Strategic Marketing Plan

Philips HuePresentation

by:

Taylor ClaytonNatalia Pamich

Dhruv DhallJason Han

Company Background

Mission Statement

Our Mission:

“Improving people’s lives through meaningful innovation. Innovation is integral to everything we do. But

innovation does not only mean “new technology”. It can also mean a new application, a new business model or a unique customer proposition brought about by an innovative partnership. By tracking global trends and understanding the challenges facing people in their

daily lives, we ensure that people’s needs and aspirations are at the heart of our innovation

endeavors.”

Core Competencies

Philips . . .• Largest manufacturer of lighting

products• World-class technology, customer

service, and inventions• Pioneer in the green-technology

initiative • Greenpeace rates Philips as one of the

top 10 Environmentally friendly companies in the world

Business Portfolio Analysis

• Healthcare: Imaging Systems, Patient Care & Clinical Informatics, Home Healthcare Solutions, Customer Services

• Lighting: Lamps, Consumer Luminaires, Professional Luminaires, Lighting Systems & Controls, Automotive Lighting, Lumileds

• Consumer Lifestyle: Health & Wellness, Personal Care, Domestic Appliances, Lifestyle Entertainment

Business Portfolio AnalysisHigh Market Share Low Market Share

High Growth

Rate

Star Question Mark

Low Growth

Rate

Cow Dog

SWOT Analysis: Strengths1. The Philips brand is very popular

(Leading global lighting company)2. Philips has the ability to produce

some of the best quality products in the consumer market

3. Strong innovation capabilities4. Large global footprint (Serving

100+ countries)5. Low-cost and highly efficient

manufacturing and supply base.

SWOT Analysis:Weaknesses

1. Hue is currently for sale exclusively in the Apple Store.

2. The High Price of Hue

SWOT Analysis:Opportunities

1. Growing market for energy efficient products

2. Emergence of new markets, services and customers

3. Technological change4. Taxation law (recognized

through energy efficient tax credits)

5. Government regulation and policies

SWOT Analysis:Threats

1. Cheaper competitive products

2. Macroeconomic changes

3. More competitors enter the market4. Foreign competitors making similar

products, but utilizing cheap labor

Industry Analysis • $825 million revenue• Projected annual growth of 3.4% • High demand for energy-efficient lighting systems –

environmental concerns, lower electricity costs• Growth stage of the industry life cycle • High competition with high barriers to entry • Philips market share of 43.1%

Competitor AnalysisLIFX LED Smart Bulbs

- Kickstarter Project- Wireless hub-free- Notifications- Music sync

Green Wave Smart LED Light Bulb

- White light only- Additional physical remote- $200 initial price, $20 for

each bulb thereafter

Points of DifferenceProduct Features Advantages Benefits

Hue LED Smart Light Bulbs

• Easy to use smart phone interface• Interconnectivity through wireless hub• Shaped like traditional light bulbs

• Easy to learn how to use• Control lights from anywhere• Fits into old fixtures

• Savings in time• Savings in Time• Savings in $

LIFX LED Smart Bulbs

• Interconnectivity through Wi-Fi• Social network and email notifications • Lights can sync with music

• Control lights from anywhere• Instant notifications• Quickly create party environment

• Savings in Time•Savings in Time•Savings in Time & $

Greenwave Reality Smart

LED Bulbs

• Wireless hub connectivity• Additional physical remote• White light

• Control lights from anywhere • Allows for more control • Cheap replication of traditional white light

• Savings in Time• Savings in Time• Savings in $

Product Market AnalysisMARKETS PRODUCTS

Current NewCurrent Market Penetration

- Phillips Sells Endura LED

- Are In Decline Phase of PlC

- Energy Saving Lamps- Sell at higher price and

same amount- Product Can Either fade

away or make minor profit

Product Development- Time for HUE Led Light

Bulbs- Current Markets of Families and Average

Young Consumers- Risk as I-phone

compatibility too specific and expensive

New Market Development- Expand Current Bulbs

to Spas and Clubs- Lack of interest and

decline could prevent expansion and sales

Diversification- Sell to brand new market

of hospitality- Good expansion and large

industry- Diversify Phillip’s product

line and increase hotel revenue

Environmental Scan:Social

• Social Media is imperative in connection

• Lighting is an important part of the guest’s stay

• Increased concern for the environment. 42% of energy from lighting and 70% of that is inefficient. Hue is not inefficient.

