Executive summary
The purpose of this report is to provide a snapshot of our current situation as a company situated within the Sonite market. We will give an in-depth, critical analysis of each brand and its position and will identify our marketing plan for the next two years.
Roar started as a company with two key brands- ROCK and ROLL. We spent the first few years as a company taking note of what our competitors were doing and understanding how the market worked. Hereafter in our 5th year we took action, modifying both of our products to fit the needs of their target consumer segments, whilst also introducing a new brand to the market, ROSE. With these three products we were covering three out of five customer segments- Professionals, Explorers and Savers. To do this however, we had to take out a loan of $4,000,000, with the condition that it was to be paid back within two years with 4% interest.
At this time, our competitors entered the Vodite market, which played to our advantage as it led to them neglecting the Sonite market. With the introduction of our modified products and new product, and our competitors neglect of the market, this brought us to our 6th year which was subsequently the most successful year in the company’s history. Following on from this success we dreamt of fully taking over the market, so to achieve this we put into place research and development for two new brands which would satisfy the remaining two customer segments in the market, which were shoppers and high earners.
However due to a combination of neglecting consumer needs, not forecasting commercial team changes and decreasing advertising budgets we were forced to withdraw our initial brands of ROCK AND ROLL in order to focus on the brands we believe had the most future potential.
In our 10th year, after carefully analysing our market research and identifying our competitors’ strategies, we decided to take the leap into the Vodite market. This was after every single one of our competitors, and for good reason. We wanted to make sure that we fully understood the market we were entering, acknowledge what our competitors were offering and recognise what the customers in the market actually wanted.
This is the main driver of our marketing plan for the following two years. Our main aim is to infiltrate the follower customer market, which is the biggest customer segment in the Vodite market by far. Additionally, we want to modify our brands ROSE and ROSHOP to be able to take advantage of the two biggest customer segments in the Sonite market. Finally, we plan to withdraw our brand ROYAL on the basis that it was introduced as a short-term brand to achieve the revenues from the High Earner market that was willing to pay a high price for an average product.
1.0 Introduction
1.1 Current position of firm
We are team Roar. We are currently solely in the Sonites market, where we are second in the market in terms of unit and value market share, with our main competitors being Liberty who have almost half of the market. Our share price index is currently third in the market at 2,788 with our cumulative net contribution over 10 years being $630,000,000.
In the initial years of the company ‘Roar’, this was a time of constant growth and positioning in the market. After 5 years spent analysing the market and our competitors, we started to apply stronger strategies which were aiming to fill the gaps left from our competitors in order to satisfy customers’ needs. The Sonite market has been a ‘Red Ocean’ since the beginning of this challenge, and the more the years passed the more red it became. Then, during year 5, our competitors “Liberty” was the first to enter the Vodite market, which in turn allowed us to reach our peak revenue in the 6thyear.
Our market leading 6th year lured us into a false sense of security and success, during which time we decided to create three new brands targeting specific audiences. Our 5 brands were difficult to manage, and the investments we needed for each of them to target specific consumer segments as we planned were not enough. Consequently, we have decided to focus on the brands that have, based on the market forecast, more possibility of market share and we saved money to invest in ROSHOP, ROSE and ROYAL, R&D, advertising and commercial team.
Over the course of this report there will be an in-depth analysis of our brand portfolio, followed by our marketing plan for the next two years.
2.0 Brand Positioning
Our company plan was to develop our brands in the Sonites Market, waiting for a competitor shift into Vodites’. Our long-term view was to let our competitors enter the Vodites market first, so we could then assess the Vodite market over time and what the consumers within it want before then entering it ourselves. We wanted, as third in the market, to take advantage of our competitors mistakes. Thus, as you will see, the 6thyear peak can be attributed to our competitors jump to the Vodite market. This gave us valuable reasons to stay and focus on Sonites and keep going with our strategic plan.
The following chapters will be an in-depth critical analysis of each of our brands current situations, whilst also providing the relevant history that has got them to these positions. To judge the performance of our brands, we looked mainly at their revenues and market share as we believe that this gave us the most accurate insight as to how the brands were performing in the market.
