kimber web viewtargets the cost cutter segment. in terms of salespeople, we currently have nine...

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Kimberly Tucker, Deo Sanders, Ray WalshMarketing Plan

11/01/2010Marketing Management 6800 Section 004

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I. Review of financial & market performance:

A) Market Position:

Powers Incorporated is a computer company that is currently competing in two

segmented markets, with two major brands. The target markets in which we are competing are

the Work Horse and the Cost Cutter. The Stallion II brand targets the Workhorse segment while

our Golden Saddle targets the Cost Cutter segment. In terms of salespeople, we currently have

nine employees in London (5 Workhorse, 2 Cost Cutter, 1 Mercedes, and 1 Support), four in

Berlin (2 Workhorse, 1 Cost Cutter, 1 Support), six in Toronto (3 Workhorse, 2 Cost Cutter, 1

Support), and four in Rio de Janiero (2 Cost Cutter, 1 Workhorse, 1 Support).

Our rationale for entering into these geographic markets centers on the line of thinking

that the other competitors, such as Refined IT, i3, and NGC Next Generation Computers, would

pursue the low hanging fruits of the geographic market area of The United States. For example,

every computer company, except for Powers Inc., initially entered the U.S.A. based on the

market research concerning the 12-month potential demand (market size) and the price people

are willing to pay. The United States had the highest potential demand for Cost Cutter and Work

Horse. Also, the price people are willing to pay in the Cost Cutter Segment are highest in three

areas: New York, LA, and Chicago. Atlanta is Fifth. Additionally, the Work Horse Segment has

four of the top seven cities in the U.S.A market in terms of price willing to pay.

Conversely, the European market, in terms of price willing to pay, was less in the Cost

Cutter and the Work Horse segments than the United States market. Also, the 12-month

potential demand for Cost Cutter was higher in the United States. However, for Work Horse, the

12-month potential demand was higher in London than any other U.S.A city. Based on these

findings in the international business environment and the information found in the available

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market segments (figure 1.1), we have chosen Work Horse and Cost Cutter to gain a strategic

advantage grounded on unconventional thinking.

Figure 1.1: Available Market Segments

Out of the five potential segments, Cost Cutter and Work Horse present a balance of price and performance, which allows for the greatest opportunity.

Additionally, an initial consultation with the C.E.O., Dr. Bobbitt, supported our decision

to pursue the target segments of Work Horse and Cost Cutter. We rationalized this decision

based on underdeveloped technology and initially low market demand at the beginning stages of

the simulation process. More specifically, research and development were unavailable to pursue

the higher end clientele, such as the Mercedes segment.

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Figure 1.2: Geographic Markets

In Quarters 3 & 4, Powers Inc. geared their geographic markets, Europe, Canada, and

Brazil, toward two target market segments: the Work Horse and Cost Cutter. We focused on the

European market, specifically London, because they had the highest demand for Work Horse.

We have since expanded our geographic market and brand to Berlin. The 12-month potential

demand was forth for Cost Cutter and fifth for Work Horse in the Canadian market, i.e. Toronto.

Both the Work Horse and Cost Cutter segments are in the top ten for potential demand in the

Brazilian geographic market. Essentially, consistent with our unconventional strategies, we

targeted substantial markets that were less appealing based on initial research.

B) Market Performance:

In the Cost Cutter segment, at the end of Quarter 3, we commanded a 72% market share

with a demand of 63 out of a total of 87. At the end of Quarter 4, we commanded a 78% market

share with a demand of 410 out of 524. There was a positive change in demand from quarter to

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quarter of 367. There was also an increase in market share of about 6%. We held the lead for

both the market share and market demand in the Cost Cutter segment for both Quarters 3 and 4.

Please refer to Figures 1.3 and 1.4.

Figure 1.3: Market Share

Figure 1.4: Market Demand

In the Work Horse segment, at the end of Quarter 3, we commanded nearly 57% of the

market with a demand of 75 out of 132. Similarly at the end of Quarter 4, we commanded

almost 59% of the market with a demand of 991 out of a total demand of 1684. The change in

demand between the two quarters was a positive 916 with an increase in market share of about

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2%. We held the lead for both market share and market demand in the Work Horse segment for

these two quarters

Figure 1.5: Market Share

Figure 1.6: Market Demand

In terms of total market share and market demand for every segment, we lag behind NGC

because of their superior brand judgments, strategic locations, and target segment (Traveler).

Powers Inc.’s brand judgments are three to twelve points away from reaching a grade of 70 in

Europe and Canada for both the Cost Cutter and Work Horse segments. However, in terms of

the top eight brands, Powers Inc. holds the top two brand judgments. According to price

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judgments in Canada and Europe, the Cost Cutter and Work Horse brands are doing exceedingly

well in all five target segments. However, the Stallion II brand is underperforming in the Cost

Cutter segment. Still, this discrepancy is due to the fact that this brand is not geared toward the

Cost Cutter clientele. These brand and price judgments suggest an average to below average

performance. To make up for this loss, we should improve both of our Work Horse and Cost

Cutter brand judgments to above 70%. To date, only NGC has been able to complete this

minimal requirement. Accordingly, we should augment all of our brands in an effort to achieve

this threshold.

Figure 1.7: Total Market Share

Figure 1.8: Total Market Demand

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C) Financial Performance:

According to our 4th Quarter sales performance, we sold a total of 1,428 units for both the

Work Horse (Stallion II - 656) and the Cost Cutter (Golden Saddle - 772) brands. Our Stallion II

brand brought in 1,930,878 in sales revenue and our Golden Saddle brought in 1,461,829. This

equaled a total of 3,392,707 in sales revenue. Additionally, we allotted a total of 22,200 in

rebates. The total cost of goods sold was 2,373,487. When you take the cost of goods sold, plus

the rebates, and subtract them from the total revenues we have a total gross margin of 997,020.

