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Brand Extension Marketing Plan Kaplan University Graduate School of Business and Management GB530 Marketing Management: Brand Extension Marketing Plan Unit 5 Shoshonie Heitmann January 14, 2012 Page 1 of 22

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Page 1: ShoshonieHeitmann Unit6 Marketing Management

Brand Extension Marketing Plan

Kaplan UniversityGraduate School of Business and Management

GB530 Marketing Management: Brand Extension Marketing Plan Unit 5

Shoshonie HeitmannJanuary 14, 2012

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Brand Extension Marketing Plan

2.0 SITUATION ANALYSIS

With over 75 years of award winning wine marketing and sales E.J. Gallo has decided to expand into other areas of the entertainment industry that is associated with wines. By marketing these accessories that go along with wines but keeps entertaining classy yet easy will be a challenge. Due to the high standards put forth by the E.J. Gallo Winery marketing and presenting any new products associated with industry must be done with careful customer awareness and product consideration.

2.1 Market Summary

E.J. Gallo has the advantage of having a stronghold in the alcoholic beverage industry and has obtained a great deal of data and research information to show what the consumer is buying and using when entertaining and drinking the Gallo products.

The target groups of Gallo will be the socially active groups of the younger trend setters in the age group of 17-34. This group tends to set the social setting of what is hot to have at your party, such as what is easy to use and what makes the party successful. This group tends to be very media savvy therefore they look for quality items associated with products they trust.

Growth in this market could be limited but a constant as long as the wine tasting trend continues to grow and the market for fine wines continues on the path that it has over the last decade.

2.1.1 Market Demographics

Demographics

There seems to be an equal amount of both men and women wine drinkers among the demographic locations.

Ages 17-65, with the highest consumption being in the millennial group which consists of ages 17-34 which is at 51% as compared to last year’s numbers of 37%. Though in the United States the legal drinking age is 21 the European market allows for a younger age to market to. The Generation X group which consist of individuals in the age group of 34-46, which ranks in at 51% now, while the Baby Boomers group, ages 47-65, is at only 30%.

Of the different age groups, core wine drinkers which are daily drinkers come in at 9%, where several times a week comes in at 29%.

Geographics

E.J. Gallo Winery does not have a set boundary for it geographic market due to the fact that the product is offered in a wide variety of locations as well as online and globally.

The target population is over 100 million users.

Behavioral Factors (Psychographics and Lifestyle considerations)

Users purchase wine and accessories mainly as a form of adding to an entertainment function. Accessories add functionality to these different social events by making task simpler with one tool.

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Users spend money on the wine but add accessories to make life easier.

Users have basic needs to socialize where wine is served and accessories are used to help with the functions of the social gathering.

2.1.2 Market Needs

E.J. Gallo Winery gives the wine drinking patrons quality product by adding accessories to this wide selection it adds value to the selections and functionality of products offered by E.J. Gallo. The organization seeks to add convenience to each patrons shopping experience by offering a multi-purpose tool.

Craftsmanship: It is important that the product meets the high quality standards that E.J. Gallo Winery has set with their world renowned wines. Consumers do not want to purchase a product that will not hold up to those standards.

Design: By using a design that is put together and tested already this allows for high quality to be met. The wine accessories market has a great deal of wine bottle opens, and there are also other tools that go along with the social gathering process, but to incorporate two in one makes the tool more appealing to the consumer.

Customer Satisfaction: By continuing with the high quality customer attention that E.J. Gallo Winery is renowned for will only promote the new wine accessory as a valued tool for the customer base.

2.1.3 Market Trends

E.J. Gallo Winery will classify itself above other wine distributors by marketing products that make social gatherings as well as the individual wine connoisseur’s life a little easier. In the past the emphasis has been only on selling wine, but with the industry taking a hit with the financial markets dipping, the organization now must look at ways to enhance the social and entertaining aspects of the consumer. Wine drinkers are not contained in one specific location. Due to growth in the wine drinking arena and the amount the average consumer is drinking the accessory market is a growing trend in the wine industry. The Wine Butler will be a thriving accessory for the social gatherings that include eating light snacks. It will allow for simpler clean up without having to pull out other tools.

