Star software inc marketing plan

Economics Questions

University of Nairobi

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UNIVERSITY OF NAIROBI School OF business

DMa 413: MARKETING STRATEGY AND PLANS assignment

D33/38309/2016

bichok peter manyang

D33/34304/2014

NJIRU MAUREEN WANJA

D33/30955/2014

MBUGUA SHARON WANJIKU

Course instructor: PROF J. M. MUNYOKI

Star Software Assuming that you have teamed up with two of your colleagues to form a small company that you will be based in Nairobi with a possible expansion to other towns, prepare a marketing plan to outline how the company will operate in the three years. Ensure that your company with have an attractive name that also reflects the general nature of your business.

Star Software’s Marketing Plans

I. EXECUTIVE SUMMARY

Star Software, Inc., is a small, family-owned corporation in the first year of a transition from first-generation to second-generation leadership. Star Software sells custom-made calendar programs and related items to about 400 businesses, which use the software mainly for promotion. Star’s 18 employees face scheduling challenges, as Star’s business is highly seasonal, with its greatest demand during October, November, and December. In other months, the equipment and staff are sometimes idle. A major challenge facing Star Software is how to increase profits and make better use of its resources during the off-season. An evaluation of the company’s internal strengths and weaknesses and external opportunities and threats served as the foundation for this strategic analysis and marketing plan. The plan focuses on the company’s growth strategy, suggesting ways in which it can build on existing customer relationships, and on the development of new products and/or services targeted to specific customer niches. Since Star Software markets a product used primarily as a promotional tool by its clients, it currently is considered a business-to-business marketer.

II.ENVIRONMENTAL ANALYSIS

Founded as a commercial printing company, Star Software, Inc., has evolved into a marketer of high-quality, custom-made calendar software and related business-to-business specialty items. In the mid-1960s, Bob McLemore purchased the company and, through his full-time commitment, turned it into a very successful family-run operation. In the near future, McLemore’s 37-year-old son, Jonathan, will take over as Star Software’s president and allow the elder McLemore to scale back his involvement.

a) The Marketing Environment

1. Competitive forces. The competition is very strong on a local and regional basis but somewhat weak nationally. Sales figures for the industry as a whole are difficult to obtain since very little business is conducted on a national scale. The competition within the industry is strong in the paper segment and weak in the accommodation-based segment. Currently paper calendars hold a dominant market share of approximately 90 percent. However, the software- based segment is growing rapidly.

2. Economic forces. Nationwide, many companies have reduced their overall promotion budgets as they face the need to cut expenses. However, most of these reductions have occurred in the budgets for mass media advertising (television, magazines, newspapers). While overall promotion budgets are shrinking, many companies are diverting a larger percentage of their budgets to sales promotion and specialty advertising.

3. Political forces. There are no expected political influences or events that could affect the operations of Blue Party Hall.

4. Legal and regulatory forces. In recent years, more attention has been paid to “junk mail.” A large percentage of specialty advertising products are distributed by mail, and some of these products are considered “junk.” Although this label is attached to the type of products Star Software makes, the problem of junk mail falls on the clients of Star Software and not on the company itself. While legislation may be introduced to curb the tide of advertising delivered through the mail, the fact that more companies are diverting their promotion dollars to specialty advertising indicates that most companies do not fear the potential for increased legislation.

5. Technological forces. A major emerging technological trend involves personal information managers (PIMs), or personal digital assistants (PDAs). A PDA is a handheld device, similar in size to a large calculator that can store a wide variety of information, including personal notes, addresses, and a calendar. Some PDAs even have the ability to fax letters via microwave communication. As this trend continues, current software-based calendar products may have to be adapted to match the new technology.

6. Sociocultural forces. In today’s society, consumers have less time for work or leisure. The hallmarks of today’s successful products are convenience and ease of use. In short, if the product does not save time and is not easy to use, consumers will simply ignore it. Software-based calendars fit this consumer need quite well. A software-based calendar also fits in with other societal trends: a move to a paperless society, the need to automate repetitive tasks, and the growing dependence on computers, for example.