Please refer to figures 1.9, 1.10, and 1.11 for more details.

Figure 1.9: Total SalesSales - Total

Brand Number of Units Sold Sales Revenue Rebates Cost of Goods Sold Gross MarginStallion II 656 1,930,878 10,412 1,167,055 753,411Golden Saddle 772 1,461,829 11,788 1,206,432 243,609Total 1,428 3,392,707 22,200 2,373,487 997,020

For an in depth analysis of our geographic market sales performances, see the

following tables:

Figure 1.10: Sales in CanadaSales - Canada

Brand Number of Units Sold Sales Revenue Rebates Cost of Goods Sold Gross MarginStallion II 122 378,078 6,100 217,044 154,934Golden Saddle 196 362,404 4,900 306,296 51,208Total 318 740,482 11,000 523,340 206,142

Figure 1.11: Sales in BrazilSales - Brazil

Brand Number of Units Sold Sales Revenue Rebates Cost of Goods Sold Gross MarginStallion II 123 319,800 1,230 218,823 99,747Golden Saddle 125 231,250 1,250 195,342 34,658Total 248 551,050 2,480 414,165 134,405

Figure 1.12: Sales in EuropeSales - Europe

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Brand Number of Units Sold Sales Revenue Rebates Cost of Goods Sold Gross MarginStallion II 411 1,233,000 3,082 731,188 498,730Golden Saddle 451 868,175 5,638 704,794 157,743Total 862 2,101,175 8,720 1,435,982 656,473

According to the 3rd and 4th Quarters’ marketing division of profitability, our operating

profits are trending in a positive direction. Although our operating profits are currently in the

negative, a 50% reduction for our operating profit has been seen from Quarter 3 (-525,963) to

Quarter 4 (-205,902).

II. Assessment of current situation and the market:

A) Competitor Profile:

The companies competing in Quarter 5 are Powers Inc., Refined IT, NGC, and i3. Our

primary competitors are Refined IT and NGC. Refined IT has recently entered the London

market. Besides Powers Inc, they are the only other company competing in the European

market. They have a sales force in Europe of five people who are already targeting the Cost

Cutter and Traveler segments. One brand, Avalanche 1, is doing particularly well because of

superior price judgments due to a lack of competition in the European Traveler segment (figure

1.13). Also, this brand holds the number one position for ad judgments in the Work Horse

segment (figure 1.14). They seem to be targeting the Traveler market segment due to price

judgments and market share research. Per 4th Quarter results, Refined IT’s Cost Cutter market

share is 10.8%. For the Work Horse, it is 5.6%. Their market demand in Cost Cutter is 57 out of

a possible 524. Their demand in Work Horse is 95 out of a possible 1684. One of Refined IT’s

strengths is their above average demand and market share in the traveler segment. Another

strength of this company is that they have a brand judgment grade of 66 out of 70 in the United

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States and European markets for the traveler segment. Although their target area (traveler) is

different from ours (Cost Cutter and Work Horse), we have strategically identified that if they

improve their brand judgments in the Cost Cutter and Work Horse segments, they will prove to

be more of a threat to us in this geographic market in Quarter 5. Their price and ad judgments

already put them in the position of being a formidable foe. Please see figures 2.1 and 2.2 below

for these judgments.

Figure 2.1: European Price JudgmentsPrice Judgment - Europe

Company BrandCostCutter Innovators Mercedes Work Horse Traveler

Refined IT World. 58 100 100 88 100Refined IT Avalanche.1 100 100 100 100 100Powers Inc. Golden Saddle 95 100 100 100 100Powers Inc. Stallion II 60 100 100 91 100

Figure 2.2: Top Ad Judgments for Work Horse

Our second major competitor is NGC. NGC boasts an astounding total market share of

43%, compared to Powers Inc.’s 33% (see figure 2.3). They hold one of the top three positions

in almost every segment in terms of market share, market demand, brand judgment, ad judgment,

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and price judgment. Further analysis illustrates that this company commands the leading market

share position in several target market segments. These market share leads are Mercedes

(82.8%), Innovators (68.8%), and the Traveler (57.2%). NGC also has the highest market

demand for the Traveler segment (1,026 out of 1,792), Innovators segment (126 out of 183), and

Mercedes segment (29 out of 35). They are even the second major competitor in the Work Horse

segment for market demand.

Figure 2.3: Total Market Share

According to brand judgments, two of NGC’s brands, TC 22X and AWC 22, are the top

two brands for the Traveler segment with a grade of 75. Their WorkLoad XL brand is the top

brand for the Innovators segment and the Mercedes segment. This brand is also the second

highest brand for the Work Horse segment and third highest for the Cost Cutter segment. In both

the Work Horse and Cost Cutter segments NGC’s brand is in direct competition and second only

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to Powers Inc in brand judgments. Please see figures 2.4 and 2.5 for brand judgments in the

Work Horse and Cost Cutter segments, the market segments pursued by Powers Inc.

Figure 2.4: Top 8 Brand Judgments for Work Horse

Figure 2.5: Top 8 Brand Judgments for Cost Cutter

NGC also has impressive price and advertising judgments. Their ad judgments place

them in 2nd and 3rd place in the top eight advertisements for the Cost Cutter segment, right behind

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Powers Inc. They also closely follow Powers Inc. in the Work Horse segment for ad judgments

because their ad judgment grade is a 55, compared to Powers Inc.’s 59. NGC has even achieved

a grade of 100 in price judgments in the United States for the Work Horse and Cost Cutter

segments. The following figure, figure 2.6, illustrates how Refined IT and NGC are Powers

Inc.’s primary competitors.

