III by yaoyufang


									 Strategic Marketing Plan

             Presented to:
      H. Bruce Lammers, Ph. D.
        Professor of Marketing
       Department of Marketing
California State University, Northridge

              Team: D4
           Bruce Willis
          Jennifer Lopez
           Tom Thumb
    Industry: Multimedia Software

       November 23, 1895
MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

                                 I.      Executive Summary

   For the past ten periods Firm D4 has been producing and selling a simple and

affordable VRD, called the skippo. In doing this we have become the industry leader in

sales volume, market share, and net contributions. We are the only firm that offers a VRD

to consumers for under $200. We have been successful in satisfying the wants of our

three targeted markets. Currently, the skippo accounts for 62% of home user sales, 69%

of student sales, and 70% of parent sales, due to its simple amount of features and high

error protection. Sales of the skippo make up 44% of the entire four-firm industry.

   Our complex place strategy allowed our marketing team to establish a vast logistics

system that is able to supply every distribution channel with 100% intensity. To promote

our product, maintain great relationships with our retailers, and service our costumers’

large demands, our firm employs the largest amount of sales representatives of any firm

in the industry. We boast the lowest average retail price of $177.59, and the lowest

advertising-to-retail sales ratio of .025 compared to the rest of our industry competition.

   The VRD industry is currently growing. Based on our proven track record our firm

expects to continually grow, maintaining our position as total net profits leader

throughout the remaining product life cycle of VRDs. We will continually provide a low-

priced, simple, and easily accessible VRD to satisfy future customers and encourage

repeat business.

   Finally, we encourage the future marketing team to look into the possibility of

producing a new VRD positioned toward the majority of consumers in the market

segments that our firm currently does not target.

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

                                  II. Table of Contents
I.     Executive Summary                                                       2
II.    Table of Contents                                                       3
III.   Situation Analysis                                                      4
       1. Total Industry Marketing Situation                                   4
                i. Total Industry Sales                                        4
                        Figure 1: Total Industry Unit Sales                   4
               ii. Total Industry Net Contributions                            5
                        Figure 2: Total Industry Net Contributions            5
       2. Firm D4’s Current Marketing Situation                                6
                i. Mission Statement                                           6
               ii. Vision Statement                                            6
             iii. Values Statement                                             6
              iv. People                                                       6
               v. Budget                                                       7
              vi. Target Market                                                7
                        Figure 3: Target Market Share (units) Industry D      8
             vii. Costs                                                        8
            viii. Distribution                                                 8
                        Figure 4: “Report 6: Customer Shopping Habits”        9
                        Figure 5: Market Share in Channel 2                  10
              ix. Advertising Efficiency                                      10
                        Figure 6: Advertising to Retail Sales Ratio          11
               x. Audits                                                      11
       3. Internal Strengths and Weaknesses                                   12
                i. Product                                                    12
                        Figure 7: “Report 3: Average Customer Preferences”   13
               ii. Place                                                      13
             iii. Promotion                                                   14
                        Figure 8: Period 10 Index Ratings                    15
              iv. Price                                                       17
                        Figure 9: Markup Percent Formula                     17
               v. Marketing Research                                          18
              vi. Customer Satisfaction                                       19
       4. External Opportunities and Threats                                  19
                i. Opportunities                                              19
               ii. Threats                                                    20
IV.    New Marketing Objectives                                               20
V.     New Marketing Strategy                                                 20
                i. Final Statement                                            21
                        Figure 10: Pro Forma Financial Summary for Firm D4   22

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

                                   III. Situation Analysis

1. Total Industry Marketing Situation

Total Industry Sales:

       Below, Figure 1 shows that the industry’s total unit sales steadily rose from

Period 1 to Period 6 by an average of 4%. It then declined slightly from Period 7 to

Period 9 by an average of less than 1%, until it rose again in Period 10 by 5.42%. The

total rise in industry unit sales over the last ten periods has been an astounding 26.6%.

       As seen by the late growth in Period 10, our marketing team has forecasted that

the industry is in a late growth stage. We predict that the industry sales will continue to

grow by an average of 4% over the next four periods before hitting its peak. We then

foresee the industry entering into its declining stage directly after, in which it will decline

slowly. There are many profitable years left in the VRD industry.

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

Total Industry Net Contributions:

          Figure 2 below shows that total industry net contributions have ranged from a low

of $990,169 in Period 3 to a high of $1,773,416 in Period 10. They have maintained

relatively constant throughout the previous ten periods, averaging $1,482,256 per period.