The growing trend among consumers is to find package deals; this can be achieved by offering a fine bottle of wine and one of the accessories that E.J. Gallo is planning on offering to it many fine patrons. In offering package deals the consumer continues to get the best quality wine but also the accessories that go along with being a wine connoisseur.

Besides offering these accessories and package deals, the trend of purchasing online is a great way to continue E.J. Gallo’s marketing of fine wine products and accessories that go along with creating social event without a lot of hassle and with easy clean up. The social media trend is a great advertising trend the will help sell the new line of wine and social events accessories.

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2.1.4 Market Growth

With economic market as it is now, and the cost of growing and producing grapes which are needed to produce the high quality wine the E.J. Gallo is famous for. The market for wine and accessories is growing. This is mainly due to the growth in sales of cases of wine and accessories that go along with them. The sales of wine and accessories have increased by 20\% making the market growth visible and viable.

2.2 SWOT Analysis 

2.2.1 Strengths

Longevity in the market

Strong presence in the wine industry and accessories that go along with the marketing of social entertaining tools.

Quality products, customer satisfaction

2.2.2 Weaknesses

Too many accessories on the market

Weak financial market

Anti-Alcohol Groups presence

2.2.3 Opportunities

Social Media advertising

Multi-purpose tools and accessories new to the market by ingenious inventors

Entertainment industry marketing

2.2.4 Threats

Crops damaged leading to bad wine harvest, hurting the accessory packages

Competitors selling similar packaging

Decline in Wine drinking due to push for healthier lifestyle

2.3 Competition

E.J. Gallo Winery is the leader in the wine industry but not to be fooled the competitors are great and the wine accessories and tools industry is highly induced. The fact is that E.J. Gallo is successful in marketing their fine wines, and adding to the product line wine accessories and tools will only make the competition stand up and take notice. The three top competitors for E.J. Gallo is Asahi Brewery, based out Japan, Bacardi Limited, out of Bermuda, and Bacardi U.S.A. based out of Florida. Customers enjoy all these products but consumers enjoy the fine wine that has over 75 years experience and home grown grapes that produce award winning beverages.

Competing with the competition is what E.J. Gallo Winery is what they do best by marketing their own manufactured wines and beverages grown in their own vineyards. E.J. Gallo is world renowned for their prestigious wines and now adding accessories as a valued tool to compliment the wine will allow the organization to stay on top of the market.

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The marketing mix of Bacardi Limited is the price, keeping the pricing low but with quality product is vital part of this competition. There are different accessories offered through the competitors but not unique to the E.J. Gallo Winery line of fine products.

2.4 Product Offering Product/features/benefits

E.J. Gallo Winery will offer the following accessories

Wine Butler is a product that allows the main product of the organization to be opened with a quality product but also allows the cracker or snack crumbs to be swept up without having to get another tool from the kitchen.

Another product that is an Air Vacuum/bottle sealer. This product is beverage bottle specific, and also geared towards the consumer who is out to save the product that may not be used at the present moment.

The last product that would be added to the accessory line for E.J. Gallo would be a Corkcicle Wine Chiller. This would make it easier for the consumer to keep the wine cold without the hassles of toting around a wine bucket full of ice. It is easy to remove and reusable which makes for a great party tool.

Brand Equity Model for the Wine Butler will be the association with Gallo wine and the family values that have been instilled throughout the company’s time of promoting homegrown grapes producing high quality, great tasting wine for the average consumer. The name Gallo put on the high quality, effective, and highly useful tools associated with the wine industry but namely the Gallo wine family.

