2013

Marketing Implementation case study analysis

SUBMITTED BY:
NIPUN SHAMA SHETTY (80303120050)

NMIMS (HYDERABAD)

1|P ag e

Trade shows: National mine Service Company

Case overview: The purpose of this article is to develop an approach for evaluating the benefits of trade shows This case describes how upper management of national mine service company looks at trade shows and the selling and non-selling benefits it can derive out of such shows. It also deals with the different products the company has to offer and how trade fairs can influence potential customer acquisition and customer retention. Here the importance of monetary returns as per the investment in trade fairs by the organization are analyzed and also different methods, matrix to determine where proper investment has to be done are discussed. Marketing communication techniques that can help fetch results out of expensive trade shows are discussed in the case. Traditional thinking of organizations about trade fairs is that being in trade fair is important because competitor is there which is not correct .Here the importance of trade fair as excellent place to meet customers and new prospects from overseas is also highlighted. The case discusses that national mine service company should look beyond image building and concentrate more on launching new products, boosting morale of younger executives and also its sole objective. National mine service company: The national mine service company is U.S based mine equipment seller with its headquarters in Chicagos McCor-mick place. The company was organized into three major divisions: the mining machinery division (MMD); distributors product division (DPD); Hydraulics division (HD). Approximately 90% of the sales were from the U.S coal industry and remaining substantial sales from domestic and foreign countries. Personal selling was headed by Mr. William Hennessey (VP sales) and dealed in major capital equipment sales such as continuous miners. The salesperson job here was to generate interest at the mine level among mine superintendents, maintenance officers and machine operators. The DPD maintained a broad product line containing 27000 products. The HD wing used a different sales and service approach called driver-salespeople where they visited mines with pickup trucks to deliver new mine hydraulic machines and pick up hydraulic machines meant for servicing.

2|P ag e

The coal mining industry is a close fraternity where buyers or manufacturers grew up in business and formed relations and are generally resistant towards trade fairs which has potential to attract new customer base. The competition is low in coal mine equipment manufacturing industry. Equipment standardization and operation dominance was more visible in smaller mines as compared to large mines Trade fair: National mine service company took active participation in annual trade shows and expositions, but majorly concentrated on much important American mining congress international coal show which was held once in four years and attracted exhibitors and potential customers worldwide. This trade show exhibited and promoted various mine machineries, coal processing equipment, transporting equipment, supplies or services. This trade fair is not for profit educational activity where selling is prohibited and booth sales personal where allowed information gathering and giving about new advances in technology, machine design and new products. National mine service found this trade show to be a perfect and special place to launch its new product Marietta 2460 Drum miner. But the problem was the fading interest of upper management towards efficiency and potentials of these trade shows. This perspective needs to be looked by a new angle of profitability and customer awareness. Trade shows facilitated three major marketing communication activities: Personal selling, trade exhibition and advertising/promotions. This trade show .NMS spent highly on sales promotions and gifting to existing and potential customers.60% of advertising budget was spent on MMD products. Objective of NMSs marketing communication was to maintain companies image and gain access to decision influencers not available to companys sales force easily.

Upper Managements take on trade fairs: Mr. Mac Vean: Though attendance is lower the desired amount of buyer awareness for complete product line and 2460 miner is achieved. He also believed in Paretos rule that 80% of the customers contributed to 20% sales of the NMS and 20% contributed to several millions worth of equipment sales per year. Mr. Mc Elhattan: The organization visits the Show because the competitor is there and you cant afford not to be there and also because such trade shows are image builders to portray company as one which services needs of customer and introduces new and improved products. There is a mix of opinions and perspective about trade shows and its future in upper management of NMS. Senior VP believes that trade shows are terribly expensive and of limited

3|P ag e

value for business versus the money spent. But he also maintains that management decision of backing out of trade show in past years made customers believe that NMS was in financial turmoil and thus couldnt participate. This affected reputation of the company in a negative way. On other side few optimistic upper management officials in NMS believed that trade show gives a competitive edge and also exposes junior officials to companys key accounts , builds image among customers and also gives platform to launch new products. Negative aspects of trade shows: Unknown effectiveness and difficulty in measuring efficiency (no surity of customers) High and rising cost of participation Top managements cost of time lost is not taken into account for participation in trade shows For heavy machinery organizations the buying process is long and selling is prohibited in trade shows. Only information gathering and giving is allowed

