Focus Groups | Powerhouse Marketing Plans(c) 14 Outstanding Real-Life Plans and What You Can Learn from Them to Supercharge [... ]aigns

What Are Focus Groups?

A focus group is a special type of interactive interviewing process in which individuals (technically called respondents) are brought together to discuss a specific topic. The respondents are selected on the basis of carefully thought-out criteria, so that they are exactly the types of individuals who can best relate to the subject. During the group discussions, questions are generally asked by a trained moderator, usually following a preplanned discussion guide. Focus group sessions are usually held in a specially designed facility that has a one-way mirror on one wall, behind which observers can watch the process.

Focus groups should generally be done in a series. It can be dangerous to do just one focus group. A single focus group typically includes from eight to twelve respondents. It is possible for such a group to go off on a tangent, resulting in misleading information. By conducting a series of focus groups, you can check the responses of one group against those of another.

Consistent answers between groups help to validate the responses. Another advantage of doing a series of groups is that this enables you to refine the discussion guide. Discussions in the first one or two groups can give you insights that you can use to hone the questions for subsequent groups.

A typical focus group project might involve a series of six groups in three different geographic locations. This provides enough diversity to validate many of the key responses, and it brings in the viewpoints of potential customers in different geographic regions . Naturally, the number of groups will vary depending on the specific nature and size of your marketing mission. If there are a lot of different segments of potential target customers, then more groups may be required. On the other hand, fewer groups may be required if there is only one segment and one geographic region involved.

Also, focus groups cost money, and the number you conduct has to be in proportion to the capital you intend to invest in the development of the marketing plan.

The interpretation of focus group findings is very subjective and is greatly dependent on the ability of the moderator and the interpreter. You are the one who is most interested in identifying the attitudes of consumers, and in determining how your potential customers are reacting to various ideas. You may, however, not be the best person to interpret what respondents are saying during focus groups. People who are listening to consumers reactions to their own business often hear only what they want to hear. They will grab on to a positive comment and may simply ignore or dismiss the other negative comments. It is usually best to retain the services of an independent expert who has no vested interest and considerable experience in evaluating participants responses.

Find the Right Respondents to Represent Your Target Customers

The respondents to be included in focus groups must be carefully selected. You must be sure that they really represent your potential target customers and that they are capable of giving you valuable insight. You also want to avoid people who might tip off potential competitors and ˜ ˜professional respondents who have been to so many focus groups that they are incapable of giving fresh, objective responses to your questions. You should become personally involved in decisions regarding the selection of respondents.

The key to recruiting exactly the kind of respondents you are looking for is the development of a very specific and detailed screening questionnaire. Put a great deal of thought into the questions that will be asked of potential respondents. You will want to know:

Whether they fit your target market profile.
Whether they have the right income, education, and lifestyle.
Whether they work for your competition, or for any other business that might result in a leak of your proprietary information. Examples are advertising agencies, certain related retailers, and market research firms.

Asking such questions beforehand can improve the quality of the information you obtain during the group discussions. You may need a professional moderator to help you develop the best possible screening questionnaire for your purposes.

Psychographic recruiting often helps bring in people who have more than normal insight into the personalities of new business ventures . In this technique, the respondents thought patterns and habits are matched against the recruiting requirements. For example, you might want only people who have a record of trying new products early, since these are the potential customers who will have to be sold first. This technique can also help you recruit respondents who are unusually good communicators , which will be useful when you are trying to identify their innermost feelings. You can ascertain these qualities in people by including sophisticated psychological questions in the screening questionnaire. Ask your researcher to consider psychographic recruiting.

Where Do You Conduct Focus Groups?

Focus groups are normally conducted in a professional facility designed for this purpose, and the selection of the focus group facility is very important. There are hundreds of alternatives listed in the Market Research Association Blue Book, and they can also be found in other sources, such as trade magazines and under Market Research in the Yellow Pages. Facilities vary considerably in appearance and in their ability to effectively recruit the number and type of respondents required. It is a real waste of time and money if half of the respondents are no-shows or do not meet the requirements of the screening questionnaire. These things happen often enough that you should check references carefully before hiring a facility to host your focus groups.

A key function of the focus group facility will be to recruit your respondents for you. The facility s staff will call potential respondents on the telephone and use your screening questionnaire. To ensure that eight people will show up, you should recruit twelve. The facility will normally use lists from its database that represent the general types of respondents you are looking for. If you have particular needs (such as customer lists), you may provide this information to the facility.

What Should You Ask During Focus Groups?

Asking the right questions during focus groups is obviously the key to learning how your potential customers feel about your business venture. Finding out how someone really feels can be quite tricky. It is important that you know what to listen for when respondents are discussing their reactions. Here are three methods that can be valuable in evaluating responses during focus groups.

The collage. An important step is to determine what image of your product or service your consumers have. A fun and effective technique for finding this out is to have focus group respondents build a collage. By selecting the pictures that will go into the collage and then describing the collage, these people can give you real insight into how they see your business venture.

