The Feasibility of the New Grocery Home Supply from Zip-mart - Research Proposal Example

Phase 1: Marketing Research Assignment 1. New product report for home grocery supply 1.1 Overview: Zip-mart has been in operation for about a year now, with the sole purpose of availing quality green supplies for middle level income consumers in the New York City. The company was founded on the view that the major grocery supply stores are charging way too high on their products, one of the main reasons they price their commodities very high is because of their operating expenses. The founders of Zip-mart saw an opportunity in sourcing for the grocery directly for themselves without involving any middle men this way they would lower the buying price and reflect the same on the selling price further more they also strategized on lowering operational cost through measures such as the minimal staff numbers and the concept of just in time stocking to lower storage costs and losses in highly perishable goods. The core operating philosophy of Zip-mart is to lower expenses and have a competitive advantage in the sense of low pricing models as a result of minimized expenses. Recently the proprietors of Zip-mart have come up with a new idea of supplying the grocery to their clients door step upon ordering. The customers may have a daily order that is consistent or communicate with the Zip-mart staff on the website or through cell-phone numbers. The idea is to lower the costs involved in renting space in the city and thus have a highly competitive pricing model to rival the major players in the sector. However a thorough research had to be carried out to assess the feasibility of this new product. 1.2 Objectives: The overall objective is determining the feasibility of the new grocery home supply from Zip-mart in terms of competition and target market response. To achieve this objective we approached it in the form of the following set of sub-objectives: 1. To identify the potential target market for the product. This objective will give a direction to the company on how they will price the product and what promotional & advertisement avenues should be used to reach the market. 2. To identify the issues involved in entering a new market segment in the grocery business 3. Determine the market preferences in terms of pricing, timing and service associated with groceries. 4. Study the attitude of the consumers to the idea of being directly supplied with groceries. 5. Study the attitude of consumers to the current prices and service being offered by the key competitors. 6. To measure brand and company attachment amongst customers and their flexibility in choice. 7. To identify the key customer concerns and wishes in terms of grocery supplies. 1.3 The Research Plan: To achieve all the above listed objectives, the research plan is designed in two parts; the qualitative research and the quantitative research. In these two parts the emphasis will be on both primary and secondary data collection to facilitate credible analysis in line with the overall objective of the research. Qualitative research This research will achieve the objectives of identifying such aspects as customer concerns and wishes, brand loyalty among customers and how flexible they can be, attitude to current market prices, consumer attitude to the new product. The qualitative data will be quantified wherever possible for analysis in order to give a general tendency of the data collected. This will be gathered from primary and secondary sources available. Quantitative research The research will rely also on quantitative data to simple analytical objectives such as the average number of the potential clients willing to have doorstep deliveries of groceries from the company. The average number of clients who are comfortable making their grocery orders from the Zip-mart website. To achieve this we will have to select an all inclusive yet manageable sample. The sample will represent the general population of the New York middle-class. Age, income, gender and preferences will be a key consideration for quantification. 1.4 Implementing the research: The research will involve primary data collection from selected respondents through the social media and emails and also one on one interview at Zip-mart stores. The sample that we are working with is just for two hundred people to reduce the expenses involved in handling a large sample. However care has been taken to ensure the sample is balanced in a way that it will represent the community we hope to get information from. Small interviews will be conducted at the Zip-mart stores from our clients who make the bulk of our hopeful target market. The interviews are pre-structured to ensure only relevant data is collected and within the minimal time possible. The questions being asked by the interviewers in the shops and the small survey questions being sent to our respondents through the social media platform and through mails are generated from our sub-objectives. The social media questions are simple and sent periodically; two questions per day to ensure we don’t take so much of the respondents’ time. The data collected will be analyzed using graphs and tables to bring out the quantifiable meaning we are interested in. Secondary data shall be collected to reduce the research expenses to give a better understanding of the grocery sector in the New York area. We shall rely on the government records to get the number of the main competitors in the industry and how much of the market they control. Secondary data will be useful to give the changing trends in the grocery sector. The local data available on the feasibility of such projects as ours shall also be gathered from secondary sources such as reliable trade reports and government publications. 1.5 Findings: 83% of the respondents interviewed listed it as a major concern to get quality fresh groceries at an affordable price. 