Introducing A New Product On The Market Essay

Length: 7 pages Sources: 7 Subject: Business Type: Essay Paper: #9861276 Related Topics: Packaging Material, Decision Making Process, Investment Portfolio, Decision Making
Excerpt from Essay :

PST's positioning on the market had always been focused on lead technology and innovation in the carton sealing and industrial tapes, specialized adhesives domains. Their focus had been on providing high quality, high price products to the market, with continuous innovation to cover new opportunities that appeared on the market. This approach translated in a doubling of K2-Tape sales over the last four years, from $39.6 million in 2008 to $68.6 million in 2012.

The K2-Tape product line included nine carton sealing tapes. Its portfolio of consumers generally focused on users from the packaging, retail, or manufacturing industries. The company had always focused on advanced technology, high-quality products as part of its orientation to market policy and its overall values and marketing strategy. This had been the primary factor differentiating the company over its other competitors.

However, in the last years, there had been strong competition from Tensile's BOPP economy product line that featured two products, which focused on the Boston market, favorable to a low-cost approach. The Boston market had a low brand loyalty characteristic that K2-Tape's competitors were ready to speculate. Generally, this low loyalty characteristic included the capacity to switch from one competitor to another for a price difference of only a couple of dollars, translating in a high price sensitivity.

As a consequence, the challenge for the company at the present time was whether to maintain its positioning as a premium product on the market or whether to follow the down-market trend that generally encouraged lower priced, lower quality products. Entering the economy grade market segment could be considered as a viable alternative by the company's management, particularly since this would have been a way to reduce costs and, potentially, maximize profit margins.

In this context, one should also add that the challenge for the company was on whether to enter the lower priced products market by giving up on the high technology products it was currently developing. PST was recognized in the industry as a technology leader and one had to consider the fact that entering a lower priced segment on the market, along with lower costs, would have automatically meant giving up on some of the high-end technology the company was renowned for. As such, the dilemma was not only related to entering a new market segment, but actually to the complete rebranding of the company as a consequence of this potential market strategy decision.

Question 2:

The customers are buying from PST a particular type of carton sealing tape. The company has a portfolio that includes nine pressure sensitive carton sealing tapes. The company uses a premium polyester film backing, as well as a special hot melt adhesive technology. The customers that PST has been targeting include companies in packaging, retail or manufacturing. A particular category of consumers includes clients in military supply and hazardous materials.

As this brief analysis in the previous paragraph shows, PST actually has a diverse customer base that ranges from other companies to governmental and military agencies that use the tape for packaging purposes. The implications for PST are numerous, but, primarily, it is worth mentioning the fact that these economic entities and governmental agencies rely on a high quality product. In particular related to the military agencies and entities working with hazardous materials, one would expect that the price criterion is not the main element in the decision making process and that the quality will always come first.

As a consequence and in terms of the implications for PST, one could conclude that the introduction of the lower priced products should not be done at the expense of the higher priced, higher quality ones. The company seems to have already created an important consumer base that looks for its high quality products and that is less likely to reposition towards purchasing the lower priced tape. The decision to introduce the lower priced products should likely be done without affecting the tradition consumer segment on which the company has been so successful.

Question 3:

First of all, the introduction of an economy tape would make the company more competitive. As the analysis has shown, the market has become more and more oriented towards the lower priced tapes. Despite the fact that the company is considered a technology leader in the field, it seems that the trend is no longer focused in this direction. The business model that the company is currently...

...

More and more, the consumer preference appears to be towards lower priced products rather than high quality, high technology, high price ones.

At the same time, it could also be the case that economy tape could increase the company's profit margins. Economy tape would likely mean lower costs, but, at the same time, it could also mean higher revenues, because of higher volumes of sales. The combination could increase the company's profit margins, which could, at the same time, be reinvested in new technologies and research and development.

In terms of arguments against the introduction of an economy tape, one needs to look at the sales the company has on each segment of product. The conclusions are that the RDS-72, the third most expensive product, also generates the third highest sales to customers. The dollar margin for this product is $108.36, which is a significant value given that the sales figures for both the period July-December 2011 and January-June 2012 have been over 30,000.

Despite the fact that the most expensive product in the company's product portfolio has not been very successful, the current marketing and sales strategy that the company has seems to successfully combine lower priced products with high end ones. With this in mind, it would be debatable whether an entirely new approach would be successful.

Another argument against the introduction of economy tape is the fact that customers associate the company with high-end approach and with a high-end portfolio of products. Introducing the lower priced products on the market would mean an entirely new sales strategy and the company would need to invest in a rebranding campaign. Some of the cost-savings it would thus obtain by producing lower priced products would need to be reinvested in a branding campaign that no one could evaluate how successful it could be.

So, in conclusion, the introduction of an economy tape would actually be the equivalent of an entirely new strategy for the company. Not only a rebranding strategy would be in order, but also a training campaign for the sales force, which had previously been focused entirely on the high quality, high priced segment. The company would need to put a significant amount of time and money into this new strategy, something that could prove negatively costly over the medium and long-term.

Question 4:

If the company decides to go ahead with the introduction of the economy product, an entire repositioning strategy should be conceived and implemented. First of all, the company will need to decide internally whether it will just introduce an economy product and retain its existing portfolio of products or whether the new strategy will imply a complete rebranding and a new focus solely on the economy segment of the market. From the perspective of this analysis, it would be necessary to continue to sell the high quality products that the company has been renowned for, otherwise the new repositioning strategy will be too dramatic for the customers to understand and be familiar with.

Once this has been decided, there are several things that the company has to consider. The first has been previously mentioned: a proper rebranding campaign. The company needs to convince both existing and potential consumers that it continues to abide by its traditional values and policies, despite the introduction of lower priced, lower quality products. If the higher end segment has been retained, this will be easier to do, but, if this is not the case, then the investment in a successful rebranding campaign has to be significant.

The company will thus need to put out on the market new messages, including an advertising campaign that will communicate the core message that the company still sticks to its quality values. The sales force will be fundamental for this effort: many of the customers will actually be reached through direct communication rather than through an advertising campaign directed through the media. For this, the proper compensation of the sales force remains very important.

The sales force should receive an additional percentage of their sales of the new, lower priced product. This will ensure an adequate market penetration strategy, and the fact that the sales force will be directly co-interested in selling higher volumes of the new product. The challenge remains that, if the higher priced products are retained, the commission on these sales are higher. This is an additional reason why a different compensation scheme needs to be created for the lower priced…

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