2.1 ROCK
Whilst we initially had a spread over all of the customer segmentswe decided to reposition our targeting to focus on Professionals and High Earners. We decided to modify ROCK in line with the ideal values of the customer segment Professional’s, which we launched in our 5th year.
We made sure to invest in advertising research and set our perceptual objectives to exactly what our target market wanted. We achieved this through using multidimensional scales, this meant that our message quality was consistently “Excellent”, fuelling Rock’s success and strengthening their position in the market. The modification brought us to our 6th year, where ROCK was the first best-selling brand in the market withthe highest Professionals purchase intention (68%) followed by our competitor LOOP (28%).
The following graph shows the relation between ROCK production and our distribution channels’ investments. Our main investments were on commercial team displayed in the speciality stores which were the main Professionals selling channel during the beginning years until the 6th year (45%). Our main mistake was to suppose that the speciality stores distribution channel was going to grow. This supposition was misleading and the Professionals’ Shopping habits in the Speciality Stores (look Shop habits) were decreasing in the following years (from 7th year to 10th year= from 45% to 33%).
As a final result, after having analysed the market share by speciality store (22%) and the retail sales results during the 6th year we kept investing mainly on it in the following year, neglecting other channels which were increased reaching similar values. Figure 2 shows the huge gap between the speciality stores investments and the other two distribution channels in the 7th year. This gap limited our production selling to Professionals which were moving to mass merch and influenced our ROCK withdrawal.
The situation changed during the 7th year. Our base cost was the highest in the market and our price not as high as LOOP (585$). Moreover, LOOP targeted less Professionals with advertisements, it has got more market share by Speciality stores and more revenue (126M$). Our mistake was: instead of increasing our price and maintaining the same production we increased the production and we invested a lot on commercial team and advertising, thinking that we were going to sell everything.
Overall, a consistent amount of stocks (303,000 units) in our inventory, the huge investment in advertising, the professional shopping habit shift/change due to the market and our wrong distribution evaluations brought ROCK far from our target (68-21% Professionals’ purchase intention) and allowed our competitor ‘LOOP’ to fill the gap that we, ingeniously, left (28-68% professionals’ purchase intention). This mistake brought us to withdraw ROCK because we could not afford a new brand replacement strategy.
Whilst we realise that ROCK is no longer a part of our portfolio, it is a prolific brand for our company as it gave us the revenues to invest in other products, whilst helping us understand how the market worked.
2.2 ROLL
As we did with ROCK, we spent the first 4 years of ROLL spreading its attention among all the segments, whilst analysing market research and our competitors. Additionally, as for ROCK, we did not change ROLL’s price during the first 3 years and after having analysed our competitors’ price decisions we adapted it into the marketAfter having realized, from the semantic scale, that none of our competitors were close to satisfying Explorers’ needs we decided to target them. Furthermore, we realized that this strategy increased Explorers’ purchase intentions (1st with 75%) and ROLL awareness by Explorer segment (78%) during the 7th year.
As an Explorers focused brand, ROLL has invested in speciality stores as the main distribution channel. The Explorers’ shopping habit from year 4 to year 10 remains speciality stores orientated even with a low decrease (from 68% to 55%). Furthermore, our increasing commercial team investment decision on speciality stores did not backfire on us even though we neglected Explorers’ shopping habits. The issue that brought us to withdraw ROLL was that during the 7th year we were targeting 30% of shoppers which were buying through mass merchandisers (41%). Furthermore, our mass merchandisers investments were really low (fig. 6) so Shoppers barely found our product in their main distribution channel and consequently we lost a potential consumer.
After achieving such a successful 6th year, this led us to greatly increase our production plan. This decision led us to having high levels of inventory, where we then greatly decreased production to try and sell out of products. This decision caused our market share to drop from 79% to 57% as our customers could not find us in the market.
Another pivotal mistake at this point was to significantly decrease our advertising budget in an attempt to save money, by doing this we became invisible to new customers. At this point we more than halved our units sold and made the executive decision to withdraw the brand, gradually taking it out of the market over the next two years.
We could not balance our price in relation to our increasing base cost due to Explorers’ needs (high performance for low price) so we ultimately lost revenues. We modified ROLL without forecasting the ideal values, so by its launch our product was already behind. It was quite clear that our brand life cycle came to the end and we had to withdraw it before having worse results.
