MARKETING PLAN ESSAY
Proposed Marketing Plan for Introduction of Multi-functional Remote Device of JKL Plc, UK.
Section 1: Introduction and Background
This report entails the development of a marketing plan for the launch of a new product, a Multi-functional Remote Device (MRD), to be presented to the Investment Committee of JKL Plc. JKL Plc is a large London headquartered multinational FMCG with operations spanning 16 countries across the world. Its turnover for the financial year ended December 31, 2010 amounted to GBP 454 million.
The search for innovative products has led the company to focus on the swift technology evolution within the hospitality industry around the world. This has necessitated the accurate estimation of future developments for maximising customer satisfaction and retention. Environmental scanning and market research reveals that customers are driving the industry towards technology convergence (Bentley, 2007, p2).
The hotel industry presently relies upon stand-alone modes or discrete technology application devices to fulfil customer service requirements, in areas like electronic check-in/ check-out facilities, purchase and use of in-room entertainment or even the control of room settings for different utilities and appliances that are used by the customers during their stay in the hotel.
Due to the continuous nature of the service provided by the industry, it is difficult to install/ retro-fit new technologies in operational properties at reasonable cost outlays. Consequently, it is difficult to consider further technology investments for retrofitting innovative technology developments as a substitute for technologies installed previously. This necessitates the need for investment in technology that encompasses multiple functions for the hospitality industry customer. This need has led to the concept of this MRD that caters to ‘last-yard’ connectivity (Bentley, 2007, p3).
The MRD would enable the shift towards methods and systems to enable integration of all hotel services into a single application that is accessible from such an electronic device. A customer will consequently be able to gain access to and manage hotel services prior to arrival at the hotel, upon arrival at the hotel, within the hotel room, within the local neighbourhood, as well as after departing from the hotel.
The company feels that the product has potential for commercial exploitation. The BOD has decided to progress with the suggestion. This report deals with the marketing of MRD devices to hospitality establishments across the target market in UK.
Section 2: Product Details
2.1. Product Concept
The single integrated application on the MRD is designed to enable access to most of the premium and desired functionalities and services offered by the hospitality establishment to their customers. The hospitality establishments that purchase these MRDs can select the permutation of the functionalities and services that can be accessed by their customers. This would depend on the technology budgets at their disposal. Appendix 1 details the major functionalities that can be accessed through the integrated application available on the MRD.
The integrated single application installed on certain versions of the MRD will enable communication with one or more servers connected to the hotel. The MRD will, for instance, communicate with different servers connected with ordering goods or services from the hotel. It will also communicate with different servers linked to shops, stores or attractions to permit a customer to effect reservations, purchase goods or services, or obtain information.
The development of the MRD will lead to technology convergence. It will also hopefully lead to the deployment of this portable device across the entire hospitality industry spectrum as a convenience and an energy friendly device. This will help maximise customer satisfaction and improve the convenience and comfort levels for hotel customers.
The MRD is essentially an upgrade with a single application that substitutes the operation of multiple remote devices for individual applications of different portable electronic remote devices. An example is the capability of the MRD to interface with the customer’s hotel room controls to organise room features like temperature, audio and video settings, lighting, any other appropriate room settings, or any permutation of the above.
2. 2. Technical Assessment
Both wired and wireless technologies enable the integrated functioning of portable remote devices for availing multiple functionalities concurrently. This enables the hotel customers to access, purchase and use different products and services offered by the hospitality industry.
The convergence of present day technology systems necessitates reliable infrastructure that can function consistently. The major constituents of infrastructure are: (1) Local and wide area data networks (LANs and WANs), (2) Workstation and server operating systems, (3) Network operating systems, and (4) the Data management platform (Wynes, 2005, p3).
The secondary constituents incorporate all-purpose business tools like software for office automation purposes, security tools like virus scanners and firewalls, and supporting applications such as custom reporting packages. The business environment that sustains such infrastructure necessitates robust processes not only for technology selection, implementation and integration, but also for user support and system administration (Wynes, 2005, p3).
Hotels endeavour to distinguish themselves from others to improve revenue streams and profitability. They should look favourably towards converged and intelligent network technologies to improve occupancy levels by attracting and retaining high-value customers, generating fresh recurring revenue streams and steering themselves towards higher operational efficiencies (Wynes, 2005, p3).
The network technology that is prevalent across the industry will also support the MRD introduction across most market segments of the hospitality industry in UK.
2.3. Market Assessment
The European hotel industry is controlled by independent, managed and family owned small hotels. The hotel sectors of UK, Germany, France, and Italy are dependent upon their home markets, whereas other European countries service a larger percentage of international customers. Whilst the UK has the maximum concentration of brands, around 70% of British hotels continue to be small and do not have more than fifteen rooms (Hotelmule, 2010, p1).