2.5 Keys to Success

The ideal key to success is to create and produce quality wine related tools that make enjoying the fine wine of the Gallo Winery more pleasurable. Continuing on the road to complete customer satisfaction. The last key would be to ensure that the product meets and exceeds all the consumer’s expectations.

2.6 Critical Issues

Many times critical issues are the smallest issues that may arise when introducing a new product in a comfortable product line. Many issues may arise due to resistance to change, but the hardest part is getting consumers to look outside the comfort zone with a familiar product and encourage the packaging of familiar product with new product. This gives the consumer opportunities that may not have been previously presented.

The product life cycle because of high quality workmanship, and materials should last for 5 to 7 years depending on usage and care of tools.

Customer satisfaction is a must for Gallo wine family and will continue to be a critical issue to ensure that the faithful customers continue to return to purchase the beloved products. This will also include the new line of wine tools.

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When looking at points of parity this would be identified as the beverage industry but specifically the alcoholic industry and tools the help promote sensible and easier product use. The difference is that each product will be made with individual attention to last for longer time than that of the brands or possible other tools offered in the retail chains due to these products being offered by Gallo and their high standards of product that is associated with the family winery.

3.0 MARKETING STRATEGY

3.1 Mission                   

The goal of E.J. Gallo is to remain family owned and continue to be the leading wine manufacturer and distributor in the United States as well as globally, adding the accessory line will be an added benefit for the customer base line to gain quality products in one stop as opposed to having to find entertainment tools from another manufacturer.

Our founders – Ernest and Julio Gallo – built our company by turning challenges into opportunities and change into growth. Today, that spirit defines the Winery’s culture

The value proposition of E.J. Gallo is the ability to continue obtaining new customer base by offering high end quality wine tools to purchase to make entertaining go smoother and easier. This will make it easier for the consumer to continue to offering fine wine with ease of added tools offered by E.J. Gallo.

The fundamental goals of E.J. Gallo is continue with the quality products that have kept the company at the top of the wine industry and promote fine accessories to bring E.J. Gallo to the top of the entertaining game.

3.2 Objectives

Maintain positive customer satisfaction with quality products.

Increase wine tools market on a steady incline

Continue marketing family based workmanship for all products

Decrease the customer shipping costs by offering packaging wine and tools together.

Increase awareness for responsible drinking among the entertaining set.

3.4 Target Markets

With increasing market of wine drinkers and the fact that many consumers are now holding more entertaining events, the market has opened up for fine quality wines as well as tools the help make entertaining easier and more effective.

The target audience for E.J. Gallo is the age group of 24-45 since this is the highest group that does not only social entertaining but also promotes work socializing. The fact that many of this target audience have increase their taste in alcoholic beverages and wine is not ranking 2nd behind beer for consumption.

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Wine tasting have driven the market for wine tools greatly due to the fact that the consumer is allowed to peruse the product before taking it home and this includes using the different tools that are available from E.J. Gallo.

Globally the market is a bit different due to the fact that Europe is littered with many fine wines therefore this market is very saturated but offering to other countries outside the U.S. has proven effective and allowed global sales to double by offering reduced shipping and tax cost for those outside the United States.

3.0 MARKETING STRATEGY (continued)

3.5 PositioningE.J. Gallo will position itself as the leader in fine entertaining accessories above the distinguishing feature of being one of the oldest family own wineries in the United States. Doing this E.J. Gallo will be able to become a leader in high quality entertaining accessories to the growing audience of wine drinkers. With the business target audience doing more entertaining to achieve interaction among new clients the market for entertaining tools has grown.

Because of the growing market the competition for the entertaining accessories is a large arena. E.J. Gallo has an advantage in this market with the high quality wine and alcoholic beverages that are produced by the family owned business. Presenting high quality multi-purpose tools as an added entertaining tool when marketing the beverages will only increase the sales.

