Week 8 EOC: Disasterous New Products

First released in November 2006, the Zune was Microsoft’s “me too” answer to the iPod. While it had some nifty product features that the iPod lacked (like sharing music from player to player), the Zune, despite an expensive marketing effort by Microsoft, never really caught on. At its best, it was able to crack into low double-digit market share while the dominant iPod took around 65%. More ominously, in a filing with the SEC in January, Microsoft disclosed that it had seen Zune revenues decline 54% in the preceding quarter. (At the same time, iPod revenues increased by 3%.) Of all MP3 players listed on Amazon.com currently, the first Zune model comes in at 36 behind an army of iPods and a few Sansoms.Why did it fail? On a design level, the Zune lacked style and the simplicity of Apple’s interface. The Zune seemed clunky in comparison. Perhaps more importantly, though, the Zune could not be used with Apple’s iTunes program, an even more dominant product in its market than the iPod. By integrating the music experience (from cradle to grave, so to speak), Apple created strong disincentives to any competitor that just could not be overcome.

Betamax was the first home video recording tape to hit the market in May 1975. Sony, however, was not the only company that had been working on recording video data on magnetic tapes. In 1976, JVC rolled out the VHS format and a format war began. As every American born before the DVD era knows, Betamax lost. But why?Several explanations have been advanced to explain Betamax’s market failure. Sony was slower to license the technology to other manufacturers. VHS was, for a time, less expensive. Sony refused to let the pornography industry use Betamax. The main problem, though, was time. When VHS was first introduced, the tapes could hold two hours of video compared to Betamax’s one. By 1977, when JVC partnered RCA, VHS could hold four hours. As everyone knows, an hour does not a movie make. As a result, forty production companies adopted VHS instead of Betamax. In 1988, Sony conceded defeat and began producing its own VHS VCRs.

Fianl Project: Implementation Evaluation Control

Marketing implementation is the process that turns marketing plans into marketing actions in order to accomplish strategic marketing objectives. Whereas marketing planning addresses the what and why of marketing activities, implementation addresses the who, where, when, and how.

Once a location has been selected, it will be necessary to evaluate how to improve the costs of supplementary equipment installation required by the manufacturing process. Operational cost will be refined as well. Preliminary design for contractor bids will be drawn from this study as well as investment figures for start up. Direct cost for the plant engineering study is $12,000. Extensive sensitivity analysis will have to be performed, with feedback from consumer research, an engineering study, transfer agreement preparation, and brand-building (advertising effort) design, with the variables being price, cost, sales volume, and preliminary investment. Income statements, cash flow analysis, and a balance sheet will be produced. Also, the structure of the next financial round will be proposed. The direct cost of financial plan is $7,000.

Many managers think that “doing things right” (implementation) is as important as, or even more important than, “doing the right things” (strategy). The fact is that both are critical to success, and companies can gain competitive advantages through effective implementation. One firm can have essentially the same strategy as another, yet win in the marketplace through faster or better execution. Still, implementation is difficult—it is often easier to think up good marketing strategies than it is to carry them out.

We will buy the competitor's product and test it for quality, freshness, and shelf life. We will then make results available to store buyers and consumer groups. Meanwhile, we will prepare to enter this market with better standards than the competitor, making any necessary modification of our production line quality control measures.

We may also enter markets where competition already exists with products signficantly differentiated from the competitive product. This may require us to replace packaging materials or graphics, or modify our mix of lettuces.

Final Project: Distribution

One key loyalty factor is good repair service, which in turn depends on fast and reliable parts distribution.

The market entry strategy is to enter regional markets progressively. Las Vegas is seen as the first entry market due to its closeness to produce suppliers in the year-round Salinas growing area. Las Vegas also has the demographic/up-scale profile of a Salad Ready-accepting market. Edwards Salads intends to explore the possibility of export to Asian markets, particularly Japan. The current unfavorable export climate caused by the strong US dollar may impede rapid development of Edwards Salads markets, but several Nevadan produce brokerages have begun to offer lettuce to Edwards Salads customers.

Companies often pay too little attention to their distribution channels, sometimes with damaging results. In contrast, many companies have used imaginative distribution systems to gain a competitive advantage.

The first facility will be established close to the Las Vegas, NV Area market (either NorthWest or SouthWest). The proximity of the supply region will be a cost-reducing factor. A specific sity will be chosed by focusing on the following issues: wage rates, labor unions, access to transportation, taxes, and county inspections.

One production line consists of the following items:

• 1 preparation table with conveyors (operated by 16 people): raw leaf lettuce heads are trimmed and cored by hand
• 1 water chiller: to maintain wash water at low temperature
• 1 automatic cutter: selected raw material is cut to required size
• 2 automatic washers: one to wash cut leaves in agitated water; one to wash and rinse cut leaves
• 5 spin dryers (operated by two people): cut leaves are dried
• 1 dumper: cut leaves return to original shape
• 1 electronic scale: cut leaves are weighed in lots
• 2 automated fill-form & seal machines: cut leaves are packaged in air-filled sealed bags
• 1 automated carton packing machine: bags are put in cartons
• 8 transfer conveyors: product is transferred from each one of above units to the next

Final Project: Promotion

Marketers must decide how to promote and distribute the promotion program itself. A $2-off coupon could be given out in a package, at the store, via the Internet, or in an advertisement.

