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How Does Marketing Increase Sales

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					Marketing 301 sec-006
Group 4
Christopher Rupp
Jon Petrusik
King Man Pun

I. Mission Statement

To become the preeminent name in improving the lives of those with infirmities

II. Marketing Objective

   1. Increase sales by 10% each period

   2. Increase the retention rate for Allround+ to 80%

   3. Introduce a new product line and achieve a brand awareness of 60% after 3 years

   4. Consider how to make up for Allround’s aging appeal as new products appear on the

       market, and how to make Allround+ the new cash cow

   5. Increase the overall stock price for the company to no less than $200 within 4 years

III. SWOT Analysis

Strengths

       Allstar Brands Corporation is one of the leading packaging manufacturers in the world.

The company has three divisions, and Allround is one of the brands under the Pharmaceuticals

division. The other division, International, not only has strong presence in European market, but

also distributes Allstar products globally. It helps Allround and Allround+ get into new markets

and distributes them to channels effectively. Therefore, Allround has the strongest channel

distribution in the market, and Allround+ follows.

       Beside the success of Allstar Brands Corporation, Allround is also the market share

leader in the over-the-counter (OTC) cold and allergy remedy market. Compared to the other ten

brands, which are produced by other four competitors: B& B Health Care, Curall
Pharmaceuticals, Driscol Corporation, and Ethik Incorporation. It captures over 20% of the

market share. Additionally, Allround has the strongest brand awareness, brand trials, frequency

of purchase ratio, and space allocation, which is an important factor to the sales. Customers also

view Allround as the most effective product for multiple cold symptoms in the market.

Customers’ satisfaction is over 64%, which is leading the market, and Allround+ has over 54%.

The brand awareness of Allround is over 82.8% and even Allround+, which is a new product in

the market, has over 77.4% brand awareness. Therefore, it is evident that Allround’s marketing

team targets and communicates to the customers effectively and keeps them loyal.

   Furthermore, Allround has strong market sense. Allround figures out the change of

customers’ behaviors. Allround marketers figured out that consumers have more concern for

healthier lifestyles than before. Therefore, side effects of medication have become their greater

consideration. The idea of original Allround containing alcohol was to help consumers rest.

However, most customers consider alcohol as negative side effect. Therefore, Allround has been

reformulated by dropping alcohol at the end of period 2. Furthermore, consumer research shows

most customers prefer capsule form for the added convenience. Duration of the medicine was

also a factor for consumers when choosing products. Based on these changes, Allstar introduced

Allround+, which is the first twelve hours multiple cold symptoms capsule in the OTC market.

Reformulation and line extension helped Allround satisfy consumer’s need and maintain their

loyalty. It also captured new customers attracted by the performance of new Allround or

Allround+.
Weakness

       Compared to the other ten brands, Allround is the market leader, however, retention rate

of Allround is almost 15 - 20% lower than major competitors such as End+ and Coughcure. Six

out of ten customers do not intend to buy Allround again after they try it.

         In additional, Allround is a cash cow product and the OCM group highly relies on it to

generate most of its cash. However, as Allround starts get into the maturity stage, sales volumes

increase only slightly or even reach a steady state. At this point in time, sales mostly rely on

loyal customers’ purchases. Allround will eventually get into the decline stage, which means

sales will decrease sharply. Furthermore, Allround+ is just starting to get into its growth stage,

and based on the BCG matrix, Allround+ is still in the question mark quadrant of the grid. It has

relatively lower market share but high market growth. Allround+ needs heavy investment in this

period. Therefore, the need to lower the cash generated from Allround and increase the

investment to Allround+ will provide financial stress to OCM group.

Opportunities

   Increasing market penetration is a great opportunity to increase the actual sales. Basically,

not all people suffering cold symptom are buying medicine. Ideally, if Allround and Allround+

can increase the penetration by marketing activities, the actual sales will increase significantly.

   Furthermore, base on the GE matrix, Allround+ is in a “grow region”. The total retail sales

increased 69% and the industry grew about 7% each period. The statistics showed strong growth

in the market and high industry attractiveness. Also, Allround is a market leader in the industry.