Focus group respondents like to participate in this type of activity, and generally everyone gets involved. The technique works with consumers of household products and with professional buyers of technical products. It has even been used in groups of potential customers of business-tobusiness products. Some of these people have not been involved in a ˜ ˜cutand-paste exercise like this since they left grammar school, but they seem to be quite enthusiastic about building a collage in a focus group.
Forced relationships. Sometimes the best way to understand the perceived personality of a new product or service is to force a relationship between the product and something else. It is not always easy for individuals, separately or in groups, to describe what they really feel about a product or service. Therefore, it is sometimes difficult for people to visualize whether a new product or service matches their needs. The forced relationship technique often helps overcome this problem.

In this technique, you ask respondents to force a relationship between your product or service and something totally different. You then ask them why they have chosen this relationship. For example, if you have an idea for a new financial product, such as a new credit card, then you might have respondents try to match your idea with an animal. If you have an idea for a new hair spray, then you might want to have them relate this to a make of automobile. These totally unrelated images can give you very revealing insights into the respondents perceptions of your new business venture.

A good example of this occurred during the evaluation of a new retail service for a large bank. Respondents in focus groups were asked to pick an animal that reminded them of this new banking concept. Although many animals were mentioned, the lion was the most frequently brought up. When respondents were asked why, they usually said it was because the lion is the king of the jungle , and this concept reminded them of a powerful service offered by a big, dominant bank.

In probing further, it was determined that these potential customers felt that they would not trust the reliability of the new service concept if it were offered by a small local bank. They felt that it required too many resources. In fact, they felt that there were only a few banks that could pull off something of this magnitude, and that the bank doing the research was one of them.
Personality associations. Many people are reluctant to tell you exactly how they personally relate to a product or service. For example, some women may personally like the idea of buying fake jewelry, but want others to believe that they are the type of person who buys only real jewelry. In a group discussion, therefore, these women may tell you that a certain jewelry concept is great, but is not for them (although internally they really feel that it is for them).

An excellent technique for breaking down this barrier is the personalityassociations technique. With this technique, respondents are shown a series of photographs of different types of individuals and asked how they feel those individuals would probably react . The particular photographs used will depend on the nature of the concept being evaluated. With a new consumer product for women, for example, you might use a variety of pictures of women in different age groups, in different types of occupations, and with different income levels. Show each respondent a new idea, then ask him or her to select the photograph best representing:
- The type of person who would be likely to buy the product or service
- The type of person who would not be likely to buy it

Respondents will often tell you things about the person in the photograph that they would never tell you about themselves (although they are really talking about themselves ). It is somehow safer to give intimate details about an abstract person than to provide those same details about oneself. This technique enables you to find out many details about potential target customers for your business that would be difficult to obtain through direct questioning.

This chapter gives a marketing plan for selling a branded line of hardware-in supermarkets throughout the United States. The plan includes the strategy for a unique distribution program in which the company provides retailers with a complete inventory of hardware products on a distinctive display. Advertising and promotion programs are included, along with the details of a distribution system. The marketing plan is based on consumer needs identified through a series of focus groups. The plan includes these consumer research results along with the results of trade research, marketing objectives, and financial forecasts.

Marketing Plan for: Craftmaster Hardware Products Santos International Corporation ^[1] July 1, 2002

INTRODUCTION

The purpose of this document is to provide a comprehensive marketing plan for a major new venture in marketing a broad line of hardware products through supermarket organizations throughout the United States. This document is divided into the following seven sections:

BACKGROUND. This section reviews the background of this project and outlines the steps that led to the development of this marketing plan.
MARKET REVIEW. This section reviews the nature of the U.S. hardware market and identifies the opportunities for this category in the supermarket environment.
CONSUMER RESEARCH RESULTS. This section outlines present consumer practices, desires, and expectations regarding the purchase of hardware products in supermarkets.
SUPERMARKET PRACTICES AND ATTITUDES. This section reviews the supermarket trade s current involvement with hardware products and its reactions regarding accepting distribution of this venture.
MARKETING OBJECTIVES. This section provides the specific objectives of this venture over the next five years .
STRATEGIC PROGRAMS. This section presents the specifics of the various plans developed for achieving the marketing objectives of this venture.
FINANCIAL PROJECTIONS. This section reviews the results of a test of this venture that was conducted in a panel of stores in Alabama, and the sales projections developed based on the results of this test. The section then provides detailed calculations of the cost, volume, and payout of the venture from initial launch to full national expansion. A pro forma profitand-loss statement is also provided.

