Evaluate marketing plans by connecting objectives, segmentation, positioning, implementation, control and business evidence in IB Business Management HL.
Columbo Coffee (CC)
Columbo Coffee ( C C ) is a family business that produces four espresso coffee machines. C C 's objective is to provide the highest quality machines, but it is currently unprofitable.
A marketing audit of the four espresso machines had the following results:
- The Ventura was CC's best selling espresso coffee machine. It has the strongest brand loyalty of all four machines, but has been suffering from overseas competition. Many customers of The Ventura want a new, improved version. However, because of its weak financial position, the company has not been able to develop it.
- The Crema is CC's exclusive luxury espresso coffee machine. Considerable publicity for CC was gained when it featured in a recent popular television series. Sales of The Crema are forecasted to grow further despite its high price.
- The Rocket has been very successful. However, technical problems have resulted in many customers returning their machines. Reduced brand loyalty and quality control are significant concerns.
- The Fortuna is the company's newest model. It was developed to replace The Ventura but consumer resistance has forced C C to keep The Ventura in production. The Chief Executive Officer (CEO) of C C sees The Fortuna as a potential market leader, but to achieve brand awareness this would require most of C C 's limited marketing budget.
The CEO of C C is considering reorganizing the four espresso coffee machines into separate cost centres.
However, before any decision is made the CEO receives an offer from its main competitor to work together. As part of a strategic alliance, the competitor will provide funds to allow C C to finance extension strategies or enter new international markets. The only condition is that The Ventura is discontinued. The family is divided. Some family members are worried about the impact of the business losing its most recognizable brand. Others think the competitor's offer will allow CC's other three machines to achieve their full market potential.
Explain two values of a marketing audit as a business tool for C C.
The $ 1.99 toy shop
James Lai's toy shop is popular with no toy priced above $ 1.99. The toy shop uses psychological pricing at a level much lower than its competitors. James imports 90 % of his stock from China. It is located in a poor part of the city centre. Its target market is low-income families. The shop is very busy at weekends with a long queue (line) at the one cash register. Most employees are teenagers, who are very low paid.
Several stakeholder groups have complained:
- parents are concerned about the quality and safety of the toys and have set up an online social networking web site urging people to stop purchasing from the shop
- older customers have complained about the long queue at the one cash register
- one employee representative (union official) contacted James about employing teenagers on very low wages
- local toy manufacturers have questioned James' use of Chinese suppliers.
Competitors have argued that the $ 1.99 toy shop's psychological pricing method is unethical. James replied to stakeholder concerns, in a letter to a local newspaper, by stating that his shop allows young children to purchase affordable toys and provides job opportunities for teenagers. James has decided to create a social networking web site to respond to critics and to manage customers' perceptions.
James admits that the rate of stock turnover could be improved. He admits that the long queue is causing many customers to leave without buying anything. James is considering opening a second, larger toy shop called $ 4.99. He announced the opening on his social networking web site, informing stakeholders that he would stock higher quality products and have more cash registers. However, he immediately received negative online feedback from customers who saw the $ 4.99 toy shop as just a $ 3 price increase for the same toys.
Define the following terms:
target market
Musical Musings (MM)
Musical Musings (MM) manufactures musical keyboards, using batch production to produce a limited range.
MM's products are designed for use in schools and homes. M M sells directly to schools, and, for the home market, sells through shops specializing in technology. MM's costs are kept low by:
- limiting its product range
- focusing on a small target market, which enables M M to limit the features on its keyboards and keep the appearance functional.
M M provides free online "Teach yourself to play the keyboard" training courses for all customers.
In 2021, MM employed an average of 50 people. During that year, however, 12 people left the company. Their reasons for leaving are shown in Table 5.
Table 5: Stated reasons for employees leaving \(\boldsymbol{M
MM's labour turnover rate for 2021 was 24 %. The manufacturing industry average was 15 %.
In 2021, MM's sales declined. MM is now considering targeting the niche market of professional musicians. MM would change its product design by adding a range of different sound features and improving the appearance of its keyboards. To achieve this change, MM would eventually stop supplying its existing market. Professional musicians would pay a higher negotiated price for improved keyboards made to their individual specifications. Changing its production process to job/customized production would be expensive for M M, however, and it would have to invest in a new marketing strategy.
State two characteristics of a niche market.