All indications are that the U.S. market is poised for growth in the green, leafy lettuces category, and that salads are increasingly important as a component of everyday American diets.

Fresh fruits and vegetables are already the fastest growing category in U.S. supermarkets. This fact is propelled by the strong consumer trend to eat more fresh produce. Per capita fresh vegetable consumption in the United States (excluding potatoes) increased to a record 100.9 pounds in 1982, up from 89.1 pounds in 1972. According to the USD A, which tracks trends in the sale of specific vegetables, fresh lettuce consumption increased 28% between 1962 and 1982.

Many companies fail to evaluate their sales promotion programs, and others evaluate them only superficially. Yet marketers should work to measure the returns on their sales promotion investments, just as they should seek to assess the returns on other marketing activities.

Most of this lettuce consumption takes place in the form of salads, although some is used as garnish on sandwiches. A study done for Progressive Grocer Magazine in 1984, by Leo J. Shapiro Associates, polled American consumers at random about their salad usage. The results, which are projectible to the population at large, were:

• 21% are serving more salads
• 72% are serving the same number of salads
• 7% are serving fewer salads

The length of the promotion is also important. If the sales promotion period is too short, many prospects (who may not be buying during that time) will miss it. If the promotion runs too long, the deal will lose some of its “act now” force.

Final Project: Price

PRICE

For most purchases, consumers don’t have all the skill or information they need to figure out whether they are paying a good price. They don’t have the time, ability, or inclination to research different brands or stores, compare prices, and get the best deals. Instead, they may rely on certain cues that signal whether a price is high or low.

FOB prices will be set with three objectives in mind:

1. The price will be right in order to penetrate the market
2. The price should always cover the costs of production
3. The price should allow for profitability

Product cost will not vary greatly with size of package, since the form-fill-seal machinery has maximum speed regardless of size. Thus, price will decrease with volume of production. We estimate that the experience curve effect will allow a decrease of cost of 20% when sales volume doubles.

Allowing for 15% profit before taxes, the FOB price will be:

	12,000/day	24,000/day
8 oz packet	$0.93	$0.83
4 oz packet	$0.83	$0.66

FOB price will be adjusted every week in order to take into account daily variations in the price of the raw material (raw materials account for 20% of product cost).

Edwards Salads pricing policy will be flexible enough to maintain market position once competition arrives. This will be done by providing for better quality and extra features without necessitating dramatic price reductions which may jeopardize "positioning" as a high quality product.

In assessing competitors’ pricing strategies, the company should ask several questions. First, how does the company’s market offering compare with competitors’ offerings in terms of customer value? If consumers perceive that the company’s product or service provides greater value, the company can charge a higher price.

Final Project: Product

Product Description

A company’s product mix has four important dimensions: width, length, depth, and consistency. Product mix width refers to the number of different product lines the company carries.

Edwards Salad is a consumer food product — fresh, washed, bite-sized, detached leaves of leaf lettuce, contained in a sealed, transparent, polypropylene bag.

The product concept flows from the European culinary tradition of "salad" – a tasteful selection of appetizing and eye-appealing green leafy lettuces. These lettuces include romaine, radicchio, mache, etc.

The packaged version of this concept places it in the rapidly growing group of high-quality, premium-priced, convenience-based products which fit with the emerging American family and lifestyle.

• Variety of salad greens eliminates need to buy heads of several kinds of lettuces, mix portions of those heads, and store the unused portions
• Sustained freshness for at least five days if bag is maintained at proper temperature
• Ready-to-use - eliminates trimming, washing, drying and cutting the salad
• Pre-selection of highest quality green
• Maintenance of nutritional content through the retail cold-chain
• Hygienic protection of produce from dust, uncontrolled spraying spill-overs, or easy touching and tampering

Edwards Salad is manufactured through an industrial process. The bag containing the lettuces is made of transparent polypropylene. Pressurized air is added to the pouch before sealing to allow vapor exchange and to protect leaves from being crushed or bruised.

The recommended shelf life varies between 5 and 20 days, depending on the quantity of lettuce involved, the combination of leaf lettuce types, and the quality of the customer's storage facilities.

Developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable market offering.

Final Project: Target Market Strategy

Market segmentation involves dividing a market into smaller segments of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes. The company identifies different ways to segment the market and develops profiles of the resulting market segments.

Eating salads is a super-convenient way to work in a couple of servings of vegetables and/or fruit. Green salads are on the menu of almost every restaurant. You can even buy a side salad (with Romaine lettuce, carrots and tomatoes, available with fat-free or reduced-calorie salad dressing) for a buck at many fast food chains these days. And you can make a green salad at home in 5 minutes, armed with a bag of pre-washed Edwards Salads, and a bottle of light salad dressing. Not only that, but salads are cool, crunchy, and fun to eat (lots of textures, colors, and flavors). Most people enjoy eating salads--even kids! You can customize them to include the fruits and vegetables that appeal to you the most, and whichever ones you have on hand.

Dividing a market into smaller segments with distinct needs, characteristics, or behavior that might require separate marketing strategies or mixes.

For years, researchers have noted a link between eating lots of fruits and vegetables and lower risks of many diseases, particularly cancer. A recent study from the National Cancer Institute suggests that people whose diets are rich in fruits and vegetables may have a lower risk of developing cancers of the head and neck -- even those who smoke and drink heavily.