2.3 ROSE
To grow as a business, we decided to expand our brand portfolio and create ROSE. ROSE is a brand targeted 100% at the Savers customer segment. We made this decision due to the market forecast growth for this segment, where from the first year, the Savers market size was set to grow at an average of 18.9% over the next five years.
We launched ROSE in our 5thyear, after carefully creating a product in conjunction with the customers’ needs and identifying what our competitors were not providing them with. To achieve this, we had to take out a loan of $4,000,000 to be paid over two years at a 4% interest rate. We entered the market with the lowest price in an attempt to achieve a penetrative pricing strategy, where we then gradually increased the price to its peak $250.
ROSE was an immediate success, where we increased production and sold out year upon year until the brand reached its peak in our 8th year. At this point ROSE had 49% of the Savers market and was the second-best selling brand in the market with $163,000,000 retail sales.
However, at this point is when we started to make mistakes and our competitors were able to take the segment from us. There are three pivotal events that can be attributed to ROSE losing their majority market share. Due to the products success, we decided to decrease advertising in an attempt to save revenues and apply them elsewhere in the business. Our main competitors however, LOCK, kept their advertising expenditures consistently high and kept their share of the market. Additionally, the Toner brand lowered the price to be the lowest in the market, which gained them around half of our market share in year 9. Finally, LONT modified their product in Year 10 to better suit the Saver customer segment wants, where they went from 1% market share in year 9 to having the majority 29% market share in year 10. We did however have a consistently strong “Excellent” advertising message quality, which none of our competitors had.
Additionally, following from our successful year 8, we further increased our production and commercial team, which meant that when we lost market share in year 9 we were left with 326,000 units in our inventory and excessive commercial team fees for how much we actually sold.
This brought us to our current position of being second in the Savers market, with important lessons being learnt about this customer segment, including the importance of a consistent advertising share of voice within the market, just how much Savers are motivated by price and again, the consequence of not constantly keeping up to date with your target markets wants.
2.4 ROSHOP
To grow our market coverage, we decided to expand our brand portfolio and create ROSHOP. ROSHOP is a brand targeted 100% at the shopper’s customer segment. We noticed from the market forecasting in the 7th year that the shopper market was set to expand 7.1% in the next period and 6.3% in the next 5 periods. Therefore, we decided to create ROSHOP to infiltrate the growing shopper market, investing on mass merchandisers as the first distribution channel and on speciality stores as a way to make our product more available.
From year 8 to year 10, we had a period where LONT was gaining more Shoppers market share (25% and 30%) compared with our brand ROSHOP (20% and 27%) otherwise in the last year we were first in the market (41%). The reason was that between the 8thand 9thyear, LONT was selling more stocks while we were trying to place our remaining inventory and in the last year LONT changed its target to Savers (29%) leaving us the Shopper market. We identify that our strides in the Shopper market are due to LONT’s repositioning, however with this advantage that we have gained we will make sure going forward that we are paying close attention to the customer segmentneeds, making sure that we continue to increase our market share and revenues.
We launched ROSHOP in our 8th year, entering the market with a lower price ($300) than our biggest competitor in that consumer segment LONT ($315) in an attempt to achieve a penetrative pricing strategy which worked successfully for ROSE. We then increased the price slightly by $5 in period 9 to increase revenue and maintained this price in period 10. However, since LONT reduced its price to $300 in period 9 we lost out on the price advantage.
Due to entering with a lower share in the market in year 8, we overestimated production and set it to 400,000 for year 8 and had 117,000 stock left in inventory so in year 9 we reduced production to 180,000 and sold out production and inventory. For period 10 we set the production at 480,000 which sold out due to the LONT targeting shift towards Savers and our following sharp increase in market share of the shopper market.
Working with ROSHOP made us very aware of how much others in the market can affect how our brands perform and how it is crucial to invest in advertising and commercial team when entering the market.
