ADMS 4250 A Marketing Strategy Team I

Markstrat Round One

Team members: Alessandra Soda, Kevin, Peter Khalil, Naqiya Hussain, Mohammad Salim Date of submission: Wednesday, September 21, 2011

Situation Analysis
Internal Analysis The current competitive landscape is equally divided amongst all the firms with each company accounting for 20% of the market share. The stock price index is also equal across the board with all the firms boasting a stock price of 1000 (SPI). The Sonite products offered by Team I SIRO and SIBI account for 9.6% and 10.4% of the total industry market share respectively. SIRO is targeted towards a price sensitive consumer and currently Team Is highest market share for SIRO is the segment of Others at 19.3% who are looking for a cheaper and product thus being able to afford the lower standard SIRO product. The retail price for a SIRO product is $250 making it appealing to a price sensitive customer such as the Singles, Buffs and Others segments in the market as it is 50% cheaper than the higher end, SIBI product which is targeted towards those willing to pay a premium for a product that fulfills their requirements. This product fulfills the demand of Hi Earners and Professionals and as a result, these segments are currently the highest contributes to the SIBI market share. (Appendix 1a) The price to produce the SIRO and SIBI product are $70 and $160 respectively, and based on the average selling price per unit Team I makes a profit of $92 and $160 respectively. The sale of SIBI products accounts for 51.82% of the total 160,263 U sold in Team I and it also accounts for 80.90% of the total net income of $K 5339 between the two products. This shows that not only is the profit per unit higher for the SIBI brand, but after accounting sales and expenses, the SIBI brand is significantly more profitable for the company than SIRO. (Appendix 1b, 1c) In terms of distribution coverage for SIRO, 38.5% of sales are from specialty stores, 38.9% from department stores and 30.9% from mass merchandisers. This suggests that Team Is strategy thus far has been to place the least focus on supplying to a lower end distributor that has the lowest price mark up among the three distributors. It is assumed that they are focusing on providing convenience to their customers by supplying to a larger number of outlets. For SIBIs distribution, 40.4% are supplied to specialty stores, 40% to department stores and 31.2% to mass merchandisers. Therefore the product is provided at a higher premium in majority of the market since specialty and department stores charge a 10% higher premium than mass merchandisers. (Appendix 1d) External Analysis Market Analysis There is no marketing research available to Team I at this point in time. At present, competitor position in the market is at par with Team I owning the same market share for related products in the Sonite industry. The SIRO product is in direct competition in terms of characteristics, weight, quality, and volume with the SAMA, SEMI, SOLD, and SUSI product brands while SIBI is directly competing with the SALT, SELF, SONO and SULI brand names. (Appendix 2a) More information will be available once the companies in the industry create a positioning for themselves by the following period. The total market size for Sonite products is at 801,313 U, and the actual segment size this period is 801 KU which include Buffs, Singles, Hi Earners, Professionals and Others segments. The forecasted growth rate for the Sonite market is predicted to increase by 17.1% by Period 1 with HiEarners predicted to grow the most by 33.9%, Singles and Pros at 23.6%, Others at 18.4% and a predicted decrease in Singles by -2.1%. All 5 competing firms, including Team I own 9.6% market share for SIRO and related products, and 10.4% of market share for SIBI and related products. (Appendix 2b) Consumer Analysis (Appendix 2a) There are five segments in the Sonite market consisting of adults with similar needs and buying behavior that purchase the products for their professional or personal use. Buffs

consist of 24.4% of the market and can differentiate between the Sonite brands easily due to their high level of knowledge of the product type. They demand a low-price, high performance product for their personal use. Singles encompassing 18.6% of the market are price sensitive however they require a balance between both performance and convenience as purchase incentive. Professionals are 18.2% of the market. They demand a high-quality product which performs well but is easy to use and they associate a high price to mean a higher quality product. High Earners, 11.5% of the current market, buy the Sonite product for social status and do not have a high need for the use of the product. Others include left over people in the segment who do not fit in a specific category in the market; 27.4% of the people in the market. They are the largest in numbers and demand a low-price, low-performance product with average convenience. It is important to note that as market research studies become available, Team I will learn the effects of how marketing effort targeted towards each segment affects their demand for the products. Competitor Analysis Team I is entering the Sonite industry along with four competitors who are also offering a highend product comparable to the SIBI brand and a low-end product comparable to the SIRO product. Market share and Stock Price Index for each company is consistent at 20% and 1000 respectively for all new entrants into the market. (Appendix 2a, Appendix 3) Since each company is starting at an equal level, decisions that will be made each period will define their position in the market place. It is vital that Team I create a long term strategy that will give them a competitive advantage in the industry and allow them to maintain a leading stock price index in comparison to their rivals.

