The Future of Business: The Essentials essay
Marketing decisions include four key components: product, place, price and promotion (Ferrell & Hartline, 2010). Such decisions strongly depend not only on external environment like demand, competition, etc., but are also shaped by the product’s stage of the lifecycle. Overall, it is possible to outline four lifecycle stages: introduction, growth, maturity and decline (Havaldar, 2005). For each of these stages, the goals of marketing are different, and different decisions on product, pricing, promotion and distribution should be done. The purpose of this paper is to analyze the strategy of Joe Schmoe, VP of Marketing at the Clipboard Tablet Company, with regard to effectiveness of pricing and product decisions, and to recommend possible alternative strategies.
- Background
The Clipboard Tablet Company manufactures and sells tablets. There are three models, named X5, X6 and X7 (Tablet Development Sim, 2012). VP of Marketing can make the following strategic decisions at the Clipboard Tablet Company: set product prices, allocate R&D budget for each products (as percentage of total R&D budget), and decide whether to continue or discontinue a product. The choices were the following: X5 price – $285, X6 price – $430, X7 price – 190, R&D allocation was 33%, 34% and 33%, and no products were discontinued. Joe Schmoe did not change these options for the last 4 years, and the purpose of this analysis is to determine whether it was a viable strategy, and whether it was possible to pursue a better strategy.
- Product review
There are 3 tablet models manufactured by the Clipboard Tablet Company: X5, X6 and X7. X5 is on the market for three years already, and customers are not really worried about its performance. X6 product is on the market for 2 years, and customers focus on its performance rather than price. X7 is only for 1 year on the market, and customers care about both its price and performance (Tablet Development Sim, 2012).
The results of Joe Schmoe’s strategy were the following. In the end of 2012, X6 is at growth stage and customers pay for it more than for other products in the same category; X5 is at maturity stage. By the end of 2013 it appeared that X7 tablet was priced higher than competing products, and its performance was below them. By the end of 2014, the situation was the following: the company’s pricing was average, X5 reached the shakeout phase and its sales started declining. By the end of 2015, sales of X5 reached maturity and pricing for all products was comparable to competition.
For products in the introduction stage, the marketing goal is to stimulate product awareness and to encourage customers to try it (Gitman & McDaniel, 2008). However, the introduction stage does not apply to the products of the Clipboard Tablet Company. For the growth stage, marketing goals are to increase market share, expand into other market segments and identify new customer needs. For the maturity stage, the major goals are to maximize profits and defend (or expand) market share, and for the decline stage, the goal is to maximize profits by cutting expenses (Pride & Ferrell, 2010).
With regard to product and pricing strategies, it is possible to outline the following approaches. For the introduction stage, product strategy is to make changes to the product and introduce limited models, and pricing strategy is either price skimming or penetration pricing, depending on the competition (Lamb, Hair & McDaniel, 2011). For the growth stage, innovation and manufacturing of new models is the optimal product strategy, while pricing strategy should be aimed to beat the competitors (Needham, 1999). At the maturity stage, the focus of product strategy is on product differentiation, additional product offerings and on selling the full model line to the customers; pricing strategy at this stage should be further decreased to beat the competitors. Finally, at the decline stage unprofitable models should be eliminated, and prices are expected to stabilize at the low level (Wilkinson, 2005).
- Alternative strategy
In the strategic decisions of Joe Schmoe the stages of product development were often disregarded, and this was the main thing which should be changed in this strategy. For X7, penetration pricing is recommended, since it is often evaluated as being priced higher than competition. For X5, slight price reduction might be recommended in the end of the maturity phase, with potential for price increase after the shakeout. With regard to X6, the pricing in the maturity stage should be reduced a bit to drive up sales, because X6 is often priced higher than competitors’ tablets.
Alternative R&D decisions might be the following: during 2012 and 2013, R&D capacity of Clipboard Tablet Company should be mostly aimed at X6 and X7, since performance is important for customers of these tablets. After X6 gains significant market share, focus of R&D capacity should be transferred to shakeout of X5 and further improvement of X7 performance. In the short-term perspective, it is also possible to discontinue X7 product since it is very expensive and does not catch enough market attention.
Overall, by the end of 2015 X5 will reach the shakeout stage, X6 will reach maturity, and the major product driving sales should be X7, along with X5. If more information on the future strategy of the Clipboard Tablet Company was available, it would be possible to adjust long-term and short-term strategic objectives; since the goal is to maximize total profit by the end of year 2015, short-term focus is chosen for alternative strategy.
