Introduction
The two opportunities involved in the selected pitch are leasing packaging patent rights to wine companies and selling single-serving Zipz wine in patented packaging. In the first opportunity, the product is the patented packaging, whereas in the second opportunity, the product is single-serving wine. The present section will evaluate the key aspects of both proposals, as well as relevant market information, in order to judge on their feasibility.
Opportunity 1
The target customer for leasing the rights to patented packaging is wine companies who are willing to sell single-serving wine in attractive packaging. Single-serving wine is usually packaged in bottles or plastic cups. The patented packaging offered by Zipz is different from these alternatives based on the shelf life of the product, as well as the look and feel of the glasses. As opposed to plastic cups, Zipz glasses offer consumers a luxurious feel and look similar to traditional wine glasses. The packaging is also made with recyclable plastic, which is attractive for consumers who are conscious about the environment.
The price of licensing is stated to be 15 cents per glass, whereas the price of the end product can be between $1 and $3, depending on the brand of wine. Thus, the packaging offered for leasing has a good value for potential customers willing to lease packaging. Another critical factor to consider in analyzing the first opportunity is whether or not the company has a way of reaching out to potential customers. Although this was not mentioned in the pitch, the company can contact wine producers directly by sending proposals.
Opportunity 2
The second opportunity presented in the pitch is selling Zipz wine in single-serving glasses. This opportunity is more complicated, as the company does not have a clear advantage in the wine market. The target customers for single-serving wine are casual wine drinkers. The company plans on reaching this group of customers through supermarket chains, such as Walmart or Costco. The entrepreneurs are not explicit about their understanding of market dynamics, and thus applying Porter’s Five Forces model to the wine market in the United States can help to understand how the opportunity relates to it.
First of all, there is a high rivalry among existing competitors in the wine markets. As shown in a report by McMillan, the supply and demand in the wine market are mostly balanced, with a variety of brands in all market segments (8). Secondly, due to the wide range of products available in the market already, there is a lower threat of new entrants. The most successful brands operating in the market are all well-established and have a certain degree of brand loyalty (McMillan 20). Thirdly, the bargaining power of suppliers does not apply to most wine brands as they have their own wineries.
Thus, the crucial force is the bargaining power of buyers, and the changing demographics of buyers shape most of the trends in the wine market. McMillan notes that “Millennials are migrating away from red blends and introductory wines and are starting to have a positive impact on lower-priced still wine categories — both domestic and foreign” (8). Based on the information above, there are two critical challenges for Zipz with regards to the second opportunity.
The company should distinguish itself from other brands based on the value provided to customers to fight off the competition (Porter 83). Also, the market dynamics indicate that most consumers today are price-sensitive, which is why it is important to set the correct price for single-serving wine.
When it comes to differentiation and value, Zipz relies on the patented packaging that enhances the customer’s experience. However, they admit that their wine does not have any significant advantage over other brands, and this is one of the key drawbacks of the second opportunity. Single-serving wine is usually made by brands as an alternative to full-sized bottles. Thus, customers can choose to buy the wine they like in a smaller size option. Zipz proposes to sell wine in single-serving glasses only, which limits the target market and offers no advantage over other brands, except for the packaging.
It also affects the value of the product; McMillan states that in the wine industry, the value is defined as quality and experience divided by the price (19). Zipz improves the experience of drinking single-served wine using the patented packaging. Nevertheless, to forego with the second opportunity, it is also critical to address the quality of the product. The quality of Zipz wine is questionable, which is why the product offered in the second opportunity does not have significant value to the customer.
The set price that is suggested by Zipz for single-serving wine is $2.99, and the entrepreneur does not explicitly state whether or not the customers will be willing to pay this price. This price is relatively high compared to other alternatives, as most other brands price their single-serving wine at about $2. Also, the majority of customers buys bottles of wine for under $15, and thus are unlikely to pay $2.99 for one glass (McMillan 19).
The price would be justified if Zipz were positioned in the premium segment of the market, with both bottles and single-serving glasses available to customers. As the company targets the general wine market where customers are relatively price-sensitive, it is unlikely that they will be willing to pay this price for Zipz wine.
