Marketing Research Paper
Market demand Simulation/forecasting the market
This year will be the third for our business on this market. We already have standing clients and, of course, strong competitors which we have to fight everyday using this or that strategy. In my prediction and pricing strategy work out I used the marketing concept famous as a Product Life Cycle (PLC), which states that every product passes natural phases of growth and recession. In other words the curve of PLC influences on profit and sales curves and makes sinusoid. If to consider price strategies as a part of PLC one can find the following connection:
The introduction phase demands a product value establishing in consumers’ minds, company gives big discounts for buying.
Quick growth needs prices lines for each customer group. All the discounts are concentrated on specific audience. Aggressive pricing is connected with a product promotion. Prices decrease results just from decrease in prime cost.
Competition fluctuations cause intensification in sales discount program and start active stimulation campaigns like “buy this and you will get additional for free”. Prices decrease may result from market extension.
During the phase of market satisfaction companies use protecting prices for saving their market share.
Recession needs price establishment for saving the profit level but without consideration of market share
PLC’s main idea is that strategies should be modified with market condition changes and products moving from start till the end.
So, to estimate the market precisely and get the full picture we need proper researches on the main consumption characteristics (indicators of Listensoft life cycle phase) and market share of each competitor. In view of this the consumers market was divided into 4 categories:
1. Companies deal with machinery and high technologies (12 entities)
2. Companies work in chemical, biological and medical researches (7 entities)
3. Other companies that actively use IT supply (cinema production, financial analysis etc.)
4. Other companies
In this first one spend about 34,2% of their budget on IT supply, the second and third categories accordingly use on IT 26,8 and 11, 9 per cent of available funds. The last one’s expenditures meet 3-4% of the budget.
Having used marketing researches for establishing the rate of potential consumers readiness to buy Listensoft we get the following:
Q.: Would you like to have the software, which allows you to translate spoken commands into written text and computer actions without using the keyboard?
Yes, that would help me a lot – 43,2%
I do not know, I never thought of this – 27,9%
No, I do not need it – 28,9%
Q.: How often do you need to update of your software or buy new one?
Constantly, software is very important for my performance – 37,4%
Sometimes, dependently from a project – 28,9%
Rare, I am satisfied with my own – 33,7%
The survey was conducted in January 2005, sampling 2,221 employees of companies listed above (target audience).
In view of above we can state the product to be on the second phase of its life cycle.
According to the reports on previous two years the market consumption of IT products made 15,2% of growth (from 70,000 to 80,625 units). Although Albert predicts some sales decrease, the researches above show that the niche is not entirely full. I see the better way in a little price reduction and work out of effective stimulation (for instance, discount) program.
So, having analyzed average turnover and profit for companies per year we found the following:
Let us have a look at our competitors; their experience can help us to find the best way for our own promotion. Just three from the operating companies can make competition to us in quality, production capacity and prices. If we establish the similar price the production capacity will come to 80307 units, as the average unit price for competitors is $248,6. Our price for the previous year made $240, which is $8,6 less then average competitors’. Please pay attention that the prime cost for this year remains the same. So if we keep price the same sales volume may bring 83185 units, which are 2878 units more.
At the same time we cannot miss PLC concept described earlier.
To stimulate purchasing we need effective discount system for existing and potential clients and promotion program that of course will influence our prices.
So, we have 5 permanent clients whose buying power is 980 units per year and expect for 3 more contracts on 450 and 500 units.
To show the permanent clients that we respect and appreciate them I suggest the following discount system:
Over 6 months of constant work means 2% of discount
Over a year clients get the discount of 5%
5 years of collaboration bring 10% of discount (but this should be considered more accurate in 2 years dependently on the market situation)
The recovery for losses caused by discounts should be put into price. Expenditure analysis results in 1.5% price increase for non-permanent clients what definitely will cause sales decrease.
The new price makes $243.6 and production capacity is 81554 items.
Let us back to our marketing research showed that the total market capacity is satisfied just partly. To raise sales, so occupy the void niche and get bigger profit we can launch promo action or in other words advertising campaign – marketing method of sales stimulation.
The most efficient modes would be:
PR articles in specialized publications
Once a month presentation/training for specialists of described spheres
Hot Lines providing answers on use questions, company last news and programs etc.
Thus according to advertising department estimates we can obtain 3.5% growth of our market share till the end of this year that means extra 3270 sales units.
The conducted marketing audit shows that every operating business should consider maximum indicators to make the most accurate picture of market and plan efficient steps for generating profits. All the indicators should be closely connected and result from each other.
PLC conception can be applied during pricing strategy work out, choosing an advertising method, defining possible profit etc.
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