In addition, merchants will also benefit a lot from Text to Increase their revenues by improving cashier efficiency, decreasing the cash-handing costs, reducing cash counting and depositing charges, as well as avoiding the bothers on checking for counterfeit money. Although other electronic payment systems have already been accepted by most consumers and retailers because of the easier and efficient solutions they provide, no service is as effective as Dixie has that addresses to small-ticket purchases. Therefore, Dixie has attracted three powerful partners as early investors to contribute on this new system.
Text seems has large potential markets, however the failures of previous two companies who provided similar system suggested that the success isn’t guaranteed. Hence it is critical for the CEO of Dixie to make the best decisions on target market, marketing mix and appropriate launch plan In a short time In order to become the electronic payment standard for low-value transactions in Canada. Question 1 : Who are the Competitors of Dixie? Do you think Dixie can replace the traditional electronic payment system?
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Advanced technology in electronic payment system allows money be transformed room traditional currency to newer forms including credit card, debit cards, electronic cheese, and electronic transactions using computing and communications devices. All kinds of secure electronic transactions can result in more efficient resource allocation, cheaper and more convenient transactions, and greater control on how goods and services are purchased. In Canada, people are already used to purchasing through electronic payment system and are familiar with the process that allows people to easily accept the new concept of Dixie.
Credit cards and debit cards systems are the main payment forms hat influence the development of Dixie in the electronic payment Industry, but the concept of Dent system does not mean to compete with credit card and debit card In the high-value transaction. Instead, it wants to replace cash and debit card for low- value transactions through the RIFF technology to increase the efficiency of Dixie is the way to settle the low-value transaction instead of cash, using Dixie tag allows people purchasing without small changes of money and swiping the payment card.
But with the current form, Dixie is not able to replace debit card systems in mom aspects such as Interact system and online payment systems. Since Dixie is designed as a replacement of cash for small payment without the PIN number during purchasing process, the tag is require certain mount of funds pre-loaded in the account and needs to be refilled when the pre-paid balance had been used up. Question 2: What should be the segmentation strategy for Dixie?
Before Deist’s launch, Dixie has to decide who the target customers are with respect to both consumer (the user of the Dixie tag) and merchants (the users of the Dixie POS terminals). Dixie considered segmenting the consumer market based on psychological factors, while segmenting the merchants, mainly retailers, geographically. However there are still many uncertainties: For Customer Market: whether the early adopter who would be attracted by the innovative technology would turn out to be the heavy users eventually?
For Merchant Market: with this electronic payment facilitate service, which retailers Dixie should target on? The goal of Dixie was to provide low-value electronic payment service which would offer the customer with convenience, efficiency, reliability and faster cashless transactions. According to the case, the market size of Canadian payment industry, estimated in 2003, was $536 billion and the estimated market sizes for cash/cheese, debit, and Visa/Mastered, were $billion, $1 1 billion and $151 billions respectively.
The average transaction size for Cash/Cheese was approximately $4. 5 and the total Cash/ Cheese transactions occurred in 2003 was about 60 billion. The service provided by Dixie is Low-value and Quick Prepaid Transaction. When segmenting the market, we should put the value proposition into consideration. For Customers market, Dixie aimed at offering a convenient and quick way that the nonusers could use anywhere and anytime. In this way, the Dixie tag would be more than a way of payment, but a part of their life.
Consumer acquisition will be another factor that would influence the Deist’s Segmentation Strategy–how the early adopters would become the heavy users or “habitual users”. Initially, the consumer questions the value of trying a new payment method. While this may sound obvious, the key to getting over this hurdle is to make it as simple as possible for them to get started. It would be always stressed to get the consumers to try new things and most important is how to generate the interests and capture the attentions.
The best way speed of the tag are quite attractive. In addition, looking for partners with high reputation will also build up the consumer confidence in Dixie tag. Once the consumers sign up the service and have their own tag, the combination of simplicity and speed will impress them and with this positive image, the consumers would like to try the tags in all the merchant locations where will accept the tag, for it would be a better way to satisfy their needs and wants and a better way to save the consumers mime and worries from dealing with cash.
So the target segment of the consumer market should be all the customers who want a low-value, cashless payment with ease and speed and will simplify their life. With the regard to merchants, we can see that there are still many stores dealing with cash payments, which decreased the efficiency of the cashiers. Convenience stores and fast food restaurants would benefit from this service most. Consumers who shop at those merchant locations want fast service, but most of those stores deal with cash or debit cards, which would take long time to process very payment or renovations.
We believe that most people living in Canada had the experience of waiting in a long queue in Tim Horror’s for a cup of coffee and finally had to walk away because of no time or no patience to wait any longer. However the transaction made with Dixie tag only takes less than 3 seconds, which would result in increased cashier efficiency and reduced “walk-sways”. By simply adopting the Dixie product and service, merchants would clearly benefit from quicker processing time and increased per unit sales, which would lead to increased revenue.
So the most rumoring potential market for Dixie would be merchants in the following industry: fast food industry, such as Tim Horror’s, Mac Dona’s and KEF and cafeteria on campus and big companies; national chained convenience store, such as Vandals and 7-11; gasoline stations. Because time and efficiency were major issues for those industries, the Dixie RIFF product and service would be a better solution for them. Recommendation: With this simplified, fastened electronic payment method, which would give an alternative to cash payment, Dixie should target their market at retail locations with average ticket sizes of less than $25.
In addition, Dixie should target on those customers who want a convenient and quick way of paying goods and services. Question 3: Dixie plans to charge both consumers and merchants for using the Dixie service. Do you think it is an appropriate and feasible pricing strategy? Dixie plans to generate revenues from charging both customers and merchants. However, they are also worried the feasibility of this strategy because of the uncertain responses from customers on the extra fee, as well as how to charge merchants.
It is very important for the company to come up with the best pricing strategy that ill be influenced indirectly by strategic positioning. Dixie is designed for customers to facilitate the fast speed with high-frequency and low-value transactions in retail businesses. Although it will bring benefits which add two percent to four percent of the transaction value for customers that are suggested on early consulting report, it actually doesn’t make sense and becomes less attractive for many customers if Dixie decided to charge fees on each transaction.
Customers will possibly generate psychological resistance to this new product because of the extra fees which they don’t expect. According to the failure test of Monde, who provided similar system as Dixie, got poor responses from customers despite the incentives of $1 5 credit they offered. On the other hand, many of Deist’s competitors, such as credit cards, debit cards and cash, do not charge transactions fees on customers directly. Therefore, it is difficult for Dixie to penetrate in the market and be embraced by most customers without incentives but extra charge.
For merchants, who will benefit a lot from Dixie on solving various problems and increasing revenues accordingly, it is common and reasonable to charge service fees from them. First, customer’s expectations of retail businesses are usually convenient, shorter waiting time and faster customer service, especially during peak hours when they are making small money purchases. Thus, retailers are constantly looking for a new and effective ways to improve the customer satisfaction and differentiate themselves on the basis of convenience, price and customer service.
In this connection, Dixie is best fit to the needs of retailers to reducing the waiting line, increase efficiency of service and improve customer satisfaction, as well as retain loyal customers and attract new ones consequently. Second, retailers are usually facing the difficulties of costing big cash to manage small transactions, which will impact profits and productivity. Employee fraud, theft and counterfeit currency result in financial losses, while manual recording processes for cash transaction purchases and time spent looking for change lead to productivity losses.
Therefore, Dixie could help retailers to minimize these business costs and improve profits. Instead of charging customers directly, Dixie can let customers to deposit at least $1 5 in their account to earn the interest on these funds. Because customers have to fill he account before using it, and Dixie estimates that the customer might use it to purchase as large as $25, so we think $1 5 deposit is reasonable and can be accepted by most customers. In addition, customers should pay $2-$3 that is the cost of tag to get the new one if they lose it.
We suggest that Dixie should using penetration pricing to enter into the market first, charging lower fees to merchants, at least lower than credit cards do. Since profit is not the goal for companies in early stage of entering the market, it is more critical for them to get into and win markets successfully. Therefore, Dixie could also charge merchants by a set subscription fee per month and give them lower price or free trial product. Question 4: What promotion strategies should Dixie implement during the launch period?
As analyzed above that the key to success is to make the usage of Dixie tag more prevalent in the electronic payment system, reach a critical mass of users and participating merchants. Since a new transaction service form to the customer, marketing communications play a critical role in informing prospect about Dixie, including how to use the tag, where they can be get, especially the benefits to the seers, and in creating favorable images and perception. For this product, there are some different methods can be implement to promote and advertise the product.
Considering the more effective benefit of economy, we recommend the combined strategies of push and pull to promote Dixie. Push strategy is mainly focus on getting the Joints of merchants. In this strategy, a sales force should be hired to inform, persuade and influence the potential cooperation in the launch period. Accepting the transaction of Dixie can be considered as a process of changing the consumption habits, so personnel selling old achieve an objective of fully explain all attributes of the product and service, and the benefits both to the merchant and customer.
Second, personnel selling have another important function of persuasion which could help distinguish attributes of Dixie from those of competitors, encourage customer to have a trial and evaluate the product and the service and build the long-term relationship. The cost of personnel selling per contact is high, but it is necessary to use for the launch period. According to the target industries, including food industry, cafeteria n campus and companies; national chained convenience store and gasoline stations, we recommend that 5-6 salespeople would be needed to service in the Toronto.
