? Table of contents EXECUTIVE SUMMARY1 1OVERVIEW OF THE COMPANY2 1. 1INTRODUCTION2 1. 2THE MISSION STATEMENT2 1. 3MARKETING GOALS AND OBJECTIVES2 1. 4CURRENT SITUATION3 1. 5KEY SUCCESS FACTORS4 1. 6MACRO ENVIRONMENT4 2 MARKET DEFINITION8 2. 1COMPETITORS8 2. 2SIZE9 2. 3GROWTH10 2. 4PROFITABILITY11 2. 5DISTRIBUTION AND MARKETING COMMUNICATION PRACTICES IN THE INDUSTRY12 2. 6MARKETING COMMUNICATION13 2. 7TRENDS IN THE INDUSTRY13 2. 8COMPETITOR ANALYSIS14 3CELL POWER SWOT ANALYSIS15 4MARKETING STRATEGY17 4. 1SEGMENTATION17 4. 2TARGET MARKET19 4. 3TARGET MARKET CHARACTERISTICS20 4. 4POSITIONING20 4. 5MARKET RESEARCH21 MARKETING MIX23 5. 1PRODUCT23 5. 2DISTRIBUTION / PLACE24 5. 3MARKETING COMMUNICATIONS STRATEGY25 6FORECASTS AND BUDGETS27 7IMPLEMENTATION AND CONTROL31 7. 1CONTROL31 7. 2IMPLEMENTATION32 7. 3CONTINGENCY PLANNING32 7. 4BREAK-EVEN ANALYSIS33 ? List of tables TABLE 1 MOBILE TELEPHONE NUMBERS IN SOUTH AFRICA BY YEAR11 TABLE 2 CELL POWER SWOT ANALYSIS16 TABLE 3 SEGMENTATION PREPAID AND STARTER PACKS MARKET17 TABLE 4 SEGMENTATION CONTRACT MARKET18 TABLE 5 TARGET MARKET SEGMENTATION19 TABLE 6 BUDGETED INCOME STATEMENT28 TABLE 7 AREAS TO MONITOR PERFORMANCE31 TABLE 8 IMPLEMENTATION MILESTONES32 ? List of figures
FIGURE 1 CELL PHONE PENETRATION WITHIN SU-LSM3 FIGURE 2 SAARF LSM – EASTERN CAPE4 FIGURE 3 CPIX INFLATION BETWEEN 2000 AND 20085 FIGURE 4 POPULATION GROWTH IN SOUTH AFRICA BETWEEN 2000 AND 20086 FIGURE 5 LIFE EXPECTANCY AT BIRTH IN SOUTH AFRICA BETWEEN 2000 AND 20087 FIGURE 6 MOBILE TELEPHONE NUMBERS IN SOUTH AFRICA BY YEAR11 FIGURE 7 SAARF LSM – EASTERN CAPE19 FIGURE 8 PERCEPTUAL MAPPING WITH CUSTOMER SERVICE AND PRICE ATTRIBUTES21 FIGURE 9 PRICING STRATEGIES24 FIGURE 10 SALES FORECAST FOR THE FIRST TWELVE MONTHS29 FIGURE 11 EXPENSE FORECAST FOR THE FIRST TWELVE MONTHS30 FIGURE 12 BREAK EVEN ANALYSIS ON ACCUMULATED SALES33 Executive summary
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The following marketing plan describes the start-up of Cell Power, a company planning to enter the cell-phone market with the aim of providing superior service and customer care. Cell Power will be the “New kid on the block” they intend to change how people look at service providers for ever in the Eastern Cape. Cell power will be a fresh and energetic team of players in the market that care about the customers. Cell Power will not only sell phones and accessories, they will be empowering the people in the community by supplying opportunities for the unemployed to earn commission on the sale of cell contracts and starter packs.
Cell Power will have dedicated sales people that will concentrate on the selected segments as explained later in the document. This will give the company the advantage over the competitors as the sales people will focus on the selected target market, in doing so the company will be able to focus all advertising and promotional activities on the specific market. The current Mobile Phone market was estimated at 39. 66 million units. Cell Power forecasts an average monthly growth of 10 percent for Pre-paid and airtime contract sales and 5% on in-store phones and accessories.
