The fundamental areas to be covered are:
Defining a market Euro-Ind.Equip.UK ltd operates in.
Defining/detailing market segmentation and the targeted consumer groups.
This will involve an overview of choice of potential bases for segmentation, selection, strategy and positioning. An in-depth look into the composition of the market and the chosen company.
Euro Industrial Equipment UK Ltd is a small company based in the Manchester area, employing just a few people, specialises in various hydraulic equipment, acting as a sole representative for a large manufacturer M&S Hydraulics from an Eastern block country. Distributes hydraulics within the UK and exports to other parts of the world mainly S.Ireland and S. Africa. EuroInd if not bound to buy products from M&S and is free to choose its supplier. The chosen company shall be abbreviated to EuroInd. It supplies different segments of the hydraulics industry and even one-off projects such as the Millennium Dome (London), hydraulic motors operate winches to raise and lower support beams/curtains.
Defining the market, composition.
A market is a combination of potential and actual buyers of a service or product. The major potential markets include construction, fishing, mining, agriculture, industrial, marine, plastic mould injection, garden. The bulk of the business would come from OEM manufacturers (e.g. JCB, Belle Eng,)
The potential markets would extend to industrial, vehicle, commercial, aerospace, construction and semiconductors. Principal products are hydraulic motors, pumps, steering units also some accessories for the three. Serving in the available markets for the hydraulic industry would provide for static use in heavy equipment, heavy machinery, amusement park rides, baggage handling, food processing, recreational use in cocktail bars and theatres. As these hydraulic motors and pumps need replacing the penetrated market becomes more of a buffer zone.
New materials and technological advancements have advanced the use of hydraulics in almost every industry. The year 2000 has seen a decline in sales due to the “millennium bug” scare, but once that has passed there has been a steady rise. The use of hydraulics has extended into creation of new markets such as electroneumatics and electrohydraulics, and a good example of a new area is hydraulic suspension on cars which has become more popular especially seen in the US but also slowly on the increase in the UK. EuroInd may have to look at the marketing mix very soon, especially the product side.
The mobile hydraulics sector is temperamental, declining and rising, but responding greatly to the agricultural and construction machinery needing mid-range products as opposed to less powerful versions. Nevertheless, EuroInd is in a so called stalemate industry where products have very few small advantages. It is hard to differentiate these goods and the production costs seem to average everywhere, labour is the only real cost. European countries can not compete with economies of low cost labour.
This makes it ideal for EuroInd to be an exclusive representative for M&S Hydr in UK. The head office/factory which produces the hydraulic products is based in Kazanlak, Bulgaria. There are outlets in other countries which are exclusive representatives for M&S (e.g. Spain, Korea). This means a possibility to compete with big names from the European and US sector such as Sauer-Danfoss, Eaton, Parker Hydraulics, White Motors. The list goes on to Italian manufacturers which try to maintain high levels of quality, cheap labour yet can not edge the production cost achieved in the Eastern block, the Balkans. Large companies like Salami, Lamborghini and Marzocchi do not offer more competitive prices.
This could see more parent companies merging (i.e. Sauer-Sanstrand merged with Danfoss) to form a greater impact on other business models and also the competitive landscape. Leverage and the economies of scale will be more evident and are likely to bring a result of few percent decrease in supply costs.
Marketing planning is used by most companies, particularly when they start up, it is a process which helps forecast for the future and the necessary actions to make things run as smoothly as possible (last 2 pages are a sample draft version of EuroInd’s marketing plan worksheet). Strategic planning is the key to balancing business goals and changing market opportunities. If the marketing mix is effective it will yield matches to consumer needs, have a competitive advantage, mix well within the market and match the resources.
Segmentation and targeting particular consumer groups are essential to all business, the two concepts are fundamental as they gain competitive advantage. Segmentation is the process of selecting markets then target particular segments to compete in. EuroInd is concentrating twenty percent retailers, thirty percent private sector and fifty percent wholesalers including OEM manufacturers. The market segment will consist of consumers who all share the same response when subjected to any marketing stimuli.
For EuroInd there is an issue of other large manufacturers of hydraulic motors with representatives in UK. The threat of that competitor depends on their ability to demonstrate a clear superiority in the total available market for the hydraulic industry. This is relevant to the market planning as good exercise of the segmentation principles to achieve the advantage.
The more the business understands the segments that they are operating in, the better and more likely they will compete with others in lower costs and customer satisfaction. As the marketing plan (last 2 pages) recognises various segments of the market, it indicates ways of adapting to the needs of those segments. OEM sector (delivery time 8 weeks) would need large storage space within EuroInd to temporary keep hold of stock for a few days. Whilst the retailers require more variety to be stocked at the premises with delivery times of 1 or 2 days.
Segmenting the actual markets can be a lengthy process with several research exercises. It applies in all cases whether the method is demographic or any other. First stage is to find qualitative data to back claims if the concept is viable, profitable or changing to certain conditions. Then quantitative data provides clues to the figures involved and scale of operations. Sample size is dependant on accuracy needed. Both sets of data are then put through an analysis first factor (remove high / odd variables) then cluster to select the appropriate segment. All these analysis have to be validated to check for serendipity occurrences, and to show future analysis to be similar using new data. Profiles are made to suit different categories, such as accommodating OEM and stocking for unforeseen breakdowns.
