Marketing Plan
...ortunity to gain early market lead as no-one currently offers a comparable solution • Potential and need to partner with Broadband supplier looking for “competitive” advantage through product differentiation Threats • Digital television may offer movies on demand, potential unknown • Existing distribution channels operate in a combination of monopolistic competition and pure competition where the market is dominated by a few large sellers, but also consists of smaller local sellers. Perceived threat small initially as volume is small in relation to total volume. • Rapidly moving environment, potential that many technical solutions could be being developed. 4. Strategic Objectives & Issues 4.1. Objectives • Cash Flow positive in year 3 of operation • 29,300 active users: end of year one. • Product growth years 2 to 5 equal to 15.9% Supporting Assumptions Description Value Source Total Non Business Broadband subscribers 31 Dec 02 293000.00 ACCC Video rental Transactions for year 2000 151897.30 ABS Active video hire store memberships 5499.40 ABS Average Video rental per membership pa 27.62 ABS Percentage Growth Broadband non Business pa 15.90 ACCC Forecasted average spend per transaction 10.00 Product penetration of Broadband users Year 1 0.10 The MoD service is a new product initiative in the Australian Market. In order to achieve company forecasts for Cash Flow and Users marketing mix tactics will be of an offensive nature aimed at increasing market share in video rentals and simultaneously driving demand of the uptake of broadband usage. An offensive marketing mix strategy is determined by an analysis of “market attractiveness of the video hire industry” against the “competitive advantage” of the MoD compared with traditional video hire. Charting the results in a matrix similar to that derived by GE/MCKinsey supports an offensive marketing strategy. While Market attractiveness is seen to be moderate to high with a ranking of 68%, competitive advantage is still quite average. Concentrating marketing efforts on Brand Image, Brand awareness, transaction costs and service quality while tapering off marketing expenditure over the medium term will see significant improvements in competitive position. The current competitive advantage ranking of 52% is expected for a start-up company in an emerging market. 4.2. Market Attractiveness Vs Competitive Advantage Market Attractiveness – Medium to High Market Forces • Strong mature market size for video industry with promising growth trends in broadband as a means for distribution. • Buyer power remains low and hence attractive to market entry. • Customer willingness to transfer to new entrants remains strong. Competitive Intensity: • Price rivalry is moderate as traditional video rental operates in a mature stage of its product life cycle. • Ease of entry for broadband distribution is moderate due to technology barriers and access to movie distributors. Ease of entry to traditional video rental remains low. • Substitute risk average to high. Market Access: • Customer familiarity with technology is strong within target market. • Channel access excellent as a result of strong relationships with content providers and dominant broadband providers. Company fit good. • Competitive Advantage – Moderate Differentiation advantage: • Product of high quality and unique to market place, service & support strong, brand image poor, Relative price strong. Cost Advantage: • Unit cost moderate, transaction cost low, marketing expenses comparatively high and a disadvantage in start up phase, overhead expenses offer a distinct advantage with new distribution medium. Marketing Advantage: • Strong market share within broadband video segment • Poor brand awareness during start up, • Excellent distribution agreements, • Strong sales coverage derived by borderless nature of e-business. 4.3. Needs Based Segmentation: Segment Identification for Video Hire service: Collectors:- Buys movies to own and odd to personal collection. Prestige associated with owning entire collections ie Star Track, Bond. Normally individual purchase decision Must See:- Rents new release movies. Current blockbusters based on reviews and performance. Relax and Unwind:- Rents movies for social requirements. Relaxation, friends. 5. Competitive Marketing Strategies Coyote Online Video Pty Limited represents an exciting innovation in Movie-On-Demand entertainment, its aim is to rapidly develop new market potential and market share with offensive market strategies appealing to identified segments in the market. At a functional level the target market is home and business users who have broadband capacity and currently hire or purchase videos/DVD. This description is given depth by identifying the initial users as Innovators and Early Adopters. Furthermore we have identified individual needs and demographics of our future customers in previous sections. The positioning of this product is determined by the values of our target audience. An audience who defines their social dimension by moving towards product innovation with desire to been seen as progressive. Their desire for quality products is not restricted by reasonable price increments so long as lifestyle satisfaction and individualism are perpetuated. Understanding these values and presenting the product as a clear differentiator in technology, convenience and choice will drive consumer adoption and move Coyote closer to its objectives. Coyote’s year first year target is to attract 29,300 active customers amounting to just over AU$8 million in sales and resulting in a