This marketing plan is the result of a study that was conducted for the purpose of identifying and developing a major new consumer product opportunity in the hardware category. This project included the following nine steps:

INFORMATION GATHERING. A careful review of virtually every secondary source that might be appropriate for the proposed venture was conducted. Information was gathered on both the supermarket environment and the market for hardware and other do-it-yourself products.
FIELD TRIPS. Store checks and in-store interviews were conducted in supermarkets throughout the United States. The purpose of these trips was to identify the extent of hardware programs in the supermarket channel of distribution in various areas of the country. Interviews were also conducted with eighty-five different hardware manufacturers for the purpose of identifying their involvement in the supermarket channel of distribution, as well as obtaining detailed information on their respective product categories. These interviews were conducted during personal visits to the manufacturer s location, as well as during two hardware shows.
CONSUMER RESEARCH. A series of focus group sessions looking at various aspects of the hardware market and specifically the concept of purchasing hardware products and other do-it-yourself items through the supermarket channel of distribution was held with consumers.
TRADE VISITS. Meetings were held with supermarket buyers and merchandising managers throughout the United States The purpose of these meetings was to identify their current practices and their attitudes toward the hardware category, as well as their willingness to accept distribution of a new venture in this category.
PRODUCT SOURCING. Based on this research, a list of products to be included in this venture was assembled . These products represented the fastest -turning products in the hardware category and those that appeared to be appropriate for supermarket distribution.

Manufacturers were then contacted and agreements were made for them to supply products for the program.
PACKAGING. Packaging for the program was designed, and small quantities of packaging were produced by each participating manufacturer. The purpose of this initial production run was to provide product for a test market.
TEST MARKET. A formal test market was conducted in Birmingham, Alabama, for the purpose of identifying product movement opportunities.
OPPORTUNITY ANALYSIS. Based on the results of the test market, an analysis was made to determine which products should be included in the program, criteria for selecting additional products, and the overall magnitude of the opportunity based on a sales forecast.
MARKETING PLAN. All of this research was summarized in the marketing plan, together with the strategic programs and financial projections necessary to launch the venture.

In addition to this research and analysis, this document reflects the input of a broad group of individuals from the marketing community and the hardware industry who were assembled for the purpose of identifying this opportunity. This input was gathered by detailed discussions on this subject, either in individual sit-down sessions, in status meetings, or in group work sessions held specifically for this purpose.

BACKGROUND

The concept of selling hardware products in supermarkets was identified as a significant opportunity. Hardware and other do-it-yourself products are one of the largest segments of the U.S. economy. Over $8 billion worth of these products is purchased by American families annually, and this is growing at the rate of 15 percent per year. Women make a significant proportion of these purchases, and they would like to buy these products in the supermarkets where they regularly shop. Supermarkets today have not yet developed a response to this need. Their programs in hardware products are very sparse, and the products they carry are generally of inferior quality.

A team of leading manufacturers in the hardware industry was assembled by Santos International Corporation to assist Santos in developing a program for the sale of hardware in supermarkets. It was felt that the advice of these manufacturers would be beneficial in that they could provide real live input from the hardware industry. This team provided broad input on various segments of the market.

It was identified through trade research that the reason supermarkets have not developed strong hardware programs is that the hardware industry is very fragmented . Very few manufacturers in the hardware industry are large enough to be able to put together a major supermarket hardware program. Most manufacturers in this industry are small or specialize in one segment of the industry. Because of this, no one has helped supermarkets accommodate the hardware needs of their customers. Furthermore, it was felt that it would be very difficult for the hardware industry to retaliate against a major new program because of this fragmentation.

Based on this input, the Craftmaster program was developed. By combining the product lines of a number of manufacturers, a full line of high-quality hardware products was assembled. The products selected were the fastest-turning products in the categories that were appropriate for supermarkets. Exceptional packaging was developed for the entire line, together with an in-store display. A direct-to-store distribution system was developed, together with a strong pull-through marketing program.

A test market was conducted in Birmingham, Alabama, with tremendous success. It was found that the supermarket trade was receptive to the idea of a major new hardware program. Consumer sales were 4.64 turns of the display inventory per year. This represented a national opportunity in excess of $150 million in annual wholesale sales. Based on this test, the decision was made to proceed with the implementation of the venture.

Upon completion of one year of intensive research and development, this marketing plan, which summarizes the overall opportunity, was created. The plan demonstrates how the venture will move through each phase until it has achieved distribution throughout the United States.

