Video rental shop Business Plan
Section 2:
Business Proposal
The assignment that has been set is to investigate ways in which factors such as the media and market research can help a new retail shop become successful in an area with other local competition. We will be planning a small-scale marketing campaign with a marketing plan.
My business idea is to open up a video rental shop. At this shop, people rent or buy videos, DVDs or console games. My proposal will be for opening in the Higham Hill area of Walthamstow. In this area along Higham Hill Road, there is already a shop called 'Hollywood Nites', but as well as being a video rental shop it is also a grocery and only has a small area at the back of the shop containing videos an DVDs. Hopefully my business will be able to expand and eventually chain of shops can be situated across Walthamstow with similar themes.
I have chosen this idea because I believe that people, especially in Walthamstow, do like to watch movies, however I find that my father (and probably other people too) goes to Hollywood Nites only to find that there are no good films because all of the decent ones have been already rented out or the cant find what they are looking for because of the layout. Therefore, we often end up using Blockbuster Video, but the closest is in Tottenham Hale - situated about 2 miles away from the part of Higham Hill that I live and where Hollywood Nites is situated. The videos would be in demand because there is only one cinema in Walthamstow but it only has three screens and it is closing down very soon. Therefore many people of all ages will either have to travel all the way to UCI cinema which is ages away or they will have to wait for films to come out on video or DVD so that they can rent out the film and watch it whenever they want from the comfort of their own home. I am proposing to deliver this service. I also think that selling these items will make a high income, and when renting out new films, lots of profit can be made in the long term. Potentially, this business will be of interest to an audience of all ages, sex, tastes or social class. It is also a market that has a high turnover of products (new video releases are being made all the time) meaning there will be constant demand for the products/services.
Section 3:
Business Name & Logo
After having chosen a business to propose, I now need to think of a business name which will give potential customers the general idea of what the shop is going to provide. Although making a name that is witty is not important, as it could take away the simplicity, people could become more attached to a name they like and are more likely to quote the shop to their friends. By this method, people who live further away and normally use a store like Blockbuster videos might take advice and try my store instead.
Before coming to a conclusion on what the name of my business should be, I have brainstormed a list of different possible names. Afterwards I will come to a conclusion on which one I think is best. My ideas for the name of the business are:-
- Video Rentals - Rent-a-vid
- Home Cinema - DVD Distributors
- Mental Rentals - Cinema Scenes / Sinema Scenes
- Premier / Premier Videos - Video Views
- Home Entertainment - Premium Premiers
From these names in the Brainstorm, I narrowed the selection down further to
- DVD Distributers - Mental Rentals
- Premier Videos - Video Views
After asking a few people for their opinions of which of the four potential names use,
I came to a conclusion. The two most popular were 'mental rentals' and 'premier videos', and as I liked both names I decided to call the company/business 'Mental Rentals', and the shop's name will be 'Premier Videos'. To make it easy for customers to distinguish between the video section, DVD section and console games section, they will be differently themed (e.g. with different colours) and have different names. For the Video section I have decided to use the name 'Video Views', for the DVD section I have decided to use the name 'DVD Distributors' and for the Console games section I have decided to use the name 'Games Galore'.
I have also designed a logo for my business. The logo is shown below:-
Section 4:
Aims, Mission Statement and Constraints
An 'aim' is the long-term intention that a company uses objectives to try to reach. The aim is the main reason that the business is set up, because the aim is the reason why the founder has set up the business in the first place. They are often expressed in the form of a mission statement. An example of an aim would be:-
To be the most popular video company in London, providing all the latest videos, DVDs and console games to buy and rent at a profit.
A business's 'mission statement' is a short statement detailing the aims of the business as a way of stimulating workers and encouraging them to work harder when they see the aims that they are working towards. The mission statement is a general aim describing the core purpose and intention of the business.
My mission statement for my business is:-
"Mental Rentals is a company to be proud of. Our mission is to become the ultimate leaders in the business of video rentals. We will strive to provide access to every video release we can get hold of, and meet all of our customers' needs. Equal opportunities are a policy here, and we know that we have the ability to be financially wealthy, respected and enjoy our work."
An 'objective' is a short-term, medium-term or long-term target which gives the people working for the company a direction to aim in. All companies, whether it is a sole proprietorship, partnership, limited company or a plc should have business objective. An objective is a common target for a team in the company, which makes it easier to co-ordinate actions and increase the team spirit. A company uses these objectives as stepping-stones towards reaching their aim. There may be many objectives or very few needed before attaining this aim/goal. Objectives need to be:-
S - Specific - this allows employees to focus on a particular
activity.
M - Measurable - this allows the firm to assess performance
against intended targets.
A - Attainable - if an objective is not attainable, it may be de-motivate the work-force.
R - Relevant - the objective must contribute to the achievement
of the overall aim.
T - Time - it is important that to maintain efficiency, time limits
are placed on objectives. It also makes measuring
performance easier.
A short term objective is an objective which the business sets out to achieve within about a year (for example breaking even). A long-term example of an objective is an objective which the business sets out to achieve in the more distant future (for example to be able to open up retail outlet in many different countries around the world). Another example of a business objective is 'to survive competition'.
My business objectives for my business are:-
) Survive competition.
2) To break-even (neither be in profit or loss) within 18 months.
3) To be making weekly sales of 80 and weekly rentals of 100 within 6 months (Including videos, DVDs and video games.
4) To be able to open a new outlet within four years.
5) To increase market share by 1% every two years (Market share is the proportion of sales made by one business in comparison to all the sales in the market).
6) Maximize profits and sales.
A 'constraint' is a factor which limits or prevents to what extent a business can achieve its objectives, and thus its aim/goal. Constraints are split into two different categories:
) 'Internal constraints' which are constraints within the company's control (for example finance, space and experience)
2) 'External constraints' which are constraints that the company have no control over (for example planning permission, competition and consumer tastes).
The internal constraints that my business will face are:-
) The lack of funds (a loan will have to be taken out to get the business started)
2) Limited shop space
3) Available services (for example electricity and communication services)
4) Lack of business experience
5) Location.
The external constraints that my business will face are:-
) Consumer tastes
2) Competition
3) Transport links
4) Population of local area
5) Availability of films and games.
Section 5:
The importance of Marketing
Marketing is the management process involved in identifying, anticipating and satisfying customer wants profitably. It is a function which links a business/company with consumer tastes to produce a product or service which will have the best demand at the right place at the right time. Marketing decisions are made based on the findings of market research, and carried out through the marketing mix. The product will satisfy customer needs and wants, and marketing will help advise what price to set the product or service. It will also ensure that the outlet is in it's most convenient place and will promote the product/service so that people are aware of its existence.
A marketing plan is a report which details a business'/company's marketing objectives and strategy (for example costings, forecast results and contingency plans).