operating loss of not more than 2 million dollars. Second year targets seek to expand customers and revenue by 15.9% while maintaining costs, thereby reducing the operating loss to $571,000. Movie-On-Demand services will be offer for New Release titles and Back catalogue with pricing established at $12.00 and $8.00 respectively. The product will be supported by a significant marketing budget of $1.8m in the first two years aimed and creating awareness, building brand loyalty and educating consumers and partners. Distribution will be modelled on a mixed channel system where direct sales is supported by strategic partnering to enhance product penetration. The company intends to grow market share at no less than the industry growth rate for broadband services. Predicted to be a rewarding 15.9%. This will ensure cash flow positive results by year 3 and a Net profit of $2.1m in year 5. The payback period or breakeven point is 5.54 years. 6. Marketing Mix Tactics 6.1. Product Tactics Product Positioning Coyote Movies on Demand services will initially be targeting the “Early Adopter” consumer segment that has a strong preference for technology lifestyle enhancements. Initially the product will be aimed primarily at the rental market with the purchasing of movies as a bi-product. MoD is using a differentiated product strategy to appeal to this targeted segment in the home movie rental and purchase market. Product Differentiation The Movies on Demand product is differentially superior to is competitors due to the following product features: • Accessible from the privacy of your own home enabling movie selection and purchase after traditional retail trading hours • Reduction in time spent on movie selection, eg time travelled to movie rental outlet, queuing in order processing at checkouts • Initially 3,000 popular movie titles to select from, with the range being expanded to 10,000 • Easy to use due to the unique proprietary software • Reliability, quick download time, • Secure site for payment These features convenience, technology and wide choice of movie titles enable MoD to provide the benefits sought by the Early Adopter target groups within the Morgan Value Segments. The benefits of MoD for these segments are: • innovative state of the art new technology (Young Optimism, Socially Aware) • quick easy use of product, wide selection of movie titles, time saver efficient and effective (Visible Achievement, Something Better) 6.2. Pricing Tactics Strategy Coyote will implement a market penetration policy. Strong market share objectives require a price that is perceived to be of good value to the consumer. We aim to be the product of choice in our market and a leader in market share. A fixed pricing structure is recommended to attract high volume. Price Structure: New Release 24 hour usage $12.00 Back Catalogue 24 Hour usage $ 8.00 New Release Purchase $35.00 Back Catalogue Purchase $25.00 New Release Try/Buy* $27.00 Back Catalogue Try/Buy* $20.00 (Refers to purchase of a movie following 48 hour usage within required time frame) With market maturity price flexibility maybe required to move into the mainstream market, it is envisaged price softening will be supported through promotional strategies rather than discount pricing which could undermine the perceived product quality. Other pricing strategies to be implemented with product growth include channel pricing for businesses and potentially international pricing for overseas markets. Market Conditions Although pricing tactics have been developed for the first years of operations pricing should remains a flexible and evolutionary component of the market mix. It must be adoptable to market conditions with the aim of maximising return for investors. Initial analysis to determine the price positioning for MoD services was aimed at understanding the perceived benefit the consumer will derive from this product. Is the perceived benefit similar to that of our substitute products? or has our service offering inherent advantages over current mediums for video hire. Focus group responses supported our assumption that MoD offered the core product benefit of movie rental but also added value via choice, convenience, try–buy benefits and prestige. With this in mind a competitor analysis was conducted to evaluate substitute product pricing levels. Having already determined our product offers an increase in value to the customer, substitute product pricing set the benchmark or minimum sell price. The results shows the movie hire industry having the capacity to operate with a range of prices each separated by a unique or differentiated quality of service. This monopolistic competition definition gives Coyote confidence to price above current market levels. Elasticity of the product was examined to determine the effect of price movements on consumer demand. Price elasticity was determined to be relatively inelastic between the ranges of $5 & $15 for 48 hour new release rental. Interestingly similar study was conducted utilizing total cost of purchase, which included monthly Internet costs. The result was comparative and indicated early adopters see Internet related costs as a separate or sunk cost. Evaluating each component of pricing against Coyotes objectives derived optimal pricing as set out above. 