PriceSmart Trinidad is a volume-driven merchandise and services provider, delivering significant value, quality and low prices to the member-consumer through an effective and efficient conduit that not only leverages economies of scale in aggressive buying, but also promises to deliver low-cost distribution and rationalized operations across the country and beyond.
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The parent company – PriceSmart, Inc – is headquartered in San Diego, California, and is the largest and fastest-growing operator of warehouse membership clubs in Central America and the Caribbean, with operations in 12 countries, 770,000 membership accounts and over 1 million cardholders. PriceSmart Trinidad offers high quality, differentiated merchandise at pocket-friendly prices for its retail and wholesale customers.
The products are divided into three main segments, namely: Hardliners (electronics, office supplies, appliances, etc.); groceries (food, detergent, wine, health & beauty, etc.), and; fresh products (chicken, beef, pork, fruits, vegetables, etc.). PriceSmart Trinidad also has a bakery, food outlet, one-hour photo studio, a tire repair centre, and a designer perfume and lotions manufacturing centre.
“Royal Health Lotion” is a new health and beauty product developed by PriceSmart Trinidad to be sold under its groceries segment. The company intends to position this product as the only facial moisturiser, cleanser, and anti-aging health and beauty product available on the market.
The product has been developed using natural herbs, such as Aloe Vera, ultra-filtered honey, and carefully selected Chinese herbs to trigger an entirely unique beauty and skin health experience to its consumers.
It will present itself as a holistic and natural alternative to conventional health and beauty products, which are mostly made from skin irritating chemicals. The strategic role of Royal Health Lotion for PriceSmart Trinidad is centred on three key objectives:
- To maintain competitiveness as the product leader in innovative health and beauty product introductions and successful product launches;
- Not only to strengthen but also to satisfy the needs of the more adventurous professional women who would like to remain youthful without necessarily relying on chemical remedies, and;
- To become the market leader in the functional beauty and health products segment by increasing market share in Trinidad.
Current Marketing Situation
PESTLE External Audit
The underlying core mission of PriceSmart is to become strategically oriented, merchandise and services leader, which derives its growth and productivity from delivering quality, value and pocket-friendly prices to a speedily expanding consumer base in Trinidad.
Political: PriceSmart has a substantial presence in groceries marketplace, where it provides a whole range of health products (soaps and detergents) to corporate institutions and government agencies. During 2011, for example, the company won tenders to supply six government ministries with soaps and detergents.
As per the latest industry estimates, the beauty and health segment declined in volume by 5 percent over 2010-11, while PriceSmart’s marketed beauty and health products increased in volume by more than 8 percent during the same period.
Economic: During FY2011, PriceSmart’s groceries segment (food, detergent, wine, health & beauty, etc.) accounted for nearly 38.5 percent of the total net revenues. In the groceries segment, health and beauty products were the second top revenue earner after wines, accounting for 26 percent of the net revenues for the segment.
Social: The Company is interested in opening more locations in Trinidad to satisfy the needs of the local population, particularly in delivering quality, value and pocket-friendly prices.
Going by available figures, PriceSmart has not only been registering decreased instances of health and beauty products recalls due to its emphasis on quality and value, but it has been able to bring more customers into its stable due to its highly innovative products.
Technology: PriceSmart has been able to leverage technology to effectively and efficiently distribute its product offerings to thousands of cardholders. Its membership portfolio is optimised to provide superior consumer experiences and save time while making purchases.
Indeed, the company continues to employ innovative technology not only to expand its consumer base but also to provide our loyal consumers with a more convenient way of executing transactions.
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Legal: Trinidad’s current legislation supports the exploration of alternative medicine industry, implying a ready supply for the natural herbal ingredients used to make Royal Health Lotion. The county’s regulatory bodies and tax regimes are friendly to business.
Environmental: PriceSmart ploughed back at least 7 percent of its 2011 after-tax profits to corporate social responsibility initiatives aimed at creating public awareness on environmental preservation and sustainability. For 5 years now, the company has been leading efforts in effective waste disposal and recycling in its core locations.
In 2011, the sales volume for the functional health and beauty products segment in Trinidad reached $500 million. This product segment has recorded a steady increase since 2000, particularly due to a rapid shift in consumer trends, the lure of the products promise, low price, and evidence-based results.
The markets for herbal-based health products in Trinidad are continually expanding to coincide with a growing number of professional women who have some cash to spend and are therefore capable of making discretionary purchases.
Until the last two decades, health and beauty products were largely manufactured from chemicals that often occasioned adverse skin reactions and other undesired outcomes. In the 1990s, however, little known companies mostly from China started producing herbal remedies for various skin conditions.
