Marketing Report z2xi

MARKETING REPORT

BUSINESS 1220E (SECTION 550) INSTROCTOR: RON HAE STEPHANIE LEVSCHUK

MACKENZIE AND MARR GUITARS

STEPHANIE LEVSCHUK 250742319 DECEMBER 6TH, 2013

EXECUTIVE SUMMARY John Marr, CEO of Canadian guitar manufacturer Mackenzie and Marr Guitars was considering how he could increase his company’s monthly sales. To help reach his monthly sales goal he had planned to release a new guitar. In order for the company to be successful with its new product and reach its goals, new marketing ideas need to be considered. These ideas include:     

Identifying a strong target market Creating an artist endorsement deal for the launch of the new guitar Having a page in the Acoustic Guitar Magazine Creating Google search ads Selling accessories along with guitars

After further analysis it was shown that the current target market has been successful in the past, which is why the company should continue to market to the same group. This target group is interested in high-end quality guitars and they are willing to pay the price for them. They should also consider targeting guitar teachers who make referrals and recommendations to their students on where to purchase their guitars. In the past it was shown that by having an artist attached to the release of a new guitar, the company sees large increase in sales for those guitars. They should continue to seek endorsements for significant increases in sale volumes. One way to reach many consumers is through advertising and one of the best ways to do this is in popular magazines. Acoustic Guitar Magazine has readers all across North America and it also has an online site. Packages available include print web and social media, which are three outstanding ways to promote the company. Google search ads allow companies to place ments connected to Google searches. This is an effective way to gain exposure without consumers having realized they were doing any research or being targeted. Along with selling guitars, selling accessories would also be beneficial to the company. Many direct competitors sell accessories in their stores and have been successful with their sales, which is why Mackenzie and Marr should consider selling them as well. By fixing challenges that the company encounters currently and creating new marketing ideas Mackenzie and Marr Guitars will be able to meet their monthly sales goals and have a successful release of their new guitar.

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THE MARKETING CHALLENGE I, John Marr CEO of Mackenzie and Marr Guitars, have developed a plan for my company to help overcome our challenges and accomplish our new goals. The company’s goal is to increase monthly sales and at the same time promote our new guitar, which is being launched at the beginning of June. INTERNAL ANALYSIS Mackenzie and Marr Guitars, has a promotional budget of $4,000 and the annual revenue goal is $1 million. The company has struggled with cash flow in the past because it is necessary to always have enough cash on hand to purchase inventory from the suppliers. This marketing plan will be used to establish how the $4,000 can be used most effectively and how we can meet our annual sales goal. Since Mackenzie and Marr is an online store most of the advertising has been done online through Google AdWords and Facebook. Both these sites allow for people to click on ments, which then brings them to the company’s website. Acoustic Guitar and Guitar World are two big magazines in which the company has published ads. These magazines reach readers all across North America allowing for large exposure. Both magazines also have online websites that promote the company. One of the most successful ways that the company has been able to promote ourselves and gain exposure was on Dragons Den. It was proven that the company had a major increase in sales for the two years in which the show aired on TV. Once the episode was taken off air, a downward trend in sales followed. These methods of marketing have been successful in the past when the marketing budget was only $1, 000 but now that this budget has been increased to $4,000 this allows for new ideas and new plans to be created and implemented.