70% thought that the current prices being offered by the major sector players was are very high. 30 percent thought that the prices were well within the limits considering the hard economic times. From the analysis the middle class segment felt comfortable and actually welcomed the idea to be supplied directly with their grocery orders regularly 73% of the respondents who preferred the idea of doorstep grocery deliveries are people in the idle class- young and very involved in work lives. This group cited some reasons such as having busy schedules. They were also excited by the idea that it will save some money as the pricing will be a bit lower. The sector is very competitive with major retailers banking on their market coverage to intimidate new entrants. The operating costs might as well push expenses upwards and affect pricing. However the idea with Zip-mart limited is new and is highly likely to succeed judging from the customers attitudes to the idea. 2. Phase 2: Marketing Plan Assignment 2.1 Business definition Zip-mart is intending to provide a hybrid of an affordable product and service to the New York City residents. The company is intending to supply common grocery requirements like vegetables, fresh fruit, dairy and bakery products for homes and apartments in the New York City, Manhattan-Chelsea. The area is more of a residential than commercial area and has quite a big potential judging from the ever busy middle class that are our target market for this product as it is leveraging on a main factor of convenience inn supplying to the houses and moderate pricing that the middle class is very conscious about (Moore, Carpenter, 2006). Competition is very rife in the grocery industry in the New York area. Most of the groceries are supplied by the major chain supermarkets in the country who incur a lot of expenses in advertisement. According to a study by (Gottlieb, 2006), The major supermarket chains that stock groceries are Kroger Co. , Albertson’s Inc., Safeway Inc., and Publix Super Markets. They had a combined advertisement expenditure of $ 1.9 between year 2000 and 2005 (Thomas & Bucchioni2012). Despite the huge investment the top five supermarket chains only account for 25% of the total revenues in the grocery industry (Plunkett, 2008). This is an indicator that there are indeed very many players in the industry. Peapod is a web based grocer which was the first successful operator upon its launch in the year 2003 but Amazon an online shopping site has been experimenting with the idea since launching its grocery department in 2006. Safeway and Supervalu are also dedicating a lot of time and interest in the online grocery idea to beat competition (Plunkett, 2008). These are the main competitors that we Zip-mart are likely to faceoff with to market its groceries. Zip-mart has a competitive edge over the rest of the players as it is a small company that is able to give a personalized service to their customers. The company is more flexible to accommodate all types of customers provided there is money to be made and a need to be met. The company (Zip-mart) is banking on vertically integrated model of sourcing for its supplies unlike its competitors who rely on intermediaries. According to (Sparks, Fernie, 2004, Gimenez, Ventura, 2004), this will reduce the prices on offer by a far much bigger margin and give a competitive advantage. Zip-mart does not incur a lot of operating expenses due to its lean staff and cost cutting JIT model of stocking. This reduction in costs means Zip-mart can offer competitive prices and dedicate much of its profits to improving services and improving quality. The supermarkets chains and hyper marts are stuck in high costs of operation and mostly rely on their brand presence to offer high prices for their groceries to make profits. Zip-mart’s pricing strategy is to offer lower prices than the prices being offered by the market leaders this will be enabled by a vertically integrated system where we will source directly from the farmers and manufacturers and contract farmers wherever possible. Burch, (2007) is in agreement with our opinion that this strategy is sustainable since Zip-mart is flexible enough to handle the cost reduction strategy and maintain a closer relationship with the customer. Zip-mart competitors like Costco have a very rigorous promotional agenda to market their groceries. The hypermarkets according to (Randall & Seth, 2011), majorly advertise in the print media and the TV. Zip-mart will market its services through engaging directly with the current consumer base that is not aware of the new product this way we will be at a better position to get the initial client sand explain to them better how the whole idea works. Zip-mart will also target its customers through social-media advertising such as facebook and also online from the website. The key in all the promotional activities is to not increase costs too much to loose on the competitive strategy of availing lowly priced goods to the customers we plan to have discount items for our clients depending on the amount they order and the frequency of order. The discounting program will create loyalty and go a long way in initiating word of mouth marketing as a delighted customer will as Lal & Corstjens, (2004) put it, pass on the message to friends and family. Our customers will get our grocery items from our outlets or through the new home supply method where they will have to subscribe at the stores or online at our website. It is a simple affair where a daily consistent order shall be discounted whereas specials orders will attract a little more than the usual. Within 30 minutes of request within the designated areas the customer will get the supplies and at stipulated times for the daily supplies. 