Sensing the untapped market in this product category, multinational corporations such as Unilever, Proctor & Gamble, and P&G responded by expanding their health and beauty offerings through new product developments and innovations.
Today, while the chemical-based health and beauty products industry is slowly decreasing, the volume sales of herbal-based health and beauty products has sharply increased due to a large proportion of consumers who are opting for a trend towards using what is natural and toxic free.
In the same vein, retail outlets and merchandise stores are actively engaged in liaising with manufacturing companies to promote herbal-based health and beauty products in order to counter the mounting concerns about adverse health impacts of chemical-based health and beauty products, but also to enhance demand in a market where health-conscious decisions on the products on offer are being increasingly used to inform purchasing decisions.
PriceSmart’s top competitors in health and beauty products are Proctor & Gamble (30.2 percent) and P&G (27.5 percent), which combined represent about 58 percent of total market in Trinidad. Presently, PriceSmart holds an estimated 10 percent of the total health and beauty products market in Trinidad, primarily because perfume and lotions manufacturing and branding are not core business areas of the company.
However, Royal Health Lotion will launch into a currently growing subset of that market (herbal-based health and beauty products), which has recorded significant growth over the last ten years.
Consequently, it is anticipated that following existing brands could potentially compete with Royal Health Lotion in the functional herbal-based health and beauty products market:
Topedo, Ebony Gal, Snapp, Dark and Lovely (owned by Proctor & Gamble), as well as Eden Herbal, Gold Coast, and Soft and Lovely (owned by P&G). Royal Health Lotion also creates a potential situation for cannibalism with PriceSmart’s own Evening Scent Lotion, which also uses herbal concoctions and target women.
This section aims to summarize the internal strengths and weaknesses, as well as external opportunities and threats that can affect the marketing performance of Royal Health Lotion.
|Best retail operating practices||Brand dilution due to the existing Evening Scent Lotion|
|Brand strength (herbal as opposed to chemical-based)||Entrance into challenging non core categories as lotion manufacturing not a core area for PriceSmart|
|Low pricing strategy||Saturation of health and beauty products segment|
|Reputation for proving value-added services||Declining consumer spending|
|Strong revenue growth in Trinidad|
|Herbal brand is attractive to local and international markets||Intense competition from rivals|
|New product introductions||Potential health issues associated with the use of herbs|
|PriceSmart’s expanding market presence||Lower supply of herbal ingredients in the future|
Segmentation, Targeting & Positioning
The following forms the summary of the segmentation variables and breakdowns for the Trinidad’s consumer market of the herbal health and beauty product.
Geographic Segmentation: The product will be availed in all the locations PriceSmart has a presence, but with emphasis on urban and metropolitan areas of Trinidad.
Demographic Segmentation: 21-50 years old professional women with a sufficient income that allows discretionary purchasing and personal spending.
The marketing plan highly considers new workers, young professionals and mature corporate/government professionals, with college or university education. Additionally, the plan considers all races (Black, White, Asian, native, etc.), but an adapted strategy for black professional women who are already familiar with herbal health and beauty products.
Psychographic Segmentation: In personality, the professional women should not only exhibit brand conscious behaviours and be hinged on popular culture, but must also be inclined for differentiation and sophistication, maintain an open mind, and demonstrate quick maturation with contemporary health and beauty products.
In lifestyle, the professional women should have an active, outgoing, and independent life, and demonstrate intense interactions with other professional peers.
Behavioural Segmentation: The benefits sought include: health information; informational text relating to the history of the health and beauty product; convenience of use; social standing associated with use of product, and; quality and functions of the product.
Royal Health Lotion will target the already existing herbal-based health and beauty products market that has been established within the growing functional health and beauty products sector. The product will cater for both medical needs (moisturising the skin, preventing aging, cleansing) and social needs (perception of beauty in terms of using what is natural and toxic-free).
The target group (professional young and mature women in corporate/government spheres) will demonstrate a shift away from chemical-based health and beauty products towards more healthier and beneficial herbal-based alternatives. Statistical reports anticipate a target market growth of 2.4 percent over the next 12 months to August 2013, 4.3 percent for the second year, and 6.5 percent for the third year.
Royal Health will be positioned as the only moisturising, cleansing and anti-aging health and beauty lotion which utilises the health benefits of Aloe Vera and Chinese herbs to bring beauty and good skin health within rich of professional women in Trinidad.
