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YORKTOWN TECHNOLOGIES
CHUBBYMATTIAS
Chubby MattiasPresented by:
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Quick snapshot of Yorktown
+$
® NUS/Cellflash & FSG
First to market
5M value2004: 500k Glofish sales36 investors
Holds exclusive licenses
The only company to sell to the public
Yorktown’s marketing mix
4 Ps
• Genetically-modified zebrafish• 4 colours• Colours last a lifetime and can
be transmitted to offspring
• MSRP $5• More expensive than
traditional fish at $1
• 2 large distributors 5D & Segrest• Smaller independent stores• Large chains such as Walmart &
PETCO
• No national campaign• Pre-launch PR blitz• Ads in 2 fish trade magazines
🐠 📍
💰 🗣
PRODUCT
PRICE
PLACE
PROMOTION
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
SET THE TARGET FIRST!
Devise a marketing strategy that willenable the sale of GloFish to generate $4Min profit over 5 years, thus reaching its fullpotential and meeting the expectations ofthe company’s investors.
Yorktown requires a focused marketing strategy
Which distribution channels would be most conducive to maximizing sales of GloFish while showcasing product differentiation?
Which promotional methods would be most effective in educating both consumers and retailers about the product?
Should Yorktown Technologies consider expanding sales of GloFish into foreign markets?
Yorktown has three main issues to address in the changing market landscape
🚦
🗣
🌏
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Resources
Capabilities
Competencies
• 500K in capital• R&D institution• Co-exclusive
distribution • Access to R&D• Access to the
market• Generation of
earned media
• Exclusive patents• Full control over
fluorescent fish market
Yorktown provides a differentiated product in a niche market
💰🔬
🛡
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
S W
TO
Strengths
• Exclusive license agreement• First to market• Longer lasting colour• Lower price (vs. foreign)
Opportunities
• High market growth• International expansion• Bundles & kits• Untapped California market
Weaknesses
• Ineffective marketing strategy• Inability to convert sales• Licensing structure• Not present in PetSmart
Threats
• Ongoing lawsuit• Low demand• Direct foreign competitor• Biotech sales are illegal in most
countries
Yorktown must go beyond their current strategy to reach their full potential in a niche market
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
SOCIOCULTURAL REGULATORY TECHNOLOGICAL
• High consumer acceptance
• California is more environmentally conscious
• International expansion possible in Asia only
• California has many procedural obstacles
• Sterilization of fish for IP protection abroad
• Innovative appeal to tropical fish enthusiasts
There are three main environmental factors to address in their market landscape
😃 🏛 🖥
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Market Size
700m
200m
14m
US sales annually
Fishes sold annually
$1.93
Households own a fresh water aquarium
Avg. cost
Freshwater ornamental fish industry figures in the US
⭐
⭐
⭐
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
200 producers 5000 retailers
24 regional wholesalers
7% increase in sales annually
Prices are controlled at the retail end of distribution
🐠
🏪📈
🏬
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
• Tropical fish enthusiasts• People seeking convenience (e.g. expertise
of staff)
• Price-sensitive consumers• First-time buyers
4 segments of consumers across 2 main distribution channels
🏠 🏘Small stores Chain stores
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Assumptions
Cost of producing zebrafish is negligible, so COGS is related to licensing and distributor/retailer margins (~ 6.5 cents/day for a tank full)*
* http://www.alnmag.com/articles/2014/06/are-zebrafish-new-mice1
Distribution margin structure is similar for both traditional zebrafish and GloFish2The 2004 operating loss of $120,000 is dependent on the MSP/operating3Sales for each of the four colours available in 2004 accounted for 25% of the total revenue of $500,0004
The underlying assumptions for the recommendation
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
19%
70%
11%
Distribution margin structure for GloFish (MSRP $5.00)
Distributor marginRetailer marginManufacturer margin
Most of the profit goes to distributors & retailers
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
16%
20%
11% $0.55 per 🐠
NUS royalty
Operating margin
$1.00 for FSG royalty
$0.80 for