MARKET REVIEW

The hardware category is one of the largest growth segments of the U.S. economy. Retail sales of hardware products are currently running at an annual rate of $34 billion nationally. These sales have been growing at the rate of 15 percent annually, and this growth is not expected to taper off in the foreseeable future. Hardware sales are stimulated by the strong do-it-yourself trends that are currently found throughout the United States and in most demographic segments. Do-it-yourself companies have grown at a compound annual rate of 15 to 20 percent over the past ten years. The hardware category has actually grown 50 percent faster than total U.S. retail spending.
Hardware sales even increase during recessionary periods. During recessions, there is a tendency for people to do more of their own repairs . Many hardware products actually become necessities during these periods. The hardware industry grew 27 percent during the 1974 “1975 recession. The current recession s effect on hardware sales is evident from looking at building supply stores. Stores that cater to contractors have grown very little, while stores that who are exclusively consumer-oriented have grown tremendously during this recession .
There is a growing trend toward self- reliance among Americans. More and more consumers are doing things themselves these days. Some are doing this to save money, while others simply enjoy working with their hands. Over 75 percent of Americans buy hardware every three months. The average person spends $13.50 on hardware during this period. Most analysts agree that the hardware category should continue to grow throughout the foreseeable future.
Supermarkets are one of the most significant distribution channels in the American retailing system. Supermarkets do over $228 billion in retail sales annually. Most of these sales are concentrated in larger outlets. There are 137,000 supermarkets throughout the United States.
Consumers do not generally shop for hardware products in supermarkets. National Family Opinion conducted a large survey this year among 1,427 consumers. Consumers were asked about their normal practices in purchasing hardware products. Only 3 percent of this sample shopped for hardware products in supermarkets. Approximately 4 percent shopped for hardware products in drugstores, and 40 percent bought hardware products in discount stores. Approximately 53 percent of consumers in this study shopped for hardware products in specialty or other stores.
Supermarkets have a very small share of overall hardware sales. All supermarkets together did $30 million in hardware sales during 2001. This is less than 1 percent of all sales. Despite the size of the supermarket channel, supermarkets are not really participating in the hardware category. Supermarkets did over $4 billion in general merchandise sales last year, yet only 0.7 percent of this was in hardware.

CONSUMER RESEARCH RESULTS

Consumers purchase hardware and other do-it-yourself products for a broad variety of reasons. Saving money obviously plays a major role in these purchases. In addition, however, many consumers gain a great deal of personal satisfaction from fixing or building something themselves. Many enjoy working with their hands. Do-it-yourself projects are often found very therapeutic. Finally, a number of consumers do projects themselves simply because it is difficult to find outside help.
It is the wife who typically conceives a household project. She is frequently at home more often then her husband, and thus has the time to develop ideas for home improvement. She will collect data on major projects, and will often think through how a project is to be completed. The wife will then either carry out the project herself or convince her husband to do the work. Projects that are completed by the wife are often minor projects that do not require expertise that she does not have. Many women, however, are beginning to tackle more and more complex projects.
Hardware products are currently purchased by both men and women. Women will generally purchase products for their own do-it-yourself projects or from a list provided by their husbands. Women not only are concerned with purchasing the right products, but would like to be able to purchase them in as convenient a location as possible. Men are also interested in shopping convenience; however, they are willing to spend more time evaluating product alternatives, seeking out information, and shopping for dollar savings from alternative hardware products.
The concept of a well-known brand name for hardware products is generally preferred by consumers. Consumers feel that brand names make it easier to identify quality products. Many people feel that major companies that have well-known brand names will stand behind their products better than producers of unknown brands. Many consumers are willing to pay a slightly higher price for a branded than for a nonbranded product. Some consumers use brand name products as a benchmark and then select a lower-priced alternative.
Consumers could recall very little manufacturer advertising for standard household hardware products. Stanley was the only name frequently recalled in this category. Most of the advertising seen by consumers was from retailers. They remembered advertising of sales both on television and in print.
Normal household projects require a broad range of hardware products. Several different types of products are generally required for a typical project. Some are already on hand, but many others must be purchased at the time of the project. The most common products mentioned by consumers during focus groups were hand tools, paintbrushes, fasteners, adhesives, and plumbing devices.
Consumers felt that retailers that are in the do-it-yourself business needed to carry a broad product selection. Consumers do not generally enjoy shopping around for hardware products. They would prefer to go to one location for all their needs. Locations where they typically shop for hardware products are hardware stores, discount stores, and building supply stores. They shop at these outlets because they feel confident that all the products they need will be there at the time of the shopping trip.
Most consumers are currently unaware that supermarkets carry hardware products. A few consumers have seen hardware products in supermarkets, but they have not purchased these products. The reason is that they felt the selection was very poor, and they were concerned about the quality of the hardware products in the supermarket being inferior.
The concept of selling hardware products in supermarkets was very well received by consumers. Both men and women felt that it would be very convenient to buy standard household hardware products in supermarkets. This would eliminate an extra trip or an additional stop during a routine shopping trip. Consumers generally felt that this would be a very valuable addition to supermarkets product offerings.
Consumers recommended that a supermarket hardware program offer a complete selection of quality products. These would primarily be medium-quality products for routine household projects. Ideally they would have a well-known brand name and would be well organized for easy shopping. Most consumers indicated that if a basic line of hardware products were offered in supermarkets, they would purchase these products.