          Industry net profits declined three times in the last ten periods. Each period of

decline was followed by a rapid rise in net profits the following period. In Period 3 net

profits fell 35%, but were followed by a rise of 61% in Period 4. In Period 6 net profits

lowered 20%, but were followed by a jump of 6% in Period 7. And in Period 9 net profits

declined 19%, but were followed by an increase of 38% in Period 10. The industry’s total

net profits are reliable and steady, and history has proven that even with a drop in net

profits, the industry responds well and rebounds with higher net profits in the following


MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

2. Firm D4’s Current Marketing Situation

Mission Statement:

          Our mission is to build profitable life-long relationships by satisfying our

customers’ technological needs and maximizing their delight to increase shareholder


Vision Statement:

          Affordable. Accessible. Always.

Values Statement:

          1)     Provide a safe and comfortable work environment, and respect each other.

          2)     Embrace and encourage diversity, creativity, and participation.

          3)     Make known all impossibilities, so that we may fail fast and get to the

                 successful road ahead.


          Our firm’s marketing team is composed of four unique people. We believe each

individual’s engagement and our high team cohesion to be the firm’s greatest competitive

advantages. The team met three times a week to go over the proper marketing mix of

product, place, promotion, and price during each period. Prior to every meeting the team

gained cohesion by participating in an idea-producing cerebral exercise. The team

continually encouraged each other to keep our mission and vision in mind when making

tactical decisions. Due to our high engagement in our routine tri-weekly meetings, we

were able to successfully meet our Period 10 financial objective. The results of Period 10

crowned Firm D4 the cumulative net contributions leader in the VRD industry.

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895


       Our budget ranged from a low of $800,000 for Period 2 to a high of $1,128,000

for Period 8. Currently our budget is $1,104,000, which is 28% of the industry total. We

have held a 28% share of the industry budget since Period 6.

Target Market:

We focused on the segmented market of home users. With a focus on home users we

knew that our product would be closely related to two other markets, parents and

students. These market segments are very similar in their demographic make up. The

reason in selecting these three groups as a target was in loyalty and repeat future sales.

These three groups have time on their side. As the young generations in the families are

exposed to our skippo brand they would be more inclined to buy skippo brand in the

future. We wanted to establish a good relationship with the younger generations to

provide us with the most total customer equity. The family market segment has been

around since the beginning of time, and we know that it will be around for the entire

product life of VRDs. The market segments that involve family values will have little

change in buying patterns relative to the other segments. We believed that the home user

market and those similar to it are the least affected by new styles, fashions, and fads. We

also believed that the needs of the home users would be the most stable of the six target

markets. These beliefs showed to be true. Below, Figure 3 shows the percentage share of

our target market (units) quickly rose to 67.3% by Period 3, and never fell below 60%

after that. We currently possess 62.4% of the home users market share (units), and expect

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

to                maintain       at   least    that   percent   for     the   rest   of       the    product’s     life.

                                               Figure 3:
                         Target Market Share (Units) Industry D: Periods 1 - 10


                         41% 57%                                                     64% 62%
                                              67% 61% 72% 70% 70% 70%
 Market Share %

                   40%                                                                                    KLUD

                   30%                                                                                    RAJA



                         Home Home Home Home Home Home Home Home Home Home
                         Users Users Users Users Users Users Users Users Users Users

                             1        2        3      4    5        6     7      8        9         10


                    The relatively stable needs of the home users allow our firm to produce a

standardized product that does not have to be changed often, if at all. Therefore, we have

incurred little to no research and development costs during the lifetime of skippo. And

due to the low amount of specialized features wanted by our targeted markets, skippo has

the lowest production costs of $60, versus the average cost $80 of our three competitors.

These numbers are as of Period 10, and are consistent with the averages during all ten



                      The three market segments of home users, students, and parents have another

     commonality. They mostly shop in Channel 2, as shown below in the market research

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

report titled “Report 6: Customer Shopping Habits.” The report cost our firm $7000, and

was well worth the price. It showed us that the majority of all three of our closely related

         target segments (home users, students, parents) were shopping in Channel 2.

