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Additional Customer Value at the UAE Store Proposal

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Updated: Feb 16th, 2021

Executive Summary

Consumers love a bargain no matter the market demographic and some consumers continue to patronize the same types of stores for their purchasing needs. In the case of Store A, the proposed project is the establishment of a department where consumers could purchase an extended warranty on the products that they purchase from the household or electronic departments of the store. The express purpose of this project is to create a certain level of “added value” to a consumers experience at a store by way of additional services that they might appreciate.

Market Summary

The current market in this particular case is composed of several of Abu Dhabi’s high end stores while the consumers are primarily clients with high credit scores and a history of timely and prevalent credit card purchases at such establishments.

Market Demographics

Geographic’s

The location of the target market will primarily be in U.A.E the as well as several other prominent locations within Abu Dhabi. Due to the concentration of high end shops and upper income consumers within Abu Dhabi, the area seems to be the most viable location to test out the effectiveness of the added warranty division.

Demographics

The target market demographics for the extended warranty will primarily be high income clients of Store A These individuals should have excellent credit scores of 600 and above while at the same time show consistent patronage of some of Abu Dhabi’s most prestigious and high end establishments. It is assumed, though not entirely confirmed, that 60 to 70 percent of the clientele that match the specified requirements will be female clients of the store (since they are the ones who do most of the shopping for households within the region) while the remaining 40 or 30 percent will be male. This is based upon consumer market surveys which examined the prevalence of female shoppers at high end department stores as compared to male consumers.

Behavior Factors

Specific behavioral factors that should be present are: high and occasional purchases of expensive brand name household goods and electronics, little variation in purchasing location (i.e. continuous patronage of the same high end stores), and finally little or no delinquency in paying for purchases made.

Market Needs

The market need in this particular case is that consumers needs an extended warranty service that links specifically to the store where they do the most shopping and, as such, enables them to derive the most benefit from shopping at their favorite location through an extended warranty service that enables them to make the most of their household and electronic purchases.

Market Trends

One of the current marketing trends in the retail industry has been to connect special amenities, services and exclusive offers to particular products. This is done in order to increase consumer patronage within a select number of stores given the better value they obtain from patronizing such establishments. Thus, for the commercial services department to establish an extended marketing division would result in greater consumer patronage of the store since that people are always out to get the most value for the amount they pay.

Target Market Growth

It is anticipated that the target market growth for the extended warranty will be a 10 to 15 percent client base increase per year until full market saturation levels are reached and by that time target market growth will be reduced to 5 to 7 percent annually.

SWOT Analysis (both the new product and Bank of America)

Strengths

One factor to take into consideration is the fact that the extended warranty and its ability to be connected to specific departments within the store for better discounts and services is an option not entirely available with other stores in Abu Dhabi or the U.A.E. The Extended warranty due to its store specific availability gives consumers a far better and wider variety of amenities and services not otherwise available with other retailers and, as such, presents itself as lucrative option for discerning clients.

Weaknesses

One of the current weaknesses that extended warranty division has to deal with is the current economic downturn that has affected the U.S. While it may be true that the banks and several corporations have somewhat recovered from the 2008 financial crisis, the fact still remains that there is still a lingering financial problem with the current economy. With the debt crisis in Europe having the potential to spread to Middle East the next few months can actually be considered a tumultuous experience for the region. Consumers may be unwilling to spend more on their purchases which would result in the extended warranty division being nothing more than a wasteful and useless expenditure.

Opportunities

While numerous financial reports within the past few months have indicated that the U.A.E job market has not improved by much, they do indicate that corporate profits have increased. One underlying reason behind this can be attributed to the subsequent increase in outsourcing wherein companies have shifted several aspects of their operations to overseas locations due to the cheaper labor cost. This is important to point out due to the fact that as corporate profits increase so to do the incomes of the upper 1 to 10 percent consumer demographic. It should also be noted that the outsourcing of specific facets of the extended warranty service such as the document processing aspect of the division can be done which can help to greatly reduce the costs needed to continue to run the division. It is based on this that it is recommended that the extended warranty division outsource aspects of its services in order to save money in the long run.

Threats

Current threats to the successful launch of the extended warranty service come in the form of other retailers. The reason for this is that other malls and retailers already exist in the market which provides their consumers with a wide array of discounts and amenities at several locations already. While it may be true that the extended warranty service enables a far better consumer targeting method since it allows consumers to chose which shops they can get exclusive discounts to, the fact remains that there are other retailers that have been around for far longer and, as such, have a dominating market share of consumers at the present. This situation presents itself as a distinct threat since it limits the ability of Store A from properly penetrating the consumer demographic they are targeting since those consumers also patronize other locations that may copy the success of the extended warranty division.

