Current Situation Company Nanda Home is the founded by Nanda, An MIT graduate which herself is some sort of celebrity. Her name itself is a brand with a lot of equity. During the past four years she leveraged this equity to sell Clocky. She utilized press and media to popularize and introduce Clocky and increase consumer awareness and information. She is spending a lot of time taking care of every business function from resolving product development issues to marketing and sales. However, she know that when her popularity declines, she needs another lever to sell the product. This means she has to market her product. She has to spend money on marketing efforts. She also knows she needs a real organization to replace her as a one-man (or better to say one woman) team. Even though working as a one-man team worked for her when the scope of activities were limited, she definitely needs an organization with a coherent structure and well-trained, experienced marketing and sales staff as the scale of work grows. Working all alone leaves her no time to spend on new product innovation. The important issue to mention here is that Nanda have drawn a lot of attention without getting prepared for it. In other words, there was no deliberate plan of action to draw Media attention to this new product. As a result, sustaining this situation is tough and requires planning and effort. An unorganized success can only be sustained by organized effort.
Product Nanda designed Clocky for those who have problem getting out of bed. She then added personality to his product to target those who buy an alarm clock just because it’s cool. Nanda differentiates it’s product through design. This includes differentiated pet-like aesthetics and features and functions provided i.e. jumping out of nightstand . We also know that both Clocky and its successors Ticky & Tocky are essentially fad products. This means If Nanda wants to stay in business, this business has to be continuously innovative. This in turn means Nanda has to innovate new products continuously. One option is to create a set of design principles to be used by others and forwarded to her. She then can invest on innovative ideas which adhere to
her design standards and principles. Coca-Cola’s vice president of global design established four core principles. Each design should reflect bold simplicity, real authenticity, the power of red and a “familiar yet surprising” nature. The table below depicts sales and revenue during the past four years of operations. From this table we can infer that Clocky is in the Decline phase of its life cycle. It has passed through the introduction, growth and maturity phases in the past four years. Flattening sales is a very good sign that the product is in the declining phase: Year
Sales
2006 – 2008
220,000
2009-2010
More than 80,000
Year
Revenues
2007
$2.2 million
2008
$1.5 million
2009
$0.99 million
The dramatic drop in sales and revenues would be a result of many factors including the inherent fad nature of the product, lack of an integrated marketing strategy, emerged competition in the market and of course recession.
Product Line Extension When a product is in its declining phase, we have the option of a product line extension so that the life cycle curve shifts up. This means buying some time till the new product again falls in its decline stage. Nanda has introduced Ticky and Tocky as two “new versions” of Clocky with more features, improved differentiated aesthetics (Toy-like appeal) and similar functionality. Even though new product introductions would help the business survive, there is risk of cannibalizing Clocky’s market specially because Ticky is priced quite similar to Clocky.
She also have the option of the extending product line by introducing new specialized versions of Clocky such as Football Clocky and Clockiddie. There is lower risk of market Cannibalization for this products as they are essentially targeting different needs. These again would be appealing to some consumers with different needs and wants.
New Product Development Idea generation Regarding the process of idea generation, she has the option of interacting with customers to test level of acceptance of new products among consumers and potential issues. She can also interact with consumers to get insight, understand their needs and wants and come up with new product ideas. Current important decision to make is: • •
Whether to stick with alarm clocks and innovate new products that fit into this category or Whether to introduce new innovative products which share the same humanized technology trait?
Current generated ideas in Alarm Clock category are: • • • •
Football Clocky Clockiddie Enabling Clocky and similar products (Ticky & Tocky) to connect to internet through WIFI technology Integrating alarm clocks into social networks such as Facebook and Twitter.
Current generated ideas in other categories are: • • •
Follo, a personal assistant Robot ambulatory houseplant pot Spitlet
Idea Screening Nanda has to screen out some poor ideas as mentioned above. The development costs of each product requires screening out many ideas in favor of the best idea. A set of product design standards or principles would help in screening out ideas and choosing the best idea.
Concept development and testing Once the best ideas are chosen, Nanda has to develop the ideas and interact with consumers to test these concepts. She has conducted focus groups to get market insight and test new developed ideas.
