New Product Launch Marketing Plan Essay
New Product Launch Marketing Plan
Learning Team A has shown in the first two phases of the marketing plan that individuals exercise for a variety of reasons including obesity, addressed target markets (recreational, fitness, and professional athletes), decision motivators and buying behaviors (individual needs and health concerns), the Product Life Cycle, the four P’s, and the product mix. Within this final phase, Learning Team A will be discussing situational analysis, market growth potential and competitive analysis, segmentation, target market, and positioning, pricing and distribution, and marketing communication. Also discussed will be the financial aspect, intended market objectives for year 1, year 2 and year 3, implementation milestones, and finally, evaluation and control metrics and methodology to measure performance.
My Run Buddy offers a new innovation in fitness technology as the first voice commanded treadmill. Its product marketing on extraordinary combination of powerful design and features are the key factors for its product brand development and market growth in the fitness industry. Enhancing and implementing strategic marketing plan will also be essential to the success of My Run Buddy.
Market Growth Potential and Competitive Analysis
There are so many treadmills out on the market today, individuals try to find just the right one that will give them just the right workout for their lifestyle. With the innovative features that are installed on My Run Buddy, such as the Voice Command option, Learning Team A believes that this will escalate My Run Buddy to the top of everyone’s list of treadmills. Learning Team A estimates that with these innovative features, sales will be high and profits will be generated.
Learning Team A compared My Run Buddy with two different treadmills that are out on the market today, the LifeSpan Treadmill and the Life Fitness T5-0 Treadmill. After reviewing both of these, the one that comes closest to My Run Buddy is the Life Fitness T5-0 Treadmill. The Life Fitness T5-0 Treadmill has many of the similar features, warranties and price range; however, it does not have the Voice Command feature. The Voice Command feature is what is unique to My Run Buddy and everyone that uses this machine, whether it be at home or in a gym, will feel comfortable with the features and enjoy the easiness of programming it to their respective needs.
The major strategies to market My Run Buddy are aimed toward health and fitness industries. According to Wellsource (2014), in the next five years, an increase of at least 4.2 percent within five years is projected for the demand in services and equipment for the multibillion-dollar health and wellness industry. My Run Buddy will reach out to male and female customers mostly between the ages of twenty to forty years old, which does not limit customers who are fifty years of age and above because of the growing demand to promote active health lifestyle for all ages. In addition to the market target stated, a small percentage of customers who may use My Run Buddy include professional athletes preparing for competitions such as marathons or the Olympic games.
My Run Buddy focuses on its ability to become as the first voice commanded treadmill providing extraordinary combination of powerful design, comprehensive product features, and positive health and fitness results to its customers. Its major advantage compared to other existing treadmills is its capacity to offer personalized fitness workouts to ensure safe workouts based on each user’s health status, vital signs, and intensity of workout.
Kotler and Keller (2012) mentioned that consumers often make the decision to purchase certain products based on how they perceive the price of the product is rather than the marketer’s stated price. The automobile may cost $100,000, and if some customers perceive the particular price to be reasonable price for the automobile, they will purchase it based on their perception and not because of the fact that marketers set the price of the automobile as $100,000. Same customer may feel that $30,000 for different automobile is too expensive even though he or she felt that $100,000 for the automobile was reasonable for them because they perceive each products differently. Kotler and Keller (2012) also mentioned that customer are less sensitive to price of the product when they believe that 1) there are not too many similar products in the market that can replace the quality of the given product; 2) the high price of the product can be justified; 3) stated price of the product is just a small cost of obtaining unique product for the life time.
Learning team A intends to set the price of the voice commanded treadmill to create the perception that the price of voice commanded treadmill is reasonable enough for a customer to purchase the customized treadmill that can enhance their health status for the rest of their lives. Rather than matching the price of the treadmill to another company’s lower price of the treadmill, Learning team A believes it will be beneficial for the company if the company can justify that customers are paying for superior quality of the voice commanded treadmill, and they are saving money for more value on the voice commanded treadmill by paying the stated retail price.
