1 Introduction – Marketing plan for product selected
In today’s competitive business environment market planning is a useful managerial tool for all organizations, both large and small firms, new and mature products. A marketing plan is usually prepared for a number of reasons, for example, as part of an annual planning process of a well-established product, or as a specialized strategy to introduce new products, or enter new markets.
In this assignment we will prepare a marketing plan for a new product in the market place. As shown in more detail in the marketing plan below, a new recipe for potato chips will be marketed by Frito-Lay Company in the salty snack industry.
1.1 Marketing plan
There are a number of different ways how a marketing plan can be presented. The approach that will be adopted here is to present it in eight different parts in the following subsections, as follows (Kotler P. et al. 1999, p 112, table 3.1):
Part 1 – Executive Summary.
Part 2 – Current Marketing Situation
Part 3 – SWOT Analysis
Part 4 – Objectives and Issues
Part 5 – Marketing Strategy
Part 6 – Action Programmes
Part 7 – Financial Budgets
Part 8 – Controls
1.1.1 Executive Summary
The product illustrated in this marketing plan, no limits computer, is a product launched for a dynamic and constantly changing market. Fierce competition is faced in such a market not only by its direct competitors but also by substitute products. Competition will stay on the grounds of product quality, price and after sales service.
The product will be directed both for industrial and domestic customer groups. The distribution network designed for these clients will be the firm’s website, sales staff in two shops and orders will even be accepted by telephone, leading to visits by our sales people to the client ordering the goods.
Being a product possessing a faster processor, a temporary competitive advantage will be attained in the market. The two retail shops that the firm own will allow product demonstrations and top management support and coordination shall also sustain the likelihood of success of no limits computer. In view of the weakness that the product being a standard one is violating a market trend that consists of increasing demand for customized computers it is important that such strengths are utilised to the maximum. This is also imperative in light of the high competition threat there is in the market.
We are aiming to attain a high product market share during the product life and invest in research and development in order to replace the product at the decline stage and thus continue operating in such market. The opportunity of international markets will also be considered at this stage. A product growth marketing strategy is stated in the this marketing plan and such aim is intended to be achieved with the aid of a good marketing mix, as developed in such program. Distribution, product features, branding, product labeling, promotion and pricing will be considered in particular to reach the aforesaid aim.
Financial budgets together with functional budgets are set in order to examine the financial performance of no limits computer. Operational controls on promotion, product quality and financial effectiveness is set to ensure that this plan is met. Namely to say is the Total Quality Management Philosophy that will be adopted to ensure product quality and Standard Costing System to control costs, which will be used. Recall tests, analytical procedures and qualitative evaluation schemes shall also be applied on the promotion mix to ensure their proper effectiveness.
1.1.2 Current Marketing Situation
18.104.22.168 Target Market
The salty snack market, which comprises potato, tortilla and corn chips, together with already prepared popcorn is a dynamic and constantly changing market. Indeed, even though rising sales are experienced in this market, a number of firms are ceasing trading in this industry or seeking consolidation with other companies due to its tough competition (Reference for business). From its inception, this market has changed a great deal based on customer orientation and demands. By analyzing the main trends of such market we can identify its critical areas.
A preoccupying trend that is constantly portraying its effect in the salty snack industry is the health issue of potato chips. A research conducted in 1993 revealed that tight regulations are being imposed by the Government with respect to nutrition listing and labeling (Reference for business). This was the result of the enactment of the Nutrition and Labeling and Education Act in 1990. Such act for instance demands detail nutrition listing such as saturated fat per serving, daily reference values to aid comparison of dietary factors and more (Purdue University).
In addition, clients are also requesting more nutrient potato chips in view of the increasing health concerns. The drastic pressure put by nutrition professionals on the gastrointestinal hazards of potato chips and other related health issues is incepting a trend of nutritional food shifting from low fat products. Indeed at this stage it is important to highlight the rapid fall that the Wow fat-free potato chips manufactured by Frito-Lay Company had in 1999 even though they had lower cholesterol and fattening features (Reference for business).