Figure 2.6: Competitor HighlightsCompetitor Tactical Highlights

Powers Inc. Refined IT NGC Next Generation Computers

Total Demand 1428 606 1831

Number of Sales Offices 4 3 3

Total Sales Force Last Quarter 23 15 20

Number of Brands for Sale 2 2 3

Average Price 2387 2605 3000

Total Local Inserts 32 4 35

Current Quarter Balanced Scorecard 0 0 5

B) SWOT:

Internal External

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Strengths Opportunities

Market Share (Workhorse, Costcutter)Market DemandSales Office LocalityEuropean Market Dominance

Travel Segment EuropeTraveler Imitator position in the US ChicagoMore European Sales OfficesSTALLION II Price Judgments

Weaknesses Threats

Poor Brand JudgmentsLimited BrandsSegmentation penetration United States penetrationAd Judgment

NGC Brand crossoverRefined IT market EntranceEconomic Downturn

An internal analysis of Powers Inc. reveals that the company’s strengths are founded on

their command of the market share and market demand in the Work Horse and Cost Cutter

segments. We have also dominated the European, Canadian, and Brazilian markets. This gives

us a strategic advantage in the location of our sales offices. On the other hand, below average

brand judgments and ad judgments (judgments that have not received a grade of 70 or above)

and a limited number of brands and advertisements constitute the weaknesses of Powers Inc.

Our other weakness revolved around the fact that we have not yet penetrated the geographic

market of the United States.

An external analysis of Powers Inc. brings to light our opportunities and threats. Our

opportunities center on us being in a position to pursue the Traveler segment in Europe and

expand our geographic market to the United States, where we can also focus on the Traveler

segment. The other opportunities for our company are our ability to expand our sales offices in

the European market and improve our Stallion II price judgments. However, we have several

critical threats that include NGC’s possible brand crossover, Refined IT’s entrance into our

European market, and the downturn in the economy.

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C) Goals of the Firm:

Powers Inc.’s mission statement states that “Powers Incorporated is a European computer

company who is devoted to being the computer industry’s leading innovator, supplier, and

profitable consumer - oriented company. We believe in delivering the highest quality and most

reliable computing products and customer services.” We initially laid out certain strategies and

goals in order to stay ahead of the competition. Powers Inc.’s focus is on large markets with

highly competitive segments, even if they are more expensive. We pride ourselves on

controlling the geographic markets that are in the middle of the cost/size continuum. Our

competitive posture centers on building a market position and defending it, taking the lead and

keeping it, and being a fast follower by imitating smart, competitive moves. Two distinctive

competencies that have separated us from our competition are being one of the lowest providers

in the market and being the market share leader.

Currently, our goal to focus on large geographic markets has been achieved, although

competitors in these markets are lagging behind what is seen in the United States. The markets

we have chosen to compete in, Europe, Canada, and Brazil, are optimal in terms of the cost/size

continuum, and we have been able to control these geographic markets so far. For example, in

the Work Horse segment, Toronto is fifth in the 12-month potential demand and eighth in the

price customers are willing to pay. Consistent with our initial goals, this moderate cost and

demand has been realized. We have been able to build up a strong market position in each of our

geographic locations in terms of our target segments. Based on market research and strategic

improvements, we are poised to defend our market dominance. As you will see in our Quarter 5

marketing strategy roadmap, we will be heavily targeting the Traveler segment, as well as having

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a small vested interest in the Mercedes segment. Based on NGC’s success with the Traveler

segment, the creation of a similar brand geared toward this segment will springboard Powers Inc.

in the direction of being a fast follower. While we are currently the market share leader in the

both the Cost Cutter and Work Horse segments, we have not been efficient in terms of offering

the lowest prices. In an effort to reverse this, we will be altering our pricing strategy for the next

Quarter.

III. Marketing Strategy Road Map:

A) Customer Profile:

In Quarter 5 we will continue to target the Work Horse and Cost Cutter segments. We

will also begin to target the Traveler and Innovators segments. The customers who purchase our

Work Horse brand are typically financial managers, office administrators, and corporate

managers. The functions they usually look for in a computer product are bookkeeping and

budgeting, word processing, and communication with other computers. The justification for

demanding these applications lies in their desire to streamline the business process in terms of

document creation and preservation. In order to achieve this streamlining process, the Work

Horse clientele has to have a product that is secure and gives them peace of mind, is easy to use,

is a low price, easy on the eyes, and available in all local markets. Please refer to figure 3.1 for a

list of the wants and needs for the Work Horse segment.

Figure 3.1: Work Horse Customer Wants and Needs

Customer Needs And Wants

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. Work Horse'Peace of mind-safe,secure,no hassle 125'Easy to use 122'Computers are lowest priced 120'Easy on eyes 120'Available in all local markets 119'Fast service response time 119'Fast computer to computer links 119'Established brand name 118

Our Stallion II brand targets the Work Horse segment. Based on the market research of

what our Work Horse clientele demands, this brand focuses on offering a wide variety of office

and bookkeeping software. The Stallion II provides peace of mind and security through antivirus

software. This brand also delivers a product that is easy on the eyes by offering a 17” monitor

and an expanded keyboard with hot keys. For a complete review of the Stallion II brand, please

refer to figure 3.2.

Figure 3.2: Stallion II brand

Stallion II Base components XStandard desktop design XDigital video disk (DVD) read/write drive XHigh capacity hard drive XOffice software-word, spreadsheets XAccounting/bookkeeping software XBusiness graphics software XPresentation software XDatabase software X17" monitor for desktop XHigh performance processor XExpanded keyboard with hot keys XAntivirus software XExpansion slots for adding new devices XStandard network/Internet connection XWindows for professionals X

Even though this brand offers some key customer wants and needs, there is still room for

improvement. Since we have a brand judgment of 67, this suggests only small alterations in our

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brand design need to be considered. In Quarter 5 we plan to make these adjustments by offering

windows for professionals with high security protection and web design software to provide

more security and diversify our product’s functionality and meet the threshold of 70. This

modified brand will be entitled the Stallion III.