These are the main stages that I will include in my marketing plan. They are to:-
Stage 1 is important to allow my business to grow year by year and expand. Examples of objectives for the coming year based on goals for three to five years time may include:-
) Targets for sales
2) Targets for market share/establishment in the market place
3) Targets for distribution levels
4) Brand image ratings
Stage 2 is important to identify customer wants, and help make decisions on the marketing mix. Stage 3 is important because creating a marketing audit will ensure full knowledge of the business' marketing assets. This could be supplemented by SWOT analysis, to identify the business' marketing strengths, weaknesses, opportunities and threats. I can therefore act accordingly to competition to survive the competition and use the strengths of my business to compete with competition and put them under threat. Stage 4 is important for achieving the objectives that operates within a defined budget and covers:-
) New product development
2) New product launches
3) Going brands
It is important because I need to understand that my budget and available products will limit how many products (videos)I will have and what genre of videos I have. Therefore my ability to maximise profits and sales will be limited.
Production Orientation to marketing is adopted by many businesses, and it means that they design and create a product and then attempt to convince consumers to purchase the product. Market Orientation to marketing is where the business does market research to find out what consumers want before creating the final product. Market Orientation is more suitable these days because, although it costs a lot to carry out market research, it dismisses the risk that the business creates a product which nobody wants to buy. Having said that, I shall use mostly product orientation. This is because I can only sell videos/DVDs/games that have already been produced, however, some market research will help me understand what films are most popular so I know what and how many videos to purchase to sell on.
Market segmentation is the analysis of a market to identify the different types of consumer. Examples of these different types of consumer are splitting them into different age groups, ethnic groups and gender. The different parts of each market (e.g. an age market) are known as market segments. Examples of these market segments are:-
) Under 18 yrs
2) 19-25 yrs
3) 25-40 yrs, etc
A market niche is a gap in the range of products/services offered within a market. Market niches are often the openings in a market which allow new businesses to enter the market with products for a market segment.
I will attempt to segment my market by:-
) Age - because of age certificates on films
2) Genre of films preferred (e.g. action, romance, animated etc)
3) Ethnic groups
4) What film-playing device they own (e.g. VCR or DVD player)
With market segmentation, it will allow me to develop a marketing strategy, as it will help me to identify target markets and niches that then can lead to development or improvement of a product. Knowing the types of consumer prone to become customers can allow the business to develop a competitive differential advantage over competitors.
Section 6:
Market Research
Market research is the process of collecting, collating and analysing information about consumers and markets. This could include information about consumers' sex, age, occupation, income, habits, likes and dislikes, where they live, where they go and what they do in their spare time, which newspapers or magazines they read, and when they listen to the radio and watch television.
Stages of Market Research
The market research objectives for my project are:-
) To find out what the best target market for my business is. I need this so that I can aim my products/services at a specific audience so that I can provide a good service to them and maximise the profit.
2) To find out what the general demand of the product will be. I need to know this because I will not want to produce a product/service and put it on sale if nobody wants to buy it.
3) To find out consumer habits. I can find out what they like and what they don't like so that I can alter or completely change products to the likes of the interviewee, creating a better product or service.
4) To find out how much people are willing to pay. This is because I need to know how much to price my products/service. If I charge too much then people will not be willing to make the purchase, however I want to charge as much as possible without putting people off so that I can maximise profits to expand the business.
A company can obtain the market research information in 2 main ways:-
) Desk research involves the studying of information which already exists. Such information is known as secondary data. This may be the internal records of a firm, such as sales or accounting records or salespersons' reports. It can also be information published by someone else, for example newspapers, or government reports, such as the National Census, Social Trends, the Central Statistics Office Digest of Statistics. Libraries are a good source of such information. For my project I will use Mintel reports and Keynote reports to find out about the market ( whether it is growing or in decline), Yellow Pages to find out about the local competition to my business and census data for the income and lifestyle of the local population.
2) Field research involves the collection of primary data or new information, for example, by the use of questionnaires. A list of carefully chosen questions are asked to existing or potential customers by personal interview, by telephone or by post. Initial field research normally focuses on obtaining quantitative data, which means gathering statistical data about the consumers which can easily be collated and analysed to give a general consumer profile. It may be followed up later by more detailed qualitative research through consumer panels or one-to-one interviews. For my project I will use questionnaire results to find out peoples' general tastes habits and situations, and competitor analysis so that I can see how the competition is working and get some ideas and tips on consumer tastes and what the consumers like to finding the market.
I have designed a questionnaire so that I can find out some information about the population. For a copy, please see Appendix 2 in the appendices section.
In my questionnaire, I asked people:-
) What is your gender? - so that I can segment the market to pick a target audience.
2) Which age group do you fall into? - so that I can segment the market to pick a target audience.
3) Do you have a child/children? - this will influence the type of films they rent/buy.
4) What area do you live in? - so that I know that if they live in the area close to where the business will be set up, I can see in conjunction with the next question if they are willing to come to the business from nearby.
5) Would you be willing to go to the Higham Hill/Parmerston area of Walthamstow to rent/buy films? - to find out if people nearby will be willing to come to my shop.
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3) Do you have a child/children? - this will influence the type of films they rent/buy.
4) What area do you live in? - so that I know that if they live in the area close to where the business will be set up, I can see in conjunction with the next question if they are willing to come to the business from nearby.
5) Would you be willing to go to the Higham Hill/Parmerston area of Walthamstow to rent/buy films? - to find out if people nearby will be willing to come to my shop.
6) On average how many films do you rent out per month? - so that I can see how much service I am likely to need to provide, and to find out how popular the video/DVD rental market is.
7) Which of these do you own (hardware)? - so that I can see what people own so that I know to provide software for the popular pieces of hardware (e.g. Dreamcast may not be owned by many people so it would be pointless for me to provide a rental service for it as I'm unlikely to make a profit on it.
8) What genre of films people do you like to watch? - so that I know what type of films will be popular so I know how many of each film release to stock.
9) How much are you willing to pay to rent out a film on video or DVD per night? - so that I know how much to charge for film sales/rentals whilst maximising profits without putting people off by overcharging.
I used closed questions in my questionnaire because closed questions allow me to compare results and show the results in a graph. This makes it easy to see which answers are most popular and which are less popular. They are also easier and quicker for the person answering the questions to answer than open questions, so the person is more likely to be willing to answer the questions.
I carried out a Pilot survey using my original questionnaire (see appendix 1) to see if I would get the sort of answers that I am looking for, and to see if I can make any changes to it to make it better. The questionnaire does give me all the answers that I need to know, and the feedback has indicated that it is straightforward to follow and answer the questions. This is mostly because it is relatively short and the questions are closed questions.
As a result of my Pilot questionnaire, I made a few changes before producing my final questionnaire (see appendix 2). The first change that I made was that I added the choice of 'maybe' to the question 'would you be willing to go to the Higham Hill/Palmerston area of Walthamstow to rent/buy films'. This is because some people, when asked, were not sure whether they would be willing to. Also, with questions 7 and 8, I gave the answers numbers because it made it easier to record the answers on the record sheet. It meant that when I was given an answer to either of these two questions, instead of having to write out all of the words each time, I could just write the numbers out. This saves time and looks neater on the sheet.
As I am setting up a video and DVD hire/retail shop, market niches can easily appear to new competition. Film hire and retail is a service that is equally used by each of the segments of the market, therefore my questionnaire will be aimed at a random sample of people. However, the different market segments have different tastes in film and spend different amounts of money over different periods of time, and I am hoping to find out what these habits are so that I can comply with demands which are attractive to the different sectors of the market. The sample that I aimed for was a random but representative sample, meaning that I chose to ask people of as many different ages and a similar amount from each gender. Everyone in the public had an equal chance of being chosen to answer the questions.
