considerable room to better satisfy the customers’ needs. In addition to examining how well the NovaBrew satisfies customers in each of these areas, it is also necessary to examine how well the competition satisfies customers in the areas. Because the Company has limited resources, it will have to selectively decide which areas it should target as areas of improvement that will push the NovaBrew further ahead of the competition in the consumer’s minds.
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20 Characteristics 1. High value in use/low cost to make it 2. Protection 3. Ease of use 4. Differential advantage 5. Rate of technological change 6. Type and degree of competition 7. Unique and trendy 8. Shelf space at retail 9. Prior use patterns 10. Affordable 11. Newness 12. Divisibility 13. Rate of use 14. Durability 15. Life Cycle 16. Bankable 17. Fundamental Trends 18. Size of market for like products 19. Consumer Purchase Patterns 20. Web Friendly TOTAL AVERAGE
Bunn Coffee BTX 10Cup Brewer
Cuisinart DCC1200™
Mr. Coffee Power Serve™
Senseo Single Cup Brewer™
NovaBrew
5
5
5
7
9
3 4 2 2 2 3 7 6 3 1 2 7 7 2 3 3 7 8 2 79 3.95
3 3 2 3 2 1 5 5 6 2 3 4 6 2 2 3 5 5 2 69 3.45
3 5 2 2 2 1 5 4 6 2 2 6 6 3 3 4 6 5 2 74 3.70
6 4 6 4 8 7 3 5 6 8 6 4 6 5 6 6 9 7 7 120 6.00
10 9 10 8 10 10 6 8 6 8 7 7 9 9 8 10 10 9 10 173 8.65
In order to determine how well the NovaBrew performs in each of these attributes in relation to its competitor’s, the Company looked again at the Competitive Product Score Card. The Company observed that two important areas in which the NovaBrew outscored the competition were in durability and its reputation amongst consumers as being a trendy product. In Durability the NovaBrew scored a 9 out of 10, while its competitors scored 6, 6, 6, and 7. In Unique and trendy, the NovaBrew scored a 10 out of 10, while its competitors scored 3, 1, 1, and 7.
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In Chapter 2, the Company determined that the reason the NovaBrew is able to command a greater market share than its competitors is because it combines durability with trendiness while being easy to use, whereas the others seem to neglect the combination of durability and trendiness. For this reason, it is crucial that the NovaBrew maintain its superior combination of durability and trendiness. Because the scores of the competitors in durability are fairly close to those of the NovaBrew, it might be an area in which it would be beneficial for the NovaBrew to slightly improve without devoting a considerable amount of resources. The What’s Wrong list showed that a main complaint of coffee makers was their durability. If the NovaBrew were to be more durable, it would better satisfy the customers and thus boost sales. In Unique and trendy, the NovaBrew blows away the competitors. The only competitor that comes close to the NovaBrew is the Senseo Single Cup Brewer™ with a score of 7. However, because the competitors are so low in this category, the Company should not seek to improve greatly in this category, but rather just maintain the differential. Two areas in which the NovaBrew has relatively low scores are Shelf Space at Retail and Affordability. In both areas the NovaBrew scored a 6 out of 10. In Shelf Space at Retail, the competitors scored a 7, 5, 5, and 3. The score of 7 belongs to the Bunn Coffee BTX 10-Cup Brewer. Because the NovaBrew does not out-score all the competitor’s in this area, this could be an area in which to improve. Shelf Space at Retail is crucial for sales because it increases the capacity for consumers for purchase the product and also because it furthers potential customers’ awareness of the product. The purchase of the NovaBrew is a complex decision and by increasing shelf space at retail the consumer will have a greater chance to first recognize the NovaBrew as a viable option and then determine that it is the clear winner amongst coffee makers. In Affordability, the 158
competitors scored 3, 6, 6, and 6. This indicates that while the initial cost of NovaBrew is not the most affordable purchase, the competition all has fairly the same price, so the Company need not focus on boosting its score in this area, as its resources could be better used in another area. With this insight into the Competitive Product Score Card, the Company can determine the best utilization of its resources and what direction the NovaBrew should take in the future. It was determined that the Company should seek to slightly increase durability, as this was most valued by consumers, perhaps by increasing the warranty so the customer is assured that in the case that the NovaBrew does not hold up to use, they will be assured compensation. In addition to durability, Company should look to greatly increase shelf space at retail and keep the cost of the NovaBrew in line with the competition. This can be done through negotiations with the retailers in which the Company determines the NovaBrew should be sold. Also going forward, the Company should keep in mind the value of protection. Although the NovaBrew currently benefits from superior technology and the protection of many patents, the competition will soon jump on that technology and seek to challenge the Company’s patents on the NovaBrew’s technology. Competitors are already starting jump on the single cup brewing trend. The Company must be prepared devote resources to technology so that the NovaBrew stays ahead of the competition. One area that the Company could explore is greater energy efficiency, to benefit from the current “green” trend, and also the ability to make soup. The Company must be prepared to technologically evolve as the competition catches up, or be prepared to devote the resources to protect their patents.
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7.5 What’s Wrong List
What's Wrong 1. Difficult to start 2. Difficult to clean 3. Requires careful upkeep 4. Assembly required 5. Poor quality materials used 6. Long start up time 7. Not user friendly 8. Difficult to replace parts 9. Unstable base 10. Produces excess coffee 11. Must descale frequently 12. Complicated. Too many knobs/buttons 13. Product leaks 14. Heating tank is not firmly situated 15. Poor temperature control 16. Defective light signals 17. Inconsistent programming functions 18. Difficult to change the filter 19. Expensive 20. Coffee grinder clogs 21. Does not always produce enough coffee 22. Very noisy 23. Difficult to read display 24. Dangerous 25. Shuts on and off on its own 26. Old technology 27. Large and bulky design 28. Water pump fails 29. Bad durability 30. Heating element malfunctions
Bunn Coffee BTX 10Cup Brewer X X
Cuisinart DCC1200™ X X
X
X
Mr. Coffee Power Serve™
Senseo Single Cup Brewer™
X
X X X X X X X
X X
X X X
NovaBrew
X
X X
X X
X
X X
X
X
X
X X X
X
X
X
X
X
X
X X
X
X
X X
X
X
X
X X X X
X X
X X X
X X
X
X X X X X
X
X X
X
Using the What’s Wrong List from Chapter 4, the Company compiled a list of the industry’s most frequent and confounding problems. The Company and its competitors (Bunn, Senseo, Cuisinart, Mr. Coffee) incorporate both strengths and weaknesses into their 160
product designs that can be used to create a superior product over its 10-year life cycle. According to various consumer reports and coffee brewer related blogs, the most complained about features are as follows: leaky products, poor quality materials, and inconsistent coffee production. 106 The NovaBrew’s launch will address these issues first and foremost. It will be a very reliable product that will not leak (due to the revolutionary NCup system). These resolutions will be accomplished within the first stage of the product’s life cycle.
Problem Fixed 1. Difficult to start
Product 1
Product 2
Product 3
Product 4
X
2. Difficult to clean
X
3. Requires careful upkeep
X
4. Complicated. Too many knobs/ buttons
X
5. Inconsistent programming functions
X
6. Expensive 7. Does not always produce enough coffee
X X
8. Shuts on and off on its own
X
9. Old technology
X
10. Large and bulky design
X
11. Water pump fails
X
12. Bad durability 13. Product leaks
X X
14. Difficult to replace parts 15. Long start up time
Product 5
X X
The Problem’s Fixed List indicates which problem areas will be addressed at each stage of production. For this strategy, the Company analyzed fifteen distinct areas that
106
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could use improvement above and beyond the foundational repairs previously discussed.107 The launch product will place heavy emphasis on improving the ease of activation, reducing the startup time, and producing a consistent amount of coffee. The first product will introduce the specialized N-Cup feature that revolutionizes the way in which consumers brew and drink coffee. The speed and efficiency of this initial product will form the basis for all products in the line. The second NovaBrew product will address other practical issues that consumers typically complain about concerning their coffee brewers. The complications that arise with respect to knobs and buttons will be entirely replaced by the easiness of a touch screen interface. Additionally, this technological advancement will reduce the error of programming functions. Problems that might occur in conjunction with the clock, autostart, the timer, and temperature control will become obsolete in this stage of production. Consequently, customers will no longer experience difficulties with the machine acting on its own that might result in an unwanted activation or shut off. Finally, to respond to the consumer complaints about coffee maker water pumps, the second NovaBrew product will redesign the structure and mechanics of the water-piercing nozzle. This advancement will not only reduce pump failure, but also increase the speed of the N-Cup brewing process. As the productâ&#x20AC;&#x2122;s life cycle takes its greatest strides in the third production stage, the Company will address more specific details about the NovaBrewâ&#x20AC;&#x2122;s design. Consumers tend to complain about the cleanliness and difficulty to fix/maintain their coffee machines. At http://www.consumeraffairs.com/homeowners/bunn.html http://www.aromacup.com/guides/pods-coffee/common-problems-with-senseo-coffee-makers-and-quickfixes/ http://www.all-about-coffee-makers.com/Keurig-coffee-machines-what-is-wrong-with-this-product.html http://www.epinions.com/review/Cuisinart_Brew_Central_12_cup_Programmable_Coffee_Maker_1/content _84386549380 http://www.consumeraffairs.com/homeowners/mr_coffee.html http://www.fixya.com/support/p114908-cuisinart_dcc_1200_coffee_maker/solutions/page-10 107
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this point in the product life cycle, it would be hugely beneficial for the Company to add an auto-clean feature. The N-Cup process is relatively clean and easy. Once each cup has been utilized, the machine crushes and sends the waste byproduct to a disposal receptacle. To improve upon this, the product will now wash the container that pierces the N-Cup, removing any coffee debris left behind. In addition, the third phase of production will change the NovaBrewâ&#x20AC;&#x2122;s overall technology and design. A SMART feature will enable users to activate and customize the product via wireless device. The Company will also launch a secondary model at a discounted price, which will be much less bulky in size and have fewer features, such as the touch screen and Wi-Fi. This product will appeal to a greater number of individuals in the target niche, thus increasing sales and profit margins. As the bulk of consumer complaints have been addressed by the fourth stage of production, the NovaBrew line will begin to achieve maturation. However, to maintain brand loyalty and target new customers, the Company will address the more long-term problems that coffee machines typically confront. Product four will increase durability while reducing the need for frequent upkeep. This can be achieved by specialization of parts and an internal redesign involving new and improved materials. The fifth NovaBrew product, which will restart the product life cycle, will focus primarily on part replacement and price. At this stage of production, the Company hopes to split the product line again (in essence jumping from Product 4 to Product 6). The advanced and redesigned NovaBrew will be available for a discounted price, and the Company will debut a brand new, drastically different coffee brewer tailored to the specific needs of all campers.
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7.6 Product Positioning The Company must be careful in examining the product aspects that will allow the NovaBrew to capture a substantial market share in its industry when designing the product. Product Positioning Diagrams are necessary for the Company to see where it should position its product relative to the established competition. The Product Positioning Diagrams will determine where the holes are in the coffee-maker industry and tell the Company how to position its product to maximize its differential advantages between its competitors to consumers and, therefore, maximize its sales. The categories used in the Product Positioning Diagrams below are the most important categories used in the Product Scorecard and the Whatâ&#x20AC;&#x2122;s Wrong List. Each of the diagrams below displays the NovaBrewâ&#x20AC;&#x2122;s primary competitors and holes in the industry for products that satisfy consumer wants.
Saves Time
Wasteful Efficient
Time-consuming Senseo Bunn Cuisinart Mr. Coffee 164
From the Product Positioning Diagrams, the Company sees that there are some holes in the market that it should take advantage of. By positioning its product accordingly to the holes from the Product Positioning Diagrams, the Company would maximize the sales of its product. Grid 1 positions the competitors according to the two variables: costefficiency and time saving. From the research the Company has attained, the Product Scorecard, and the What’s Wrong List, the Company sees that there is a hole in the market for a cost-efficient and time saving product. The competitors Cuisinart DCC-1200 and Mr. Coffee Power Serve both scored very low on the time saving characteristics and costefficient characteristics from the Product Scorecard and What’s Wrong List. 108 Bunn’s BTX 10-Cup Brewer scored average on cost-efficiency while also scoring very low on time saving characteristics.109 Lastly, Senseo’s Single Cup brewer scored a little better than average on time saving and cost-efficient characteristics and is positioned barely on the top-right quadrant of the grid.110 The Company sees that there are gaps on the grid for high time saving products as well as high cost-efficient products. Therefore, the position the Company should take advantage of from the grid is a product that is both very time saving and cost-efficient. Positioning the NovaBrew in this “hole” will tailor the product to two key characteristics consumers look for in the coffee-maker industry and increase the sales of the NovaBrew.
http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/drip-coffeemakerratings/models/user-reviews/mr-coffee-bvmc-lmx43-99031377.htm#readReview 109 http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/drip-coffeemakerratings/models/overview/bunn-nhbx-b-99021275.htm 110 http://www.senseostore.com/product_detail.asp?T1=SEN+SL7810-65 108
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Innovative
Hard to Use
Easy to Use
Outdated Senseo Bunn Cuisinart Mr. Coffee Grid 2 positions the competitors according to the two variables: new/innovative and ease of use. These two variables are two highly valued characteristics consumers of the coffee-making industry desire when buying coffee machines. 111 Research from the Product Scorecard and What’s Wrong List position all three competitors show that the Mr. Coffee Power Serve, Cuisinart DCC-1200, and Bunn’s BTX 10-Cup Brewer are in the bottom, left quadrant of the grid, as all three products scored very low on new/innovative and ease of use characteristics.112 Only Senseo’s Single Cup brewer scored in the top-right quadrant of http://academic.mintel.com.proxy.library.nd.edu/sinatra/oxygen_academic/search_results/show&/ display/id=542987/display/id=596924#hit1 112 http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/drip-coffeemakerratings/models/user-reviews/mr-coffee-bvmc-lmx43-99031377.htm#readReview 111
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the grid. However, its scores are only barely higher than average for the two variable characteristics, which leaves a hole in the market for a very new/innovative and easy to use product.113
Eco-Friendly
Little Variety Much Variety
Not Eco-Friendly Senseo Bunn Cuisinart Mr. Coffee Grid 3 shows that there is a hole in the market for a product that gives the consumers a variety of benefits and uses while also being eco-friendly. These two characteristics are also very highly valued by consumers in the industry as shown by the
http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/coffeemaker-buyingadvice/coffeemaker-brands/coffeemaker-brands.htm#35766 http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/drip-coffeemakerratings/models/overview/bunn-nhbx-b-99021275.htm 113 http://www.senseostore.com/product_detail.asp?T1=SEN+SL7810-65
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research of the Company and from the Product Scorecard and What’s Wrong List. 114 Positioning the competitors on Grid 3 with the variables variety of benefits and uses and being eco-friendly shows that the three competitors, Mr. Coffee Power Serve, Cuisinart DCC-1200, and Bunn’s BTX 10-Cup Brewer, all have low variety in the benefits and uses they offer and neither one of these competitors are eco-friendly.115 While Senseo’s Single Cup brewer scores better than the three other competitors, it only offers a little more variety of benefits and uses and is not very eco-friendly.116 Therefore, a hole exists in the market for an eco-friendly product that offers much variety in benefits and uses. Such a product will tailor to consumers’ wants in the industry and will most likely generate more sales than products that fall elsewhere on the grid. From the Product Position Diagrams, the Company is able to see where the holes are in the market. The Company now knows where to position the NovaBrew in relation to its competitors and implement the designs of the product to fit the holes in the market. By doing so, the Company will take advantage of the lack of a product in the market that satisfies the highly valued characteristics consumers want and desire in their coffee machine products. Positioning the NovaBrew to fill the holes in the market will adapt the product to consumer wants and desires and thus, give the product differential advantages to its competitors and will attract more consumers in the industry.