Marketing strategy development and business analysis Nanda has not engaged in this stage of product development for any new products.
Consumers Consumers who were interested in Clocky showed interest to the product even before Nanda commercializes her product. The implications of this are: 1. Nanda is able to interact with consumers in order to get insight. 2. Nanda has not put much effort to popularize her product. a. In latter product introductions, she would be able to use this as a lever. However, at the same time current consumers would not necessarily be interested in other products. i. This emphasizes the necessity of putting together an integrated marketing strategy. Some consumers loved Clocky and some despised it. If you are a normal person which can easily use your mobile phone alarm to wake up, chances are you hate Clocky because of amount of noise and discomfort that it would create. This fact is highlighted by the results of ZMET consumer interview where many pictures depict a sense of annoyance and hatred toward alarm clocks. This means when considering market positioning, we have to be aware of this fact. Even when tied up with other features and appealing look, the product would still not appeal to many people. Choosing the target market wisely with regard to these facts is important because otherwise a lot of marketing money would be spent ineffectively. Morevoer, many people she had talked with had either heard about Clocky but were not sure where to buy it, or were just learning about the product for the first time. This signifies the fact that consumers are aware but not informed . Nanda has to come up with marketing strategies to increase awareness and inform consumers. The fact that product has been dropped by some retailers such as Bed, Bath and Beyond shows the fact that consumers are not well informed about product. Another important aspect of consumer behaviour is their level of involvement. We would say for Clocky, the level of involvement is medium.
It’s definitely not a low involvement product as consumers undergo a cognitive process to make the decision to buy the product. However, compared to high involvement products such as cars or apartments, we would say Clocky fits in the middle. This again signifies the necessity of an integrated marketing communication strategy crafted based on the Hierarchy of Effects Model. As discussed earlier, many consumers are not informed (knowledge stage bellow) about the product.
Consumer Research The first consumer research undertaken lacks quality of data. In each section of the survey , a significant percent of records has been collected as Not Applicable which makes it hard to draw any conclusion. The data also misses some critical points. As an instance, do people who buy Clocky “just because it’s cool” use its alarm to wake up? Or do they just use it as something fancy on their desk? Having said that, there are some points which we can infer from consumer research. Firstly, nearly half of consumers bought Clocky as a gift. Moreover, most consumers heard about Clocky through Press and word of mouth. This again highlights the fact that consumers awareness is mostly a result of Nanda appearance in press and word of mouth. This would initially be a good low-cost means of product promotion but in larger scales of activity and latter stages of product life cycle, these means become ineffective.
Channel Nanda currently distributes Clocky mostly through retailers (US-International) and her website. Amongst retailers, Upscale retailers such as Sharper Image and Brookstone are more interested in the product. However, Clocky did not appeal to mainstream retailers and Nanda efforts to distribute Clocky through mainstream retailers was not successful. The only remained option in this category is Target. Small retailers and boutique shops ask for higher margins (50%) and as a result are not a choice for Nanda. She also found many companies are interested in providing Clocky as a corporate gift to the employees or customers. Her website has been constantly used as one the main channels of distribution.
Competition While competition is not intense in the niche market Nanda focusing on, there are a few potential competitors who draw attention: •
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Smart phones: All have alarm clock feature ○ Users of smart phone alarms are probably not among potential consumers of Nanda products because consumers can easily snooze the clock several times. Zeo sleep coach ○ Is more expensive ($150-250) ○ Is more complicated and not as easy to use as Clocky, Ticky and Tocky Puzzle alarm clock ○ Has similar features ○ Similar price of $50. ○ Is not as easy to use as Clocky finding the pieces of puzzle would be inconvenient. Counterfeits ○ Priced lower than Clocky ○ Are not as safe as Clocky
Price Clocky is offered on a regular price of $39 and special chrome version of $45. The marginal costs for Clocky were initially around 18$ and were decreased to $8-12 after four years of operations (Economies of scale). Pricing Ticky and Tocky is a decision Nanda has to make. Given that their marginal costs are two and three times higher than Clocky, how should she price the new products to mitigate the risks of market cannibalization? Current offered prices are $50 for Ticky and $70 for Tocky.