SUPERMARKET PRACTICES AND ATTITUDES

The supermarket trade views hardware as a major product category. Virtually all of the supermarket executives interviewed felt that hardware was a significant product category. They generally felt that although these items turned very slowly, they could be profitable because of the high profit margins attached to the hardware category. Because of this, they felt that this category was appropriate for supermarket distribution, as long as the line was broad enough to generate sufficient overall dollars.
Many supermarkets have unsuccessfully attempted to establish a hardware business in their stores. Almost all of the supermarkets visited during this study carried at least some hardware. Generally these were small sections with a very limited selection of product. Many supermarkets simply carried a few items scattered around the store. The only major exception to this was in Los Angeles, where a major distributor had established a strong hardware business in supermarkets. Many nonfood merchandisers have tried to establish a hardware section. They have developed plans for four or eight feet of space, but they have found that they were unable to maintain this program because of a lack of manufacturer assistance.
The overall reaction to this venture by supermarket executives was very positive. The venture was seen as solving a major problem for supermarkets. The supermarket would be provided with a complete hardware department and with a product line covering its customers basic needs. Because the company would be providing supermarkets with ongoing assistance in marketing and in maintaining the program at store level, executives saw this as a workable program. Many executives felt that this was the only way in which they could successfully enter the hardware category.
Supermarkets typically felt that the venture would eventually have to take over their entire hardware business. Many organizations indicated that they would put the new brand in alongside whatever programs they might currently have. Once it proved successful, however, they would prefer to eliminate their existing program. In sum, supermarkets would really like to turn over the unique requirements of purchasing and marketing hardware to an outside expert company.
The supermarket trade felt that the operators of a supermarket hardware program must provide them with a line that is complete enough to cover all their needs. Many supermarkets wanted to be able to provide ˜ ˜a miniature hardware store for their customers, but this would have to fit into the space that they had available. In some cases this was four feet of space, while in other cases the supermarket could provide eight feet. It was felt that Santos International Corporation must have a broad enough product line to accommodate the various size stores.
A permanent section for hardware products must be created within the supermarket. The trade would like to allocate a fixed area within the stores for hardware. The objective would be a permanent ongoing department. To accomplish this, the venture must provide the stores with a plan-o-gram that will enable them to create this permanent section.
Store service would be a critical factor for a hardware venture. The primary problem that supermarkets have had in the past with hardware has been ordering the product. Store personnel have tended to neglect these departments, resulting in empty pegs and eventually the elimination of the section. It was felt that the new Santos International program must provide assistance in setting up the display initially and in ordering product on an ongoing basis. This will ensure that the display is kept full at all times. In most cases, store personnel will be able to take product from the back room of the store and place it on pegs on the display once it has been ordered.
The most viable physical distribution system was felt to be UPS drop shipments to each individual store. Several distribution options were discussed with the trade. Using the supermarkets own warehouses was not felt to be a viable option because the hardware line has too many individual items. It was recommended that a distributor s warehouse be used so that the distributor could pick-pack orders for each individual store. Custom orders could then be shipped to each individual store by UPS. It was felt that store personnel could effectively receive the merchandise and put it on the displays.
The supermarket trade liked the idea of putting all the hardware products it sold under a common brand. The trade was told that all products in this program would be under the one brand. Packaging for all products would be similar, and the entire brand would be advertised. The reaction to this concept was quite positive. Executives felt that the new advertised brand would be perceived as a major national brand and would help generate incremental sales for their stores.
The major conclusion from the research with supermarket executives was that hardware would be an excellent addition to the supermarkets nonfood departments. Supermarkets are looking for high-margin products. Nonfood products help to increase overall profits, and hardware was felt to fit this profile. It was generally felt that the new hardware brand from Santos International Corporation could become an excellent new business for supermarkets.

MARKETING OBJECTIVES

To create and maintain, over the next five years, a highly profitable consumer product business marketing a line of basic household hardware products through supermarkets nationally. It is intended that this be a permanent ongoing major business, staffed with a product management team that is dedicated to perpetuating the brand s existence and continuously expanding the brand s sales and profits.
To achieve a strong reputation among consumers as a high-quality brand of hardware products that is sold in supermarkets. The goal is to become known as a brand of highquality products for routine household do-it-yourself projects and to become known as a brand that is conveniently located at the local neighborhood supermarket.
To become the only brand of hardware products in most of the major supermarkets throughout the United States. The Craftmaster concept solves a major supermarket trade problem. Therefore, the goal is for Craftmaster to become so valuable to supermarkets that they do not feel it is necessary for them to carry any other brand of hardware products. In sum, the goal is to become the dominant force in selling hardware products through this very important channel of distribution.
To lock up the key hardware manufacturers as the source of product for the supermarket program. Santos International Corporation does not intend to go into the business of manufacturing hardware products. The company intends to be a key force in marketing other manufacturers products under its own brand name. Therefore, it is Santos s goal to make sure that the manufacturers of its products make products of excellent quality, yet at competitive prices.
Over the next five years, to obtain distribution in supermarkets throughout the country. The plan is to carefully manage growth by systematically rolling out the program in key markets throughout the United States. This will reduce the risks involved in expanding too rapidly , and it will enable Santos to expand the organization in an orderly manner.
To successfully launch the venture on the east coast of the United States during 2003. The goal is to achieve distribution during 2003 in 5,301 stores located between Boston and Washington, D.C. This means that by the end of 2003, Santos International Corporation will be solidly in the hardware business in supermarkets.