Recent market forecasts predict that UK’s £1 billion corporate hospitality market will grow by only 1 percent this year. The ‘UK Corporate Hospitality Market Development Report’ notes that the market suffered a 5 percent reversal during 2009, when turnover dropped to £933 million, a five-year low. The growth is expected to reach 11 percent in real terms during the period 2010 to 2015 (Quainton, 2010, p2).
Reports on performance during 2010 confirm robust profit growth within London and stagnation across the provinces. This is confirmed by the London hotels’ double-digit rise in profits, as per latest survey conducted by TRI Hospitality Consulting. However, the performance across the provinces has not been as strong with the industry norm GOPPAR (Gross Operating Profit per Available Room) falling by 1.4 percent. This contrasts with the 13.9 percent growth in London (Hotelnewsresource.com, 2011, p 2).
The performance of hotels in London is remarkable compared to the subdued performance of hotels in the provinces. The improved performance of the London hotels over 2008 levels bodes well for the subsequent 12 months. The economic environment is expected to benefit from the upcoming Royal Wedding and the 2012 Olympic Games (Hotelnewsresource.com, 2011, p 2). This environment augurs well for the launch of the MRD by JKL Plc.
There has been a rise in budget and ‘no-frills’ choices within the hotel industry. There are two distinct markets for ‘luxury’ and ‘budget’ hotels. Another category between these two markets is the mid-market category that comprises mainly of three-star hotels. The average hotel in UK has 12 rooms, unlike the average budget property, which has 75 rooms. Budget accommodation accounted for 12 percent of overall serviced accommodation within the UK in 2008. Nearly all budget hotels fall in the branded category, according to British Hospitality’s 2008 Trends & Statistics Report (Morton-Holmes, 2009, p3). This is largely the intended target market for the various models of MDR developed by JKL Plc.
2. 4. Product Development and Testing/Validation
Manufacturers, operators, owners, and suppliers engaging with the hospitality industry have to be certain that their products fulfil customer expectations in today’s complex and dynamic marketplace. They also need to comply with necessary regulatory and safety standards mandated by different municipal, state and national government agencies. Poor quality goods can lead to customer dissatisfaction, injury and other hazards. Both can also adversely affect the brand image and brand equity of the organisation. Rigorous and relentless product testing is required to ensure that products conform to required standards and regulatory norms. The process entails the assessment of products against detailed standards and regulations (Bureau Veritas, 2007, p2).
It is assumed that all MRD models will conform to the specifications detailed in the product concept and major functionalities in Section 2.1.and Appendix 1 respectively. It is also assumed that the necessary pre-development product concept testing research has been carried out in terms of the market and technical assessments. Concept testing involves qualitative surveys that determine the acceptance of a single or multiple products concept through the deployment of surveys targeted at focused respondents like prospective customers and/or industry experts. Product testing of the MRD will consequently determine if all its versions satisfy industry standards and regulatory requirements.
Testing will also determine whether the MRDs are produced according to required specifications and whether they meet the established criteria of different functionalities. It is intended that product testing will be conducted at 2 beta sites within each category of the target market in the hospitality industry, especially the budget hotels and those considered to be ‘Inns at law’ under the UK 1956 Innkeepers Liability Act.
Section 3: Marketing Plan
3. Marketing Analysis
3.1.1. Environmental Analysis
The application of acknowledged and appropriate marketing tools like PESTEL and SWOT analysis facilitates the analysis of the organisation’s market position (Proctor, 2000, p 9).
A PESTEL analysis enables a complete analysis of the ‘political, economic, social, technological, environmental and legal’ aspects of the marketplace and offers essential information that helps in formulation of marketing strategy (Proctor, 2000, p 9).
The political environment within UK is stable.
Considerable medium and short term risks still exist in the current economic environment.
The recent increase in VAT by the government to shore up its finances has subdued the economic sentiment.
The MRD introduction will lead to better economic performance of the hospitality industry in terms of improved turnover and profitability and immediate savings in energy costs.
The Company’s introduction of MRD will not require adjustment to social norms since the UK population is largely conversant with the use of high technology electronic devices.
There is robust implementation and consumption of high technology merchandise.
The technology savvy population is open to innovative products
Direct savings in electricity consumption will be achieved with the MRD introduction.
Carbon footprint reduction from the use of multifunction electronic devices will lead to savings in toxic material like plastic and non-biodegradable components like silicon chips and sensors.
The MRD introduction will reduce the carbon footprint across the entire supply chain.