To have effective segmentation some characteristics should be looked at. Measurability is the degree to which profits and purchasing power of a market group can be measured. They show the size of the segment. Accessibility is how a market segment can be served and communicated to, it will be problematic for the firm if the market is huge but accessibility is very limited. Sustainability is another area which shows if the market segment could actually support the entering business. Looking for the future actionability will show if it is possible to create effective programmes to attract and serve fading segments.
To analyse different market segments it is necessary to look at how the company fits into the market and also how appealing is the segment. The company may not be ready in the long-run, mismatch of objectives and company goals. The segmented market may be desirable and be growing but still unprofitable. Smaller companies find themselves lacking in being able to serve a large segment as these areas are too competitive.
These small companies would most likely select segments which are small and unattractive, but potentially will be more profitable to them. When a segment will fit companies strength it is not always the case of guaranteed success. This is because the company should only enter the segment if it has superior resources and skills to rally in with the competition. A segment will be less attractive if it already contains many competitors, power of buyers has the potential to bargain prices and possibly bring them down. Same with the supply side, if the supplier is too powerful most profits will go to them.
The company has to try different segmentation variables, alone or in combination, to find and enter the optimum market structure. From the major variables used in segmenting consumer markets we can look at some which are in use by EuroInd. The consumer market is targeted on a multivariate strategy. It is simple, two or more variables, mainly geographic choosing north-west (UK) for easy distribution throughout the country and the psychographic/demographic variable of countries wealth, outlook and social class. The geographical segmentation is based upon dividing geographical units into segments. This can be countries, cities, neighbourhoods and paying appropriate attention to needs and wants. Psychographic representation splits buyers into groups based on social class, lifestyle or personality. UK exerts a high social class and wealth perception to the rest of the world, it also has a striving economy, where the pound is very strong always competing with the US dollar.
EuroInd has chosen the segment marketing with a niche market approach. There is a general oligopoly system in place, therefore emphasis on price is necessary. Niche market is a more narrowly defined group of a segment divided into sub segments. Where segments attract competitors, niches have very few as the needs of consumers are understood so well that the customer is willing to pay a premium. By segmenting a market EuroInd recognises that buyers have different needs, perception and buying behaviour. It isolates broad segments in order to adapt to needs of one or more segments. This way the company can benefit from better marketing in areas of efficiency, service and it will have a better established and continuously improving link with existing customers. It makes it harder for a new competitor to enter the market as the existing EuroInd is already fine tuned its products, prices and service of consumer needs.
Some market orientation has to be considered as activities of the buyer influence EuroInd position in terms of success, big sales for Belle Engineering Ltd OEM manufacturer will create more business for EuroInd therefore other OEM manufacturers will see the progress/output and determine whether is it not more feasible to change supplier.
Target consumer groups
EuroInd sees that its products can not appeal to all the consumers. Obviously if the hydraulic products are properly positioned, prospective purchasers would instantly recognise the benefits or advantages of these products over its competitors goods. Main methods EuroInd would use to target and promote the products are: Direct mail, Magazines, Personal Recommendation and infrequent appearance in Yellow pages.
Direct mail for personalisation/flexibility, choice of audience, but disadvantages of “junk” mail image and relatively high cost per exposure in comparison to other methods. Magazines are good for demographic and geographic region selection, high quality and prestige, long life and high number of pass along readership. It has high costs for printing, some issues are wasted. Similarly for yellow pages which seemed a cheaper alternative to magazines, but with less capture of the potential consumers. Personal contacts establish trust and good intention to create relations, but may be lengthy period before acquaintance.
Positioning is how you give your product a brand or identification, or how it is perceived by the consumer. Positioning can involve researching and the development of a distinct position for each segment. The chosen strategy is positioning against another product and a competing business. This strategy takes on the explicit comparisons. It is aimed at attracting the customer from the reference brands by offering advantages and benefits in the technological and technical side of the product. For example the motors have better torque, power, higher operating pressure (extra 50 bar) characteristics over its rivals. There is also the price incentive.
The current approach is reviewed from time to time in order to assess whether the market position can and should change to meet the new conditions of the market for its products. The ability of the company to adjust will be greatly enhanced by the upto-date knowledge of the marketplace gained through continual monitoring. By continuously trying to get good data about its customers, the segments they fit in to and their buying motives, EuroInd maintains a position which makes sense the most.
Last, EuroInd sells products business-business operation more frequently and therefore realises that the end users must have their need satisfied by offering reliability on their components. If the marketing concept holds then the key to achieving business goals is “determine the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors” (Kotler P, 1988).
EuroInd operates in a large market. Has small advantages over its rivals and is faced with difficult product differentiation being forced to work mainly on price. Forecast to the future should be bringing a steady increase in business over the next few years, with reasons being stronger demand for manufactured consumer and capital equipment products throughout the global economy. Improvements to the Eastern Europe, Asia, S.America s’ structure can also indicate a stronger demand.
The Book of Marketing Michael J. Baker
Business Studies Hall, Jones
Understanding the Small Business Sector(1994) Storey DJ
Eaton Hydraulics (website) www.eaton.com
Principles of Marketing (2001) 3rd European ed. Kotler, P et all
Marketing Management (1988) Kotler, P