3.7 Marketing Mix

Product With offering a new product line of unique multi-purpose entertaining tools for the social network in comparison to the single use tool that is currently on the market this allows individual consumers to see the difference of the tools in the market today. The benefits of purchasing say the “wine butler” is the consumer gets both the convenience of a cork screw as well as a wisk- broom to clean up the messes of entertaining.

The new product line will help the social networking consumer flexibility and ease when gathering to entertain new clients or even friends and family. Advantages of having a multi-purpose tool for entertaining will cut down both prep and clean-up time.

Price Since the target audience for this new product line is that of social entertaining and association with a familiar product that is cost effect but of high quality the price should be reflected as affordable and not be so high in price that the consumer can purchase several of other like items and shy away from the multi-purpose tool.

Price will be set according to each market area. Researching what the competitors are doing with similar accessories, what the cost of manufacturing is, the cost of marketing the multi-purpose line, as well as taking into account the overall long term cost of carrying items in this line.

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The goal is to maximize the market for entertaining accessories. This would mean that getting the higher sales will help dominate the market in the line of accessories. By getting the items manufacturer by a reliable high quality outsourced manufacturer the organization will save money, this therefore can help set the price of the items at lower due to cost being less. Due to E.J. Gallo’s standards the products will be made to meet the high quality that the organization instills therefore gaining ground above the competition with distinction of brand known for selling only high quality products.

The pricing method that would be the best used when setting price for example the Wine-Butler would be the markup pricing. This would be using the fixed cost of the outsourcing as a base line and figuring in the unit cost, as well as the expected unit sales. This will give a rough mark up price to charge the customer for the high quality products. This then allows the company to have a range so that factoring in the competitors, gain-and-risk sharing, and what the impact of the price will have on other parties involved.

By setting a price structure this allows the company to look at different aspects to be able to adapt a price. These different variables must be figured into the variations of price, such as environment, geographical demands, and costs, which is looking at the consumers needs in different areas. By looking at the different variables prices can be set accordingly. In the market of entertaining every area we market to will be different, such as a densely populated area with many different industry thriving will have a higher price setting than that of a more rural area that may not entertain as much.

Place The target market will be retailers such as grocery chains, liquor stores, and possibly major retailers that have both retail and grocery stores as one. The reason behind this is it allows E.J. Gallo to sell to both retailers and wholesalers who will take title of the product and then resell the merchandise.

The Pull strategy will be used due to the standards with E.J. Gallo practices business on. The organization will be doing all its own marketing, advertising and promotion of new product line to ensure that brand association is established.

Importance will be placed on design decisions by using customer input, what their desires are when purchasing the product. What the overall manufacturing time is, as well as shipping and delivery times. Ensuring the customer service in placed high on the list so that the customer becomes a repeat buyer.

Due to this new product line being offered on line as well as in retail stores, e-business practices will be established and followed to ensure same products are available to these customers as would be to those the purchase in a retail store. Since our organization is a brick-and-click company the practices that are used in the everyday operations of selling products to consumers will be used as well on the web sells.

The retailing side of this will be mostly that of which is sold directly from our wine gallery on site at the winery, during wine tastings and tours. The wholesales aspect will dominate our

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Brand Extension Marketing Plan

organization as it has in the past by offering the new product line along with the fine beverages that are produced by the organization.

Promotion The organization’s goal is to become the brand that everyone is using for entertaining tools this will be done by advertising the fact that the consumer will be getting two tools in one, or the multi-function capabilities of each of the new products in the line. The goal is to reach an additional 25 percent of the consumer market beyond the wine drinker. The purpose to promote an easier method to giving a party.

Advertising will be magazines, billboards, signs in major airport hubs, as well as the internet. The internet advertising will be the major vehicle used due to the fact that there has been an increase of internet usage per household by 21 percent over the last few years. This is return will help keep advertising cost down and this can be passed on to the consumer with lower price of products.

