Term Paper on "Marketing Planning Project"

Term Paper 6 pages (2603 words) Sources: 1+

[EXCERPT] . . . .

Marketing Planning Project

Quantify the size of the DVD rental market in Australia and identify the current trends and likely developments in this market.

After completing a thorough analysis of the DVD rental market in Australia it is clear that there is no single, sound methodology in place industry-wide for sizing this market. In fact a correlation emerges that shows the less disciplined and rigorous the market sizing methodology, the larger the market. From the anecdotally-based market forecasts on industry websites including AustrailaDVDRentalGuide.com (2007) which postulates Australian DVD rentals, both online and offline can be extrapolated from the figures for the UK and other countries. Clearly more discipline and precision is needed in the sizing of the Australian online DVD rental market. While many sources have quantified the market to be small and nascent, the best methodology found during research to complete this paper was from Colman (2006) from CCZ Equities Research. His approach is to define the CCZ Base Model which is based on household penetration of online DVD services, also taking into account subscriber growth, DVDs sent and DVD titles. His model shows that Quickflix, the leading online DVD rental service in Australia, under his model, generated 8,000 subscribers in 2006. Extrapolating this as the basis of market size to sales and taking into account the role of Telstra as a company capable of investing in creating the market for online DVD rentals in Australia, leads to a market estimate of between 14,000 and 16,000 subscribers in 2007 for online DVD rentals. This forecast of between 14,000 and 16,000 subscribers also ties back to the QuickFlix Business Prospectus (2006). This prospectus also takes a top-down approach to defining the market, further validating the dynamic that the looser the methodology the larger the market. Triangulating the methodologies found during this research effort, it appears that the market is between the range 14,000 to 16,000 subscribers in Australia in 2007, growing at a 3% to 5% growth rate. The factors contributing to this growth rate are defined in the trends section below.

Current Trends

At present, there are aggressive pricing policies being instituted by the online DVD services companies, trying to counter the.5% market penetration (ScreenDigest, 2005).

Australian demand for DVDs as a form of online DVD rentals climbed to 80% of the demand of all forms of rented entertainment online in 2004 (ScreenDigest, 2004), and continues to grow through 2007.

Valuation of the industry as shown in the model by Colman (2006) on page 8 specifically shows how the industry will grow through 2009 based on the assumptions of Australian market penetration for QuickFlix relative to competitors.

How will the identified trends and possible developments in the market affect the proposed venture? Analyse and assess the industry competitiveness of the new venture.

The economic climate and current nascent nature of this industry, while slowly growing today, show significant growth into the 2009 and 2010 timeframe due to the following series of factors:

The Australian Cable TV market and subscription entertainment services are known for low churn. This is a major advantage in the development of an entirely new online DVD rental service, as churn is a customer dynamic that forces many companies to over-spend in the areas of customer retention and acquisition.

Aggressively pursue best practices in order fulfillment and order management. This is a critical for any new web-based or online initiative. The fact that the order management process is critical to building the foundation of a sustainable and agile customer service function has been seen in the many experiences of NetFlix in their subsequent years of growth. For any new venture to succeed, it must also focus on how to create a highly integrated backend series of processes to fulfill the right DVD to the right customer on the right order. Columbus (2002) in discussing system integration explains the economics of integration as it relates to customer-facing systems, which are identical in scope to the ones needed in this new venture.

Strong orientation to attracting, retaining and rewarding customers for staying loyal to the new venture. NetFlix attributes much of its success as having the ability to quickly track customers' preferences and needs. For the new venture to succeed, it will need to also aggressively pursue a thoroughly defined Customer Relationship Management (CRM) strategy corporate-wide. There are many definitions of CRM and its components, yet one of the best is from Gartner Group. (Gartner 2001) defined a series of eight building blocks for CRM that are based on several excellent assumptions including the fact for CRM to be successful it requires being considered a strategy that encompasses all areas of a company at the enterprise level vs. just an isolated or siloed strategy. Gartner's definition is shown in Figure 1.

Figure 1: Gartner Group's Eight Levels of CRM (Gartner 2001)

Managing the DVD library and its exponential growth is a critical success factor for any new venture and the budget of $1,250,000 is sufficient to develop and implement an enterprise content management (ECM) system. This is, like the CRM practices and systems mentioned in the previous point, critical for the development of the entire venture.

What exacerbates and hastens the need for content management strategies is the chaotic nature of content management systems.

Figure 2: Content Management Systems Before synchronized

Figure 2 provides an example of what a typical organization's content management structure is prior to the development of an Enterprise Content Management (ECM) to capture, coordinate, synchronize and eventually use in strategies the content and knowledge scattered throughout the venture. It is useful to remember that Figure 2 is the schematic, if you will, of the network employees must rely on for their information. In completing tasks in the new venture, having a synchronized and highly organized and content management system will literally save, over time, years of searching for data and information. This is going to be critical for the company as it works to gain and retain customers as the ECM system will need to integrate to the CRM system to deliver the competitive advantage required according to Columbus and Murphy (2002).

When an Enterprise Content Management (ECM) is put into place and made the foundation of customer management strategies, an entirely different structure to content creation, organization, syndication and use comes into play. This is significant to reducing "knowledge walkouts" as it creates a solid framework for organizing knowledge. Figure 2 represents what a prototypical ECM framework looks like from a schematic standpoint. The key take-away from this graphic is that once an stable framework is in place for content, stability and order come to customer management.

Figure 2: ECM is the foundation of solid knowledge management. Source: Establishing a True Source of Product Content for Competitive Advantage, AMR Research (Murphy (2003))

Based on your assessments of the online DVD rental venture and of the industry, outline a marketing strategy for Year 1. In order to complete the assignment formation of a marketing plan for the company will be required using the following format.

Outline of Marketing Plan

1.0 Executive Summary

The foremost challenge for this new venture is in transforming the concept of providing the ordered DVDs to customers at the right time of their rental, at the right price while keeping the entire billing and ordering system in place. Triangulating these factors in this business model is critical. As McKinsey & Company (2005) has specifically shown in their research, the focus on creating value through turning service points in competitive differentiators is critical. For the new venture to be successful in competing in a nascent market, there must be a focus on transforming exceptional service into a dominant area of identity.

2.0 Introduction

The intent of this plan is to show the potential for an online DVD rental service in Australia, challenging HomeScreen, QuickFlix, and FetMeMovies.

3.0 Situation Analysis

The current situation for online DVD rentals is still nascent as is shown in the analysis by Colman (2006) and also specifically shows the emerging growth opportunities of this market. This marketplace is known for very low penetration rates today, in addition to the potential cannibalization of these services by downloadable movies from the Internet. According to Colman (2006) this will be the case by the 2009-2010 timeframe.

4.0 SWOT Analysis

The following are the current strengths, weaknesses, opportunities and threats for this specific market:

Strengths

Much opportunity for growth and alignment with media partners for the entire Australian marketplace. Becoming the primary distributor for any of the largest movie production companies has much significant potential.

Acceptance of a subscription model that is based on customer preferences and allowing consumers to define their own schedule of entertainment for the long-term.

Technologies necessary to support this venture are mature including CRM and ECM.

Weaknesses small and nascent market that is growing relatively slowly right now.

The market is not price elastic as has been seen by the price moves made by dominant vendors in this market during 2005.

Cannibalization by online video rentals… READ MORE

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