6.3. Distribution Tactics Whilst Coyote Movie-On-Demand services will eventually be targeting both consumer and business customers, the initial target segments will be the “Early Adopter” rental consumer segments that have a strong preference for technology lifestyle enhancements. By initially targeting these key groups Coyote believes they will assist in further developing the Movie-On-Demand solution such that it will be adopted by the mainstream markets. These “Early Adopters” will become an ever growing reference group that will continue to champion and influence others to adopt the service. In targeting these initial groups Coyote will implement a “Mixed Channel System” of both direct and indirect channels to market. The “Mixed Channel System” is best illustrated below. Coyote believes that both PC manufacturers and Broadband providers have a keen interest in assisting the adoption of Coyote Movie-On-Demand Services. PC manufacturers will be able to leverage additional hardware sales by having the Coyote software pre-loaded, Broadband providers will be able to drive more traffic across their networks by actively promoting Coyote services. Both PC manufacturers and Broadband providers will be additionally encouraged to promote Coyote by the payment of financial incentives. Coyote intends to implement a market leader alliance strategy to gain rapid market penetration and gain access to key channels to market. In doing this Coyote will adopt a multi-channel distribution network involving several PC and Broadband channels who can both effectively distribute and support Coyote and its clients. Eventually, Coyote will establish direct strategies to target large potential business users; hospitals, hotels etc and will develop further bespoke systems to fulfil individual needs. 6.4. Communications Tactics An Integrated Marketing Communications Plan has been developed in order to communicate to the three target markets. The initial objective of the communications tactics is to communicate to innovators and early adopters to create the Diffusion affect. The Diffusion affect relies heavily on word-of-mouth recommendation, thus there will be an emphasis on targeting innovators in order to create word of mouth from credible sources. Endorsements will be sort form credible innovators in the DVD market such as Michael D who was one of the first DVD innovators to develop is own website and is now the most popular website in Australia. Successful diffusion can only take place when the communication elements meet the following product characteristics: Relative Advantage – the consumer must be able to see what benefits Coyote On Line Video service has over their current form of obtaining movies Compatibility – the process of downloading movies to a PC will be fast and efficient. We must communicate to the consumer how they can watch the movie on the television after they have downloaded it to their PC. Complexity – In the initial stages of product development and release it can have some complex elements and this will be attractive to the innovator as they are the personality type that will enjoy a product that requires some technological knowledge. For the mass market the lest complex the product the more likely it is to succeed. Trialability – A feature length movie trailer will be developed in order for consumers to trial the download function of the product – experiencing the speed and ease to which the file can be downloaded. Observability –One of the problems with the communication tactics for this product is that it cannot be demonstrated in the advertising. The product is not tangible and therefore the experience of downloading a movie in the comfort of your own home needs to be communicated Coyote On Line Video will initially conduct a targeted communications plan in order to specifically communicate with identified innovators and early adopters in the segments. A combination of Advertising, Public Relations, In Store, Direct Mail and Online Marketing Disciplines will all be used to communicate the launch of the product to the target market. A combination of Push and Pull marketing strategies will used to create consumer demand and therefore sales and drive companies such as Telstra and Optus to provide the Videos on Demand service. Communication Objectives • Generate awareness of new home entertainment format Coyote On Line Videos. • Educate target audience on new format for purchasing or renting the latest releases on DVD. • Drive conversion and demand for Coyote On Line Videos. • Maximise exposure of Coyote On Line Videos in the marketplace. • Promote monthly title releases from distribution houses • Drive conversion to Broadband The following positioning statement should be communicated throughout all communication channels: Coyote Movies on Demand is the most convenient, technologically advanced home entertainment formate with a wide and varied range of titles available. Advertising Campaign Objectives • Raise awareness of Coyote On Line Video • Communicate the ease of which movies can be accessed • Reflect the innovativeness of the formate • Educate consumers on the availability of MoD • Strategy • Media buying to include positioning on entertainment and broadband related websites such as: Bigpond, Optus, Urbancinefile, MichaelD website • On-line in technical innovators environments • Magazines such as • T3, Ralph, FHM, Sound and Image, Audio Visual News • Creative to have a rational appeal related to the audience’s self-interest and show that the product will produce the desired benefits. Communicate the ease to which a movie can be accessed at home without leaving the house. • Opinion leader to be used in order to communicate desirability of the format to consumers. Public Relations Campaign Objectives • Generate awareness of new home entertainment format. • Educate consumers on new format • Drive conversion and demand