Environmental Scan:Economical

• Hermesworldwide.com – economy is rebounding

• Luxury vacations and luxury hotels are more popular

Hue can give luxury hotels favorable impressions through customizable options and Apple functions

Environmental Scan:Technological

• Smart Phones are in growth stage of PLC

• Popularity can be a marketing tactic to intrigue customers

• Ipads in room : customizability!• Increased emphasis for green technology

• Popular pick for hotels

Environmental Scan:Competitive

• Main competitor – LED LIFX– Independent and not out yet

• Green Wave Reality Light Bulb–No color options, not customizable–However, it is cheaper

Environmental Scan:Political

• EISA (Energy Independence and Security Act of 2007)–Medium screw base

and socket– Voltage range within

110 and 130 volts–Minimum CRI rating

of 80 – Hue has 91

Environmental Scan:Regulatory

• Large Environmental Emphasis in Today’s Society

• Baltimore Business Journal – “Lighting turned off after a time period.”– Hue is energy efficient so gives more total

usage

Environmental Scan:Natural

• Natural Disaster in Hurricane Sandy– Entire Cities Ran Out of Power– Entire Hotel would lose lighting – Need Emergency Response Team

• HUE requires many resources• Supply chain manager

must ensure that there is a stock for emergency situations

Market Segmentation • Hospitality segment• Small share of Philip’s Lighting

division business

Target Market• High-end, cosmopolitan hotels with

modern and colorful décor• Age range of guests is 25 to 55

Market Needs

To maintain youthful and colorful themes that attract consumers

Buyer Behavior• Growing trend for making tablet devices

available to guests in their rooms so they are satisfied with their room’s modern and “high-tech” features

• For example, St. Regis in Shenzhen, China and the Four Seasons in Beverly Hills, California

Marketing Mix: Product

• Philips Hue• Six sigma

Marketing Mix: Price

• Objectives: gain market share, social responsibility • Constraints: newness of the product, type of

competitive markets, current economic condition • Demand: demand curves, price elasticity • Costs: associated with production• Break-Even Quantity

Marketing Mix: Price

• Strategies:– Demand-oriented: captive pricing, target pricing,

bundle pricing – Profit-oriented: target profit, target return-on-sales,

target return-on-investment – Competition-oriented: customary pricing,

psychological pricing

• Dynamic, flexible-price policy with price cuts for bulk-buying.

Marketing Mix: Price

Price = $20/bulb (Based on customary/target

pricing)

With 100% mark-up

BEQ = FC ÷ (P-UVC) = 36 545 905.82/(20 – 10) = 3 654 591 units

BES = 3 654 591 units * 20 = $73 091 811.64 sales

Marketing Mix: Price

Regular Price Bundle Price with Hue

iTouch $199 $99iPad Mini

$329 $229

iPad $399 $249

Hue – Apple Bundle Price

New, discounted prices for Apple equipment:

Marketing Mix: Promotion

• The Promotion is a key factor in the success of this campaign– As demand is on the rise perfect time for

Hue–No comparison to any hospitality lighting

• Apple functionality and social media key aspects• Building relationships

core as well

Marketing Mix: Promotion- Advertising

• Brand New Product so Informational Product Style– Introduce Hospitality Industry to

HUE–Marketing it with Apple is core– Both Hue and Apple Benefit from

this• Methods

– TV Apple I-pad advertisements– Great wide scale exposure– Large and diverse customer base

Marketing Mix: Promotion-PR

• Social Media– Dedicated Managers to manage

hotel accounts– Hue can create accounts to

build relationships and reach out to clients

– Constantly Show off Features as well

• Hotel conventions– PR team directly represent HUE– Networking and brand

development• Mixers

– Gain Data and Keep in Touch– Generate Buzz Marketing– Spread the Word

Marketing Mix: Promotion - Sales

• Bulk Sales– Include some amounts of Apple I-

pads with sales and orders– Cross Promotional Feature• Provides Increased Luxury to rooms• Boston.com – more features in a room,

more satisfaction• Provides incentive to purchase and a

deal

Marketing Mix: Promotion – Direct Marketing

• Direct Conversation Through Social Media• Direct Marketing through TV Ads• Iphone app also a form. Managers might see

Ad on TV• Direct Meetings

– Best and Most Detailed Information – Must have all materials and convey FABs

• Conventions– While PR Manages Image, Sales should gain

interest and desire for product through displays– Remember to use variety of methods for success

• Di

Marketing Mix: Promotion – Personal Selling

• Sales Team specifically for Hospitality– Conduct research into expectations and

wants– Must have knowledge of product to explain– Six Steps– PBC– Negotiate Prices and Develop Deals– Develop Customer Relationships– Use Need Satisfaction Format of

presentation

Marketing Mix: Place

• Corporate system of distribution• 20 Sales agents who engage in direct selling to

modern luxury hotels• No need for wholesalers, distributors or stores • Maintain our own sales force to perform all channel

functions• Strategic channel alliance with other divisions of

Philips involved in the hospitality industry• Value created by quick transactional function

