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
LuLu
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.
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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
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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.
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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
period.
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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
wealth.
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.
People:
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.
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MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895
Budget:
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
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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
100%
90%
80%
41% 57% 64% 62%
70%
67% 61% 72% 70% 70% 70%
Market Share %
60%
Skippo
50%
InnoVRD3
40% KLUD
30% RAJA
20%
10%
0%
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
Period
Costs:
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
periods.
Distribution:
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
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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
below.
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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
focused.
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.
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MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895
Audits:
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.
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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
Product:
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
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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
simplicity.
Place:
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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.
Promotion:
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
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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
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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
spending.
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
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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
reached.
Price:
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)
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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
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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
Opportunities
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.
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MKT 304, #12333, Firm D4
Strategic Marketing Plan
November 23, 1895
Threats
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
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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
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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
periods.
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