Proposal of a marketing strategy



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8.3 Positioning

8.3.1 Product


Coming out of the GE matrix we have chosen to concentrate on one product, the realisation product of pensile facades. It has got the highest potential and also highest market share entitles us to believe that taking care of it will bring the expected profit which is our main goal.


  • Decrease in number of product lines (product bundling)

Through cut off in number of product lines company will be able to decrease uncertainty of customers. General assumption is closeness of individual lines which is directly here fulfilled. There will be just one main line – pensile facades and other products usually at offer will slowly free space for extension in materials for pensile facades. TAB. 46 below shows the disproportion of current status among all four offered portfolio products. In order to improve profitability we will have to concentrate on qualitative and quantitative increase of space assigned to pensile facades as well as number of information materials.

TAB. 46 Comparison of Product Portfolio Items






Pensile facades

Ceramics

Supporting constructions

Mosaics

Total no. of product portfolio items

25

322

3

160

Total oper.profit 2007 (in ths.CZK)

1820

1020

305

24

Space assigned (of showroom)

1/5

1/2

1/10

2/10

No. of information materials (leaflets)

2

17

0

2

Own file in webpages

Yes

Yes

No

Yes

Resource: own calculations
Through this strategy we will reduce cost originated from improportional attention paid to different projects. As suggested above in the Balanced Scorecard analysis, pensile facades are the most convenient for further development, the others in contrary. Cost savings will lead into higher profit of the company.

8.3.2 Price


After taking into account possible external and internal factors influencing the price of products offered we would suggest following:


  • Value-based pricing

Prices should be created according to expectations of customers. We suggest employing value-based pricing together with creating rules for price setting. Offered solutions of pensile facades should not only copy the price line as in suppliers price lists, but also the demand of customers. Every material is known for its specifics and these are differently felt in comparison with existing needs. Materials for pensile facades with known purchase of larger quantities will then have lower margins than those assigned as exclusive.


  • Market penetration with a good-value strategy

Since the company is already known for high prices (due to historically imposed business portfolio with high quality products, but also high price) there is no chance of employing price skimming. Even newest trends which would excuse higher prices would be only felt as confirmation of expensiveness. Because the main target of company is to reach higher profit, we suggest penetrating market with well balanced prices (build as said above) and increasing the attractivity of products with additional services. Services can serve as attracting tool for new customers as well as perceived added value for current customers.


  • Strategy of equal approach to every customer

This strategy is a step towards completing the requirement of fair behaviour. CRM software enables business representants to keep records on price discounts history for individual customers which helps improve not only argumentation when dealing on a new business order but also to prepare price exactly tailored for customers. This system ensures more flexibility when creating price offer since more examples will lead the business representant when doing so. This is closely connected with invoicing records. Should the customer have a good payment moral, business representant can consider larger discount. This way no internal rules of equal approach would be disturbed.

8.3.3 Place


We think that channels used for transferring product to customer are well chosen and even correspond with our new marketing strategy. Since Styl 2000 wants to orientate mainly on more demanding customers selling very expensive product it needs to keep in personal contact with its customers and keep this channel in own hands. There is however possibility and also opportunity to broaden the net of channels through following strategies.


  • Readaptation of showrooms

Showrooms are display-windows of company and should serve the purpose of attracting accidental passers-by or supporting word-of-mounth fame. Architects already value highly the possibility of getting free samples, but the environment of showrooms is rather customer-unfriendly – with dark colours, few display pannels, difficult accessibility to some parts of showroom. Also there is no division in logical parts which makes customers orientation more difficult and does not correspond to modern demands. That´s also thing decreasing chances of Styl 2000 to be understood as a modern company. It also does not correspond with our conclusion that we want showroom become a modern place for many customers with main focus on pensile facades. Also many customers (48%) confirmed in the survey (TAB. 43) that having the possibility of using showroom is very attractive for them. We should also take into account the fact that nowadays 30 customers visit showroom in average per year, but for the future we would like to see there 120 customer per year. Then the factor weighting expressed in above mentioned table gets more importance than before.