Decisions for this round

(Appendix 4a, 4b) Targeting decisions Based on an understand of consumer analysis, Team I has decided to focus 40% of their SIRO product targeting on the Others segment and 30% each for the Singles and Buffs segments. All 3 of them are commonly price sensitive therefore the SIRO product quality and retail price suits their needs. Although Buffs have high product knowledge, thus they demand for high quality, their incomes do not make them a realistic target for the SIBI brand. The product will also fit the average lifestyle lived by Singles. Moreover, Singles and Others have the highest projected growth in the next five periods among all segments therefore there is potential for long term profitability by targeting these segments. Team I has placed greater emphasis on the Others market as they do not have any specific requirements from their product, and it is believed that the future growth rate of this segment could exceed the projected forecasts potentially giving Team I a strategy for long term revenue from this segment. Team I has decided to equally focus on targeting the SIBI product towards High Earners who purchase products for social status and Professionals who associate a high priced product for a good quality product. They are also the segments that have the highest income and are least price sensitive therefore they can afford the retail price markup per unit. Moreover, based on buying behavior, Team I will provide the required sales force in their desired distribution channels to ensure that the information about the ease of use and quality of the product is conveyed. Production The production decision for this period was calculated based on the forecasted size of the segment in the next period which has a projected growth of 137 U bringing the market size up to 938U and the brand purchase intentions per segment. The SIRO product is projected to be purchased by 9.8% of the total market, which multiplied by the expected next period market size results in the need for around 92U. Given that the major segment being targeted by this product are Others, Team Is

strategy to product 100 U is to ensure that there is enough supply for the possibility that the market forecast growth for Others has been under projected as experts claim that due to the lack of penetration being lower than other segments, its future growth rate could exceed forecasts. The SIBI product is projected to be purchased by 10.2% of the total market, which multiplied by the expected next period market size results in the need for around 96 U. Given that Team I has decided to increase the advertising media and research for the SIBI product, 100 U was produced this period, therefore, an excess of 4 U was produced than calculated. This strategy is meant to ensure that there is enough supply for a potential growth in demand among segments as SIBI consumer knowledge has the potential to increase with the higher quality and frequency in advertising. Price Team I has decided to leave the suggest retail price unchanged. This is a strategy to learn of the position in terms of cost differentiation competitors will take in the market in the next period. This will entail whether Team I needs to refine their target market and refine their prices as result. Advertising media budget Team I has increased advertising media and advertising research costs for the SIBI brand by $50 each. As the advertising budget was $210 this period and all of it was not utilized, Team I has decided to allocate the remainder of the budget towards research for the SIBI brand while keeping the advertising media and advertising research costs for the SIRI product unchanged. It is understood that the target segment for SIBI prefers a high quality product therefore it is important not only to make the brand name more memorable for the target segment but advertising will also emphasize the quality of the product. It is aimed that this will create brand meaningfulness and memorability for the targeted segment, and give the SIBI brand name an advantage over competing products with the same qualities and features. In future periods, market research will make advertising experiments available thus allowing Team I to advertise based on the susceptibility of each market to the marketing. Sales Force Sales force decisions were made by using the targeting decisions for each product and the buying behavior of the targeted segments. (Appendix 5a, 5b) SIRO is targeted towards the Buffs, Singles and Others. When buying behavior of these segments were combined 44%, 33.90%, and 22% of the purchases made at specialty stores, department stores and mass merchandisers, respectively. The SIBI product is targeted towards Hi Earners and Professionals whose buying behavior account for 70%, 80% and 50% of the respective distribution channels. The 30 people in the sales force were allocated based on the demand by the target segments for their services in each distribution channel. Research and Development In this round, Team I spent 9.21% of their total budget to purchase all available Sonite industry research and relative market research studies from the Vodite industry. All Vodite studies were not purchased as it was recognized that competitor, sales force, and advertising data would be unavailable as there are no entrants in the industry yet. This decision is aimed to assist Team I in reaching their overall goal to gain market share to eliminate their competition for long term profitability and sustainability by providing the needed data to learn of competitor positions as well as their relative position in the Sonite market. These studies will reveal which competitors are targeting the same markets as Team I, thus posing to be a direct rival. Moreover, analyzing competitor expenditures in R&D for the Vodite market will reveal their intentions to enter the new industry. (Appendix 6)

Appendices 1a

1B

1C SIRO: Revenues Expenses = $77,213 (6791+4691) = $65,731 SIBI: Revenues Expenses = $83050 (12660+9560) = $60, 830 1D

2a

2B

4a

4b

5a

5B