2.2 Customer definition The average customer for Zip-mart is a middle class average income earner who is sensitive about the amount of expenses s/he incurs in recurrent expenditures. This is the kind of customer who is always busy and has limited time to spend doing shopping for grocery in large supermarkets that have long lines of clients at the pay-points (Mehra & Hoffman, 2002). This customer is also very specific on the quality of groceries he gets at the grocery shops and supermarkets. Although he does not live the high end life class is very important for this customer segment and they are always concerned that they get the best quality of groceries (Mehra & Hoffman, 2002). The income level is for this segment stands at $ 50,000 according to as reported by Tervenise (2012) adapted from federal statistics (2012) .this means they have an average buying power meaning they will go for the lowest prices in the market. The customer has a chance of knowing about our new product through promotion at our already popular grocery stores in addition to this we are intending to have a large promotion targeting the middle class through the social media and magazines. This way we shall be able to introduce the potential customers to the new product in a more detailed convincing manner that will have immediate results. Our customers will have no reason to buy from our competitors simply because we shall be offering the best prices in the market from our cost cutting strategies. We shall strive to maintain these prices and entrench the same in our brand. We shall complement the aspect of low prices with all round running discount programs on quantity to ensure our customers pay less as they purchase more. We are also offering another value in the groceries we are selling. Our groceries shall be delivered to the clients at an even lower price than what they buy at in the stores this is our newest product that we will use to develop a long lasting relationship with the customers. We will strictly implement quality measures and ensure that the groceries sold in our stores are fresh from the farm. To do this we will have to implement a Just in Time (JIT) strategy that will guarantee we only stock what we need this strategy is very effective as noted by (Cheng & Lai, 2009). Of course there is always room for improvement when it comes top remaining competitive and relevant in any industry, It is the same case with the market we are working in. for this reason we shall engage with our customers to know how satisfied they are with the quality of the groceries we supply them. According to Bourlakis & Weightman, (2008), quality can only be improved from the source. So as we move forward we plan to have more direct control production practices of the farmers we deal with to ensure quality is guaranteed from the source. We believe that the wealthy class might not be so enticed with the low prices and we are not focusing our attention on the segment in much detail, but in the future we have noticed there is growing trend of high demand for fresh organic grocery products which is a similar view shared by Ngobo (2010). The organic groceries are quite expensive but the customers are willing to chuck out the extra coin provided they get what they want. We shall invest into satisfying this market niche once enough feasibility study has been carried out to ascertain the viability of the market. It’s a promising market from our preliminary analysis. 2.3 Marketing objectives and strategies Product- We have been in the grocery business for one year. Basically our products have been general grocery supplies like green vegetables, dairy, fresh fruit and bakery. We are intending to offer the same product for our customers but packaged differently and delivered differently all to add value to it. We plan to deliver the grocery directly to our customers at their homes to deliver convenience and affordable prices this is possible with a lot of prior planning before take-off as noted by (Breitenbuch, 2004, Kornum & Bjerre, 2005). The product plus the service distinguishes from the rest in the market. It is therefore our view that our product is a unique and one of a kind in the grocery market. We intend to uphold the highest quality standards in the market than any of our competitors. We intend to operate on a slogan of quality plus quantity at a fair price. This is what will differentiate our product from the rest in the industry. Groceries are homogeneous and the only way to differentiate them in the market is by quality service and added utility (Wisner, 2011). To add more value to our grocery we shall be very prompt in deliveries the maximum a customer will have to wait for deliveries should not exceed 45 minutes. Price- Our pricing model has been largely influenced by our customer concerns. The main concern for our customer segment is the price of course. Our customer segment is comprised of middle income earners, they are our niche and if at all we are going to remain relevant to them then we will have to maintain the lowest prices possible. We have ensured that we get the grocery at the lowest prices possible by sourcing them directly from the farmers and contracting the farmers to grow on our behalf. This way we avoid paying more to intermediaries and transfer that benefit to the customer. The low prices are really competitive as compared to what our competitors are working with. We intend to sustain the low prices by continually innovating in such ideas as JIT and home deliveries. This is going to be our operating statement and what we shall pride of when marketing our products in new territories in the future. Promotion- We are aware that having a good product is not enough to bring customers to your shop and keep them. As such we have to engage in promotional activities first to make our clients aware of what we are offering and also to