The last but not least characteristic of the salty snack market is the necessitating flavor variety in the potato chips product. The late 80s and 90s have underlined the fact that clients demand vast product variety and choice in the flavors offered. In fact, the adoption of barbeque and sour cream and onion potato chips products aided in sustaining and developing the firm’s market share (Reference for business).
After analyzing the market trends we can now adopt the three-dimensional business model of Harvard Professor Derek F. Abell, shown on 12 Manage website in this marketing plan in order to provide a better insight of the market and see that the company’s product fits into such market.
In his model Abell identified the following three dimensions. We will utilize these dimensions to highlight the characteristics of the salty snack market as follows:
· Served customers groups – the customers that the organization should market are according to the age group. Clients between the age of four to ten years will demand a sweeter potato chip than those in the eighteen to twenty five age category.
· Served customer functions – the market trend reveals that the new potato chip marketed should hold a vast array of flavors in order to complement the product variety demanded.
· Technologies utilized – intense research and development should be applied in order to enhance the product features to be healthier and nutrient as the customer is demanding. The company should therefore devote the necessary finance for such activities.
22.214.171.124 Product Features
The main features of ‘Sklips’ Potato Chips (original) are the following:
o Dehydrated Potatoes;
o Potato Starch;
o Sunflower Oil;
o Lecithin; and
o Dried Onion.
· Nutrition Information:
Of which sugars
Of which Fibre
· Serving Size – 1 oz (28g/About 10 Crisps)
· Servings per Container – 10
Note: The product features were derived by examining present nutrition facts of products already marketed by Frito-Lay Company and similar products of competing firms.
Apart from the original ‘Sklips’ Potato Chips outlined above, a barbeque flavor, prawn cocktail flavor, cheddar and sour cream flavor, and extra strong flavor will be marketed.
The product upon which this marketing plan is based will face direct competition from competitors providing similar products, like General Mills Incorporation, Kellogg Company, Procter & Gamble, UTZ Quality Foods Incorporation and Kraft Foods Incorporation (Cbronline.com). It is true that at the introductory stage the product will possess better features that will attract clients, but competitors will shortly manufacture similar or more health friendly products to compete. They will not only compete on price and product quality, but also on distribution mediums.
Frito-Lay Company is presently one of the market leaders in the salty snack market. It holds over 67% of the market’s sales. However, the firm commenced facing tough competition from UTZ Quality Foods Incorporation on the grounds of distribution mediums. The utilization of the internet to inform clients and market the products sold has boosted UTZ Quality Foods Incorporation in this market (Reference for business). Management of Frito-Lay Company should keep abreast this competitive tool when the marketing strategy and action programmes are prepared in this marketing plan below.
The main distribution networks available that will be adopted consist of direct channels as follows:
· Hypermarkets, supermarkets and mass merchandisers are key retailers for the distribution of the product to the client. Since the company is already well established, the present retailers used by the firm should be adopted.
· A group of specialized salesmen whose responsibility is to negotiate agreements with new retailers willing to sell the aforementioned product. This distribution medium can also apply to other products marketed by the organization.
1.1.3 SWOT Analysis
In this section, the strengths, weaknesses, opportunities and threats of the organization will be outlined in line with the external and internal environment that it will operate in.
The three main strengths that the company presently possesses are the following:
· The product that will be launched in the market has better attributes than competing products by being a healthier good leading to a temporary competitive advantage. This will help the organization to generate revenue and sustain and build up its reputation.
· The company already holds a vast number of agreements with well established retailers. This thus enables the corporation to quickly distribute and introduce effectively the product in the market.
· Top management is fully aware of the need that a constant customer orientation approach is necessary for the survival of the organization. Their pressure on employees to focus on clients will thus help the firm to be more competitive and responsive to threats from the external environment.
The most fundamental weakness that the enterprise will have is the health pressure exerted in the external environment. Even though it is a healthier product when compared with competiting ones, the good still contains salts, sugar and other hazardous elements. For instance, recent university studies highlighted the fact that low fat products like the one marketed increase the risk of cancer and hearth disease (Reference for business). Such adverse influence will negatively affect the market reach of the product.
