Potco and the New Slow Cooker

PotCo Case Study; Considerations for Bringing the Product to Market Pre-Launch Production Distribution Positioning Market Position Target Market Marketing Pricing Placement Promotion PotCo have developed a brand new product; a slow cooker which uses a heat exchanger rather than a heating element.

This creates a new version of an existing product which differs greatly from those already on the market; the running costs are much lower, which can create a significant advantage but the cooking time is extended as the heating method can take up to two hours to heat two litres of food. The product, which is envisaged as having a retail price of A$150, appears to have a great deal of potential but prior to launch there are a number of issues the company should consider.

These include prelaunch considerations included production and distribution, determination of the positioning and target market, and setting up of the marketing strategy. This report has been produced to examine these issues. 2. Pre-Launch Before launching a product to market, essential that the upstream supply chain is reviewed in order to ensure that there is sufficient coordinated production capacity, of an appropriate level, at a suitable quality level (Nahmias & Olsen, 2015).

During the early stages, especially for a new product, a company has the potential to gain the competitive advantage of a first mover (Mintzberg, Quinn, & Goshal, 2003). However, in order to gain and leveraged a first mover advantage, the product need to be available to the target market, and fulfil its marketing promises (Mintzberg et al., 2003). Therefore, the first consideration with the issues associated with the production of the complete unit.

2.1 Production PotCo is utilising an outsourcing strategy, with the components being manufactured in China, providing a lower production, compared to Australia (Wang, Signh, Samson, & D, 2011). Outsourcing production in this manner provides a potential for a number of problems, which should be recognised in order to manage and contain. For example, in a study of 35 Australian firms outsourcing components to Chinese manufacturers, it was found that the main problems related to the quality of the components, and delays in supply (Wang et al., 2011).

However, these are problems which could be rectified or minimised through a number of strategies building long-term relationships with suppliers (Wang et al., 2011). Where long-term relationships exist between buyers and suppliers, suppliers are more likely to be committed to that relationship, and seek to satisfy not only contract terms but customer expectations (Hill & Hill, 2012). Therefore, it is unsurprising that the research by Wang et al., (2011) found that the implementation of proper control procedures, as well as improved communications with potential upstream suppliers, would often alleviate the problems.

Therefore, it is recommended that PotCo undertakes strategic development of the relationship with their suppliers. The firm may also wish to consider contractual terms to ensure accountability for potential breaches, provide increased incentives for compliance product specifications and requirements, which may reduce the potential for cultural misunderstandings (Shenkar, Luo, & Chi, 2014) There are also challenges associated with the logistics of manufacturing, as the cast iron pot is manufactured in Zhejiang and the heat exchanger element in Guangzhou.

This indicates not only the need for very clear and accurate product specifications, as well as strict control to ensure specifications satisfied to make sure the components fit together, it also creates a fragmented supply chain, requiring additional effort into coordination (Hill & Hill, 2012). These components need to be brought together in an efficient manner to be prepared for sale, packaged and then distributed. Therefore, control not only over the components themselves but supply chain management is also essential.

This latter element may be supported through the utilisation of supply chain technology, especially useful for tracking requirements and progress in real-time, facilitating communication between supply chain members in different time zones (Fawcett, Fawcett, Watson, & Magman, 2012). This may also be utilised to manage the relationships with the downstream retail elements of the supply chain (Ayers & Odegaard, 2007). 2.2 Distribution The production of the product is only the first logistics consideration; the products also have to be distributed.

The first issue is the movement of the goods from China to Australia, either as to component parts to be packaged in Australia, or as a final product. When any Australian entity, even individual, corporation, imports goods into Australia, there are potential duties payable (Britney Bowes, 2016). The shipping contract undertaken between PotCo and the suppliers in China will determine the various responsibilities for the export of the products from China to Australia (Ramburg, 2011).

There are numerous types of contract, which goes beyond the scope of this paper, the most common is Free On Board, (FOB), will give the responsibility of the seller to send the goods to the ship and remains the owner of the goods until they are unloaded at the dock (Ramburg, 2011). However, with many types of contract, essential that PotCo understands their responsibilities and liabilities with reference to the shipping contract.

With reference to the contract, they would then make arrangements for transportation, as well as insurance from the point where they gain title to the goods (Ramburg, 2011). The goods, regardless of the shipping contract, and the strategy whether they are components, office products, will need to be delivered to the appropriate location. The company may wish to deliver products directly to large retailers in order to avoid their own storage costs and increase efficiency in the supply chain.

This is utilised by a number of firms, for example, Apple often send products directly from the Apple suppliers to their downstream retailers (Lashinsky, 2012). However, this may be problematic where the organisation is adopting a fragmented distribution strategy, including using a temporary pop-up shop. Furthermore, initial demand may be uncertain, and importing goods from China may result in distribution delays (Slack, Chambers, & Johnston, 2010).