for broadband access of movies. • Overcome perception that downloading is time consuming. • Maximise exposure of Coyote On Line in the marketplace. Strategic Overview Three tiered Public Relations campaign for Coyote On Line: Coyote On Line Education campaign To ensure that Personal selling takes place in store environments. An education campaign needs to take place with store staff in shops such as Telstra and Optus on the benefits of Coyote On Line Videos enabling them to use it as a selling tool for Broadband. Consumer campaign Launch event to take place in order to launch the new format to key IT and entertainment media. Event to take place at a venue that reflects the innovation and entertainment of the new Home Entertainment format. One-on-one interview to take place with key spokesperson for Coyote On Line to achieve maximum exposure for the new format in key publications Monthly media relations campaign to be put in place to maintain talkability around the new product in target media. Campaign to encourage media to include availability of movies on Coyote On Line when reviewing for DVD and VHS sections. Online Communications Coyote On Line Website Develop online Coyote On Line website with two strategic objectives: 1. As a means to access MoD 2. Membership club as a means to capture information on users and direct market Coyote On Line to target market MoD website aims • Create referral network for Coyote On Line company name • Utilise every opportunity to promote Coyote On Line to the target market • Structure the activities of the Coyote On Line Club in a high tech style with member and third party involvement Coyote On Line website content • Movie reviews of films available on line • Conduct surveys which will enable Coyote On Line to capture feedback on the service and therefore update the service to consumers needs. • comments / chat room to capture information on consumer attitudes and ideas around the concept of movies on demand • Ask us expert line (Q&A) Provide the formate for members to have a chat session with industry experts and celebrities • Broadband offers – sales promotion offers for number of downloads etc • Advertising – sell advertising space to distributors and broadband providers 7. Marketing Budget 7.1. Forecast Sales Forecast USERS Units Sold Year 1 29300.00 809286.63 $8,092,866.29 Year 2 33958.70 937963.20 $9,379,632.04 Year 3 39358.13 1087099.35 $10,870,993.53 Year 4 45616.08 1259948.15 $12,599,481.50 Year 5 52869.03 1460279.91 $14,602,799.06 7.2. Financial Analysis 8. Implementation & Control Guidelines As a start up company there are five key roles that have been identified to launch this product to the market place. As a small start up company there are Following Roles have been assigned: Managing Director & Business to Business Manager. As owner of the Proprietary Software. This role will be responsible for the overall running of the company including management of staff performance and also be responsible for the Business-to-Business Marketing of the product. In the initial phases this role’s primary responsibility will be to ensure that the team is co-ordinated in their approach to launching the product. Sales Channel Manager. This role will require the building of relationships with key PC Manufacturers and Broadband providers. The outcome of these relationships will be in-store presence in consumer stores and in store training of the staff. This will encourage Personal selling at a store level. In-Store Training. In-store training provides a key tool for Personal selling at consumer level. This role will be responsible for developing a training presentation and actual staff training. On-Line Manager. Crucial to the success of this product and company is the development of a website that not only sells the product but is constructed in a way that captures and monitors customer satisfaction and value. This role will co-ordinate all elements related to the site from compiling the weekly feedback report to movie reviews on-line. Communication Manager. In order to communicate the launch of this new format and educate consumers and businesses on the new format and extensive Advertising and PR campaign will be developed and implemented. 8.1. Action Plan for Implementation Subsequent to approval of the Marketing Plan each staff member will develop a detailed timeline of action points around the following overall task plan: Task By whom By When Finalise Media demonstration On-Line Site On-Line Manager 14th July 2003 Finalise On-Line Site On-Line Manager 31st August 2003 Commence Indirect Sales Channels strategy by develop key relationships with PC Manufacturers and Broadband ISP Providers Sales Channel Manager July 2003 Develop in-store staff training program In-Store Training Manager June 15th 2003 In-store training to commence In-Store Training Manager June 20th 2003 Develop Sales Business to Business presentation and strategy Business to Business Manager July 2003 Officially appoint advertising agency for creative Communications Manager 31st May 2003 Commence media buying negotiations Communications Manager 31st May 2003 Develop PR timeline Communications Manager 31st May 2003 Finalise titles available for launch MD 1st July 2003 Media launch event to take place Communications Manager 15th July 2003 Launch Product All 1st September 2003 8.2. Monitoring of Marketing Performance Staff Ownership As a start up company with only five employees at the outset it will be essential that all parties communicate on a weekly basis in order to ensure that all parties are moving in harmony to achieve