Brand Currently, Nanda products are offered by a name which has not been related to any particular brand name. There is a lot of equity in Clocky as a brand. Nanda has to make the decision of whether to offer all of her products under one brand which serves as an umbrella (house of brands) or whether stick to the current situation of one brand name for each product?
Decision making and alternatives The main decisions Nanda has to make are around three main categories:
• • •
Product Branding approach Marketing strategy
Product Which products to develop next? Her alternative are as follows: 1. Develop product in the same Alarm Clock category 2. Develop products in new categories which share the same quality of “humanized technology”.
Branding approach Which brand approach to take? Her alternatives are: 1. A separate brand name for each product 2. House of brands Is she is to stick with the latter choice, what to choose for this house of brands? 1. Nanda Home 2. Another name which reflects the element of “Humanized technology”
Marketing strategy Is it necessary to change the marketing strategy for Clocky? How to market Clocky’s successors ? This in turn would be translated into other decisions: 1. Channel of distribution a. Upscale retailers b. Mainstream retailers c. Website d. Corporate gifts e. Small retailers and boutique shops 2. Price a. Decrease Clocky’s price
b. Keep Clocky’s price c. Price Skimming for Ticky and Tocky (50 and 70) 3. Target market & Positioning a. Fun market b. Need market c. Gift market d. People who suffer from Narcolepsy
Evaluating alternatives Product 1. Develop product in the same Alarm Clock category a. Pros: i. Is less risky ii.Requires less manufacturing and development costs iii.Newly emerged competition and presence of counterfeits b. Cons: i. Similar target market limits marketing promotion options ii. Makes innovation harder iii.Typically extends product line which results in a few more years of sustained sales so demands higher frequency of innovation 2. Develop products in new categories which share the same quality of “humanized technology”. a. Pros: i. Provides various options and facilities market positioning and promotion around “Humanized technology” ii.Enables Nanda to address new consumer needs and wants and virtually new target markets iii.Less competition because of the innovative nature of the product (highly differentiated) iv.Higher margins b. Cons i. Is generally more risky ii.Generally has higher development & manufacturing time and costs iii.Typically has high sales and marketing costs Brand Which brand approach to take?
Her alternatives are: 1. A separate brand name for each product a. Pros i. Each product has its own identify and success or failure of other products does not affect it dramatically ii.People would not recognize all brands as related to the same producer b. Cons i. Brand equity which results from synergy created among house of brands is not realized. ii.Marketing expenditure is generally higher and less efficient 2. House of brands a. Pros i. Marketing expenditure is more efficient as it improves marketing appeal of the whole family of products b. Cons i. Failures or practices of each of the brand names would affect the others (Dove is a very good example when its campaign for real beauty has been compared to other brands under the name of Unilever ) If she is to stick with the latter choice, what to choose for this house of brands? 1. Nanda Home a. Pros i. Has the element of “home” which reminds consumers of products related to or utilized at “home”. b. Cons i. Does not have the main elements of “humanized technology” and “Alarm Clock” ii.Would distort consumer perception of the product 2. Another name which reflects the element of “Humanized technology”
Channel of distribution a. Upscale retailers i. Pros: 1. Clocky was already successful in this category
b.
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d. e.
