1. 0 INTRODUCTION
1. 1 Background of the company
Swiss Army is an illustration of a company that has developed by basing its product expansion on established brand equity. The brand has its roots in its history of knife development from the 1800s. The knife became wildly accepted in the United States when soldiers brought the knives back at the end of World War II. Swiss Army has a strong worldwide reputation built on quality and reliability with 92% brand awareness in the United States alone. Leveraging the success of the knife, the company expanded into apparel, travel gear, and other product categories.
The launch of the Swiss watch was an overnight success; and now 1 out of 5 watches under $500 in the United States is Swiss. The company enjoyed similar success with its travel gear and expects to do the same with apparel. In addition to building on an established brand, Swiss executives believe in building a long and lasting relationship with its customers. Before any product development occurs, the company talks to its customers to understand what values and attributes they associate with Swiss Army products.
Armed with this information, Swiss Army develops products that reflect the values its customers hold about the brand. This has allowed a century-old company to grow with the times without growing old. Teams can separately analyze the website, promotional plans, new product and brand extensions and Swiss Army stores to analyse the current status of Swiss Army stores and new marketing developments. 1. 2 Mission of the PBL To analyze current status of the Swiss Army’s marketing development to retain and expand its international standard brand equity. 1. 3 Objective of the PBL
To identify how Swiss Army retain its brand equity and expand it through product line expansion by using strategic distribution channels and effective advertisement methods. 1. 4 Marketing tools used to analyze Swiss Army We have used SWOT analysis and Ansoff Matrix as a mean to assist us in our Problem Based Leaning Case Study. 1. 5 Learning Issues 1. Brand equity Brand equity refers to the marketing effects or outcomes that accrue to a product with its brand name compared with those that would accrue if the same product did not have the brand name And, at the root of these marketing effects is consumers’ knowledge.
In other words, consumers’ knowledge about a brand makes manufacturers/advertisers respond differently or adopt appropriately adept measures for the marketing of the brand The study of brand equity is increasingly popular as some marketing researchers have concluded that brands are one of the most valuable assets that a company has. Brand equity is one of the factors which can increase the financial value of a brand to the brand owner, although not the only one. There are many ways to measure a brand. Some measurements approaches are at the firm level, some at the product level and still others are at the consumer level.
Firm Level: Firm level approaches measure the brand as a financial asset. In short, a calculation is made regarding how much the brand is worth as an intangible asset. For example, if you were to take the value of the firm, as derived by its market capitalization and then subtract tangible assets and “measurable” intangible assets- the residual would be the brand equity. One high profile firm level approach is by the consulting firm Interbrand. To do its calculation, Interbrand estimates brand value on the basis of projected profits discounted to a present value.
The discount rate is a subjective rate determined by Interbrand and Wall Street equity specialists and reflects the risk profile, market leadership, stability and global reach of the brand. Product Level: The classic product level brand measurement example is to compare the price of a no-name or private label product to an “equivalent” branded product. The difference in price, assuming all things equal, is due to the brand. More recently a revenue premium approach has been advocated. Consumer Level: This approach seeks to map the mind of the consumer to find out what associations with the brand that the consumer has.
This approach seeks to measure the awareness (recall and recognition) and brand image (the overall associations that the brand has). Free association tests and projective techniques are commonly used to uncover the tangible and intangible attributes, attitudes, and intentions about a brand. Brands with high levels of awareness and strong, favorable and unique associations are high equity brands. 2. Brand extensions Brand extension is a marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category.
The new product is called a spin-off. Organizations use this strategy to increase and leverage brand equity (definition: the net worth and long-term sustainability just from the renowned name). A brand’s “extendibility” depends on how strong consumer’s associations are to the brand’s values and goals. While there can be significant benefits in brand extension strategies, there can also be significant risks, resulting in a diluted or severely damaged brand image. Poor choices for brand extension may dilute and deteriorate the core brand and damage the brand equity.
Most of the literature focuses on the consumer evaluation and positive impact on parent brand. In practical cases, the failures of brand extension are at higher rate than the successes. In spite of the positive impact of brand extension, negative association and wrong communication strategy do harm to the parent brand even brand family
3. Channel conflict
Channel conflict occurs when manufacturers (brands) disintermediate their channel partners, such as distributors, retailers, dealers, and sales representatives, by selling their products direct to consumers through general marketing methods and/or over the internet through e-Commerce.
Some manufacturers want their brands to capture the power of the internet but do not want to create conflict with their other distribution channels, as these partners are necessary and viable for any manufacturer to maintain and gain success. Channel conflict can also occur when there has been over production. This results in a surplus of products in the market place. Newer versions of products, changes in trends, insolvency of wholesalers and retailers and the distribution of damages goods also affect channel conflict.
In this connection, a company’s stock clearance strategy is of importance. To avoid a channel conflict in a click-and-mortar, it is of great importance that both channels are fully integrated from all points of view. Herewith, possible confusion with customers is excluded and an extra channel can create business advantages.
4. Market segments
A market segment is a group of people or organizations sharing one or more characteristics that cause them to have similar product and/or service needs.
A true market segment meets all of the following criteria: it is distinct from other segments (different segments have different needs), it is homogeneous within the segment (exhibits common needs); it responds similarly to a market stimulus, and it can be reached by a market intervention. The term is also used when consumers with identical product and/or service needs are divided up into groups so they can be charged different amounts. These can broadly be viewed as ‘positive’ and ‘negative’ applications of the same idea, splitting up the market into smaller groups.
Market segmenting is dividing the market into groups of individual markets with similar wants or needs that a company divides the market into distinct groups who have distinct needs, wants, behavior or who might want different products & services. Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private although industrial market segmentation is quite different from consumer market segmentation, both have similar objectives. All of these methods of segmentation are merely proxies for true segments, which don’t always fit into convenient demographic boundaries.
The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritize the groups to address; to understand their behavior; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Improved segmentation can lead to significantly improved marketing effectiveness. Distinct segments can have different industry structures and thus have higher or lower attractiveness (Michael Porter).
With the right segmentation, the right lists can be purchased, advertising results can be improved and customer satisfaction can be increased leading to better reputation.
5. The product line extension
A product line extension is the use of an established product’s brand name for a new item in the same product category. Line Extensions occur when a company introduces additional items in the same product category under the same brand name such as new flavors, forms, colors, added ingredients, package sizes. This is as opposed to brand extension which is a new product in a totally different product category .
Product Line Extension adding depth to an existing product line by introducing new products in the same product category; product line extensions give customers greater choice and help to protect the firm from a flanking attack by a competitor. 6. Channels of Distribution A channel of distribution or trade channel is the path or route along which goods move from producers to ultimate consumers. It is a distribution network through which a producer puts his products in the hands of actual users. A trade or marketing channel consists of the producer, consumers or users and the various middlemen who intervene between the two.
The channel serves as a connecting link between the producer and consumers. By bridging the gap between the point of production and the point of consumption, a channel creates time, place and possession utilities. A channel of distribution represents three types of flows:
• Goods flow from producer to consumers;
• Cash flow from consumers to producer as payment for goods; and
• Marketing information flows in both directions, from producers to consumers in the form of information on new products, new uses of existing products, etc. The flow of information from consumers to producers is he feedback of the wants, suggestions and complaints.
7. Marketing Strategy
Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage . A marketing strategy should be centered on the key concept that customer satisfaction is the main goal. Marketing strategy is a method of focusing an organization’s energies and resources on a course of action which can lead to increased sales and dominance of a targeted market niche.
A marketing strategy combines product development, promotion, distribution, pricing, relationship management and other elements; identifies the firm’s marketing goals, and explains how they will be achieved, ideally within a stated timeframe. Marketing strategy determines the choice of target market segments, positioning, marketing, mix and allocation of resources. It is most effective when it is an integral component of overall firm strategy, defining how the organization will successfully engage customers, prospects, and competitors in the market arena. . 6 Problem Statement The problem statements chosen to assist us in analyzing the learning issues: 1. Which factors are attributable to the strong global brand equity of Swiss Army? 2. What are the main motives behind the product line extension from Swiss army knives into other product areas? 3. Are there any problems for channels of distribution associated with the prospect of Swiss Army stores? 4. How might Swiss Army use ‘non-traditional advertising’ to promote its brands and new products?
2. 0 ANALYSIS OF THE PBL 2. SWISS ARMY’S SWOT ANALYSIS
|Strengths |Weaknesses | | | | |Strategic R & D (6 blades in springs) |VICTORINOX operates a large plant which requires a great amount of | |Strong brand recognition |energy and causes emissions. Leads to pollution) | |Righ attitude shown by the senior manager (Carl Elsner-highly |Has a good brand equity which leads to high expectation among its | |pedantic and a perfectionist) |consumer (might face difficulty in maintaining its good name) | |Largest employer in the Canton of Schwyz, and the largest cutlery |Most of their products are exclusive and costly (Low income consumers| |factory in Europe |might not afford to buy) | |Recognition by top organization (Exp.
Nasa) |Highly exclusive and only sold in specifically chosen premises. | |Successfully put to the test on expeditions (Exp. North Pole, | | |Mt.
Everest) | | |Added Swiss watches to their product range (make Victorinox brand | | |better known internationally) | | |Exhausted the legal means with the brand protection of their | | |products. | |Opportunities |Threats | |Increasing number of outdoor activities (Bright chance to |Biggest competitors from China which simply copy the pocket knives | |diversify into other remaining outdoor activities) |without retaining the quality. |Popularity of American foods and fashion in overseas markets |Poor-quality imitations include the Swiss cross. (Increase market | |Most consumers around the world have good perception of Swiss Army|turnover) | |product. (Easier to penetrate into new market segment) |Armitron brand has earned its tagline America’s Watch with its broad | | |popular appeal and unequalled market penetration.
Armitron watches | | |are available at more than 10,000 mid-tier and mass retail locations | | |nationwide, and is the No. 1 selling watch line at many stores | STRENGTHS The exciting idea and the actual recipe for the success of VICTORINOX pocket knives lay in the multiple use of each spring: six blades on only two springs made it possible to produce the Army Knife in such a light and elegant form.
The typical clicking noise which occurs when the blade is opened and engaged is an audible sign of the high spring pressure. Even after years of intensive use, this spring pressure will remain the same. Special blade steel is used for both cutting blades, made of stainless chromium and molybden-alloys. Worldwide presence is the distinguishing characteristic of the pocket tools from Victorinox. To stay ahead as market leader, the Swiss knife maker surprisesn the market every year with new innovations and offer a popular, high-quality and reliable product at a good price.
Over the many years since its establishment in 1884 the company has also written a turbulent history. For an unbroken period of more than 100 years Victorinox has been the supplier of soldier’s knives to the Swiss army. Over the years further useful features were built into the practical multi-tool, and improvements were made in their functioning. Carl Elsener, senior managing director of Victorinox is highly pedantic and a perfectionist which is good and necessary for VICTORINOX in terms of its success. The “Swiss Army Knife” is often seen, as it were, as an mbassador for Switzerland and also as a synonym of the proverbial Swiss quality. With 1,000 employees, Victorinox is the largest employer in the Canton of Schwyz, and the largest cutlery factory in Europe. Approximately 34,000 “Swiss Army Knives” (100 different models) and 38,000 other pocket tools (300 different models) as well as 30,000 household, kitchen and professional knives are produced daily in Ibach. 90% of production is exported to over 100 countries. The flagship of the series is the “Swiss Champ” with 33 features. It consists of 64 individual parts, weighs only 185 grams, and fits easily in the hand.
More than 450 steps are required in its manufacture. The New York Museum of Modern Art, and the State Museum of Applied Art in Munich, have each on their own initiative selected it for inclusion in their collections of excellence in design. Many well-known international companies use the original “Swiss Army Knife” as a symbol of quality and versatility in their own advertising. The “Swiss Army Knife” even orbits the earth as part of the official equipment of space shuttle crews. US presidents since Lyndon B. Johnson present guests to the White House with Victorinox pocket knives.
A special highlight came in 1997 when President George Bush, and his wife Barbara, honored the factory in Ibach with a visit. A small brochure available in English, French, German, and Spanish contains a collection of adventures from around the world where the “Swiss Army Knife” has played a significant part. The knife has been successfully put to the test on expeditions to the arctic ice of the North Pole, on the highest peak on earth, Mount Everest, in the tropical rain forests of the Amazon, and elsewhere, and in situations of extreme danger and great need it has even proved to be a lifesaver.
For hobbies, camping, or picnicking, it is indispensable. As Americans aptly described it as: “Not just a knife, a friend”. The company has added Swiss quality watches to their product range, which contributes to making the Victorinox brand name better known internationally. In the same way as pocket knives and multi-tools, watches are typical “Swiss Made” products – precision articles worn every day. Victorinox only diversifies in areas and products which uncompromisingly match our brand.
For this purpose, they have bought a small watch factory in Bonfol, the home community of the USA car manufacturer Chevrolet, and they have a 50% share in the watch company Xantia in Bienne. Swiss Army has exhausted the legal means with the brand protection of their products. They are very well supported in the implementation of this protection, on the one hand by the embassies which always intervene very quickly and efficiently with the governments in question, and, on the other, by the US customs offices which strictly reject all names which might confuse the consumer.
Their efforts are, therefore, geared towards limiting the threat posed by imitations with brand strategic measures.
WEAKNESSES VICTORINOX operates a large plant; the knife production requires a great amount of energy and causes emissions. This might lead to environmental pollution. The United States and Canadian distributor of Swiss Army Knives manufactured by Wenger S. A. (Wenger), a company supplying knives to the Swiss armed forces. Swiss Army has a good brand equity which leads to high expectation among its consumers. This might cause Swiss Army to face difficulty in maintaining its good name due to the high expectation.
Most of their products are exclusive and costly. Low income consumers might not afford to buy products designed by Swiss Army. Swiss Army products are highly exclusive; therefore, they are only sold in specifically chosen premises which only attract rich consumers.
OPPURTUNITIES
Increasing number of outdoor activity lovers around the world creates opportunity for Swiss Army to expand its market by diversifying their products into remaining outdoor activities. Consumers all around the world familiar with Swiss Army and this create opportunity for them to diversify their product into other markets.
Most consumers around the world have good perception and strong positive mental model on Swiss Army products. This creates advantage to Swiss Army where they can easily penetrate into new market segments. Example, lately they have expanded into office apparels by placing a pen drive into their pocket knife. THREATS Poor-quality imitations of the Victorinox “Officer’s Knife” are made abroad. These imitations have frequently even included the Swiss cross, a practice which has required intervention by Swiss embassies, or legal proceedings, to prevent.
The pocket knife-imitations from the Far East are recording an enormous increase in turnover. Biggest competitors from China which simply copied the company’s pocket knives, without helping Swiss Army to bear the high costs involved through years of further development to improve the knives to today’s perfect standard. The Armitron brand has earned its tagline America’s Watch with its broad popular appeal and unequalled market penetration. Today, Armitron watches are available at more than 10,000 mid-tier and mass retail locations nationwide, and is the No. selling watch line at many stores. The Armitron brand has developed its reputation based on the dependability and style of its watches. Each timepiece offers exceptional style, quality and value. It is well known that the quality standard on Armitron watches match those of timepieces at much more expensive price points.
2. 2 FACTORS ATTRIBUTABLE TO THE STRONG GLOBAL BRAND EQUITY OF SWISS ARMY
Swiss Army has made a point that any product extensions done by the company should fall in line with its long standing value of the brand.
This made Swiss Army’s market share gained quickly compared to any other companies because of the strength acquired by its brand name. Victorinox-creators of the original Swiss army knife and Swiss army brand name and watches carries great deal of equity among its customers. So when the Swiss Army launch into new product area, there’s already an acceptance level, positive feeling about the brand and desire for the brand. The brand creates curiosity among the consumers and sparks interest in their new product emerging from Swiss Army.
There are few factors attributable to the strong brand equity which is: • Strategic Brand Management The Victorinox Swiss Army brand positioning is practical luxury inspired by the heritage and ingenuity of the Swiss Army knife. The classic, prestigious and luxurious brand positioning captures consumers’ attention to be able to own such a majestic product. Assigned with the task to deliver this brand message, the design team was also guided by strong architectural concepts: Switzerland’s close association with nature, clean graphic design, and Swiss craftsmanship and engineering.
In the eyes of the consumer, the Swiss flag which sealed on the Swiss Army product is a seal of approval, visual shorthand representing luxury, quality, precision and trust. This terribly impressive list of high-end associations has been developed over the years by a collective of successful Swiss companies which together have shaped the way the world views Switzerland. It is not surprising that the Swiss flag is now a powerful icon that is being leveraged by marketers around world whether or not there is any legitimacy behind its use. The company currently produces about 34,000 Swiss Army knives, 38,000 multi-tools, and 30,000 ousehold, kitchen, and professional knives per workday under one brand. Approximately 90 percent of its production is exported to more than 100 countries. • 125 year history of brand momentum. It all began when the Swiss army issued its soldiers with a gun in the late 19th century that required a special screwdriver to dismantle and clean it. At the same time the soldiers were receiving tinned food as rations, so a device was required to be able to do the two tasks. An entrepreneurial knife maker, Carl Elsner, heard the Swiss army wanted to issue each soldier with a special knife.
Victorinox was created in the early 1890s by Karl Elsener who was horrified to discover that the Swiss army was being supplied with knives manufactured in neighboring Germany. In establishing Victorinox, it was Elsener’s goal to supply the Swiss army with knives made in Switzerland. Since its invention, the Swiss Army Knife has gained so much popularity all over the world. This tool became very convenient for most consumers especially to the outdoor enthusiasts. • Global acceptance since World War II. The “Swiss Army Knife” gained international fame when U. S. roops returning home after World War II brought back the red multi-tool pocket knives they had taken from German prisoners. German army officers were not issued with them but bought these Swiss-made knives privately. It was during World War II that the Officer’s Knife’s popularity stretched beyond its borders, as large quantities were supplied to the United States Army, Navy and Air Force. It was U. S. soldiers who coined the term “Swiss Army knife” after futile attempts to easily pronounce its original name, Offiziersmesser. • Swiss Army’s Victorinox as a contextually designed product.
Swiss Army’s Victorinox is a good example of a contextually designed product. Contextual Design (CD) is a user-centered design process. It incorporates ethnographic methods for gathering data relevant to the product, field studies, rationalizing workflows, system and designing human-computer interfaces. In practice, this means that researchers aggregate data from customers in the field where people are living and applying these findings, into a final product [1]. Contextual Design can be seen as an alternative to engineering and feature driven models of creating new systems.
Designing a multifunctional product is one approach to making a contextually designed product. Swiss Army knife has an effective integration by combining many functions into one design which is found useful by many users. • Symbol of preparedness, functionality, and value as the multi-use knife of the century Victorinox brand is a high quality product that uses inox metal for superior performance. The special feature of Inox is that the metal does not rust and you can even use it in the sea without bringing any damage to the knife.
Competitors are exist but are producing low quality multi tool knife, so we can say that Victorinox has a monopoly in this sector. The most of the Victorinox consumer are hard core loyal to the company, because of the quality. The Victorinox is a brand that focus in a specific target group (extreme sports, maintain bikers etc) but by adding a USB in their product the interest spread to other sectors (office, students, etc). Consumers are easily influenced by the message that if they buy this product it will give the idea they are active persons and adventurous.
Even NASA astronauts have a Victorinox knife as standard equipment. • Symbolizes the current trend of multi-tasking. Modern-day Swiss Army knives are amazingly diverse, with additional tools, such as nail files, toothpicks, tweezers, key rings and magnifying glasses, contributing to more than 100 different combinations. It is no small wonder that the Swiss Army knife is occasionally referred to metaphorically to describe multitasking usefulness and efficiency. Victorinox continues to innovate adding ever more functionality to the tool. Most recent Victorinox knives have included an MP3 player and a USB memory stick. Successful Category Extension Recently, Victorinox has leveraged their brand image beyond the realm of blades into watches, writing tools, luggage (through TRG Group), and even apparel. This extension has involved licensing the use of the Swiss Army shield logo rather than production by the company itself. SwissCard One of the ways that Victorinox has tried to adapt to the decreased usage of pocket knives in recent years is the introduction of other forms of multi-purpose gadgets such as the SwissCard which is designed to fit wherever a few credit cards could go.
The SwissCard is roughly the size of a business card, and typically has a small pair of scissors, a short non-folding knife, a small file with a screwdriver point, a plastic toothpick, tweezers, a slim ballpoint pen, and a straight pin. These are housed in a hard plastic case of approximately 3 1/4 x 2 inches in size, with inch measurements on one side and metric measurements on the other. Multi-tools SwissTools are Victorinox’s version of Leatherman style multitools, ie a pair of pliers with other tools folded into the grips. Flashlight
A number of Emissive Energy Corps products have been redesigned and rebranded as Victorinox LED torches. Most are available with a knurled Aluminum body, similar to Swiss Army Knives. Presentation Master – Fingerprint USB Flashdrive – Laserpointer – Bluetooth When you are travelling for business and you need a secure backup for an important presentation, the bladeless Presentation Master Flight is at your service. Besides being lightweight, protected and portable, this bladeless version is permitted to be carried on airplanes.
For added convenience, the flash drive component is removable, offering travelers the option to carry their data while storing their pocket tool in their checked baggage. Watches The Swiss Army brand has produced a number of pocket and wrist watches as well. They range from closable watches to classic bare clock watches. They can also be engraved. Kitchen Cutlery A wide assortment of functional tableware and kitchen cutlery is sold by Victorinox without the Swiss Army brand. Additionally, Victorinox also markets kitchen cutlery under the Forschner brand name.
Forschner knives, though most are stamped blade in construction rather than forged, tend to receive high marks in consumer comparisons, and have been consistently identified as particularly good values by the American magazine Cook’s Illustrated, performing comparably to competition such as J. A. Henckels and Wusthof.
2. 3 THE MAIN MOTIVES BEHIND THE PRODUCT LINE EXTENTION FROM SWISS ARMY KNIVES INTO OTHER PRODUCT AREA
The Swiss army had started in 1897 with the Victorinox, the army knives. Since that time, Victorinox has become well-known in more than 100 countries for precision, quality, functionality and versatility.
This century old heritage has been extended to Swiss Army Watches, in 1989 which reflect the ingenious design and outstanding durability Victorinox has come to stand for over the years. After that, in the 90’s the functional travel gears were introduced followed by the apparels and perfumes. The bottom line in 1996 was negatively impacted by a $9. 9 million special charge for discontinued inventory, inessential investments and out-of-date displays and other assets. The company experienced an operating loss of $5. 4 million without the special charges its operating income would have been $2. million. The company closed the year with a net loss of $5. 3 million (64 cents per share). Write-offs continued in 1997. The $2. 1 million charge included $1. 3 million for discontinued inventory and $0. 8 million for restructuring charges. Sales for the year, at $118. 7 million, represented a nine-percent decrease from 1996 revenues of $130. 0 million. A 17-percent drop in sales of the Swiss Army knife, and six-percent declines in sales for both the watch and cutlery product lines contributed to the lower total sales figures. Operating losses came in at $6. million, with net losses at $4. 0 million (45 cents per share). Hence to recover from losses and write-off’s the management has taken steps to improve the company’s sales and financial performance. In addition to restructuring and write-offs, management hired specialists such as new public relations and advertising agencies, as well as marketing, packaging and engineering consultants. New products were introduced, including additional Swiss Army brand watch styles, the Victorinox Swiss Card, Victorinox Swiss Tool and a special cut-resistant glove for sale to the food-service industry.
Businesses will attempt to use extension strategies to prevent their product from going into decline. This company has clearly used the segment-by-segment invasion plans adapting to the needs of consumers. Initially the Swiss army knife had been a very strong consumer brand and very dominant in the market. The company enjoyed similar success with its travel gear and expects to do the same with apparel. They are diversifying into the business using the mixed-extension strategies. In 2001, they launched their own retail store at Soho, New York to create in-store consumer experience.
It’s no hassle for consumers as they can shop all of their wide range products under one roof. The main motives behind the product line that introducing multiple products could be to increase internal competition within the firm, attract consumers seeking variety who may otherwise switch to another brand moreover also yielding economies of scale in advertising, sales, merchandising, and physical distribution. Effective marketing organizations are marked by a strong cooperation and customer focus among the company’s department: marketing, R&D, purchasing, operations, accounting and finance.
The marketing department must monitor and control marketing activities continuously. They are responsible to ensure that the company achieves the sales and profits and other goals established in its annual plan. The main tools are sales analysis, and financial analysis of marketing plan. The Ansoff Matrix Based on the Ansoff Matrix, Swiss Army is positioning itself in product development grid and diversification grid. In the case of Victorinox, it had chosen the introduction of new products as an expansion plan. They are into product development where they have brought in the new products into the existing market.
Initially, they have introduces the Swiss knives to cater to the Swiss army, but a German firm could produce knives more cheaply in its industry that had brought the Swiss knives to a flop. However, Karl Elsener later introduced the “Officer’s Knife”, a lighter and more elegant knife for officers, which had even more functions. Nevertheless, this did not hinder its success. Army officers bought the knife themselves at cutlery stores, and this versatile pocket tool rapidly became a favourite everywhere. Now, the same knives are available with additional features such as flash lights and even Universal Serial Bus(USB).
This product development of the knives proves that there are specific customers whom are still loyal to the product and the firm can leverage its strengths by developing a new product targeted to its existing customers. Besides product development, diversification is also part of their product- market expansion scope because they have ventured into new market by introducing new products. As we are aware, initially their target group was the Swiss army which includes active and outdoor lifestyle range then shifted to officers and now they are also focusing on young generation.
At the same time as the products have diversified from army knives, watches, kitchen cutleries, Swiss cards, multi tools, presentation master (usb, flash lights) and expanded into apparels, travel gears and perfumes. Diversification is the most risky of the four growth strategies since it requires both product and market development and may be outside the core competencies of the firm but the Swiss army have proven track record of success by introducing the new range of products.
In near future, the study of consumers will help firms and organizations improve their marketing strategies by understanding issues such as how the psychology of how consumers think, feel, reason, and select between different alternatives (e. g. , brands, products); how the consumer is influenced by his or her environment (e. g. , culture, family, signs, media); the behaviour of consumers while shopping or making other marketing decisions, limitations in consumer knowledge or information processing abilities influence decisions and marketing outcome.
The information obtained should be able to help marketers to adapt and improve their marketing campaigns and marketing strategies to more effectively reach the consumer. Understanding these issues helps them to adapt their strategies by taking the consumer into consideration.. They also learn that consumers will sometimes be persuaded more by logical arguments, but at other times will be persuaded more by emotional or symbolic appeals. By understanding the consumer, they will be able to make a more informed decision as to which strategy to employ.
This is what we will embrace as a technique in order to certify that the product they have selected would be influential to the customers and how the marketers could improve their strategies to reach the consumers more efficiently.
4. CHANNELS OF DISTRIBUTION USED BY SWISS ARMY
A channel of distribution or trade channel is the path or route along which goods move from producers to ultimate consumers. It is a distribution network through which a producer puts his products in the hands of actual users. A trade or marketing channel consists of the producer, consumers or sers and the various middlemen who intervene between the two. The channel serves as a connecting link between the producer and consumers. By bridging the gap between the point of production and the point of consumption, a channel creates time, place and possession utilities. A channel of distribution represents three types of flows: • Goods flow from producer to consumers; • Cash flow from consumers to producer as payment for goods; and • Marketing information flows in both directions, from producers to consumers in the form of information on new products, new uses of existing products, etc.
The flow of information from consumers to producers is the feedback of the wants, suggestions, complaints, etc. A. Alternative choice of Distribution Channels Every small-scale entrepreneur requires a channel that can distribute his product to the right customers at the right time and at the right cost. It consists of all the middlemen which participate in the distribution of goods and which serve as a link between the manufacturer and the consumer. i. Manufacturer to Customer This is also known as direct selling because no middlemen are involved.
Swis Army may sell directly through his own retail store. This is the simplest and the shortest channel. It is fast and economical. Small producers and producers of perishable commodities also sell directly to the local consumers. Big firms adopt direct selling in order to cut distribution cost and because they have sufficient facilities to sell directly to the consumers. ii. Manufacturer to Retailer to Customer: This is one stage distribution channel having one middleman, i. e. , retailer. In this channel, the Swis Army sells to big retailers like departmental stores and chain stores who in turn sell to customer.
This channel is very popular in the distribution of consumer durables such as refrigerators, T V sets, washing machines, typewriters, etc. This channel of distribution is very popular these days because of emergence of departmental stores, super markets and other big retail stores. The retailers purchase in large quantities from the producer and perform certain marketing activities in order to sell the product to the ultimate consumers. iii. Manufacturer to Wholesaler to Retailer to Customer This is the traditional channel of distribution. There are two middlemen in this channel of distribution, namely, wholesaler and retailer.
This channel is most suitable for the products with widely scattered market. It is used in the distribution of consumer products like groceries, drugs, cosmetics, etc. It is quite suitable for small scale producers whose product line is narrow and who require the expert services and promotional support of wholesalers. B. Channel of Distribution chosen by Swiss Army The Swiss Army chose the Manufacturer to retailer to customer. While selecting a distribution channel, the Swiss Army has compared the costs, sales volume and profits expected from alternative channels of distribution.
Below are the comparison done by Swiss Army before choosing its proper Distribution Channel: i. Market Considerations The nature of the market is a key factor influencing the choice of channels of distribution. The following features of the market were considered by Swiss Army to determine its channels: • Consumer or industrial market: If the product is meant for industrial users, the channel of distribution will be a short one. This is because industrial users buy in a large quantity and the producer can easily establish a direct contact with them. But in case for goods meant for onsumers, retailers may have to be included in the channels of distribution. • Number and location of buyers: When the number of potential customers is small or the market is geographically located in a limited area, direct selling is easy and economical. In case of large number of customers, use of wholesalers and retailers becomes necessary. • Size of order: Direct selling is convenient and economical where customers place order in big lots as in case of industrial goods. But where the product is sold in small quantities, middlemen are used to distribute such products.
A manufacturer may use different channels for different types of buyers. He may sell directly to big retail stores and may use wholesalers to sell to small retailers. • Customers buying habits: The customer buying habits like the time he is willing to spend, the desire for credit, the preference of personal attention and one stop shopping significantly affect the choice of distribution channels. ii. Product Considerations Swiss Army has also consider the type and nature of the product influencing the number and type of middlemen to be chosen for distributing the product.
The important factors with respect to the product are as follows: • Unit value: Products of low unit value and common use are generally sold through middlemen, as they cannot bear the cost of direct selling. On the other hand, expensive consumer goods and industrial products are sold directly by the producers. • Bulk and weight: Heavy and bulky products are distributed directly to minimize handling costs. Coal, bricks, stones, etc. , are some examples. • Technical nature: Industrial products requiring demonstration, installation and after sale services are often sold directly.
The consumer products of technical nature are generally sold through retailers. • Product line: An entrepreneur producing a wide range of products may find it economical to set up its own retail outlets. On the other hand, firms with one or two products find it profitable to distribute through wholesalers and retailers. • Age of the product: A new product needs greater promotional effort and few middlemen may like to handle it. As the product gains acceptance in the market, more middlemen may be employed for its distribution. C. Factors affecting the choice of Channel Distribution chosen by Swiss Army
After deciding the number of retailer, Swiss Army selected the particular dealers through whom they will distribute their products. While Swiss Army selecting a particular retailer, the following factors were taken into consideration: a. Location of dealer’s business premises; b. Financial position and credit standing of the dealer; c. Knowledge and experience of the dealer; d. Storage and showroom facilities of the dealer; e. Ability of the dealer to secure adequate business and to cover the market; f. Capacity of the dealer to provide after sale service; g. General reputation of the dealer and his sales force; . Willingness of the dealer to handle the entrepreneur’s products; i. Degree of co-operation and promotion service he is willing to provide; j. Nature of other products, if any handled by the dealer. D. Conflict in the Distribution Channel chosen by Swiss Army Conflict in the channels may result in disgruntled retailers who have enjoyed a long-standing relationship with the brand. The development of Swiss Army stores may create channel conflict only if they “cannibalize” sales from other retailers. This may, in fact, create greater primary brand awareness and improve sales for established retailers.
Cannibalize is having a new product take sales away from an existing product is not usually an attractive situation for a firm In this case of cannibalization, a firm will need to reduce the benefit calculated for a new product by the amount of the existing product benefit lost. However, firms need to recognize that cannibalization is not always avoidable. After all, competing companies might have entered the market with a similar product and taken these sales anyway, even if the new product had not been introduced. Cannibalization can even occur before a new product is introduced.
In fact, some experts claim that a pre-announcement for a new product can cannibalize the sales of an old product in a prior period. Swiss Army currently encourages the act of cannibalization. By encouraging competition among their stand-alone business units, companies could create a climate in which risk taking and new ideas were both rewarded and valued. Having a future market focus and abandoning an old product as soon as a new one comes along can benefit overall profits.
2. 5 CURRENT MARKETING STRATEGY
Swiss Army is practicing traditional marketing strategy at the moment.
Traditional marketing strategy which concentrates on the 4Ps, advertising and promotion, low cost processing and placement of distribution of product, retailing and the method to deliver goods to the customer. The 4Ps including Place, Product, Promotion and Price are referred to the strategy place for selling the goods, the quality of the product that produced, the promotion of the product through advertising and the price that profitable to Swiss Army and preferable to the customer. Swiss Army also targeted the segment market according to their product.
For example, the Victorinox Swiss Army knife is targeting customer that likes adventure activity, Swiss Army watch targeting the men’s market accordingly to the type of occupation of the customer and the Swiss Army apparel and travel gear is targeting the young market that likes to travel a lot (Kotler and Keller 2009). Besides that, Swiss Army is also promoting the product through co-branding with another company in making the co-branded Swiss Army knife. For example, Swiss Army co-branding with Tiffany & Co. in producing an elegance sterling silver knife which is targeting women’s market instead of men’s market.
Besides that, Swiss Army is giving out membership to the loyal customer in rewarding them with special offers or special gift upon their purchases. Swiss Army is also promoting the latest products through the internet instead of magazines, newspaper and TV commercial (Tiffany & Co. 2010).
3. 0 RECOMMENDATIONS: TO PROMOTE SWISS ARMY’S BRANDS & NEW PRODUCTS
Recommended Advertising Strategy Non-traditional advertising is another approach in marketing the product to the customer. The non-traditional marketing is totally different from traditional TV commercial, newspaper, magazines and direct mail advertising.
The value of non-traditional advertising is anything else besides the traditional advertisement which is more creative and unpredictable by the customer. Nowadays, customer does not longer prefer the traditional marketing tactics which is not attracting anymore. The customer had switched their attention to online media, and other channel that can gain their interest in knowing the product (Stephens and Villanueva n. d. ). Thus, non-traditional advertising had become more important in gaining customer attraction and awareness of the product.
Here are some of the non-traditional advertising methods that recommended to Swiss Army in marketing the product. A) Product Placement Product placement is an advertising technique in promoting the products through appearances in movies, storyline of television program, or other media. Product placements usually begin with the agreement between the manufacturer and the media company. The manufacturer will pay an amount of fees to have their new product used during the shows or movie to display the features and usage of the product.
According to Brennan et al. (2004), product placement is to create awareness and high exposure of the brand. Through the product placement, the customers are easily getting know the new product from the company and the features of it. For example, in James Bond movies, products from BMW, Motorola, Aston Martin and Omega are used by the character in the movie to demonstrate the usage of the products. Currently, information about the product can be obtained through watching of film. The audience consisted old generation, generation X and generation Y.
Thus, Product placement is a marketing tool that used to captive audience. The exposure of the product through product placement is more frequent and attracted to the customer compared to the media advertising method (Brennan et al. 2004). The acceptance level of product is significantly higher if the exposure of the product is more frequently. Product placement is giving the audience a sense of familiarity and belonging when the products in the movies are constantly practice (Brennan et al. 2004). Besides that, the amounts of audiences are increasing year after year.
Therefore, the potential of exposure of the product through product placement is given a better opportunity to introduce to each and every customer in the market. Although the product placement strategy had poses few of the advantages, but it also brings some disadvantages to the product. The information that brought through the movie about the product might not be accurate as the reality. Some of the usage of the product had been over-acted by the movie which do not presented the real usage of the product. The customer might disappointed if they having high expectation on the usage of the product which had been shown through the movie.
These might cause a huge loss to the brand and the product maker. Besides that, the cost of putting in the product into the movie is much higher than advertising through media commercial (Brennan et al. 2004). If the product placement does not bring any positive effect to the product, the product maker might gain a negative outcome which the product cannot be sold. B) Publicity Publicity is one of the promotion method in trapping the public’s attention and perception on the products or brands. The main objective of publicity is not sales promotion but create the image and awareness of the product to the customer.
Usually product publicity includes the history and story of the product. The story of the product will be presented through newspaper, TV news or radio (Turney 2002). These might gain the awareness and understanding from the customer on the purpose of the product in the market. Product publicity is low in cost if the publicity is aired through news stories, web blogs, and web sites. According to Turney (2002), news article or news in newspaper or magazine is affecting the buying decision more than the advertisement of product or service.
The major disadvantage of publicity is the lack of control the release method that going to be used for the product. Low chances of release of the news by the media resulted in less awareness from the customer (Wikimedia Foundation Inc. 2009). C) Celebrity Endorsement Celebrity endorsement or celebrity testimonial is a marketing tool in which a written recommendation is given from a well-known celebrity in verifying the quality, performance and satisfaction against the value of the product or service. The celebrity can be actor, political person or sports person which is suitable to represent the particular field of industry.
For example, Michael Jordan is the most famous sports celebrity endorsement for Nike product, and Britney Spears appears in the Toyota Vios advertisement which endorses the quality of the car. According to Belch and Belch (2001), the popular celebrity helps in affecting the purchasing behavior of the customer. The celebrities also manipulate the products quality which increases the awareness and reputation of the brand to the customer (Belch and Belch 2001). The customer has the perception that the product had been endorsed by the celebrity is having higher quality compared to other product.
This affected the motivation of customer in buying the product because of the celebrity. The celebrity image is highly correlated to the product they endorsed. Thus, the behavior of the celebrity reflected the image of the product. There are risks that the positive image of the celebrity would change which might affected the customer perception on the product. The sales might decline and causes losses to the company. Besides that, there might be risk that the celebrity had overshadowed the product. Customer might switch together with the celebrity if the celebrity endorsement had switched to another brand.
Lastly is the high cost of celebrity endorsement. If the celebrity endorsement does not work effectively, the company might encounter a loss due to large amount of investment (Wikimedia Foundation Inc. 2009). D) Co-branding Co-branding is the co-operation between two well establish brand names of different companies working out a same product. The product from the co-branding strategy will match both the characteristics of the companies which increase the functionality and appearance of the product. The objective of co-branding is to getting new customer, to increase the brand awareness and to support the customer loyalty.
Co-branding is beneficial to both the companies in terms of cost. With the alliances of both companies, the cost of product can be reduced by sharing operating costs, production costs and marketing costs. The co-branding strategy also increase the awareness of customer because both of the brands will penetrates into each market. This helps in widen the network of the company with the customer (Panda 2001). Even though co-branding is beneficial, but there are some limitations in practicing this strategy. When the customer had familiar with the co-branded product, they tend to avoid buying product that solely made by either one of the company.
The associations between the companies should have co-related in terms of product function. If both of the companies are different from each other in terms of product function, the co-branded product might not as good as their own product (Panda 2001). Recommendation : Non-traditional Advertising Strategy Non-traditional advertising is different from the traditional advertising method. The approach and way of advertising is different in attracting the new generation of customer. Nowadays, customer is expecting something different in product recognition to them.
Thus, it is recommended that combination of traditional and non-traditional advertising should be practiced by Swiss Army in capturing the attention of current customer and also potential customer. Swiss Army should concentrates on getting attention of the generation Y customer because this customer is having the highest purchasing power compared to other customers. Information that gained by the generation Y usually is from internet, movies, and magazines. Publicity of the product should focus more from the web sites, web blogs and web news. Direct arketing can be done together through the online purchasing method. Product can be sold in cheaper price because the cost of advertising is much lower compared to advertise through newspaper or magazines. Besides that, Swiss Army should focus on product placement either in a movie or TV programs. This is because product of Swiss Army usually is used for daily activities such as cutting rope using Swiss Army knife, travel language for the adventurous people and Swiss Army watch for daily usage. The combination of celebrity endorsement through the movie increases the awareness of the product to the customer.