         Our original goal was to focus on distribution in Channel 2 to satisfy our targeted

customers’ wants. That goal later turned to accessibility of our product through

distribution in Channel 2 to all of the market segments that frequented the discount

retailers in Channel 2. We made steady incremental 20% increases in distribution

intensity from Period 1 to Period 6. In Period 6 both channels were running at 100%

intensity. Our shift from a cost-focused strategy to a cost leadership strategy was due to

the fact that all three of our competitors chose to focus on serving target markets that

were mostly shopping in Channel 1. Our new goal has allowed us to provide a low cost

product that is widely available in both channels. Intense distribution is the main reason

why we were able to maintain a dominant presence in Channel 2, as shown in Figure 5


MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

       Our firm currently employs 34 sales representatives, 14 in Channel 1 and 20 in

Channel 2. We are proud to say that our firm provides the most jobs for sales

representatives in the industry. The firm passions itself on operational excellence, its

ability to provide reasonable quality at a low price, while being efficient and volume


Advertising Efficiency:

       We are the industry’s leader in advertising efficiency. Our firm’s advertising-to-

retail sales ratio is .025, which means that for every $25,000 spent in advertising will

produce $1,000,000 in retail sales for skippo. Below, Figure 6 shows Firm D4’s skippo

brand’s advertising-to-retail sales compared to the other firms in our industry.

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895


          Our firm values honest and organized record keeping. All of our information is

updated as soon as we are aware of new changes. We utilize the best 21 st century

technology to organize all new information regarding our finances, statistics, and

information about competitors. We take pride in our release of financial information to

outside agencies. Recently, the Audit Review Challenge audited us on a claim of false

information. We were able to respond within the same working day to clear our name and

receive a full refund.

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

        Our current marketing situation has allowed us to boast as the industry leader in

units sold, amount of workers employed, and net contributions earned.

3a.    Internal Strengths and Weaknesses


       The name skippo was chosen because it was short, memorable, and unique. We

decided not to put a generic name on the product, but rather position the product so

people could easily distinguish our brand from our competitors. We want the name

skippo to be associated with thoughts of ease, simplicity, and fun.

       Our firm’s skippo has a low amount of special commands, which provides

simplicity for our customers. We provide a product that is easy to use for all ages, and

appeals to many different demographics. The amount of special commands on the skippo

is geared toward the home users, students, and parents. We wanted to optimize the

amount of special commands to please all three of our most loyal market segments. With

each increase in special commands our cost rises; therefore, in keeping with our cost

leadership strategy, we want to capitalize off of the market segments that want a low

amount of special commands. Since Period 1, skippo’s level of special commands has

been 8. The skippo has the lowest amount of special commands of all the VRDs in the

industry. Due to its position among the other firms’ products, the skippo is even able to

attract the market segment of parents who prefer 5.4 special commands, as seen in Figure

7 below. The skippo has an error protection of 4. Again, this helps keep production costs

low, and serves to satisfy the needs of the majority of our targeted market segments. The

ease of learning of skippo is 8. This feature is high compared to our competitors, but

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

necessary in catering to our customers’ VRD needs. The market research “Report 3:

Average Customer Preferences,” shown in Figure 7, shows that the home users and

parents want 8.3 and 7.7 in ease of learning. The skippo caters to their exact wants.

         We set out to provide a product that is easy to use for our multi-generational

clientele. The skippo is a consistent product that has pleased the parents, home users, and

students for a period of ten years. The skippo is uniquely positioned as a product that will

continue to appeal to those three market segments.

         Due to our cost leadership strategy we have limited differentiation for the skippo

product. The skippo does not appeal to those who want a sophisticated and complex

VRD. High-tech professionals are uninterested in the skippo because of its low special

commands and high ease of learning. Another limit, though slight, is the ability to market

the skippo based on its features. In promoting the skippo, focus must be put on its



MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

       In order to sell our low priced product and make a profit we needed to be able to

make it accessible to our markets. We decided to gradually increase our distribution

intensity as long as the skippo was selling within 20% of our estimated unit sales forecast

each period. We were able to increase distribution intensity to 100% in each channel

because we met and exceeded production quotas for each of our previous ten periods.

We kept Channel 2 more intense than Channel 1 from Period 1 to Period 5 because that is

where the majority of our VRDs were being sold. High sales in Channel 2, gave us the

luxury of increasing the distribution intensity in Channel 1 as well. We increased the

distribution intensity 20% in each channel from Periods 1 to Period 5. Our place strategy

of making the skippo accessible in every location possible has solidified our firm’s

position as the leader in total VRDs sold. We believe that our distribution strategy is the

best advertiser of our product. Though indirect, having the skippo in every location that

sells VRDs has been a great way to get the product noticed. Our tactic of indirect

advertisement has been a huge competitive advantage for our firm.

       Our intense distribution system and our logistical setup are costly. Our intense

setup has the potential of not paying itself off if our product does not sell. Therefore, it is

pertinent that we offer a product that is widely appealing and affordable to the multitudes.

Sales of the skippo are heavily reliant on its low price and product features to feed the

firm’s enormous distribution setup.


       Our promotional mix of non-sell time and commissions for our sales

representatives, advertising spending and style, and sales promotion were key in

obtaining our top position in net profits in the VRD industry. Our firm’s most valuable

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

asset is our human capital. We pay thirty-four sales representatives a base salary of

$20,000 per year. That is a $680,000 cost that has no value, unless the representatives are

able to sell the skippo. To protect our $680,000 investment we treat our representatives

with an industry leading percent non-sell time of 28% in Channel 1, and 24% in Channel

2. All three of our competitors allow only 10% non-sell time for all of their sales

representatives. By allowing our representatives more time to organize and prepare, we

have been rewarded by the workload they are willing to take on.

       Period 10 results, shown above in Figure 8, show that our average sales

representative in Channel 1 handles 367% of the expected sales representative workload.

Our representatives are not only willing to do more than three times the work than that of

our nearest competitor Firm D3, whose sales representatives workload index was 98%;

they are willing to give the skippo a .628 channel push. Firm D3’s channel push for the

InnoVRD3 is just barely higher at .657. Our channel push in Channel 2 is .71, compared

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

to our nearest competitor, Firm D3’s .283 channel push. This competitive advantage in

channel push is obtained while working our sales representatives at a 197% workload

index. This is made possible through our high percent of non-sell time that we give our

representatives, as well as the 9% commissions that we pay them.

       Our advertising strategy has been to spend whatever we have left in the budget.

We mainly advertise indirectly through our intense distribution strategy and high channel

push by our loyal sales representatives. We chose to advertise indirectly in our

advertising spending style as well, to promote future sales of our product. We used this

tactic to counter our competitors’ ploys of intense direct advertising through big


       Starting in Period 3, our firm began to experiment with offering our retailers sales

promotion money. We spent no more than $10,000 in either channel until Period 5. From

Period 5 until present, we have spent a competitive amount of money on sales promotion

in both channels. In Period 10, our latest period, we spent $34,000 in Channel 1, and

$14,000 in Channel 2. We wanted to push the amount spent for sales promotion by other

firms because we held the largest portion of the industry budget. Our strategy behind this

thought was that more spending by the other firms in our industry on sales promotion

meant the less they will have to spend on other necessary operating assets. We did not

allow the increased spending on sales promotion to hurt our firm, rather help gain a

bigger competitive advantage on the other competing firms.

       Our firm is known for high workload amounts. It is imperative that we continue to

provide a high percent of non-sell time and high commissions. If we do not, we run the

risk of high employee turnover and dissatisfaction levels. The sales promotion spending

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

among all firms in the industry is beginning to lower net profits for all firms. This poses

potentially lower net contribution levels once the absolute threshold of sales promotion is



         Our price strategy has been to provide a consistently low price in both channels.

We have maintained a similar retail price in both channels by controlling the price that

we sold the skippo to the retailers for. We have deemed it necessary to keep a slightly

higher price in Channel 1. This has been done to encourage consumers of the skippo to

buy more in Channel 2. Our current gross profit margins are $30 in Channel 1 and $55 in

Channel 2. Increasing sales in Channel 2 will result in a higher percentage profit margin

in comparison with sales in Channel 1.

         The higher gross profit in Channel 2 is due to the differences in markups between

the two channels. The customary markup by dealers in channel 1 is 50 percent. Dealers in

channel 2 use a 35 percent markup. Our goal has been to market our price toward the

home users, whose ideal price range is $140.00 - $177.50. The students would like to pay

a little bit less, and the parents are willing to pay a little bit more. To attract all three of

these segmented markets, we decided to aim for a retail price of around $177 in each

channel. The formula below in Figure 9 shows how we calculated our wholesale price for

each channel.

                                    Figure 9: Markup Percent Formula

           Dealer markup percent = (Retail selling price – Wholesale price) / (Retail selling price)

                                   Channel 1: 50 = ($180 – $90) / ($180)

                                Channel 2: 35 = ($177.50 - $115) / ($177.50)

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

       Our low priced skippo product has provided us with a big competitive advantage.

Market segments, such as creators and managers, buy the skippo solely on the basis of

price and availability. We take great pride in each sale that our firm makes to a market

segment that we did not initially target. Each of these sales was a potential sale for one of

our competitors, but our firm was able to steal it away through one of our many

competitive advantages.

       Our low price has caused us to be extra cautious when figuring out the ideal

amount of production to request. We made the mistake of understating our production

requested in Period 3 and Period 4. During these two periods we sold out of the skippo,

causing potential customers to buy our competitors’ products. We steadily increased our

production requested accordingly to keep up with the increased demand by consumers for

the skippo, but it still remains an area of concern for future periods.