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Mackenzie and Marr Guitars is a 4-year-old online stores and their mission is to build the best acoustic guitars available and sell them for significantly less than competing models. The company is able to sell products at a cheaper price because they do not have to contract with a wholesaler or a retail outlet, just the manufacturer. The capacity to produce these guitars depends on the suppliers. Mackenzie and Marr’s sales goal is 100 guitars a month and this will not happen if the supplier takes on another contract because they may face capacity constrains. The Naked Lady and Limited Edition guitars are capped at 250 where the Dreadnought is unlimited. Having an efficient business and strong relationships with suppliers allows us to meet customers’ needs and demands. John Marr and Jonathan Mackenzie founded Mackenzie and Marr Guitars in 2009 in Montreal Quebec. Both owners bring forward a diverse set of skills and have always been avid guitarists. Mackenzie has a successful medical practice in Ottawa, Ontario where he spends most of his time. Marr founded Athletes Foot, which evolved into a successful company. After that he held many executive level sale positions and is the person responsible for the day-to-day operations of Mackenzie and Marr Guitars. Both owners have operated successful businesses in the past and bring a wealth of experience to this operation, which should result in a successful business venture. EXTURNAL ANALYSIS PEST ANALYSIS Adjustments in Canada’s trade relationships with China will have an impact on imported goods into the country. Tariffs on Chinese goods are expected in increase by 2015, causing the prices of imported goods to increase. Duties on imported goods are expected to increase to 6%. These changes are taking place because China’s economic status has changed from 1974 and it is

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now a developed country. China’s historical cost advantage in production has also been diminishing because of rising wage rates. Increasing transportation costs due to high fuel prices, have caused some companies to move their production back to North America. To maintain selling guitars at lower prices, Mackenzie and Marr need to decide where is best to produce their guitars in order to get the lowest price but still maintain high quality. In 2008, a major recession occurred in Canada and the economy has been weak ever since. In years to come the economy is projected to grow stronger. Due to the recession and the fact that guitars are not a necessity, many people were not spending their money on them. As we move past the financial crisis, we are starting to increase our sales once again. Guitars are a non-essential purchase, and are seen as a leisure activity. In the past, when the economy was stronger, the Canadian market showed an interest in acoustic guitars. With consumer confidence decreasing this had an effect on sales numbers. The new marketing plan needs to increase consumers’ confidence in the economy and convince them to use their discretionary funds on activities they enjoy, like playing guitars. With many new advances in technology, businesses need to stay current with these changes both for the sake of their business but also for their consumers. An online retail store requires the company to have an up to date, easy to navigate, and efficient website. It should be multi-faceted and create social media sites such as twitter, instagram, and facebook to help promote the store and feature the strengths of the company and products. COMPETITIVE ANALYSIS Retail Music Chains are seen as a direct competitor and examples of these stores include Long and McQuade (61 locations across Canada), Tom Lee Music Co. (11 locations in British Columbia) and Group Archambault (13 locations in Quebec). These stores carry many different

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types of instruments, guitars just being one of them, and have a range of products from high end to entry-level quality. Consumers find it helpful that they carry a large variety of guitars to choose from and that they have the opportunity to test the product before making their purchase. The staff at these locations are very knowledgeable about the products they sell. These companies are known for always offering the same price for their products in the store as it appears online. Specialty guitar retailers are another example of a direct competitor. These companies operate on a smaller scale and target much more of a specific clientele. They focus more on guitars and fretted instruments and sometimes have vintage and collectibles in their stores. These guitars are custom made and are a high quality product. As a result of being a specialized business, companies can struggle to compete with prices that the retail chains are able to offer. Musician’s Friend is an online musical instrument retail store and is also a direct competitor. They offer a wide variety of brand name instruments, which they try to sell at a lower cost. They have a strong distribution network, with their headquarters located in the United States. This company offers international shipping for most of its products, although duties and taxes will be added on. Canadian consumers generally have to wait up to 2 weeks to receive their purchases where customers in the United States wait between 5 and 8 business days. Other leisure activities that people may enjoy in their spare time are seen as indirect competition. Examples include sports, camps and family time. CONSUMER ANALYSIS Mackenzie and Marr Guitars is currently trying to identify and decide who their target market is. They have been targeting consumers who are 55 years and older, who are financially well off and who have been playing guitars their entire life. These consumers are able to