Kotler and Keller (2012) stated that companies need to consider four different objectives when they are attempting to determine the level of effectiveness for their market logistics: 1) How should the company handle orders from customers? 2) Where should the company store their products? 3) How much products should the company store in the designated storage space? And 4) How should the company distribute the product to the customer? Learning team A believes it is best for customers to be able to order the voice commanded treadmill from the company’s internal website or the electronic commerce company, such as Amazon because customers do not always have time to visit the local retail locations to order the product.
Learning team A believes the company should store voice commanded treadmill in warehouses located in west coast, east coast, and southern states and use the fast transportation method, such as FedEx, UPS, and USPS to expedite the shipment process. Learning team A does not recommend the company to store excessive amount of voice commanded treadmill in their storage locations, but they suggest that company’s logistic professional and sales professional should work together to determine the projected amount of sales for the given period and attempt to clear out the amount of inventory if they become too excessive by promoting clearance sales events.
Marketing Communication Plan
Multiple methods of advertising and promotion for My Run Buddy will be used as part of marketing plan for reaching out to its target market. Kiosks will be installed in stores and retailers selling the product, where its shoppers will experience free product demonstration. Discount coupons, extended warranty, free product delivery, or free trial offers are also few promotions to be considered for customers. Other than kiosks in stores, My Run Buddy can also be offered for free trial or deals to different fitness locations such as LA Fitness or Gold’s Gym. Furthermore, advertising through multiple media such as print, online, television will be utilized to spread information about the product.
Our cost structure allow us to pass some savings and still have a solid 200% contribution margin which means that even if we start with low profit, we can sustain the operation enough to see the product establish in the market. Our Policy is to have certain allowances and discounts for wholesalers tie to our AR so our Promotional Pricing follow the following: Total Cost (Including Labor, Overhead, and Transportation) per unit: $2,000 US Direct Cost (Parts, electronic components, etc…) per unit: $1,250 US Contribution Margin Goal (Floor Price):
Sensitivity on Total Profit without marketing expense:
Price 1: $3,600 (80% Profit) p unit
Price 2: $3,200 (60% Profit) p unit.
We will sell the Unit to the Wholesale at $3,600 with a contractual allowance to renew each year of 5% prompt pay discount (less than 30 days), and an additional volume (more than 10 Units per month) discount of 7% of the marked price. This will allow the wholesaler the possibility to pay only $3,181 per unit if they pay on time and order 10 units per month. A savings of $419 per unit or 11.64% discount.
Our closest competition based on the specs (4.0 Motor, Absorption pad, Monitor, etc.. but without the voice activation is the Life Fitness Club Series Treadmill (http://www.treadmilltalk.com/treadmill-comparison-chart-5.html) with an average price in the US of $5,500.
To start sales with a minimum of 60% Profit
To increase sales by 2% in Year 2, and another 5% Year 3
To keep plan under budget
Break Even Analysis
Cost to produce a treadmill unit (Direct Cost): $1,250
Fixed Cost (Annual Overhead): $9,000 ($750*12)
If selling for $3,200, then we need to sell 5 Units to break even! ($9,000/ ($3,200- $1,250)) If selling for $3,600, then we need to sell 4 Units to break even! ($9,000/ ($3,600- $1,250)) If selling for $3,181, then we need to sell 5 Units to break even! ($9,000/ ($3,181- $1,250))
We are estimating a marketing expense (promotion, training, etc…) of $500 on Year 1, $400 Year 2, and $280 on Year 3 Per Unit; these figures are considered in the budget.
We are estimating a total of 200 Units sales on year one with an increase of 2% in Year 2, and another 5% Year 3. We will keep the price the same for the first 3 years; therefore we expect the following each year: Year1: $636,200 in revenue with a 64.7%
Year2: $648,924 in revenue with a 64.7% Profit
Year3: $681,370 in revenue with a 64.7% Profit
Year 1: Establish the Product in the industry: To be one of the top 5 brands in the fitness equipment industry among the wholesalers and the consumers.
Year 2: Increase Sales on a steady pace: To increase the number of wholesalers purchasing our product by 7%.
Year 3: Brand Management: To ensure consistency between our brand licensing strategy and the overall business goal” and to focus on maximizing leverage of the brand.
