Presentation
Of
Marketing
Submitted By:
Abdul Basit
Roll #: 31
Semester: 3rd (Section A)
Submitted To: Sir Hashim Khan
INSTITUTE OF MANAGEMENT STUDIES
UNIVERISTY OF PESHAWAR
THE MARKET PLAN
RADO - watch
SITUATION ANALYSIS
General's core business is industrial timing devices and consumer clocks, based on
skills in manufacturing high quality timing movements and plastic casings. This
market plan is based on providing consumers with a high quality, innovative watch. It
will be offered in a variety of styles for both men and women. The casing and
movement has other potential applications not discussed in this plan.
Our 1995 profits of 30 million dollars represent 7.5 percent of total sales. Sales
growth has slowed to a current level of 5 percent annually. Growth in current markets
is expected to be limited. The Rado watch is one of several projects with the potential
to improve General's growth rate.
Market Analysis
The Rado watch will compete directly with several other branded fashion watches.
The market size for branded fashion watches is forecast to be $524 million retail
dollars in 1998, growing to $721 million by 2002. Annual market growth is expected
to exceed six percent through 2002, exceeding our current annual sales growth.
Market Segments
Table 1: Market Segments by Age
AGE PERCENT OF WATCH PERCENT OF POPULATION RELATIVE PURCHASE
BUYERS OVER 17 INDEX
16-24 19% 13% 1.46
25-34 33 19 1.74
35-54 35 40 0.88
55+ 13 29 0.45
Those under 35 years of age purchase slightly over 50 percent of all branded fashion
watches as shown in the Table 1. The highest purchase prevalence is those from 25 to
34 whom purchase 74 percent more watches per capita than those the average
consumer. Purchase behavior is expected to differ among age segments and by
gender. Young females [18-24 years of age] are expected to be intense purchasers.
This group is likely to be very styling conscious. Women in the 25 to 34 age group
will be our second significant segment, expected to buy more watches than any other
age-sex segment.
Consumer purchases of branded fashion watches also vary by region as shown in
Table 2. An index of relative watch sales by regions shows that sales are above
average in the east north central, west north central, north central, and Mid-Atlantic
States. Product introduction is likely to be more successful in the states in these
regions.
Table 2: Watch Sales by Region
REGION WATCH SALES POPULATION INDEX OF WATCH SALES
%
ENC 20% 15% 1.33
SA 16 17 0.94
MA 15 13 1.15
WEST 15 21 0.71
WSC 10 10 1.00
WNC 8 7 1.14
NE 6 5 1.20
ESC 5 6 0.83
MOUNT 5 6 0.83
Consumer Behavior
Swatch has changed watch buying habits by encouraging ownership of multiple low-
priced, carefully designed branded fashion watches. Brand switching and
experimentation by consumers is easy for low priced watches, assuming availability.
Consumers are very design oriented when buying branded fashion watches. Watch
attributes that we consider most important include watch and band design, packaging,
price, and durability. Distribution and display are very important in this market and
can encourage impulse purchases for both personal use and as gifts.
Consumers are reached through five types of outlets.. We currently have access to
four of these channels, representing 75 percent of watch sales. Channel development
is necessary to reach the total watch market. A majority of branded fashion watches
are currently purchased at department stores. We will take advantage of our strong
distribution through department, discount, and drug stores to assure widespread
availability of Rado watches. Jewelry store channel development will be deferred until
we are established in our traditional retail channels.
Competitive Analysis
Although there are fourteen competitors in this market, there is substantial
concentration. Swatch, Fossil, Guess?, and Anne Kline are strong competitors,
holding 70 percent of the market. Swatch and Fossil have strong manufacturing and
distribution skills, while Guess? and Anne Kline have less extensive distribution
networks but strong name recognition in fashion. Fossil and Swatch are strong at the
lower price lines. Branded fashion watches are a relatively new product category.
Although pioneered by Swatch, there is considerable opportunity for new entrants as
demonstrated by Fossil and Guess?.
Company Analysis
General currently distributes products through channels accounting for 75 percent of
watch sales. Branded fashion watch sales are growing faster than our current product
lines. Our innovative product, product design skills, strong manufacturing skills, and
experience in distributing consumer clocks provide an opportunity for entry and
growth in this market.
SWOT Analysis
Strengths
Innovative production methods provides the potential for new designs
Experience in distribution channels for timepieces
Weaknesses
No experience in distribution to jewelry stores
No experience in marketing fashion products
Opportunities
Large market
Market growing faster than our current sales
Consumer demand for fashion goods creates a demand for innovative
products
Threats
Strong competition with concentrated market shares
Possibility of new market entries
OBJECTIVES
Market share of three percent of the branded fashion watch market in the first year [sales
of over 8 million dollars].