Market research done shows a need for higher service levels, higher technology for lower prices and a particular demand for additional low cost communication. The preferred target market lies in the lower income groups with products that are focused on their particular circumstances and needs Cell Power’s goal is to be in a profitable position after the first 6 months. The budget targets set for thirty contracts per service providers, this is set far below the industry standard, management decided to rather underestimate the growth than to be caught by surprise and run into a cash flow problem.
Cell Power will be not exclusively trade in the main shop; they will make use of distributors to grow the brand name Cell Power. With the reselling via the distributors the name Cell Power will be closer to the market and the risk will be less for the owners. ? 1Overview of the company 1. 1Introduction Cell Power will start with the aim of securing a foothold in the ever growing cell phone industry. The company will have two shareholders. One of the shareholders secured the rights to sell network contracts direct to individuals and/or corporate clients. The second partner has access to start-up capital.
The business will be based in Port Elizabeth, in one of the main shopping centres to attract walk-in customers. The company will sell to all people that have a need for a cell phone or related GSM products. The company will however concentrate more on people in the LSM 2 to 6 with products that are focussed on their particular circumstances and needs. The company will have dedicated sales people for corporate contacts, the retail outlet and cash customers. This will enable the company to focus and maximize these segments and fully understand the needs of these customers. . 2The mission statement Cell Power will advise our customers of the most cost effective way to access mobile communication services. We intend to provide these services across any of the three networks, inclusive of voice, data or any other services available on the mobile phone networks. 1. 3Marketing goals and objectives ???To close thirty contracts per network on a monthly basis. This will translate to a total of ninety contracts per month; ???Appoint at least five distributors for accessories and air time vouchers per month for the first five months; ???To sell R 5,000. 0 of air time in the first month of business and increase this amount by 10% per month for the first year; ???Sell a total of R 4,500. 00 of accessories per month and increase by 5% per month for the first year; ???To attain break-even at six months; 1. 4Current situation The cell phone industry is still growing at a rate faster than the overall economy of South Africa. Even though the industry is starting to consolidate and smaller service providers are bought out by larger more established service providers, there is a gap in the market for personal service and advice to the end consumer and the business sector.
The “Pay as you Go” market is another element of the business that is a focus point as this is aimed at the lower LSM (2-5) group and young people. This lower income sector will be the sector that will grow fastest in the mobile communications market. In the current economy with consumer expenditure under pressure from amongst others, the national credit act, high interest rates and a slowdown in the economy consumers will be looking at prepaid services as an alternative to contracts because of the flexibility of the prepaid vouchers. Figure 1 Cell phone penetration within SU-LSM
The growth will be at the lower LSM 1 to 5 as the penetration of cell phones in these LSM’s are the lowest and the higher LSM’s, 6 to 9, are nearing saturation as depicted in Figure 1. The population of the Eastern Cape is more concentrated around LSM 2 to 6 and this fits with our target audience as depicted in Figure 2 on the following page. Figure 2 SAARF LSM – Eastern Cape 1. 5Key success factors To be successful in the mobile communications industry you need to deliver exceptional service to customers. The acquisition of mobile products and services, contract or prepaid, should be hassle free.
Personal service will differentiate you from the competitors. 1. 6Macro environment Political Factors ???The political arena is perhaps the most unstable it has been since the advent of democracy in 1994. There is a highly contested succession race within the governing party for the Presidency. This contributes to increased market and consumer uncertainty and a lack of consumer confidence. This will contribute to depressing sales. Economic Factors ???Issues of the structural economy have a significant impact on the business environment. These include the highly (structurally) regulated employment market.
With the governments’ preferential procurement policy it will be advantageous to ensure that, even though the business will likely fall in the exempted category of business, an appropriate affirmative action policy and employment equity plan is in place. In addition, it would similarly be advantageous to ensure that there is an acceptable level of historically disadvantaged ownership and/or business management participation. This will create a better footing for the business to secure revenue from government contract and contracts from state owner enterprises, as well as companies who in their procurement policy favour BEE aligned business. Interest rates are another economic factor that is currently eroding the consumers’ disposable income. Consumers are looking to make savings where they can and with this additional mobile communication services will be considered a luxury. People will be using phones more economically. ???Inflation is closely coupled with the interest rate. If government cannot bring the inflation rate down to acceptable levels the growth will be less and job creation will also be on the down side. Fewer people employed mean fewer customers and more customers going into debt that will not be able to afford to pay the cell phone bills.