The operating margin is too low to cover the licensing expenses ($0.80 - $1.00)
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Increase price while maintaining distributor & retailer margins
Renegotiate
Licensing agreements1
Feasibility
Infeasible✖
Considerations
High bargaining power from NUS & FSG
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Renegotiate
Licensing agreements1Distributor margins2
Feasibility
Infeasible✖Infeasible✖
Considerations
High bargaining power from NUS & FSG
High bargaining power from distributors
Increase price while maintaining distributor & retailer margins
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Renegotiate
Licensing agreements1Distributor margins2
Retailer margins3
Feasibility
Infeasible✖Infeasible✖Infeasible✖
Considerations
High bargaining power from NUS & FSG
High bargaining power from distributors
Prices are controlled by retailers
Increase price while maintaining distributor & retailer margins
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Renegotiate
Licensing agreements1Distributor margins2
Retailer margins3Increase MSRP4
Feasibility
Infeasible✖Infeasible✖Infeasible✖Feasible✓
Considerations
High bargaining power from NUS & FSG
High bargaining power from distributors
Prices are controlled by retailers
Differentiation based advantage
Increase price while maintaining distributor & retailer margins
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Independent pet stores Chain stores🏠 🏘
🎪 🖥Kiosks Online
There are 4 distribution alternatives for Yorktown
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Positioning statement!
As the first biotech animal for sale in the U.S., GloFish haspositioned itself as an industry pioneer. With innovation at thecore of the brand’s ethos, GloFish is dedicated to offering itscustomers a wide and exclusive selection of fish that are uniqueand safe for the environment. From amateurs to collectors,GloFish’s differentiated product assortment is great for anyonelooking for something truly eye-catching!
Yorktown requires a focused marketing strategy
First-time buyers of aquarium kitsTropical fish enthusiasts
Use variety & innovation to attract the target segments
1 2
a. Less price sensitiveb. Shop mostly at small storesc. Values variety & innovation
a. More likely to purchase fish in bundles
b. Shop mostly at larger chainsc. Values variety & innovation
Use variety & innovation Use variety & innovation
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Increase the variety of GloFish offerings
🔬
💚
Invest more in R&D with NUS
Launch branded aquarium kits & supplies
Tanks & lightsDecorations & food
More coloursMore species of fish
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
1
2
3 $7.99 per 🐠
Match price of online distributors
Premium pricing to convey differentiation
$14.99 per 🐠Premium pricing to compete with foreign competitors
$5.99 for$7.99 for
All pricing options maintain the existing distributor & retailer margins
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
1
2
3 $7.99 per 🐠
Match price of online distributors
Premium pricing to convey differentiation
$14.99 per 🐠Premium pricing to compete with foreign competitors
$5.99 for$7.99 for
All pricing options maintain the existing distributor & retailer margins
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
8 for $56.994 for $29.991 2
• Targets first-time buyers filling their aquarium• Leverages the fact that zebrafish do best in groups• “Build Your Bundle” to maximize customizability• Yorktown will absorb cost of bundle discounts
Bundle pricing increases basket size for first-time buyers
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Sustained in-store sales require an investment
Internet
In-store
• Maintain distribution in both smaller stores and larger chains
• Invest in providing GloFish branded display aquariums to the largest chains
• Launch online sales on GloFishwebsite
• Offer free US overnight delivery on orders over $40.00
🖥
🏠
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Kiosks enable a diversification of targeting
California
Kiosks
• Leverages high growth• Seasonal targeting of youth• November and December only• High visibility will increase brand
awareness
• Population greatly values innovation• Contains 12% of total US population
• Invest in a report for commercialization
🎪
🏝
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Targeted approach for tropical fish enthusiasts
Mass approach for first-time buyers
Finding Dory sponsorship
Invest in optimal store displays