Doing a pretest will allow E.J. Gallo to see if this type of promotion of the product is effective. This will be done by running a test ad in a major magazine and sending to select recipients and polling them on their reaction to the said advertisement therefore allowing for changes to be made if necessary to the effectiveness of promotion. Then a follow up would be done after advertisement was run to see if it had any impact upon the sales and recognition of new product lines.

3.8 Marketing Research

Will adding this new product line of multi-purpose entertaining accessories to the already well known brand name alcoholic beverages create a profit for E.J. Gallo Winery? A focus group will be used to see how the new product line is received by the consumer. This group will consist of 20 to 25 people whom are wine or alcoholic beverage drinkers, as well as entertainment socialites. Also data research will be done on the different products that are currently offered to see if the uniqueness of the new product line will in fact be perceived as an essential tool that all social gatherings would deem necessary to make the entertaining easier?

Currently we are running some observational research in our showroom at the winery to see the reaction of flyers that have been put out for display about the possible new accessories and the value they could add to any entertainment activity. The other two research variables will be undertaken upon completion of the observation and looking at the responses from the patrons that attend our winery functions.

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4.0 FINANCIALS

4.1 Break-even Analysis

First year sales revenue for E.J. Gallo’s entertaining accessory line is estimated to be

$412,500.00. The average sales price is $15.00 per unit with the variable expense per unit at

$12.00. This results in a contribution margin of $3.00 per unit. The sales volume in the first

year is estimated to be 27,500 units. Estimated fixed costs for the first year are $345,000.00.

Using the contribution margin method, estimated losses in the first year will be

$(262,500.00).

TOTALPER UNIT

Sales (27,500 items) $412,500 $15 Less variable expenses $330,000 $12

Contribution Margin $82,500 $3

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Less fixed expenses $345,000

Net operating income ($262,500)

At this rate, break even will be reached when sales reach 5000 units: $75,000 / $15-$12 =

5000 units. This is estimated to take place in the third month. Break-even analysis assumes

per-unit wholesale revenue will remain at $15 average. Variable costs are $12 per unit.

4.2 Sales Forecast: lst year by month; 2nd and 3rd years by quarter

AssumptionsTime Units Start Unit Increment Unit Price Unit Variable Cost Total Fixed CostsMonth 0 2500 $15.00 $12.00 15000

Units Sales Variable CostContributionMargin Fixed Total Costs

NetIncome

0 $0 $0 $0 15000 $15,000 $15,0002500 $37,500 $30,000 $7,500 15000 $45,000 $7,5005000 $75,000 $60,000 $15,000 15000 $75,000 $07500 $112,500 $90,000 $22,500 15000 $105,000 $7,500

10000 $150,000 $120,000 $30,000 15000 $135,000 $15,00012500 $187,500 $150,000 $37,500 15000 $165,000 $22,50015000 $225,000 $180,000 $45,000 15000 $195,000 $30,00017500 $262,500 $210,000 $52,500 15000 $225,000 $37,50020000 $300,000 $240,000 $60,000 15000 $255,000 $45,00022500 $337,500 $270,000 $67,500 15000 $285,000 $52,50025000 $375,000 $300,000 $75,000 15000 $315,000 $60,00027500 $412,500 $330,000 $82,500 15000 $345,000 $67,500

Break Evenx Break Even y Label

5000 $75,000.00 BEU aprox =5000

In year two and three of E.J. Gallo’s new accessory product line the risk of the market not continuing in the upward trend of entertaining as an expansive business adventure. The second year increases the unit increment in hopes that sales will continue to rise, but in the third year the factor of sales evening out the unit increment is lowered along with the unit price. This is the result of profits looking similar in both years.

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  Year 2 1st Q 2nd Q 3rd Q 4th Q  2013 $135,000 $270,000 $405,000 $540,000                      

  Year 3 1st Q 2nd Q 3rd Q 4th Q  2014 $135,000 $270,000 $405,000 $540,000

           

           

If sales continue on the trend that is currently projected for the first year as well as the following two years, the company should make a fair profit on one of the items in the new line of entertaining accessories. The whole line should do well as long as the market of wine and alcoholic beverages continues to grow as has in the last few years.