The key opportunity that the organization faces is that in the future it can market its product internationally. Exporting in foreign countries can help the firm increase its worldwide market share of potato chips and enhance its reputation globally. A common saying used in business management which should be followed is that we have to “think local but act global”. This means that we have to consider each countries client’s needs and wants in isolation but we have to market our product internationally. The firm is already marketing products internationally, which further aids in the applicability of such business measure to Sklips Potato Chips.
Being a highly dynamic and challenging market, there are a number of threats that may emerge in the salty snack market. The most significant ones are explained below:
· In this industry the price difference between competiting firms is getting smaller all the time even though the market is increasing. Intense competition is directing towards closer product substitutes. This therefore enhances the need for tremendous cost efficiency and cost control to enable competitive prices. Improved product quality and brand image are also very important because they are becoming the only distinguishing feature from competitors products.
· In the salty snack industry competitors can in the short term imitate our products. There is also the risk that they can issue better products in terms of health and/or taste. This therefore stems out the need of continuous research and development in new products. It is a vital mistake if management relies on one product and avoids researching for improved products of better attributes.
1.1.4 Objectives and Issues
126.96.36.199 Purpose of Marketing Plan
This marketing plan is prepared in order to introduce this new product, which will be placed in the market next year for this well established organization. Our main objective is to provide adherence with the market and customers needs and enhance internal co-ordination within the firm itself. This marketing plan is in line with the corporation’s values and mission and vision statements, which are named in the next sub-section.
188.8.131.52 Organization’s mission/visions statements and values
To become the worlds’ favorite convenience fun foods company (Fritolay.com).
Deliver sustained growth in the organization through proper utilization of the factors of the production of the firm (Fritolay.com).
· Involved employees
· Customer orientation
· Retailer selection and maintenance
184.108.40.206 Marketing Objectives
In this area we will consider marketing objectives of four main areas: target market objectives, promotional objectives, distribution channel objectives and research and development objectives.
220.127.116.11.1 Target market objectives
The total market share that management intends to achieve over the product life cycle is shown below. Due to the high costs attached with a market research no intensive research was conducted. We hypothetical assume that the figures were gained from utilizing past data from the national statistics office.
18.104.22.168.2 Promotional Objectives
We have to comprehensively promote the product’s brand image and promote its benefits and value to maintain and build up a good brand. Advertising and promotion techniques should also be adopt to reach the expected level of sales and create product awareness in the market.
22.214.171.124.3 Distribution Channel Objectives
The distribution channels adopted should be easy reachable by clients. We have to adopt the present distribution networks that the company holds.
126.96.36.199.4 Research and Development Aims
It is imperative that research on product development is conducted continuously. We expect that at the maturity stage of Sklips potato chips life (year 9) new potato chips will be developed to be launched at the decline stage of this product to replace it. This is imperative if the firm intends to continue in this market.
1.1.5 Marketing Strategy
The general marketing strategy formulated by management under which this marketing plan is being developed, is a brand strategy based on the premise to meet customers expectations and demands and improve shareholders wealth. This can be attained through a growth strategy in line with the company image as stated in sub-section 188.8.131.52.
Being a long-term plan the growth strategy prepared will cover more than one year of operation. Ansoff product/market expansion grid, shown in 12 Manage website will be utilized in order to analyze the growth strategy that the firm’s management is planning to adopt:
The new product considered in this marketing plan, named Sklips potato chips will first be categorized under product development. Under this strategy management will try to market the good in existing markets to regular clients. Being a new product, a low price will be charged at first in order to quickly penetrate the market
Eventually to portray leadership in innovation, a product development strategy will be adopted for new products launched into the market with better features derived from research and development.
Presently market development in international markets and diversification strategies has not yet been developed. These will be considered subsequently when this product reaches maturity in the local United States marketplace.