There are many limitations that I have to my market research. For instance, Mintel reports and Keynote reports would be very useful for me to seek information on my market, however they cost hundreds of pounds each and we cannot afford them. I therefore used the internet to get hold of brief summaries of my required market. I can also use special business libraries to get a look at the full versions of these reports. I have also used the website 'www.yell.com' to seek what competition I have in my local area is. I can then use competitor analysis to get ideas about how to run the business well. I expect my results from my market research to be relatively accurate because I used both primary and secondary data. The questionnaire results should be accurate because it was a fair and random sample of people, however the results could easily be accidentally biased and that we do not know the views of everyone, just a sample. The Mintel and Keynote reports will be accurate because they are detailed reports of factual events using factual and accurate statistics of the general market.
Section 7:
Analysis & Evaluation of Market Research Findings
Secondary Data
The first piece of secondary research that I found was at the website www.yell.com. I used the search engine to find business' with the description "VIDEO & DVD - HIRE AND RETAIL" in the area of "E17". A list of the seven companies, complete with address and telephone numbers, that I must compete with within Walthamstow came up on screen. In conjunction with this, I used www.multimap.com to find a map of the Walthamstow area, and located these businesses on the map and then located where I am planning to locate my business. This makes it easy to see visually how close I am to competition, and I will also now know where to go to carry out competitor analysis. (See appendix 3).
The second piece of secondary data that I found was at www.mindbranch.com, and it is a market report on the "Video Retail & Hire". It is relatively recent (published in November 2000) and tells us that the market is growing, especially in the DVD sector. Between 1998 and 1999 the UK market for retail and hire fell by 5.7% to the value of £1.44billion. Due to the release of the digital versatile disc (DVD) in 1998, the market grew by 11.3%, which shows me that the market is growing. I am also told that 'Titanic' and 'The Full Monty' are popular films. I have also found out that video retail is the largest sector of the market, with a share of around 61.5% in 1999. This piece of research also suggests to me that using the internet may be a good way to sell videos, advertise and promote the business. The main information which gives me confidence that my business should do well is the market is forecasted to increase by 94% within five years from 1999. (See appendix 4).
The second piece of secondary data that I have found is an executive summary of a keynote report from www.keynote.co.uk. This is more recent than the last - published in June 2002. This report also shows an increase in the market, of 60% to 69.6% between 1998 and 2001. A drawback is that film piracy might limit the success of firms in the future. I am told that competition in the market has increased, and that much competition will come from online retail. A positive sign though is that the market is forecasted to continue increasing until 2006, however by 2003, the growth is expected to slow down. The DVD market is expected to increase for many more years, however the VHS market is expected to slow more dramatically. This suggests to me that I should concentrate more on the DVD sector than on the video sector. (See appendix 5)
Primary Data - Questionnaire results
I have chosen graphs rather than tables to show my data because it shows the data more clearly and one can see the necessary information at a quick glance, without having to do any working out or difficult comparison. The fact that my questions are multiple choice questions means that I have used pie charts and bar charts to show the data.
This pie chart shows the percentage of the people asked in each age group. It shows us that in the questionnaire, more than half the people that I asked were aged under 18. Aged between 25 and 40 is next highest, and then the other 3 age groups are similar in amount. This means that the . results of the questionnaire might be biased k towards the views of under 18s. I used a pie . chart to show this information because it allows us to not only easily see the relationships between
each of the age groups easily, but also it allows us to see how many people there are for each of the age groups in comparison to the overall number of people surveyed.
Primary Data - Competitor analysis
Hollywood Nites
Business: Video and DVD rental, ex-rental sales and limited console games. Also newly transformed into a grocery store in conjunction with this.
Situation: Small building on a street corner along a main road. Near a park (playground, playscheme and recreation field), Co-op and surgery. Only reachable on foot or by W15 bus.
Prices: Ex-rental videos £2 - £10
Video rental £1 - £2.50 per night
DVD rental £2 - £2.50 per night
Console game rental £1 - £2 per night
Popcorn 80p
Quantity of new release films bought: Videos 1 - 4
DVDs 1 - 2
Specialise in what market: All
Customers: Approx. 6 people in 30 minutes.
Apollo Home Entertainment
Business: Sale and Rental of videos, DVDs and console games. Also basic refreshment for sale (drinks, popcorn and sweets).
Situation: Medium-sized building along a main road. Very close to Walthamstow market and the EMD cinema. Huge transport network.
Prices: Video sales Various prices (up to £17)
Video rentals £2 - £4 for two nights
DVD sales Various prices (up to £20)
DVD rentals £2.50 - £4.00 for two nights
Console game sales Various prices (up to £45)
Console game rentals £2 - £3.50 for two nights
Quantity of new release films/games bought: Videos 2 - 8
DVDs 2 - 6
Console games 1 - 3
Specialise in what market: All
Customers: Approx. 9 people in 30 minutes
Summary of Main points from the Findings
* DVD sales/rentals growing rapidly, video sales/rentals growing steadily but slowing.
* Competition in market growing.
* Market share increasing and forecast to grow hugely over next few years.
* Likely to have a sufficient demand from local area.
* People rent out mostly between 1 and 4 films per month.
* £2.50 per night is the most popular price, with £2 in second and £3 in forth place.
* People without children rent out 3 times as many films than people with children.
* Animated, adult, action and spoof films are popular among people aged under 18 and people without children.
* People aged under 18 seem to make up most of the rental market.
* People aged under 18 show at least some interest in all the different film genres.
* People aged 18-40 seem to show no interest in war, animated or adult films but a 35% interest in the other genres.
* People aged 40+ show no interest in action, animated, spoof or adult films, and show very little interest in comedy films.
* Romance films is the most popular genre of films among people aged 40+.
* Games consoles are not owned by many people, so console game sales/rental may be a small and unprofitable market.
* On average between 6 and 9 customers enter film rental/retail shops within 30 mins.
* Popcorn and light refreshments might help increase no. of people using the shop.
The Market
Film sale and rental shops tend to provide films of all genres and all of the new releases, with the exception of some outlets which only specialise in films from a certain country, ethnic group, or language. This means that market niches do not appear and everyone in the area will be happy to use the service. This also means that they maximise their revenues, however not always their profit margins.
My business will be no different in the sense that I hope to provide all of the new release films for my customers, and not concentrate on certain film genres. This is because all of the genres are popular, however different genres are more popular with different segments of the market. Before, there may have been a risk to this method when it comes to knowing how many copies of each film to purchase for rental, however a new method of distribution introduced in 2000 may benefit larger businesses in the market, and possibly businesses like mine in the near future. The keynote report (see appendix 5) relays information that rather than paying the film studio for a certain number of copies of each film (meaning the business risks not being able to cover the costs of the purchase), the rental company shares the revenue on each film hiring with the film studio. This means that no matter how many copies of each film you purchase, you only pay a certain amount of the rental price each time the film is rented out. Therefore the business does not run the risk of not covering the purchasing costs. This service will obviously only be available to businesses that the film studios see as being successful enough.