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recognize the difference between high and low quality products because they have an interest in guitars and have been playing them for most of their lives. Mackenzie and Marr offer custom made, high quality and long lasting guitars, which are sold at a cheaper price than their competitors. Guitars are not a product that you buy often unless you are a collector or an avid musician. This purchase will vary from consumer to consumer depending on their finances, interests and amount of leisure time they have to enjoy their guitar. Customers of Mackenzie and Marr Guitars, have the ability to purchase their products online and have them shipped right to their residence. The company does offer a seven-day “love it or leave it” guarantee. This allows the customer a seven-day trial period to test out their guitar before making their final decision. If they are not satisfied with the product, they will receive a full refund. This purchase is not an impulse buy. Consumers spend time researching the product before they make their final decision and weigh the pros and cons of many styles of guitars. The fact that the consumer is unable to play the guitar before they purchase it may present a challenge for some, however, with the company’s “7-day love it or leave it” policy, the consumer has room for a trial. TARGET MARKET Mackenzie and Marr sell high quality guitars at very reasonable prices. This hobby is considered to be a leisure activity, which is why it would be best to continue targeting the same group of consumers who are 55 years and older. Trying to target consumers, who are between 15 and 24 may be challenging because they may be unable to afford this product at this stage in their life and may not have enough time to enjoy their purchase. Targeting guitar teachers is also a possible avenue to explore. Many teachers provide referrals to specific stores where students

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should purchase their guitars. Teachers can determine the type of guitar that is best for their students, review it with their parents and make the purchase an easier process. THE FOUR P’S As an online retail store Mackenzie and Marr Guitars are an international company and have consumers all over the world. A weakness that may arise from being an online store is that customers do not have the opportunity to physically see the guitar before they purchase it. This challenge does not have an impact on the target market in general but may affect individual consumers decisions. Currently, Mackenzie and Marr sell five different guitar models and are releasing their sixth model in June 2013. They have two different series of guitars: the Legend and the Summer Wage. The Legend Series is made up of three different guitars and they are categorized as models. These guitars are the Tom Rush Naked Lady, Ian Tyson Limited Edition and Rush Signature Dreadnought. The Summer Wage series is composed of basic model guitars called the Tofino and the Dionisio. The Dionisio has a special feature, a cut-away in the body of the guitar that allows players to reach the highest frets. All five models differ in body size and price. Each guitar has its own strengths and weaknesses, which can affect the consumer’s choices. The Limited Edition is a jumbo acoustic model, which is known for its deep tones. It produces the loudest volume but overall it is the least balanced guitar with regards to overall tones. The Naked Lady and Dreadnought Guitars are known as Dreadnought models. These guitars are smaller, they produce a good volume and are generally well balanced. The Tofino and Dionisio are Auditorium models, which are the smallest and quietest but they have the best balance in of high and low tones. All of these models are custom made and constructed from Indian rosewood, which is known for its rich overtones. Mackenzie and Marr’s new guitar

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that is being released is crafted from mahogany wood. This guitar will have a crisper and brighter sound than the existing ones. It is also in the company’s best interest to be selling accessories online. Accessories can include music books, strings, capos, humidifiers and tee shirts. Giving the consumers the opportunity to purchase items that accompany their guitar from Mackenzie and Marr Guitars, gives the consumer confidence in the quality of the product. The company is targeting a group of people who have a great deal of knowledge regarding guitars and they will know the difference in the diversity of the products offered and which may be best for themselves and their students. Guitars are sold between $800 and $1,000. The new guitar, which is being released, will be sold at price of $700.00 and this price includes a 54% markup on the product (Refer to Exhibit 1). This guitar has been priced lower than others because it is projected that it will help increase monthly sales for the company. It is projected that this new guitar will make up 25% of the company’s overall sales. Since the target market is typically people who are financially well off, the price of the guitar will not have a negative effect on the consumer. Many music teachers tell their students where their instruments need to be purchased from, without considering the price. A $700.00 guitar will provide the students with a durable, long lasting and quality product. In order to market the release of the new guitar along with increasing the company’s overall sales, Mackenzie and Marr Guitars need to be reaching out to their customers in the most beneficial ways possible (Refer to Exhibit 2). In the past, an endorsement has been used to help promote products and it has proven to increase sales. Currently, country music is very popular in today’s society, which is why it would be in the company’s best interest to have an endorsement for the release of their new guitar with a popular country artist. Artists to consider include, Brad Paisley, Luke Bryan and Keith Urban and they will receive a 10% royalty on each new guitar