TAB. 47 Showroom Reorganisation Cost

Needs to be changed

Cost (+)/ revenue (-) approx. (in CZK)

Build new crossbars, cancel old ones, paint the room

12.000

Complete offer on materials for pensile facades

0

Outsell redundant ceramics

- 13.000

Install 2 consoles with options showing different kinds of facades

30.000

Install TV showing realisations of facades in neverending trail

21.000

Total

50.000

Resource: own calculations


  • Switch from traditional channels to cheaper and more efficient ones

This point in positioning strategy of place will lead company to cost reduction and efficiency savings. The aim is to use less the channels which are more expensive and increase use of or

introduce newly use of cheaper channels.

TAB. 48 Cost Breakdown - Current Situation

Item

no.of manhrs

no.of units

Total manhrs

no.of repetition

personal cost

(in CZK)


extra cost

(in CZK)


personal total

(in CZK)


extra total

(in CZK)


total

(in CZK)


Addressing - new customers (ph)

0,5

1200

600

1

230,40

9,60

138240

11520

149760

Addressing - current customers(ph)

0,5

450

225

1

230,40

9,60

51840

4320

56160

Visit – new customers

3

300

900

2,5

230,40

400,00

518400

300000

818400

Visit - current customers

2

150

300

2,5

230,40

400,00

173146

150300

323446

Sending materials - new customers

0,33

120

39,6

1

230,40

30,00

9124

3600

12724

Sending materials - current customers

0,33

45

14,9

1

230,40

30,00

3421

1350

4771

Offer - business representant

198

8

1584

1

230,40

0,00

364954

0

364954

Offer - business technical support

154

8

1232

1

197,80

0,00

243690

0

243690

Total

 

 

 

 

 

 

 

 

1973904

Total manhours - business representant

 

 

5463,5

 

 

 

 

 

 

Resource: own calculations based on internal statistics
In TAB. 48 are displayed different channels through which the product of pensile facades goes to the customers. The usual procedure starts with addressing new customers per phone and continues with visit at the customer. The response rate (regarding number of addressed customers to actually arranged visit) has so far been approximately 25% for new customers and 33% for current customers. Every preparation for this takes about half an hour (looking for details, preparing history of business relation etc.). In the table the number of units is served by always three business representants. Price of their work has been stated through simple division of average cost/man/month at the amount of 35.000,-CZK, i.e. 420.000,- CZK per annum, by 1882 hours per working year and man. Same calculation was used for business technical support whose task is to prepare technical part of the offer. In TAB. 42 we assumed the time necessary for preparation of one order is in average 5,5 week, here the ratio of business representant work/business technical support work is 3/10 to 7/10.
Addressing customers consists not only of manhours cost, but also extra cost like phone call fees. There were approx. 2,5 visits done to the same customer – less for the new ones since the outcome did not lead to cooperation, more for currect in order to discuss details on business in preparation. Visiting customers is burdened by 400 CZK extra cost covering travel expenses and is the most expensive of all channels (besides from creating an offer). In 2007 120 information materials containing leaflets and brochures were sent to new customers, 45 pcs to current customers. Extra cost cover postage and price of information materials.
We believe that using cheaper channels like email or web sites and paying more attention to strict choice of addressed people thanks to CRM software will not only lead to shorter time of preparation thanks to having all information in one place and available for all competent people, but also will save money. Calculations confirming this are in TAB. 49.

TAB. 49 Cost Breakdown - Strategy proposal



Item

no. of manhrs

no. of units

Total manhrs

no. of repetition

personal cost

(in CZK)


extra cost (in CZK)

personal total

(in CZK)


extra total

(in CZK)


total

(in CZK)


Addressing - new customers (phone)

0,5

1200

600

1

230,40

9,60

138240

11520

149760

Addressing - current customers (phone)

0,4

120

48

1

230,40

9,60

11059

1152

12211

Addressing - new customers (email)

0,25

600

150

1

230,40

0,83

34560

495

35055

Addressing - current customers (email)