In Quarter 5, we will also create a new Work Horse brand called the Thoroughbred

because the success of the Work Horse segment in terms of market share and 12-month potential

demand has lead us to create a similar brand with upgraded features. In addition to having the

same features as the Stallion II, the Thoroughbred will offer a rugged portable design with

standard battery because business professionals seem to prefer the freedom a laptop provides.

This rationale is based on the fact that NGC has two brands that offer this feature and

subsequently have a brand judgment of 75. We will also offer an eye-popping 19” monitor to

make it easier on the eyes. In addition to these changes, we will supply a product with a very

high capacity hard drive for more storage and windows for professionals with high security

protection for added peace of mind. These new features are consistent with the Work Horse

clientele’s wants and needs. To cover the costs of these additions, we will slightly raise the price

to 3,099 in the European Market with no rebate and 3,199 in the Canadian market with a 100

rebate. This employs an odd pricing strategy in which our product is priced just below whole

dollar amounts. The rationale for this strategy is that costumers will feel as if they are getting a

bargain. Please see figure 3.3 for a table of this new brand.

Figure 3.3: Work Horse Thoroughbred brand

Thoroughbred Base components XRugged portable design XDigital video disk (DVD) read/write drive XVery high capacity hard drive XOffice software-word, spreadsheets X

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Accounting/bookkeeping software XBusiness graphics software XPresentation software XDatabase software XWeb design software X19" high resolution monitor for desktop XHigh performance processor XExpanded keyboard with hot keys XAntivirus software XExpansion slots for adding new devices XStandard network/Internet connection XStandard battery for portable XWindows for professionals with high security protection X

In addition to the Work Horse segment, we also targeted the Cost Cutter segment.

Similar to the Work Horse brand, the Cost Cutter brand focuses on office administrators and

corporate managers. However, data processors are key clientele for this segment. In terms of

application, they favor word processing, bookkeeping and budgeting, and data management-

accounts for inventory. The justification for demanding these applications lies in their desire to

streamline the business process in terms of document creation and preservation. These functions

also allow them to efficiently manage data accounts and inventory. Thus, the Cost Cutter

clientele has to have a product that is secure and gives them peace of mind, is easy to use, is easy

to setup, is a low price, and has minimal complexity for its operators.

The Golden Saddle brand targets the Cost Cutter segment. Based on the market research

of what our Cost Cutter clientele demands, this brand focuses on offering a wide variety of

office, bookkeeping, and database software. Because this brand is not doing well in terms of

brand judgments and profitability, we will modify the Golden Saddle brand. It has a brand

judgment of 61 and only has a brand profitability of 127 dollars, which signify a need for

improvement. In order to modify this brand accordingly, we will offer windows for

professionals with high security protection for peace of mind, a rugged portable design with a

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standard portable battery for more freedom. This modified brand will be named the Golden

Saddle I. Prices will remain the same (on average 1,875) because of superior price judgments.

Figure 3.4: Cost Cutter modified brand

Golden Saddle I Base components XRugged portable design XCompact disk (CD) read/write drive XHigh capacity hard drive XOffice software-word, spreadsheets XAccounting/bookkeeping software XPresentation software XDatabase software X17" monitor for desktop XMid-range processor XExpanded keyboard with hot keys XAntivirus software XStandard network/Internet connection XStandard battery for portable XWindows for professionals with high security protection X

Consistent with our goals to be a fast follower that imitates smart, competitive moves,

Powers Inc. will create two new brands targeting the Traveler and Innovators segments. NGC

has been the most successful company in terms of brand, ad, and price judgments for the

Traveler segment. However, there reluctance to enter the European market provides us with an

opportunity to create a similar brand that capitalizes on the untapped traveler segment. The

Traveler clientele, which is composed of sales people, corporate managers, and engineers,

demand presentation, word processing, and business software, portability. They also need a

product that is easy on the eyes and can communicate with other computers. In order to comply

with these demands, our Traveler brand, Pegasus, will offer the following features listed in

figure 3.5:

Figure 3.5: Pegasus brand

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Pegasus Base components XRugged portable design XDigital video disk (DVD) read/write drive XHigh capacity hard drive XOffice software-word, spreadsheets XAccounting/bookkeeping software XBusiness graphics software XPresentation software XDatabase software XWeb design software X15" monitor for desktop XHigh performance processor XStandard keyboard XAntivirus software XStandard network/Internet connection XStandard battery for portable XWindows for professionals with high security protection X

Based on the price Travelers are willing to pay in the European market, our brand will be priced

at 3,299.

In terms of market share, market demand, and brand judgment, NGC and i3 command the

Innovators segment. NGC dominates the Innovators market demand with 126 out of 183. I3 is

second with a demand of 43. NGC also holds 68.8% of the Innovator market share. In the

United States, these two companies hold the top two positions in terms of brand judgments for

the Innovators segment, with NGC achieving a grade of 44 out of a minimum of 70 and i3

achieving a grade of 38. However, Powers Inc. is a close third with a grade of 32. This is due to

the fact that neither NGC nor i3 have entered the European or Canadian markets. Yet, according

to the 12-month potential demand, London and Berlin are the third and fourth most important

geographic locations for the Innovators clientele. Still, no other company has entered this market

except for Powers Inc. Given this information, Powers Inc. has a great opportunity to target the

Innovators segment in the European market.

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The Innovators clientele consists of engineers, managers, and data processors. In order to

streamline their business and be more efficient managers and engineers, they demand a product

that has web design and management applications, technical graphics, and statistical analysis

software. This clientele also insists on having a computer product that has fast access to

graphical images, is ultra fast and can handle large tasks, is quick to response to commands, and

has fast computer to computer links. Please see figure 3.6 for a complete list.