Competition

The competition that the store will face in releasing this particular type of service will come in the form of other retailers in the U.A.E who may copy the concept.

Products Offered

The only product offered in this particular case is the extended warranty and the amenities, discounts and services that come with its use depending on the store in question.

Key to Success

The key to success in this particular situation is being able to showcase how having an extended warranty would be better than just relying on the limited warranty of a product when shopping at a particular store. By doing this, customers who frequent such establishments would more than likely to buy products from that particular store as compared to other retailers in the general area.

Critical Issues

The critical issue that must be taken into consideration in this particular case is that will customers actually go for the extended warranty? Though the service is able to give significant amenities and services it can only do so in select locations and, as such, it must be questioned whether consumers will even go for the extended warranty in the first place.

Marketing Strategy

The marketing strategy for the extended warranty will revolve around primarily targeting affluent consumers and show casing the benefits they will attain from the purchase of the warranty. After which the benefits of the extended warranty will be compared to the benefits of other warranties issued by other retailers and will show how the extended warranty offer by Store A is a superior service in terms of shopping at specific locations.

Marketing Objectives

The marketing objectives for this particular endeavor are the following:

  • To increase the extended warranty purchases of the company by 30%
  • To achieve a product penetration rate of 60% within the affluent consumer market within Abu Dhabi.
  • To increase consumer awareness of the stability of the company’s services by a margin of 30 to 40 percent before the initial release of the extended warranty card.
  • To achieve an initial subscription rate of 20% of targeted market demographics within the first year of release after which subsequent increases in consumer subscriptions should increase by 10 to 15 percent per year.

Marketing Research

In order to determine how well the company was able to meet its market objectives sufficient market research will need to be conducted. First and foremost it will be necessary to examine after six months time whether the company was able to increase the extended warranty purchase of its target clients. After which an examination will be necessary to see how many current subscribers there are in the extended warranty program versus the number of estimated credit card users of the targeted demographic within Abu Dhabi. After combing both data sets it will be possible to see the degree of market penetration, the degree of usage and whether the company was able to meet its market objectives.

Financial Objectives

The financial objectives of this marketing plan are the following:

  • To increase the amount of extended warranty users that the company obtains
  • To increase the amount of revenue obtained via high end product purchases
  • To increase the company’s market share of the top 1 to 10 percent of spenders within Abu Dhabi

Target Markets

The specific target market for the extended warranty are the top 1 to 10 percent of income holders within the Abu Dhabi area.

Strategies

The following will be the strategies utilized:

  • Promotion through print ads and viral marketing
  • Sending out invitations targeting specific consumers
  • Creating agreements with several of U.A.E’s electronic brand repair outlets
  • Establishing new training regimens for store employees to recognize the new warranty

Marketing Mix

Product – the product in this particular case is the extended warranty service

Price – the price of the warranty will depend on the cost of the electronic/household product that is bought

Promotion – promotion strategies will be those previously described in this paper

Place – the place will be Abu Dhabi

Distribution

Distribution of the production will primarily consist of select brands being chosen or deemed acceptable as products where the extended warranty can be applied. This usually entails an investigation into what types of products need warranty the most.

Advertising and Promotion

Advertising and promoting the extended warranty will involve three specific strategies: direct consumer invitation, targeted commercials and press releases for the general public. In the first strategy the company will copy the current method of warranty promotion utilized by U.S. retailers by sending specific invitations to select customers via mail. These invitations will include a summary of the benefits the warranty would give to the consumer, how much it would cost them per year to maintain, and the selection of stores that they can link the warranty to. A number or email address will be placed on the invitation that the customer can use in order to directly contact the store and facilitate the transaction at a later date. The second strategy involves the use of targeted advertisements which showcase the release of the new extended warranty service via viral marketing campaigns and various TV advertisements. It is expected that this should drum up sufficient interest for various consumers to call the company and see if they are eligible to purchase extended warranty for their product. The third strategy involves a press release given to specific newspapers and online bloggers who will then subsequently relay the news via newspapers and online blogs. It is expected that by utilizing this strategy the store will be able to better penetrate the desired consumer market.

Customer Service

All extended warranty certificates issued by the company will come with a 24 hour call center hotline (that has been outsourced beforehand) in order to enable consumers to subsequently call the hotline for a repair to be scheduled. Also, customers can call the hotline if they would like to make specific purchases and arrangements over the phone without having to visit the store itself. Calling the customer service hotline is completely free and can be utilized by an extended warranty holder.