0,25

330

82,5

1

230,40

0,83

19008

272

19280

Visit - new customers

3

348

1044

1,5

230,40

400,00

360800

208800

569606

Visit - current customers

2

202,5

405

1,5

230,40

400,00

139968

121500

261468

Sending materials - new customers

0,33

120

39,6

1

230,40

30,00

9124

3600

12724

Sending materials - current customers

0,33

45

14,9

1

230,40

30,00

3421

1350

4771

Offer - business representants

108

10

1080

1

230,40

0,00

248832

0

248832

Offer - business technical support

120

10

1200

1

197,80

0,00

237360

0

237360

Web support

0,5

450

225

1

230,40

0,30

51840

135

51975

Total

 

 

 

 

 

 

 

 

1603043

Total manhrs - business representants

 

 

4413,5

 

 

 

 

 

 

Resource: own calculations based on internal statistics
Since we aim to increse profit and not market share, we kept number of addressed customers (potential or current) and only split this number into two channels – traditional phone and new email. Because company does not have any statistics on how high the response rate from new customers to emails is (for purpose of this work we assume 8%), we will suggest using emails extra for the first year (address 600 extra new customers) to pick the statistic numbers and to decide how many addressing activities can be in future done by phone and/or email in order to either keep or increase response rate. For currect customers we first of all decrease amount of time needed for preparation of addressing a customer and also expect to get higher response rate since business representants already have information on past activities of this customer as well as on needs and wishes. We assume that for 450 addressed customers there will be response rate of 45% namely because of possibility to tailor an offer based on data from CRM system and for this purpose email is more convenient than phone because a customer can see all details in print. On the other hand we respect habits of some customers who may prefer being called to being emailed (sometimes also for security reasons since the spam filters nowadays are very powerful). We can see that number of visits has increased. We also expect higher effectivity of these visits that´s why necessity of 1,5 repetition in average.
We also kept number of pcs of information material sent to customers since we do not have any data on the response rate for this channel and would in the next year concentrate also on achieving them. However we believe that this cheap channel could be used in future. An important change happened in the ordering process. Due to introduction of templates for both technical and economical part of order creation and thanks to use of CRM where all data and information can be found with one mouseclick time for order process has been pushed down to average of only three weeks. Thanks to this change there are less manhours needed and therefore cost sink.
Very important number in terms of increase of profit is amount of 11 facades which can be expected as a result of all above mentioned changes. This increase of 25% in sales has to be attributed to higher number of visited customers. We kept the same ratio of 56,25 customers visit to one sold facade and did not for security reasons take into account all web operations whose calculation is also included in the table but influenced the result only with cost, not directly with benefits. This will more deeply discussed in the next strategy description.
We can also observe a substantial decrease in manhours of business representants by 20% which even though does not lead to decrease in cost (simply because it is fixed salary together with other fees) still enables business representatives to devote their time to service improvement and personal training.


  • Use of CRM software in web pages

Company has got good web pages. Their connection with CRM software will increase usability of both WWW and CRM – feeding from and feeding into each other. In the next stage of implementing CRM also access for long-term and loayl customers through web gate will be ensured – thus entrusting customers with responsibility for orders placed, at the same moment also ensuring the most flexible way of interaction only possible. In TAB. 49 we can see that 450 units, under which we understand updates in webpages, reactions to customers contacting company through web pages forms or processing orders per web gate, are not highly cost demanding and increase customer´s satisfaction through higher flexibility of business representatives. We believe that this way we will be able to shorten up time of reaction to maximum of 2 days as expected in TAB. 42.

8.3.4 Promotion


Promotion seems to be the most neglected area, however the only one and simple sollution is to create a marketing plan and change the structure of promotional activities as suggested in chapt. 7.6.