Positives aspects of trade shows: Expositions are open to public which is of less use to such heavy machine manufacturing organizations Trade shows are meant for focused and invited target group like current and prospective customers, suppliers, business associates and press Trade shows provides successful and low cost face -to -face trade show contacts with potential customers Helps attract potential buyers easily Helps company know about its competitors product and technological innovations

Approach to be followed for effective trade shows: Set preshow objectives and goals to be achieved from trade shows i.e. introducing new product, generating sales lead etc. The managers should look to trade shows as tool to maintain relationships with key customers or tool to gather needed competitive intelligence gathering rather than mass personal selling platform. Measuring efficiency of trade show is not dependent on traditional wisdom rather it is dependent on satisfying complex selling and nonselling marketing functions. Selling objective can be selling to new clients and also identification and access to potential clients. It may also include getting information about how existing products are performing in market and also what potential and existing customer need in the new products. Such informations are difficult to get other than trade shows. Non selling

4|P ag e

activities like image building, gathering intelligence, enhancing corporate morale and product testing can be achieved through effective trade shows. Trade shows can serve the major purpose of the organization to boost the morale of staff members and gives opportunity for sales members to rub shoulders with top management. Trade shows are meant to be decided by company on two objectives: what is the target audience? and what kind of trade shows are available for the desired results? Thus targeted marketing communication can ensure effectiveness and can meet broad range of different objectives simultaneously. Conclusion: Establishment or maintenance of trade show program only for image strengthening or for intelligence gathering or for servicing current accounts is a bad investment. Rather companies should look at marketing communication mix to satisfy its selling and non-selling objectives.

5|P ag e

Pricing: The Hertz Corporation

Case overview: The case discusses the various trends followed in highly competitive car rental business and also explains the reason behind Hertz to implement highly risky but highly potential pricing strategy of no-mileage rentals across the board to all customers. The major objective of the case is to portray how Hertz managed to come to number one position in car rental industry inspite of tough competition in the industry. Hertz background: Hertz Corporation was founded in 1924 and was a $1.3 billion company. It was known as far And away the most profitable car rental firm in the world and was engaged principally in business of renting and leasing automobiles and trucks to customers in USA(81%) and 19% of foreign countries. It is head quartered in New York and is wholly owned subsidiary of RCA corporation. RCA is among one of nations largest industrial Corporation known for its high Technology electronics, communications, television and radio broadcasting and vehicle renting and leasing. Hertz Corporation has the reputation throughout the industry for being a well-managed company with lean organization management with respect to personnel. They do least paperwork to avoid wastage of valuable time. Hertz believed in involvement of representatives of all departments in decision making process to yield best results for the organization. It was believed that these principles of company ensured people working hard together to increase the productivity. Hertz car rental operations were conducted primarily at major airports and at downtown locations in major cities. The predominantly company owned structure allowed locations to maintain a consistent public image distribution structure of Hertz gave flexibility to implement corporate policy changes quickly. It used cars which were produced in that country for its fleet and also maintained fuel efficient car fleet to manage energy shortage issues. Management believed that the profitability of the firm depended on ability of the firm to judge and react to publics interest in cars.

6|P ag e

Hertz market consisted of leisure, commercial (large and small) and individual business customers with small business segment contributing to the major revenue of company. The Hertz company is organized functionally with Bennett Bidwell as CEO and president, Hal Bingaman as VP of marketing and Craig Koch as GM of rental car division.

Industry analysis: The automobile rental industry represented approximately $2.5 billion worth of business annually and is highly competitive in terms of pricing and services offered. After 1981 the car rental market became stagnated due to energy crisis and lagging economy. Car rentals had a complementary demand as per air industry situation. Due to airline industry getting affected in 1981 due to PATCO strike and low air travels even the car rental had to suffer losses and low revenues. The customer target segments are as following:Leisure users: rent cars for vacations, holidays, emergencies Business users: corporates or individuals who rent cars for business trips The major revenue to the car rental companies came from car rental companies located in Downtown areas of most cities and major airports. The four major players in the industry comprised of Hertz, Avis, National and budget rent-aCar. Avis is number two car Rental Company and mostly operated through licensees. Avis mainly concentrated its efforts on gaining wider distribution through franchising and also it obtained three quarters of its business at airports. National car rental was in third place with market share of 20.1% out of which 50% was licensee operated. National stressed on quality and service in the company advertisements. Budget rent a car has 12% market share and was totally a franchising operations. It had fastest rate of growth in volume and profits and became a tough competitor with military like strategy and research based marketing. They believed in quality service and stressed on the customers being their number one preference.