Marketing Research

       Our firm has been very methodical in how we analyze any historical marketing

reports. After our first period we ordered seven market research reports, totaling

$134,000. It was a big investment to make, but we used the information in the reports to

find out about the industry and the marketing mixes of our three competitors. We

continuously bought “Report 1: Market Share By Segment”, “Report 2: Market Share By

Channel”, and “Report 5: Detailed Sales Analysis” after every period. These three reports

cost our firm $42,000, but it has been a cost that we deem necessary to stay competitive.

The other reports that were classified as unnecessary costs were important in early

decision making. As reported earlier in previous sections, “Report 6: Customer Shopping

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

Habits” and “Report 3: Average Customer Preferences” were used in making important

strategic decisions that led the way to many future tactical decisions.

       The amount our firm saves in comparison to what we believe our competitors

spend on market research reports has become another cost saving competitive advantage.

Customer Satisfaction:

       Our goal of achieving the highest amount of total customer equity is based on

customer satisfaction. Our simple, low cost product comes with the minimal amount of

customer service necessary to ensure repeat business. In order to provide our customers

with an easily accessible and low priced product we do not spend any amount of money

to go over and above our basic duties in serving the customer. In turn, we believe that our

customers thank us through repeat business due to our cost leadership strategy.

       All three of our competitors earned a higher individual firm rating based on

customer satisfaction than us. This is due to the large amount of customers that we serve

each year. Throughout our ten period history, our level of customer service has allowed

us to give back some of the savings to our customers in the form of a low priced product.

3b.    External Opportunities and Threats


       The skippo has a distribution intensity of 100% in each channel. The nearest

competitors’ distribution intensity in Channel 2 is KLUD at 33%. The opportunity given

to our firm to sell the skippo without much competition in Channel 2 should continuously

be capitalized on.

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895


          An increasing threat in the industry is the rising amount of sales promotion being

offered to retailers. We believe that the saturation level will be reached soon, which will

only hurt the net profits of all of the firms in the industry.

          The average workload of each sales representative at Firm 3 is 92%, compared to

our sales representative’s average workload of 267%. On top of that, Firm 3 is now

paying a commission percentage of 11%. These statistics might cause our shareholders to

question the firm’s intent on keeping our valuable human capital resource justly satisfied.

                               IV. New Marketing Objectives

          Our firm’s new marketing objectives are to maintain our current position as the

industry leader in sales volume, market share (units and $ sales), and net profits. We plan

to continue our high sales volume due to our expansive distribution system that has

already been established. Our current market share (units) is 43.8%. We plan on

maintaining this number by offering a product that is geared toward satisfying the many

student, parents, and home users in the industry. We also plan on selling our product to

other market segments solely based on our low price. In order to keep our price low, and

to maximize net profits, we encourage the new marketing team to keep close watch on

unnecessary costs.

                                V. New Marketing Strategy

          Our new marketing strategy will not vary much from what it has been in the

previous five periods. Our target market will continue to be the home users, with

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

secondary target markets of students and parents. We will not change our product’s

features to keep costs down and to provide the same simple, low cost product to the

majority of consumers looking to purchase a VRD.

       Our distribution intensity of 100% in both channels will continue to satisfy our

customers want to have a low price product available at every location. We will continue

to support thirty-four sales representatives, totaling $680,000 of our $1,104,000 budget.

We will provide them with the same percent of non-sell time, 28% in Channel 1 and 24%

in Channel 2. And we will continue to pay our hard working sales representatives a 9%

commission rate.

       Our advertising spending and customer service budget will both be decreased by

$5,000, and we will cut our sales promotion in Channel 2 by $1,000. We believe that the

$11,000 worth of cuts will be better spent on market research reports that were not

purchased last period. The $42,000 in market research reports that will be purchased will

provide us with information that will continually allow us to remain atop the industry in

sales volume, market share, and net profits. We have included a Pro Forma Financial

Summary that we suggest you use for next period. It is labeled Figure 10: Pro Forma

Financial Summary for Firm D4, and can be found on the next page of this report.

Final Statement

       Our marketing team has worked hard to produce a product line as successful as

skippo. We believe that our internal company strengths are very much superior to our

competitors in the VRD industry. We recommend that the new marketing team look into

producing a new product that appeals more to the needs of the high-tech professionals

and managers. Our distribution system that supplies our thousands of customers with our

MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895

skippo product will also be able to handle the load of a new product line. Financing the

new line shouldn’t be too hard, due to our previous successes in the VRD industry as

shown by this report. May you continue the legacy of the skippo brand, by keeping in

mind the mission, vision, and values that our firm has so passionately pursued in previous



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