5.0 CONTROLS

E.J. Gallo will continue to monitor expenses and revenue through the measurement and analysis system that is currently being used in the wine and alcoholic beverage side of the organization. This system will help set up the specific goals for achieving for expenses not to exceed as well as monitoring the revenue intake from the new product lines. This is done by gathering the required data from the outsourcing partner to ensure that the materials are still high quality but at the best prices, as well as ensuring the shipping and handling cost do not get out of control

By using the marketing plan and returning to it periodically to check for the progress that was predicted, and make necessary changes. It will also be important to continue to market the trends in the market to ensure that the market is growing and not declining.

Adjustments will be made if the market trends start to change by adapting the new line to meet the consumer’s product wants and needs. In do this an adjustment will have to be made to the overall marketing plan. In the end the consumer will be monitor as to purchasing power and what the entertaining industry is doing. 5.2 Marketing Organization

E.J. Gallo will continue to use their marketing team to present and control the marketing plan that is presented. The implementation will include this team as well as the publicist who works with external factors of marketing. The new management of this extended brand line will be directly involved in the whole marketing plan to ensure completion and implementation.

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5.3 Contingency Planning

Problems with competition products, getting the knowledge that this is a multi-purpose entertaining tool.

Getting information out that this is a brand extension to the already well known wine and alcoholic beverages.

Discovering the market will not with stand new products due to already existing less expensive products on the market.

Continue to collect data from winery and wine tastings to see if the product is well received by the consumer.

Continue to watch data of sales and trends in the industry. Adjust to consumers needs and possibly only offer the product as part of a package

deal with purchase of beverage. Possibly adapt to internet only purchases of product to decrease overstocking.

1.0 Executive Summary

The above brand extension marketing plan forms the basis for the introduction of an innovative new product line for E.J. Gallo Winery. This line will include unique multi-purpose entertaining tools to be presented with the already well known wine and alcoholic beverage products produced by E.J. Gallo.

This analysis outlines the best strategies to follow for the highest achievement of the company’s strategic goals. “Wine Butler” and other multi-purpose tools will be marketed as functional tools to make entertaining easier while striving to continue the growth in the wine and alcoholic beverage industry as a leader of unique products.

The marketing strategies should be able to reach a market size of over 21 million with both local sales as well as international sales via the internet. The forecast sales growth prospect is 3.5 percent over the next four years. While satisfying the needs of the untapped market for multi-purpose entertaining tools.

“Wine Butler, as well as the rest of the additions to the entertaining tools product line will enable E.J. Gallo to continue their stronghold on the alcoholic beverage market, this done by continue with the company’s philosophy of keeping the personal touch in the products presented by the organization, to include unique and quality products for use during entertaining.

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References

Corkcicle For Perfect Wine, (2011). Retrieved on December 12, 2011 from

http://www.pushhere.com/case-study/corkcicle/

Davison Inventing, (2011). Retrieved on December 5, 2011 from

http://www.davison.com/s_experience/about_davison.html

E.J. Gallo Winery, (2011). Retrieved on December 2, 2011 from

http://gallo.com/press-room/fact-sheet/CompanyFactSheet.html

Kotler, P., & Keller, K., (2009), Marketing Management, Pearson Prentice Hill, New Jersey

Nichols, R., (2011), U.S. Wine Consumer Trends Boomers’ tastes Evolve, Millennials Continue

to Drive Market Growth. Retrieved on December 13, 2011 from

http://www.winebusiness.com/news/?go=getArticle&dataId=83196

Top E. & J. Gallo Winery Competitors, (2011). Retrieved on December 13, 2011 from

http://www.hoovers.com/company/E__J_Gallo_Winery/cfrcif-1-1njht4-1njhu5.html

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