financial objectives. Once the approval has been given a detailed timeline for each department will be developed in order to provide key performance objectives for each staff member. Performance reviews will be carried out on a quarterly basis by an external monitor employed by investors. Market Metrics Process Market Metrics In order to be a customer-orientated company Coyote will use internet site at which consumers purchase the product to provide information for a process market matrix to track customer perceptions and satisfaction. The internet site will be structured in a way to encourage and capture feedback from consumers. In order to purchase or rent from the site the consumer has to become a member; in the process of becoming a member Coyote will capture demographic information on members. This will in turn enabling us to create a profile of all customers. The website will also run regular surveys offering prizes for feedback and encourage Q&A with members. At the initial stage of launch and the 12 months subsequent to the launch the capture of this information will be crucial to the longevity of the business. It will be the responsibility of the On-Line Manager to compile a weekly report for the first 12 months of the company launch detailing feedback from customers. This process will help meet customer satisfaction and value and intern ensure the product is in line with customer needs. This process will ensure that customers continue to purchase movies on line and meet financial objectives. The website will be a key tool for customer relationship marketing with customer specific e-mails to be sent to customers on a regular basis alerting them to new products available. The e-mails will be addressed by name to the customer. The customer will be encouraged to e-mail the site with feedback and requests. These e-mails will be replied to on a daily basis. In order to monitor the performance of the company both in financial performance and market orientation End-Result Market Metrics As a company introducing a new product to the market place we have no customers and no market share at the outset. We do have key performance objectives with regard to forecast sales and users and these will be monitored and tracked throughout the five-year period using customer acquisition and customer retention as key end-result market metric. Financial Performance Metrics End-Result Metric or Financial performance metrics will be used on a yearly basis to measure growth and financial performance, which will enable Coyote to analyse performance on a yearly basis and take corrective measure for the following year. Net Marketing Contribution (NMC) is a basic marketing profitability equation that will be used on a yearly basis enabling Coyote to determine any major causes of a performance gap. Net Marketing Contribution = (Market Share X Market Share X (Price per unit - Variable Cost per Unit )) - Marketing Expenses 9. Appendices 9.1. IDC Internet Growth Report – July 26 2002 Australian Internet User Penetration Continues to Rise Steadily Australia has one of the highest Internet user penetration rates in the world. Internet access is already taken for granted and considered an indispensable tool in many homes, offices, and schools across the nation. By the end of 2002, more than 10 million people accounting for over one-half of Australia's total population will be accessing the Internet. By the end of the forecast period, Internet user penetration will rise to over 60%. In line with this growth, demand for a growing variety of Internet access devices and methods, content and services will continue to rise. In its latest report on the state of the Internet Economy in Australia, entitled The Internet Market in Australia: Analysis and Forecast, 2001-2006, IDC forecasts that the Australian Internet user population will grow from roughly 9 million people in 2001 to well over 12 million people by the end of 2006 (see Figure 1). The 5-year compound annual growth rate (CAGR) for Internet users in Australia is 6.1%, relatively low compared to growth rates forecast for many other countries of the Asia/Pacific region. This is explained by the relatively large base of existing Internet users in Australia, which is recognised as one of the most developed Internet markets in Asia/Pacific. Figure 1 -Internet users in Australia In Australia, Internet users accessing the Internet from both home and work. Home users will continue to be the single largest group of Internet users over the forecast period, but small businesses and government are expected to experience strong growth over the forecast period, reflecting their growing recognition of the benefits of Internet usage. Australian governments in particular have been increasing their efforts to become Internet-enabled workplaces as well as to provide a growing variety of information and services online. The number of Internet users at medium and large businesses will grow more slowly, because many of these businesses were early Internet adopters and already have a large proportion of existing Internet users. Meanwhile, the growth of mobile Internet users over the forecast period will be phenomenal. Mobile Internet users will grow at a 5-year CAGR of 95.1%, albeit off a small base of users. This represents a user base that will expand from just 350,000 people in 2001 to 9.78 million by the end of 2006. Source: The Internet Market in Australia: Analysis and Forecast, 2001-2006. 9.2. IDC Internet Commerce Report – Feb 2002 Internet Penetration and Usage Within the Australian Market Continues to Mature Inter...