This may be due to the import procedure, with the goods traversing customs (Ramburg, 2011), but it was also noted by Wang et al., (2011) that a potential problem could be delays in the supply chain. Therefore, to ensure supply, it may be advisable to hold a suitable level of product in Australia, ready for distribution. Therefore, there is also a requirement to consider suitable distribution hubs, which will provide access to the main Australian markets.

The company may wish to undertake this themselves, but may also choose to utilise major wholesalers, which will reduce their own infrastructure requirements for distribution, but may also require additional price discounts as wholesalers will also want to make a profit (Ayers & Odegaard, 2007).

Therefore, there are a number of decisions which will need to be considered in terms of distribution, including the contracts from the upstream suppliers, the practicalities regarding rotation and insurance, as well as placement of the products in an area to ensure a reliable distribution to the downstream supply chain elements. 3. Positioning When a product is developed, it is essential to determine a suitable marketing position, in order to help identify the potential target market as well as support the marketing strategy.

The market position may be partly determined by the development of the product, and the source of differentiation, as well as the target market (Thompson et al., 2013). As this is a product that is ready, a consideration of the strategic fit within the existing marketplace should be considered. This may then help identify the potential target market. However, while these are being presented separately, these considerations should take place, currently rather than consecutively.

3.1 Market Position To assess a market position, it is necessary to consider the product, and how it fits in with the current market. The product has already been described as benefiting from differentiation. Porter, (2014) identified two sources of competitive advantage; differentiation and cost advantage. Differentiation occurs where a product is able to offer features, functionality, or characteristics, which are desirable to the target market, but are not present in competing or substitute products (Porter, 2014).

The advantage may be tangible, which may be protected by patents, or intangible, such as brand value. For example, in the example already used in this paper Apple, there are specific design features which are unique Apple and protected by patents, as seen with the recent court cases between Apple and Samsung (Lashinsky, 2012), as well as the intangible associations with the Apple brand (Ferraro, Kirmani, & Matherly, 2013).

Cost advantage can only be obtained by one firm in each sector, and is seen when organisation is able to produce goods at a lower cost compared to their competitors, and benefit from superior profits which may then be utilised to support other aspects of the operation (Porter, 2014; Thompson et al., 2013). For PotCo, there is the competitive advantage of differentiation, as the product is highly differentiated from any others on the market, due to the way in which it works, the cost savings associated with its use.

Importantly, the market position needs to be considered in terms of the entire product and the way it is presented. The operational differentiation is only starting point. The product itself has been designed to a high quality standard, with a cast iron pot, similar to the expensive French Le Creuset brand. By creating a product anogolous to an existing well-known brand, as well as other similar characteristics, such as the weight, the company may benefit from the strong reputation associated with the established brand (Keller, 2012).

This transference of assumed values often takes place based on visual clues and associations of existing experiences with similar products (Kotler & Keller, 2011). However, while this may help to support a premium product positioning, the company may also wish to consider the similarity of the design in order to avoid any potential litigation for breach of painted designs owned by Le Creuset. The functionality of the product provides additional features compared to those on the market.

The product can be controlled through mobile technology with the development of applications for smart phones, including the iPhone and android phones. This supports differentiation and also indicates that a significant number of the potential purchasers will also be owners of smart phones. When bringing these different elements together, the design similar to existing high market products, with a feature rich operation that can link in with mobile technology, this would be best positioned as a premium product.

However, in order to gain sufficient sales and generate a high level of profitability, the premium product should not become too exclusive, therefore targeting the upper mass market. This will provide access to a large consumer base, and support a mass retail channel distribution, including retail stores, pop-up stores, as well as online sale. 3.2 Target Market With the determination that the retail price should be in the region of A$150, this is a slow cooker with a relatively high price tag.

Simple searches on the Internet, such as The Good Guys (2016), demonstrate that the current prices of slow cookers in the Australian market vary from $29.95, up to $329, with the vast majority priced at less than $100. Therefore, pricing will indicate this should be the upper mass market, fitting in with the market positioning strategy. However, it is also listed to determine who the potential buyers will be. A slow cooker is designed to cook food in a convenient, and slow manner.

Therefore, they are utilised by individuals who will value and the convenience of this cooking method. This may include a valuation due to a premium on their own time which is otherwise used for family or work, and the ability to prepare food with the hassle. Traditionally, many food preparation products have targeted women as a primary market, often being the decision-makers in family homes. However, slow cookers are utilised by both men and females.

Therefore, the target market will not be segmented by gender, especially as many men may seek easy ways to cook (Farris, 2014). Furthermore, research indicates that are more likely to be attracted to products they see as technologically innovative (Farris, 2014), which will also fit in with the functionality of this product. As the product has a capacity in excess of 2 litres, the target market may also include single people and families.