Figure 3.6: Innovator wants and needsCustomer Needs And Wants

.Innovators

Fast access to graphical images 129Ultra fast, handle large tasks 125Quick response to commands 124Fast computer to computer links 124Can see, work on multiple programs 123Fast processing and output 123Want high performance over price 121Able to tailor to individual needs 121Easy to tie into local area network 120

In order to meet these customer demands, we will create a new Innovators brand that will

target the European market, as well as the Canadian and Brazilian markets. This new brand, the

Mustang, will offer several key features demanded by the Innovators clientele. Some of the

features included in this brand are graphic, statistical analysis, engineering, and web design

software. All of the components in the Mustang brand can be found in figure 3.7. Also, since the

price the Innovators clientele are willing to pay in the European market ranges between 3,500

and 3,780, we will price our Mustang brand at 3,619.

Figure 3.7: The Innovator brand - Mustang

Mustang Base components XRugged portable design X

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Digital video disk (DVD) read/write drive XVery high capacity hard drive XOffice software-word, spreadsheets XAccounting/bookkeeping software XBusiness graphics software XPresentation software XDatabase software XStatistical analysis software XEngineering graphics software XWeb design software X19" high resolution monitor for desktop XHigh performance processor XExpanded keyboard with hot keys XAntivirus software XExpansion slots for adding new devices XStandard network/Internet connection XStandard battery for portable XWindows for professionals with high security protection X

Current market research has shown that, although NGC has their product priority

emphasizing the Travel segment and then the Work House, they have been successful in other

segments, such as the Innovators, Cost Cutter, and the Mercedes segments. This is mainly due to

product feature spillover. For example, both the Mercedes and the Innovators segments value

fast access to graphical images, as well as computers that are ultra fast and can handle large

tasks. Due to these feature similarities, when customers from different segments view each

product’s components, they will often choose products not necessarily consistent with their

segmentation.

Our Work Horse, Traveler, and Innovator brands do just that. The consistency of our

product offerings across all segments allows each of our brands to reach consumers in different

target segments. For instance, when customers seek peace of mind, our Thoroughbred, Mustang,

Stallion III, and Pegasus brands offer both Antivirus software and Windows for professionals

with high security protection. Similar the Thoroughbred and the Mustang boast standard

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network and Internet connections. This overlap between the Work Horse and Innovator

segments offer the clientele exactly what they demand, specifically fast computer to computer

links.

Powers Inc. also seeks to have key advantages over both external competition and

internal cannibalization. In order to minimize internal cannibalization we have instituted key

differences in our brands that allow for differentiation amongst our segments. The Stallion III

for example is the only standard desktop design that we will be featuring in Quarter 5. This key

difference will allow our immobile customers albeit for business or personal reasons, the

availability of a stationary setup. Another key difference among our segments is the absence of a

Digital Video Disk (DVD) drive for the Cost Cutter segment. Since this clientele wanted the

lowest price and minimal complexity for their operators, the Compact Disk (CD) was more

suitable.

A) Marketing Mix Elements:

In the Customer Profile section, we outlined our rationale for product development in

terms of the target segment, brand design and augmentation, and the rationale for these

decisions. We identified the Work Horse as our primary segment. In doing so, we first created

the brand Stallion II. However, the brand judgment for this product was lower than the required

grade of 70. Thus, we decided to modify the Stallion II by offering more security and software.

This modified brand is called the Stallion III. In order to provide the Work Horse segment with

more features and benefits, we created the Thoroughbred brand. This will be our first rugged

portable design computer product, with Traveler segment crossover potential.

The Cost Cutter segment has been our secondary target. We first created the Golden

Saddle brand to focus on the needs of this clientele. This brand offered a lower cost and peace of

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mind through high security protection because this segment valued inexpensive products and

security without hassle. We decided to modify this brand due to the fact that the Golden Saddle

had a brand judgment of 61, which is below the minimum of 70. The augmented brand, Golden

Saddle I, offered more security and freedom through a portable product. Besides this modified

brand, we did not create a new Cost Cutter brand because we have decided to shift our secondary

focus from the Cost Cutter segment to the Traveler segment.

Based on market research, in Quarter 5 we have decided to pursue the Traveler segment.

The rationale for doing so is due to low market product realization for the brands of the Refined

IT Company. Additionally, the current market leader in the United States, NGC, has been

reluctant to provide the Traveler clientele with a product in the European market. Thus, we

designed a Traveler brand that would focus on the European Traveler segment. Based on the

wants and needs of this segment, we created the Pegasus brand. This brand offers presentation,

word processing, and business software, as well as portability, because the Traveler clientele is

primarily composed of sales people, corporate managers, and engineers.

The last brand we developed for Quarter 5 was the Mustang, which is aimed at the

Innovators segment. The rationale behind this move is identical to our decision to pursue the

Traveler segment in that the product demand for the Innovators segment in European market has

been ignored by other companies. In order to fulfill the needs and wants of the Innovators

segment, the Mustang offers web design and management applications, great graphics, and

analysis software.