1.1.6 Action Programmes
The product’s brand name selected, ‘no limits computer’, is very effective because it is easy to remember, can be legally registered and shows an important product attribute. Being more powerful and advanced than competing products, this new product will provide a temporary competitive advantage. However, to provide proper branding it is important that the firm’s management does not stop there. At the introductory stage of the product life cycle, the product will be regarded as a shopping product1. Through good branding management should transform the product into a speciality product2 at the other stages of the product life cycle to sustain growth in line with the organisation’s objectives (Kotler P. et al. 1999, p 563, Table 13.1).
Proper branding for no limits computer can be performed by showing the additional benefits attached with this computer apart from its processing strength. For instance, by adopting very good after sales service and showing constant willingness to help clients in cases of faulty computers. If, for example, a student returns with a faulty computer, if we provide a substitute computer during the replacement period, we can reveal additional benefits to the client.
The adoption of a return back warranty may also show high confidence, which can improve the product’s value. It is also important that thorough inspection points are placed in the manufacturing process to ensure that faulty components are identified before sold to customers, and thus diminish the negative effect on the product’s brand value that such damaged products may lead.
184.108.40.206 Packaging and Labeling
Packaging does not play an important role for desktop computers. The box in which the computer is carried does not signify a lot because it will usually be thrown away once the computer is installed. What is important is the desktop style and labelling.
The tower case will be with transparent plastic so that the hardware inside the computer can be seen. A colourful tube will be placed with the inside hardware so that when the computer is switched vivid light will be seen. As already stated in the product features sub-section three different colours are available for the tower case, keyboard and mouse. This is done with the aim to enhance the style of the product.
With respect to labelling it is planned to attach a sticker at the front of the tower case with the name of the firm and contact details. This is done with the objective to promote the producer in the client’s residence and to serve as easily accessible contact information whenever the customer is encountering problems with the product or needs some information from the organisation.
Being a new organisation with a new product, it is important that potential informative advertising is adopted in order to create product awareness and thus penetrate the market (Kotler P. et al. 1999, p 794). The main areas, which need to be considered at this planning stage, are the media vehicles to be adopted, the media timing and the advertising message itself.
The media vehicle chosen should be the one with the highest reach and frequency. The advertising mediums chosen can be classified between offline promotion mediums and online means.
Offline advertising tools are adverts on computer magazines, newspapers, business cards, billboards and bumper stickers on cars. Advertising specialities like calendars, pens and more, with the company and product name imprinted on them should be given because they are very effective in product awareness. A survey in the 90s carried by Lane R et al. revealed on pages 453 to 456 that 63% of clients surveyed who were carrying advertising specialities remember the advertisers name and message.
Online mediums that will be adopted consist of search engine optimisation, pay-per-click advertising opportunities, such as google ad words, and incoming links campaigns.
Since the product is new and at the introductory stage the timing of the advertising should be all year round in order to create product awareness and start harnessing a good brand image.
The advertisement should basically show two things. The product itself highlighting its power and speed and the firm’s website URL in order to lead clients to access to more detailed information about the product and the organisation.
220.127.116.11.2 Sales Promotion
The objectives behind the sales promotion of no limits computer are to help the organisation attain a long-term market share and help in revealing the attributes and benefits of the product at its early stage of the product life cycle.
Point-of-purchase promotions like IT fairs are an important medium that the organisation should utilise in order to show the product and its features (Kotler P. et al. 1999, p 823). It is important that such events are well planned and scheduled in order to have the sufficient resources to meet and if possible even exceed customers’ expectations.
Ad speciality items like pens, calendars and T-shirts should also be given to clients and distributed to prospective customers in order to build up the reputation of the organisation. In a study in the 90s, as revealed in Kotler P et al (1999) textbook, more than three-quarters of the 63% surveyed clients who carried advertising specialities remembered the advertiser’s name or messagea. This clearly shows that advertising specialities are an effective sales promotion tool.
18.104.22.168.3 Public Relations
The product can also be promoted with the aid of public relations. Being a new product on the market with technological advancements, the organisation can utilise public relations like news, public speeches and newspapers articles in order to create product awareness.