Although my business will provide sale and rental of films of all genres to all people, there are main segments of my market that seem to stand out. The market seems to be mostly attracted to people aged under 18 and without children. Therefore to maximise the number of people entering the store, the store layout and appearance will be slightly more orientated towards their likes than the likes of the people in the other segments.
These people seem to rent out between 1 and 4 films per month and are mostly willing to pay £2.50 per night for each rental. This means that from one person in this market segment, I could get a payment of between £2.50 and £10 per month. These people seem to particularly like action, war, comedy, animated and spoof films. Video players, DVD players, and PCs seem to be quite popularly owned by these people.
Section 8:
Business Environment
Impact on my Business
Business environment is the combination of factors which lie outside an individual firm's control, but which have an effect on its performance. A business needs to be aware of it's environment because:
) when it is planning, it can try to predict the impact it's business environment may have on its plans.
2) if an unexpected change in a business' environment occurs, the business will need to react to that change.
The business environment can be split into five sub-categories:
S social restraints
L legal restraints
E economic restraints
P political restraints
T technological restraints
These are the factors which may affect my business:
) Social: - the local population to my business will limit my sales and revenues
- ethical issues such as erotic films, film certificates and offensive films
- consumer tastes will affect sales of certain films
2) Legal: - methods of advertising and promoting and must be within the law
- I cannot supply films which have been banned by the UK government
- it is illegal to sell films to children aged under that shown on the
film's certificate
- employment laws, such as minimum wage and minimum required
standards for workers in the workplace
3) Economic: - wealth, reputation and business decisions from competition
- the state of the economy and change in the market share
- the prices of the films which are determined by the film companies
4) Political: - government policies towards certain films or film genres
- tax prices for retail licences and film imports (e.g. from USA)
5) Technological - methods of membership
- film piracy
- rise/decline of film playing hardware and software (DVD, VCR, CD)
Competition
Local competition will have effects on my business. I cannot price my films at a price that is too high because otherwise the customers would begin to use the service provided by my competition. This is because if two businesses where selling the same product of similar quality, people will go for the cheaper one, otherwise it is a waste of money. This is why I should not put my prices higher than local competition, as my sales will become severely limited. I also don't want to set my prices too low because although I am likely to get more customers and make more sales, I want to cover my costs and maximise my profits. As a result, the prices should ideally be very close to the prices the competition has set. This means that the sales will be limited because people will be split between using each of the business (mine and the competition). The profit from selling films can only benefit from prices which are as high as possible (without being too much more than competition) because I will have to pay for the films to sell them on, and I will have to pay for the films individually so I have to make as much profit on each film individually. With film rental however, shall have to make a decision on whether to have similar prices or lower prices because each method has potential to provide me with the most profit. This is because with prices similar to competition I will have fewer customers which pay more money for a set number of films but the demand will slow quicker. However with the same number of films, if I have prices lower than competition, over a longer period, I will have much more customers but each paying less money. Demand will also take longer to decline, however this method (although unlikely) has potential to bring in higher profits than if prices were similar to prices set by the competition.
Competitor analysis is identifying the strengths and weaknesses of competitors and their products. This can be used to get ideas about factors in my own marketing plan.
For my competitor analysis, I will survey four businesses. Two businesses were briefly surveyed in the 'primary research' part of section seven but that was to link to and help draw a conclusion to the findings of the questionnaire.
For my more detailed competitor analysis, I have chosen to survey:-
) The location - because this will affect how many people use the businesses and will affect the target market (i.e. if it is situated in a busy area near a playground, there is likely to be higher demand and the market might be younger.
2) Transport links - this will increase the sphere of influence, and so will affect the demand of the product/service.
3) Product/service - because I see exactly what they are selling in conjunction with the films to increase the number of people using/entering the outlet. I can also see what films the businesses specialise in and compare this to how effective and popular the businesses are.
4) Pricing - so that I know how much my competition is pricing the products/service, so that I can price mine accordingly.
5) Target market - so that I can compare different businesses to see which target market would generate the most profit.
6) Quantity of new-release films bought for rental - so that I can get an idea on how many I should purchase for my business without purchasing too many.
7) Distribution services - to see what ways the businesses try to promote the product further and generate more demand. I can then consider whether these method will be suitable for my business.
8) No. of customers in 30 mins - so that I can see how popular each business is in relation to the business decisions it has made (e.g. pricing, location, product, etc).
I then carried out my competitor analysis using these factors, and the results are shown in the appendices (appendix 6).
My competitor analysis was successful and gave me the answers that I was looking for in the survey. I shall analyse the results according to the marketing mix because this is the way that I can get ideas relating straight to my marketing plan, which will also be based on the marketing mix. The marketing mix is often referred to as the four P's:-
Price-
All of the businesses seem to price their video rentals similarly. Slightly older films, which have begun to lose their demand, have been priced at £1-£2 per night or £2-£2.50 for 2 nights. New release films have been priced at between £2.50 and £3 per night or between £3 and £4. DVD rental costs between £2 and £3 per night and costs up to £4 for 2 nights. Only one of the business concentrates on selling DVDs and videos (Apollo Home Entertainment) and these cost up to £20 for DVDs and £17 for videos. Two of the other businesses use the method of selling ex-rental films, which is a good way of getting rid of films that have lost their rental demand. This will be useful when designing my marketing plan because it suggests to me what prices I should price my products/services. These results show definite similarities to the prices suggested from the questionnaire.
Product-
The competitor analysis shows that Asian films for the films aimed at the adult Asian community is not popular or in demand, probably because there is not a large population of Asian people. Videos and DVDs are generally used in all of the shops for rental and videos are available for sale in some of the outlets. The results are significant to my marketing plan because it shows me that light refreshment goods such as drinks and sweets may boost the number of people coming into the shop. Whilst in the shop, some of these people may think that although they have only entered for some drinks etc, they might as well rent out a video. Also, it suggests to me that selling films that have lost their rental demand may be an advantage because it is making the best of an asset that would otherwise be left on the shelves to collect dust. It also advises me that I should only purchase 1, 2 or 3 films for rental at my outlet due to the limited size and reputation of my business.
Promotion-
None of the four businesses have major advertising campaigns, except occasional adverts in the local newspapers ('the Independent' and 'the Yellow Advertiser'). There would probably have been a larger marketing campaign around the time of the initial opening of the outlets but now, the population knows about it after dense campaigning and there is no need apart from the occasional advert. DVD distribution by post was also suggested, however this has risks such as the DVDs being lost in the post etc. Generally, only in-store distribution is used and this suggests to me that for my marketing plan, I should keep it simple by only making in-store sales.
Place-
The outlets are placed along main roads that have a good transport network. This is relevant to my marketing plan because it tells me that this proves to help increase the number of people using the services, and tells me that because my business is also on a main road with a decent transport network I should also get a good demand for the products/service. If nearby other main places of interest, this should also help increase the demand.
There is the opportunity for me to enter the market place because people don't like to have to go too far for products/services of this type. Therefore where I position my business, I should get people from the local area coming to my outlet rather than others slightly further away. One reason for this is because film rentals and sales are not always planned, but are also sometimes made on impulse. Also, brand names (carrying reputation) should not be much of a disadvantage to my new business because the customers will know that neither my business nor my competition creates their own products (DVDs, videos or games) but get them from the same place - the film producing companies such as 'Paramount' and 'Twentieth Century Fox'. Therefore, as long as the price is similar, where the customers get their products/services from should not put them off business they know less about. The possible idea of delivering DVDs by post also adds to the convenience customers can receive.