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that is sold. Having a strong country icon attached to the Mackenzie and Marr brand is what the company needs to ensure increased sales. Publishing an ad in the Acoustic Guitar Magazine is also another option to be considered (Refer to Exhibit 4). This magazine reaches readers all across North America and the average reader is approximately 55 years old, which is directly our target market. In order to maximize the company’s marketing budget and gain the most promotion, purchasing the 12-month package will accomplish this. This package includes a full-page spread in the magazine, a leaderboard online and 2 promoted facebook ads. This package reaches out to customers all in the target markets whether they prefer to read online or a hard copy and a social media aspect is also incorporated. Google search ads and words, allows for people to search relevant topics related to guitars and ads for Mackenzie and Marr appear. (Refer to Exhibit 3) In regards to targeting music teachers, for every student they refer who purchases a guitar they will receive a $50.00 store credit. New marketing strategies will hopefully lead to the increase in sales that they are seeking. CONSULSION In order for Mackenzie and Marr Guitars to overcome their challenges and meet their goals, the company should consider the changes in promotion. By having a strong focus on two marketing plans and maximizing the budget to its full capacity, it will assist consumers in becoming more educated about the company and allow it to become more successful. Selling accessories along with guitars will help the business in of sales and will be beneficial to consumers. Having a strong and loyal target market is important for stand alone companies because it allows them to be aware and understand the consumers’ needs and wants. In conclusion, with the implementation of a new marketing strategy, Mackenzie and Marr Guitars have that ability to continue to be successful, launch their new guitar and grow their business.

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Exhibit 1 Mackenzie and Marr Costs Expense

Calculations

Selling Price

$700.00

Markup

54%

Margin

= Markup / (100% + Markup) = 0.54 / (1 + 0.54) = 0. 35 = 0.35 x 100% = 35%

Mackenzie and Marr’s Profit

= 0.35 x $700.00 = $245.00

Artist Endorsement (10 % royalty)

= 0.10 X $700.00 = $70.00

Importing Tariffs (projected to increase to 6%)

= 0.06 x $700.00 = $42.00

Taxes (Goods and services tax – 5% of selling price. Quebec sales tax - 9.975% of selling price.)

GST = 0.05 x $700.00 = $35.00 QST = 0.09975 x $700.00 = $70.00 Total Tax = GST + QST = $35.00 + $70.00 = $105.00

Total after all expenses

= Selling Price – Margin – Endorsement – Tariffs - Taxes = $700.00 - $245.00 - $70.00 - $42.00 $105.00 = $238.00

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Exhibit 2 Marketing Expense Breakdown Expense Google

Cost Search Ads: $1.00 per click Capped at 1000 clicks per month = $1.00 x 1000 = $1,000.00 ments: $0.50 per click Capped at 400 clicks per month = $0.50 x 400 = $200.00 Total Google Expense: = ment + Search Ads = $1,000.00 + $200.00 = $1,200.00

Acoustic Guitar Magazine

Leadership Package (Full printed page, leaderboard and 2 promotes on Facebook) = $2,700.00

Artist Endorsement

10 % royalty

Total Promotion Expense (Budget $4,000)

= Google ment + Acoustic Guitar Magazine = $1,200.00 + $2,700.00 = $4,000.00

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Exhibit 3 Acoustic Guitar Magazine – Full Page ment

Exhibit 4 Google Search Words Guitars Instruments Acoustic Mackenzie Marr

Online Instrument Store Montreal, Quebec Guitar Stores Limited Edition Dreadnought

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