Market management analysis of Sonic PDA

Marketing Management Sonic PDA

Porter's generic strategies were developed along the rationale that businesses succeed by focusing on either being a differentiated product or a low-cost product. A business that operates as neither is one that will have a difficult time attracting consumers, who will tend to prefer one or the other (QuickMBA.com, 2007). The two basic strategies can be adapted to fit either a mass market or a niche market model (Kotler & Keller). The strategy chosen will depend on a large number of factors. These include an assessment of the company's own competencies and the competitive dynamic of the industry.

One of the objectives of Sonic is to gain a 3% share of the U.S. market within the first year. Presumably, the market share will grow after that. This will require a penetration pricing strategy, something that Sonic has accounted for in its marketing plan. The penetration pricing strategy and ambitious market share targets suggest that Sonic should pursue a cost leadership strategy. This is particularly true of the first product, the 1000, which will see its price lowered with the introduction of the second product in the brand's lineup sometime in the second full year of operation.

The size of the market share ambitions precludes either version of the focused strategy. A 3% share in the first year, with sales escalating after that, would see the company pursuing anywhere from 10-20% of the market, more if possible. In addition, the broad-based package of benefits of the Sonic 1000 should appeal to a wider range of consumers. Working within the broad market, the Sonic 1000 should focus on the cost leadership strategy rather than the differentiated strategy. While the company views the package of benefits offered by the Sonic 1000 to be unique, there is little within that package that can be viewed as proprietary. As such, if that particular package of features and benefits is shown to resonate with consumers, competitors will adapt. Given that Sonic's competitors are large, well-funded and experienced technology companies with substantial R&D capabilities, Sonic can expect that even if the 1000 does have a competitive advantage in its features, that advantage will not be sustainable.

Sustainable competitive advantage tends to come from brand associations. There are two strong players in the industry with robust brand associations that allow them to charge premium prices for their products -- Apple and Blackberry. These brands both have loyal customer bases. At present, they share the market because the iPhone is relatively new and largely a toy, while the Blackberry is old-established and appeals to a corporate audience. These two markets are distinctive. The Sonic 1000 market is not so finely-tuned. Thus, not only does Sonic not have a strong brand name that can deliver sustainable competitive advantage but the company also does not have a fine enough niche target market to justify a differentiated strategy. This leaves the cost leadership strategy by default.

The cost leadership strategy has its own pitfalls. In order to execute this strategy well, Sonic will need to deliver excellence in cost control at all levels of production. Given that smartphone production is becoming increasingly commodified (typically in China), basic production advantages are going to be difficult to achieve vis-a-vis the company's larger competitors. Sonic will not be able to deliver the cost advantages associated with economies of scale in the same way that its larger competitors will, nor will it be able to deliver on the distribution cost advantages either, particularly early in its life when volumes are low. This highlights the need for Sonic to build market share as quickly as possible. The implication of that strategy, again, is penetration pricing.

One of the most important implications of Porter's generic strategies is that Sonic needs to avoid falling in between the differentiated strategy and the cost leadership strategy. At present, that is the position the company appears to be in. It is not large enough to successfully implement a cost leadership strategy, unless it has some production cost advantage deriving from design that was not included in the marketing plan. The product itself, and the company's brand, are unlikely to deliver sustainable competitive advantage that would allow Sonic to adopt premium pricing. The company needs to commit fully to one strategy or the other. The more feasible of those two, at present, is the cost leadership strategy.

2. Sonic's target market is at present ill-defined. The current marketing plan views the target market rather broadly -- the entire set of PDA/smartphone users. It is reasonable -- and advisable -- to pare down this target market into something more workable. To do this, the best starting point is the recommended generic strategy -- cost leadership.

The first implication of this is that it rules out the consumers currently attracted to highly differentiated products -- maybe. The Blackberry's core users are attracted by the strong functionality of that device. One of the most unique features of the Blackberry is its encryption software, which makes the Blackberry the most secure PDA by far (Kinetz, 2010). If this feature could be improved, then perhaps the second Sonic product could attract this audience. Similarly, Sonic might be able to attract iPhone users in future by introducing the same gimmicky applications that make that product so popular. But using a Linux-based platform precludes that -- developers simply do not make applications for Linux PDA platforms in the same quantity as they do for Apple's platform.

This leaves the company's target market focused on the remainder of users. The marketing plan identifies five key target segments, which are roughly based on demographics. With professionals and students effectively ruled out (save for the latter who cannot afford the extravagant iPhone), the remaining markets are corporate, entrepreneurs and medical users. Psychographic analysis based on usage patterns would have been a better way to break down the target markets, but for the time being these three or four groups will have to suffice. Kotler and Keller highlighted the need for a strategic target market based on one of three potential criteria -- consumer groups, consumer needs and technology. Arguably, Sonic would be better served studying consumer needs first, then working backwards to identifying consumer groups. The analysis conducted in the marketing plan starts with consumer groups and then identifies consumer needs. However, the information is good enough to work with, even if Kotler and Keller's approach would have been better.

The corporate market wants software that is widely compatible and a device that is customizable to fit diverse corporate tasks and networks. While the Linux platform delivers the latter, it does not necessarily deliver the former, which would be better achieved at present with a Windows or Apple platform, or the Blackberry one. The entrepreneur market prefers hands-free access, which the Sonic 1000 delivers. The calendar feature is also included. Entrepreneurs therefore make a good target market for the Sonic 1000.