http://academic.mintel.com.proxy.library.nd.edu/sinatra/oxygen_academic/search_results/show&/ display/id=542987/display/id=596924#hit1 115 http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/drip-coffeemakerratings/models/user-reviews/mr-coffee-bvmc-lmx43-99031377.htm#readReview http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/coffeemaker-buyingadvice/coffeemaker-brands/coffeemaker-brands.htm#35766 http://www.consumerreports.org/cro/appliances/kitchen-appliances/coffeemakers/drip-coffeemakerratings/models/overview/bunn-nhbx-b-99021275.htm 116 http://www.senseostore.com/product_detail.asp?T1=SEN+SL7810-65 114
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7.7 Product Iterations After performing the Comparative Product Analysis and analyzing the Whatâ&#x20AC;&#x2122;s Wrong List and Product Positioning Diagrams, the Company was ready to determine the features of each of its five products over the life cycle. For each stage the Company kept in mind both what consumers want in a coffee maker and what the market will allow the Company to give them. For example, the Company decided to hold off on giving the NovaBrew innovative technology in the initial stage, as it needed a way to stay ahead of the competition in later stages. The Company also released a lower-priced version of the NovaBrew in the third stage to compete with lower prices in the industry. Product Product 1
Product 2 Product 3 Product 4 Product 5
Features 1. Single-cup brewing to eliminate wasted coffee 2. One-push start to ease difficulty of start-up 3. Brewing time of less than one minute to quicken start up time and save time overall 1. Simple touch-screen interface for simplicity 2. Wi-Fi capability to allow for remote programming and powering on and off 1. Smaller, more basic, cheaper model (no Wi-Fi capability) in addition to standard model 2. Improved water pump to fix issue where pump malfunctions 1. Self-cleaning function to decrease upkeep 2. Increased durability to better satisfy customers and decrease returns 1. Cheaper model gets Wi-Fi capability and all other features of the standard model 2. Standard model is replaced by portable version that is chargeable and has solar power capability
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7.8 Utility Hooks Once the Company determined what each of its product iterations would be, it analyzed how each of the products fulfills Maslow’s needs to ensure that the NovaBrew will meet consumer needs. This is crucial to the success of the NovaBrew, as the Company needs to take advantage of the fact that the competition is in the Production and Selling Modes, and therefore is not considering or meeting Maslow’s needs. Product
Physiological Faster beverages
Product 1
Product 2
Security
Belonging
User does not have to worry about a potential fire caused by a coffee pot being left on
Coffee drinking can become a social/family event, with each member having their own drink User can become a part of the “green” trend
Easier to turn product on or off when desired so it is safe
Product 5
170
User gains confidence due to power over what he or she drinks
Product looks more advanced, and technology is a status symbol
Product 3
Product 4
Esteem
User does not have to worry about cleaning an electric product
User can spend time with family/ friends instead of cleaning Can be used for outdoor gatherings with convenience
SelfActualization User can have any drink that they want
User can spend money saved on energy costs for other items User has more counter space for other appliances or for cooking Saves user time and energy
User is respected by others for using solar power
The first product iteration fulfills each of Maslowâ&#x20AC;&#x2122;s needs. It fulfills the physiological need by providing the user with beverages faster. The NovaBrew provides security as well, as the user does not have to worry about potential fires started because a coffee pot was left on. The NovaBrew gives its users a sense of belonging, as coffee drinking can now become a social, family event, as each family member can have their preferred hot beverage. The first product fulfills the need for esteem by giving the user power over what he or she drinks, increasing their confidence. Lastly, the NovaBrew allows the user to have whatever drink he or she wants, fulfilling the self-actualization need. The rest of the product iterations fulfill each of the needs in the way described above, in addition to fulfilling some of the needs in other ways. The second product iteration provides security by making it easier to turn the product on or off when desired, thus making the NovaBrew safer. It also gives users a sense of belonging by allowing them to become a part of the â&#x20AC;&#x153;greenâ&#x20AC;? trend. Lastly, the second product fulfills the need for selfactualization by allowing the user to spend money saved on energy costs for other items. The third product iteration contributes to the need for esteem, as the product looks more advanced and has increased technology; technology is a status symbol. It also fulfills the self-actualization need by providing the user with more counter space for other appliances or for cooking. The fourth product iteration provides the user with security, as the self-cleaning function eliminates the need to clean an electric product, which can lead to electrocution. This also allows the user to spend more time with friends and family instead of cleaning, giving the user a sense of belonging. Lastly, the fourth product iteration saves the user time and energy, fulfilling the need for self-actualization.
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The last product iteration, with its solar-power abilities, gives the user a sense of belonging, as the NovaBrew can be used for outdoor gatherings with convenience. It also boosts the userâ&#x20AC;&#x2122;s esteem, as they will gain the respect of others by using a product with solar power.
7.9 Trend Analysis The Company looked at previous chapters to determine which trends are the most significant to the success of the NovaBrew. The top ten trends are based on what social trends will be the most important when marketing the product. Top Ten Trends 1. Variety of uses for the products. 2. Single living on the rise 3. Non-wasteful/eco-friendly 4. Fast-paced life style 5. Ready to brew quickly 6. Premium on consumer choice 7. Convenience 8. Time saving 9. Brand named popularity 10. Coffee drinking on the go These trends were selected from the Trend Analysis based on how the Company wants the product to be differentiated from competitorsâ&#x20AC;&#x2122; products. Our niche includes campers who are complex buyers, placing an emphasis on quality and value rather than price. The top three trends, non-wasteful/eco-friendly, premium on consumer choice, and convenience, all cater to complex buyers and show how the NovaBrew stands out from the competition. These three trends are the ones that the Company finds to be the most important in marketing our product.
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The Company’s product stands out from competitors’ products because it only produces a single cup. This is an important hook for our product because people are going to be able to make a single cup of coffee without wasting a whole pot. This makes the product more eco-friendly. This relates to luxury campers who especially try to be less wasteful, because of their love for the environment and being outdoors. 117 The single cup coffee brewer can brew all different types of coffee, tea, and hot chocolate, with over 200 different flavors for consumers to choose from.118 This fact makes the product stand apart from its competitors. People can drink whatever type of coffee they want to and their partner or roommate can then do the same. This supports the trend on having a premium on consumer choice. For luxury campers, everyone in their RV or camp group can have exactly what type of hot beverage they want in the morning. The Company’s niche includes luxury campers with families. The NovaBrew makes single cups of coffee in under a minute.119 These families will be able to quickly brew a cup of coffee, tea, or hot chocolate for each member of the family, giving everyone what he or she wants in a timely manner. This makes the product extremely convenient for luxury campers.
http://www.isnare.com/?aid=575256&ca=Travel http://www.keurig.com/shop/k-cups/all-k-cups 119 http://www.keurig.com/the-keurig-story 117 118
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7.10 Summary Stage 1 Primary Goals 1. Get brand recognition among 50% of consumers in target niche within six months 2. Offer product trial for 90 days to obtain feedback on product Secondary Goals 3. Identify and fix problems with product 4. Get competitor to show its hand on replicated product Product Features 1. Single-cup brewing to eliminate wasted coffee 2. One-push start to ease difficulty of start-up 3. Brewing time of less than one minute to quicken start up time and save time overall Expected Scenario 1. The Company goes to market 2. NovaBrew quickly gains recognition and is a factor in the market 3. Competitors purchase and attempt to replicate NovaBrew 4. Competitors release nearly identical product Tactics 1. Hold back touch screen interface and Wi-Fi capability 2. Enter market with high price 3. Guarantee prime shelf space with retailers 4. Increase research and development to discover possibilities for new features
Stage 2 Primary Goals 1. Offer new technology to combat competitorâ&#x20AC;&#x2122;s product 2. Get brand recognition among 80% of consumers in target niche Secondary Goals 3. Develop brand loyalty through quality products and great customer service 4. Find ways to cut costs to match competition Product Features 1. Simple touch-screen interface for simplicity 2. Wi-Fi capability to allow for remote programming and powering on and off Expected Scenario 1. Competitorâ&#x20AC;&#x2122;s product garners attention 2. New technology keeps the Company ahead of the competition 3. NovaBrew continues increasing market share through quality and brand recognition 4. Competitors slash prices in an attempt to attract programmed buyers Tactics 1. Introduce new technology to stay ahead of competitors 2. Market NovaBrew as a premier product to develop brand loyalty 3. Provide excellent customer service to keep customers coming back 4. Look for ways to cut costs to offer a less expensive product, as the competition did 174
Stage 3 Primary Goals 1. Reach entire market by offering a cheaper model in addition to the more expensive model 2. Get brand recognition among 100% of consumers in target niche Secondary Goals 3. Buy out smaller companies to decrease competition and increase market share 4. Continue to find and fix flaws with product Product Features 1. Smaller, more basic, cheaper model (no Wi-Fi capability) in addition to standard model 2. Improved water pump to fix issue where pump malfunctions Expected Scenario 1. Competitor’s cheaper product cuts into the NovaBrew’s market share 2. Cheaper version of NovaBrew defeats competition by providing better quality and brand recognition 3. More expensive model continues to sell to more affluent and complex buyers 4. Smaller firms fail and fall out of the market Tactics 1. Offer basic and advanced models to cater to entire market 2. Continue to work with retailers to maintain prime shelf space for the NovaBrew 3. Buy out smaller competitors that fail 4. Look to address more advanced coffee maker flaws
Stage 4 Primary Goals 1. Eliminate flaws and perfect product to maintain reputation for high quality 2. Continue to stay in the marketing stage, focusing on the consumers Secondary Goals 3. Survey customers to learn their opinions on and suggestions for the NovaBrew 4. Find new technology to give the NovaBrew a spark and keep it out of decline Product Features 1. Self-cleaning function to decrease upkeep 2. Increased durability to better satisfy customers and decrease returns Expected Scenario 1. Product enters maturation as rate of technological change decreases 2. Competition focuses on production and selling, rather than marketing 3. The Company capitalizes on marketing and brand recognition to maintain market share Tactics 1. Address functional coffee brewer flaws to maintain top quality 2. Listen to customers’ opinions and suggestions to provide them with the best possible product 3. Research and develop new technology to keep NovaBrew from going into decline 175
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Stage 5 Primary Goals 1. Introduce a new product to cater more to target niche 2. Use new technology to prevent the NovaBrew from going into decline Secondary Goals 3. Continue to reach entire market by maintaining a lower-priced product 4. Continue research and development to keep the NovaBrew out of decline in the future Product Features 1. Cheaper model gets Wi-Fi capability and all other features of the standard model 2. Standard model is replaced by portable version that is chargeable and has solar power capability Expected Scenario 1. Portable model catches attention of target niche and boosts sales, avoiding decline 2. Competition does not have technology to compete and continues to decline 3. With the competition falling out of the market, the NovaBrew continues to dominate the market and increase market share Tactics 1. Add technology of standard model to the cheaper model to stay ahead of the competition and satisfy customers 2. Introduce portable, solar powered model to cater to target niche 3. Research and develop new technology to keep NovaBrew from going into decline
7.11 Conclusion This chapter was dedicated to figuring out how to design the NovaBrew to stand out from the competition and fulfill luxury campersâ&#x20AC;&#x2122; desires and needs. The Company used several analyses to determine what coffee maker users want in a coffee maker, and came up with five different product iterations to release throughout the life cycle of the NovaBrew. The Company is confident that each of these five products will succeed, as it carefully considered the Whatâ&#x20AC;&#x2122;s Wrong List and potential moves that the competition could make. By designing the NovaBrew to solve the biggest problems in the coffee maker industry, the product will stand out from the competition and attract complex buyers. Also, by anticipating how competitors might react in each stage of the life cycle, the Company is ready to release a product in each stage that will stay ahead of the competition. 176
Chapter 8 Product Distribution Plan
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Chapter 8: Product Distribution Plan 8.1 Introduction .....................................................................................................................179 8.2 Goals.................................................................................................................................180 8.3 Needs Assessment ........................................................................................................184 8.4 Channel Structure ..........................................................................................................186 8.5 Types and Kinds of Middlemen ...................................................................................189 8.6 Functional Allocation ....................................................................................................196 8.7 Policies .............................................................................................................................197 8.8 Summary .........................................................................................................................199 8.9 Conclusion .......................................................................................................................199
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8.1 Introduction After a considerable amount of research about the Company’s target niche, the Company must now determine how it will distribute its products to the target niche. This section will require the Company to make several vital decisions, which could either adversely or positively affect the Company’s overall health in the future. With a good research staff, the Company should be able to analyze its distribution options, and ultimately, make the right decisions. First, the Company will analyze its current goals that pertain to the average number of sales per day at our stores. This number will be substantiated by research about what a feasible number per day would be, and it will be substantiated by the Company’s projections of its requisite sales figures. With the goal of gaining $10 million in revenue, the Company must keep that figure in mind when it determines what its average sales per store should be, ideally. Then, it will adjust it for reality. Secondly, to substantiate the aforementioned sales per day figures, the Company will perform an analysis on the amount of sales it needs to make to obtain its goals of $10 million in revenue. This analysis will include projections about the number stores needed to reach its goal, number of stores per city, number of cities, and number of states. The Company will also design the channel structure. This section will include the Company’s use of wholesalers, retailers, and other types of middlemen. Hopefully, the Company can find a channel of distribution that cuts out the majority of the middlemen. Using the Company’s proprietary matrix, it will determine whether the Company will have a long channel or short channel. To determine the types of middlemen that will be included in the distribution system, the Company will perform several analyses to ascertain which mode it will use. 179
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Fortunately, the Company will probably be able to keep the number of middlemen to a minimum, because of its modest sales goal. Since the middlemen will be cutting into our potential margins, the Company will want to determine what value the distribution channels, or middlemen, add to the product. This calculation can be calculated using the â&#x20AC;&#x153;Levels of Channelsâ&#x20AC;? matrix. The Company will ultimately be responsible for any returns, advertising, stock penalties, and other problems that occur during the marketing process, Therefore, the Company will need to develop a list of policies that will keep the liability of the Company to a minimum, while still providing room for growth. The final section will show how the Company plans on developing its distribution play over the life cycle of the first year. This will be a general summary of what has been ascertained from the aforementioned analyses.