Communicate bundling pricing as a KPI booster
Offer competitive margins on GloFishaquarium kits + supplies
Use both push & pull to attract the target segment
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
• Social media campaign + contest: #FindingGloFish• Playing #FindingGloFish game -> chance of winning GloFish + kits• Posting a picture with your GloFish -> chance to win tickets to Finding Dory
premiere• Sponsorship embeds positive associations into GloFish brand
Sponsorship to target youth and increase brand awareness
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
• R&D + kit production
• Store displays
• Promotional pull
JANUARY-
MARCH
• Internet logistics
• California expansion
• Promotional pull
APRIL-
MAY
• Finding Dory sponsorship
• Promotional pull
JUNE-
JULY
• Promotional pull
AUGUST-
OCTOBER
• Kiosks
• Promotional pull
NOVEMBER-
DECEMBER
Implementing the recommendation in one year
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
$60,000
$30,000
$15,000
$10,000$10,000
$75,000
$50,000
$250,000 breakdown of the first year marketing strategy
KiosksStore displaysR&DInternet logisticsCalifornia expansionPromotion pullFinding Dory sponsorship
The biggest portion is spent on the pull strategy
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
Year 1 Year 2 Year 3 Year 4 Year 5
5-year sales forecast
UnitsRevenueExpensesProfit
4m in profit after 5 years
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
• Expansion into Singapore 5 years from now• Global market is small (US accounts for 35% of global sales)• Success of Taikong in Taiwan means there is consumer interest in East Asia • Leverage relationship with NUS as a marketing element
Possibility for long term international expansion into Singapore
CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
IMC
TROPICAL FISH ENTHUSIASTS• Print & online ads in relevant media
• Sponsored content about GloFish’s innovation
• Targeted SEO marketing on specific keywords
• Emphasize first-to-market, R&D, variety
FIRST-TIME BUYERS• Earned media on increased variety and California
• Online targeting of first-time aquarium buyers
• National TV ads (with holiday blitz)
• Owned media about environmental friendliness
• Emphasize FDA approval, aquarium kits, and bundle pricing
Bronfman Chair Model: overall focus is on variety & innovation
FIRMCONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Appendix
1. Variable costs 2. Distribution margin structure for traditional zebrafish3. Distribution margin structure for GloFish4. Distribution margin structure for GloFish cont.5. Operating income statement (2004)6. Operating income statement corrected for loss (2004)7. Pricing option 1: match internet distribution price8. Pricing option 2: premium pricing for differentiation9. Pricing option 3: premium pricing for foreign competition10.Bundle pricing 111.Bundle pricing 212.Bundle pricing’s effect on operating margins13.Breakeven analysis for mall kiosks
• (assuming only VC in 2004 are licensing expenses)
• NUS royalty rate of 16% of revenue = (0.16)($5.00) = $0.80/fish -> for yellow, orange, and green fish(or $150,000 annual minimum royalty)
• FSG royalty rate of 20% of revenue = (0.20)($5.00) = $1.00/fish -> for red fish
Variable costs (2004 operating income statement)
• $500,000 in sales revenue -> 100,000 sales volume for $5.00/fish
• (assuming each of the 4 colours accounted for 25% of sales volume)
• Licensing expensesNUS royalty:$0.80(25k yellow fish) + $0.80(25k orange fish) + $0.80(25k green fish) = $60,000* However, licensing agreement stipulates an annual minimum royalty of $150,000
• FSG royalty:$1.00(25k red fish) = $25,000
• Total licensing expenses = $150,000 + $25,000 = $175,000
Distribution margin structure for traditional zebrafish
• Manufacturer’s selling price (MSP) = $0.05
Wholesaler’s selling price (WSP) = $0.25
Manufacturer’s suggested retail price (MSRP) = $0.75-$1.00
• Wholesaler margin = (WSP-MSP)/WSP = (0.25 - 0.05)/0.25 = 80% -> $0.20 profit
• Retailer margin = (MSRP -WSP)/MSRP = (0.75-0.25)/0.75 = 66.7% -> $0.50 profit
= (1.00-0.25)/1.00 = 75% -> $0.75 profit
• Manufacturer operating margin = $0.05 -> 5.0% - 6.7% of MSRP
(assuming cost of producing zebrafish is so negligible that it’s ~ $0.00)
(source: http://www.alnmag.com/articles/2014/06/are-zebrafish-new-mice)
• Wholesaler margin = $0.20 -> 20% of MSRP of $1.00
Retailer margin = $0.75 -> 75% of MSRP
Manufacturer margin = $0.05 -> 5% of MSRP
Distribution margin structure for GloFish
• Manufacturer’s selling price (MSP) = ???
