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Before we talk about strategy for future development, we have to understand where we are, and where we've been. Strategy is about playing towards strengths and away from weaknesses. Marketing is about understanding our target markets and target market needs.
Therefore, we begin this section with our market analysis, looking in detail at our target market and market needs. Then we develop our SWOT analysis, looking at strengths, weaknesses, opportunities, and threats. Afterwards we finish up with a look at some other key factors of the present situation.
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AMT focuses on small business in the local market, with special focus on the high-end home office and the 5-20 unit small business office.
We have broken our markets into groups according to standard classifications used by market research companies: home offices and small businesses.
Exact definitions of these market segments are not necessary for our marketing planning purposes here; general definitions will suffice. We know our home office customers tend to be heavy users, wanting high-end systems; people who like computing and computers. The low-end home office people buy elsewhere. We also know that our small business customers tend to be much less proficient on computers, are more likely to need and want hand-holding, and more likely to pay for it.
|High-end Home Office||10%||25,000||27,500||30,250||33,275||36,603||10.00%|
The home offices in Tintown are an important, growing market segment. Nationally, there are approximately 30 million home offices, and the number is growing at 10% per year. Our estimate in this plan for the home offices in our market service area is based on an analysis published four months ago in the local newspaper.
Home offices include several types. For our plan, the most important are the home offices that serve as the only offices of professional firms. These are likely to be professional services such as graphic artists, writers, and consultants, also some accountants and the occasional lawyer, doctor, or dentist. There are also individuals who maintain home offices for part-time use, including "moonlighters" and hobbyists. This segment is not who AMT wishes to sell to; our marketing focus consists of professionals and entrepreneurs who maintain a full-time office. In this plan, we will refer to customers in the home office segment as HOs.
Small business in our market includes virtually any business with a retail, office, professional, or industrial location outside of someone's home, and with fewer than 30 employees. We estimate 45,000 such businesses in our market area.
The 30-employee cutoff is arbitrary. We find that the larger companies turn to other vendors, but we can sell to departments in larger companies, and we shouldn't be giving up leads when we get them. We will refer to customers in the small business segment as SBs.
|Market Segments||Loyalty Status||Buyer Readiness||Benefits||Value||Product Attitude|
|High-end Home Office||Medium||Informed||Quality||$25m||Positive|
Our target HOs are on average as dependent on reliable information technology as any other business. They care more about reliable service and confidence than about the rock-bottom lowest price. They don't want to rely solely on their own expertise, so they choose to deal with us instead, with our promise of service and support when needed.
Our standard HOs will be one-system installations, without networks, and will generally be more powerful systems than the average small business. Fax modems, voicemail, and good printers are likely system component additions. They tend to be interested in desktop publishing, accounting, the Internet, and administration software as well as their job-specific software needs.
It's important that we realize we won't be selling to the price-oriented HO buyers. We'll be able to offer an attractive proposition to the service-oriented and security-oriented buyers only.
Our target SBs are very dependent on reliable information technology. They use their computers for a complete range of functions beginning with the core administration information such as accounting, shipping, and inventory. They also use them for communications within the business and outside of the business, and for personal productivity. They are not, however, large enough to have dedicated computer personnel such as the MIS departments in large businesses. Ideally, they come to us for a long-term alliance, looking to us for reliable service and support to substitute for their in-house people. These are not businesses that want to shop for rock-bottom prices through chain stores or mail order. They want to be sure they have reliable providers of expertise.
Our standard SBs will be 5-20 unit installations, critically dependent on local-area networks (LANs). Back-up, training, installation, and ongoing support are very important. They require database and administrative software as the core of their systems.
The SB buyers are accustomed to buying from vendors who visit their offices. They expect the copy machine vendor, office products vendors, and office furniture vendors, as well as the local graphic artist, freelance writer, or whoever, to come visit the SB office to make their sales.
There is usually a lot of leakage in ad-hoc purchasing through local chain stores and mail order. Often the administrators try to discourage this, but are only partially successful.
Overall we see the number of potential customers in our small business and home office markets growing at about 8-9% per year, over the next few years. This is just a simple calculation based on locations and users. We see a more interesting market opportunity in the skyrocketing expansion in the uses of computers in business.