continuously remind them of the product in order to retain our client base. We are a growing company, just one year old. This means mainstream media promotion is very expensive for us to engage in a full scale. Our first promotional strategy is to communicate and introduce our product to the client base we already have in our grocery stores. At the grocery stores we shall have staff members meeting the customers buying from the stores and talk to them about the new product and how it is more beneficial than any other in the market. We shall at this point sign agreement with the customers willing to subscribe to the daily door step deliveries of our groceries. We shall also do extensive promotion through our already popular website and contract social media marketing experts to increase our brand presence through the social media. We appreciate the impact the social media has as many of our target customers use the social media. To further appeal to our customers we shall have regular promotional activities where we shall give some of our loyal customers free months supply of the grocery they buy. This is a good tactic as they will talk about it to their friends and associate and market our brand in the process. Word of mouth is one of the most effective promotional tools as the potential customer gets the message from someone s/he trusts. We shall also offer discounts for bulk purchases in our stores and offer discount coupons. The discounts as suggested by Lamb, Hair & McDaniel, (2011), have the same effect of getting the customer talking about us and increasing his loyalty too. Place- We know the importance of being conveniently placed for easy access by our customers it is for this reason that are located in the Chelsea area of Manhattan. This area is a residential area with a small mix of commercials. Our customers can easily access our stores as the walk home from work. We are also very accessible in the internet through our website which will be the future access point for our products. We will be doing extensive promotion to increase the awareness of our website and the products we are offering. It is our belief that we will get the required customer traffic from the internet more than we could get doing it the traditional way of opening shops in the city which according to Stone (2012) is becoming unbearable with the city shoppers. This will have a wider reach and of course offer convenience to our customers. 2.4 Matching our strategies with the budget We are intending to spend four million dollars in the first year alone to market the new product. This is a lot of money but it is along term investment just like any other advertisement activity. 8the most critical stage is the awareness stage where we make people aware of the product we are selling. In this part we shall spend 60% of our advertisement budget. We are conservative on the customer base we hope to reach by the end of our financial year. We expect to get 1000 active customers by the end of the year. Working with this customer base we hope to achieve a profit of $10,000,000 after deducting our operational expenses. This means that for every customer we shall spend at least $4000 in the one year period. Considering the fact that it is a very competitive industry, then this numbers are god to work with as the customers have to be continuously reminded of your presence in the market to ensure repeat purchases We are going to allocate 40% of the projected profit for the purposes of advertisement and promotion. This figure includes the costs incurred in giving discounts and promotional offers to our customers. We intend to lower the figure gradually as we gain market acceptance and establishment of a solid customer block which we can maintain through quality products and low prices. Marketing mix grid 2.5 Timeline for implementation The marketing plan is to be implemented gradually upon gathering of the relevant information from the marketing research team. The implementation timeline is as in the table below 1st month Analysis of relevant data from the marketing research team. We will be interested to know our competitors and the attributes of their products and how different is product we are offering from the rest. We shall seek to know the critical characteristics of our target market for example the income 2nd month Introduction of the concept to the customers through initial advertisement to give awareness and arouse eagerness. This is the first litmus test for our product as we shall be keen to see the first reaction 3rd month The third month is the actual introduction of the product to the market. It will be a gradual process that will be mainly concentrated on the customers that were subscribed from the stores. A month of advertising would have been enough to make our website known and we expect to get moderate sales coming in from the website orders. We shall intensify advertisement a lot in this stage to maintain the initial momentum. This is a critical take-off stage 4th -12th month Past the 3rd month we shall have gained a little bit of momentum and the main activity from this stage onwards is to maintain then growing momentum by following up on the progress of the product so far. This is the best stage to note inefficiencies and improve on them before it is too late References Gottlieb.M, (2006) Grocery Stores: An industry study, MSGCPA [PDF] available at http://home.aubg.bg/students/MCA100/Senior%20Thesis/sample%20proposal.pdf [accessed on 3/Nov/2012] Stone. A, (August 18 2012) why waiting is torture: The New York Times-Sunday review, available at http://www.nytimes.com/2012/08/19/opinion/sunday/why-waiting-in-line-is-torture.html?pagewanted=all&_r=0 [accessed on November 4 2012] Tavernise.S, U.S. Income Gap Rose, Sign of Uneven Recovery, The New York Times. 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