Bad debt will be on the increase. Figure 3 shows the inflation over the last eight years. Figure 3 CPIX Inflation between 2000 and 2008 ? Social Factors Social factors include the demographic and cultural aspects of the external micro-environment. These factors affect customer needs and the size of potential markets. Some relevant social factors to consider are: ???HIV/Aids will definitely have a negative influence on the industry, not only for users but also for the employer. Loss of employment will lead to the inability to afford luxury items, i. e. cell phones. ??? Population growth rate in South Africa is at 0. % and our life expectancy at birth is 43 years. This will have a negative effect on business in the future. Figure 4 and Figure 5 show these rates over the last 8 years. Figure 4 Population growth in South Africa between 2000 and 2008 Figure 5 Life expectancy at birth in South Africa between 2000 and 2008 Technological Factors ???Technology is changing at a pace that has never been seen before. If the players in the mobile communications market do not keep up with technological developments they are soon likely to be left behind by their competitors. ???Consumers demand more from their cell phones than they emand from their office computers. The cell phone market is driven by technology and consumers hunger of information. The fast pace of technology places a responsibility on the suppliers to be current with technological and application based development. ? 2 Market Definition The market we are intending to compete in is the mobile (wireless) communication industry. This includes both voice and data products. The market also expands into complimentary products that can be sold as value ads, i. e. laptops, home theatre systems, 3G, IBurst and mobile communication accessories.
This company will focus on targeting lower income earners and in particular to market innovative value-added type products which remains under marketed in this market segment. 2. 1Competitors Mobile Phone License holders The mobile phone license holders in South Africa are the companies who hold primary “operator” licenses from the government to provide mobile communication services via the GSM network. Mobile phone operators in the mobile communication value chain are primarily responsible for providing access and connections to the mobile (GSM) network.
They are also responsible for connectivity and network related support to the end user client. Mobile phone license holders are increasingly competing in the retail market. In the past, they provided connectivity only. They now actively compete in the retail market through partnership or direct shareholding in retailers. The current operator license holders in South Africa are: ???Vodacom; ???MTN; ???Cell C. Service providers The term service providers refer to those companies in the market who provide access to the mobile communication market and essentially act as intermediaries between the operators and the consumer and/or retail istributors. Service providers are primarily responsible for the provisioning of billing systems, contract management and service support. They are increasingly competing in the retail market in that they sell retail products, such as handsets, with contracts and also direct or indirect ownership in retail outlets. Some service providers in the market include: ???Nashua; ???Vodafone; ???Teljoy. Retail Stores Retail stores were historically the value chain partner responsible for providing and servicing other network connectivity devices such as 3G cards. They are also responsible for warranty servicing of handsets and connectivity devices.
Some existing retail stores in the market are: ???Game; ???Makro; ???Pick & Pay; ???Edcon Group. 2. 2Size Originally, the market was thought to be limited to the size of the population. Over time, a new approach has been developed. It is now widely accepted that market size is limited to a factor of the population. The overall size of the market is determined by the number of economically active individuals, noting that even though market penetration amongst adult economically active consumers is already quite high, many adults are purchasing second lines and handsets.
An ever increasing number of children are also becoming direct or indirect consumers of mobile communication products and services through mobile phone purchases and use, as well as through indirect services such as GPS tracking for young children (that require connectivity to the GSM network). Adult consumers are also buying indirect services which are GSM network based, with vehicle tracking services being the most well known amongst these. This ever expanding mix of services is what leads to the population factor approach in determining market size.
In developed countries, this factor now exceeds one among adult economically active consumers. An illustrative example shows us why this is: an average economically active consumer may well have a combination of any of the following products, which are GSM network based: 1. One or more mobile phones; 2. A 3G card to provide mobile internet connectivity for in particular laptop computers; 3. A vehicle tracking system (such as Tracker); 4. A home surveillance system (such as Spot). When originally launched, mobile phones were speciality goods. They were sold through exclusive distribution to a high income, exclusive consumer market.