Allround+ is the only twelve-hour, multiple cold symptoms capsule in the OTC market.

Competitive strength of the business unit Allround+ is quite high. Therefore, Allstar definitely

should invest in Allround+.
Threats

          The major threats come from competitors. In the first three periods, the market had been

introduced to four new products: Dryup, Coldcure, Besthelp+, and Coughcure+. All of these are

related to cold symptoms or multiple cold symptoms relief. So, these new products directly

compete with Allround and share the same market segment. They not only lower Allround’s

market share, but also force Allround to increase it’s marketing budget to maintain the sales and

shares. Therefore, the promotional and advertising expenditures increased significantly in the

past ten periods. The advertising spending increased an average of 9.6 % and promotional

spending increased an average of 2.1%. The total marketing increased almost 10% in the first

seven periods. Increasing marketing budget directly increases variable cost, decreases unit profit

and lowers product contribution.

          In addition, the negative perception of customers is the other threat to Allround. Recently,

consumer groups and some physicians questioned whether or not multi-symptoms brands

provide excessive medication for specific maladies. Since Allround and Alround+ are one of the

multi-symptoms medications, this concern may have negative effect on consumer perception

such that consumers do not buy Allround and, instead, buy other cold or allergy medicines.

Target segmentation

   Allround mainly targets empty nesters and retired group because they are groups of loyal

customers, since Allround has been around for a long time. Allround+ targets young singles,

young families, and mature families. These segments are working groups who focus on

convenience and have busy life styles.

   Beside these customers, Allstar can also consider targeting new market segments. Niche

market can be profitable if the marketers target and communicate to the niche segments
correctly. The research shows heavy potential in the child market segment. Allround+ targets

these young families with children. Therefore, Allstar can launch new products such as cold

liquid or capsules for children. Since other brands have already introduced children’s cold or

cough liquid in the market, Allround+ has to differentiate itself by providing different values.

Therefore, a new product could provide different flavors as a cold liquid or capsule that children

can chew. Nobody has yet introduced a product like that.

    In addition, Allstar could launch allergy products that are totally new to Allstar brands. The

allergy market segment has shown great potential and strong growth recently. Customers realize

that allergies are separate from virus and flu related illnesses, even though they share similar

symptoms. However, some customers still use cold medicine to relieve allergy symptoms. So,

Allstar should try to change these consumers’ behavior. If consumers only use allergy medicine

for allergy relief, then it is a profitable market to get into.

IV. Marketing Activities

    1. To Achieve Objective #1:

There are three basic things that need to be accomplished. The first is to increase the price each

period. We would generally increase the price by a percentage relative to the projected rate of

inflation but never exceeding that rate. This would allow the product to generate more profit each

period, while remaining at a market-leading price that matched the overall fluctuations of the

economy, yet it never got to a point that was detrimental to sales. Increasing the price each

period in this fashion, therefore, is a practice that should be continued.

        The second practice is to concentrate on increasing promotional allowances and sales

force based on the information gathered regarding the Market Outlook for growth in individual

retail channels. If grocery stores, for example, were showing the strongest growth, and mass
merchandisers were the weakest, we would take sales persons from a category like mass

merchandisers and add them to the grocery sales force. Likewise, as any individual market looks

strong and has a high growth rate, give it higher promotional allowances (based on their relative

differences in purchase amounts).

         The third practice is to pay attention to a product’s relative strength and place in the

Product Life Cycle to decide what type of advertising to pursue. If a product is doing well and

winning over the market, consider advertising with less “primary” and “benefits” messages and

concentrate more on “comparison” and “reminder” advertisements.

      2. To Achieve Objective #2:

      As mentioned in the SWOT analysis, the target market for Allround+ is a bit busier, so,

spend advertising dollars to promote the capsule form fully. Also, do not hesitate to reformulate

and make changes to Allround+ that make it seem like a new and better product. When we

reformulated Allround, and subtracted alcohol, our retention rate increased significantly. Also,

think about ways to keep the product in good shelf space through promotional allowances and

co-op advertising so that people remember Allround+ and are more inclined to continue buying

it.