  • Create a marketing plan

This is the most important part of suggestions. To plan well advanced in order to be aware of all possible reasons and outcomes, budget and risk. As we showed in FIG. 13 financial intensity of current marketing promotion projects is very high. We could also see the description of effectivity of promotional activities during 2007. All these numbers show that such a strategy is more than important. The only thing we want to illustrate through TAB. 39 is inconsistency in sofar planning and necessity to introduce a marketing strategy based on thoughtful planning at all. Since our aim is to increase profit we will suggest reducing activities not directly connected with pensile facades (as we can see Promo 3 which contained a visit at Spanish producer of facades and tour of his realisations was though cost demanding but brought as a success two sold realisation of a facade) and introduce a plan of companies to be invited during the year.
With the help of CRM software the company will be able to define and segment into groups all of its customers according to profit brought and cost caused. It really is pitty that from 450 current customers were to 2007 promotional activities invited on 149 and only 45 of them took part on them. Because in Promo 3 whose invitees we believe to have been chosen more carefully than others (because of expected high cost) the response rate was 80 % and in other activities the response rate was only 30% we will keep the middle rate of 50% for future response rate based on CRM. The software should namely ensure enough information to choose invitees carefully.

TAB. 50 Strategies for Promotion



 

No. of invitees

No. of attendees

No. of facades sold

Attendees /sales ratio

Total cost

(in CZK)


Cost per attendee (in CZK)

Profit of 1 facade (in CZK)

Total profit (in CZK)

Cost/profit ratio

Current situation

149

67

8

5,625

386235

5 765

227 500

1820000

21%

Strategy 1 (lower total cost)

90

45

8

5,625

259425

5 765

227 500

1820000

14%

Strategy 2 (increase in sales)

150

75

13

5,625

432375

5 765

227 500

2957500

15%

Resource: Own calculations based on internal documentation
In TAB. 50 we have suggested two ways of fulfilling this strategy – either based on lower total cost or on increased sales. Both will lead to our objective to increase overall profit. Strategy 1 goes out from current situation when having invited certain amount of companies 45 of them became also attendies65. The outcome were 8 facades. If we want to decrease cost we will keep the same amount of attendees who represent 50% of invitees. The first saving lies in lower administrative cost. The second then in total cost because even if we assume that financial intensity of promotional activities is the same, total cots will be lower thanks to lower number of attendees. The cost/profit ratio then falls down to 14%.
Strategy 2 is based in keeping the same number of invitees, but thanks to CRM having increased response rate. Relying upon the fact that if the company´s representative meet 5.625 company at a promotional activitiy they will ensure one facade we would expect 13 facades as a result of increased number of both invitees and attendees. Cost/profit ratio is very similar in strategy 2 to strategy 1 but still there is 1 percentage point of difference and we would rather prefare strategy 1.66
When creating plan business representants will have to think and plan their business visits ahead but on the other hand they also will be able to give clear infomation on activities planned.


As we mentioned above promotional activities are a very important mean of communication with customers. In TAB. 39 we showed that promotional activity somehow corresponding with the main business function of Styl 2000 had better results than others. We are well aware of the fact that not having more information this could mislead you to wrong conclusion but knowing the customers personally and also taking into account their main interest in key company´s characteristics (TAB. 43) we believe that promotional activities with higher level of concentration on constructions and realisations of facades will bring good results. We suggest coming up with new activities more closely connected with building industry, such as promo arcticles in magazines or others with construction industry connected leaflets and information brochures, further starting with supporting universities and other schools oriented at construction industry – giving lessons and offering trainings on and with materials provided for free by Styl 2000, teaching architects-to-be to use materials offered by company and encouraging prefering them to others. Except for schools and universities continue in above mentioned promo activities (wine cellars etc.) and complete the range with experience trip to see constructions done by Styl 2000, be it on bicycle or by car.
This chapter aimed to show a general strategy. In our case it was differentiation focused on product portfolio item, strategy of decline aiming at harvesting brand and decreasing cost together with introduction strategy with increasing awarness of company, and CRM strategy as a supporting mean to all above mentioned. How to reach objectives stated in targeting was described in partial strategies divided according to which part of marketing mix they influence mostly. All of them will be once again enlighted in the following chapter in order to find out if the suggested marketing strategy is feasible and if it pays off.
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