Over time, however, mobile phones have become a product that falls somewhere between the category of shopping goods and convenience goods. Some mobile phones now retail for under R200. 00 and the phenomena of disposable mobile phones is already well established in developed economies such as Japan. 2. 3Growth By 2006, industry statistics show that there were already 39. 66 million mobile communications users in South Africa. Comparing this to the estimated population of adults at mid-year 2006 of 27. 19 million or even the total population estimate on the same date, which was 47. 0 million, it becomes apparent that the market is, seen as a whole, quite saturated. Figure 6 and Table 1 on the next page indicate that mobile telephone numbers have more than quadrupled over the last 5 years. In addition the growth rate of new mobile users has declined to the lowest point since the introduction of mobile phones in the country. This dictates that the only successful strategy is to differentiate your product significantly and tap into or create new markets where there were no previous markets. Figure 6 Mobile telephone numbers in South Africa by year
YearTelephones – mobile cellularRankPercent ChangeDate of Information 20037,060,00017 2001 200416,860,00017138. 81%2003 200516,860,000180. 00%2003 200633,960,00016101. 42%2005 200733,960,000180. 00%2005 200839,660,0002016. 78%2006 Table 1 Mobile telephone numbers in South Africa by year 2. 4Profitability Mobile phone operators remain profitable. All three operators have shown at least operating profits in the last reporting period under review. Cell C, however, has not yet achieved actual break even. This overall profitability amongst the established operators is however linked to their existing client base.
Businesses in the retail market are experiencing pressure on profits and it essential to develop new markets in order to maintain profitability. 2. 5Distribution and Marketing Communication practices in the industry Distribution in the market takes place via various channels. Some of these channels are: Operator owned retail stores These are retail stores directly owned by the network operators. They supply a wide range of services but their primary focus is on selling contracts, both for data and voice applications. These shops however only sell services of one operator.
Examples of such stores include: ???Vodashop; ???Cell C; ???MTN. Service providers Service providers also have retail outlets. They usually sell services and products from a range or even all of the operators. In many ways they act as a mobile communications brokerage. Examples of these players include: ???Nashua Mobile; ???Autopage. Retail outlets Retail outlets are numerous. Most chain stores now offer cellular products. These stores focus on the sale of the handset, whether directly purchased by the consumer or indirectly purchased via a contract with a network operator.
Examples of retail outlets are the Massmart Stores (Game, Dion, Woolworths and Makro). ???Direct sales; ???Cell C direct; ???Vodacom. ? 2. 6Marketing Communication National marketing communication is driven by the network operators. They will drive certain products with an effective push and pull effect. Local and regional advertising will rely on these adverts and will capitalise on the national campaigns by placements in local newspapers or on local radio stations. Brand Building Advertising is used to remind consumers of the advantages and value added by the networks.
Most brand building is done by the network operators as these are the primary brands in the market. Sales promotions are aimed at the retailer and end consumers. This type of sales promotion creates a push and pull effect in the market. Distribution channel marketing aims at promoting the distribution channels that are to be used by the retailer (the business under discussion) to provide marketing support for the introduction of new marketing channels. The consumers must know about the market innovations before they can begin to make use of them. 2. 7Trends in the industry The following trends are evident in the industry:
Convenience One of the down sides of the current models in the industry is that there are high barriers to entry especially into the contract market. Clients are required to submit substantive sets of documents and undergo extensive credit and background checks. By making available more people centred application procedures or developing products that do not require large sums of credit as part of the sales model, the trend in the industry can be extended into the lower income group. “Number for life” and number porting. Clients are now able to maintain one number for their life.
This enables them to move to different contract dispensations or even port their numbers across networks. This has lowered the barriers to contract change and creates opportunities which have not yet been fully taken up by the market in moving clients to newer service. Add-on services Add-on services are an ever growing trend in the industry. These are services that use the GSM mobile phone network to provide services which are about enhanced communication activities. These include telemetry (tracking) application, both of articles such as vehicles as well as people, as well as security/surveillance applications, such as Spot.