Our pricing strategy in previous quarters has been the average of the price people are

willing to pay in each geographic market. For example, in Europe, we determined the price

people were willing to pay in both London and Berlin for a specific segment, Work Horse. We

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then took the average of those prices and as the cost for our product in that geographic market

and for that particular target segment. Essentially, we tried to provide the lowest cost for each

segment while still making a profit. In Canada, our Stallion II brand was priced at 3,099 with a

rebate 100 dollars. In the same geographic location, our Golden Saddle brand was priced at 1,849

with a rebate of 50 dollars. In this market, the Stallion II was identified as the first priority

because this geographic area had more of a demand for the Work Horse segment. In the

Brazilian market, the Stallion II sold for 2,600 with a 20 dollar rebate. Additionally, the Golden

Saddle sold for 1,850 with a 20 dollar rebate. We decided to have the Golden Saddle as the first

priority in this geographic market because there was more of a demand for the Cost Cutter

segment. In the European market, we priced our Stallion II brand at 3,000 with a rebate of 15

dollars. The Golden Saddle brand was priced at 1,925 with a rebate of 25 dollars. In this

geographic market, the Work Horse brand, Stallion II, was identified as the first priority.

Figure 3.8: Pricing for Powers Inc.

Competitors` Price and Priority - CanadaCompany Brand Price Rebate Priority Point of Purchase Display Bonus Gift

Powers Inc. Stallion II 3,099 100 1 Yes 0 0Powers Inc. Golden Saddle 1,849 50 2 Yes 0 0

Competitors` Price and Priority - BrazilCompany Brand Price Rebate Priority Point of Purchase Display Bonus Gift


Competitors` Price and Priority - EuropeCompany Brand Price Rebate Priority Point of Purchase Display Bonus Gift


The price judgments of these two brands for our target segments have been excellent. For

example, our European Stallion II brand received a judgment of 91 in the Work Horse segment

26

and a 100 in the Traveler, Mercedes, and Innovators segments. This suggests crossover potential.

While this brand received a grade of 60 for the Cost Cutter segment in the European market, it

was not geared to this segment. In Canada, the Cost Cutter brand, Golden Saddle, received a

judgment of 96 and a 100 for all remaining segments. While the Stallion II made a 57 in the Cost

Cutter segment, it was geared toward the Work Horse segment of this geographic market, in

which it received a price judgment of 84. Based on these findings, the prices for our modified

Work Horse and Cost Cutter brands, Stallion III and Golden Saddle I, will remain the same.

However, the price of the Stallion III brand will be reduced to 2,899 with a 50 dollar rebate

because we had it overpriced for this geographic market.

Figure 3.9: Price Judgments

Price Judgment – Canada


Powers Inc. Golden Saddle 96 100 100 100 100Powers Inc. Stallion II 57 100 100 84 97

Price Judgment – Europe



However, both the new Work Horse, Traveler and Innovators brands will have new

prices. In the Canadian market, the new Work Horse brand, the Thoroughbred, will have a retail

price of 2,999 with a 50 dollar rebate. This brand will have first priority in this geographic

27

market. This price was determined through research on the price people are willing to pay in this

market and the cost of goods already sold for this segment in this market. Since the Work Horse

is the first priority in the Canadian market, we only have point of purchase displays for these two

brands. Again, based on market research, our Traveler brand for this market, the Pegasus, will be

priced at 3,054 with no rebate and our Innovators brand, the Mustang, will have a price of 3,580

with a 50 dollar rebate.

In the Brazilian market, the Thoroughbred brand will be priced at 2,585 with a 20 dollar

rebate. The Traveler brand, Pegasus, will have a price of 3,058 with a 15 dollar rebate. The price

of the Mustang brand will be 3,512 with a rebate of 50 dollars. These prices were determined

based on a competitive analysis of what these segments were willing to pay in the Brazilian

market. Our top two priorities are focused on the Thoroughbred and Golden Saddle I brands.

They also contain the point of purchase displays because the demand is higher for the Work

Horse and Cost Cutter segments.

Finally, in the European market, the new Work Horse brand, the Thoroughbred brand

design will be priced at 3,099 with a 30 dollar rebate. The price of the Traveler brand, Pegasus,

will be 3,449 with a rebate of 25 dollars. The Innovators brand, the Mustang, will have a price of

3,619 with a 50 dollar rebate for this geographic market. Again, these pricing decisions were

based on a competitive analysis of what the Innovators, Traveler, and Work Horse segments

were willing to pay in the European market. The Traveler and Work Horse brands were our top

two priorities. The rationale for this priority decision is based on the 12-month potential demand.

For this geographic market, we had three point of purchase display groups: the Thoroughbred,

Pegasus, and the Mustang. The findings in the 12-month potential demand research are also the

rationale behind our point of purchase decisions.

28

Figure 3.10: New Quarter 5 Prices

CanadaBrand Available for Sale Retail Price Price Rebate Sales Priority Point of Purchase Display

Stallion III X 2,899 50 2 X Golden Saddle I X 1,849 50 4 Thoroughbred X 2,999 50 1 X Pegasus X 3,054 0 3 Mustang X 3,580 50 5

BrazilBrand Available for Sale Retail Price Price Rebate Sales Priority Point of Purchase Display

Stallion III X 2,600 20 3 Golden Saddle I X 1,850 20 2 X Thoroughbred X 2,585 20 1 X Pegasus X 3,058 15 4 Mustang X 3,512 50 5

EuropeBrand Available for Sale Retail Price Price Rebate Sales Priority Point of Purchase Display

Stallion III X 3,000 15 2 Golden Saddle I X 1,925 25 5 Thoroughbred X 3,099 30 1 X Pegasus X 3,449 25 3 X Mustang X 3,619 50 4 X

In terms of promotional activities, Powers Inc. tried to design advertisements that

persuaded each target segment to buy a particular brand of our product by creating the right

message and placing it in the right geographic market. However, according to the International

Advertising Federation, all advertisements across all segments have received a very poor rating.

In previous quarters, our Cost Cutter ad (Stallion II) received a grade of 52, the highest in this

segment. We held the second and third places in the Work Horse segment (Stallion II and

Golden Saddle respectively), with a grade of 60 and 59.