22.214.171.124.4 Personal Selling
Personal selling is a very important part of the marketing mix. A two-way personal communication will exist between the salespeople and the customers, via face-to-face contact in retail shops and by telephone. Being a product with high specifications it is vital that the sales force is knowledgeable about the product well knowing its features and use. Likewise salespeople should know how to cater any problems that clients might encounter in order to provide a proper after sales service and thus abide with the marketing objectives stated in sub-section 126.96.36.199 of this marketing plan.
Salesmen will also communicate with clients that order through internet via e-mail. In this area salesmen should possess proper written communication skills in order to correspond appropriately with the client. They should also be capable to present the product correctly once delivered to the customer.
Since, as already stated the served customer groups are both domestic and industrial, it is important that a customer sales force structure is adopted for the industrial segment of the market in order to enhance a customer orientation approach. Salespeople in this area should be assigned in line with different industries. We are planning to divide our industrial clients into four main groups as shown in the following table:
Sales force handling such client
Large organisations with multiple and scattered locations.
National account managers
Large accounts with scattered locations.
Senior account managers
Low yearly sales accounts.
Other industry clients.
188.8.131.52 Pricing Issues
A market-skimming pricing strategy will be adopted where a high price will initially be set due to the competitive advantage that such product posses from its higher strength and power. Under such price some segments of the market will find it viable to purchase such product leading to the introductory stage sales. However, when competiting firms will start launching products of similar capabilities, the price will be lowered in order to attract the next price-sensitive layer of clients. A detailed list of the selling price charged during the product’s life is shown in sub-section 184.108.40.206.
Allowance pricing, like cash discounts and quantity discounts will also be adopted. A cash discount of 5% will be given to clients that pay for the product immediately by cash. This is done with the aim to help the working capital position of the firm. Quantity discounts reaching up 15% will be given to customers buying more than four computers. This is given to reach industrial clients. All types of discounts have to be authorised by the manager in-charge.
220.127.116.11 Distribution Networks
The distribution mediums identified in section 18.104.22.168 will be adopted for no limits product. Management is forecasting that the sales generated from each distribution network over the life cycle of the product were derived. This is presented in the following time series analysis:
1.1.7 Financial Budgets
The financial effect of the aforementioned strategies are analysed in three different categories, being sales volume, profitability position and performance indicators. These are shown in the tables below:
SALES VOLUME OF NO LIMITS COMPUTER
The management of the company are forecasting that the demand for the second product launched at the decline stage of no limits computer will increase by 15% in all stages of the product life cycle due to the good reputation gained by the firm in the first six years of operation. We will not describe in detail the financial objectives of the second product launched because it is outside the scope of this assignment.
The estimated profitability for no limits computer during its life is as follows:
· The operating costs will start diminishing in year 3 by 5% each year due to economies of scale.
· The estimated selling price per unit and cost per unit sold is anticipated as follows:
Selling price Cost
Year 1 £2,200 £1,540
Year 2 £2,000 £1,540
Year 3 £1,850 £1,463
Year 4 £1,600 £1,390
Year 5 £1,500 £1,320
Year 6 £1,300 £1,254
Year 7 £ 900 £1,191
The expected profit margins derived from the above figures are noted below. The calculations made to determine the following figures are shown in appendix A.
% PROFIT/(LOSS) MARGIN
From the predictions made above, the providers of capital will also gain from such investment. The leverage of the organisation is 50% share capital and 50% debt totalling £10,000,000. This capital will be utilised as follows:
· Capital expenditure £4,000,000
· Research & development £5,000,000
· Working capital £1,000,000
22.214.171.124 Functional Budgets
The estimated operating costs necessary for the launching and running no limits computer are determined in the following functional budgets:
Advertising & Promotion
Internet costs comprise connection charges, IT staff salaries and other generally related costs.