Cost Estimate

The following is a cost estimate of the costs and profit margins of the project

Year 1 estimate along with costs

Summary of Financial plan
Annual unit sales 14,600
Price P/Unit $ 502.75
Variable cost P/Unit (production and sales) $ 70.97
Fixed costs (machine rent, maintenance, toppings etc.) $ 27,792
One-time start-up costs (equipment, marketing, legal, etc.) $ 109,000.00
Working capital required (receivables, inventory, etc.) $ 202,600
Estimated Annual Gross Revenues and Income:
Annual revenues $ 4,000,00
Annual variable costs $ 300,000
Annual contribution margin $ 120,124
Break-Even Point
Contribution margin per unit $ 200.78
Annual break-even quantity 2,000,000
Ratio of break-even to expected quantities 10.4%
Starting-up the business:
Total up-front funds required 13,000,000
Additional units to cover up-front funds 300,000
Break-even quantity with up-front funds 4,300,000
Financial Performance
Payback period for start-up funds (in days) 728
Annual return on start-up investment 30%
Variable cost to price ratio 35.3%
Contribution margin ratio 58.0%

Setting up the Logistics and Manpower of the Project

Creating an Effective Project Team

Framing the Project

One of the first steps necessary in creating a project team for this particular undertaking is to frame the project in terms of its goal, what resources are available, what is the timeline for each step in the process and how will responsibility be delegated to individual team members. For this particular project the following can be considered an outline of how the project should look like from inception to outcome:

  1. Creation of effective suppliers and supply lines to facilitate the supply of raw materials for the extended warranty process.
  2. Determining where the repair facilities should be located in order to facilitate effective repair.
  3. Organizing appropriate employee systems to facilitate the process of supply and conversion.
  4. Examining potential markets where the warranty will most likely have the highest demand
  5. Establishing proper client relations.

Team Composition

Since the basic project outline has now been established it now becomes necessary to determine the overall composition of the team and how it should be organized. One method of organization that could be potentially utilized is the vertical approach, more commonly known as the “top down approach”, wherein a strict hierarchy is established with orders coming from the team leader getting passed to the appropriate team member resulting in that individual accomplishing the task given to them. Blackstone, Cox & Schleier (2009) indicates that while such an approach in managing a technology intensive company allows greater control over the process of task delegation and compliance to an established plan they state that it limits the ability of a project to effectively respond to changing market forces and actually limits the ability of the project team to effectively respond to changes within a business environment (Blackstone, Cox & Schleier, 2009).

What must be understood is that technology oriented businesses do not operate within a vacuum, rather they operate within a constantly changing and shifting environment where new innovations technologies effectively necessitate the need to change project strategies on an almost yearly basis (Thamhain, 2005). Taking this into consideration a more effect approach to be utilized is the horizontal approach wherein each member is given the freedom to contribute ideas, process and implement their own unique methods in getting a specific task accomplished. It is due to this that in the case of Plant Source the recommended project team composition should utilize the horizontal approach in order to help facilitate a more effective sharing of idea and the utilization of innovate processes in order to get the job done.

Operation of Project Team

Client Relations

As mentioned earlier creating effective client relations is an important aspect of the company since the division needs a buyer for its products.. As such it becomes necessary to utilize business to business sales with corporations such as Shell, Exxon Mobile and Petron in order to for the company to actually get its products out there. It is due to this that one division of the project team for this particular venture needs to deal with establishing business agreements with other corporations in order to facilitate the sale of division’s extended warranty whenever these companies/consumers buy their products directly from Store A. In fact this particular aspect of operations can be considered the most important since without it the project won’t become viable at all.

Liaison Group

One aspect of the project team must deal with developing proper agreements with local repair outlets in regions identified as viable locations for consumers to get to in order to have their product repaired. The reason why a liaison group is necessary is due to the fact that proper agreements need to be created with local repair shops in which they agree to change their current method of production to one that is more inclined towards the needs of the company. Since this at times puts repair shops at risk this necessitates the need for constant reassurances, proper guidance as well as local site teams that will initially assist the repair shops in developing the necessary systems and training for the repair of particular items.

Other aspects that the liaison team will have to deal with involves having to create an appropriate technological system where repair limitations, transportation systems as well as seed supplies need to be systematized, catalogued and distributed depending on the inherent need per repair shop. Furthermore, the liaison team will be responsible in determining how much work a certain repair shop can accomplish within a given area and determine how this will impact company production. This can either involve them scaling backing or increasing repair sites within particular regional areas.