As I found out in the questionnaire that I did, people generally return to film rental outlets multiple times within months. One unique method of rental distribution that I could use to position my service into the market is that the customer could pay a certain amount (either in-store or over the phone using a credit card) annually, then once (or twice) per month the number one DVD film in the charts at that time could be sent to the customer by post - to be returned within 4 or 5 days, either by post again or in-store. This would only work for DVDs because as I have tested, videos (whilst in their cases) will not fit through most letterboxes. Apart from this, positioning my service/products in the market soon after the initial opening is severely limited by my funds and the nature of the product.
Eventually, in years to come, other ideas can come to practice that will increase my share in the market, which require more funds. One of these ideas is a mini one-screen cinema, which is a room that can contain a small audience who pay to see a film that has recently been released on video or DVD. The film shown changes each day. Another idea is a mini arcade, which has games consoles securely contained within a cabinet. The controllers however can be held, but not removed. Customers pay for a certain game. The worker then unlocks the cabinet to insert the game into the console, and then relocks it. After a time limit, the worker retrieves the game and places it back behind the counter.
Impact of my Retail outlet on the Local Community & Businesses
The opening of my retail outlet will affect the local community in positive and negative ways. It will also mean that my competition will have to adjust their methods because of me, and I will have to analyse the effect competition will have on my business. My business, 'Mental Rentals', may cause my competition to lower prices to a price lower than mine to intensify competition and to attempt to drive me out of business. This may not be a good idea for the companies that are my competition because it will severely limit their revenues, and thus profits, possibly casing them to go out of business instead. It will also mean that my population will be limited, and when my business outlet opens, it will probably lower the population of my competition.
Other businesses in the local area may also benefit from a process called 'the multiplier effect'. The multiplier effect happens when an initial increase in expenditure in a local area leads to a multiple increase in income in the area. This will happen because the people who are employed by my business and, if I expand in the future, people involved in building work etc, will earn more money. They will then go out and spend this extra money at local shops (buying new things and using services) so that the people working in these shops will also earn more money. These shops can also eventually expand and employ more people with higher wages too. These employees will also go out and spend their money, so the multiplier effect continues. Therefore the overall effect to the local community can be much better than the expenditure. Two businesses from the area local to my business that will benefit from the multiplier effect are:
* Take-away restaurants, as people who rent out videos at night to watch are proven to generally also not want to cook, but spend the evening chilling out whilst stress-free.
* VCR and DVD player selling businesses because people who want to watch the films that I am supplying may not have a player, thus meaning my business may influence them to purchase a player from a local dealer.
Although this is not a local business, the film companies will also benefit or suffer negative effects due to my business. The benefit will be that they will receive a revenue from me because I must buy my films off of them to sell/provide for rental to the customers. The negative effect my be that there may be a decline of people purchasing the films because more people may only want the film temporarily to watch once, and therefore may just resort to renting out the films.
The positive effects on the community will be:
* Increasing social activity, so people can talk to each other about their views on films, and can invite people over to watch films with them. It also gets couples spending quality time together in the evenings.
* Increasing the number of jobs available to people in the local area (eventually).
* There will be less people on the roads at night/in the evenings making noise because many of them will be at home viewing my films.
* The people in the community now do not have to pay in order to travel to a cinema to see a film within a limited amount of time. Instead they can rent/purchase films to watch from the comfort of their own home whenever they want to. This is more convenient and efficient for them.
* Government may benefit from tax, thus meaning that they have money to spend on local services and infrastructure (e.g. building new schools and hospitals), benefiting the people of the community.
The negative effects on the community will be:
* It may increase traffic on the roads, and cause local parking problems.
* It may generate more noise from extra people and extra traffic.
* Wrappers/containers from the refreshments may slightly increase litter.
The normal costs (cash) and benefits that a business faces are called 'private costs' and 'private benefits'. Business activities bring many benefits to those involved, including the local community, however also negative effects. These effects on the community are 'externalities' (collectively known as the business environment), which result in external costs and external benefits. Although these externalities do not always have cash costs or benefits, they are valued by the business, and valued by the government or the local council and given a cash value.
The government/council will want to consider the full costs and benefits of any proposed new business activity. This means that not just the private costs and benefits that affect the business, but also the external costs which affect the wider community. To do so they will look at the full social costs and benefits, which is the sum of the private value and external value.
* Social cost = Private costs + External costs.
* Social benefit = Private benefits + External benefits.
This is known as cost - benefit analysis, which is a technique that is often used by the government and councils to evaluate business proposals and investment decisions. It takes into account the full social costs and benefits when deciding whether the business activity or proposal should be allowed. This technique can be use in my marketing plan in order to evaluate the impact of my proposal for my new 'Premier Videos' retail outlet on the local community.
The general rule is that if the social cost < social benefit, then the proposal is likely to gain planning permission, however coming to a decision is difficult because it is difficult to put a value on all external factors (e.g. noise pollution as an external cost).
The table over the page works out the social values, and will determine for me if my social cost < social benefit.
Private costs and benefits will be valued in the table as yearly cash amounts for the next few years, because it is impossible to foresee these values deep into the future, and due to possible changes such as expansion and price changes in the future, social costs/benefits can change. They will be cash amounts because this is how they would be measured in real life and it is not too difficult for me to estimate what the values will be for my business.
However, external costs and benefits often do not have cash (e.g. noise pollution or traffic congestion). In the case of noise pollution in real life, a cash value is used, because they would evaluate how much it would cost to introduce double glazing windows to the point that the sound falls to it's original levels.
Practices and evaluations like this are not possible for me to do so I have devised my own method of valuing external costs and benefits. The values will be measured out of 1000. If a factor gets a low score (close to 0), then it has barely any effect on the public, and is also very unimportant. If a factor gets a high score (close to 1000), then it will have a large effect on the public that will make their lives either almost unbearable or improve greatly. It will also be an extremely important cost factor because it may be dangerous in any way to the public.
I also filtered out factors which are of no or limited importance of contribution towards the social cost/benefit. This is because they are unnecessary and only the relatively important factors will have a noticeable impact on the community.
Below is my cost - benefit analysis:
Costs
Benefits
Private...
¬ buying/renting land or property
~ 5000
¬ employee wages (youth(s) or family member(s) at weekends and evenings)
~ 2500
¬ tax
~ 1000
¬ film purchases
~ 4000
¬ increased collection of films available (assets)
~ 2000
¬ revenues from membership
~ 3500
¬ revenues from sales
~ 3000
¬ revenues from rentals
~ 5000
External...
¬ increase in traffic on the roads
~ 500
¬ local parking problems
~ 600
¬ may generate more noise from extra people and extra traffic
~ 350
¬ wrappers/containers from the refreshments may increase litter
~ 400
¬ increasing the number of jobs available
~ 400
¬ convenience of not having to go to a cinema, but being able to view films in comfort at home
~ 600
¬ government tax resulting in better schools, hospitals, etc
~ 700
¬ increase in social activity
~ 600
Social (full) ...
(private... + external...)