The next big wave is connectivity, LANs, and the Internet. The growth figures in these areas are spectacular. According to Harper's Internet Index, there are now 57 million Internet users in the United States, and that number has doubled in two years. There are currently over 6 million websites, up from 100,000 in 1996.
Meanwhile, demand for personal computers continues to grow. The IDC forecast for this quarter suggests 14.1% growth in sales of personal computers in the United States, compared to the same quarter a year ago.
As we look at our SWOT analysis to follow, we are in a sustainable overall position. We have strengths to balance our weaknesses, particularly our knowledge of what our customers need in terms of connectivity, the Internet, LANs, software, training, and service. We also have some attractive opportunities in these same areas of expertise. However, we have an inherent weakness in competing against price-oriented competition from the major brand stores.
Our focus group sessions indicated that our target HOs consider price but they would buy based on quality customer support and service if the offerings were positioned correctly. Price is the message they're exposed to again and again; they have been trained to shop on price. We have very good indications that many would much willingly pay 10-20% more for a relationship with a long-term vendor who provides back-up and quality service and support. They end up in the box-pusher channels because they aren't aware of the alternatives.
Availability is also very important. The HO buyers tend to want immediate solutions to problems. Consequently, they can be subjected to high-pressure, undertrained salespeople who may not be able to factor in all of a customer's needs.
The SB buyers understand the concept of service and support, and are more likely to pay for it when the offering is clearly stated.
There is no doubt that we compete more against all the box pushers than against other service providers. We need to effectively campaign against the idea that businesses should buy computers, the heart of their business, as plug-in appliances, that don't need ongoing service, support, and training.
|Growth and Share|
|Competitor||Price||Growth Rate||Market Share|
In personal computers, we support three main lines:
The Super Home is our smallest and least expensive line, initially positioned by its manufacturer as a home computer. We use it mainly as a cheap workstation for small business installations. Its specifications include ...[additional specifics omitted].
The Power User is our main up-scale line. It is our most important system for high-end home and small business main workstations, because of .... Its key strengths are .... Its specifications include ....[additional specifics omitted].
The Business Special is an intermediate system, used to fill the gap in the positioning. Its specifications include ... [additional specifics omitted].
In peripherals, accessories and other hardware, we carry a complete line of necessary items from cables to forms to mousepads ... [additional specifics omitted].
In service and support, we offer a range of walk-in or depot service, maintenance contracts and on-site guarantees. We have not had much success selling service contracts. Our networking capabilities ...[additional specifics omitted].
In software, we sell a complete line of ... [additional specifics omitted].
In training, we offer ... [additional specifics omitted].
The main key to success with HO buyers is making the product and marketing positioning clear. Many potential buyers would prefer our offering(s) to the box-only offerings of the chain stores and mail order sources, if only they possessed adequate information to conduct a value-added cost/benefit analysis.
Word of mouth is critical in this segment. We will have to make sure that once we gain a customer, we never lose them. To help accomplish this, we must work to reinvigorate relationships through successful database marketing, among other means. We must always remember to sell the company, not the product. They have to understand they are taking on a relationship with AMT, not just buying boxes.
The accompanying historical results table is not strictly accurate. It is based on our best guess of what the share would have been for CPU units in our town, over the past few years.
It is valuable, however, for understanding our present position. We do believe the general trends are reflected in the table.
It is important for us to understand that we can't try to gain market share in CPU sales. We are getting into a different business. We need to emphasize training and support.
|Company Market Share||25%||20%||15%|
|Industry Variable Costs||$13,125,000||$18,637,500||$28,800,000|
|Company Variable Costs||$3,187,500||$3,570,000||$4,080,000|
|Industry Gross Contribution Margin||$1,875,000||$2,362,500||$3,200,000|
|Company Gross Contribution Margin||$562,500||$630,000||$720,000|
|Company Net Contribution Margin||$243,750||$210,000||$192,000|
Our macroenvironment is exciting. We are in the middle of an unprecedented boom in connectivity and communications, as the Internet offers spectacular new information technology. We are talking about real value here, real changes in the way we deal with information.
Meanwhile, all other signs are encouraging. The economy is in a strong growth spurt, unemployment is at an all-time low, stocks are up, and macroeconomic indicators are all positive.
We do need to keep in mind that we have two channels of distribution that are relevant to our business:
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