8.2 Goals The Company has outlined several primary goals and secondary goals in the previous chapters. However, now, the Company will outline what it wants to accomplish on a store-by-store basis, which will be the framework for the distribution system as a whole. In the following sections, the Company will show its primary and secondary goals for the product distribution system.
Primary Goals 1. With 48, 000 sales per year and 144 stores, maintain 0.91 sales per day per store 2. Gross profit margin of 40%
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Secondary Goals 3. Ideal return rate of 0.5%, with a maximum return rate of 1% 4. Maintain prime shelf positions in stores 5. Appropriately distribute inventory among stores The Companyâ&#x20AC;&#x2122;s primary goal is to obtain $10 million in sales, as outlined in the previous chapter. However, the Company must develop a distribution goal that will allow this goal to become a reality. Fortunately, the Company has calculated how many NovaBrews it will need to sell in order to reach this target. Assuming the final product sells for approximately 150 dollars, the Company should sell approximately 24,000 units of the NovaBrew. Now, it is important to note that the Company will not be receiving all of this money from the sale. As will be mentioned in the subsequent sections, the Company will have to use several modes of distribution that will reduce the total amount of revenue the Company receives from the sales of its NovaBrew and N-Cup concepts. To account for the reduction in sales, the Company has done a substantial amount of research on how much, on average, a Company will receive from the total amount gained by the retailers from the sales of a Companyâ&#x20AC;&#x2122;s (supplier) goods. This research yielded the following results. On average, a Company will receive about 50% of the total sales to the consumers.120 Therefore, the Company should aim to earn $20 million in sales before factoring in the sales distribution to retailers, increasing the sales of NovaBrews to 48,000 units. The Company plans on having about 144 stores for distribution, which works out to be about 333 NovaBrews per store per year, which is about 0.91 sales per day per store. However, it is important to note that the Company will be receiving a substantial
120
http://www.consumerpsychologist.com/distribution.html
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amount of subsequent revenue from the recurring sales of its N-Cups. The N-Cup provides the sales stability that most Company’s strive for. The Company’s second primary goal is to get the margins we need to get 40% on our total sales. The Company has done a considerable amount of research to determine what its cost structure will allow for margins. Also, the Company has looked into the cost structures of other companies to determine what it can expect in terms of margins. The Company has determined that the Gross Profit margin on consumer appliances is on average about 30%.121 However, the Company’s cost structure allows for about 40% margins, with a low margin for error.122 40% margins are very hard to come by in the consumer appliance industry, but thankfully, the Company has found a niche that can support healthy margins. The Company has also identified several secondary goals that it hopes to implement to obtain its primary goals. The first of these goals is to keep the amount of returns to a minimum. Not only does a high return rate lower the amount of revenue the Company can record for the fiscal year, but it also should give the Company the idea that something it is doing is not going over well with its customer base, which is a recipe for disaster down the road. The average return rate in the Consumer Appliance Industry is about 11%, as identified by the research staff at PC World.123 Although the Company will strive to keep its return percentage to a minimum, the Company will need to stay below the industry average by a considerable margin to remain solvent. Considering the NovaBrew is a new product to the market, it will be fairly hard to determine the Company’s future return percentage, without at least having some history to base the determination http://multichannelmerchant.com/news/marketing_market_sector_report_2/ http://www.google.com/finance?q=NASDAQ:GMCR&fstype=ii 123 http://www.pcworld.com/article/146576/most_returned_products_work_fine_study_says.html 121 122
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on. Therefore, the Company will shoot for a maximum of 1% return rate, with an ideal return rate of .5%. Another secondary goal for the Company will be to keep the product in the best position it can. This will require the Company to incentivize the retailers to keep the NovaBrew in its prime shelf positions. Research has shown that sales from strategically placed products have yielded about 30% more sales volume on average. 124 As long as the NovaBrew can merit a good product shelf placement, the Company will have a better chance of making its primary goal of $10 million in sales a reality. Another secondary goal the Company has for the NovaBrew is to keep retailers stocked at all times. Since the Company will be strongly targeting a very niche area, it will not have a large amount of stores to keep supplied, and since the Company has identified Washington and Northern and Central California as being the primary areas of interest, the Company must make sure that it keeps its shelves stocked at all times. After the Company has had the product on the shelves for a month, the Company should be able to get an idea of which stores contribute the most to the total sales of the Company. Research indicates that about 80% of most sales come from 20% of stores. This is Paretoâ&#x20AC;&#x2122;s Principle.125 Therefore, the Company will identify its prime sales channels, and allocate product appropriately. Therefore, to keep the Company in line with its goals, the aforementioned sales strategies and organizational strategies must be implemented to successfully reach its goals and objectives.
http://articles.economictimes.indiatimes.com/2010-01-20/news/27572872_1_shelf-space-productshelves 125 http://management.about.com/cs/generalmanagement/a/Pareto081202.htm 124
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8.3 Needs Assessment The Company conducted a Needs Analysis to determine the appropriate physical distribution channel that would allow the Company to meet its goals. After much research, the Company determined that on average a single N-Cup sells for 62.5 cents and that the average household spends on average of $540 on N-Cups per year.126 Furthermore, the Company plans on selling its product for $150. Because the sales of the Companyâ&#x20AC;&#x2122;s product also include the sales of N-Cups, the Company combines the sales of both its product and the N-Cups. Additionally, the Company plans to have 25% of its sales through the web. Factoring in the web sales of the NovaBrew and the N-cups, the company determined that it needs to earn $16 million sales in order to reach its goal of $10 million gross sales. The Company is confident it will be able to go over and beyond $10 million gross sales the first year, and thus aims for $20 million sales the first year, which includes web sales. The company assumes that the 48,000 units are evenly distributed among each month, equaling 4,000 sales per month. Additionally, the amount of N-Cups sold per month increases each month, as it encompasses the previous customers and the new customers for the month.
NovaBrews Sold 24-Packs Sold
Jan
Feb
Mar
Apr
4,000
4,000
4,000
4,000
May 4,000
Total Units
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Total Sales
4,000
4,000
4,000
4,000
4,000
4,000
4,000 48,000 $7,200,000.00
12,000 24,000 36,000 48,000 60,000 72,000 84,000 96,000 108,000 120,000 132,000 144,000 936,000 $14,040,000.00 $21,240,000.00
TOTAL
A crucial part of the Needs Analysis is determining the number of stores the Company will have in selling its product and the number of products sold per store. The
126
http://www.singleservecoffee.com/archives/008530.php
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number of coffee makers sold per store depends on the type of retail store and the location of the store. Therefore, the first step of the Company was to locate which areas of the country that would maximize sales for the NovaBrew. Research shows that the areas of the highest camping participation rates are the Pacific region (18.5%) and the Mountain region (26.9%) and the West North Central region (18.1%).127 Further research shows that the areas where people drink the most coffee are the Pacific region (California, Oregon, Washington). Combining the two maps, the Company decided it would have the most benefit by targeting the Pacific Region, specifically northern and central California and Washington State. This is the area where people do the most camping as well as drink the most coffee. These areas also have plenty camping areas and national parks. The Company has determined to use selective distribution of retail stores to sell its product. The retail stores are Dick's Sporting Goods, REI, Camping World, Sears, and Target. The Company determined that its product should be sold at one of these retailers because Dickâ&#x20AC;&#x2122;s, REI, and Camping World will have access to customers who shop at specialty stores, and Sears and Target will have access to customers who shop at nonspecialty stores. Research on these stores shows that all these stores combined sell on average two coffee makers a day. By combining this data with the number of products the Company determined it needs to sell in the first year, the Company needs at least 144 stores to generate $20 million sales within the first year. Therefore, the Company determined that it will have 144 stores located in North and Central California and Washington.
127
http://www.rvbusiness.com/2010/09/2010-special-report-on-camping-published/
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Category
Metric
Units sold per year
48,000
Sales per day per store
0.91
Number of stores
144
Number of cities
131
Number of stores per city
1.10
Number of states
2
8.4 Channel Structure In order to decide upon an appropriate channel structure for distribution of the NovaBrew, the Company must look at the nature of the market and consumer buying patterns. Because the NovaBrew is tailored to the specific niche of luxury camping (and eventual transition to camping in a more broad sense), the Company must consider the geographic location of its channels as well. With the dense population of campers and camping related goods/services located in Central California and Washington State, the Company will try to attack the market in these two areas. Other considerations that factor into the channel structure decision include intermediary characteristics and key product features.
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Short 1. Web Popular 2. Perishable 3. Fashion 4. Small size, Low price 5. Complex, expensive 6. Bulky 7. Heavy 8. One of a Kind 9. National Distribution 10. Limited Resources 11. Seasonal 12. Strong Brand 13. Desire to Control Market TOTAL
Long
X X X X X X X X X X X
9
X X 4
The Channel Structure Analysis indicates a much more practical distribution through a short channel.128 The score for a short in relation to a long distribution was 9 to 4 respectively. While variables such as strong brand, complete market control, and national distribution are better suited for a longer channel structure, it is in the Companyâ&#x20AC;&#x2122;s best interest to attack the market in an isolated area by means of a short channel. This will allow the Company to eliminate the need for several layers of middlemen. By selling from the manufacturer directly to retail and specialty store locations, the Company can maintain high profit margins and overall efficiency. These specialty shops and retail store locations also provide a more direct marketing strategy for the Company. Market research data indicates that campers and luxury campers that fit within the target niche utilize particular stores in these geographic locations. http://edgar.brand.edgaronline.com/DisplayFiling.aspx?TabIndex=2&FilingID=7600789&companyid=3184&ppu=%252fdefault.aspx %253fcompanyid%253d3184%2526amp%253bformtypeId%253d7 http://www.californiarving.info/ http://www.reserveamerica.com/ http://www.zonecampingpass.com/img/locations_zones_map.jpg 128
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Because the NovaBrew will be sold as a bundled product, the need to continuously purchase N-Cups decreases the volume of NovaBrew sales necessary to attain the company goal of $21,240,000 in sales with a 40% profit margin. Consequently, the Company will target its sales to a more limited number of stores, approximately 144. Typically, the recommended number of stores suited for short distribution is less than 150. This figure indicates a very minimal need for the Company to distribute through wholesalers. Instead, the manufacturer will ship directly to the company warehouses spread throughout the target locations. The Company’s ability to market and sell a specialty product like the NovaBrew is much more sensibly applied to specific locations, not heavy distribution over several regions. The Company has neither the proper financing nor the marketing capabilities to distribute the NovaBrew through numerous layers on a large scale. To keep costs low, distribution to warehouses and store locations will occur strictly via USPS ground services and other ground carriers when necessary (United Postal Service, FedEx, etc.). Other modes of transportation and quicker mail services will not initially be used, as they do not fall within the Company’s budget for product launch. As shown in the analysis, the NovaBrew’s distinctive design and Web popularity make the product a perfect candidate for high volume Internet sales (short channel). Ideally, the Company hopes to account for 25% of its sales revenue through its userfriendly and exceedingly informative website. The website’s layout provides the company with a hands-on opportunity to communicate with customers about the product. It will provide information about the product specifications, a shopping cart for the NovaBrew line and N-Cups, as well as question/answer chat boxes for customer convenience. Through this channel of distribution, the Company will spread its presence in the market and provide an easy and direct distribution from the manufacturer straight to the customer. 188
8.5 Types and Kinds of Middlemen When considering which middlemen the Company should employ with the selling of the NovaBrew and N-Cups, the Company first looked at what functions it is physically or economically unable to perform and thusly which functions the Company would need a potential middleman to perform. Because the Company is domestic, it concluded that it would not need the benefit of an industrial distributor to provide market coverage, sales contacts, and storage of inventories. The company decided that it would take on the expense of storing and shipping the NovaBrew to avoid having to deal with a wholesaler. This way the Company can avoid the fees the wholesaler would demand, thus losing potential profit. Given the relatively modest sales goal the Company set out to achieve and the current concentration of the market, the use of a wholesaler would be economically inefficient as well. Bypassing the wholesaler and going directly to the retailer also allows the company greater control over the marketing of the NovaBrew. This will prove invaluable as an effective marketing approach will be key to the NovaBrewâ&#x20AC;&#x2122;s success and the meeting of the Companyâ&#x20AC;&#x2122;s goals. In addition to the use of retailers, the Company decided that the use of the Web would be an efficient, low-cost way to provide a direct distribution straight to the customer. The Company would be able to avoid the expenses related to the use of any middleman. Although the majority of coffee maker sales do not occur on the Web, there is still is a considerable portion that do. For this reason, the Company deemed the sale of the NovaBrew through the Web to be a beneficial way to provide an alternative method in which the consumer can purchase the NovaBrew. The Company plans to make sales available through its own personal website.