4,350
5,350
If I do the calculation Social benefit - Social cost, I get the figure 1000. As this is a positive number, this means that my business should be a benefit to all involved (me, the public, employees, the government, etc). This means that when I propose my business to the Higham Hill/Walthamstow council, I should be successful in attaining planning permission.
Legal and Ethical Issues
The law in many ways, resulting in me being prosecuted or fined, may affect my business when setting up and affect my promotion campaign and materials. Local trading standards officers are likely to make sure that a am complying with these laws, as well as making sure that I am going about my business ethically. My business may be closed down, and I could end up going to prison under the criminal law. Such legal issues I will need to address in my marketing plan are:-
* It is illegal to sell or allow children to rent films when they are under the age of that shown on the certificate of the film. This limits the market of certain films.
* Any workers that I employ have the right to receive at least the minimum wage. This means that I must pay this, meaning that my costs towards labour will be at a minimum of a certain amount.
* It is illegal for me to create, sell or make available pirate videos for sale or rental, which have been copied illegally.
* Planning permission is needed in cases such as the change of use of a building, the change in size of a building and any large items to (i.e. shop signs/ large banners) that need to be placed on or outside the building. This law is to protect the community from large, dangerous or hazardous changes.
There is also the civil law to protect the customers. It gives the customers the right to a 'proof of purchase' document that resembles the transaction of the purchases. Through this, providing the product is still in good condition or is unopened, they have the right to a refund. This is also the route consumers must follow to claim damage payments for any loss, injury or inconvenience suffered. Two of the Acts which allow consumers to have their cash back are:-
* The sale of Goods Act, 1979 - which states that the products sold must be of merchantable quality, fit for the purpose for which they were sold, and must be described correctly. This means that the quality of the picture shown on the video/DVD films sold must be of a sufficiently good quality for the viewer.
* The Trade Descriptions Act, 1968 - which means when advertising the product, it must be described correctly. This means, for example that I cannot describe action films as romance films, etc.
* The Weights and Measures Acts - which states that it is illegal to advertise and sell a product (such as the popcorn, drinks and sweet) as a certain weight, if it is actually less than that weight or is short measured.
* The Food and Drugs Act, 1955 - which states that it is illegal to sell food or drink that is unfit for human consumption, and lays down minimum standards for the food. For me, this means that the sweets, drinks and popcorn that I am considering to sell must be fit for consumption and drinks must not be watered down.
* It is illegal to place adverts in certain, undesignated places, such as private walls, etc. This applies to where I can advertise using posters, leaflets, etc.
* The Supply of Goods and Services Act of 1982 - which extends the rights of consumers under the 'sale of goods Act' to include any sub-standard goods or services provided as part of a service. For my business, this means that the quality of the picture shown on the video/DVD films rented out from my business must be of a sufficiently good quality for the viewer.
For a full list of the laws which any film retail and rental business (thus, also meaning my business) see appendix 7.
Ethics are the moral principles that should underpin decision-making. A decision made on ethics might reject the most profitable solution in favour of one of greater benefit to society as well as the firm. Typical ethical dilemmas in business include:
* Should an advertising agency accept a cigarette manufacturer as a client?
* Should a firm in a take-over battle hire a private detective to investigate the private lives of the rival executives?
* Should a producer of chemicals sell to an overseas buyer it suspects will be using the goods wrongly (e.g. for biological weapons).
If public opinion and media pressure force firms to take the publicity impact of their decisions into account, this may change the decisions made. This would not mean, however, that the firm was becoming more ethically minded. An ethical decision means doing what is morally right for everyone, and is not a matter of scientific calculation of costs and benefits.
I want to make the promotion of my business ethical because if it shocks and offends my market, then they will probably stop using my business. There would also be the case that some films may contain brightly flashing lights that are dangerous to people who are epileptic. As the business, I must ask myself, 'is it right to not inform the public of films that may cause people to have epileptic seizures?' To keep my business decisions ethical, I could mark these films with a sticker that reads 'may contain flashing lights'. Without this, any consumer that suffers an epileptic seizure from films from my outlet can attempt to sue my business under the civil law.
The ASA (Advertising Standards Authority) is an agency that was set up the encourage businesses to adopt codes of practice as an alternative to passing laws. Codes of practice are not laws, but rules that a business voluntarily agrees to keep to. The ASA checks that all advertisements (apart from on TV or radio) are honest, legal, decent and inoffensive. Consumers and other businesses can complain about an aspect of a company's promotion, and the ASA will often investigate. Although if the complaint is upheld, the ASA cannot force the business to withdraw the advert, it will ask the business to do so and if they do not comply, the ASA can persistently continue requesting and make it very uncomfortable for the business. They can also let the public know of the business' unethical ways, causing the public to stop using the business' products/services. To avoid this problem, businesses sometimes ask the ASA if their promotion material complies with the codes before they reveal it to the public.
Pressure groups also work in similar ways. They defend consumers' rights by investigating and publishing reports on particular products. They also influence industries and the government in promoting consumer interests.
Section 9:
Marketing Strategy
My service will be place into the market as selling and renting quality films at a medium and reasonable price. In a marketing graph, my service would be situated here:
High Quality
Apollo Home Entertainment
Video Junction
My film service (Premier Videos)
Hollywood Nites
Low High
Price Sangham Video Centre Price
Low Quality
This shows us my service qualities (quality and price) in comparison to each other in the graph. It also compares this to the service qualities of other video rental outlets. The graph shows that my service concentrates more on quality than having a high profit, especially for the first few years. This is also true for my competition. We can see that the points are very close together along the price axis. This shows that the outlets price their films competitively at similar prices.
My Unique Selling Point (USP), which will make my product/service different from the competition's and that should convince people to use my business instead of the competition's, is that each month there will be a small leaflet/booklet sent to members that contains information of new and upcoming releases, and the top ten films for that month.
Marketing Plan
I am now going to create my marketing plan for Mental Rentals and for the products and services that will be available at Premier Videos - my retail outlet.
Product
Although it is difficult to make my film sales and rentals have a unique selling point, there are ways to make my films seem different and appealing in comparison to other films being rented out or sold from other business. A successful product must have a Unique Selling Proposition (it must have a feature(s) that make it different and stand out from the competition. This is because customers will not purchase a film for the sake of it being a physical item which is just good to look at. They will purchase it for the whole experience and thrills of the films. This explains why some people prefer to which some genres of films than others, as found in my 'market research' section.
My business will rely on people returning to my store to purchase or rent out other films because if they do not, the number of customers that I get will be severely limited and will not exceed the population of the local area. This will also be true for my 'Fast Moving Consumer Goods' that I am planning to sell in my outlet - sweets, drinks and popcorn. This means that the products and my service must succeed to meet consumers' expectations in order to keep them interested and loyal to my business. This also means that I must keep an up-to-date and large product range. As my business is going provide for the whole market with a large product range, this means that I will be using a 'Differentiated Marketing Strategy'.
All of the products, apart from the food and drink products, will be represented under the brand image of 'Premier Videos' even though I was not the company that produced the actual films. The casing/boxing of the films for rental will be displayed with the logo (see page 3) on it, which is the branding.
Brands are important because:-
* Customers perceive the products which have strong brand images as being different and better than rivals. This enables the product to be sold at a premium price - a price that is above the average for the type of product. Therefore if I can create a strong brand image, my business will have the potential to make more revenue and profit.