Figure 3.11: Ad JudgmentsAd Judgment – Canada

29

Company AdCostCutter Innovators Mercedes Work Horse Traveler


Ad Judgment – Europe

Company AdCostCutter Innovators Mercedes Work Horse Traveler


Our advertisement decisions were based on the needs and wants of our target segments.

Like the brands we created, the benefits we chose to stress and prioritize in our ads were

determined by what needs, features, and components were most important to the particular

segment our ad was targeting. Our Stallion II ad was geared toward the Work Horse segment.

Because this segment valued a product that gave them peace of mind, was easy to use and easy

on the eyes, and had bookkeeping and work processing software, we decided to emphasize these

things in our advertisement. Please see figure 3.12 for the benefits and the prioritization of those

benefits offered in our Work Horse, Stallion II ad. We geared our Golden Saddle ad toward the

Cost Cutter segment. This target segment valued a computer product that gave them security,

was easy to use, easy to setup, and gave the clientele minimum complexity. They also demanded

a product that was priced at a lower cost but could still perform a variety of tasks and functions.

We designed this Cost Cutter advertisement around these wants and needs. Figure 3.13 illustrates

the benefits we chose to stress and prioritize in this Golden Saddle ad. In order to make our ads

more visually appealing, we added a picture or two.

Figure 3.12: Stallion II Advertisement

30

Stallion II[Stallion II]

Mention brand name 6Manufacturer`s rebate 1High speed/execution time 3Easy to use, simple design 4Easy on eyes with larger screen 5Ready to use, bundled software 2Picture people in travel setting 7

Figure 3.13: Golden Saddle Brand

Golden Saddle[Golden Saddle]

Mention brand name 1Manufacturer`s rebate 5High speed/execution time 4Do variety of tasks 3Easy to use, simple design 2Easy on eyes with larger screen 6Ready to use, bundled software 7Picture business professionals 8

We justified the media placement of these two ads based on the 12-month potential

demand. We ran both the Stallion II and Golden Saddle ads seven times in the Canadian market

because the Work Horse and Cost Cutter segments both had a high potential demand in this

geographic location. In Brazil, we only ran the Stallion II ad because the Work Horse had a

higher potential demand. In Europe, we concentrated on running the Stallion II and Golden

Saddle ads in the city of London because both the Work Horse and Cost Cutter segments had a

high potential demand in this geographic location.

Figure 3.14: Advertisement Placements

2 2

31

Local Advertising – CanadaCity Company Ad Number of Inserts

Toronto Powers Inc. Stallion II 7Toronto Powers Inc. Golden Saddle 7

Local Advertising – BrazilCity Company Ad Number of Inserts

Rio de Janeiro Powers Inc. Stallion II 1

Local Advertising – EuropeCity Company Ad Number of Inserts

Berlin Powers Inc. Stallion II 1London Powers Inc. Stallion II 10London Powers Inc. Golden Saddle 6

The placement of these advertisements and the number of times will largely remain the

same for Quarter 5. However, the number of times they will run in their perspective geographic

markets will increase. Please see figure 3.15 for the specific numbers.

Figure 3.15: Quarter 5 Allotted Ads for Stallion II and Golden Saddle

Canada Number of times ad should run in market

City Cost Stallion II Golden SaddleToronto 3,500 6 5

Brazil Number of times ad should run in market

City Cost Stallion II Golden SaddleRio de Janeiro 3,500 4 4

Europe Number of times ad should run in market

City Cost Stallion II Golden SaddleBerlin 6,000 7 4London 7,000 10 4

32

Besides increasing the numbers for the advertisements that have already been created and

have already been running in the market, we will also modify the Work Horse and Cost Cutter

ads because they have low ad judgments. We will also develop two new ads in Quarter 5. These

new advertisements will be geared toward the Traveler and Innovators segments. Due to

extremely low ad judgments, we modified our Work Horse ad. This Stallion III ad now

emphasizes that Powers Inc. is the highest rated Work Horse brand. It also emphasizes the

software the Work Horse clientele has demanded. Please see figure 3.16 for a full description of

our modified Work Horse advertisement. Besides the Stallion III, we have also modified the

Golden Saddle ad in the hopes of raising our ad judgments. Based on market share research and

the wants and needs of the Cost Cutter segment, which this ad is targeting, we have modified the

Golden Saddle ad accordingly. In the modified ad, Golden Saddle I, we have emphasized that

our company has the highest rated Cost Cutter brand. Like the Work Horse ad, this ad also

emphasizes the software applications provided in our Cost Cutter brand. Please refer to figure

3.17 for a full description of our modified Cost Cutter advertisement.

Figure 3.16: Modified Stallion III Ad

Stallion II [Stallion III]

Mention brand name 8Manufacturer`s rebate 1Do variety of tasks 4Bookkeping/budgeting applications 5Word processing application 6Easy to use, simple design 3Easy on eyes with larger screen 7Ready to use, bundled software 9

Figure 3.17: Modified Golden Saddle I Ad

Golden Saddle

33

[Golden Saddle I]Mention brand name 1Manufacturer`s rebate 6Do variety of tasks 5Bookkeping/budgeting applications 4Word processing application 2Data management application 7Easy to use, simple design 8Highest rated brand-Cost Cutter 3

In addition to modifying these two ads, we have also decided to develop two new

advertisements for our newly created Traveler and Innovators brands. The rationale behind this

move is so that we can get the word out for these two new products. Based on the feature

demands and the wants and needs of the Traveler segment, we designed our Traveler ad,

Pegasus, to emphasize that this product is easy on the eyes, has a rugged design, is ready to use,

and has high speed and execution time. Please refer to figure 3.18 for our Pegasus advertisement.

