Abstract
The two
target market for Gizmo would be students and business professionals. The
marketing strategy that would be employed in the case of students target market
would be low-cost marketing approach, while in the case of the business
professional market would be relationship marketing approach. The report also
indicates that high pricing strategy would increases sales in business
professionals market and reduces sales in students market. The report indicates
that the exclusive use distribution would be beneficial to the company
regarding increasing supply chain processes efficiency, enhancing forecasting
as well as inventory control, retailer control and building dealer loyalty.
However, the report indicates that main limitations of using exclusive
distribution include lack of diversification and lost sales volume. In
conclusion, the use of exclusive marketing has more benefits than limitation
and should be embraced by partnering companies.
Supply
Chain Management-Gizmo Case Study
Introduction
Orange
a company involved in the distribution of products is partnering with Random
Wireless to provide exclusive distribution services for its Gizmo product.
Gizmo is a smartphone product offered by Random Wireless. It is designed in a
way that allows the users to access the internet, take notes, save documents,
share files and listen to music. Therefore, it is a good entertainment and
communication tool for any user. Understanding the concepts of exclusive
distribution is crucial for the company for it to succeed in this partnership
with Random Wireless. The main objective of this report is to analyze possible
markets that can be targeted by gizmo product. Then, the report will analyze
the appropriate marketing strategy for the identified target markets and the
implications for the supply chain processes within the company as far as these
target markets are concerned. Also, the report will analyze how the pricing strategy,
as well as the sales volume, is expected to changes in every target market
depending on the employed pricing strategy. The last section of the report will
provide an in-depth analysis of the disadvantages and advantages of having one
exclusive distributor and the way the decision would be impacted by the nature
of the target market to be selected.
Possible Target Markets
There
are two possible target markets for the Gizmo product that the company can
target as it distributes the product on behalf of Random Wireless. One of the
target markets would be business professionals. Business professional is a
target market made up of individuals and group of persons in need of
communication and time management tool. Most of the business professionals come
from generation X, as they are older people. They would need Gizmo for purposes
of using it to carry out research and manage time. Gizmo is designed in a way
that would allow the users to access the internet and be in a position to
search for any information they need. It also has time management application
that allows a person to keep track of time at any given time.
The
second target market for Gizmo would be students. Students usually need phones
for purposes of taking note of them, sharing and listening to music. Also, they
make use of phone products to access the internet, especially social networks
where they chat and interact with peers; for practical and entertainment
purposes. Gizmo as a phone product is designed in a manner that allows these groups
of customers to access the internet, take notes, file documents and allow for
sharing of files, such as music files. Therefore, it suits the need of the
student as a customer and it would be appropriate to target them as far as
Gizmo product is concerned. Lewison
and Hawes (2007) notes that when targeting student markets, it is essential to
offer products that meet their preferences and needs. Given that Gizmo is
designed in a way that it meets the needs as well as preferences of the
students’ population, it would be appropriate to target the students as
possible customers.
Marketing
Strategies and Supply Chain Implications
According to Ballou (2007), the nature of
marketing strategy employed by an organization for its products has a direct
impact on the supply chain processes, such as product distribution. Therefore,
when selecting the marketing strategies, it is essential to ensure one take
into consideration possible supply chain implications for purposes of selecting
the strategies that do not have negative implications but one that ease the
process of managing supply chain processes (Christopher, 2016).
Business professional usually value
luxury as well as professionalism in the way they are served by an
organization. They have the financial resources needed to purchase a product at
any price as long as the customer services offered of great value. Therefore,
the marketing strategy that would be appropriate for this target market would
be relationship marketing. According to Oly Ndubisi (2007), relationship
marketing strategy plays a central role when it comes to enabling an
organization to build customer loyalty, long-term engagements, and
interactions. Therefore, it focuses on having a direct response to the
organization and the target customers (Hollensen, 2015). The use of
relationship marketing strategy in the case of business professionals' market
segment would be aimed at ensuring that the organization can maintain a close
and professional relationship with these groups of customers who value
professionalism and luxury in the way they are served (Hollensen, 2015).
Richards and Jones (2008) notes that
customers' usually become loyal towards a brand that offers value to them
regarding trying to meet their needs and preferences at all times. The ability
of an organization to meet the needs as well as the preferences of the
customers is through having a direct relationship with customers. Solomon
(2014) indicates that when an organization maintains a close relationship with
customers, it becomes possible for it to gain feedback on their needs; thereby
ensuring product features as well as customer services are geared toward
meeting these needs. Therefore, the best marketing strategy for satisfying
needs as well as the preferences of the business professionals would be relationship
marketing. The use of this strategy would enable the company to maintain direct
communication with customers, thereby understanding aspects of services and
product that need improvement for purposes of fully meeting the needs of the
customers (Heczková and Stoklasa, 2014).