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After the Company determined the type of middlemen it will use, the Company turned to the determination of the intensity of the distribution. In doing so, it sought to find just the intensity at which the desires of the target market are met, as providing a greater intensity would only increase marketing expenses and decrease ultimate profits. Because the NovaBrew is an appliance and therefore classified as a shopping good, the Company decided on mainly a selective distribution, but mixed with some exclusive distribution due to our target market. The Company planned to sell the NovaBrew through not all, but multiple retailers where the consumer would likely look and also some specialty stores dedicated to camping and outdoor activities. This distribution plan will allow the Company the opportunity to enhance the image of the NovaBrew, strengthen customer service, improve quality control, and maintain some control over pricing, while best matching the consumer buying patterns. Once the Company decided on selective distribution and exclusive distribution, it researched traditional stores in which coffee makers are sold in order to best match consumersâ&#x20AC;&#x2122; past buying patterns. The Company concluded that Target and Sears were too retailers in which coffee makers are traditionally sold and determined them to be a good fit for our product for that reason.129 These stores will make up our selective distribution. The Company then researched stores in which camping equipment is sold, and thus stores in which our target market will frequent. It determined that Dickâ&#x20AC;&#x2122;s Sporting Goods, REI, and Camping World are the three major camping specialty stores and decided to have them make up our exclusive distribution.130
http://www.priceviewer.com/store_state/60/Sears/WA http://www.mallseeker.com/sears.aspx?state=5 http://sites.target.com/site/en/spot/state_listing.jsp 130 http://www.dickssportinggoods.com/corp/index.jsp?page=storeLocator&ab=Header_FindAStore 129
190
Next the Company was faced with the number of retailers to use. When determining this number, the Company had to keep in mind its goal of $10 million in sales. Earlier the Company determined that 144 stores would be a reasonable estimate for the number of stores it will require to reach its sales goal, recognizing that the sale of the N-Cups will likely add a great amount of profit. In deciding where to place the retailers, the Company researched in which regions camping is prevalent. The Company found that Washington and the Northern/Central California are regions in which many go to camp.131 The following are the 144 stores that the NovaBrew would be sold in.
Dickâ&#x20AC;&#x2122;s Sporting Goods State WA WA WA Total CA CA CA Total GRAND TOTAL
City Puyallup Renton Fresno Modesto
Number of Stores 1 1 2 1 1 2 4
http://www.rei.com/map/store http://www.campingworld.com/stores/ 131 http://www.coleman.com/coleman/media/images/CampingTrends2010.pdf
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Camping World State WA WA WA Total CA CA CA CA CA CA Total GRAND TOTAL
City Burlington Tacoma Bakersfield Rocklin Roseville San Martin Vacaville
Number of Stores 1 1 2 1 1 1 1 1 5 7
REI State WA WA WA WA WA WA WA WA WA WA WA Total CA CA CA CA CA CA CA CA CA CA CA CA CA CA 192
City Bellingham Issaquah Kennewick Lynnwood Olympia Redmond Seattle Tukwila Spokane Tacoma Berkeley Brentwood Concord Corte Matera Dublin Folsom Fremont Fresno Marina Mountain View Rosewood Sacramento San Carlos San Francisco
Number of Stores 1 1 1 1 1 1 1 1 1 1 10 1 1 1 1 1 1 1 1 1 1 1 1 1 1
CA CA CA CA Total GRAND TOTAL
San Jose Santa Rosa Stockton
1 1 1 17 27
Target State WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA Total CA CA CA CA CA CA CA CA CA CA CA
City Bellingham Bonney Lake Everett Factoria Federal Way Kennewick Kent Lacey Lake Stevens Lakewood Longview Lynnwood Marysville Northgate Puyallup Renton Richland Silverdale Spokane Valley Woodinville Yakima Albany Atwater Auburn Azusa Birdcage-Citrus Heights Colma Cupertino Daly City Serramonte Dublin Dublin East El Dorado Hills
Number of Stores 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 21 1 1 1 1 1 1 1 1 1 1 1 193
EarlyBird Industries
CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA Total GRAND TOTAL 194
Elk Grove Eureka Fairfield Folsom Fremont Hub Gilroy Granada Hills Hayward Hayward North Lake Elsinore Lathrop Lincoln Livermore Lodi Manteca Merced Morgan Hill Mountain View Napa Napa North Newpark Mall Novato Pinole Pittsburg Pleasant Hill Rancho Cordova Redding Richmond Rohnert Park Roseville Roseville North Salinas San Ramon Sand City Stockton Stockton North Sunnyvale Tracy Turlock Vallejo Watsonville Yuba City
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 53 74
Sears State WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA WA Total CA CA CA CA CA CA CA CA CA CA Total GRAND TOTAL
City Aberdeen Chehalis Cheney Colville E Wenatchee Eatonville Ellensburg Enumclaw Everett Kennewick Lacey Lynnwood Marysville Mount Vernon Oak Harbor Omak Othello Port Angeles Puyallup Redmond Shoreline Tukwila Walla Walla Antioch Capitola Eureka Fairfield Newark Richmond San Bruno Santa Rosa Tracy
Number of Stores 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 23 1 1 1 1 1 1 1 1 1 9 32
195
EarlyBird Industries
8.6 Functional Allocation The traditional channel for consumer goods transfers goods from the firm, to the wholesaler, to the retailer, and then finally to the customer. The Company, however, does not have a wholesaler. The Company is not using a wholesaler in order to save costs and maintain control over marketing of the NovaBrew. The intensity of distribution refers to how many middlemen will be used at the wholesale and retail levels in a particular territory.132 The Company has to decide what and how much the middlemen should do. The retailer of course will sell the final product to the consumers. A retailer makes retail sale, so in order to receive more money the Company will try to skip the retailer and sell directly to the customer via the web. The Company Carry Stock Inspect Train staff Run ads POP displays Contests Word of mouth Stock shelf Price comparison Buy "paper" Train staff Introduce new items
Retailer 8 9 8 9 8 4 4 7 7 7 8 9
Consumer 9 7 9 2 2 5 5 9 9 6 7 2
0 0 0 0 0 0 9 0 5 0 0 0
The chart shows that the customers do not have a lot of function in marketing the product. For most of the categories customers scored a zero because they are not involved in marketing the product. The exception is word of mouth that can increase the success of the product significantly. The Company will be most involved which is reflected in its high
132
Etzel, Michael J. Marketing, 14th ed. Irwin/McGraw-Hill, 2007.
196
scores. The retailers have lower scores because they are not as involved in marketing the product, but more just stocking the shelf.
8.7 Policies 1. Money back guarantee within thirty days of purchase 2. Customer responsible for shipping expenses Returns
3. N-Cups are not eligible for return 4. Returnable credit will be processed in 5 - 10 business days 1. All retailer advising programs must be pre-approved in writing by NovaBrew in order for the retailer to be eligible for reimbursement on any advertisements.
Advertising
Shelf Space Allocation
2. Qualifying media include: newspapers, catalogs, circulars, direct mail, in-store promotional events, trade shows, email and internet, reflection of the NovaBrew on retailer's websites. 1. Retailers have to ensure that the NovaBrew receives adequate shelf space. Advertising and promotion in the context of retailers will not be a definite requirement. There is a one year warranty that does not cover:
Damaged Goods
1. Damage by service providers other than those authorized by the NovaBrew 2. Damage due to negligent and improper use 3. The period exceeding one year
The Company aims to provide users with a highly efficient and convenient product. In order to fully contribute to that notion, the Company has laid out a set of policies that help ensure the customers are completely satisfied, while still maintaining a feasible support structure.133
http://Keurigretailqualifier.com/docs/Keurig_Retailer_Coop_Ad_Policy_Rev_5-1-2011.pdf http://www.Keurig.com/customer-service/ordering-shipping-and-returns/frequently-askedquestions#{E88D3452-0140-4781-8B33-A2F4518C74B3 133
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EarlyBird Industries
The Company recognizes that the focus of sales will come from emphasis on the availability of a high quality product. The target niche analysis also reveals certain aspects about the consumer that further highlights this idea of the product. The NovaBrew will be sold via the Internet, in the sense of its own website, as well as through specialty retailers. The NovaBrewâ&#x20AC;&#x2122;s Web page will layout the basic design and practices of the product but will not extend any limitations in terms of the basis for advertising to the retailers. Retailers such as Target, Sears, Dickâ&#x20AC;&#x2122;s Sporting Goods, REI, and Camping World will play an important role in the sales figures of the product. Advertising within the context of retailers will be done on a Cooperative basis. It is evident to the Company that cooperation with retailers is key to establishing good sales figures for the product. Thus the advertising agreement is such that retailers are allowed to practice their own form of advertising within given constraints of what type of advertisements they choose. However under one program of policies set out by the company, such advertisements have to be pre-approved by the company in writing for the retailers to receive full reimbursement. Retailers are still given the freedom and license to design initial advertisements, as is suited to their form of selling. To further ensure that customers are satisfied with the product, the Company provides a one-year warranty. This warranty, however, does include certain constraints. The Company hopes to ensure that the consumer and retailers benefit from the policies that are put into place and that the policies contribute to an overall higher sales figure.
198
8.8 Summary
Goals
Needs Assessment Channel Structure
Middlemen
Functional Allocation
Policies
Primary: 0.91 sales per day per store with gross profit margin of 40% Secondary: ideal return rate of 0.5%, maintain prime shelf position, appropriately distribute inventory among stores Units sold per year: 48,000 Sales per day per store: 0.91 Number of stores: 144 Short channel of distribution No wholesalers Specialty Stores Dickâ&#x20AC;&#x2122;s Sporting Goods Camping World REI Retailers Target Sears The Company: marketing and quality control Retailers/specialty stores: in-store responsibilities Customers: spreading awareness through word of mouth Returns Advertising Shelf Space Allocation Damaged Goods
8.9 Conclusion The goal of this chapter was to establish a distribution plan for the NovaBrew and determine where specifically the product should be sold. To comfortably exceed its goal of $10 million in sales before retail markup, the Company determined that it needs to sell 48,000 NovaBrew coffee makers and 936,000 N-Cup 24 packs in the first year. The Company will do this through 144 stores throughout northern and central California and Washington. The Company will use a short channel of distribution in order to eliminate wholesalers and maintain high profit margins and overall efficiency. Also, the NovaBrew is conducive to Web sales, which the Company plans on making up 25% of total sales. 199
EarlyBird Industries
The Company will avoid wholesalers, selling exclusively through select retail and specialty stores and the web. The retail and specialty stores will include Target, Sears, Dickâ&#x20AC;&#x2122;s Sporting Goods, REI, and Camping World. The Company is confident that these stores are the right fit for the NovaBrew, as Target and Sears have a history of high sales of coffee makers, and the three specialty stores are all frequented by campers and also sell coffee makers. These five partners will be crucial in bringing EarlyBird Industries and the NovaBrew to the top of the coffee maker industry.
200
Chapter 9 Product Pricing Plan
201
EarlyBird Industries
Chapter 9: Product Pricing Plan 9.1 Introduction .....................................................................................................................203 9.2 Goals.................................................................................................................................204 9.3 Strategy............................................................................................................................208 9.4 Competitive Pricing Analysis .......................................................................................209 9.5 Break Even Analysis ......................................................................................................212 9.6 Price Flexibility Analysis ...............................................................................................213 9.7 Comparative Product Analysis ....................................................................................214 9.8 Policies .............................................................................................................................217 9.9 Pricing Plan .....................................................................................................................220 9.10 Summary ......................................................................................................................224 9.11 Conclusion ....................................................................................................................224
202
9.1 Introduction After a generous amount of analysis, the Company now feels it has the understanding to determine its pricing plan. The pricing plan is arguably the most important part of the marketing process, considering price is usually the determining factor in the binary process of buying behavior. Some of the processes the Company will implement to help them with this difficult challenge include Skimming or Penetrating strategies, Product Positioning Diagrams, Break-Even Analysis, Price Flexibility Analysis, Comparative Product Analysis, policies, and rice plan over product lifecycle. The Company will begin with a brief overview of what it will try to accomplish with its goals and strategies. Because there must be a considerable amount of analysis to substantiate a pricing strategy, the Company has decided to give just a brief overview of the different strategies it has considered implementing. However, it will lay out some goals that I would like to accomplish through their goals. The strategies the Company will choose from include skimming and penetrating. There are obviously several pros and cons to both strategies. However, the Company believes it can utilize one of them to create an effective and sound marketing strategy. Although these two strategies are vital to determining the pricing of the product, the Company will also have to develop an understanding of the push and pull strategies as well. These strategies are more oriented towards how a product is marketed when it first comes on the market. Ultimately, the Company will have to provide a substantiated reason for choosing each strategy. Another problem the Company will face will come from its competition. Although we may have a considerable advantage in terms of product differentiation, the Company must determine what its competitors will do to counteract its competitionâ&#x20AC;&#x2122;s defensive strategies. 203
EarlyBird Industries
By using a Product Positioning diagram, the Company will be able to get an idea of where its product falls in terms of its competitors. A Break-Even Analysis must also be performed to make sure the Company can enter the industry without losing capital. The Company will try several different pricing strategies to see which one work out to where it could be profitable in approximately six months. Furthermore, the Company will perform a Price Flexibility Analysis to determine what price ranges the Company could profitably play in the industry. It is important to understand that the Company will be competing against a very mature industry, and therefore, its competitors will have must lower cost structures than it has. Thus, the Company must pay close attention to how it prices its product. Additionally, the Company will develop a Comparative Product Analysis to determine the spectrum of potential trends that it will be up against. This section will go beyond simply the price of the product. It will primarily focus on the substance of the other competitors, and whether we can beat them with our product. Some other strategies the Company must take into account include its policies. These policies will be comprised of different marketing mechanisms that will hopefully enhance the Companyâ&#x20AC;&#x2122;s sales. Finally, the Company will determine its pricing plan over its entire product life cycle. This analysis will be an amalgamation of all prior analysis, so that the Company can determine how it would like to position itself over its product lifecycle.
9.2 Goals Until now, the Company has developed goals for both its distribution and product plans. Now, the Company is faced with the task of determining what its pricing goals are, 204
and how it will go about implementing those goals. Although the goals for the pricing plan are listed as independent of the distribution and product plans, they are all related to each other. Each plan will ultimately affect the other in either an adverse or positive way. Fortunately, the Company has identified four goals that that it would like to accomplish.