      3. To Achieve Objective #3:

Consider introducing a new product line that does not conflict with Allround and Allround+’s

market share in order to generate greater overall profits for the company. When we decided to

introduce a line extension, what worked well for us was to create large differences in marketing

for the two products. For Allround+, for instance, we concentrated on primary and benefit

advertisements along with point of purchase and trial size retail programs. For original Allround,

we stuck to Co-op retail programs and reminder advertisements. Therfore, we recommend that
you use different marketing schemes for each product. Allow any new product introduction to

fill an entirely separate niche from Allround by not only marketing it differently, but by pricing it

differently and having it cure fundamentally different symptoms.

        To get brand awareness to 60% in 3 years, focus most of the overall advertising budget

towards advertising on the new product and give high allowances to retail channels. This will

allow them to sell the product at a low price and give it good shelf space so that consumers are

aware of it, while still making a significant profit themselves. Using expensive and high quality

advertising initially will also help to hook users a lot faster.

    4. To Achieve Objective #4:

    We have already begun the process of treating Allround as an old product by advertising it

differently than Allround+. However, it will only become more expensive and begin to decline in

the user’s mind as an inferior product. Therefore, use higher promotional allowances and less

money on advertising and retail programs to mil the cash cow for all that it is worth. This way

you do not increase fixed costs but you still give retailers an incentive to buy the product and get

it to the consumer. When Allround begins to decline sharply, and you have introduced a new

product that is hopefully doing very well, do not hesitate to cut funding to the old product and

focus your efforts on the new product. This may not be for many years, but it is certainly a factor

to keep in mind while marketing other products and splitting up the budget among your interests.

    5. To Achieve Objective #5:

The stock price will be around $150 when you take over. In order to get it above $200, there is

no one thing that must be done. You must be ready to adapt and change as the market changes.

If you complete all of the objectives laid out before you in this marketing plan, you will achieve
objective number five. Just remember to stay alert for changes and do not be afraid to pursue any

perceived opportunities.

V. Lessons Learned

Products
       At the start of our company, we were only distributing a 4-hour multi-symptom cold

medication, All-Around. This has proven to be our biggest money maker due to the fact that the

public was already familiar with the product at the start of the simulation. In recent weeks we,

have seen a decline in All-Around. Although slight, this decline is a sign of things to come.

          In the third week, we launched All-Around + which is our 12-hour time released version

of All-Around. The release of this new pill caused our stock to drop for the first and only time.

Although the new All-Around + does not have the market presence of the original, it was able to

turn a profit after the second week of sales.

Pricing
          In regards to pricing, we have not decreased prices to increase sales; we have only raised

prices to keep up with inflation to the best of our abilities. With our original product, All-

Around, we dealt with inflation by increasing our price an average of twenty-five cents per week.

Over the seven weeks that this product has been on the market, the price only increased by a total

of a $1.70.

          With All-Around+, we have only been increasing the price by around 28 cents per week

in order to keep up with inflation. We have been keeping the price of All-Around+

approximately 70 cents cheaper than All-Around in order to switch the market focus to All-

Around+ since All-Around is on the decline.

Promotion
      Promotion has always been our primary source of expenditure. Since the beginning, we

have spent almost seventy percent of our budget on promotion and advertising. Originally, it was
All-Around that used the majority of our budget. After a few weeks of trial and error, we found

the best way to promote All-Around was to use a combination of co-op advertising, product

displays, and coupons.

       In recent weeks we have switched our promotional focus to All-Around+, dedicating

about 50% of our budget to its promotion. When we first started promoting All-Around+ we

used the same methods as All-Around, but we soon realized it was not nearly as effective. So

after some experimentation, we realized that product displays and trail sizes were going to play a

much bigger part with All-Around+ then they did with All-Around.

Placement
      Throughout the history of our company, our product placement has changed very little.

Of the few changes we have made to our placement, our most effective one has been giving the

wholesales a bigger discount.   This move produced the only real change in our distribution

scheme.

				
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