Project break-even in 1998.
MARKETING STRATEGIES
General will introduce a new product, the innovative Rado watch, using penetration
pricing, extensive advertising, and expanded distribution in order to increase our
revenues and growth rate.
ACTION PLAN
Product
We will introduce between 30 to 40 different designs in the first year. One quarter of
these will have a "metal" case, copying many of the traditional and modern metal
designs. These are targeted at consumers 25 and over. We will design a series
including licensed characters and unusual shapes for the market segment under 24
years of age. Swatch does not have exclusive licensing for Disney and Warner
Brothers characters or Coke. By using these and others we will have a variety of
product and character designs in our line. The most unusual aspect of our line will be
some very unusual shapes. Several of these will be geometric; hexagon, trapezoid,
oval, and diamond. For younger ages our technology allows the design of watches in
the shapes of cartoon character faces.
Price
The Rado watch will be sold for a suggested retail price of $45. We believe that we
have product quality and feature advantages, encouraging the use of a price slightly
exceeding Swatch. This pricing strategy, coupled with our efficient production
methods, aids in achieving our relatively high market share for a new product entry.
Distribution
We will introduce Rado in the northeast but within the first year sell to the national
market. With our current strong distribution channels nationwide covering 75 percent
of watch sales, we will limit our potential if we restrict our distribution to specific
regional markets. Although we do not currently have jewelry stores, our distribution
will place watches in at least 75 percent of locations in the United States. We will use
current normal distributor markups.
Promotion
Five new sales representatives will be added to assist in the development of new
distribution outlets. A sales trainer will be hired to train the sales force in the new
product. This will be within our $500,000 sales support budget based on an average
salary and benefits cost of $100,000 for each position.
The advertising level for the four leading firms can be compared by determining the
ratio of voice share (% of total advertising dollars of $20 million) divided by the
market share as shown in Table 3. Consumers will not know our brand; therefore, we
will have to advertise more aggressively to achieve brand awareness. Although our
market share goal in 1998 is three percent, we will set advertising at one million
dollars. This will achieve an advertising voice/market index considerably higher than
our competition.
Table 3: Fashion Watch Advertising and Voice
COMPANY MARKET VOICE VOICE/ ADVERTISING
SHARE SHARE
MARKET MILLION $
SWATCH 20% 28% 1.4 5.5
FOSSIL 20% 24% 1.2 4.8
GUESS? 20% 21% 1.05 4.2
ANNE 13% 13% 1.9 2.5
KLINE
RADO 3% 5% [assumes 5.0 1.0
PLAN same level of
total
advertising
as last year]
Media will be targeted to our major market segments; women between 18 and 24 and
between 25 and 34. Smaller amounts will be directed to other segments.
FINANCIAL ANALYSIS AND EXPECTED RESULTS
As shown in Tables 1 and 2 of the financial appendix, we expect to achieve a market
share of three percent and sales of $8.5 million in the first year. The Rado watch
project will break-even in the first year. We do not expect any watch technology
breakthroughs during this period. Competition is expected to be based on design,
price, and achieving widespread distribution, areas in which we expect to be very
competitive.
In conclusion, we will invest one million dollars in the Rado watch project. We can
achieve sufficient market share to achieve our financial and marketing objectives.
During the next five years the market is expected to grow and our costs are expected
to decline with experience increasing unit contribution. Our greatest challenge will be
tracking the market's tastes in watch design and meeting and leading these with
creative and innovative designs.
CONTINGENCY PLANS
Table 4: Impact of Advertising Levels on Financial Results
TOTAL AD BUDGET BREAK EVEN YEAR NET PRESENT VALUE IN MIL. $
$2,500,000 1998 $35.8
3,000,000 1999 34.0
3,500,000 1999 30.4
4,000,000 1999 28.6
It is not expected that there will be increased price competition due to the entry of the
Rado watch. Increased advertising, however, might lead to an increase in industry
advertising. A sensitivity analysis of the effect of increased advertising on our break-
even year and cumulative profits appears in Table 4. Increases in advertising in steps
of an additional $500,000 dollars up to $4 million, assuming no additional gains in
market share, have fairly limited effect on our performance. Therefore, in the event
that there is increased industry advertising, we are prepared to increase our advertising
by as much as $1,500,000 annually. Our increase advertising also will allow us to
react to lower than expected consumer awareness, fewer distribution outlets than
planned, or less than expected consumer acceptance of Rado watch.