Primary Goals 1. Gain 70% market share through competitive pricing strategies 2. Maintain a low cost structure of about 60% to minimize cost of goods sold
Secondary Goals 3. Attain a pricing mix of 33% NovaBrew units and 67% N-Cups 4. Break even within six months The first goal the Company would like to accomplish is to gain 70% market share through competitive pricing strategies, without causing its competition to retaliate by implementing their own version of the NovaBrew. Fortunately, the Company has identified several good reasons as to why it will be able to successfully float under the radar without causing too much of a stir in the industry. First, the Company has done a considerable amount of research to determine how it will accomplish this goal. Although the pricing plan is vital to making sure the Company keeps competition to a minimum, several other factors play out in this process as well. Currently, the warm beverage industry operates considerably on the use of patents. About 70% of the products sold in the warm beverage industry are patented.134 Also, licensing will account for a considerable amount of revenue growth and stability. Since the NovaBrew is a new concept, it will need to establish some brand loyalty through the use of its N-Cup concept. Brand loyalty causes programmed 134
http://www.inventionstatistics.com/Number_of_New_Patents_Issued.html
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decision making with approximately a 60% success rate.135 Therefore, this a good pricing plan, the Company believes it will be successful in gaining market share. The second goal the Company would like to accomplish is to maintain a low cost structure of about 60% to keep its cost of goods sold to a minimum. Thus, the Company will be able to maintain a relatively low price on its product throughout its life cycle. Although keeping a products cost low is ideal, manufacturers must think about the way they will accomplish their pricing goals. Currently, the warm beverage industry has a cost of goods sold percentage of about 60%.136 This would imply that the Company must do everything it can to make sure it can accommodate a cost structure similar to this, even though it is a new company. Fortunately, the Company has identified ways for which it will accomplish these goals. The third goal the Company would like to accomplish is to attain a pricing mix of 33% NovaBrew units and 67% N-Cups that will be hard for its competitors to compete with. Essentially, the Company is bundling its NovaBrew and N-Cup concepts. Fortunately for the Company, its successful use of licensing and product placement will allow it to create a very tempting pricing mix. Historically, the video game industry has made the majority of its earnings from bundling its game console with its actual video games. 137 Therefore, the video game company is able to charge less for the video game console, and earn back the loss and then some with the sale of its sale of licensed video games. Luckily, the Company will be able to implement this same strategy, which will result in a lowering of the NovaBrewâ&#x20AC;&#x2122;s price. Since the cost of the N-Cups will be considered negligible, it makes
http://www.rightnow.com/briefcasefiles/PDFs/The_Loyalty_Connection__Secrets_to_Customer_ Retention_and_Increased_Profits.pdf 136 http://www.google.com/finance?q=NASDAQ%3AGMCR&fstype=ii&hl=en 137 http://www.nrdc.org/energy/consoles/files/fconsoles.pdf 135
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sense that the Company could implement a pricing mix analogous to the video game industry. Historically, Companies have found that non-reusable items, such as the N-Cup, add about 125% to an average companyâ&#x20AC;&#x2122;s profit, because of the indispensability of the product combination.138 Therefore, the pricing plan will determine the success of this goal. The fourth goal the Company would like to accomplish is to break even within six months. By establishing a strategy to break even within six months, the Company will have the ability to negotiate much better rates with its creditors, which will also result in a lower cost structure. Typical interest rates in new ventures range from between 14 and 18%.139 Although this rate of interest is considerably high, statistics show that once a company can break even, their cost of capital falls considerably. This is because they have a track record, which results in less risk on behalf of the creditor. Therefore, as long as the Company can prove it will be able to break even in six months, it will find the search for capital considerably easier. Finally, the Company will determine the strategies it will implement to attain the aforementioned goals. There are a considerable amount of analyses that can be done to help substantiate how the Company will attain these goals. However, at this point, all the Company can do is substantiate; the real test will be when the product goes live.
138 139
http://www.rocketmarketinggroup.com/tag/customer-loyalty-statistics/ http://www.adventurista.com/2009/01/true-cost-of-venture-debt.html
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9.3 Strategy Skim 1. Differential Advantage
Penetrate
Push
X
X
2. High Value in Use/Low Cost
X
X
3. Strong Social Hook
X
X
4. High Trend Ratio
X
X
5. Monopolistic Environment
X
X
6. Strong Dealer Support
X
X
7. Protection
X
X
8. Strong Utility Bundle
X
X
9. Accessibility of Niche
X
X
10. Clearly Focused Target Niche
X
X
11. Break Even Point/Goal Need
X
X
12. Rate of technological Risk
Pull
X
X
An analysis of the factors suggests that the Company should focus on price skimming with a push strategy. With skimming being the initial policy, the Company will have to push in terms of sales people going out into the market and promoting the product. The main reason the company has decided to skim is due to the high quality nature of the product and its relevant target niche. The NovaBrew possesses a differential advantage in the form of the N-Cup, which is what its competitors lack. It possesses true potential for high value in use because of its usage capabilities. Another factor that is significant is the fact that the Company has a very specific target niche.
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9.4 Competitive Pricing Analysis When deciding the price level at which to place the NovaBrew, the Company first looked at the prices of its competitors, recognizing that the price of the competition will greatly influence the price the Company ultimately determines for the NovaBrew. It determined that the price line for home coffee makers is from as low as $15 to as high as $180. The prices of our chosen competitors are shown in the following table:140
Competitor
Price ($)
Mr. Coffee
50
Cuisinart
80
Senseo
128
Bunn
136
Examination of the price line and the prices of the competitors revealed that there is a definite spread in the prices of the competitors. Because such a discrepancy exists, the Company was able to form distinct price categories for the industry. Low priced coffee makers were defined as those under $50, medium priced coffee makers from $50 to $100, and high priced coffee makers $100 and above. Next the Company formed various product positioning diagrams holding the yvariable constant as price and using two other consumer decision variables as the x-
http://www.sears.com/shc/s/p_10153_12605_00869761000P?srccode=cii_17588969&cpncode=2766799145-2&i_cntr=1321213580205&sid=IDx01192011x000001 http://www.coffeeespressopro.com/bt10.html http://www.meijer.com/s/kitchen-small-kitchen-appliances/_/N-3zx/Ntk-AllSearch/Nttbunn?keyword=bunn&navparm=0&view=30&cmpid=CASEM http://senseostore.com/detail/SEN+49970 http://www.amazon.com/dp/B004T6EKBQ/ref=asc_df_B004T6EKBQ1778513?smid=ATVPDKIKX0DER&ta g=hyprod-20&linkCode=asn&creative=395093&creativeASIN=B004T6EKBQ http://www.target.com/c/home-kitchen-dining-kitchen-appliances-coffee-tea-espresso-coffeemakers/-/N5xtro#navigation=true&Nao=120&viewType=medium&sortBy=PriceLow&isleaf=true&navigationPath=5xtro &parentCategoryId=9976310&facetedValue=/-/N-5xtro&RatingFacet=0&productsCount=145 140
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variable. In the previous chapters the Company determined Ease of Use, and Differential Advantage as key areas in which the NovaBrew far surpasses its competitors. Because the Company decided these aspects would be integral to the companyâ&#x20AC;&#x2122;s marketing strategy, it decided to use them as the consumer variable against which to pit price. The purpose of this exercise was to gain greater insight into the best price at which to enter the market by discovering where there are currently holes in the market that the Company can fill with the right combination of quality and price. The product positioning diagrams are as follows:
High Price
Attack
Hard to Use Easy to Use
Low Price Senseo Bunn Cuisinart Mr. Coffee
210
From the Ease of Use vs. Price diagram, the Company found that there is currently a hole in the market for products with higher price and high ease of use. It determined that this would be a good pricing strategy because consumers will perceive value in the product at a higher price as well as receive that perceived value when they purchase the NovaBrew.
High Price
Attack Low Differential Advantage High Differential Advantage
Low Price Senseo Bunn Cuisinart Mr. Coffee
The Company gleaned the same result from the Differential Advantage vs. Price diagram. It found that the market is lacking a coffee machine with a higher price, but also higher quality and features. Based on these diagrams, the Company determined that the best price for the NovaBrew would be on the higher end of the price line. It planned to
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market the NovaBrew as a pricier coffee maker, but one with definite value to go along with the price.
9.5 Break Even Analysis As a matter of due diligence for potential investors, creditors, and for internal management purposes, the Company must provide a model to carry out a break even analysis and forecast the sales and profitability of the NovaBrew. By imputing the economic, competitive, and other information determined through research by the Company into the model, the Company is able to determine the short-term and long-term success potential of the NovaBrew. The NovaBrew will be selling for $150, even though the maximum price is $165. The difference is because the price of the NovaBrew will change at different points in the product life-cycle. The price is derived from the ratios from the Trend Analysis. Senseoâ&#x20AC;&#x2122;s Single-Cup brewer is used as the competitor for the trend analysis because it is the product with the most market share that also has a single-cup capability and most importantly, because it is the competitor the Company is attacking. The $10,000,000 in revenue will come from both the retail and web sales. The retail sales will make up of 75% of total sales and will have a 40% margin.
212
Break Even
Sales (in millions)
15 12
Total Costs Total Revenue
9 6
Fixed Costs
3 2
4
6
8
10 12 14 16 18 20
Time (in months) Based on the modelâ&#x20AC;&#x2122;s output, it will take the Company 584.24 days (19.47 months) to break even with the NovaBrewâ&#x20AC;&#x2122;s yearly total costs. A total of 91,874 units will have to be sold through retailers and online sales to meet the total fixed costs. However, the Company would only have to sell a significantly lower amount of units to break-even once the sales of the N-cups are factored in. Therefore, the Company is confident that the break even period is significantly shorter and will break-even around six months.
9.6 Price Flexibility Analysis The Company can measure elasticity by comparing the Maslow and utility bundles the NovaBrew to those of its competitors. The Company will average the two bundles for the NovaBrew and its top competitor, Senseo, and then divide them to find the price 213
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flexibility ratio. Then the Company will multiply the ratio by the price of the highest-priced competing product to find the maximum price the Company can charge.
Senseo
NovaBrew
1. Maslow Bundle
6.9
9.7
2. Utility Bundle
7.8
9.9
7.35
9.80
AVERAGE RATIO FLEXIBILITY
9.80 / 7.35 = 1.33 1.33 x $136 = $181
The average of the utility and Maslow bundle for Senseo is 7.35 and the average for the Keurig is 9.8. This makes the ratio 1.33 and the price flexibility $181. The Company will be able to sell its product for a higher price than its competitors because it is a specialty and superior good. This is called pricing above competition, and it is only acceptable when the product is distinctive.141 The Companyâ&#x20AC;&#x2122;s product is superior to regular coffee brewers because it brews a single cup, is very fast, and offers a variety and versatility that no coffee maker can compete with, so it can be priced higher. However, it needs to be competitively priced with the other single cup coffee brewers.
9.7 Comparative Product Analysis The Company realized that consumers are willing to pay for quality and to an extent associate value with price at which a product is sold. For example, if the NovaBrew is priced too low, consumers will question the quality and the value of the product and neglect to purchase for fear of getting an inferior product. If it is priced to high, consumers will likewise decide not to purchase for either financial issues or because they deem the
141
Etzel, Michael J. Marketing, 14th ed. Irwin/McGraw-Hill, 2007.
214
price unreasonable compared to the benefits gained. For this reason, the determination of key benefits of the NovaBrew is crucial. Only then can the Company decide on a reasonable price for the NovaBrew based on the perceived benefits to the consumer and target point out these most valuable benefits in its promotional message. To gain this insight, the Company then used the Comparative Product scorecard to isolate factors that have a considerable impact on price and assess in which areas it can win. It did so recognizing that these factors will be benefits of the NovaBrew that consumers will particularly value and justify paying a higher price for.
20 Characteristics 1. High value in use/low cost to make it 2. Protection
Bunn Coffee BTX 10Cup Brewer
Cuisinart DCC1200™
Mr. Coffee Power Serve™
Senseo Single Cup Brewer™
NovaBrew
Can We Win?
5
5
5
7
9
Yes
3
3
3
6
10
Yes
3. Ease of use
4
3
5
4
9
Yes
4. Differential advantage
2
2
2
6
10
Yes
5. Rate of technological change
2
3
2
4
8
Yes
6. Type and degree of competition
2
2
2
8
10
Yes
7. Unique and trendy
3
1
1
7
10
Yes
8. Shelf space at retail
7
5
5
3
6
Problem
9. Prior use patterns
6
5
4
5
8
Yes
10. Affordable
3
6
6
6
6
Maybe
11. Newness
1
2
2
8
8
Yes
12. Divisibility
2
3
2
6
7
Yes
13. Rate of use
7
4
6
4
7
Maybe
14. Durability
7
6
6
6
9
Yes
15. Life Cycle
2
2
3
5
9
Yes
16. Bankable
3
2
3
6
8
Yes
17. Fundamental Trends 18. Size of market for like products 19. Consumer Purchase Patterns
3
3
4
6
10
Yes
7
5
6
9
10
Maybe
8
5
5
7
9
Yes
20. Web Friendly
2
2
2
7
10
Yes
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From the areas in which we can win, the Company selected Value in Use, Ease of Use, Durability, Unique and Trendy, and Differential Advantage as being the key areas that our target niche would value. The Company reasoned that luxury campers would be willing to pay more for high value is use and ease of use with the perception that, especially when camping, one does not want to have to use a coffee pot and dirty more dishes than necessary, as well as fuss with measuring coffee grounds and dealing with their disposal. The Company was able to see from the Whatâ&#x20AC;&#x2122;s Wrong List that a common complaint of coffee makers was their durability. Because consumers place so much value in a durable coffee machine, Company decided that durability would also be a key benefit from which to base the price. The Unique and Trendy aspect was also determined to have an impact on price because luxury camping is a niche in which everyone is looking for the next great product to enhance their camping experience and they have the financial means to buy the newest, up and coming products at reasonably high prices. Lastly, Differential Advantage was included because what the consumer perceives to make the NovaBrew a more valuable purchase than the competition will greatly influence whether the consumer believes the price is justifiable based on what he or she is receiving in exchange. The Company decided to include these factors in its promotional message in order to draw consumersâ&#x20AC;&#x2122; attention to these benefits so that they consider them in their purchasing decision. If consumers take into account these factors the Company is confident that the NovaBrew will be deemed to be a product with extremely high value for the price and be chosen above its competitors.