2. Upscale retailers are willing to provide the product 3. Generally higher margins are expected here ii.Cons: 1. Only a certain group of consumers buy from upscale retailers, others are not reached out 2. Less control over the channel comparing to zerolevel channels Mainstream retailers i. Pros 1. A whole new consumer category would buy the product. (Regarding the potential target market, not all consumers behave the same way when they decide where to buy the product. Many people would just buy stuff from mainstream retailers) 2. Nanda was not traditionally successful in dealing with mainstream retailers probably because of relatively high price of Clocky. Her only option in this category is Target. ii.Cons 1. Lower prices are expected which results in lower profit margins especially when compared to upscale retailers 2. Less control over the channel comparing to zerolevel channels 3. Is less adaptive comparing to website Website i. Pros 1. Enables Nanda to start interactive marketing which would be more effective in getting consumers engaged 2. Would help Nanda to acquire more market insight 3. Is a Zero-level channel, this means Nanda has more control over the channel 4. More economic (lower costs, higher margins) 5. Is more adaptive, no need to commit to a certain member for a specified time. ii.Cons 1. Less potential buyers when compared to retailers Corporate gifts Small retailers and boutique shops
i. Pros ii.Cons: 1. Lower profit margin Price 1. Decrease Clocky’s price a. Pros: i. Would increase demand especially among value-priced buyers by stretching product-line ii.Would help extend product life cycle iii.Makes product more appealing to mainstream retailers iv.Increased number of sales b. Cons i. Very low profit margins 2. Keep Clocky’s price a. Pros: i. Higher profit margins b. Cons: i. Would result in the product be out of the market 3. Price Skimming for Ticky and Tocky (50 and 70) a. Pros: i. Would Appeal to upscale consumers ii.Higher margins iii.Has the option of lowering the price after a specified time period to grab more market share b. Cons i. Fewer number of potential customers as a result of higher price Target market & Positioning 1. Fun market a. Pros: i. Potential point of difference ii.Is significant b. Cons i. A potential conflict between general unpleasant perception of alarm clock in consumers’ mind and the concept of a “fun, cool alarm clock” ii.Can be replicated by competitors iii.Segment size is hard to measure
2. Need market a. Pros: i. Segment is measurable ii.Is significant especially when take into account the international market b. Cons i. Many consumers in need of this product would have already bought one of the products so future innovations would not appeal to them again 3. Gift market a. Pros: i. Is supported by the survey results ii.Is significant iii.Size of the segment can be measured iv.There is less potential conflict between consumer perception of alarm clocks and provided image b. Cons: i. 4. People who suffer from Narcolepsy
Recommendation To decrease price of Clocky so that mainstream retailers are more willing to provide the product. Ticky and Tocky price would be the same (0 and 70) and will be offered through the website and upscale retailers. This mitigates the risk of market cannibalization. Nanda should stick to current alarm clock market at least until other innovative ideas are mature enough to be introduced in the market. For now Nanda has to target Gift and Need market. She also has to follow the same strategy of Product Line Extension through new innovative products in the alarm clock product category such as Clockiddie and Football Clocky. Regarding the brand, she has to create a house of brands but with a new brand names which highlights the main important elements of “humanized technology” and “alarm clock that wakes you up”. 1) Nanda has to offer Clocky in mainstream retailers such as target and newer products such as Ticky and Tocky, to upscale retailers. When
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time passes Ticky and Tocky would reach the declining phase of their life cycle, then she moves them to mainstream retailers and offers new products in upstream retail market. She offers all products in her website. Nanda decreases the price of Clocky to $25-30 because of lower marginal cost of product ($8-12). Nanda has to use “Price screening” method for Ticky and Tocky starting from current set prices of $50 and $70. This makes Clocky more appealing to the mainstream retail market and mitigates the risk of cannibalization. When Ticky and Tocky reach their declining phase, she decreases the price enabling her to stretch the product line. She introduces new innovative products to the upscale retail market. Nanda gradually offers new innovative products such as Clockiddie to the market to extend current product line. This approach buys her time. In the meantime, she continues to work on other innovative ideas around “humanized technology” (not necessarily in the alarm clock market). She has to turn the current one-woman-team to a organized team of product development and innovation, marketing and sales. In other words she has to establish a small innovative company with a structure that promotes agility. Regarding the brand, Nanda has to create a house of brands but she has to change the current name “Nanda Home” with a more relevant meaningful brand name which highlights her vision of “humanized technology”. Nanda has to use her website to interact with consumers and acquire more insight toward consumer needs, wants and behaviour. Currently Nanda does not have a clear marketing strategy. Even though some target markets are identified, they are not resulted from insight into consumer behavior. She has to come up with a clear marketing communication strategy resulted from consumer surveys and tied with market positioning and promotion strategy. She has to promise to provide value that she can deliver. Nanda should target need market fun and gift market with her alarm clock product category. She has to continue promoting product in the international markets. Nanda has to highlight product ease of use, safety, appealing look and special features and functions to differentiate her alarm clock to those of her competitors.