The product will be sold in sexy, eye-catching and cool functional packaging, not mentioning that that it will be premium-priced to appeal to the high-end cadre of professional women.
Objectives & Issues
PriceSmart aims to target professional women with a mix of online and offline advertising and promotion not only to highlight the new health and beauty product and its magical capabilities, but also to ensure it sells at least 600,000 units of the product in the first year of operation and increase the sale by 15 percent and 28 percent in the second and third year of operation, respectively.
We intend to introduce at least 100,000 people to our brand (Royal Health Lotion) in the first year and increase the number by at least 30 percent and 70 percent in the second and third year of operation through online and offline advertising and promotional events to encourage their continued interest and use of the product.
Due to our competitive leverage in best retail operating practices and one-stop shopping in a U.S.-style warehouse club, we will have adequate sales revenue to return to profitability within the first 12 months of marketing the product.
The table below summarises the return on the marketing plan and the projected overall profitability for the new health and beauty product for the next 3 years.
|Item||1stYear (000)||2ndYear (000)||3rdYear (000)|
|Sales revenue [a]||$150,000||$167,000||$200,000|
|Costs of production [b]||$13,000||$20,000||$22,000|
|Costs of personnel [c]||$28,000||$35,000||$46,000|
PriceSmart aims to allocate 3 percent of its first year profits of the new health and beauty product to corporate social responsibility initiatives, particularly in recycling efforts and garbage disposal within urban and metropolitan areas. The allocated will be increased to 7 percent and 10 percent in the second and third year, respectively.
Key Issues affecting Successful Implementation & Success
The current market for traditional health and beauty products in Trinidad is largely fragmented due to socio-economic disparities among consumers and stiff competition from players. Consequently, direct competition will expected from rivals such as Proctor & Gamble and P&G, who have already existing herbal-based health and beauty products targeting the high-end consumer market.
PriceSmart will therefore heavily rely on product awareness and a strong distribution system in the marketing roll-out.
Due to the number of competitors in the health and beauty products segment, PriceSmart will not only experience difficulties in trying to prevent imitation behaviour from emerging labels, but it may find itself operating in a saturated market given the wide range of existing brands. Lastly, the company must invest a sizeable capital investment into the production of the beauty product.
Royal Health Lotion will be marketed as herbal-based health and beauty product that uses the power and agility of the naturally occurring Aloe Vera plant to remove skins to cleanse and remove skins toxins, moisturise and act as an anti-agent.
The brand will be sensually and sexually packaged to appeal to independent professional women while clearly identifying the health and beauty benefits associated with the product. It is important to note here that the product will trade as Royal Health Lotion, a product of PriceSmart.
Owing to the fact that the product promises so much health-related benefits to the professional woman, it is anticipated that sales will begin almost immediately and the benefits of making purchases will be instantaneously understood.
PriceSmart will undertake a price strategy that will not only consider consumer demand and the company’s mission of providing high-quality, value-added pocket-friendly prices, but also the product lifecycle. In reinforcing consumer demand, PriceSmart will target the appeal, health value and feminine nature of the product to add its value in the increasingly competitive high-end consumer market.
Consequently, PriceSmart’s intention to position Royal Health Lotion as a unique, innovative and attractive health and beauty product will allow the company a certain level of leverage in pricing to be able to compete favourably in high-end markets. In product lifecycle, PriceSmart will take advantage of the fact that it is the first to use Aloe Vera and other carefully selected herbs to provide a product with capacities to act as a moisturiser, cleanser and anti-aging agent.
This will ensure a high profit margin for the company to enable it recoup costs associated with research, development and packaging of the product as the newer the product and the earlier the product lifecycle the high the price can usually be.
PriceSmart aims to not only initiate a strong awareness about the launch of Royal Health Lotion throughout the target market of high-end professional women consumer segment, but also to win substantial market share over top functional health and beauty products competitors such as Procter & Gamble and P&G.
Remembering that this is not a core functional area of PriceSmart, the company will assume extra caution when making media selection to ensure we reach the intended target market. Since many of these women not only have stable and well-paying forms of employment but can easily access technology, PriceSmart will rely mainly on online promotion and advertising.
However, the company will also make use of other targeted promotional tools such as women’s magazines and trendy outdoor billboards. The message concept in the promotional tools will be “Explore, Discover…and Remain Young and Beautiful for Eternity.”
Place (Distribution Strategy)
Initially, Royal Health Lotion will be distributed through PriceSmart’s warehouses. However, the company expects to enter into binding agreements with other businesses, including convenience stores, discount shops, health facilities, and beauty parlours, to distribute the product.