* Strong brand images create customer loyalty. This means that customers are less likely to go to a rival product/store in response to a special offer or cut price. This means that other new business would find it difficult to enter and get a grasp on the market.
* Customers trust strong brand images because they make it easier for companies to launch new products that become popular.
My products satisfy my target market's wants because, as the primary market research suggests, people do like to rent out films multiple times per month. Therefore, the fact that I will have a large range of films on both video and DVD will give them a large choice each time that they visit. Each genre of film that a person could want to watch will be available at my outlet. Also, people tend to want to have snacks and drinks during films, the fact that they can purchase their refreshments with their film in my outlet will be convenient to them.
Although I will have a differentiated marketing strategy, my products will not be differentiated from those of competitors. The only thing that will be different from the competition is the film cases (labelled with 'Premier Videos') and the branding behind them. This will mainly be because it is not the retail and rental businesses (like my business) that produce the films. Each film is only produced by one film producing company, so all of the film retail and rental businesses will be purchasing the same films from these companies to sell to the public.
The product life cycle shows the stages through which a product goes through over time until it is no-longer available. Each product goes through five stages. These are:-
* The Development Stage:- this consists of thinking of the ideas and producing the new product. This involves research and production costs, making this on of the costly stages. This is also when the marketing plan is produced to see if the product is worth being produced.
* The Launch Stage:- this covers the original launch of the product and it's young period shortly after launch. This is the stage when much advertising is necessary to back the product, making this another costly stage. This is the time where there will be low sales and revenue, competitors will be aware of the product leading the other similar products going into development, and the business is at most risk of going bankrupt for not recovering costs. The business will not have yet broken even.
* The Growth Stage:- this is the stage where sales and revenue will be growing. If the business that creates the product is not selling the product directly to the consumers, this is the time that retailers are most likely to accept to selling the product in their outlets. Profits will be growing and costs will be decreasing, as density of advertising and promotion decreases. Prices are likely to rise or fall. Businesses may also be seeing the launch of the similar, competitor products at this time. The business will try to establish strong brand loyalty.
* The Maturity Stage:- this is where sales have peaked and begin to level off and slow in growth. By now the product will be fighting against the competitor products, so once again increased marketing will is needed to maintain the business' market share brand image. Weaker rivals will have been filtered out by the competition and leave the market. If desired, extension strategies will be planned now. This means that the business could alter/update the product/packaging to try to give the product a new boost to increase sales once again.
* The Decline Stage:- this is when sales will drop dramatically and advertising and promotion campaigns will cease. The competition will produce other similar products that are technologically superior. The product will be left in the market to be 'milked' (until sales are close to, or at, zero), or the company will withdraw the product to protect the business' image. Eventually this will happen anyway when sales cease. This is now the product's death.
Bearing this in mind I have drawn up a product life cycle for the films that will be provided for sale and rental in my outlet:-
The graph shows that sales and rentals will increase quite dramatically once the films have been launched. This is because all of the advertising would have been done at the release of the films in the cinemas; therefore people will already know about the films and so may be planning purchase or rental in advance. This is a general product life cycle for both the film rentals and film sales, however it is likely that the sale of films will reach the maturity stage before rental films do. The decline of sales will be quicker than the rise because (especially with film rentals) people tend to get films as close to release as possible. Obviously, the quantity that can be supplied by me is limited, so the launch and growth stages will be quite steady until maturity. At maturity, most people will have bought or viewed the films, so the volume will begin to decrease quite rapidly leading to death, with the maturity stage being level for a very short time.
The product life cycle will have an effect on my marketing mix, mainly on the product's price. If a product is designed to last the consumer a long time, then the price will be higher because of the durability. This is the case with my film sales. Film rentals are only temporary, so the price people will be willing to pay will be limited. It would also affect the place. This is because people will be willing to go longer distances to purchase products that they believe will only need to be bought once and will last them a long time, even after the product has been withdrawn at death. At this moment, my product is at the launch stage of the product life cycle, so the competition will be gaining knowledge about my USP, and much promotion will be necessary to ensure that the products and service becomes a success.
This means that my retail outlet must be situated in a densely populated area, where people can get to it easily because people would not like to travel too far just to buy or rent films when there are other, more local outlets that they could use. My marketing and promotional campaign will need to be dense in order to make sure that people in the local area know about my retail outlet because it will be new and I cannot expect the public to telepathically know about a retail outlet that nobody has heard or knows about.
Pricing
When I launch the films and service from my outlet, my prices will be based on one of three pricing strategies. These are:-
* Competition Based Pricing:- with this strategy, the main element influencing what price to charge is what the competitors are charging. If I set my price close to competitors, it is called Going-Rate Pricing. If I set it a little bit above it will be Up-Market Pricing, and if I price it a little bit below it will be to Undercut rivals. This strategy can be used at any stage of the product life cycle.
* Penetration Pricing:- is setting a low initial price to establish market share and get a good foot-hold in the market. The price is likely to be raised later on in the product's life cycle once it has established market share and a brand image. This is particularly used at the launch stage.
* Market Skimming:- is setting a high initial price. This effective for a product that is innovative and unique, and when there are no similar products on the market. This enables the business to quickly recover research and development costs. This is also used for products that have high launch costs and short product life cycles.
I have decided that my products/service will use Competition Based pricing. This is because my products are similar to the competition, so if my prices are too high I will lose customers to the competition and if I price them too low I will not be able to cover my costs. Also my launch costs will not be very high, and for the first few years the market share and brand image will only be important for the demand of the local area to my outlet, not the whole market as the local area is my target market.
Placement
Placement is the method of distribution between the retail business and the customer. This could be via:-
* Orders over the internet
* Mail order
* Retail outlets
My method of distribution is not going to be a major concern in my marketing plan because it is already established that my primary/only method of distribution will be via a retail outlet.
As I suggested earlier, another suitable distribution for DVD sales could be by post. This would not be much of a cost problem because each order would only cost 16p per DVD for a two-day delivery.
Section 10:
Promotion
Promotion is any activity of a business that informs and/or persuades potential customers to buy its product or service, or which re-enforces existing customers' loyalty - especially for fast-moving consumer goods. There are four main to promotion as part of the marketing mix. These are:-
* Promotion - which usually involves giving out money-off tokens.
* Personal Selling - which usually involves sending out sales representatives to businesses to talk directly with the customer.
* Public relations - which involves making the public aware of the product/service or business (e.g. through sponsorships or publicity in the media.
* Advertising.
Advertising is any communication, paid for by the business, that is designed to persuade the target market to purchase the product. There are two forms of advertising. These are:-
* Informative Advertising - which primarily seeks to provide customers with information about a product or service. It is particularly appropriate for a new product at the beginning of its life cycle.
* Persuasive Advertising - which seeks to influence and persuade customers to buy the business' product rather than a competitor's. All advertising contains an element of persuasion, but advertising often become more persuasive in the growth and maturity stages of the product's life cycle when there are many rivals all offering broadly similar products.
The AIDA model is often used by businesses to structure promotional strategy and materials and to measure effectiveness:-
* A - attention - Customer's attention is captured and made aware of the product
* I - interest - Promotion has impact that stimulates interest
* D - desire - Customer feels deprived of the product which stimulates desire
* A - action - Customer then makes the actual purchase
The objectives of promotion for my marketing plan are:-
* To make the potential customers know that the product is out there.