B. Target Market(s)

By focusing on commitment to service and quality, Star Software has effectively implemented a niche differentiation strategy in a somewhat diverse marketplace. Its ability to differentiate its product has contributed to superior annual returns. Its target market consists of manufacturers or manufacturing divisions of large corporations that move their products through dealers, distributors, or brokers. Its most profitable product is a software program for a PC-based calendar, which can be tailored to meet client needs by means of artwork, logos, and text. Clients use this calendar software as a promotional tool, providing a disk to their customers as an advertising premium. The calendar software is not produced for resale. The calendar software began as an ancillary product to Star’s commercial printing business. However, due to the proliferation of PCs and the growth in technology, the computer calendar soon became more profitable for Star than its wall and desktop paper calendars. This led to the sale of the commercial printing plant and equipment to employees. Star Software has maintained a long-term relationship with these former employees, who have added capabilities to reproduce computer disks and whose company serves as Star’s primary supplier of finished goods. Star’s staff focuses on the further development and marketing of the software.

C. Current Marketing Objectives and Performance

Star Software’s sales representatives call on potential clients and, using a template demonstration disk, help them create a calendar concept. Once the sale has been finalized, Star completes the concept, including design, copywriting, and customization of the demonstration disk. Specifications are then sent to the supplier, located about a thousand miles away, where the disks are produced. Perhaps what most differentiates Star from its competitors is its high level of service. Disks can be shipped to any location the buyer specifies. Since product development and customization of this type can require significant amounts of time and effort, particularly during the product’s first year, Star deliberately pursues a strategy of steady, managed growth. Star Software markets its products on a company-specific basis. It has an approximate 90 percent annual reorder rate and an average customer-reorder relationship of about eight years. The first year in dealing with a new customer is the most stressful and time consuming for Star’s salespeople and product developers. The subsequent years are faster and significantly more profitable. The company is currently debt free except for the mortgage on its facility. However, about 80 percent of its accounts receivable are billed during the last three months of the calendar year. Seasonal account billings, along with the added travel of its sales staff during the peak season, pose a special challenge to the company. The need for cash to fund operations in the meantime makes it necessary for the company to borrow significant amounts of money to cover the period until customer billing occurs. Star Software’s marketing objectives include increases in both revenues and profits of approximately 10 percent over the previous year. Revenues should exceed $4 million, and profits are expected to reach $1.3 million

III. SWOT ANALYSIS

A. Strengths

1. Star Software’s product differentiation strategy is the result of a strong marketing orientation, commitment to high quality, and customization of products and support services.

2. There is little turnover among employees who are well compensated and liked by customers. The relatively small size of the staff promotes camaraderie with coworkers and clients, and fosters communication and quick response to clients’ needs.

3. A long-term relationship with the primary supplier has resulted in shared knowledge of the product’s requirements, adherence to quality standards, and a common vision throughout the development and production process.

4. The high percentage of reorder business suggests a satisfied customer base, as well as positive word-of-mouth communication, which generates some 30 percent of new business each year.

B. Weaknesses

1. The highly centralized management hierarchy (the McLemores) and lack of managerial backup may impede creativity and growth. Too few people hold too much knowledge.

2. Despite the successful, long-term relationship with the supplier, single-sourcing could make Star Software vulnerable in the event of a natural disaster, strike, or dissolution of the current supplier. Contingency plans for suppliers should be considered.

3. The seasonal nature of the product line creates bottlenecks in productivity and cash flow, places excessive stress on personnel, and strains the facilities.

4. Both the product line and the client base lack diversification. Dependence on current reorder rates could breed complacency, invite competition, or create a false sense of customer satisfaction. The development of a product that would make the software calendar obsolete would probably put Star out of business.