Marketing Mix: Positioning

Adds value to customer experience by having modern and “high-tech” features at their fingertips to customize their room

Compatibility with Hotel’s Style/Decor

Perc

eive

d Cu

stom

er V

alue

of G

uest

room

Perceptual Map

High

HighLow

Other White LED light bulbs

Hue

Test Market

Limited time: 1 MonthLimited place: The Los Angeles W

Hotel

Plan Objectives

• Profit: high ROI and profit • Sales: $100 million in sales • Market Shares: increase the LED light

bulb share in the luxury hospitality market

• Quality• Customer Satisfaction • Employee Welfare • Social Responsibility: promote energy

efficiency

Implementation:Resources Required

Lighting& Bulb Cost (as a

percent of co. revenue)

+LED Cost (as a percent of co.

revenue)=

LED Light Bulb Cost (as a percent of co.

revenue)

Profit 6.5% + 10.0% = 16.5% / 2= 8.25%

Wages 19.1% + 14.7% = 33.8% / 2= 16.9%

Purchases 49.9% + 22.0% = 71.9% / 2= 35.95%

Depreciation

3.2% + 10.5% = 13.7% / 2= 6.85%

Marketing 1.0% + (4.0%) = 5.0% / 2= 2.5%

Rent & Utilities

4.1% + 8.5% = 12.6% / 2= 6.3%

OtherTotals:

16.2%100%

+ (30.3%)100%

= 46.5% / 2= 23.25% = 100%

Implementation:Resources Required

Lighting& Bulb Manufacturing

LED Bulb Manufacturing

Input Materials: • Glass and glass products • Metal wire• Plastic• Rubber • Inert gases.

Input materials: Different quantities of:• Synthetic sapphire • Gallium • Indium• Silicon carbide• Aluminum• Epoxy resin• Copper

• LED Manufacturing requires a combination of resources used in these two separate manufacturing processes

Implementation:Gantt Chart

Implementation:Estimated Budget

• To arrive at total budget we used Philip’s 2011 reported net operating capital for their lighting division of $6,554,614,000

• Multiply net operating capital by the LS&E market share of 53%

• Gives the budget for the LS&E and electronics division

$6,554,614,000 x 53%=$3,473,945,420

Implementation:Estimated Budget

• Next, apply our estimate of Hue’s 8% budget share to the LS&E budget to arrive at Hue’s final estimated budget

$3,473,945,420 x 8% = $277,915,633.60LED Light Bulb Cost (as a

percent of co. revenue)

XHue’s Total Budget

=Estimated Budget

for Each Cost Category

Profit 7.25% X $3,473,945,420 = $20,148,883

Wages 16.9% X $3,473,945,420 = $46,967,742Purchases 35.95% X $3,473,945,420 = $99,910,670Depreciati

on6.85% X $3,473,945,420 = $19,037,220

Marketing 2.5% X $3,473,945,420 = $6,947,890Rent & Utilities

6.3% X $3,473,945,420 = $17,508,684

OtherTotal

23.25%100%

X $3,473,945,420 ==

$64,615,384$3,473,945,420

Implementation:Organization Chart

Marketing Dashboard

Evaluation and Control:Marketing Mix Modifications

• Price• Place

Sources:

http://www.newscenter.philips.com/main/standard/news/press/2012/20121029-connected-lighting-system-for-the-home.wpd#.ULMN_7Se18s

http://www.theverge.com/2012/11/8/3616828/smart-bulbs-phillips-hue-greenwave-reality-insteon-ledhttp://energy.gov/energysaver/articles/frequently-asked-questions-lighting-choices-save-you-moneyhttp://www.kickstarter.com/projects/limemouse/lifx-the-light-bulb-reinventedhttp://www.bulbs.com/learning/ledfaq.aspx#anchorlasthttp://thenextweb.com/gadgets/2012/10/29/meet-philips-hue-the-smart-led-light-bulb-exclusively-hitting-apple-stores-on-october-30

/http://www.newscenter.philips.com/main/standard/news/press/2012/20121029-connected-lighting-system-for-the-home.wpd#.

ULMN_7Se18shttp://www.greenwavereality.comhttp://eartheasy.com/live_led_bulbs_comparison.htmlhttp://clients1.ibisworld.com.lib.pepperdine.edu/reports/us/industry/default.aspx?entid=4456http://www.newscenter.philips.com/pwc_nc/main/corpcomms/resources/corporate/Q2_2012/presentation_2Q12.pdfhttp://www.philips.com/about/company/companyprofile.pagehttp://www.usa.philips.com/c/led-light-bulbs/30033/cat/en/