Though these products have been marketed to higher income groups they are well suited to provide additional line sales in the lower income market due to their low entry costs and, if properly structured, these services can be provided at a cost level that is affordable to lower income level consumers. Innovative sales channels Innovative delivery systems have become a market trend. These include telephone and internet based sales. However, these channels have not been aimed at accommodating lower income earners. Furthermore, these channels must rely on local partners that create a partnering opportunity. 2. 8Competitor analysis
The exact number of competitors in the market across the entire product offering is impossible to determine as there are no reliable statistics and some of the businesses that compete are informal and come and go with fairly rapid succession. There are a very large number of direct and indirect competitors in the market across the range of product offerings. This, together with the fact that all three the network operators have a significant market share, supports the approach of the Cell Power to act as a mobile communications “brokerage”, with a service based product offering which would be relatively new in the target market.
Most competitors have a broad, unspecified market focus without differentiating themselves successfully. By focussing on a specific target market with a developed product offering to cater to that market, the number of direct competitors will be closed down. In terms of online sales, the South African online market is dominated by seven sites, which account for more than 75% of total online sales in South Africa. None of these sites target cell phone sales specifically and in particular, none of them offer a high service level approach to online mobile communication sales. 3Cell Power SWOT Analysis
Strengths ???Personal Service The business aims to provide personalized, premium service, to take the drudgery out of owning a cell phone. ???Latest phones available Due to the business model the business will be able to provide the latest and widest variety of handsets without engaging in major capital outlays. ???Low entry barriers (simple purchasing) Eliminate cumbersome administrative procedures through electronic and online contracting. ???Highly skilled entrepreneurs The entrepreneurs are highly skilled in the various related fields of expertise providing a solid skills base for the business. Technological awareness The company is technologically very aware and have highly skilled technology innovators in the entrepreneur team. Weaknesses ???Limited capital The capital limitations place a constraint on the business in that few mistakes can be afforded and there is little money available for very large marketing campaigns. ???Limited experience Though the entrepreneurs are experienced in their various fields they have limited direct experience of the mobile communications market. ???Lack of a Black Economic Empowerment partner
The business does not have a significant BEE partner which may compromise business potential with certain client groups. ???New brand / no customer base As this is a start-up company not affiliated to any other the business will start off a zero client base and the brand will be new. It will take time to build a customer base and brand loyalty. Continued on next page. Opportunities ???New products to lower income markets New contract packages aimed at the lower income market, such as contract + top up, value added products such as home security and child security based products. ???Emerging black middle class
Despite tough market conditions there is still an emerging black middle class who were historically disadvantaged to whom products can be marketed as that market is not yet saturated. ???Creating simple service acquisition models It remains relatively complicated to purchase most mobile communication products. Providing simple purchase options to lower income earners is a potentially profitable opportunity. ???Disposable phones Disposable phones are now a well established product yet deeply under marketed in South Africa. They provide an affordable alternative to renting handsets as well as an entry point for low income potential users.
Threats ???Increased competition from new competitors More competitors are entering the market every day and in particular new competitors that sell through new and innovative marketing channels (such as the internet) pose a challenge. ???Declining macro-economic conditions The overall macro-economic position is in decline with increasing inflation and unemployment figures. ???New competitors from non-traditional channels Competitors are emerging all the time from novel marketing channels such as the internet and telesales. ???Pace of technological advancement
Technological development may eventually threaten the mobile communications market as we know it through the introduction of new foundation technology as well as technology based sales systems. Table 2 Cell Power SWOT Analysis ? 4Marketing strategy 4. 1Segmentation ???Prepaid & starter packs market oLSM 2 & 3; oYouth market – schools upper primary and high schools; oCollege and university students. LSM 2 (12. 2%)LSM 3 (12. 6%) Demographics SexFemaleMale & Female Age16 – 3416 – 24 EducationPrimary completedUp to high school HousingRural House/matchbox houseRural House/matchbox house Income per monthR1,210. 00 per monthR1,509. 00 per month Media
RadioCommercial, mainly ALSRadio: commercial mainly ALS Stations: Ukhozi FM, Umhlobo Wenene FM9 TVSABC1 OtherFlyersFlyers Table 3 Segmentation prepaid and starter packs market ???Phones & accessories oSmall to medium size convenience stores; oGeneralist stores in Port Elizabeth & surrounds. The focus will be on small to medium size convenience stores and generalist stores in Port Elizabeth and surroundings including Humansdorp, Jeffereys Bay, Uitenhage and Despatch. ???Corporate & Private contracts oLSM 4 TO 7; oBusiness owners with between one and twenty cellular contracts; oWalk in customers responding to advertisements and word of mouth.