Figure 3.18: Traveler Ad, Pegasus

Pegasus [Pegasus]

Mention brand name 2Manufacturer`s rebate 9High speed/execution time 7Presentation application 8Easy on eyes with larger screen 4Ready to use, bundled software 3Rugged design for portability 5Link PC to local network/Internet 6Picture people in travel setting 1

In addition to creating a Traveler ad, we also designed an Innovator ad, entitled the

Mustang. In order to determine the benefits and the prioritization of those benefits that this ad

will emphasize, we researched the feature demands and product wants and needs of this segment.

Based on these findings, our Mustang ad will emphasize engineering and business software, web

34

design tools, and a product that can tackle really big problems. Please refer to figure 3.19 for a

full description of this Innovator advertisement.

Figure 3.19: Innovator Ad, Mustang

Mustang [Mustang]

Mention brand name 9Manufacturer`s rebate 8High speed/execution time 7Tackle really big problems 6Engineering design application 2Business graphics application 3Web design tools 4Link PC to local network/Internet 5Picture engineering setting 1

We justified the media placement of these two new ads in Quarter 5 based on the 12-

month potential demand. While we have every segment ad running in each of our geographic

markets, these research findings prompted us to concentrate our Work Horse, Stallion II ad and

our Traveler, Pegasus ad in the European Market. In Brazil, we concentrated on running our

Stallion II and Golden Saddle advertisements. In the Canadian market, we focused on running

our ads for the Work Horse, Cost Cutter, and Traveler segments. Again, the rationale in

determining the prioritization of which geographic market would concentrate on running which

ad and its corresponding target segment was based on the demand of each segment in each

geographic location. Figure 3.20 provides the number of times the Pegasus and Mustang ads

should run in a specified geographic market.

Figure 3.20: Allotted Ads for Pegasus and Mustang


City Cost Pegasus Mustang

4

4

35

Toronto 3,500



Rio de Janeiro 3,500



Berlin 6,000

London 7,000

Also, in figure 3.21 there is a full description of the number of times each ad should run

in each geographic market and in which media outlet. We determined the media placement of

each advertisement based on the consumer characterisctics of each target segment and the

geographic placement of each ad based on the 12-month potential demand. For example, the

Work Horse clientele is composed of financial managers, office administrators, and corporate

managers. Thus, in the European market we placed our Work Horse ad in executive business

magazines, daily newspapers, general news magazines, general business magazines, and business

newspapers. However, the media placement of every ad is not the same due to the fact that

Powers Inc. would like to cover all its bases. Essentially, we placed some of the same segment

advertisements in different media outlets in order to figure out which combination is more

appealing to our target segment and which one can reach our target segment more effectively.

Figure 3.21: Media Placement of each Ad in each Geographic Market


Media Cost Stallion II Golden Saddle Pegasus MustangBusiness newspapers 19,000 1 0 2 1

6 3

2 2

11 4

14 4

36

General business magazine 13,500 1 0 0 0Computer magazines 4,300 1 1 0 0General news magazines 6,900 1 1 0 0Leading trade journals 6,300 1 1 1 0New venture magazines 7,800 1 1 0 0Sports magazines 21,500 0 0 0 0Executive business magaz 25,000 0 0 2 0Science & technology mag 13,300 0 0 0 0Daily newspaper 7,000 0 1 1 2Leisure & entertain mag 16,600 0 0 0 0


Media Cost Stallion II Golden Saddle Pegasus MustangBusiness newspapers 12,000 1 1 1 1General business magazine 8,500 1 0 0 0Computer magazines 3,000 0 0 0 0General news magazines 4,500 1 1 0 0Leading trade journals 4,000 0 0 0 0New venture magazines 4,300 0 0 0 0Sports magazines 13,000 0 0 0 0Executive business magaz 15,000 0 0 0 0Science & technology mag 7,000 0 0 0 0Daily newspaper 4,300 1 2 1 1Leisure & entertain mag 7,500 0 0 0 0


Media Cost Stallion II Golden Saddle Pegasus MustangBusiness newspapers 20,000 3 0 4 0General business magazine 14,000 3 0 0 0Computer magazines 4,500 0 0 5 0General news magazines 7,000 5 0 3 0Leading trade journals 6,500 0 0 7 0New venture magazines 8,000 0 0 0 0Sports magazines 22,000 0 0 0 0Executive business magaz 26,000 3 0 0 0Science & technology mag 14,000 0 0 0 0Daily newspaper 8,000 3 0 6 0Leisure & entertain mag 17,000 0 0 0 0

Finally, Powers Inc. will expand their sales operations in the European market place in

Quarter 5. Based on the success in both London and Berlin, we have decided to open up

37

additional sales offices in Paris and Rome. Our sales people will focus on three segments: Work

Horse, Travel, and the Innovators. From the aforementioned market research both the 12-month

potential demand and price willing to pay, these markets present a huge chance for success. For

instance, in Paris the 12-month potential demand is 4578 compared to Berlin’s potential of 4928.

This closeness and vacancy of this geographical market makes both Paris and Rome appealing.

In terms of salespeople with the inclusion of our two new brands we will now extend to 5

new sales people in London, focusing on our Pegasus brand and 3 in Berlin focusing on this

same segment. Additionally, to take advantage of our new Innovators brand, the Mustang, we

will extend new salespeople in the same geographical markets, London and Berlin. In both these

markets we will add 4 new salespeople for each segment, bring our new total to 16 in London

and 12 in Berlin.

In the Canadian marketplace we will be adding two new salespeople to each of our new

segments, the Innovators and Travelers brand. This will bring our new total of Canadian

salespeople to 10 total salespeople.

In our Brazilian market we will also increase our salespeople to meet the demand and

launch our two new brands. We will have 1 person selling the Innovators brand, Mustang and 2

selling our Travelers brand, the Pegasus. This will bring our new Brazilian total to 7

salespeople.

kimber web viewtargets the cost cutter segment. in terms of salespeople, we currently have nine...

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