The use of relationship marketing strategy for
the business professionals' market segment would have some implications on the
supply chain processes. First, it would mean that the company will have to
build a strong customer relationship management team that will focus on
ensuring that direct communication and responses are maintained in the company
and these group of customers. According to Jacobs and Chase (2013), customer
services are critical in enhancing relationship marketing between an
organization and the target customers. Therefore, having strong customer
service team, which has high-quality skills in the areas of customer
relationship management will be instrumental in making the relationship
marketing strategy work as far as business professionals target market is
concerned (Palmatier et al., 2007). Second, the relationship marketing strategy
would force the supply chain management team in the organization to come up
with ways of meeting the needs of customers as well as their preferences as a
way of enhancing the organization's competitive advantage arising from offering
services that add value to the target market. This means the supply chain
management team will be actively involved in devising supply methods, such as
packaging, shipment, and others that would make it possible for the target
customers to feel that they get higher value for their money as far as
purchasing of Gizmo is concerned (Tayur, Ganeshan and Magazine, 2012). Additionally,
the supply chain management will be forced to ensure that it put in place
measures aimed at creating a positive perception in the eyes of the customers
regarding the overall products and services associated with it. For example,
the supply chain team is supposed to make sure that that stock is always
available and the order time is minimal for purposes of creating a perception
in the eyes of the customers that they get high-quality services from purposing
Gizmo from its retail channels. Thus, the supply chain will have to improve its
processes with the aim of enhancing the process of maintaining direct
relationships with the target customers. The move will be central in making the
ability of the company to implement the relationship marketing strategy
effectively.
The second marketing strategy that needs to be
employed by the company is one that is of being price sensitive as far as the
student target market is concerned. The students are usually concerned about
the price of a product, given that the majority of the students do not have
adequate financial resources, they tend going for the phone brands that meet
their needs and take into account their financial capabilities (Lewison and
Hawes, 2007). Hence, for purposes of generating high sales in the students’
target market; it would be appropriate for the company to ensure that it offers
its products at lower prices. Offering the products at lower prices would
ensure that the customer feels that their needs are fully meet and would ensure
that higher sales volume are generated in this target market (Pereira and dos
Reis, 2010).
The employment of low-cost marketing
strategy would have some implication on the organization's supply chain
processes. First, it would mean that the supply chain team is supposed to
reduce operation costs, associated with transportation, distribution, and
others to enable the company to offer Gizmo at a low price to the target
market. According to Monczka et al. (2015), the supply chain management costs
have a direct impact on the final price that is charged to customers for a
particular service or product. Therefore, for purposes of the company to ensure
that it is in a position to offer students target market Gizmo at lower prices,
it will have to ensure that the supply chain processes can lower operational
costs. The move will be a key to making sure that the firm can reduce overall
operational costs, thereby, offering its phone product at low cost to students.
On the other hand, the use of low-cost marketing strategy would force the
supply chain management team to be innovative for purposes of coming with ways
that can enhance packaging and distribution of the product at a lower cost so
that the final customer can be able to benefit from low prices. Therefore, the
supply chain management team will be forced to embrace innovation as part of
enhancing the capability of the company to offer its products at competitive
prices to the students’ market (Christopher, 2016). Therefore, in the case of
the students target market, the company will be forced to employ low cost
supply chain management approach, where it will minimize wastes, and try to
lower costs of operations so as to manage to implement the low-cost marketing
strategy as far as this target market is concerned (Wedel and Kamakura, 2012).
Pricing
Strategy
The company can employ two types of pricing
strategies for the two target markets. The company can either use low pricing
strategy or high pricing strategy for its product. The low pricing strategy
would be the one where it offers Gizmo at a lower price compared to what is
offered by the competitors (Steenhuis, Waterlander & De Mul, 2011). This
means that the low pricing strategy would be sensitive to the prices offered by
other phone product players within the specific target markets. When it comes
to the student's target market, the customers are conscious of the cost
incurred in purchasing a phone product. Students as customers prefer purchasing
products that are cheap. Hence, in the case that the company will offer Gizmo
at lower prices to this target market, the sales volumes will automatically
increase.
Solomon (2014) indicates that
customers who prefer purchasing cheap products will be sensitive to any change
in price and a decline in the price of a particular product would have a
positive influence on their buying behaviors. Therefore, when the price of
Gizmo is low the sales volume in the students' target market will also increase
significantly. For example, if the price is a decline in a margin of $10, the
sales volume in this market will increase by a margin of 10%. On the contrary,
in the case that the company will offer Gizmo at a high price in this target
market, the sales volume will decrease. The student's target market prefer
cheap phone product, and therefore offering Gizmo at a higher price would mean
that the organization would not be sensitive to the financial needs as well as
preferences of the customers in this market, and they will be forced to go for
alternative brands that are favorable regarding prices.
