Ecommerce Market Study Essay, Research Paper

June 10, 1999 Student Number: 100077846

Executive Summary

The firm’s objectives can be met and a go–ahead is suggested subject to addressing the recommendations. Macrosegmentation of the market identified machinery, wood, base metals and plastics as target markets for the firm. Revenue expectation based on a 0.4% market share is $329,000. Break even is $259,000 and requires contributions from 17 customer projects at an average billing of $15,000. The budget set for implementing the promotional mix is $100,000. Target ROI = 15%. The following recommendations must be considered before start-up: 1. Protect service names and marks. 2. Conduct a microsegmentation analysis to refine market segment intelligence. 3. Develop multisegment targeting strategies for the chosen markets. 4. Ensure that funds are in place for first year’s operation. 5. Develop a decision support system including customer details, candidates for networking and reciprocity. 6. Complete 3 – 4 assignments at cost to establish a credible portfolio. Use as a source of referrals. 7. Obtain ISO 9000 certification – “walk the talk”. Apply benchmarking standards. 8. Develop assessment and promotional tools using the firm’s service. If the service is to work for the client it should work for the firm. 9. Finalize details of the promotional plan. 10. Develop influence as a trade mission co-ordinator.

Organizational Mission

The firm’s mission is to provide innovative and effective global marketing services to British Columbia industries. They focus on E-business as a primary means of achieving client objectives and measure their effectiveness in terms of customer satisfaction and referral business.

Market Opportunity Analysis

Analysis of the size and sustainability of various market segments. The segmentation basis used is demographic. Primary descriptors are geography, customer type, growth rate and size.

Demographics – (BC Statistics)

 There are 13,700 small and medium exporters in BC – 4.6% of all businesses in British Columbia. They account for $3.7 billion or 13% of British Columbia’s total export value. The average small and medium exporter typically exports $269,500 annually.

 Rising trend – small and medium exporters  1000 per annum and export  $200+ million per annum.

 British Columbia’s small and medium exporters typically ship “value added” products – less susceptible to economic slowdowns. During a recent slowdown they actually increased their exports by $12 million.

 79% of small and medium exporters are dependent on the United States as their primary export market.

Environmental Scan (Purchasing On-line)

Social Forces

 Increasing competition is forcing higher standards in the global marketplace – TQM, ISO 9000.

 Globalization of trade increasing competitive pressure on domestic producers due to foreign competition – simultaneously offering new opportunities for export.

 Small and mid-sized businesses often lack vision and resources to develop world class enterprises – need help.

Political/Legal Forces

 Various Governments are attempting to stimulate business on the Internet – taxation moratorium, privacy protection, copyright protection and fewer regulations.

Technology

 Dramatic increase in Internet use for business – 73% of corporate buyers use the Internet.

 Opinion leaders such as IBM are shifting their entire purchasing systems onto the Internet.

 Vendor analysis is more efficient – faster and more comprehensive comparison of supplier alternatives.

 Distribution improvement – intermediaries become redundant as suppliers and buyers connect directly.

 Purchasing cycle time reduced – RFQ’s that used to take 20 days to process now take 20 minutes.

 Shipping/Logistics – tracking, price brokering, inventory/shipping integration are streamlined.

 Real-time Supplier/Purchaser dialogue and co-operative design over the Internet eliminates waste, reduces costs and speeds up new product development.

 Internet not expected to be significantly affected by Y2K problems in either North America or Europe.

 Perceptions of transaction security remain a concern. (This perception is rapidly diminishing)

 Suppliers are ill equipped to provide E-commerce – (Actually a plus for Global Reach Inc.)

 Heterogeneity of service is a concern as buyers are confronted with numerous unfamiliar suppliers and engage in extensive, high-involvement decision-making. – (Actually a plus for Global Reach Inc.)

Competitive Analysis (Business in Vancouver, The AD Pages, telephone survey)

There are 51 Marketing Consultants operating in the Lower Mainland. Average market share of 1.9% is inferred – no data available. Web page development and media promotion are standard. Larger firms have the capacity to develop E-commerce solutions but are focusing on expensive EDP and Intranet strategies – suitable for only the larger exporting firms. Some are involved in E-commerce on the Internet – no significant impact on the market. Methods of charging for services are fixed price quotations, cost plus arrangements, often with performance bonuses. Assume average annual billing per client is $15,000. Fee range = $25 – $200+ per hour.

Target Market

Profile and Analysis

 16% Machinery  11% Wood  7% Base Metals  6% Plastics Total Firms = 5,500

We have targeted the above market segments for the following reasons.

 They include four sectors that involve the greatest number of small and medium exporters.

 Their products are non-perishable, usually standardized and can be transported with safety.

 Their products are readily catalogued and adaptable to the Internet.

 They are value-added products and are relatively immune to economic slowdowns.

 The average size of firm lies within the lower end of the small and medium exporter range thereby lessening direct competition from large marketing consultant competitors, yet they are sustainable as market segments and they show growth of more than 10% per annum.