7|P ag e

The car renting companies applied different selling strategies to leisure customers and the corporate segments. Leisure customers were obtained via travel agent suggestions, advertising and promotional events whereas rental companies usually employed a Salesforce to obtain corporate accounts. Challenges involved in entry to this sector: New entrants had to deal with lack of airport parking space due to major players utilizing 90% of space as per FTC decree Large capital was needed to finance and maintain car fleet Government controls related to price, labor matters, charge card operations, environmental protection and used vehicle sales

Pricing policies adopted in industry: Car rental rates were historically charged on basis of time and mileage. Special holiday or weekend rates were offered on no-mileage charge to spur off-peak demand. Pricing policies depended upon the frequency of rentals and the volume generated by the corporate accounts. Larger the volume, larger the discount rates the corporate received. Most large companies had discount arrangements with several different car rental companies due to which the car rental companies had to maintain competitive pricing strategy.

Events that forced Hertz to change its pricing policy: In 1980 Hertz raised its large commercial account rates by 25% to increase the profit margins. But this in turn gave an upper hand to its competitors like national. National went on to increase its market share by servicing major commercial accounts with low pricing strategy. National, Avis and budget also took advantage of the situation and increased the advertising budgets and upgraded their fleets and improved their facilities and airport distribution. Hertz suffered a market share slip of 40% during 1980.Hertz got a negative feedback and repute of being low value for money service. National and Avis further detoriated the conditions for Hertz by announcing new flat rate programme (no mileage charge) for smaller commercial accounts.

Hertz pricing strategy (bounce back): Hertz went on to became the first company to offer no mileage rentals across the board to all customers. It took the risk of implementing this strategy with the contingency plan that it will creatively go back to its old time plus mileage pricing strategy if new pricing policy backfires in market. The pricing strategy was implemented to make sure Hertz remains as number one in market. Bidwell, Koch and Bingman believed that Hertz needed to make an innovative move.

8|P ag e

But they had a tough time deciding whether to follow the leader strategy (i.e. no mileage pricing with conditions) or innovate pricing strategy. Hertz came up with guaranteed pricing strategy (no mileage pricing with no stipulations to all customer segments) with increased advertisements and promotions to ensure publicity. New pricing comprised of three parts: It offered customers flat rate based on the number of days cars would be used without mileage charge Flat charge for one-way rental based on differential between rentin and checkin cities The no frill no mileage pricing was available to all major customer segments.

Outcomes of implementing no-mileage charge strategy: New pricing strategy increased the ease to customers wherein they could calculate how much the rental would be in advance. Ease of administration because of simple calculations Company could predict their travel budgets in advance due to flat pricing Improved service quality Hertz came back to number one position Makes selling easier for travel agents Waiting time reduced for customers

Challenges of new pricing strategy: Customer can exploit the pricing strategy by extreme usage of car Lower margins possible Worn autos No enough cars to meet the demand

9|P ag e

Program management: North American

Philips Lighting Corporation

Case overview: The case discusses about the failure of project shopping cart program by NAPLC even after successful test marketing and potential market status. It describes how new Norelco light bulb launched by the organization failed in its main objective of establishing a substantial shelf space in grocery stores. NAPLC company profile: NAPLC had been manufacturing lights since 1891 and sold over 40000 lamp types through 70 organizations in 59 countries. NAPLC was the fourth largest lighting manufacturer in USA. NAPLC was a division of NAPC (North American Philips corporation and affiliated with N.V Philips of Holland, the worlds largest lighting manufacturer. NAPC ranked among the 150 largest industrial companies in USA.NAPLC focused its efforts in field of consumer electronics which included sub-brands like Magnavox, Philco, Genie, Anchor Brush. The product mix includes incandescent, fluorescent and HID (high density discharge) lighting fixtures, miniature and optic projection lamps. Type A: General purpose household bulbs like Norelco (for grocery, department stores and drug stores) Type B: candle bulb used in candelabra Type C: Straight and show widow lamp bulbs Type D: bowl reflector silvered top bulbs Type E: Tubular special purpose lamp bulbs Type F: frosted or colored lamps Norelco was Type A category and was the major product which NAPLC planned to launch in its project shopping cart targeted mainly towards grocery shops.