2.5 ROYAL
Our final brand, ROYAL, was launched during the 8thyear to target High Earners. High Earners are willing to buy more expensive products to prove their social status, which appealed to us as they would give us more revenues per product produced. This is unlike ROSHOP and ROSE which are more low-end products where we have to produce a lot of to create notable company revenues. Additionally, we noted that none of our competitors were successfully fulfilling the high earners wants.
Although we knew that the high earner market was shrinking, we entered into it regardless, as we wanted to provide the market with a product that met their needs in order to slow the decline, whilst the low base cost and high profits providing us the extra revenue we needed in order to achieve our goals of entering into the Vodite market.
Our market share became stagnant over year 9 & 10, where our biggest competitor Nova gained 5%. We however, spent more than double on our advertising, whilst also having much lower brand awareness within the High Earner segment. This would make it seem that Nova were providing a more desirable product. However, through analysis of the semantic scales, it is found that ROYAL is closer to the target market in every aspect of the product. Which leaves one thing- price. Nova’s price is $40 more expensive than ours, which proves that High Earners are purely motivated by the price of the product and not what they actually look for in a product. From this, our plan is to increase the price of the product over the next two years in a bid to gain more market share and keep Nova at bay.
3.0 Marketing plan
Overall, our company started with a limited possibility of targeting options due to our given brands’ base cost. Our struggle of understanding the development of the market environment definitely influenced our 5 years choices. The mistake made in the first 5 years helped us to understand company’s procedures reaching the peak of our company history the next 6thyear. Our choices changed the market and brought us to withdraw our first two brands ROCK and ROLL and invest on brand with a short-term but high profit view (ROYAL) and on brands with a long-term and an increasing profit (ROSE and ROSHOP).
Our long-term view plan for the next 2 years is to withdraw ROYAL because the High Earners market is still decreasing and ROYAL is close to reach its ‘Dog’ phase. We invested in R&D for ROSE which is currently in a ‘Question Mark’ position creating POROSE2, which should help us gain market share in an ever-growing market. Our next step is to invest in ROSHOP, the most profitable brand so far, which is going towards ‘Star’ from a ‘Cash cow’ position. We are convinced that ROSHOP will continue to gain market share in line with the ever-growing market.
Moreover, our ROSE distribution will be mainly on mass merchandiser distribution channel without neglecting online stores which are increasing. ROSHOP distribution will focus on mainly mass merchandiser, but online stores could possibly turn into the main channel further down the line due to the constant increase during these 10 years.
In year 10 we asked for a loan of 550K$ to invest on the most expensive R&D for our first Vodites product REWARD (figure 18). We want to bring the most innovative product in Vodite market, a product that is able to distinguish itself from competitors.
Our procedure was analysing the semantic scale and the multidimensional scale which showed us an uncovered slice of market near Followers. Moreover, after having seen that the Vodites forecast for Followers segment was the biggest market and growing in the next five years we decided to target them.
Knowing that Followers do not take the first step and they are not easy to target we took advantage of our competitors’ entrance into Vodites market to let Followers have an idea of the average quality of the competing products. Additionally, we were the only company that waited until every competitor entered into Vodites. This gives us the possibility to gather more data and information about our competitors behave in Vodites market. After the market stabilized, we were ready to launch our unique product targeting Followers.
Moreover, we identify that the Followers’ choices are based more upon the market as a whole as it changes and grows, rather than the opinion of the Innovators’ and Adopters’ on specific products. Furthermore, our distribution plan consists of investing mainly on Mass merchandisers and Online Stores which are the main Followers distribution channels, without neglecting the long-term possible Followers’ shopping habit shift as we did with ROCK.
3.1 TOWS analysis
The TOWS matrix below creates strategies we can implement going forward to take full advantage of our companies’ internal strengths and make use of our external threats.
4.0 Conclusion
To conclude, we identified through our critical analysis of each of our brands in our brand portfolio, and those that we withdraw, our positioning of these in the market and how we achieved this. We as a company understand our past mistakes and have learnt from them, identifying our weaknesses and turning them into future opportunities.
Our main development aim now as a business is to successfully enter the Vodite market, which we believe is fully plausible considering our product offering, target market and understanding of the market. Whilst doing this we identify that we have to continue providing our brands in the Sonite market with investment and attention in order to not repeat history and end up withdrawing once successful brands.
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