Distributor’s selling price (DSP) = $1.50
Manufacturer’s suggested retail price (MSRP) = $5.00
• Retailer margin = (MSRP -DSP)/MSRP = (5.00-1.50)/5.00 = 70% -> $3.50 profit
• (assuming Distributor margin is consistent with traditional zebrafish, thus is 80% with $1.20 profit)
MSP = DSP - (Distributor margin)(WSP) = $1.50 - (0.80)(1.50) = $0.30
• Manufacturer operating margin = $0.30 -> 6.0% of MSRP
(assuming cost of producing zebrafish is so negligible that it’s ~ $0.00)
(source: http://www.alnmag.com/articles/2014/06/are-zebrafish-new-mice)
Distribution margin structure for GloFish cont.
• Distributor margin = $1.20 -> 24% of MSRP of $5.00
Retailer margin = $3.50 -> 70% of MSRP
Manufacturer margin = $0.30 -> 6% of MSRP
• $500,000 in sales revenue
Distributor margin = 24% of $500k = $120,000
Retailer margin = 70% of $500k = $350,000
Manufacturer margin = 6% of MSRP = $30,000
• Total distributor + retailer margin = $120k + $350k = $470,000
2004 operating income
• Revenues -> $500,000
Licensing expenses -> ($175,000)
Distributor + retailer margin -> ($470,000)
• Operating income (loss) -> ($145,000)
* However, the case states there was an operating loss of $120,000, thus there is $25,000 in over-accounted loss
• Therefore, the manufacturer margin must be higher, and that must be taken from the distributor margin (because the
MSRP and DSP are clearly stated in the case, but not the MSP for GloFish)
• For the operating loss to be $120,000, the distributor margin has to be $95,000
2004 operating income (corrected for loss)
• If the distributor margin is $95,000 on $500,000 in sales revenue and 100,000 in sales volume
- Unitary distributor margin = $95,000/100,000 fish = $0.95/fish -> 63.3%
- MSP = DSP - (Distributor margin)(WSP) = $1.50 - (0.633)(1.50) = $0.55
• Manufacturer operating margin = $0.55 -> 11.0% of MSRP• Distributor margin = $0.95 -> 19% of MSRP
Retailer margin = $3.50 -> 70% of MSRPManufacturer margin = $0.55 -> 11% of MSRP
• $500,000 in sales revenueDistributor margin = 19% of $500k = $95,000Retailer margin = 70% of $500k = $350,000Manufacturer margin = 11% of $500k = $55,000
• Revenues -> $500,000Licensing expenses -> ($175,000)Distributor + retailer margin -> ($445,000)Operating income (loss) -> ($120,000)
Pricing option 1: match internet distribution price
• MSRP -> $5.99/fish (yellow, orange, green)Retailer margin = $3.50 -> 58% of MSRPDistributor margin = $0.95 -> 16% of MSRPRoyalty = $0.96 -> 16% of MSRPOperating margin = $0.58 -> 9.6% of MSRP
• MSRP -> $7.99/fish (red)Retailer margin = $3.50 -> 44% of MSRPDistributor margin = $0.95 -> 12% of MSRPRoyalty = $1.60 -> 20% of MSRPOperating margin = $1.94 -> 24% of MSRP
• (assuming equal sales across all 4 colours, with a weighted operating margin of $0.92)• Sales volume required for $4M profit = ~ 4,358,000 fish -> 2.2% market share of annual US sales volume• Sales revenue required for $4M profit = $28.22M -> 4.0% of market share of annual US sales of $700M
Pricing option 2: premium pricing for differentiation
• MSRP -> $7.99/fish (all colours)
Retailer margin = $3.50 -> 44% of MSRP