216
9.8 Policies The Company focuses on excellence and level of quality in its single cup brewing technology, its gourmet coffee and its customer service as one of its major selling points. The pricing policies then, reflect this goal to achieve superiority as a company. In a broad sense, they do this by ensuring that they are both beneficial to the consumer as well as the company. In addition to this the Company has analyzed competitors such as Bunn and Senseo, to see what their policies regarding price and budget are, to ensure that the ones listed above provide both the highest satisfaction and the highest efficiency as a product. 1. Money back guarantee within thirty days of purchase Returns
2. Customer responsible for shipping expenses 3. N-Cups are not eligible for return 4. Returnable credit will be processed in 5 - 10 business days
Advertising
Shelf Space Allocation
1. All retailer advising programs must be pre-approved in writing by NovaBrew in order for the retailer to be eligible for reimbursement on any advertisements. 2. Qualifying media include: newspapers, catalogs, circulars, direct mail, in-store promotional events, trade shows, email and internet, reflection of the NovaBrew on retailer's websites. 1. Retailers have to ensure that the NovaBrew receives adequate shelf space. Advertising and promotion in the context of retailers will not be a definite requirement. There is a one year warranty that does not cover:
Damaged Goods
1. Damage by service providers other than those authorized by the NovaBrew 2. Damage due to negligent and improper use 3. The period exceeding one year
Payment Arrangements
Regular Payments via cash and card. Only NovaBrew gift cards will be applicable.
One-Price Strategy
The company will have a one price strategy in order to maintain customer reliance.
217
EarlyBird Industries
The NovaBrew can be returned in 30 days. However customers are responsible for shipping expenses. Other companies have similar policies. Bunn and Senseo also offer a 100% money back guarantee. However, Bunn is on a 15-day limit, which is half the amount of time that the Company is offering to consumers. 142 This is in effect to attempt to ensure greater customer satisfaction. While the guidelines referring to Bunn’s policies say that to be eligible for a return, the customer needs to send back a certain percentage of the product, the NovaBrew does not have these limitations. The limiting factor with the NovaBrew is that is no refund or exchange of the N-Cups. This is because it involves the gourmet coffee itself that is sensitive to expiry dates and is usually checked for quality content. There are several forms of advertising that the NovaBrew will be using. Perhaps the most important regarding policy is that of co-op advertising. The Company has realized that maintenance of its brand name and loyalty to its quality, design and its exceptional flavor. This significance will be reflected through advertising, especially through the Company’s chosen retailers. The marketing efforts of the NovaBrew’s retailers can have a positive effect on both the brand image as well as in enhancing product sales. The United States Retailer Cooperative Advertising Policy sets forth the terms under which NovaBrew is prepared to invest a portion of its marketing budget in qualified advertising that reflects such commitment and, thus, mutually benefits NovaBrew and its retailers. 143 Consistent with the Brand Equity Policy, NovaBrew places certain restrictions on the manner in which the NovaBrew can be advertised:
142 143
http://bunncoffeemachines.com/returnpolicy.html http://keurigretailqualifier.com/docs/Keurig_Retailer_Coop_Ad_Policy_Rev_5-1-2011.pdf
218
The Retailer alone has the sole discretion to determine both advertised price(s) and selling price(s). Each Retailer may, in its sole discretion and at its own expense, advertise and sell NovaBrew Retail Consumer Products in a manner inconsistent with this Policy.
All retailer advertising programs must be pre-approved in writing by the Company in order for the retailer to be eligible to receive reimbursement on any advertisements under this program. The following criteria define qualified advertising eligible for reimbursement under this Policy: 1. Newspaper inserts — special advertising supplements inserted into net paid, general circulation newspaper 2. Catalogs — bound or stapled booklets printed on coated or quality uncoated stock for distribution to the end user of the product(s), where the size is at least 5” x 7”, and at least eight (8) pages 3. Circulars — multi-page leaflets on newspaper stock, where the size is at least 11” x 17” 4. Subject to prior written approval, Direct Mail advertising, (including proportionate share of publishing, freight and postage) 5. Subject to prior written approval, Advertising at trade shows, fairs, cooking demonstrations and other relevant public exhibits; 6. Subject to prior written approval, in-store promotional events, demonstrations, and related temporary displays 7. Subject to prior written approval, TV and radio broadcast advertisement. 8. Subject to prior written approval, email and Internet advertising 219
EarlyBird Industries
9. Web page design, development and maintenance expenses associated with NovaBrew 10. Retail Consumer Products appearing on the Retailerâ&#x20AC;&#x2122;s Web site(s). Note: NovaBrew deems all information regarding NovaBrew Retail Consumer Products on a Retailerâ&#x20AC;&#x2122;s Web pages advertising
Further agreements with retailers states that the NovaBrew be provided front shelf space in all its retail stores.
9.9 Pricing Plan 4a: $150 4b: $100
5a: $100 5b: $150
2: $150 3a: $150
Sale s
3b: $100
1: $150
Introduction
Growth
Time
220
Mature
Decline
Product
Price ($)
Product
Price ($)
Product 1
149.99
N-Cup 24 Pack
14.99
Product 2
149.99
N-Cup 50 Pack
29.99
Product 3a
149.99
Product 3b
99.99
Product 4
149.99
Product 5a
99.99
Product 5b
149.99
In an effort to meet the Company’s goals, EarlyBird Industries will execute a consistent pricing plan over the product’s ten year life cycle. The first product will be launched to the consumer at a price of 149.99. Though some might argue that this price is too high for the target niche, market research indicates that this figure falls within the middle of the industry’s price line. Similar competitor products for at-home coffee machines range from roughly $20 for basic brewers to over $300 for luxury coffee makers.144 The first stage NovaBrew will be sold through specialty stores and retailers as a higher end product. It will masterfully combine luxury with convenience and efficiency. Likewise, at this stage of the product’s life cycle, EarlyBird Industries will offer N-Cups in 24-cup boxes for $14.99. The company estimates that the average NovaBrew customer will purchase this portion of the bundle once every week and a half to two weeks. While EarlyBird Industries plans to steadily sell NovaBrew machines to new customers, roughly
http://www.google.com/search?client=safari&rls=en&q=coffee+machine&ie=UTF-8&oe=UTF8#hl=en&client=safari&rls=en&q=at+home+coffee+brewers&gs_sm=e&gs_upl=198643l201575l0l201666 l24l12l1l5l6l1l187l1638l3.9l16l0&um=1&ie=UTF8&tbo=u&tbm=shop&source=og&sa=N&tab=wf&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=e161eb8094b23c24&bi w=1024&bih=585 144
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EarlyBird Industries
70-80% of the company’s revenue will result directly from the sale of N-Cups. The continual purchase of N-Cups guarantees a constant cash flow to the company. After two years of production, EarlyBird Industries will launch a second product in the NovaBrew line. This improved design will render the first product obsolete and thus eventually replace all older models that occupy shelf space. Web sales will immediately switch over to the second NovaBrew upon the product’s launch. For the consumer, this era of the product’s life cycle will result in absolute benefit. The price will remain constant at 149.99 but the actual machine will see numerous new features that enhance the coffee brewing experience. In addition, the company will introduce a new N-Cup bundle in larger 50-cup packs for $29.99. This will provide a discounted price per cup to consumers while encouraging them to buy in bulk. They will not have to repeatedly purchase N-Cups if they have established their favorite flavor. One of the main goals behind this pricing strategy is to expand brand loyalty. At this phase in the NovaBrew’s life, it is imperative to the company’s future success that the product establishes a loyal customer base. This will be achieved by excellence in production, customer service, and affordability. Halfway through the NovaBrew’s ten-year life cycle, EarlyBird Industries will introduce a new deviation from the product line. The original design will be modified and improved upon with new features and a fresh physical appearance while maintaining a market price of $149.99. These changes will account for the most powerful and efficient NovaBrew to date. However, in hopes of further penetrating the target niche, EarlyBird Industries will launch a second NovaBrew product more tailored to camping. This smaller, more compact coffee brewer will diverge from luxury RV-oriented camping into the more general hobby of camping. It will be offered to consumers at a price of $99.99. This product will also continue to use the standard N-Cup thereby increasing the bundle’s sales. 222
As the NovaBrew’s lifecycle heads into maturation, the fourth generation product will be launched into the market during the eighth year of production. Again, this improved NovaBrew will be sold to consumers for $149.99. The product will include innovative features such as a self-cleaning function. This change, for example, will urge previous customers to upgrade their product while encouraging new users to purchase their first NovaBrew. At the end of the product’s lifecycle in the tenth year, EarlyBird Industries will drastically change the landscape of both the target niche and coffee brewing all together. The end of the NovaBrew line will encompass another split in the product much like that of the third production phase. For $99.99, customers will be able to purchase fourth phase product, which includes all of the NovaBrew improvements implemented over its entire lifecycle (excluding the features of the 3b product). This price drop will be accompanied by the launch of a brand new NovaBrew machine that will restart the product’s lifecycle. The final NovaBrew product will utilize solar technology that will allow customers to take their brewer on the go. This revolutionary product will include a chargeable battery pack that can be recharged by UV rays via solar receptors on the outside of the unit. EarlyBird Industries hopes to spin this product into a line of camping friendly coffee machines built for any camping scenario. The technology in a decade will allow members of the target niche to use their product virtually anywhere. In conjunction with the product’s earlier pricing strategy, the company will sell this brewer to consumers for only $149.99. This last stage of production will not only increase sales above and beyond the company goals, but also place EarlyBird Industries in a better position to command a greater market share and dominate the industry for years to come.
223
EarlyBird Industries
9.10 Summary Stage 1
2
3
4
5
Goals 1. Break even within six months 2. Use bundling to attain a unique and effective pricing mix 1. Gain market share through competitive pricing strategies 2. Maintain a low cost structure to minimize cost of goods sold 1. Gain market share through multiple price levels 2. Keep up with competitorsâ&#x20AC;&#x2122; pricing 1. Gain market share through competitive pricing strategies 2. Maintain a low cost structure to minimize cost of goods sold 1. Gain market share through multiple price levels 2. Maintain a low cost structure to minimize cost of goods sold
Price ($)
Strategy
Use a skim strategy, offering the NovaBrew at a high price to 149.99 break even sooner and portray the NovaBrew as high quality Keep prices high and costs low to maximize profit, while 149.99 maintaining quality to keep customers coming back. Offer lower-priced product to 149.99 compete with competitorsâ&#x20AC;&#x2122; 99.99 reduced prices Keep prices high and costs low 149.99 to maximize profit, while 99.99 maintaining quality to keep customers coming back. Reduce the price of the standard 99.99 NovaBrew and offer a new, 149.99 portable version to capture a larger portion of the market
9.11 Conclusion Pricing was the main focus of this chapter. To reach its goal of $10 million in sales before retail markup and 0.91 sales per day per store, the Company determined that it would need to use a skim strategy, selling the NovaBrew for $150. While this may be on the high end of the price scale, the combination of a fairly affluent target niche and the high quality of the NovaBrew support this decision. The Price Flexibility Analysis also supports this decision, as it allows for a price up to $181. The Company will keep the price of the NovaBrew consistent throughout the life cycle, as keeping prices high and costs low will maximize profit. The only exceptions are the cheaper, more basic models introduced in 224
the third and fifth stages. These $100 models will be released to combat the competitionsâ&#x20AC;&#x2122; lowered prices. With a price tag of $150 and enormous profits from N-Cups, the Company will easily reach its goal of $10 million in sales, going above and beyond expectations.
225
EarlyBird Industries
226
Chapter 10 Product Promotion Plan
227
EarlyBird Industries
Chapter 10: Product Promotion Plan 10.1 Introduction ..................................................................................................................229 10.2 Goals ..............................................................................................................................230 10.3 Media Budget Plan .....................................................................................................234 10.4 Channel Plan ................................................................................................................241 10.5 Message Design ..........................................................................................................243 10.6 Advertisements ............................................................................................................247 10.7 Summary ......................................................................................................................253 10.8 Conclusion ....................................................................................................................253
228
10.1 Introduction After a considerable amount research and analysis, the Company has finally hit the point where it must decide how it will promote its new product. In the previous chapters, the company has been focused primarily on understanding why the product will win and how it can be positioned so that it will win. Thanks to the research the Company has done on its target niche, it now has a good grasp on what it believes would make a good promotion plan. In the following pages, the Company will attempt to develop a thesis on what it believes will be a success full promotion plan. In the previous chapters, the Company has outlined several goals that it would like to accomplish in the coming months and years. However, if the Company is going to make these goals a reality, it must focus its efforts on how it will get the product to the attention of its target niche. Some ideas that have been thrown around include media, word of mouth, publicity, personal selling, and advertising. However, the Company has a strict budget of only $300,000, so this chapter will be devoted to making sure that budget is spent to optimize potential sales. The Company has decided that it will not be beneficial to use television advertising, as it is out of the Companyâ&#x20AC;&#x2122;s price range. Also, the Company believes television advertising isnâ&#x20AC;&#x2122;t aligned with the ideals of its target niche, so it would be particularly unnecessary for the Company to spend money on television advertising. However, the Company hasnâ&#x20AC;&#x2122;t completely thrown out the potential for free or in kind television advertising. Thus, if the situation presented itself, the Company would consider using television advertising. Several other forms of promotion include email, specialty magazines, and radio. Although the Company will get into each of these modes of promotion, it is important to understand that our target niche fits very well with each of these modes of promotion. Since we are focusing primarily on luxury campers, 93% of 229
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them own computers, another 97% own a radio, and almost 40% subscribe to a specialty magazine.145 In each of these instances, the Company will be able to reach a considerable amount of its target niche. Therefore, with the research the Company has compiled in the pursuing chapter, it should be evident that the Company will be able to successfully get the concept of the NovaBrew into the lexicon of the luxury camper niche. Finally, the Company will conclude by showing some of its concepts for advertisement and promotion. Using the theory and research obtained in the aforementioned chapters, the Company should be able to tailor the ads very well to the target niche.