MATERIALS, LABOUR AND OVERHEADS BUDGET
· To minimise the cost of holding stock management will adopt a Just in Time approach and no stock will be held both for raw materials and finished goods.
· The material cost consists of raw materials incurred in the manufacturing process plus Asus motherboards purchased from our supplier.
Proper controls and evaluation techniques should be put in place in the firm’s operations in order to ensure that the objectives set in this marketing plan are reached. We will specify the controls necessary for the marketing mix elements identified in the following sub-sections.
Advertising should be evaluated not only before adopting it but also after its implementation. Recall tests can be used to examine the effect of brand awareness and sales effect by showing the advertisement power to be noted and retained. This consists of asking individuals that were exposed to the advertisement to see if they recall anything about it and its associated product. To determine the effect on brand awareness it is important that brand comprehension is examined before the advertising campaign (Kotler P. et al. 1999, p 808, 809).
The progress of sales promotion can be monitored by analysing the movement of sales. An analytic procedure should therefore be adopted periodically in order to examine the changes in sales before, during and after sales promotions (Kotler P. et al. 1999, p 830). Such figures ought to be compared with the forecasted figures in this marketing plan, shown in section 1.1.7.
Sales force effectiveness should also be examined thoroughly because it plays an important role on the product considered. An evaluation method that can be utilised is the comparison of salesperson’s performance. This entails comparing and ranking the sales generated by the salespeople employed. The control should not solely rely on this method because sales are not always the best indicator (Kotler P. et al. 1999, p 862). Another technique suggested is the qualitative evaluation scheme. This comprises evaluating sales staff knowledge of the product, clients, duties and more, by examining personal traits like manners, speech with clients and customers complaints. This process is usually performed by the sales manager and it is imperative that salespersons are informed of the criteria that will be used in such scheme (Kotler P. et al. 1999, p 863).
126.96.36.199 Product Quality
It is crucial that we ensure that a product of very good quality reaches the client as stated in the organisation’s vision itself. An ideal system that can be adopted is a total quality management scheme. This system entails a programme aimed to intermittently improve the product quality, after sales service and other marketing processes (Kotler P. et al. 1999, p 492). Its main philosophy is do it right the first time. Such method requires full adherence to its principles by the entire firm. Therefore other marketing strategies and activities should be consistent with such approach. It is thus important that it is properly communicate to all departments and staff, because everyone is concerned.
Ideal standards will be set in the production process in order to stimulate high efficiency not only in terms of cost but also quality, in order to abide with total quality management philosophy of manufacturing the product correctly the first time (Drury C. 1996, p 840, 841). A just in time stock system will be applied, which is a method very much in line with total quality management. This requires that the suppliers of raw materials are meticulously selected to ensure they provide the right raw materials at the correct time.
We will ensure that the firm is reaching quality excellence by reaching a production process with no product defects and by reviewing that minimal customer complaints are put, which makes sure that after sales services, and other related services like delivery are being properly given to the customer.
188.8.131.52 Financial Effectiveness
The control technique that will be adopted in order to ensure that the forecasted revenues and costs are met is a standard costing system. Under this system, predetermined costs and revenues, commonly known as standard costs and standard revenues are set at the planning stage. Every month of the product life, the actual costs and sales are matched with the standard costs and revenues with the aim of identifying variances between the two, if any (Lucey T. 2003, p 215). The type of standard set will be an ideal standard, because it conforms to the total quality management philosophy mentioned in the previous sub-section (Lucey T. 2003, p 217).
The standard costing system will also act as a performance evaluation technique. In order to motivate operational management and staff to maximise their contribution and if possible even exceed the budgets set, a bonus system will be put in place (Lucey T. 2003, p202). Whenever favourable variances or no variances arise in a particular department a bonus will be given to the section spread between the manager and the staff.
Appendix A – Determination of Profit Margins
The following is the formula utilised to determine the net profit margin:
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1 Shopping products are products not purchased frequently where clients spend a lot of time considering price, product’s quality and style.
2 Specialty products consist of products with exclusive brand identification for which clients are prepared to perform special purchase efforts.