5. While the small size of the staff fosters camaraderie, it also impedes growth and new-business development.

6. Star Software is reactive rather than assertive in its marketing efforts because of its heavy reliance on positive word-of-mouth communication for obtaining new business.

7. Star’s current facilities are crowded. There is little room for additional employees or new equipment.

C. Opportunities

1. Advertising expenditures in Kenya exceed kshs 132 billion annually. More than kshs25 billion of this is spent on direct-mail advertising, and another kshs20 billion is spent on specialty advertising. The potential for Star Software’s growth is significant in this market.

2. Technological advances have not only freed up time for Kenyans and brought greater efficiency but also have increased the amount of stress in their fast paced lives. Personal computers have become commonplace, and personal information managers have gained popularity.

3. As Kenyan companies look for ways to develop customer relationships rather than just close sales, reminders of this relationship could come in the form of acceptable premiums or gifts that are useful to the customer.

4. Computer-based calendars are easily distributed nationally and globally. The globalization of business creates an opportunity to establish new client relationships in foreign markets.

D. Threats

1. Reengineering, right-sizing, and outsourcing trends in management may alter traditional channel relationships with brokers, dealers, and distributors or eliminate them altogether.

2. Calendars are basically a generic product. The technology, knowledge, and equipment required to produce such an item, even a computer-based one, are minimal. The possible entry of new competitors is a significant threat.

3. Theft of trade secrets and software piracy through unauthorized copying are difficult to control.

4. Specialty advertising through promotional items relies on gadgetry and ideas that are new and different. As a result, product life cycles may be quite short.

5. Single-sourcing can be detrimental or even fatal to a company if the buyer supplier relationship is damaged or if the supplying company has financial difficulty.

6. Competition from traditional paper calendars and other promotional items is strong.

E. Matching Strengths to Opportunities/ Converting Weaknesses and Threats

1. The acceptance of technological advances and the desire to control time create a potential need for a computer-based calendar.

2. Star Software has more opportunity for business growth during its peak season than it can presently handle because of resource (human and capital) constraints.

3. Star Software must modify its management hierarchy, empowering its employees through a more decentralized marketing organization.

4. Star Software should discuss future growth strategies with its supplier and develop contingency plans to deal with unforeseen events. Possible satellite facilities in other geographic locations should be explored.

5. Star Software should consider diversifying its product line to satisfy new market niches and develop non-seasonal products.

6. Star Software should consider surveying its current customers and its customers-clients to gain a better understanding of their changing needs and desires.

IV. MARKETING OBJECTIVES

Star Software, Inc., is in the business of helping other companies market their products and/or services. Besides formulating a marketing-oriented and customer focused mission statement, Star Software should establish an objective to achieve cumulative growth in net profit of at least 50 percent over the next five years. At least half of this 50 percent growth should come from new, nonmanufacturing customers and from products that are non-seasonal or that are generally delivered in the off-peak period of the calendar cycle.

To accomplish its marketing objectives, Star Software should develop benchmarks to measure progress. Regular reviews of these objectives will provide feedback and possible corrective actions on a timely basis. The major marketing objective is to gain a better understanding of the needs and satisfaction of current customers. Since Star Software is benefiting from a 90 percent reorder rate, it must be satisfying its current customers. Star could use the knowledge of its successes with current clients to market to new customers. To capitalize on its success with current clients, benchmarks should be established to learn how Star can improve the products it now offers through knowledge of its clients’needs and specific opportunities for new product offerings. These benchmarks should be determined through marketing research and Star’s marketing information system. Another objective should be to analyze the billing cycle Star now uses to determine if there are ways to bill accounts receivable in a more evenly distributed manner throughout the year. Alternatively, repeat customers might be willing to place orders at off-peak cycles in return for discounts or added customer services. Star Software also should create new products that can utilize its current equipment, technology, and knowledge base. It should conduct simple research and analyses of similar products or product lines with an eye toward developing specialty advertising products that are software based but not necessarily calendar related.