10 | P a g e

The target market includes retail, industrial, commercial and original equipment manufacturer (OEM) in United states. Consumer lighting company also manufactured and packaged bulbs under Norelcos name and also did private labelling. NAPLC successfully implemented private labeling marketing program in 1974 which accounted for approximately 40% of consumer group sales. There are four main manufacturers like GE, Westinghouse, Sylvania and Norelco competing for light bulb representation in grocery market Reason for implementation of project shopping cart: When Norelco management first confronted the issue of developing a new light bulb program, the major market share (approx. 57%) was from the grocery store segment. Grocery stores contributed to much larger bulb sales as compared to non -food stores. Norelco management believed that this private label had potentially vulnerable position to grow. No product of NAPLC till 1977 had a shelf space in grocery stores and the growth was quite slow as there was tough competition by market monopolist GE.GE dominated the light bulb market in terms of brand awareness and product shelf space. The attributes which consumers associated with GE brand were high quality, long lasting and better for eyes. Thus without a program management like project shopping cart it was difficult for Norelco to attain its desired market share mainly in grocery stores. NAPLC believed that one way of increasing the reach and distribution of product was to launch private labels which also helped in moving the inventory at a faster rate. This strategy was never used by competitors which Norelco could use. Norelco believed that there was no real consumer advertising awareness for light bulbs and a low level of interest in consumers. Company believed that manufacturers sales representatives can attract the target audience required. Managements ground research before implementation: The upper management found out that women were the primary purchasers of type A products and mostly bought it from supermarkets and groceries. The major problem with consumers perception due to which newer brands did not get a chance to showcase its brand was that they thought that light bulbs are all the same and brand does not matter. This revealed consumers lack of knowledge and information about new light products.GE remained as monopoly in this market due to its breadth of distribution and brand awareness. NAPLC upper management believed that bulbs were purchased on basis of need rather than brand preference. Lighting products were categorized into planned purchase and impulse purchase. The wholesalers and distributors made quantity purchases and then sold the bulbs in smaller quantities to retailers.18 percent of grocery stores accounted for 75% of sales.

11 | P a g e

Challenges faced in implementation: Grocery channel sells bulb for suggested retail price (low price) and is the only segment that does this. They work on low margins and the manufacturer has to use pull strategy to influence consumers so that the retailers stock the product. For grocery store shelf space the manufacturer has to again use consumer advertising, couponing and rebates. Push based which is easy can be used for hardware and discount stores. The grocery stores are highly dependent on margins from bulbs and it contributes to major profit here. The grocery stores are very happy with high margins, and product which sells always no matter what the brand is.GE maintained a high price which yielded low margins to grocery stores who generally kept only one brand which was mostly GE. Thus buying process or trade decisions for new products in grocery stores was more complex than it was needed. The buying and shelf space decisions were authorized by buying committee where buyer had no say. Project shopping cart: Although grocery total sales increased, the light bulb share of market declined whereas the non- food segment had a steady growth. As per the conditions in market Norelco came up with strategy that their sales would increase for type A products only if they can successfully convince grocery channels that reason for loss of market share is due to high retail pricing of GE and lack of other brand bulbs form which customers can choose. Norelco planned to become second brand name bulb that these stores carried. Norelco designed new, different and creative approach in packaging and merchandising of bulb. Survey was done to implement the customers most soughted attributes. They switched from cardboard to plastic packages, up to date look, more eye appealing color, closed ends to ensure added protection, more information, color coding of wattage information. Retailers preferred merchandising the bulb via self- service racks. They thought that rack held more products and encouraged impulse buying. Thus Norelco offered racks to retailers which increased the sales. This racks where designed such that SWP and SW bulb would be at consumers eye level. This program was also promoted through food market institute trade shows and special Olympics. NAPLC drilled down on each detail before finalizing the strategy as previously Westinghouse even with brilliant free standing merchandizing and packaging idea failed with its newly launched Turtle lite product. The pricing strategy for shopping cart was to stay with policy pricing (not more than 58% to 63% from list price)

12 | P a g e

Failure of project shopping cart: Even though the company spent on merchandising, promotions and packaging and expected that this would appeal customers, it failed. The program did not meet the goals as the grocery retailers were not ready to take risk to put up Norelco along with GE. They though that GE is the only company which is and will always be the market leader in bulb. The major problem was also that bulb industry had just few areas to differentiate its product from its competitors. Norelco got a chance to get placed in shelves of Kroger chain and ShopRite supermarket but campaign had no significant impact on sales. Even reduction in price would not help the situation. The company lost 630000$ and had an excess inventory of 300000 packaged light bulbs. Two objectives were achieved i.e. product mix had improved and Norelco got on shelf space. But the main objective of penetrating the grocery segment was not met .Thus even after proper program management, the project shopping cart failed.