Product Development

One of the necessary aspects of proper project management is to ensure that there is an adequate level of product development within the project team (Lenfle & Loch, 2010).This particular aspect of operations involves the team setting up the necessary warehouses, repair men and repair shops however it must also be noted that this aspect of the project team does not just involve setting up the technology and supervising product quality but it also involves having to examine the current technological environment to see if there are any emerging technologies that can be utilized in the repair process.

Product development also involves taking the initial product and seeing if it can be improved beyond its original capacities through the use of new technologies.

Response to Changing Technological Environment

One of the measures of a successful project by a technology intensive company is how the project reacts to sudden changes in the global market (Thamhain, 2005). What must be understood is that a project timeline can last from weeks, to months and even up to several years. Within this span of time numerous changes can and will occur which may affect the viability of a particular project. One example of this can be seen in the case of the Playstation 3 produced by Sony and the Wii created by Nintendo. While both units were released at roughly the same span of time; sales of the Nintendo Wii eclipsed that of the Playstation 3 due to the innovative concept of a motion controller and the greater degree of person-to-console interactivity that the Wii was able to provide to gamers. Sony on the other hand had banked on the performance and graphics that the Playstation 3 could provide however as seen by the initial sales results of the company the unit was considered far too expensive with fewer game titles available as compared to the Wii which was much cheaper and had a plethora of titles to choose from. It was only when Sony dropped the price of the Playstation 3 by several hundred dollars a year later that the company was able to gain sufficient traction within the gaming community. Based on this case alone it can be seen that companies need to be able to respond to changing technologies which may affect their market shares

(Baydoun, 2010).Some possible technological developments that may arise which could cause problems for the company in the form of better extended warranties developed by rival corporations or even changing consumer preferences from extended warranties to normal warranties.

The response of the project team to sudden changes in the technological environment that it finds itself in is a measure of how well the current project they are undertaking will succeed. A slow response as seen in the case of Sony can result in rivals capturing a greater market share or even completely capturing the market as seen in the case of the Microsoft Zoon and the iPhone. Thus, when evaluating the project team their response to technological innovations will come in the form of determining how fast they were able to respond to the change, how did they change their business strategy, what processes did they implement to minimize the negative effects on the project and to what extent did they facilitate their own responses to the changes that occurred (Killough & Sheely, 2011).

Project Life Cycle Achievement

All projects are subject to a certain lifecycle as indicated by the inherent limitations of the project itself and as such it becomes important to determine whether the team either contributed towards meeting deadline objectives, going over the deadline or even completing the project earlier than expected (Howes, 2001). As examined by Thamhain (2005), technology based projects need to conform to set resource and time limits from creation to completion (Thamlain, 2005). Project teams that expend more resources and time than what is legitimately necessary can thus be categorized as inefficient and negligent since it is their responsibility to ensure that projects are able to stay within set limits.

Thus, in evaluating a project team on the basis of life cycle achievement it is important to determine whether they sufficiently utilized project management tools as indicated by Thamlain (2005) which are necessary aspects in ensuring proper project completion. This can come in the form of financial planning tools, time sheets, completed project milestones, daily reports and logistics software which combines all this data in order to determine the current rate of project completion versus the rate in which the project team should have been working at. By examining the data from such tools it will be easy to evaluate whether the team was able to properly meet and accomplish specific project milestones within a given time frame and if it was able to meet the project deadline that was created at during the project planning stage.

Reference List

Blackstone, J. H., Cox, J. F., & Schleier, J. G. (2009). A tutorial on project management from a theory of constraints perspective. International Journal Of Production Research, 47(24), 7029-7046.

Baydoun, M. (2010). Risk management of large-scale development projects in developing countries: Cases from MDI’s projects. International Journal Of Technology Management & Sustainable Development, 9(3), 237-249.

Howes, N. R. (2001). Modern Project Management : Successfully Integrating Project Management Knowledge Areas and Processes. AMACOM Books.

Killough, C., & Sheely, K. B. (2011). Efficient Management: From Global Threats to Small Projects. Public Manager, 40(3), 45-49.

Lenfle, S., & Loch, C. (2010). Lost Roots: HOW PROJECT MANAGEMENT CAME TO EMPHASIZE CONTROL OVER FLEXIBILITY AND NOVELTY. California Management Review, 53(1), 32-55.

Thamhain, H. (2005). Management of technology in technology intensive organizations. New Jersey: John Wiley and Sons.

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