STRATEGIC PROGRAMS

The initial Craftmaster product line will consist of an assortment of basic hardware items appropriate for supermarket distribution. It will provide a broad line of the fastest-turning products in the hardware category. The objective is to provide the supermarket shopper with a line of products appropriate for do-it-yourself projects. The typical supermarket will be offered seventy-six different products that will completely fill a four- foot gondola section.
Larger supermarkets will be offered a fuller product line. There are a number of supermarkets in the United States that are large enough to accommodate a major line of hardware products. These stores will be offered the basic four-foot product line, plus an additional four-foot expanded section. This expanded section will include 104 additional fast-selling products.
All products will be marketed under the Craftmaster brand. This name is applicable to doit-yourself products, and it has been trademarked for exclusive use by Santos International Corporation. The name is catchy, can provoke consumer interest, and has a timeless quality.
The entire Craftmaster product line will be packaged in a coordinated manner. Hardware products that are currently sold in supermarkets come from a variety of different manufacturers. The packaging of these products has many different colors and designs. Because of this, the hardware category in supermarkets is confusing and unattractive. All Craftmaster packaging will have uniform graphics that convey a high-quality image. All products will appear to be one major national brand. This will be unique among hardware products in supermarkets.
The Craftmaster packaging will not interfere with the manufacturers normal operations. The products sold as part of this program will come from a variety of different manufacturers with different packaging machines. The objective is to minimize expense at each manufacturing location. Because of this, Craftmaster will use the existing basic package of each manufacturer. The only change in the packaging will be the graphics. Therefore, each manufacturer can continue to use its own machinery, carton sizes, and so on.
The Craftmaster in-store display is created from existing store fixtures. Each store will be asked to allocate either a four-foot or an eight-foot gondola, depending on whether the supermarket is accepting the basic program or the expanded program. The display will then be plan-o-grammed. Each peg on the display will be assigned to a specific product type. Signage will then be placed on the gondola. The result is an attractive hardware display that is well organized for shopping convenience.
The Craftmaster display can be tailored to fit the needs of virtually any supermarket. There is an amazing variety in the sizes and types of supermarket outlets. The Craftmaster display can fit into any of these different types of stores. The display can be put at an end aisle or in-line, with adequate inventory for replenishment. Most stores will require displays in fourfoot increments . Three-foot sections can also be created if that is required to meet the needs of a particular store.
Craftmaster products provide excellent consumer value. The products that have been selected for this program provide excellent quality levels for household tasks . These products will generally be superior in quality to similar products found in supermarkets today. Extremely expensive products (professional level) have not been included in this program, as they do not fit the profile of the typical supermarket shopper. Pricing of Craftmaster products will be competitive with that of similar-quality products in other channels of distribution.
The trade margins have been set to represent an excellent profit opportunity for the supermarket. Pricing has been established to enable supermarkets to earn a 40 percent margin (percentage off retail price) on the entire product line. This is considered to be an excellent profit level in the supermarket environment. Distributors participating in this program will earn a 25 percent margin off the wholesale price to the supermarket. Distributors are required to pay for store service out of their margins. The store service will run from 8 to 10 percent of the wholesale price, netting the distributor between 15 and 17 percent. These are considered to be acceptable margins by distributors .
Consumer advertising will be used to build the Craftmaster brand. Most hardware products are not advertised. The typical hardware brand is too small to justify the expense of any significant level of advertising. Craftmaster has the advantage of selling a number of different hardware products under the same brand. The combined revenue of all these different products provides a significant fund for advertising. Santos International Corporation has allocated 20 percent of the revenue received on the Craftmaster brand to advertising expense. This will enable the brand to spend in excess of $2 million on advertising on an annual basis.
The overall objective of all Craftmaster advertising will be to build the sales of Craftmaster hardware products in supermarkets. The goal is to become the major source of hardware in the supermarket channel of distribution. Therefore, the advertising will be geared to telling consumers that they can now buy these products in supermarkets. It is intended that this strategy will help shift sales from other outlets into the supermarket channel of distribution. The other major objective of the advertising will be to identify Craftmaster as a quality brand of do-it-yourself products.
The Craftmaster brand will fully exploit the opportunity for sales promotion that supermarkets provide. Supermarkets provide an excellent vehicle for sales promotion, in that they utilize virtually every promotion device available: coupons , rebates, contests, and so on. These promotion techniques are not typically used for hardware products because they are not always acceptable in the traditional channels of distribution. This provides the Craftmaster brand with a unique opportunity. Santos intends to utilize this as a way of outpromoting the hardware industry.
The Craftmaster brand will use promotion as a vehicle for obtaining and maintaining distribution and for ensuring strong consumer sales. The marketing plan has allocated 10 percent of the income from Craftmaster sales for sales promotion activities. This will yield over $1 million on an ongoing annual basis for promotion.