Innovative products need to comply with UK statutory, regulatory and electronic standards.
Compliances are mandated.
The SWOT analysis of an organisation entails the elucidation of its natural strengths and weaknesses along with its external opportunities and threats. This enables the management to utilise and develop its strengths to take advantage of available market opportunities, lessen its weaknesses and cover threats (Proctor, 2000, p 47). The SWOT analysis of JKL Plc is as follows:
First mover advantage in home market
Extensive domain knowledge of electronics industry
Established distribution channels
High technological expertise
MRD brand focus to be established
No presence in overseas hospitality electronics markets
The UK hospitality market is open to innovative products and related value added services
Increasing requirement for converged broadband and other hotel services offers a strong opportunity to introduce the latest range of services across the board
Faces serious threats to its first mover position as a MRD provider in UK from aggressive potential competitors
Low technological entry barrier for large electronics’ industry organisations
3.1.2. Market Segmentation
TRI/BDRC, a prominent industry consultancy firm, assesses the overall hotel room stock within UK at 708,412. This figure is roughly in agreement with its peer MGCL’s estimation (Slattery & Gamse, 2008, p11).
MGCL catalogues the range of hospitality establishments in the UK as ‘bed and breakfasts’, guesthouses, farmhouses, motor lodges, youth hostels, motels, inns, and hotels. Another hospitality industry consultancy segregates these establishments into two commercially distinct groups (Slattery & Gamse, 2008, p11). The first group comprises of the bed and breakfasts, guesthouses and farmhouses that are the most haphazard and least successful establishments (Slattery & Gamse, 2008, p12). MGCL’s estimate of 202,000 rooms within these establishments appears to be reliable. However, the annualised availability of such rooms is not expected to be more than 100,000 due to their closure for a large part of the year (Slattery & Gamse, 2008, p12).
The second group comprises of hotels, motels, motor lodges and inns, although they are not distinct segments. Yet, jointly they are considered as “inns at law” under the UK Innkeepers Liability Act of 1956 and are thus different from the former group of venues. It is within this group that the hotel-keeping industry’s professionalism has grown. MGCL estimates the present volume of room stock within this group to be 514,000 (Slattery & Gamse, 2008, p13).
In terms of geographical spread, whilst the hospitality business establishments are spread throughout UK, they have a propensity to be present in the major cities. The largest number of hospitality establishments is found in London and in the South East of England. Each of these locations accounts for 13 percent of the overall national hospitality establishments. The South West, which is a tourist destination region, has the next largest cluster of hospitality establishments. The lowest group of hospitality establishments is found in Merseyside and the North East (NGRF, 2003, p1). Appendix 2 details the corresponding projected employment levels and the change in catering and hotels for the period from 1999 to 2010.
Recent industry research reveals that views on the comparative performance of the different categories of hotels cover a wide range. Some researchers aver that the four-star and five-star hotels viz. the market’s top end is suffering heavily. The best returns are estimated for hotels in the medium level categories, whilst the low budget and luxury hotels are making profits (PwC, 2010, p12).
3.1.3. Target Market
The adopter categories are expected to comprise of hotels and their ultimate individual customers. JKL Plc needs to address target market segments that will minimise the speed to market and maximise the sales and profitability of the company. Of the overall hotel room supply of 708,412, the company should first address the 514,000 room stock pertaining to the ‘inns at law’ group. It is this group of establishments that is professional and profitable.
Within the above target group, the company needs to first focus on the medium level category of hotels viz. the volume target market of two, three and four star categories of hotels. This will also include the budget hotels category, which is expected to continue to perform well in future. This needs to be followed by addressing the luxury and low budget hotel segments.
JKL Plc, with regard to geographical spread, needs to initially address the hospitality establishments that are situated in London and the South-East region of England. This should be followed by the next largest cluster of establishments, which are located in the South-West tourist destination region.
3.2. Marketing Mix
The marketing mix of JKL Plc, as indicated by the 4P configuration of product, price, promotion and placement, is provided below.
The company’s products and related services seek to fulfil the technology convergence needs of its target markets through a permutation of various functionalities offered by the integrated single application housed in the MRD. The functionalities of MRD have been thoroughly detailed in the earlier Section 2.1. The product positioning enables MRD to be considered as a fully-converged convenience device that is energy friendly and helps in improving the comfort levels of all the customers of the hospitality industry.
JKL Plc will differentiate its pricing according to the needs of the different target market segments and the corresponding value added functionalities preferred by the prospective customers. Introductory pricing will be differentiated with the post launch pricing taking into account the first mover advantage. There is no competition within the fully-converged devices market, as yet. However, the pricing structure has taken into account the prices of remote devices that are less converged in terms of the functionalities offered.