The focus will be on business owners with contracts for employees not more than twenty, being the small to medium business segment. Service and advice on contracts, services and optimization will be offered to ensure best value for money. Cell Power will be concentrating on the LSM 4 to 7 Group as potential customers for contracts. This group of customers has the biggest potential to grow in the future. LSM 4 (14. 9%) LSM 5 (13. 5%)LSM 6 (14. 4%) LSM 7 (7. 8%) Demographics SexMale & femaleMaleMaleMale & female Age16 – 4916-4925-4925+ EducationUp to high schoolUp to matricMatric and higher Matric and higher HousingUrbanUrbanUrban
Income p/mR1,924. 00 per monthR2,674. 00 per monthR4,400. 00 per monthR6,880. 00 per month Media RadioCommercial mainly ALS Stations: Metro FMCommercial mainly ALS Stations: Metro FM Wide range of commercial and community radio Wide range of commercial and community radio TVSABC 1,2 & E. TVSABC 1,2,3 & E. TV SABC 1,2,3 & E. TV SABC 1,2,3, E. TV, M-Net & DSTV OtherFlyersDaily/Weekly Newspapers, Magazines, FlyersDaily/Weekly Newspapers, Magazines Cinema, Flyers Daily/Weekly Newspapers, Magazines, Internet, Cinema, Flyers Table 4 Segmentation contract market Figure 7 SAARF LSM – Eastern Cape 4. 2Target market
Adolescence marketCompany ContractsRetail outletsLSM 4 to 7LSM 2 to 3 Prepaid & Starter packs12345 Phones & Accessories678910 Contracts1112131415 Table 5 Target market segmentation The market sectors 1 to 15 depicted in Table 5 is the total market available in the cell phone industry. Cell Power will focus on the highlighted segments (1, 3, 5, 6, 8, 9, 10, 12 and 14), known as selective specialization. The product itself will not be different but in many cases only the promotional message or distribution channels vary. 4. 3Target market characteristics Geographic characteristics: ???Areas including and surrounding Port Elizabeth.
For example Humansdorp, Jeffreys Bay, Uitenhage and Despatch; ???Expand to other areas in the Eastern and Southern Cape. Demography characteristics: ???Males and Females aged between 16 and 49 years; ???Income group R1, 210. 00 to R7, 000. 00 per month. Psychographic or lifestyle characteristics: ???Technology conscious teenagers; ???Social class aimed at lower income class, students and scholars; ???Small businesses seeking personal service; ???Security conscious individuals, cell phones acting as a sense of security. Usage characteristics: ???Focus on medium to large users of the product; ???Maintaining close relationships with the top 30% of customers. . 4Positioning Positioning refers to the image that consumers have about a product, especially in relation to the products of competitors. The following positioning criteria will be used: ???High customer care; ???Low customer care; ???High price; ???Low price. Figure 8 Perceptual mapping with customer service and price attributes As mentioned before, Cell Power’s differentiating attribute will be to deliver excellent customer service. 4. 5Market research A thorough review of the LSM data was done. This is detailed above and provides a solid and reliable analytical data base that relates directly to the intended target market.
In addition, interviews were conducted with a focus group of Nelson Mandela Metropolitan University students that fit the target market. Two local small to medium sized business, namely AXXESS DSL and Equity Training Solution were interviewed. From the interviews with the students, the following consumer needs emerged: ???Need for higher service levels; ???The market demands higher technology for lower prices; ???Students in particular demand additional low cost communication application in the style of MXIT but preferably with a more versatile application range.