10.2 Goals Over the past several chapters, the Company has identified some goals that it would like to accomplish over the product life cycle of the NovaBrew. The goals for the past sections were tailored to the specific task the chapter was pertaining to. Therefore, this chapter will attempt to give some goals that are specific to the promotion plan. However, the promotion plan is truly the final and overarching amalgamation of all previous research, so the goals outlined in the pursuing paragraphs should be taken as overarching goals that the Company has for the life cycle of its products. The Company has decided to break down its goals, like it has before, into three primary and three secondary goals.
http://oakwatervillage.com/oakwater-village-launches-new-website/ http://www.rvda.org/AM/Template.cfm?Section=Home1&template=/CM/HTMLDisplay.cfm&ContentID=107 16 145
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Primary Goals 1. 0.91 NovaBrew sales per day per store and 17.81 N-Cup 24-pack sales per day per store 2. Break even in six months 3. Obtain 20% of sales through word of mouth
Secondary Goals 4. Obtain a ranking of at least five in a national brand test of best travel companions in 1.5 years 5. Publish at least one article in each of the companyâ&#x20AC;&#x2122;s targeted specialty magazines every three months 6. Obtain shelf penetration of 15% in 70% of its identified stores The Companyâ&#x20AC;&#x2122;s first primary goal is to obtain the sale of 0.91 NovaBrews and 17.81 N-Cup 24-packs per day in all 144 of our stores. Fortunately, the Company has been blessed with a product that is bundled. Like the Company showed in the previous chapter, the Company will be able to charge considerably less than it otherwise would for its NovaBrew, because it will be able to earn all the money lost on the sales of the NovaBrew back tenfold through the marketing of its N-Cup concept. Since both of these products work exclusively with each other, there are no alternatives for other products or substitutes. Therefore, there is a considerable amount of product inelasticity, which is good for the Company. As of date, most American consumers have around 2.6 cups of coffee per day, which would allow the Company to substantiate their goal of 3 N-Cups per day.146 Although the number is not exactly 3, the Company has determined that its target niche actually drinks more coffee on average than the average coffee drinking American. To further the substantiation of its 3 cups per day, the Company also cites that tea drinkers also drink a 146
http://faculty.washington.edu/chudler/caff.html
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similar amount of tea per day. Fortunately, the NovaBrew caters to both tastes, for both tea and coffee drinkers, amongst many other varieties of warm beverages. The Company has found that most tea drinkers actually drink more tea on average than most coffee drinkers. The average American tea drinker drinks an average of 3.4 cups per day.147 Therefore, the Company believes that with the sheer variety of beverages offered by the NovaBrew. The second primary goal is to break even in six months. Although this number my sound rather arbitrary, the Company has found that breaking even in six months is an obtainable goal. Research has shown that most companies that begin in the beverage industry are able to break even with in about five months of inception.148 This number is a function of time and cost management. Although the Company has fixed costs of roughly 40%, it also has about 20% of variable costs. As long as the Company doesnâ&#x20AC;&#x2122;t violate its cost structure guidelines, it should be able to break even in six months. Therefore, the Company has a month of leeway between the average breakeven point for most companies in the industry and its goal of six months. The third primary goal is to obtain roughly 20% of our sales through word of mouth. The reason the Company cites word of mouth as being of importance is the function of two key trends in our target niche. As of date, luxury campers are very social people. Caravan and Camping states that roughly 90% of all campers that fall under the luxury camper category are interested in social camping.149 Therefore, it would be safe to assume that they NovaBrew would be able to spread through the word of mouth that takes place at campgrounds.
http://www.umm.edu/altmed/articles/green-tea-000255.htm http://biztaxlaw.about.com/od/financingyourstartup/a/breakeven.htm 149 http://www.caravan-camping.com.au/files/mediakits/Caravan%20and%20Camping%20Industry% 20Profile%20S.pdf 147 148
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The first secondary goal the Company would like to accomplish is a ranking of five in a national brand test of best travel companions in 1.5 years. The Company believes this is a reasonable goal, considering the NovaBrew will be an integral part of the consumers traveling experience. However, the Company will need to receive a considerable amount of recognition from specialty magazines if it is going to make this goal a reality. Today, there are about four specialty magazines that are specifically for luxury campers. These magazines are Camping Life, Truck Camper Magazine, Camping World, and Camping Magazine.150 Every year, these magazines hold rankings of particular aspects of the camping lifestyle. The Company would like to develop a considerable amount of brand recognition through the types of advertisement that will be mentioned in the next section of this chapter, and then it would like to develop a following in all of these four magazines. Once these magazines have grown to like the NovaBrew, which should take about six months, the Company thinks it has a good shot of obtaining a top-five ranking. The second secondary goal the Company would like to accomplish is the publishing of at least one article on the NovaBrew in each of the aforementioned magazines every three months. Although the NovaBrew is only a product, many happy customers will usually write in about their experiences with products they have heard about from other campers. So, as long as the Company is able to garner the amount of word of mouth awareness it has identified as being its third primary goal, the Company should be able to be mentioned about 4 times a year in each magazine. The combined circulation of each magazine totals
http://www.google.com/#hl=en&pwst=1&sa=X&ei=fXDITseAFuTY0QGuyuj8Dw&ved=0CCMQvwUoAQ&q =camping+magazine&spell=1&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=faf9a1f3c844986&biw=1170&bih=707 150
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about 400,000, which should give the Company enough exposure to obtain several of its aforementioned goals.151 The third secondary goal the Company would like to accomplish is to obtain shelf penetration of 15% in 70% of its identified stores. The Company is able to substantiate each of these numbers because of its unique target niche. Since the Company is pursuing luxury campers as its target niche, the store in which the NovaBrew will be located will have a small amount of space dedicated to warm beverage. Therefore, because there will be a small amount of shelf space to begin with, the Company believes it will be able to negotiate good product placement as well as a sizable amount of shelf space. If the aforementioned goals are accomplished, the Company will have the ground to demand more shelf space and better placement, because it will be mutually beneficial for the retailer as well as the Company. Research has shown that product placement accounts for a 40% increase in sales over the length of the product life cycle.152 Therefore, it is very important that the Company accomplishes this goal; because of the implications it will have on all of the Companyâ&#x20AC;&#x2122;s goals.
10.3 Media Budget Plan EarlyBird Industries will start out with a media budget of $300,000 in order to promote and drive sales of the NovaBrew during the first year. The pre-launch period will include a large amount of marketing activity. This is the three-month period from January through March, which the Company decided was the best pre-launch period of the NovaBrew because the camping season is from summer to fall. Luxury campers camp the most during camping season which consists of May, June, July, August, September, and http://www.google.com/#hl=en&pwst=1&sa=X&ei=fXDITseAFuTY0QGuyuj8Dw&ved=0CCMQvwUoAQ&q =camping+magazine&spell=1&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=faf9a1f3c844986&biw=1170&bih=707 152 http://www.nextmedium.com/news/statistics.html 151
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November.153 For this reason, EarlyBird Industries plans to release the NovaBrew at the beginning of April. The three- month pre-launch period is in place in order to generate word-of-mouth awareness and influence the marketplace even before the NovaBrew is released and sold online as well as through the independent retail contractors. In Thousands of Dollars
Pre-Launch Jan
Feb
First Year Mar
Apr
May
June
July
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
TOTAL
Web Advertising & Website
7
7
7
13
5
5
5
5
4
4
4
1
1
1
1
70
Direct Mailings
5
5
5
4
4
4
3
3
3
3
3
1
1
1
1
46
Specialty Magazines
10
10
30
10
8
6
6
4
4
3
2
2
1
1
1
98
Social Media
2.5
2.5
2.5
2
1.5
1.5
1.5
1.5
1.5
1.5
1.5
0
0
0
0
20
Contests/ Promotions/ Giveaways
4
4
4
4
4
4
3
3
3
3
3
1
1
1
1
43
Billboards
0
0
0
3
3
3
2
2
2
2
2
1
1
1
1
23
28.5
28.5
48.5
36
25.5
23.5
20.5
18.5
17.5
16.5
15.5
6
5
5
5
300
TOTAL
EarlyBird Industries will allocate their $300,000 media budget during the first year between six different media channels. The specifics of this plan are detailed in the above Media Mix chart. The six channels the Company will utilize in its advertising campaign to promote the NovaBrew include website/Web advertising, magazines, direct mailings (email), social media, contests and giveaways, as well as billboards. Furthermore, the Companyâ&#x20AC;&#x2122;s marketing team has decided not to attempt to use television advertising to promote the NovaBrew because the Company cannot afford to the first year.
http://books.google.com/books?id=AfdVZVQ1JQoC&pg=PA158&lpg=PA158&dq=northern+california+ camping+season&source=bl&ots=a_0nCOaw2K&sig=-Gm3SoLhltugMpzX51w4jlJjD0&hl=en&ei=gw7YTqLlJKTy0gHK7NnqDQ&sa=X&oi=book_result&ct=result&resnum=7&ved=0CGgQ 6AEwBg#v=onepage&q=northern%20california%20camping%season&f=false 153
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Web Advertising and Website Web advertising and website upkeep will be essential for EarlyBird Industries’ marketing plan for the NovaBrew. A majority of the budget will be used during the three month pre-launch period and the first month the coffee machine will be released (April). $7,000 will be spent in the channel during each of the three months which will cover designing, creating, and hosting EarlyBird Industries’ own website. Some of this money will go towards EarlyBird Industries’ internal Web designers as well to popular Web hosting sites, iPage, and justhost.154 These companies provide the Company with many hosting services that includes websites, space and bandwidth, email accounts, databases, and Google ad credits.155 The website budget will also include the cost of creating a professional Web page through Triad Web Design. According to Triad, the costs will be approximately $500 to build the initial site, as well as $200 for website upkeep and $100 for each new addition to EarlyBird Industries’ website. The budget will then increase to $13,000 for April, during the original release of the NovaBrew. This will allow EarlyBird Industries to advertise online on camping sites. It will also cover getting the full website up and running so that customers can purchase the product online. After April, the Web advertising and website budget will decrease to $5,000 a month for the months May, June, July, and August, to $4,000 a month for the September, October, and November, and to $1,000 for the remaining months. This will allow the Company to continue Web advertising for the camping season months from May to November and then pay for website upkeep costs and sustain Web advertisements for the remaining months. http://www.webhostingsearch.com/ http://www.ipage.com/hosting-features http://www.justhost.com/cgi/info/web_hosting#ic 154 155
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Specialty Magazines Using advertisement though specialty magazines is also essential for EarlyBird Industries’ marketing strategy. Advertising through specialty magazines is a very good advertising strategy for the NovaBrew because they allow the Company to efficiently target its niches in the market. Since the Company’s target niche is located in certain regions of the United States (Central and Northern California and Washington), the advertisements will be placed in camping and outdoor activity magazines specific to each region. Advertisements through specialty magazines will be the media type most heavily spent with $10,000 spent each month for the first two months, $30,000 for the third month (the month before the release month of the product), and $10,000 during the release month of the product, with a gradual decrease each month for the remaining months. The Company’s marketing team determined to advertise in four specialty magazines that are specifically for luxury campers. These magazines are Camping Life, Truck Camper Magazine, Camping World, and Camping Magazine.156 Using these magazines will efficiently and effectively target the Company’s desired niche because luxury campers read and subscribe to such magazines. Direct Mails (Emails) Direct Mailings via email is another type of media that EarlyBird Industries will use as part of the Company’s marketing strategy. The Company marketing team will email people who fall in the target niche of luxury campers. Emailing prospective consumers is easy and cost-effective. In addition, according to Mintel, interest in hearing about products
http://www.google.com/#hl=en&pwst=1&sa=X&ei=fXDITseAFuTY0QGuyuj8Dw&ved=0CCMQvwUoAQ&q =camping+magazine&spell=1&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=faf9a1f3c844986&biw=1170&bih=707 156
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and services by email is on the rise.157 Most importantly, emailing prospective consumers is very beneficial and important to the sales of the NovaBrew because luxury campers are very attached and committed to camping. The Company will highlight the benefits of the NovaBrew and attract the committed luxury campers by persuading them that the NovaBrew is the â&#x20AC;&#x153;new thing to haveâ&#x20AC;? for campers and that having such a product is a must to be considered a committed luxury camper. For the first three months during the prelaunch period, the Company will spend $5,000 each month towards the emailing media. From then on, the Company will spend $4,000 for a few months and gradually decrease the amount for the remaining months. Social Media The Company will also take advantage of social media and advertise the NovaBrew through the use of blogs, Facebook, and Twitter. Further research shows that more and more consumers think that blogging, social media, and discussion groups can help them make good decisions about what to purchase.158 By advertising the NovaBrew on camping blogs and luxury camping group blogs online, including camping groups on Facebook and Twitter, the Company will not only get the word of the NovaBrew out to its targeted niche of consumers, but would also be able to increase positive word of mouth of the product once some campers that go on the blogs use the NovaBrew and share their opinions on the product. The Company will spend $2,500 each on in the early introduction stages to receive brand recognition. Furthermore, the Company will spend $2,000 for the month the product is first introduced to help spread word of mouth of the product and gradually decrease to $1,500 for the remaining months.
157 158
http://www.mintel.com/press-centre/press-releases/617/mintel-reveals-consumer-trends-for-2011 http://blogs.forrester.com/category/consumer_behavior?page=1
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Contests/Promotions/Giveaways EarlyBird Industries will conduct lots of contests and giveaways of the NovaBrew in order to help spread the knowledge of the Company, draw consumers, and ultimately increase the spread of word of mouth from luxury campers to other luxury campers. $4,000 will be devoted to each month during the pre-launch period. Following the launch period, $4,000 will also be spent on contests and giveaways for three more months once the product is released because this is the period when luxury campers start camping and contests and giveaways at camping sites will greatly spread the knowledge of the product to committed luxury campers. By doing so, the Company reasonably expects word of mouth of the NovaBrew to increase among the targeted niche of luxury campers. One of the contests will be for the first 100 luxury camping groups to enter the camping grounds while signing up each member of the group to the Company’s contact list. In order to continue to entice people to purchase the NovaBrew, the Company’s marketing team also plans to have several giveaways at camping sites and contests online throughout each month. For example, the Company will randomly select two dates each month and give away 50 NovaBrews to the first 50 people to purchase the NovaBrew online immediately after the selected dates, which will be released on the Company’s website. Also, there will be a contest on the NovaBrew Facebook page where users post pictures of themselves using the NovaBrew, and people vote for the best picture. The company will continue to spend $4,000 each month for two more months after the release month of the NovaBrew and spend $3,000 each month for the remaining camping season months (July to November). In addition, EarlyBird Industries will continue to have contests and giveaways online, ranging from Facebook to blogs, by spending $1,000 each month for the remaining months. 239
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Overall, the Company is confident that these contests and giveaways will help draw customers to the product and the Company. These contests and giveaways will help spread awareness of the new product as well as the word of mouth of the new, favorable product between luxury campers and therefore, lure and persuade people to purchasing the NovaBrew. Billboards EarlyBird Industries will also spend a total of $22,000 on billboard advertisements, and more specifically, $3,000 each month after the pre-launch months and gradually decreasing to $2,000 each month and eventually to $1000 each month for the remaining months. Studies show that billboards, especially mobile billboards, are very effective in reaching out to its consumers.159 EarlyBird Industries will strategically place billboards on highways and other popular roadways in areas near target locations. This will provide exposure for the NovaBrew and entice consumers to search for more information about the Companyâ&#x20AC;&#x2122;s product.