JKL Plc needs to engage in extensive promotion and advertising activities. Although it does undertake adequate marketing activities for its established FMCG business, it will need to create a fresh budget for the integrated marketing strategy that includes promotion and marketing activities for the successful introduction of the MRD.
The marketing message for the new product introduction has to be created in consonance with marketing objectives, the target market, other key stakeholders and the vital USPs or features of the product (Scott, 2010, p 17).
The company will need to engage in promotional activities that span the pre-launch, launch and post-launch phases, including participation in industry and trade fairs. It will also need to focus on industry print media including specialised trade and industry journals and magazines.
The MRD will be formally launched and showcased at the British Hospitality Association’s Climate Week that is usually held in the month of March. It is a nationally acclaimed event that promotes green and environment friendly causes. The launch will also be aired on national and local TV and radio.
The company will organise a string of presentations and demos to industry participants, mainly hotels and specialist electronics retail outlets that will stock the product. Such events could also be held in the relevant trade and industry platforms. The firm will also make use of internet tools such as chat rooms, social networking sites like Facebook and Twitter and the organisational website to maximise national reach and encourage product discussion.
The hospitality industry is generally considered to lag behind in technology implementation. This has become a barrier to technology adoption as faster technology evolution constantly renders current technology obsolete (Khosrow-Pour, 2002, p209). However, the major barriers to technology adoption lie in the cost of technology deployment, the standardisation of technologies that are required to be converged and security of the e-commerce payment mechanisms. The speed of adoption is largely related to the above factors, along with the bandwidth speeds that are becoming increasingly important due to the requirement of immense volume of real-time online content.
The major barrier to adoption of the MRD by the company’s customers is primarily on account of the security concerns relating to payment mechanisms. This issue will also be addressed by JKL Plc through its various communications and campaigns to its potential customers.
It has been assumed that the concept testing exercise has also been successfully conducted and the trial rates and repeat rates confirm the potential of the product. The trial rate represents the extent and speed with which customers will make an initial purchase of a new product. The trial rate is checked jointly with the repeat rate to gauge the sales potential and the consumer satisfaction of the brand. A high trial rate along with a high repeat rate signifies that consumers’ need the product and that it fulfils their expectations (Barron’s, 2000, p 1).
The MRD in all its versions will be freely available across all of UK. Adequate stocking will be ensured to satisfy the forecasted demand across all sectors and geographical spread of the industry. The distribution network and its modes will also be in place well before the launch of the product.
3.3. Market Forecast
Budgeting is critical to all marketing plans. The details of the budget for the introduction and launch of the MDR will need to be prepared by considering the different costs associated with MDR kits, the pre-launch beta testing at potential customer locations, press releases, post-launch promotional events and media expenses as well as annual promotional expenses. Table 1 below details the MRD sales forecast and the related marketing budget for 5 years.
It is felt that the sales forecast should be based on the total room stock of approximately 600,000 rooms, excluding the 100,000 that are not available for a considerable part of the year. However, room supply has been assumed to grow at 5 percent per annum. The MRD sales have been assumed to grow from 3 to 12 percent of the target market during the 5 years. The average MRD price of GBP125 in year 1 is expected to stabilise at GBP150 for years 2 and 3, followed by a 20 percent drop in the subsequent 2 years due to economies of scale.
3.4. Evaluation and Assessment
It is imperative that a market feedback mechanism be put in place for periodic evaluation of the new product. Corrective measures will consequently need to be taken to rectify the product malfunctions and issues that are thrown up by such feedback. The resultant coordination between the design team and production will lead to better product performance and speed of adoption and ultimately to improved customer satisfaction levels.
A well structured system is required to be established to ensure periodic financial performance reviews that compare budgets with actual performance. The product performance reviews need to address the customer and market issues.
Damage control is an integral part of marketing activity (Scott, 2010, p 8). Its implementation is necessitated both during and after the launch of JKL Plc’s MRD. The product performance can for instance be impacted by an unsatisfied customer who could complain about its mode of functioning, user friendliness or even its digital display.
Section 4: Conclusions
This project report involves the preparation of the marketing plan for the launch of the MRD for the hospitality industry in UK. The relevant product and market assessments have been done and it has been demonstrated that there is a definite market for converged electronic devices that can be suitably deployed in the hospitality establishments throughout the target market.
It is evident from the marketing plan presented above that the product has good potential for its introduction in the UK hospitality industry. However, adequate care needs to be taken for the successful implementation of the project, especially considering the fact that the group will have first mover advantage. It is important that a proper feedback mechanism be implemented to enable product enhancements in order to maximise customer convenience and satisfaction levels.
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