In the interviews with the small and medium sized business the following consumer needs emerged: ???Business would like to see all or most of their staff with access to mobile communication services; ???In exchange for ensuring that their staff members are equipped with mobile phones (at a reasonable expense to the staff member) these companies would be prepared to arrange stop order facilities against staff salaries to pay reasonable (salary proportionate) contract fees; ???Business themselves are seeking to provide company owner mobile phones to key staff members provided that assistance can be given with identifying cost-limited contracts suited to the identified needs of these staff members. ? 5Marketing mix 5. 1Product Classification
The product is the combination of hardware and services sold by the company. The hardware includes mobile phone handset and data products. The services includes contract to lifestyle matching and warranty management. Accessories Cell power will develop its own brand of accessories to complement the rest of the product offering. This range will focus on providing trendy, fashion conscious accessories that will appeal to the youth LSM. The line will be of a medium quality construct and will be externally sourced and internally customised. The accessory line will be backed by an internal warranty and repair/replacement policy. Packaging Products are received from suppliers in branded supplier packaging.
As a differentiation and brand building strategy, all clients will receive their Cell Power purchased product in branded gift wrap style packaging. This is in line with the need of the young consumer to feel that they are receiving high service levels without adding significant additional cost. Brand Cell Power will be a new brand in the market in the Eastern Cape. The brand will have to be established in the hearts and minds of the target market through innovative branding strategies. Considering the target market, Corporate Social Investment based marketing actions will play an important role in gaining the confidence of the target market. Quality
The quality of products and service will be of a higher standard compared to the current offerings in the market. The focus is to penetrate the market and build a brand associated with quality and service excellence. 5. 2Distribution / Place Inventory location and warehousing Only very low levels of inventory will be kept in our warehouse located in the store as the business will predominantly operate on an “order on demand” system. This will keep the cost of stock on hand and the associate warehousing costs low. Order placing Customers and retailers will be able to place orders with our Sales department via Internet, fax, e-mail and telephone. Order placement should include 48 hours from date of approval. Pricing strategy overview
In the mobile phone market the retail partner is not in direct control of the pricing of the mobile communication devices. This is determined by the operators who provide the contract bundles. Cell Power will however be in control of the pricing of the accessory range and research has proven that an 80% mark-up is sustainable on this product range. Cell Power is entering the market at a penetration pricing strategy seeking to gain a large market share in a short period of time. It is apparent that other similar suppliers are cream skimming and that the demand for mobile communication allows them to do so. Entering the market by offering unsurpassed service and competitive pricing will enable Cell Power to penetrate the market and increase market share.
The product pricing will address pricing objectives, competition, demand and cost. To set the specific price level that achieves their pricing objectives, Cell Power management will make use of several pricing methods. These methods will be selected based on the intended target market. The pricing strategies are: ???Bundling ??? use different products and sell on as a unit. ???Value-based pricing – base the price on the effective value to the customer relative to alternative products. ???Psychological pricing – base the price on factors such as signals of product quality, popular price points, and what the consumer perceives to be fair. ???Promotional discount – a short-term discounted price offered to stimulate sales. . 3Marketing communications strategy Objective ???To build brand awareness ; ???To stimulate and encourage repurchasing. Advertising Our advertising objective is to attract customers to the retail store. In order to do this it will be necessary to advertise in the local newspaper for the first twelve months to get the consumer to notice our outlet. Other media types that will be used include a budgeted radio promotion in the lead-up to the store opening. Personal Selling We will use our sales representatives to call on local businesses in the area, including where possible, to access the pool of employees by offering corporate incentive packages.
These incentive packages will aim to meet the expressed need of the businesses to see their employees have access to mobile communication services in exchange for providing guaranteed payment systems. We will be targeting small to medium size businesses as they are the most likely to change suppliers or networks. Sales Promotion The following sales promotion tools will be used: ???Free starter kits; ???Special offerings ??? Free accessories on Special Events days; ???Branded gift wrapping; ???Promotions times to coincide with international product launches and/or new service offerings; ???Co-branded accessories with local university brand shops. ? 6Forecasts and budgets Projected income statement for the first 12 months of operation: Continued on the next page. Table 6 Budgeted income statement Notes on income statement: The projected income statement for the first 12 months is as follows: Prepaid airtime & contract sales projected to increase by 10% every month, commission will be paid by the service provider monthly. ???Contract sales will consist mostly of data contracts, with an average of R200. 00 sales commission per contract. ???Ongoing contract revenue is 5% of previous contract sales cumulative for duration of the contract (minimum contract period is 24 months) ???In-store phone and accessories sales are projected to increase by 5% every month, with accessories consisting of chargers (AC & Car), batteries, phone-pouches, headsets (wired & Bluetooth) and Bluetooth GPS units. Average mark-up on low-cost, high volume items is 80%, in line with competitors pricing. ???The first two months have an additional R5, 000. 00 each in the budget for a radio campaign.