Distributor margin = $0.95 -> 12% of MSRP
Royalty = $1.28 -> 16% of MSRP (for yellow, orange, and green fish)
Royalty = $1.60 -> 20% of MSRP (for red fish)
• Operating margin = $1.94 - $2.26 -> 24% - 28% of MSRP
• (assuming equal sales across all 4 colours, with a weighted operating margin of $2.18)
• Sales volume required for $4M profit = ~ 1,835,000 fish -> 0.01% market share of annual US sales volume
• Sales revenue required for $4M profit = $14.66M -> 2.1% of market share of annual US sales of $700M
Pricing option 3: premium pricing for foreign competition
• MSRP -> $14.99/fish (all colours)
Retailer margin = $3.50 -> 23% of MSRP
Distributor margin = $0.95 -> 6.3% of MSRP
Royalty = $2.40 -> 16% of MSRP (for yellow, orange, and green fish)
Royalty = $3.00 -> 20% of MSRP (for red fish)
• Operating margin = $7.54 - $8.14 -> 50% - 54% of MSRP
• (assuming equal sales across all 4 colours, with a weighted operating margin of $7.99)
• Sales volume required for $4M profit = ~ 501,000 fish -> 0.003% market share of annual US sales volume
• Sales revenue required for $4M profit = $7.51M -> 1.1% of market share of annual US sales of $700M
Bundle pricing 1: effect on operating margins
• MSRP -> $14.99/fish (all colours)
Retailer margin = $3.50 -> 23% of MSRP
Distributor margin = $0.95 -> 6.3% of MSRP
Royalty = $2.40 -> 16% of MSRP (for yellow, orange, and green fish)
Royalty = $3.00 -> 20% of MSRP (for red fish)
• Operating margin = $7.54 - $8.14 -> 50% - 54% of MSRP
• (assuming equal sales across all 4 colours, with a weighted operating margin of $7.99)
• Sales volume required for $4M profit = ~ 501,000 fish -> 0.003% market share of annual US sales volume
• Sales revenue required for $4M profit = $7.51M -> 1.1% of market share of annual US sales of $700M
Bundle pricing 2: effect on operating margins
• Bundle 2 - 8 fish for $56.99
• MSRP -> $56.99
Individual price -> $7.12/fish
Bundle discount -> $6.93
Individual bundle discount -> $0.87/fish
Retailer margin = $28.00 -> 49.1% of MSRP
Distributor margin = $7.60 -> 13.3% of MSRP
(assuming two fish of each colour)
Royalty = $6.84 -> 16% of the price of 6 individual fish (for yellow, orange, and green fish)
Royalty = $2.85 -> 20% of the price of 2 individual fish (for red fish)
• Bundle operating margin = $11.70 -> 20.5% of MSRP
Individual operating margin = $1.46/fish
Bundle pricing’s effect on operating margins
• $7.99 individual pricing operating margins
- Yellow, orange, and green fish -> $2.26
- Red fish -> $1.94
• $29.99 bundle 1 pricing operating margins
- Yellow, orange, and green fish -> $1.85
- Red fish -> $1.55
• $56.99 bundle 2 pricing operating margins
- Yellow, orange, and green fish -> $1.53
- Red fish -> $1.24
Breakeven analysis for mall kiosks
• Annual cost = $12,000 - $36,000/year
Assumed monthly cost = $1,000 - $3,000/month
Assumed monthly cost for November-December = $2,000 - $6,000/month
• B/E for a monthly kiosk leasing cost of $6,000/month
# of fish = Monthly cost / Operating margin = 3,093 fish
(using smallest operating margin for red fish of $1.94)