The Craftmaster concept provides a tremendous opportunity for publicity. Do-it-yourself products is one of the largest retail product categories. Major supermarket distribution of this category will now be available for the first time. This will provide a major new consumer benefit. These facts are genuine news, and are the basis for a substantial public relations campaign.
The Santos International Corporation will launch a major public relations campaign with the introduction of the Craftmaster brand. The theme of this campaign will be that the company is making a broad line of quality hardware products available to consumers in convenient supermarket locations. Press conferences and meetings will be held with all segments of the business and consumer press. Appearances will be scheduled on national and local television programs and on radio broadcasts. Feature articles will be generated in national and local print media. This publicity will be used to supplement the advertising, and to create a sense of urgency and excitement about the launch of the Craftmaster brand.
The Craftmaster brand will be introduced to the trade in such a way as to create the impression that this introduction is a major new marketing event. Supermarket buyers tend to react very favorably to new brands that are associated with powerful consumer pullthrough programs. In many cases the supermarket buyers will feel that they must accept distribution of this new brand simply because most of their customers will be looking for these products in the buyers stores. Supermarket executives do not like to miss out on those products that they feel their customers know about and want to buy on a regular basis. The introduction of the Craftmaster brand will be done in such a way as to make buyers feel that they have no choice but to accept distribution.
During the Craftmaster sell-in, each supermarket will be exposed to a series of powerful sales activities. The campaign will begin with a pre-sell meeting with each buyer to introduce the concept. The buyer will then be invited to attend the actual sell-in presentation. The next step will be a major PowerPoint presentation to each supermarket organization. The entire buying committee will be invited to attend this presentation, which will be a dramatic, highly persuasive show that will convince the buying committee that it must accept distribution of the program. Finally, a third sales meeting will be held with each organization for the purpose of closing the sale.
A national organization will be created to manage the implementation and ongoing activities of the Craftmaster brand. This organization will create all marketing plans, it will obtain and maintain distribution, it will coordinate all manufacturing activities, and it will ensure a profitable operation. The following outlines the responsibilities of each management position:
1. Vice president of sales and marketing. The vice president of sales and marketing is the chief marketing officer for the brand. This person will create ongoing marketing plans on a periodic basis, direct the advertising agency and all other outside marketing organizations, and supervise the three zone sales managers and will be responsible for the entire sales organization. New and ongoing product sales are the vice president of sales and marketing s primary responsibility.
2. Operations managers. There will be two operations managers. They are the primary link between the sales organization and the manufacturing organizations. They will ensure that the products are packaged properly, and that they are shipped in a timely manner. They will evaluate data from the sales and servicing organizations to ensure that the entire physical distribution system is flowing smoothly. They will also provide the primary quality control for all Craftmaster products.
3. Zone managers. There will be three sales zone managers. They will supervise the distributing organizations as well as the three district managers in each zone. Zone managers are responsible for obtaining new distribution and for ongoing sales in each zone. They report to the vice president of sales and marketing.
4. District managers. There will be a total of nine district sales managers, with three located in each zone. They will supervise the servicing organizations and will be the primary contact with supermarket buyers. District managers will obtain new distribution and will contact supermarket organizations on a regular basis. They report to the appropriate zone managers.
All manufacturers will sell the products directly to a series of outside distributors. Several distributors that will actually purchase the product on an ongoing basis in various areas of the United States have been lined up. These distributors will receive purchase orders for each store from the service organization. They will then ship the products and invoice each store. Replenishment stock for the warehouse will be ordered by the distributor directly from the manufacturers. The distributor will actually be the manufacturer s customer. Distributors will be supervised by sales zone managers in their respective territories .
A national service organization will be the primary contact with each store. Acme Support Services, Inc., has been appointed as the Craftmaster service organization. Acme has a national organization of 1,200 people located throughout the United States. It will contact each store on a regular basis to take replenishment orders. It will also set up each store for the first time. This organization will be supervised by the district manager in each appropriate area.
A number of manufacturers have been commissioned to manufacture product for the Craftmaster brand. Manufacturers have been selected based on their ability to produce a quality product and to provide the large quantities that will be required as this program is rolled out nationally. In addition, pricing from each manufacturer must be competitive. All of the manufacturers selected thus far are leaders in their respective industries.
Each manufacturer will pay Santos International Corporation a commission of 10 percent of net factory sales on all products sold under the Craftmaster brand. This will be on net prices to distributors. Each manufacturer thus far has signed an agreement indicating that the manufacturer has the right to sell product to our distributors under the Craftmaster brand. Each manufacturer will use Craftmaster packaging graphics. This 10 percent commission is the primary income to the Santos International Corporation.