 They are already involved in export and have strong unfilled needs and wants in this area. They are often early adopters of technology and are customers with a strong tendency to rebuy.

Target market Strategy

 To stimulate recognition of Global Reach Inc. as an innovative and credible enterprise from the target markets and to stimulate learning and acceptance of the marketing methodology used by the firm.

 To build strong client loyalty by branding the firm’s services and providing verifiable assurance through ISO 9000 certification.

Marketing Objectives (1st year – build awareness and market share)

 Develop strategic alliances and reciprocal agreements with key reference groups, opinion leaders, suppliers and buyers.  Achieve a 0.4% market share and gain name recognition as a premium service by 30% of the target markets.

 Develop a viable micro–marketing database.  Build a credible project portfolio

 Exploit differential advantages of unique attributes  Cover costs of operation.

Marketing Mix

Product

A comprehensive marketing service offering effective strategies for global trade. Unique attributes are:

 ISO 9000 certification  E-business specialists  Global marketing focus

Distribution

 The distribution channel is direct to the consumer. The core service of the business is information processing using high technology. Service delivery involves high-tech media such as video conferencing and real-time consultation over the Internet. High-tech distribution is balanced with personalized, pre and post-sale services conveying tangible cues affirming the firm’s positioning as a premium service. Seminars, workshops and video conferencing provide much of the education and assurance components.

Pricing strategy Pricing includes fixed price and cost plus contracts and may accommodate performance bonuses where practical. Pricing is based on an hourly rate of $79. Fixed price contracts to include a 15% contingency reserve. Pricing is significantly below larger consulting firms ($100–200+) but above smaller limited service firms’ ($25–$50) establishing an aggressive, yet prestigious, pricing strategy for Global Reach Inc. as a new premium service company.

Revenue/expense & breakeven analysis Assumptions are: * market share of 0.4%. * 80 billable hours per week (net of sales and administration time) * contingency = 15% * No variable costs. * Avg. Project = $15,000

Market

size Market

share Billable

hours Billing rate per hour Expected

revenue No. of projects Avg. hours per project Fixed cost contribution

5,500 0.4% 4,160 $79 $329,000 22 projects 189 $15,000

Fixed

cost Office

expense Promotion budget Partnership draws ISO 9000 certificate 15% contingency Total

costs

$25,000 $100,000 $80,000 $20,000 $34,000 $259,000

Breakeven point 17 projects Desired profit @ 15% $39,000 Breakeven point ROI 20 projects

Promotion

 Image development as a progressive high quality firm offering premium customer services.

 Relationship marketing is emphasized and education services provide the opportunity to heighten learning and awareness of the firm’s credibility, customer focus and methodology.

 Trade missions and Internet trade portals demonstrate the firm’s ability to connect with the global community.

 Use AIDA concept to stimulate attention, interest, desire and action for the firm’s services.

Promotional Mix

Est$ Media Purpose/Expected Result

30K Advertising Trade journals – frequency – pulsating – coincide with seminars, workshops and trade missions. Build awareness and generate interest/leads.

10K Direct Mail Interactive CD-ROM technology – stimulate preference, conviction, lead generation.

5K Telemarketing Follow-up, reinforcement and post-sale assurance and empathy.

5K Invitations To solicit response to trade missions and special events. Build brand loyalty.

5K Web Site Rich content with useful application aids, trading portals. Lead generation.

10K Workshops Learning and acceptance of new technologies. Develop preference, conviction.

5K Video Conferencing Educate and provide better diffusion throughout target markets. Follow-up and post sale support. Build customer loyalty. Generate referrals.

10K Sales Promotion Free seminars. Stimulate need recognition and develop preferences for the Firm’s services. Lead generation. Qualify prospective customers. Build commitment.

15K Personal selling Consultative and need satisfaction approaches. Strong relationship sales focus.

5K Public Relations Computer camp for disadvantaged children – Network for a good cause. Suggests a caring, progressive orientation. Strong relationship builder.

Recommendations

1. Protect service names and marks “Global Reach”, “Compete With Big Business By Building Community”.

2. Conduct microsegmentation analysis. Determine customer purchasing strategies, criteria importance and unfilled needs and wants.

3. Develop multisegment targeting strategies for chosen markets.

4. Ensure that funds are in place for first year’s operation. Capital obtained from family connections.

5. Develop a decision support system including customer details, candidates for networking and reciprocity.

6. Complete 3 – 4 projects at cost to establish a credible portfolio. Use as a source of referrals.

7. Obtain ISO 9000 certification – “walk the talk”. Apply international benchmarking standards.

8. Develop assessment and promotional tools using the firm’s service. If the service is to work for the customer then it should work for Global Reach Inc.

9. Finalize details of the promotional plan. Use results of microsegmentation analysis.

10. Develop influence as a trade mission co-ordinator for small and medium exporters.