Medical users want hands-free access, wireless recording and the exchange of information to increase productivity. The former is a feature in the Sonic 1000 but the latter is not. It will come in the Sonic All Media 2000, which is a marketing plan to be developed later. This takes us back to the student market. The low cost strategy can appeal to students who cannot afford the Apple device or its expensive AT&T usage plan. Students prefer a device that is compatible with numerous applications and peripherals, is available in a number of colors and is cost effective. With a cost leadership strategy, the Sonic 1000 delivers on the latter. It does not have strong compatibility but it does come with a number of features that attract the student user -- camera, Internet, SMS, video/music downloading. The student market, therefore, joins the entrepreneur market as one that makes a good target market for the Sonic 1000. The student market is significantly larger than the entrepreneur market. In addition, the latter can be expected to have some overlap with the professional and corporate markets, neither of which has been identified as strong targets for the Sonic 1000.

There is an addition benefit to focusing marketing efforts on the student market. Today's students are tomorrow's entrepreneurs and professionals. The Sonic 1000 is very much an introductory device, as the plans for the Sonic All Media 2000 make clear. Building an installed base on Sonic fans at the student level will help later, more sophisticated Sonic products become established more easily.

3. A positioning statement should be focused on how the product will benefit the target customer and what you as a company do differently from the competition (Precis Marketing, 2010). The positioning statement should flow from the most precise understanding of the target market possible. In the case of the Sonic 1000, the target market consists of students. The product is going to be positioned against two products. The differentiated product in this sector is the iPhone. Apple has developed this new smart phone that is feature rich. Applications are developed by third-party developers and can be installed on the phone easily. Apple has a very strong brand name that is helping it to build share for the iPhone, but the product is expensive. It is believed that there is considerable room for a competitor to target the student market with a lower-priced but also feature-rich device.

The mainstream player in this market is the humble cell phone. Popular phones such as the Motorola Razr have camera functions, and new phones are being introduced with mp3 players and other technology. It appears as though there is some degree of technological convergence happening between cell phones and PDAs/Smartphones. The result is that the Sonic 1000, compared with these devices, is a superior product. Yet its pricing is fairly competitive relative to the new wave of feature-rich cell phones. This leads to the following positioning statement for the Sonic 1000:

"The Sonic 1000 is a portable device that will replace the cellphones of the past with the integrated, feature-rich smartphone of the future. Competitive priced, the Sonic 1000 will appeal to students who want a well-made phone with all the features they love, but at a price they can afford."

Kotler and Keller argued that a positioning statement should focus on competitive frames of reference, points of difference, points of parity and establishing and communicating category membership. This positioning statement for the Sonic 1000 meets all of those criteria. The two competitive frames of reference are both implied in this statement. Implication in this case is acceptable for a couple of reasons. The first is that the consumer is savvy about these products; the second is that it leaves the door open to address new competitors in the market. The cellphones that dominate the low end of the student market (or the student mass market, to view it another way) are framed deliberately as stale technology. The issue of price is raised twice, highlighting that relative to the main smartphone competitor in the student market, the Sonic 1000 is taking a cost leadership position.

The positioning statement highlights points of difference. The technology difference between the Sonic 1000 and cell phones is highlighted ("feature-rich"). The price difference with the iPhone is also highlighted ("a price they can afford"). In highlighting these two differences, the Sonic 1000 is positioned clearly between two established competitors. Porter's generic strategy theory argues that this is a bad tactic, but the Sonic 1000 makes the case for this positioning in the current marketplace with the phrase 'the cellphones of the past." Sonic is positioning itself more with an eye to the future, in which it sees cell phones as a declining technology. The vision of the Sonic's positioning a few years down the road is of a two-product universe, not the three-product universe that currently exists in the student market.

The points of parity are also highlighted. The second clause identifies the Sonic 1000 as having "the features they love," implying a consistency of features with the iPhone. The point of parity with the cell phone is stated less explicitly. By portraying the cell phone as a technology of the past, it is implied that the Sonic 1000 -- no matter who it compares cost-wise with cellphones -- is a better value. While this implication can be considered weak, the Sonic vision of a two-product universe precludes the need for excessive comparison with cellphones.

Category membership is clearly defined with the multiple references to both features and price. The positioning statement is explicit that the Sonic 1000 is a smartphone. The positioning statement is also explicit about the target market, naming students directly. Put together, the positioning statement clearly identifies the Sonic 1000 as a low cost smartphone for students, while highlighting the points of difference with competing products and the points of parity with the aspirational product (the iPhone) and simultaneously creating aspiration for the Sonic 1000 among cell phone users.

4. One of the biggest reasons why Sonic must compete as a low cost producer is because the company does not have a strong brand with which it can charge premium prices for its product. Indeed, its main competitor Apple thrives on the power of its brand. Apple, however, has been building its brand since the 1970s, while Sonic is a new product. The process of building the Sonic brand begins now. Over time, Sonic will need that brand to fend off generic competitors once the smartphone market becomes commoditized. Only a handful of domestic technology players remain in part because of the commoditization affect and the inability of most competitors to develop a strong brand.

Initially, the Sonic brand must be developed around the company's value proposition. The brand first needs to be defined, then communicated (Brandwerks, 2010). The value proposition that Sonic hopes to communicate is that it has great smartphones at an affordable price. The price is one area of focus at present, largely because the main competitor in the student market is differentiated. Over time, however, the price issue will fade because not only will generics enter the market with an even lower price but Sonic will have built the reputation of its brand.

The brand definition being a company that produces quality, good value smartphones should be the focus of the marketing campaign. This branding can be carried for the company for years, and will help it to defend against both differentiated competitors moving into the mainstream and generic competitors attempting to cleave off share at the low end of the market. Generics and no-name or unfamiliar brands often suffer from the perception that quality is poor. Sonic needs to avoid this, so while the company's communications must discuss price, the quality should be the primary focus with the price speaking for itself, which is possible because of the high level of knowledge among mobile device consumers about the products available to them.