The customers are more willing to buy Swiss Army product if there are celebrity that using Swiss Army product in a movie or TV programs. This enhances the purchasing behavior of the customer on Swiss Army product.
4. 0 PLAN OF ACTION
Product Quality Control
In today’s market, quality is a given -a minimal requirement to staying in business. Customers have no tolerance for products that are built outside of spec. In efforts to maintain a highly satisfied customer base Swiss Army implementing systems that ensure products of highest quality are produced.
As the order and manufacturing process are integrated, the equipment configuration definition becomes critical for customer order integrity and product quality. The configuration might start with a customer facing an order-entry Web application. The data entered by the customer be the same data utilized by both engineering and manufacturing. Product data management is an essential component of product integrity for the Swiss Army. On the front-end, Swiss Army are installing systems that enhance the odds of an order being fulfilled correctly.
APS’ error proofing solutions focus on error reduction by integrating information between various automated systems to ensure product is built to customer specifications with no defects. As product is produced, in-line testing Swiss Army ensures that they can catch problems before additional value is built into the job. It also reduces rework and scrap. APS’ solutions facilitate the automatic data collection for the purpose of verifying product is produced within spec. Data is collected in-line or at the end of the line ensuring the detection, determination and subsequent elimination of root cause defects.
Customer service Its importance varies for Swiss Army for their product, industry and customer; defective or broken merchandise can be exchanged/swapped, often only with a receipt and within a specified time frame. Retail stores who are selling the Swiss Army product will often have a desk or counter devoted to dealing with returns, exchanges and complaints, or will perform related functions at the point of sale. Customer service for Swiss army also may be provided by a person (e. g. , sales and service representative), or by automated means called self-service. Examples of self service are Internet sites.
The experience a customer has of a product also affect the total service experience, but this is more of a product direct feature than what is included in the definition of customer service. Swiss Army have argued that the quality and level of customer service has decreased in recent years, and that this can be attributed to a lack of support or understanding at the executive and middle management levels of a corporation and/or a customer service policy. Then use the points in the article to assess how well they and/or their staff are handling this customer service situation. Once again, be sure to have someone else assess their own customer service performance, as they won’t be able to deal with the customer properly if you’re trying to evaluate their performance at the same time. ) After assessing several customer-seeking-help situations, Swiss Army will know how their customer service performance measures up, and be able to pinpoint specific problems if there are any. They are using some tips in the article to improve their customer service as needed. Product Development Product development is the process of designing, creating, and marketing an idea or product.
The product can either be one that is new to the marketplace or one that is new to your particular company, or, an existing product that has been improved. In many instances a product will be labeled new and improved when substantial changes have been made. All product development goes by Swiss Army through a similar planning process. Although the process is a continuous one, it is crucial that Swiss Army stand back after each step and evaluate whether the new product is worth the investment to continue. That evaluation should be based on a specific set of objective criteria, not someone’s gut feeling.
Even if the product is wonderful, if no one buys it the company will not make a profit. Brainstorming and developing a concept is the first step in product development for Swiss Army. Once an idea is generated, it is important to determine whether there is a market for the product, what the target market is, and whether the idea will be profitable, as well as whether it is feasible from an engineering and financial standpoint. Once the product is determined to be feasible, the idea or concept is tested on a small sample of customers within the target market to see what their reactions are.
Interviewing customer for performance evaluation Once the target customers and prospects have been selected you need to interview them to determine at a high-level their criteria of greatest interest. Issues such as general feature set, product quality, reliability, installation, billing, customer service, etc. may be identified by the customer. By doing so, you may uncover something not relating to the product that customers value and that you can address without sacrificing engineering resources. Sample questions may include “What are the top criteria you use to help you select a product for purchase? As a general rule of thumb, the broader and more open-ended interviews should be conducted on-site at the customers’ facility to obtain the richest information. Swiss Army have conducted interviews over the phone that were more narrowly focused and sought answers to precise questions. As a side note, customers don’t necessarily need to know that you are interviewing them with the ultimate intent of establishing pricing, as they may be tempted to negatively influence their results.
5. 0 CONCLUSION
We shall try to further consolidate our position on the world market.
At the same time, we will have to ensure the stability of our company. We, therefore, do not envisage any sudden changes in our development. In order to remain competitive in the future, we will have to push ahead the rationalization and automatisation processes, adjust our product range to our customers’ requirements, and become increasingly active on a local scale at the points of sale. Finally, we will have to set the course for future markets in time and in the right way. 0.
REFERENCES
Kotler, P. , and Keller, K. L. (2009). Marketing Management (13th ed. ). New Jersey: Pearson Education, Inc. Tiffany & Co. 2010). Swiss Army Knife. Retrieved 21 January 2010 from http://www. tiffany. com/shopping/Item. aspx? fromGrid=1=11889743===s+1-p+1-c+-r+-x+-n+6-ri+-ni+0-t+Swiss+Army=1 Stephens, J. and Villanueva, J. (n. d. ) Non-traditional Marketing Rules. Retrieved 21 January 2010 from www. creative-brand. com Brennan, S. , Rosenberger III, P. J. , and Hementera, V. (2004). Product Placements in Movies: An Australian Consumer Perspective on their Ethicality and Acceptability. Marketing Bulletin. 15(1). Turney, M. (2002). Advertising and Publicity. Online Readings in Public Relations. http://www. ku. edu/~turney/prclass/readings/ads. html. Retrieved 21 January 2010. Wikimedia Foundation Inc. (2010). Publicity. http://en. wikipedia. org/wiki/Publicity Retrieved 21 Janua
