To reach our target market as intensely as possible, have effective promotional plans and keep promotional overheads low. This will be done by nation-wide distribution through large retailers. Five Degrees of Innovation is introducing an new plastic label remover that fits onto an individual thumb in order to scrape unwanted adhesive labels. We projected our sales based on the Contandina case 80%, 30% rule. First we found our main target segment which is 15,015,300 people nation wide. We then adjusted this figure for the amount of awareness (30%) we can generate and distribution channels we can attain (ACV of 35%).This gave us a figure 921,914 people who will buy our product in the first year.
Market penetration will increase in the future years as the marketing budget is raised to increase awareness. Penetration3.1%4.6%5.85%5.26%4.68% Market Size* 15,015,30015,015,30015,015,300 15,015,300 15,015,300 Sales 921,914 1,382,871 1,756,0271,580,4241,404,821 To account for alternative scenarios we changed the percentage of penetration to come up with a best and worst case scenario. We changed the awareness and ACV by 5% from the base case to come up with the sales projections for the best and worst case. To achieve sales projections in the worst case, we assume that the product sales did not pick up as quickly and the awareness did not increase as expected. Penetration4.09%5.85%7.24%6.58%6.58% Market Size* 15,015,30015,015,30015,015,300 15,015,300 15,015,300 Sales1,229,219 1,756,027 2,173,0831,975,5301,975,530 Market Size* 15,015,30015,015,30015,015,300 15,015,300 15,015,300 Sales 658,510 1,053,616 1,382,8711,229,2191,229,219 From our questionnaire results we found the average price a person would pay for this product is $2.83 per piece and we will retail it for $ 1.99 for a unit.
We will sell this product for $1.54 to the retailers to account for their markup of 30%-35%. Comparable products in the market range from $3.99 – $5.99 per piece. Since our product is a point of purchase product keeping the price low is an essential feature for us to reach the desired sales. Large retail stores follow a concept of Odd – Even pricing. This is known to be a very effective demand increasing pricing strategy, because consumer’s tend to see the product in the lower price range than it actually is. Example, if a product is sold for $49.99 instead of fifty, it is below $50.
We will follow the same pricing strategy and offer a suggested retail price for $1.99 for a pack of two. The objectives for our promotion plan consist of building awareness about our product, Educating the usefulness of our product, and hopefully inducing a trial purchase. These objectives will be attained through the combination of elements in our promotional mix. As a start up company introducing a new product on the market we will use a push strategy to get the Scrape-up onto the shelves of our distribution channels. We will do this through the use of a well-trained and dedicated sales force that will call on our intermediaries and encourage them to order our product and stock it in their stores.
Once our product is in the stores it will be the combination of our promotional efforts as well as the wholesalers to push the product onto the consumers. (Please refer to Figure 3-1) Our sales force will be dedicated to convince the large retailers to carry our product. They will use various means of communication. These will include tele marketing, trade shows, physical demonstrations, and also responding to any orders placed via web site. For physical demonstrations and trade shows our sales force will have a travel allowance.
The reason for such a small sales force is that we will not be selling to individual retailers. Each sales rep will cost us $20,000 annually. Packaging will play an important role in our promotion plan. We will be using bright colors to grab the attention of the customers and will have information on the uses and utility of the product on the back of the package. Through maintaining good relations with our retailers we are hoping to place our product near the cash registers on a peg board display and keep our product visibly available this will enable consumers to pick up the product and learn about its functionality. We will attract the customer’s attention by the bright colors of the product and satisfy their curiosity with informative information on the packaging.
The POP display will follow the same theme as our packaging in that it will have bright colors in order to attract impulse buying. We will be using sales promotions during the holiday season in the form of giving our product to in-store gift wrapping services. This will physically demonstrate the functionality of the product. This will promote awareness for our product during this time of year and hopefully boost consumer sales. We going to the large office supply chains to place our product in their catalogs and circulars. This will help us reach consumers who do most of their shopping through the mail and do not visit the store We will have a sales force consisting of a sales director and three sales representatives.Our sales team will be aided with possible sales promotion and discount allowances directed towards these wholesalers in an effort to stimulate demand.
Our sales force costs will be the cost of the sales supervisor plus an annual salary of $20,000 each for our three representatives. Our strategy is to attain distribution nation wide and keep distribution costs to a minimum. This will be done by riding the distribution networks of big nation wide retailers These include Office Max, Staples, Office Depot, and Wal-mart. We will be responsible for shipping our product to the distribution centers of these large chain stores. We ar4e responsible for the setup for the displays in the point of purchase. This strategy helps us keep our variable shipping cost to only $0.07 per unit.
The combination of these distribution networks has a -% of reach. Bibliography: