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Marketing Objectives
The marketing objectives that our company aims to attain are as follows: First, in terms of customer growth, we have a target of one customer, i.e. eBay in the first year and then extend it to Victoria’s Secrets in the second year. But we intend to spread our awareness through the e-retailers like traditional companies such as Nike, Adidas, marks and Spencer, Wal-Mart, who are new entrants in the business. We intend to capture their accounts by the third year. Second, our target is to provide absolutely impeccable service quality to our customers. Though our product is in the B2B arena, we intend to provide customer service to our clients by providing online visual merchandising experience through our software which will enhance the feel of the virtual fitting room and its attractiveness. We will help the clients to store the preferences of their end-customers and their details so that it can be retrieved by the client company to do their product enhancement or do a study on their consumers. But this feature will involve an incremental R&D cost, which we will be able to fulfill only after second year. We want to spread the awareness of our brand internationally.
Description of the Target Market
Our primary target market for the year 2008 is eBay and the Victoria’s Secrets. EBay has an international presence through the internet and has become the top 10 clothing sites in 2006 with net increase in visits being 20%. Further eBay earns 10% of the entire world’s ecommerce sales. (www.fashionunited.co.uk/news/eBay.htm)
Figure 1 shows that the number of customers available with eBay who are active and the number are increasing over the years. Increase in customer base over the years will definitely increase our revenue and make our association with the company profitable.
Further figure 3 shows the revenue status eBay had till 2003 which actually gives us a glimpse of the increasing financial stronghold of the company and the expected sales that where are expected to get from being associated with this company.
Victoria’s Secrets has seen a sales increase of 20% over 2007 and is expected to grow further with its increasing online sales went from practically zero in 1998 to over $200 million in 2001.
Table 1. Annual Income Statements. Source: Hoovers.
All amounts in millions of US Dollars.
As table 1 shows that there exists an increasing trend of revenue state for Victoria’s Secrets. In 1998, management launched www.VictoriasSecret.com with little fanfare. This high-impact web presence translated into strong growth for the online division, whose sales grew from practically zero in 1998 to over $200 million in 2001. Performance metrics for the web included sales growth, the number of “new to file” customers (i.e., newly acquired customers), average order size, and purchase rates.
Our presence with both traditional retailers like Victoria’s Secrets and online retailers like eBay will help us establish our presence among both the type of companies. Moreover, the pricing strategies and promotion will be advantageous for our presence to be felt among the target group of clients.
Description of Target Business Partners and Sponsors
As our product gets more sophisticated, we may consider collaborating with Macromedia to run our modeling results on their popular Macromedia Flash player. However, this will be subject to the condition of us integrating the player into our Virtual Fitting Room. This way, the end users will not be required to go through the additional step of downloading Macromedia Flash Player to view the 3D models, a practice many websites are currently engaged in. This will protect our interests, the copyrights of the product as well as retain our bargaining power. In return, Macromedia shall increase the network externalities of their flash player with satisfied users of their fine imaging results and resolution of our models.
This tool will enhance our product and an association with them will help in our R&D pursuits. For instance, with this we will provide added convenience to the end-customers of our clients which will create customer delight for them. So, they will have convenience and will visit the site more often due to ease of use. This in turn will increase our revenue and will induce them more to purchase apparels which will help our clients increase their revenue. Further, this will enhance our customized avatar to be seen and experienced by the end customers of our clients. Increased ease of use will increase the number of visitors to the sites of clients as well as our sites. Further, with heightened end-customer satisfaction that our product will provide, more e-retailers will find our product interesting buy fro their sites. They will want to buy the product as it will give them a competitive advantage against their competitors and hence will increase our brand awareness. Further it will provide our product a competitive edge over our competitors who still have to use a downloaded flash player.
Marketing-Mix Strategy
Price: Our Company’s revenue model will be based on three sources:
- We would charge our clients US$200 for digitization of their garments.
- A 20% charge for every visit by the end-user to the client’s site.
- To integrate the virtual model into the client Web site we would charge US$1000.
Clearly, we adopt a penetration pricing strategy which is equivalent to our competitor. We propose to offer the prices in bundle to provide the allied services such as integration of the model with client web site. The goal of such a pricing strategy is to derive the maximum revenue and profit from the market. Further a 20% surcharge on visits by end-customers will ensure that our recurring income comes from the client. Hence the price will cover our cost of making the software as well as the cost of helping our clients to set up the software in their website.
Place: As ours is a web-based business so we would target any customer from any geographic location. The distribution of the software will off course depend on the demand pull from the new clients. Since the product requires to be installed once and then it can be continually used, we do not have to consider a supply chain of delivering the product.
Promotion: we will indulge in direct selling model to customers. So, we would need to adopt direct promotional strategies. Further, we would participate in trade shows initially to increase brand awareness among the e-retailers. Further we would print our advertisement in retailer’s magazines. We adopt the above-mentioned promotion mediums because they will B2B marketing are about increasing one-to-one awareness among customers. Thus, direct promotion is an inevitable option. So, we need to have representatives who would visit the clients. Moreover, emailing becomes imperative for an online business.
So, we will adopt an online promotional strategy for absolutely virtual organizations like eBay. Trade shows will again be a big part of our promotional plan as we can reach out to the maximum number of clients through such shows. But we will take part in virtual online trade shows. The estimated cost of direct emailing will be minimal. The PR people who would do direct promotion will cost their salary plus other minor expenses. The cost of taking part in the trade shows will be around $300 to $500 per event to $1000 per event as per the scale of the show. The cost of advertising the product in magazines will be around $45 to $55 depending on the content of the advertisement. In the first year we will rely only on direct mailing and direct PR promotions. Then in the second year we will participate in trade shows where in we can enhance our presence. From third year onwards we will promote our products through advertisements in magazines as well as online advertisements.
Product: Our product as discussed earlier is a unique software which would help to recreate a virtual fitting room for the purchasers of apparels online. The software will help our clients to attract more customers and reduce the number of discontent that online purchase has with apparel sales. Our product differentiates from the competitors on personalization element. We aim to offer a product which will customize the end user preference along with the proper graphical depictions of the garments of our clients and their textures. Further no other software provides virtual assistance in making a choice of the costume to be chosen. This is an additional feature that our clients will have through our product. So, we position our product son this customization model. That is, we aim to position our product on the basis of customized solution to our clients. The product offering that we will have is first the software which is our core product, assistance in setting up the software in the client’s site if requested by the customer, third, providing online visual merchandising for the customers if so desired by the client and various other services to the customers.
Sales Strategy and Forecast
We assume that fro the first year our customers are eBay and Victoria’s Secrets Direct. From table 1 we see in 2006 the number of people visited the websites to purchase apparels in these two sites. So, if we multiply the 20% i.e. $40 charges for every customer who visits the site for this purpose, we see that the revenue in 2006 standard would be $11280 in 2006 standard.
Table 2.
Now if we have to forecast that an expected increase of 20% customers is expected in 2008 from 2006 then we see that the rise on customers’ amount to an increase in revenue only from surcharges to be around $132336. Hence, we see that the major factors that we need to consider for forecasting sales are the number of visits to the sites to purchase apparels and the number of new customers we make. Further once we increase our customer base to other companies like Gap or Levi or Old navy will definitely see a further increase in sales revenue in the third to fifth year. So, by the end of fifth year we will expect a sale of $409577.5 with the same assumptions on 20% increase in visits to he sites every year and inclusion of Gap and Old navy the other two popular online shopping destinations in our clientele. Our analysis is based on the assumption that the prices for our product are kept same over the years and other environmental conditions remain constant.
Monitoring and measuring performance
The expected revenue to be earned in 2008 and the expected costs associated in the first year are shown in table 2.
Table 3.
The table clearly shows that we expect to break even in the first year itself and the ROI calculated over the first year in 1.1%. We expect it to increase over the years as the cost of our fixed investments will decrease with increasing sales and so will the average variable cost, and revenue will increase thus increasing the profit. Thus, this monitoring of the sales figures will help us to understand the company’s sales situations.
Now if we forecast the increase in sales over a five-year period, we get the following figure.
The above figure shows the sales growth that we expect over a period of five years.
Further we expect the ROI to increase over this five-year period.
From figure 4 we see the ROI forecast for the next five years of operation are given. We assume that the other variables remaining same, we calculated the increase in revenue in a nominal 20% rate annually and the basis of which we calculated the ROI. The calculation is shown in the following table.
Table 4.
Clearly table 4 gives the financial forecast over the next five years which helps us to make an approximate estimation of the financial performance of our company ion and ideal situation. Bu t we need to bear in mind that these results will definitely be affected by the market conditions and competition’s strategy which will force us to change our strategy. But overall these will b e the broad marketing strategy that we propose to employ.
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