* To inform the potential customers of what the product and service is and where they can get hold of it.
* To persuade customers to purchase/rent films from my retail outlet.
* To gain Competitive Differential Advantage and create/emphasise the unique selling point(s).
Other business may also use promotion as a way of re-enforcing their brand images and the demand for their other products.
There are two forms of promotion, which are:-
* Above The Line Promotion - this is advertising using independent media. This allows the business to reach a widespread audience. Elements of above the line promotion include:-
- Television
- Cinema
- Radio
- Posters
- The Internet
- Own Vehicles, Signs Outside Premises, etc
- Adverts in National Newspapers
* Below The Line Promotion - this is promotion which does not depend on media such as TV. Instead it takes place through methods that give the firm greater control over who receives the message. As such, it can be more precisely targeted. For this reason, below the line promotion is often more appropriate for a small firm that is niche marketing or adopting a concentrated marketing strategy, and also because it is likely to be less expensive. Elements of below the line promotion include:-
- Direct Mail (e.g. leaflets, etc)
- Exhibitions and Trade Fairs
- Sales Promotion (coupons, competitions, celebrity endorsement, samples, demonstrations, special offers, tasting sessions, loyalty schemes, credit arrangements, warranties)
- Branding
- Packaging
- Personal Selling
- Public Relations
Different kinds of promotion cost different amounts:-
Television
This is a powerful medium to get across a message. The advert will often go out to millions of people and can show a product in a very favourable way, making it look very attractive. It is a very expensive form of advertising but reaches the biggest number of potential customers-the Target Audience. The time of day the advert is broadcast affects who sees the advert. For example, if the advert is broadcast when children's programs are being shown, it is likely that only children and perhaps their parents may see the advert. If the products are chocolate bars, this might be suitable, but if the product is cars, the target audience will probably not see the advert and it will have probably been a waste of money. Therefore, it is very important that the time of day that the advert is broadcast is chosen carefully. It must also be considered that when most people watch television, at peak times, adverts are most expensive. When the least number of people are watching, they tend to cost the least amount of money. The business must consider the message getting across to the public, the time the advert is broadcast, the number of times the advert should be shown and how many adverts the budget will allow.
Radio
Radio has similar considerations to TV: the time the advert goes out, the number of times the advert is played and how many adverts the budget will allow. Radio is cheaper than TV, but has the disadvantage of not being able to put across a visual message. The audience may not be as large as a TV audience.
Newspapers and Magazines
These are often produced every day and sold to different groups of people. Some newspapers are aimed at business people, whilst others may be aimed at the majority of people. Newspapers can be local or national. The national newspapers will be purchased and read by a lot more people than local ones and therefore they are a lot more expensive to advertise in than local newspapers. However, the cost of the advert per reader is often lower for national newspapers than for local newspapers. Also, particular national newspapers are usually read by certain social groups and if these people are the potential customers (target market), this may be a very cost effective way to reach them. If the business is small (like mine) and is only selling o the local population, an advert in the local newspaper will be cheaper and more cost effective than one in a national newspaper because it only needs to be read by local people.
Magazines are often bought by specific groups of people, such as film enthusiasts, and therefore adverts can be placed in magazines that are specifically aimed at these groups of people. This means that the target audience sees the adverts and the money spent on advertising is cost effective and is not wasted. Magazines are often colourful and can make adverts look more attractive than they do in newspapers. Magazines are usually only published once a week or once a month.
The adverts in newspapers and magazines are permanent and can be cut out and kept. Far more information can be put into a newspaper or magazine advert than on TV or radio. However, it is attention-grabbing than an advert on TV and may not even be read.
Posters/Billboards
These are large adverts on boards usually placed at the side of roads. They are permanent but can be easily missed as people go past them. The message of the advert has to be simple and visual or passers-by will not grasp what is being advertised. No detailed information should be included, only a persuasive type of poster or slogan.
Businesses pay to have their advert on the board for a certain amount of time and then someone else might place an advert there. The advert could be owned by the business itself and then they could decide when to change their own adverts.
This can be quite a cheap form of advertising, but it is seen by everyone, not just the target market and is therefore more suitable for products that are bought by a large range of people. The position of the poster can vary 9 (e.g. it could be by a main road or it could be by a quieter road). There will be different amounts of people seeing the poster if it is in different places, and therefore the cost of placing the poster on the billboard will be higher if more if more people are going to see the advert.
Cinemas
This can be an effective form of advertisement but will only be seen by a limited number of people. The type of film being shown will obviously affect who is watching it and therefore who will see the advert. Because only a limited number of people see the advert, the cost is lower but it can be a very effective way of advertising if your target market is likely to go and see the film being shown.
Leaflets/Direct Mail
These can be given out to anyone in the street and many of the leaflets will not be read. They can also be delivered to people's homes (direct mail) and can be targeted at particular neighbourhoods. For example, if the leaflets were advertising a local expensive restaurant, leaflets could be sent to an area where houses are expensive to buy. It is likely that more wealthy people live in these areas. Leaflets have the advantage of being permanent and can be kept for future reference; this is especially useful if a promotional offer is put on the bottom of the leaflet which offers money off the product or service.
Other Types of Advertising
There are several types of advertising that are carried. Examples include bright lit-up (neon) signs, sometimes flashing, which show the name of a product. These can be found at city-centre sites or outside the businesses themselves.
Bags which have the name of the shop on them are given out with purchases. This advertises the shop as customers walk down the street. Delivery vehicles can have the company name or product on their side.
The internet is also becoming a more popular site for businesses to place adverts. It has the advantage that a lot of information can be placed on the web site and in some cases an order for the products can be placed at the same time. This may not be expensive to set up, but it is limited in that only people who have a computer and are linked up to the internet can see the advert. The people seeing the advert may live in other countries and therefore may not be able to buy the product anyway.
This will affect my choices of advertising/promotion because my business will only be small and only target people living locally to Higham Hill. There is also the fact that the size of my business and the fact that my business is new will limit the funds I have to spend on advertising and promotion.
Basically, each form of promotion has advantages and disadvantages:-
Type
Advantages
Disadvantages
Television
Can reach millions of people all over the world
Very expensive
Radio
Cheaper than T.V, can be used to reach certain listeners
Sound only, smaller audiences
Newspapers/Magazines
A lot of information is known about the readers
Often not in colour, are static and silent
Posters/Billboard
High visual impact for a long time and will be seen by a lot of different people
Are only seen for a few seconds by drivers and are vulnerable to weather and graffiti
Cinemas
Very high visual and sound effect, captive audience
Are relatively expensive and have limited viewers
Leaflets/Junk mail
Cheap to produce and distribute
Are easy to ignore
Internet Sites
High visual impact, interactive and can link directly to buying the product
There is a lot of competition so getting peoples attention may be difficult
For my promotion section, one of the forms of promotion that I will use is an advert in the local newspaper. This is because it will allow me to inform
Assignment 4:- Marketing Strategies Mark Linton 11 Dolbé Mark Mark Linton 11 Dolb Mark Mark Linton 11 Dolb
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