It could be increase as the number of Jointed merchants increase. For the long-term, it would be easier to manage since the industries familiar with the process of transaction. Pull Strategy is focus on tag users. The strategies involve traditional advertising through television, radio, newspapers, subway shelters, and indoor and outdoor kiosks directly at customers to encourage them to ask for the service of Dixie. It also sakes sense for brand development. As we know that getting the merchants Just half the battle, acquiring customers counts the same amount of significance.
Since the users of Dixie tag could be ranged from all level of age or income and from much kind of industries, the wider the advertisement could cover the more effective the outcome would be. On the other hand, once Dixie cooperates with the merchants who are the company with certain scope or goodwill, it would enhance the confidences both to merchant and customer. Television and radio; every weekend on the newspaper; three months lasting in the byway at 60 sites; one indoor kiosk set in busy mall and one at 8 high-traffic site.
The total cost of advertisement for three months simply is approximate $1 (See Exhibit 1) Question 5: What is the launch strategy for Deist’s future development? The key to Deist’s success is to establish the largest possible customer (merchants and consumers) base. In order to achieve this goal, Deist’s distribution strategy is very important. Dixie need to decide where to launch its service. Alternatives such as to launch it nationally or Just Ontario, or even Just a particular area like Toronto were being considered. Hence, Dixie has to understand the pros and cons of each of these alternatives.
National Roll To launch Deist’s services nationally is no doubt the best way to expose to the largest possible customer base and then give Dixie the first mover advantage across the country. However, accompanying with the benefit, the risk of taking a national roll is fairly high because it simply requires larger financial losses. Further more, if the launch failed to meet expectations, press coverage will cause a very negative influence. Dixie as a small company certainly could not afford to conduct a national lout despite it looks very attractive.
Toronto Roll As we discussed, the key to success is to quickly reach a critical mass of users and participating merchants. Toronto launch, comparing to the national roll, is less expensive and more focus. Downtown Toronto area not only has a right mix and density of Merchants, but also has a critical mass of potential consumers who could be expected to habitually purchase goods at participating Dixie merchants. Furthermore, to launch in Toronto is easier to manage and control their service quality. However, Toronto is a limited market that should not be Deist’s ultimate argue.
Ontario Roll To launch Deist’s service in Ontario the alternative in between of the above two. It can give Dixie a larger customer base than to launch in Toronto only, also requires more resource. In addition, as the statistics mentioned in this case, during the period of 2001, there were 116,241 merchants in Ontario adopted interact direct payment method and 775 million transactions occurred. But everything is less than having a national roll. However, not every city in the Ontario province is very influential.
After analyze the three alternatives, we believe that Dixie should roll the launch in hashes, which allows them to manage the launch very closely and hence minimize risks associated with the launch of a new product. This is particularly important to them given that they are launching in Canada’s largest city with some of Canada’s leading Financial Institutions and one of Canada’s largest mobile operators as our partners. Deist’s has a potential to succeed, since it was rolled quickly to a large number of stores in an area. This makes the system more attractive to residents of the area, and they are more likely to embrace the system.
If the system proves to be a success in Toronto, it should be rolled out on a larger scale quickly. Conclusion Based on our analysis, Dixie has a very great market potential and the simplified and fastened electronic payment method. Dixie offers to both customers and merchants will be very competitive as it will provide an easy and efficient alternative to cash payment. However besides what mentioned in this case, we also suggest that there are many Dixie could focus on in the future. For Deist’s future development, we recommend Dixie to keep using the cross industry merchant strategy to get access to a larger customer base.
That is to say, in other rods, to allow consumers to use their Dixie tag at a wide variety of merchant types and brands. Dixie should take the successful experience of Octopus Card in Hong Kong, trying to reach each corner of the city by offering a ubiquitous service. By doing so, consumers tend to use the tag more than once per day thereby not only strengthening the influence of their purchase behavior, but also reinforcing the Dixie service as a lifestyle device; one that simplifies their day to the point that they do not want to be caught without their tag. Because of Toronto is a pilot market, hence Dixie should set a great example in
Toronto to attract more markets. Therefore, not only the industries mentioned above should be Deist’s target, also Dixie should make their presence in the other industries such as parking, bus, underground, railway, and video rental and movie theater. In short, Deist’s goal is to make their tag as a “Toronto Pass”, one tag does it To summarize, Dixie is in the business of replacing cash for small value transactions by offering a ubiquitous, smart and simple cashless payment solution that not only offers quick and convenient payment at the point of sale, but that ultimately simplifies people’s life.