13 | P a g e

From program to policies: Alcan Aluminium

corporation building products division

Case overview: The major issue discussed in this case is whether Alcan should start setting up industry new vinyl capacities along with its existing Aluminium siding products, against companys mission of maximizing aluminum production. The case discusses how delaying the decision to enter into vinyl BPD (building product division) at right time caused problems for Alcan. The case amplifies the John Edwards dilemma in taking decision wherein he had to align to Alcans mission to maximize aluminum sales and at the same time being president of Building products division(BPD) take care of the increasing sales and profit for company in tough market conditions where the New vinyl products were slowly eating away aluminum demands. ALCAN overview and industry analysis: ALCAN is a Montreal (Canada) based company incorporated on may 31, 1928. Alcan was recognized as one of the low cost producers of Aluminium due to ownership of hydroelectric plants. These plants also powered many Canadian smelting operations. Alcans distribution cost was however higher than its competitor Alcoa whose smelting operations were close to market. Alcan management felt that companys strength resided in its diversified international base and management; its well-balanced raw materials position; its market access as experienced ingot seller and fabricator. Aluminum is a versatile material with applications ranging from kitchen foil wrap to tanker armor. It was produced in two stages where the first stage was chemical process refining bauxite into alumina followed by electrolytic process converting alumina into Aluminum ingots. Companies like Alcan who could locate its smelting operations close to low cost power benefited in the market. Aluminium gained importance during World War 2 when defense and armament demands increased. This segment grew a lot due to heavy demand in containers and transportation, Aluminium cans, light weight automobile manufacturing where steel was used instead of Aluminium. Aluminium competed on cost effectiveness over steel and copper.

14 | P a g e

Aluminium was majorly used in siding BPD industry but gave up to increasing demand of vinyl siding products. Alcans principal products were bare, embossed, coated aluminum sheet and coil, plates, rural and commercial building products. Five operating divisions included building products (BPD); Alcan cable, Alcan ingots and powders, metal goods; Alcan sheet and plates. ALCAN BPD was one of the major producers of residential aluminum siding market. Vinyl siding was cheaper than Aluminium due to which few members in Alcan suggested that they open up vinyl capacities to stay number one and a competitive force in BPD market, but they ignored the importance of setting up Vinyl capacity due to which Alcan suffered in sales. Alcan also fabricated and converted Aluminium to end products like sheet, plate, foil, wire and rods. They also served other firms with aluminum ingots. ALCAN BPD distribution channel: Independent Manufacturer owner Others

Problems faced due to delayed decision: Vinyl was making inroads in BPD especially in residential siding industry as compared to diminishing demand of aluminum. Vinyl manufacturers enjoyed higher gross margin due to low cost of production. The other problem was that independent distributors preferred buying vinyl directly from manufacturers in bulk volume as the cost would further reduce as compared to aluminum. Salesforce could not convince independent dealers. Alcans marketing myopia (short sightedness) that setting up vinyl capacities will cannibalize their own aluminum siding BPD, dealt a heavy blow to them as they suffered low aluminum product sales and late entry into vinyl BPD products gave the Salesforce a tough time to penetrate into much advanced and flourishing vinyl market in terms of both new customers and existing customers. The existing influence and position in market was fading for Alcan which they had built on aluminum BPD superiority. Independent distributors were not ready to stock Alcan vinyl sidings as the variety was low. Moreover the competitors provided much better co-operative advertisement schemes.

15 | P a g e

Improvements recommended: More variety in vinyl products in terms of colors, designs. Better distribution channels over independent distributors. Making use of aluminum distribution channel if needed. Better sales strategy and promotions to penetrate the BPD market through its vinyl products. Coming up with better vinyl quality that does not expand under normal heat. Making changes to products and process leads to competitive edge in market place. Alcan should try to concentrate on huge orders rather than independent distributors. Salesforce should be properly guided with regards to the process required to sell vinyl sidings.

------------------------XXXXXXXXXXXXXXXXXX---------------------------