159
http://www.adhitch.com/statistics.html
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10.4 Channel Plan The Company used Comparative Trend Analysis, the Buying Decision Process and an Industry Trend Analysis to determine how to allocate its budget between the four major types of channels. These four channels are word of mouth, publicity, personal selling, and advertising.
Qtr. 1
Qtr. 2
Qtr. 3
Qtr. 4
Word of mouth
20%
30%
20%
15%
Publicity
35%
20%
10%
10%
Personal selling
10%
10%
30%
40%
Advertising
35%
40%
40%
35%
The budget allocation for the marketing promotional and channeling plan is such that the immediate focus of the company is to get the product out into the market and let it be known and recognized. The initial aim is to build a general consumer base through awareness of the product. Thus the company in the first quarter will be concentrating on establishing the movement towards word of mouth, as this provides a great pushing point for initial growth of sales. In order to establish this spread of word of mouth, the Company will be investing 70% of its first quarter budget towards both advertising and publicity. Publicity events will include product demonstrations at malls and tastings at various shopping centers. The idea here is to use advertising and publicity to create awareness and popularity of the product within the initial consumer base, with the hope that it will spread via word of mouth.
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In the second quarter a greater emphasis is placed on word of mouth, as now the initial consumer base will have hopefully been established. Word of mouth will be used at this stage to a great extent, as during this stage of the life cycle word of mouth creates growth. The product will be promoted via this channel, but with the support of advertising. Although the initial publicity established word of mouth, for it to be sustained, and even prompted to grow, 40% of the second quarter budget has been allocated to advertising. This emphasis on advertising has been laid in order to ensure continued growth of sales at this stage of the life cycle. As the product has now also spread beyond the initial introduction stage, it will be passed on to retailers. Thus co-op advertising becomes part of the equation, contributing to the high percentage of the budget that has been allocated towards it. A portion of the budget is still allocated to publicity, as it continues to support the growth of the consumer base. As the Company enters the third stage of its life cycle, there is an increase in the emphasis that is laid on personal selling. This has been established due to the idea of a specific target niche that has already been decided by the company. The Company recognizes the significance of the largest segment of the market that is most valuable to the product and to break into this lucrative segment, 30% of the budget has been allocated to personal selling. The Company will increase personal selling in order to reach out to the lucrative consumer base that is the home market where over 70% of coffee is brewed. In addition to this 40% of the budget is still allocated to advertising. This is due to the fact that at this stage because the company has established a sense of brand loyalty it has expanded its mode of selling to public coffee houses. Through co-op advertising and other methods of selling and promotion, the product will be sold as part of coffee brewing at coffee shops. The K- Cups will here be promoted as a brand in themselves. 242
In the last stage of the life cycle, even greater emphasis is laid on personal selling. According to earlier analysis, the target niche, especially at this stage of the life cycle, is individuals with a slightly higher income base to be used within their homes. The pricing plan also reflects this idea. In order to break into this niche, the company has decided that sales people will have to reach out personally to the consumers and thus 40% of the budget has been allocated here to personal selling. In addition to this a local promotional plan will be initiated in eight cities in Washington and California, including Seattle, Spokane, Tacoma, Redding, Sacramento, San Francisco, San Jose, and Fresno. Within these cities the promotional plan will be a combination of both local advertisement campaigns and salespeople going out into the market and promoting the product. The advertising budget is still at a high of 35% because it provides continued support to the general sales effort of the company. Thus this channel plan of the promotional budget allocation reflects the trends that have already been established about the product, the Company and the consumer base. Great emphasis has been placed on the life cycle analysis of the product. The Company has already established that over the period of the productâ&#x20AC;&#x2122;s life cycle, both the consumer base will vary and there will be additions and growth as far as the product itself is concerned. Thus the channel plan addresses the significance of tapping into the specific target niche as the life cycle progresses as well as incorporating the growth of the product itself into the promotional plan.
10.5 Message Design An effectively designed message will be integral to the success of the NovaBrew and ultimately, the achievement of the Companyâ&#x20AC;&#x2122;s overarching goal of $10 million in sales. Without a successful message design, the target niche will either not be sufficiently aware 243
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of the NovaBrew, or will be aware, but fail to be convinced that the NovaBrew is a good fit for them. The Company sought to bring together all the Company has learned about the industry and the selected target niche, so as to combat this from occurring. The first thing the Company concentrated on was making sure the niche, luxury campers, was clear in the message. By doing so, the Company will entice the luxury campers to view the NovaBrew as a product suitable for them, a product precisely designed to be conducive to luxury camping conditions. A luxury camping is mostly made up of RV owners. In the previous chapter, the Company identified the typically RV owner to be 49 years old and married. Earlier, the Company also identified the typical coffee consumer to be a middle-aged male, married, with kids. The Company wants to merge these profiles in its message. The Company plans to depict in its ads a RV or luxurious campground, a middle aged male with a wife and perhaps in some, kids, all actively engaged in the use of the NovaBrew. The Company also wants to include the N-Cups in the ads, so as to intrigue the consumer and make clearer the ease of use. Next, the Company wanted to make sure the message was clear on the key advantages of the NovaBrew over its competitors. In order to do so, the Company looked at the Whatâ&#x20AC;&#x2122;s Wrong List compiled in Chapter 4. The Company determined in this chapter that a key complaint forwarded in regards to the competitors was large pot coffee brewers or if using a single serving coffee maker such as the Senseo, that the cup size was inconsistent.160 The NovaBrew delivers the perfect personalized cup of coffee with every
http://www.consumeraffairs.com/homeowners/bunn.html http://www.fixya.com/support/p114908-cuisinart_dcc_1200_coffee_maker/solutions/page-10 http://www.epinions.com/review/Cuisinart_Brew_Central_12_cup_Programmable_Coffee_Maker_1/ content_84386549380 http://www.consumeraffairs.com/homeowners/mr_coffee.html http://www.aromacup.com/guides/pods-coffee/common-problems-with-senseo-coffee-makers-and-quickfixes 160
244
brew. The Company plans to highlight this fact by including its message words that directly suggest this, such as “the perfect cup every time.” The Company also wanted to draw attention to the unique single serve brew of the NovaBrew and how each person in the family can choose their own type of coffee. The Company plans to accomplish this by showing the family in an ad each with their own cup of coffee and saying something to the effect that with the NovaBrew everyone can get what they want. The Company wanted to be direct as possible in featuring these factors in its ads, so the niche will be able to determine the benefits of the NovaBrew at first glance. In addition to the What’s Wrong list, the Company looked at the Maslow Hierarchy of Needs and Utility bundle analyses in order to successfully convey to the consumer the fulfillment of certain needs afforded by him with the purchase of the NovaBrew. The Company decided to focus on the highest need in Maslow’s Hierarchy, the need for selfactualization.161 The Company will already show the trendiness of the NovaBrew with its “at home” brewing and single-cup brewing, two up-and-coming trends that the Company determined in the trend analysis. In addition to highlighting trendiness, the Company plans to highlight the self-actualization need being fulfilled by using good-looking middle-aged couples smiling with the NovaBrew in their expensive RV’s or luxurious campgrounds, looking like they have the perfect marriage and family, as well as a lust for adventure and life in general. This depiction will translate into consumers associating the NovaBrew with this type of lifestyle, the lifestyle that fulfills the ideal of the target niche.
http://www.ncausa.org/custom/headlines/headlinedetails.cfm?id=667&returnto=171 http://www.senseo.us/Products/Appliances/Pages/Personal_Cup_Brewer.aspx http://www.cuisinart.com/products/coffee_bar/dcc-2750.html http://www.Keurig.com/brewers/platinum-brewing-system http://www.ncausa.org/custom/headlines/headlinedetails.cfm?id=667&returnto=171 http://www.usatoday.com/news/health/2007-10-07-tea-benefits_N.htm 161
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At this point, the Company has captured the attention, interest, and desire of the niche. The only thing left is to confirm the action of the purchase. In order to motivate the consumer to purchase and facilitate that purchase, the Company decided to include in its ads in specialty magazines, the email address of the Companyâ&#x20AC;&#x2122;s website which will be capable of processing Web sales of the NovaBrew and the link to its Facebook page. The Company will also use email blasts of its ads to those who subscribe to luxury camping magazines and participate in clubs. The Company will once again incorporate a link to its website and Facebook page. The Company will also put on demonstrations at luxury campgrounds and camping expos, recognizing consumers will be more likely to make the decision to purchase if they have proof that the NovaBrew works as is claimed right in front of their eyes. In addition to increasing the likelihood of purchase, this will also increase publicity. We will get media outlets to cover these demonstrations and also word of mouth will spread throughout the camping community. Publicity will also by created by the Companyâ&#x20AC;&#x2122;s Facebook page and the contest the Company plans to launch through the Facebook page in which people can post pictures of themselves with the NovaBrew and vote for the best picture. The winner will get a year-long supply of N-Cups. Creating publicity such as this, especially in the beginning of the life cycle, will be crucial to creating interest and maintaining that interest in the future.
246
10.6 Advertisements When choosing the company advertisements, the Company must take into account various factors that affect consumer-purchasing patterns. This process reflects information gathered from the Whatâ&#x20AC;&#x2122;s Wrong List, target niche, social trends, Competitive Product Scorecard, and decisions made in the message design. To achieve this marketing mix, the company will create a website and several advertisements for specialty magazines and other media outlets that will address the target niche. The first set of ads will each address a different aspect of the productâ&#x20AC;&#x2122;s appeal. In addition, the Company will launch a Facebook page to better communicate with customers and other individuals who might exhibit interest in the product. Website
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The product’s website, www.NovaBrew.com, serves as both a means to sell the NovaBrew to consumers for a high profit margin as well as an opportunity to directly communicate with buyers. The site’s homepage includes news about promotional contests in addition to basic information about the product. It includes a link to a Live Chat feature with the Company Web sales employees. The Live Chat is an integral part of the website’s overall functionality. Any customer who is hesitant about purchasing a particular product can speak to a real sales person at the company offices. In addition, the homepage has a section devoted solely to the Company’s N-Cup partnerships. At the top of the site layout, users can click to shop for NovaBrew machines/N-Cups, access their shopping cart, login to an exclusive member’s section, find contact information, and view news about the company.
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Facebook Page
Similar to the company website, EarlyBird Industries will utilize a Facebook page to address customers in the target niche via social networking. This link to the customer is as deliberate as the company can possibly achieve. The Company will be able to view and monitor any individuals who display interest in the NovaBrew. This media outlet also allows customers to join promotional activities. For example, the NovaBrew Facebook page will cite the conditions of a yearlong N-Cup giveaway that requires NovaBrew users to 249
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take unique and exciting photographs with the product. This contest promotes use of the machine within the target niche while resulting in an anticipated sales increase. Facebook is an excellent way for the company to expand brand loyalty and create a following of NovaBrew users. Advertisements
In order to reach consumers through formal advertising, the Company has created three distinct designs. The first ad appeals to the target niche by portraying an RV camper parked across from a scenic sunrise. The text reads “Start your day the right way” while an image of the product is shown. Below the NovaBrew logo, brief text bullets about the product’s strengths inform the user of product differentiation.
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Similarly, the second advertisement allures the target niche by illustrating the actual luxury camper in his RV while drinking coffee produced from the product. This advertisement will be utilized in media that the target niche will be directly exposed to (specialty magazines, newspaper ads, etc.). The design also highlights major advantages that the product has over those of its competitors.
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The last prospective advertisement for the NovaBrew’s launch emphasizes the NCup’s exclusivity with some of the coffee industry’s most popular brands. The product stands alone on a black background as numerous logos of the Company’s partners float 252
behind the NovaBrew. This advertisement indicates that NovaBrew has an advantage over its competitors by providing unique and well-liked coffee blends to its users. Though the design does not portray members of the target niche, this message is difficult to convey without the spotlight directly on the product. For this reason, the Company will launch ads to communicate the various strengths of the product as opposed to one single campaign.
10.7 Summary
Goals
Primary: 0.91 sales per day per store, break even in six months, obtain 20% of sales through word of mouth Secondary: top five ranking in best travel companions in 1.5 years, one article in each specialty magazine every three months, shelf penetration of 15% in 70% of its identified stores
Media Budget Plan
Web Advertising & Website: $70 million Direct Mailings: $46 Specialty Magazines: $98 Social Media: $20 Contests/Promotions/Giveaways: $43 Billboards: 23 Total: $300 million
Channel Plan
Type: Qtr. 1, Qtr. 2, Qtr. 3, Qtr. 4 Word of mouth: 20%, 30%, 20%, 15% Publicity: 35%, 20%, 10%, 10% Personal selling: 10%, 10%, 30%, 40% Advertising: 35%, 40%, 40%, 35%
Message Design
Make sure the niche is clear in the message Message focuses on the key advantages of the NovaBrew over its competitors Convey the fulfillment of needs by using the NovaBrew
10.8 Conclusion The final chapter is dedicated to the promotion of the NovaBrew. The Company will allocate their $300,000 media budget during the first year between six channels: website/Web advertising, specialty magazines, direct mailings (email), social media, 253
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contests and giveaways, and billboards. The majority of the funds will go to the website/Web advertising and specialty magazines, as these are the two best ways to reach luxury campers. With the ever-increasing scope of the Internet, Web advertising is a great way to reach anybody, and there are several magazines popular among luxury campers. The Company will distribute their media budget between four channels: word of mouth, publicity, personal selling, and advertising. Over the first two quarters the Company will focus on word of mouth and publicity, and over the last two it will switch to personal selling and advertising. The Company needs to gain publicity through word of mouth early on before it moves to personal selling and advertising. There are three major goals the Company plans to attain through its message design. It will make sure the niche, luxury campers, is clear in the message, make sure the message is clear on the key advantages of the NovaBrew over its competitors, and convey to the consumer the fulfillment of certain needs by using the NovaBrew. These three goals will ensure success for the Company, as advertisements that focus on them will not only capture the attention of luxury campers, but they will also convince the niche that the NovaBrew is the best coffee maker for them, as the competition is simply inferior.
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