On the other hand, when it comes to
the business professionals target market, they are not cost conscious at all,
as long as they get professional and luxury services and products. According to
Solomon (2014), most of the customers in high-end markets relate prices of
product to its quality and class. Therefore, when targeting this type of
market, an organization should consider pricing its product highly with an
objective of winning the confidence of the customers about the quality of the
brand being offered in the market. When the price of Gizmo is high in this
target market, the sales volume will increase drastically as professional
business customers will view the brand as being luxurious and of high quality.
Nonetheless, when the price of the product is low, the sales volumes will
decline in this target market as the customers will view the brand as being of
low quality and less luxurious (Hinterhuber,
2008).
Exclusive
Distribution
Exclusive distribution is a strategy
that Orange is considering using in its partnership with Random Wireless as far
as it Gizmo product distribution is concerned. Exclusive distribution can be
defined as a distribution approach which involves the supplier granting a
particular distributor exclusivity of selling products or services under a
certain contract, within a given region or particular group of clients (Gamarra
and Growitsch, 2008). When a distributor is given exclusive distribution
rights, legally one is not supposed to sell the products of the competitor of
the supplier in the market as this would amount to the breach of contract (Lafontaine
and Slade, 2014). There are various advantages as well as disadvantages that
Orange will realize from engaging in exclusive distribution strategy with
Random Wireless as far as its Gizmo product is concerned.
One of the advantages of using
exclusive distribution strategy is that it would allow the company to enhance
efficiency in the supply chain management process. According to Buettner et
al., (2009) exclusive distribution allows an organization to enter into a
single contract with one distributor to distribute its product in a particular
region making sure that the supply processes will not be inhibited by changes
in the market issues, such as demand. The exclusive distributor will be at
liberty to select the best distribution strategy to use as part of distributing
the company's product at different times, and this would enhance the efficiency
of the entire supply chain process. Additionally, the supplier will be in
control of the retailer distributing activities, and this would help to monitor
whether high-quality services are offered or not at all times. Furthermore, the
use of exclusive distribution would help in enhancing the loyalty of the dealer
towards the products of the company. This would make sure that the dealer
focuses mainly on ensuring that the firm's product can succeed in the market at
all cost, the success of the brand also contributes to the dealer success (Christopher,
2016). For example, the ability of the dealer to generate more sales from
the company's brand would mean that more revenues would be generated. Thus,
having an exclusive dealer would play a great role in building loyalty, which
is instrumental in enhancing the ability of the company to achieve a
competitive edge in the target market. The company would also be in a position
to collect data on inventory movement during different periods, thereby
enhancing the ability of accurately forecasting future demand for the product,
thereby controlling inventory regarding production and purchasing of the needed
raw materials (Christopher, 2016).
However, one of the limitations of
using exclusive distribution strategy is the fact that the company ends up
losing sales volume that it could realize from using multiple distributors
(Mulky, 2013). Also, the use of exclusive distributor denies the distributor an
opportunity of diversifying products and the supplier diversification of
sellers. Therefore, in the case of the distributor compromises on the quality
of services, this has a direct impact on the sales of the supplier, leading to
low sales revenues. When the students' target market is selected, exclusive
distribution channel would not work effectively due to the high cost associated
with it. Nonetheless, the selection of business professionals target market
would allow the use of exclusive use distribution channel effectively.
Conclusion
Briefly, this report reveals that the two
possible target markets for Gizmo would be business professionals as well as
students. These two target markets are made up of customers whose needs as well
as preferences in the area of communication are well taken care of by the
features present in Gizmo phone product. Also, the report reveals that the best
marketing strategy for the business professionals target market would be
relationship marketing as it would help to satisfy the needs of the customers
in this market, leading to their customer loyalty towards Gizmo brand. The use
of relationship market would force the firm to build a strong customer
management team in its supply chain processes to build a close and direct
relationship with customers. On the other hand, the report indicates that the
use of low cost marketing strategy would be effective in the case of students'
target market and would force the supply chain management to enhance efficiency
so as to reduce the costs of operation to enable the firm to offer Gizmo at
prices that are friendly to the financial needs of the students (Solomon,
2014).
Also, the study indicates that use of low
pricing in the students market would increase sales volume but reduce them in
the case of business professionals market. The use of exclusive distribution
would be beneficial to the company regarding increasing supply chain processes
efficiency, enhancing forecasting as well as inventory control, retailer
control and building dealer loyalty (Christopher, 2016). However, the main
limitations of using exclusive distribution include lack of diversification and
lost sales volume. In conclusion, the use of exclusive marketing has more
benefits than limitation and should be embraced by partnering companies. Stennek
(2014) indicates exclusive distribution allows an organization to maintain the
quality of the services offered to the final customer, as it can keep track of
the existing relationship between distributor and customers, hence demanding
for improvement in areas of weakness. Therefore, the activities of the
distributor can be controlled for purposes of enhancing the quality of services
offered to the target customers.
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