The plan is to have the entire brand management team in place by the middle of January 2003, and to have the initial stores set up and begin advertising by October 1, 2003. Beyond this, the plan will unfold according to the rollout schedule indicated in the next section of this marketing plan. Table 10-1 outlines the timetable for the launch of the Craftmaster brand during 2003.

Table 10-1. Venture Timetable
	2003 Completion Dates
Brand management team in place	1/17
Produce sales materials	2/11
Complete pre-sell meetings	4/8
Manufacturer product samples	4/11
Write sell-in presentation	4/11
Complete sell-in presentations
”Boston	4/15
”Hartford	4/22
”New York	5/13
”Philadelphia	5/20
”Baltimore	5/27
”Washington, D.C.	6/3
All purchase orders to manufacturers	7/15
Ship product and displays to distributor	8/26
Set up all stores	9/30
Start advertising	10/1

FINANCIAL PROJECTIONS

Test Market Results

A test market was conducted in a panel of stores in Birmingham, Alabama, for the purpose of gathering data to be used in developing the Craftmaster sales forecast. Eighty-two different products were placed in a five-store test. The movement of each product was tracked every other week for eight weeks. There was no advertising placed during this test. The following results were obtained:
1. Product movement. The movement of product varied greatly from one class of product to another. Fifteen fasteners turned at an annual rate of 7.09 times. This was the fastestturning segment of the product line. Roller frames /covers turned at the slowest rate, which was 0.88 times. The results of the test clearly indicated that the products in the original line needed to be adjusted. It also provided a basis for selecting products on an ongoing basis.
2. Turns forecast. Based on the results of the five-store panel test in Alabama and basic adjustments made to the content of the product line, the overall line is forecasted to turn 4.64 times per year. This figure will be used for all future forecasting until actual movement is identified. Products found to move slower than 4.64 times per year will be eliminated from the program.
It is estimated that the Craftmaster program will eventually achieve distribution in 30,000 supermarkets throughout the United States. This represents 22 percent of all supermarkets. It is felt that all 30,000 stores will receive the basic four-foot product line section. Ten thousand of these stores will also receive an additional four-foot section containing the expanded product line.
It will take four years to roll out the Craftmaster program to the entire United States. It is felt that it will take the first six months of 2003 to prepare sales materials and actually contact each organization. During the third quarter of 2003, the product will actually be set up in 5,301 stores.
During 2003, distribution will be obtained along the east coast of the United States. This will include distribution in six markets stretching from Boston to Washington, D.C. This area encompasses 17.56 percent of U.S. households. To achieve distribution in these markets, a total of ninety-eight presentations will be made to supermarket buyers.

The national sales forecast for 2003 for all products included in the Craftmaster program is $7.4 million in net factory sales. This is made up of $5.3 million in sales of product from the basic four-foot section and $2.1 million in sales from the expanded section. The total net factory sales in 2007 is forecasted to be $114 million. Table 10-2 gives the national sales forecast for the basic section and the expanded section from 2003 through 2007.

Table 10-2. National Sales Forecast ($000s Omitted)
	2003	2004	2005	2006	2007
Basic Section
Wholesale sales	7,087	29,207	73,859	107,561	108,780
Net factory sales	5,315	21,906	55,395	80,671	81,586
Expanded Section
Wholesale sales	2,836	11,687	29,553	43,038	43,526
Net factory sales	2,127	8,765	22,165	32,278	32,644
Total Program
Wholesale sales	9,923	40,894	103,412	150,599	152,306
Net factory sales	7,442	30,671	77,560	112,949	114,230

The national sales forecast for the basic four-foot section is made up of pipeline sales plus consumer sales. For 2003, it is estimated that the pipeline sales will be $3.2 million in wholesale sales. This is simply the amount of dollars that will be required to fill each of the 5,301 displays. Consumer sales assume that the display will turn at an annual rate of 4.64 times. In 2003 the inventory in the stores will be available only during the last quarter of the year. Total wholesale sales for each year beyond 2003 have been adjusted to allow for inflation at the rate of 6 percent annually (conservative estimate). Net factory sales for 2003 are 75 percent of wholesale sales, because the distributor s margin has been subtracted.
It is estimated that the expanded four-foot section will generate $2.1 million in net factory sales for 2003. The calculations for identifying consumer sales and pipeline sales on the expanded section are similar to those for the basic four-foot section.
During the beginning of 2003, $130,000 will be invested in the development of marketing tools and in the initial ninety-eight sales presentations. This development expense will pay for the creation and filming of a television commercial, as well as the preparation of the formal sales presentation to be used during sell-in meetings. Ten thousand dollars will be invested in elaborate presentation equipment, which will include a computer and projector. It is estimated that $50,000 will be required to pay for travel expenses, meals, room rentals, and so on, to put on ninety-eight major sales presentations.
On an ongoing basis, it is expected that the pretax profits generated from the Craftmaster program will be in excess of $6 million. During 2003, a loss of $383,000 is expected; this is the investment required to launch the brand. It is expected that the brand will generate a profit of $1 million during 2004 and will remain profitable in subsequent years.

^[1] Disclaimer: The specific information in this sample marketing plan was compiled for intended use as an example only. Although this marketing plan is based on actual products from a real company, the specific information in the plan is hypothetical and is not intended to compete with or to divulge proprietary ideas, company structure, or the financial status of any company. The names, numbers , and some of the facts in this marketing plan have been changed because of the confidential nature of the information. The information is intended to be used as a guide only.