Other means of advertising and promotion will consist of advertising in the local newspaper and flyers at robots. ???A prime position, measuring 25m2, at Greenacres – shopping centre can be secured for R400. 00/m2. ???Sales commission of 50% of new contracts secured is payable to sales-rep(s). ???Two in-store sales & customer service representatives will be paid monthly wages. ???Initial capital expenditure of R50, 000. 00 will be required for office furniture & decoration (R30, 000. 00) and initial stock (R10, 000. 00) and the design of a web-site (R10, 000. 00). This will be recorded on the balance sheet. The following figure depicted below shows the monthly sales forecast Figure 10 Sales forecast for the first twelve months ?
The figure depicted below show the expense forecast for the first twelve months. Figure 11 Expense forecast for the first twelve months ? 7Implementation and control 7. 1Control The purpose of the Cell Power marketing plan is to serve as a guide for the organization. The following areas will be monitored to gauge performance: Performance AreaMonitor Frequency Revenue new salesMonthly Revenue commission on previous salesMonthly ExpensesMonthly Table 7 Areas to monitor performance Variance between the monthly budgeted sales & expenses with the actual values will be the only measure of control financially. If measurable results are not realized, changes will be made to the marketing mix.
Marketing efforts will be reviewed on an ongoing basis, weekly meetings with sales & customer service representatives will be held. The sales representative(s) will be given monthly targets. Customer feedback will be important since we are focusing on a hi-tech market. Our website provides a blog and a newsgroup where people can interact. New product release videos available from the cell-phone manufacturers will be placed on the website. ? 7. 2Implementation The following table and chart identify the key milestones. Dates and action plans have been clearly defined. The action plan will be closely monitored during weekly management meetings. MilestoneStart DateDue DateManager Marketing Plan Completion21/07/200824/07/2008Evert
Secure space in Greenacres shopping complex21/07/200822/07/2008Nic Complete Service Provider contracts & obligations21/07/200825/07/2008Willie Complete store furnishings28/07/200828/08/2008Nic Complete website28/07/200828/08/2008Piet Radio Advertising campaign21/08/200821/10/2008Evert Newspaper & Leaflets Advertising Campaign21/08/200821/08/2009Evert Opening Day, with Apple 3G iPhone29/08/2008 08:00Piet Table 8 Implementation milestones The major success factor is the store launch on the specified date, which falls in line with the national launch of the new Apple 3G iPhone, exclusively available through Cell Power. We anticipate people queuing the night before store opening and we will be serving tea, coffee and hot chocolate throughout the night. 7. 3Contingency planning
Price competition Pricing & commissions regarding prepaid airtime and contracts is set by the service providers and is therefore beyond our control. Accessories pricing is comparable with the rest of the market. Local competition Cellular stores are currently present in the shopping centre, namely Vodashop and MTN. Other competition present is the local Checkers which sells pre-paid airtime though their point of sale systems. Also available are ABSA and FNB ATM machines, vending prepaid airtime. Economic downturn The economy is slowing down. However due to increase in petrol prices, we foresee an increase in the usage of communication products.
In this event, we will start to offer other products such as ADSL bandwidth by reselling products from Axxess DSL, a national ISP. 7. 4Break-even analysis Break-even is immediately related to the number of contract customers signed-up. These add a cumulative monthly contribution of 5% of the contract value. Break even, with the projected income statement in chapter six, will be reached after six months. The total number of contracts signed up over this period is 694. Figure 12 Break even analysis on accumulated sales The monthly ongoing revenue earned from contracts has a significant effect on the performance of the company as depicted in figure 12. Without this contribution break even would only be reached in nine months instead of the current six months.