Milestones during this project will be the main guides to product progression and success. In order to determine whether the product development and launch is on track our team has decided to set in place milestone or timeline marks to stay on track. Our product will have 4 major milestones with different sub sectioned goals. The first milestone will be identifying customer needs and within this major category we have to accomplish the following goals; business problems, customer requirements, business opportunity, target application and technology requirements/abilities. The second milestone will be to accomplish understanding of the market opportunity. Within this we plan to accomplish industry trends, market size and growth, target market and finally market channels.
The third milestone will be entering the market. Within this second major milestone we will accomplish product positioning, competitive strategies, pricing, marketing plan, sales strategy, sales tools and customer support. The third milestone will be a continuous process during the length of the product. The final milestone is generating revenue and the goals accomplished will be establishing partners, channels and leads. The last milestone will also be a continuous process for the length of the product. Milestones may be introduced and revamped depending on the shift of the product lifecycle. Since our team is aiming for continuous growth and success, we are aware that milestones need to be in place and also re introduced so that a cycle does not fail and we continue to succeed.
Evaluation of Metrics and Methodology
Elrod, Susan Murray, and Bande (2013) mentioned that there are four different categories of performance measures supply chain companies consider when attempting to determine the level of effectiveness for their supply chain management system: financial cost, quality, time, and flexibility. The cost to produce the product, the cost to distribute the product to the customer, and the cost to store the product in warehouse are some of the key factors affecting the financial cost category of the supply chain management performance metrics (Elrod et al, 2013). Customer’s perceived value of the product, level of accuracy of the product, and the ability for a company to distribute the product safely to the customer without any damage fall under the quality category under the performance metrics for supply chain management (Elrod et al, 2013).
Learning team A intends to incorporate similar set of performance metrics by evaluating production cost and inventory cost against the amount of revenue the voice commanded treadmill generated for given period of time to determine if the cost of product is exceeded by the revenue the product generates. Learning team A will also evaluate how fast the company can distribute the voice commanded treadmill to its customers without damaging the product and how well the voice treadmill can perform according to the specific features on the product to obtain customer loyalty.
According to Mindtools.com (2014), “The need for contingency planning emerges from a thorough analysis of the risks that your organization faces. It is also useful in thinking about new and ongoing projects: what happens when ‘Plan A’ does not go as expected?”. Contingency planning is highly important to our team and will be the foundation we follow for risk assessment and planning. We will minimize error and failure by expecting the worse. What if the consumers do not want to buy our product, what if it doesn’t sell as much as we thought it would.
By preparing for the worse we will be setting up for successful future. Our contingency plan will be to continuously conduct risk assessment regardless of how well our product is doing. Communicating issues and good ideas will be a constant goal within the product team and shareholders involved. If at whatever point we need to retrain or train personnel our team is equipped with the information to do so. We will keep documentation of successes and failures no matter how big or small. Finally we will evaluate performance and implement goals so that we are able to assess how well the product is doing.
In conclusion, Learning Team A has shown, within their marketing plan, that the Voice Command treadmill is a unique product that will generate large profits for the proper company in today’s society. Learning Team A has also shown how this type of treadmill is more advanced than those on the market with the addition of the Voice Command feature and how it will be accepted in the long term by consumers looking for the proper workout equipment to maintain their health. With this new feature, Learning Team A feels that consumers will be drawn to My Run Buddy for their health needs as the innovative features lets them feel more comfortable working out and they don’t have to worry about calling anyone if there is a medical condition that arises, all they would have to do is tell the machine to contact the hospital.
Elrod, C., Susan Murray, P. E., & Bande, S. (2013). A Review of Performance
Metrics for Supply Chain Management. Engineering Management Journal, 25(3), 39-50. Kotler, P., & Keller, K. L. (2012). Marketing management (14th ed.).
Upper Saddle River, NJ: Pearson Prentice Hall.
Wellsource. (2014). Market trends project more growth for wellness industry. Retrieved from http://www.wellsource.com/company-news/Market-Trends-Project-More-Growth-for-Wellness-Industry.html Mindtools. (2014). Contingency Planning. Retrieved from http://www.mindtools.com/pages/article/newLDR_51.htm