Executive Summary
Learning Team A has shown in the first two stages of the selling program that people exercise for a variety of reasons, including obesity, and addressed target markets (recreational, fitness, and professional athletes), finding incentives and buying behaviors (individual needs and health concerns), the Product Life Cycle, the four Ps, and the product mix.
In this final stage, 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.
Situational Analysis
My Run Buddy offers a new innovation in fitness technology as the first voice-commanded treadmill. Its product, selling on an extraordinary combination of powerful design and features, is the key factor for its product brand development and market growth in the fitness industry. Enhancing and implementing a 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 on the market today that people try to find just the right one that will give them the perfect exercise for their lifestyle. With the advanced features that are installed on My Run Buddy, such as the Voice Command option, Learning Team A believes that this will propel My Run Buddy to the top of everyone’s list of treadmills.
Learning Team A estimates that with these advanced features, sales will be high, and profits will be generated.
Learning Team A compared My Run Buddy with two different treadmills that are 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, guarantees, 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 convenience of programming it to their respective needs.
Selling Strategies
The major strategies to market My Run Buddy are aimed toward the health and fitness industries. According to Wellsource (2014), 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 clients mostly between the ages of 20 to 40 years old, which does not exclude clients who are 50 years of age and above because of the growing demand to promote active healthy lifestyles for all ages. In addition to the market target stated, a small percentage of clients who may use My Run Buddy include professional athletes preparing for competitions such as marathons or the Olympic games.
Positioning
My Run Buddy focuses on its ability to become the first voice-commanded treadmill providing an extraordinary combination of powerful design, comprehensive product features, and positive health and fitness results to its clients. Its major advantage compared to other existing treadmills is its capacity to offer personalized fitness exercises to ensure safe exercises based on each user’s health status, critical targets, and strength of exercise.
Marketing Plan
Kotler and Keller (2012) mentioned that consumers often make the decision to buy certain products based on how they perceive the price of the product is rather than the marketer’s stated price. The car may be $100,000, and if some clients perceive the particular price to be a reasonable price for the car, they will buy it based on their perception and not because of the fact that sellers set the price of the car as $100,000.
The same client may feel that $30,000 for a different car is too expensive even though he or she felt that $100,000 for the car was reasonable for them because they perceive each product differently. Kotler and Keller (2012) also mentioned that customers are less sensitive to the 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 a unique product for the lifetime.
Learning Team A intends to position the price of the voice-commanded treadmill to create the perception that the price of the voice-commanded treadmill is reasonable enough for a client to buy 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 clients are paying for the 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 trying to determine the level of effectiveness for their market logistics:
- How should the company handle orders from clients?
- Where should the company store its merchandise?
- How much merchandise should the company store in the designated storage space? and
- How should the company distribute the merchandise to the client?
Learning Squad A believes it is best for clients to be able to order the voice-commanded treadmill from the company’s internal website or from an electronic commerce company such as Amazon, as clients do not always have time to visit local retail locations to order the merchandise.
Learning Squad A believes the company should store voice-commanded treadmills in warehouses located on the West Coast, East Coast, and in southern states, and use fast transportation methods such as FedEx, UPS, and USPS to expedite the shipping process.
Learning Squad A does not recommend that the company store an excessive amount of voice-commanded treadmills in their storage locations, but they suggest that the company’s logistics professionals and sales professionals should work together to determine the projected amount of sales for the given period and attempt to clear out excess inventory by promoting clearance sales events.
Marketing Communication Plan
Multiple methods of advertising and promotion for My Run Buddy will be used as part of the marketing plan to reach its target market. Kiosks will be installed in stores and retailers selling the product, where shoppers can see a free product demonstration. Discount vouchers, extended warranties, free product delivery, or free trial offers are also a few promotions to be considered for clients.
In addition to booths in stores, My Run Buddy can also be offered for free trial or trade to different fitness locations such as LA Fitness or Gold’s Gym. Furthermore, advertising through multiple media such as print, online, and television will be utilized to distribute information about the product.
Financial Information
Our cost structure allows us to pass on some savings and still maintain a solid 200% contribution margin, which means that even if we start with low profits, we can sustain the operation enough to establish the product in the market. Our policy is to have certain allowances and discounts for dealers tied to our accounts receivable. Therefore, our promotional pricing follows the following:
Total Cost (including labor, overhead, and transportation) per unit: $2,000 USD
Direct Cost (parts, electronic components, etc.) per unit: $1,250 USD
Contribution Margin Goal (Floor Price): $2,500
Sensitivity on Total Profit without marketing expenses:
Price 1: $3,600 (80% Profit) per unit
Price 2: $3,200 (60% Profit) per unit
We will sell the unit to the wholesaler at $3,600 with a contractual allowance to renew each year of a 5% prompt payment 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 dealer the possibility to pay only $3,181 per unit if they pay on time and order 10 units per month. A saving of $419 per unit or an 11.64% discount.
Our closest competition based on the specifications (4.0 Motor, Absorption tablet, 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.
Financial Goals:
To start sales with a minimum of 60% profit
To increase sales by 2% in Year 2, and another 5% in Year 3
To keep the 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))
Selling Expenses
We are estimating a selling expense (publicity, preparation, etc.) of $500 in Year 1, $400 in Year 2, and $280 in Year 3 per unit. These figures are included in the budget.
Forecasting Demand
We are estimating a total of 200 units of sales in year one, with an increase of 2% in Year 2 and another 5% in Year 3. We will keep the price the same for the first three years; therefore, we expect the following each year: Year 1: $636,200 in gross with a 64.7% net income. Year 2: $648,924 in gross with a 64.7% net income. Year 3: $681,370 in gross with a 64.7% net income.
Marketing Aims
Year 1: Establish the Product in the industry: To be one of the top 5 brands in the fitness equipment industry among the jobbers and the consumers. Year 2: Increase Sales on a steady pace: To increase the number of jobbers buying 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 the purchase of the brand.
Execution Milestones
Milestones during this project will be the main guides to product progress and success. In order to determine whether the product development and launch is on track, our team has decided to put in place milestones or timeline marks to stay on track. Our product will have four 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 needs, business opportunity, objective application, and technology requirements/abilities. The second milestone will be to accomplish an understanding of the market opportunity. Within this, we plan to achieve 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 placement, 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) mention that there are four different categories of performance metrics supply chain companies consider when trying 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 the warehouse are some of the key factors affecting the financial cost category of the supply chain management performance metrics (Elrod et al., 2013).
The 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 integrate a similar set of performance metrics by evaluating production cost and inventory cost against the amount of revenue the voice-commanded treadmill generated for a given period of time to determine if the cost of the product is exceeded by the revenue the product generates.
Learning Team A will also evaluate how quickly 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.
Contingency Planning
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 anticipating the worst. 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 worst, 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 stakeholders involved.
If at any point we need to retrain or develop 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.
Conclusion
In conclusion, Learning Team A has demonstrated in their marketing plan that the Voice Command treadmill is a unique product that can generate significant profits for the appropriate company in today’s society.
Learning Team A has also demonstrated how this type of treadmill is more advanced than those currently 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 exercise equipment to maintain their health.
With this new feature, Learning Team A believes that consumers will be attracted to My Run Buddy for their health needs, as the advanced features make them feel more comfortable working out and they do not have to worry about calling anyone if a medical condition arises, they would just have to tell the machine to contact the hospital.
References
- 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 projecting more growth for health 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