However, with a high level of functionality, and a relatively high retail price, it is envisaged that the main target market will be the middle to upper middle consumer market. This means that the consumer, or remember their family, likely to be in well-paid jobs, and values the use of their time elsewhere. This creates a generally broad target market, but one which may be accessed through specific targeting of the marketing message. 4.

Marketing With the creation of the product, the determination of the position, the target market, the remaining elements of the marketing mix may be considered. 4.1 Pricing The retail price has been set at approximately $150. However, PotCo will need to sell these products to the retail channels at a price that will also facilitate a suitable profit level for the retailer. This includes a requirement to offer an attractive price in order to gain attractive shelf space and encourage sales promotions with the retailers (Ayers & Odegaard, 2007).

Sales for products are most likely to increase where there are strong visual displays in a retail environment, which will support the marketing undertaken by the company (Morgan, 2011). As retail space is limited, it is unreadable that retailers fall to maximise their profit by supporting products which are likely to generate the highest level of profit, either by volume sales or by profit margin (Ayers & Odegaard, 2007). Therefore, the profit margin for the retailer should be at least 30%, but most retailers to gain up to 50%.

Therefore, the wholesale price will be between $75-$100, depending upon the retail purchaser, and the conditions of sale, including sales volume, returns clauses, and payment periods. It is assumed that the cost of production and distribution will be sufficiently low to facilitate a wholesale price of this level.

However, it is essential that the organisation undertaking financial analysis to determine the cost of each unit, and ensure that contracts will support the ability of the company to gain a suitable level of profit, as well as an appropriate payback period depending upon the organisation's own financial position. To support sales, the company may also emphasise the overall cost of the purchase, rather than just the initial purchase price.

For example, the organisation may commission an independent body to assess the actual cost of cooking in the new product, which may then be utilised on the packaging, which may even be compared to a typical mass market slow cooker. This will support differentiation and promotion, but may also impact on the price, as the cost of the initial purchase will be influenced by the low cost of operation. This message will help to increase the aspect of value, without cheapening the brand image.

Therefore, pricing will support the premium positioning already outlined, but be undertaken in a manner that will help to gain interest in a contract from retailers to ensure an extensive distribution of the products, as well as support for products sale from retailers. 4.2 Placement PotCo has already identified three channels of discussion where products will be placed; retailers, pop-up stores, and online.

To support proper placement, which is generally seen as the end of aisles, the entrance to shops and displays detailed; the company will provide point of sale material demonstrating the use of the product. Firstly, the retailers chosen should be frequented by the target market. For example, it would be pointless selling premium goods to a bargain basement store, as they would not sell and may also degrade the brand image, tarnishing its premium positioning (Kotler & Keller, 2011).

Therefore, PotCo will need to consider various retailers, and their alignment with their target market, to maximise their potential sales. This approach will also be good for the retailers as it supports higher sales level. The point of sale material is often welcomed by retailers, as long as it does not cost them additional funds, as it will help to increase sales. In this manner, the company may gain more prominent position. However, to gain the best positions the company may also have to pay slotting fees (Mottner & Smith, 2014).

4.3 Promotion One of the most important elements of any new product promotion. Unlike existing products, the consumers understand the product; PotCo will need to educate consumers in order to communicate the source of differentiation and value associated with that distinction. This is best suited for the use of an integrated marketing communication strategy, where there is a similar supportive message communicated across different media platforms.

The use of public relations can be highly effective as it is known that report from independent individuals are often interpreted with a high level of credibility compared to marketing messages (Verma, Sharma, & Sheth, 2016). Therefore, public relations exercises may include sending out samples to different media outlets that have interests in cooking and related products. This may include morning television programmes where products are reviewed, cooking magazines, as well as food and cooking bloggers.

Word-of-mouth may help to create a buzz, and can be highly cost-effective, as it will require investment in sending out of products, but may result in a significant level of publicity. The company may also utilise social media. As the product is integrated with smart phone apps, the target market is using smart phones. Therefore, with the majority of smartphone users also using social media, this may provide an opportunity for effectively reaching the target market (Chaffey & Smith, 2013).

The company will create and then maintain social media presences on Facebook, Twitter, YouTube, and others. These mediums offer the potential for increased exposure. The use of sponsored post on Facebook will target individuals with the profile of the target audience a cost-effective manner. Social media may also be used to link into the YouTube Channel, where there will be reviews and demonstrations of how to use the product. The traditional approaches towards marketing, including billboards, television, and magazines will also be pursued.

However, as television is expensive, billboards and magazine will provide the primary marketing mediums. Literature will also refer to the company's own webpage, as well as their presence on social media. The marketing message will include reference to the low cost of running the product. However, the premium market, this message needs to be communicated in a tactful manner, so that it is not associated with being cheap. Therefore, with only.