The profit margins of Zipz are quite high, as the cost of production is $0.95, and the profitability is thus likely to be high as well. The entrepreneur does not define the requirements for future technology development, but it is anticipated that there will be no need to change the patented packaging. The company is able to deliver the concept as described due to their ownership of the patent and experience in producing single-serving Zipz glasses.
Results of Analysis
Overall, the feasibility analysis shows that the first opportunity is feasible, while the second one is not. In the first opportunity, Zipz offers a fair price and value for leasing packaging to wine producers and has a possibility for communicating its proposal to potential customers. The patented packaging also distinguishes Zipz from its competitors, thus making the opportunity feasible. However, when it comes to selling Zipz wine in single-serving glasses, the company’s proposition does not respond to the features of the target market.
According to Lerner and Sahlman, one of the key factors affecting the success of an enterprise is competition, and the competitive landscape of the market is prominent (118). To distinguish itself from the competitors, Zipz should provide good value for an adequate price, which it fails to do. Thus, the product would not be successful in the chosen market and the opportunity is not feasible.
Reflection
Watching the pitch of Zipz and the comments offered by the “Sharks” allowed carying out the feasibility analysis by highlighting the most important aspects of it. First of all, the “Sharks” concentrated on the current performance of Zipz. This is essential as performance tracking enables to make correct predictions about the future productivity (Schoemaker and Tetlock 78). Secondly, the “Sharks” judged on both the price and the value of the product, which are critical to achieving success in the wine market. Although the packaging enhances the customer’s experience of drinking single-serving wine, the quality and price of the product will make it difficult for it to succeed.
On the one hand, Zipz is not a well-established wine brand that has a required degree of brand loyalty, and thus potential customers do not trust the company to produce high-quality wine. On the other hand, the price of the product is high compared to other offers in the market. To set an adequate price that would add value to the product, it is crucial to consider the price of other offerings in the chosen market segment (Anderson et al. 72).
Another important lesson was that they considered more than one opportunity out of those available to the company. For instance, instead of focusing on leasing only, they also questioned the possibility of improving the product to target a larger portion of the market. At the moment, Zipz only focuses on a small part of it. This shows that the company did not choose its opportunity space wisely based on the industry features and dynamics (Hornblower 4).
The vast majority of customers in the market opt for purchasing full-sized wine bottles when they can. In this context, single-serving is bought occasionally when a customer wants to drink wine on the go or to taste a new brand of wine before purchasing a full-sized bottle. Thus, selling wine in both the traditional 750ml and single-serving glasses at an adequate price would help Zipz to target a more substantial portion of the market and establish its brand, as well as to cope with the high competition.
Finally, the video showed that it is important to consider consumer preferences and trends in the target market and to adjust the product accordingly. The “Sharks” mentioned relevant market data, such as the fact that most customers buy wine for $9.99 or less, which allowed concluding that the proposed price of the product is too high. Overall, the lessons from the video helped to define the focus of the feasibility analysis and to enhance the judgment based on market information.
Conclusion
The analysis highlighted that the two opportunities available to Zipz many differences regarding their feasibility. The opportunity to lease patented packaging to wine producers appears to be feasible, as Zipz provides excellent value for the set price and is capable of distinguishing itself from other offers based on quality. Nevertheless, the opportunity of selling Zipz wine in single-serving glasses has several significant issues.
While targeting a very narrow portion of the market, the company does not offer an appropriate value or high product quality. Thus, this opportunity is not feasible, which explains why it was criticized by the “Sharks”. The video offered several insights into feasibility analysis and helped to ensure that the exploration of the proposed opportunities is accurate and comprehensive.
Works Cited
Anderson, James C., et al. “Why the Highest Price Isn’t the Best Price.” MIT Sloan Management Review. 2010, pp. 69-76.
Lerner, Josh, and William A. Sahlman. “Reviving Entrepreneurship.” Harvard Business Review. 2012, pp, 116-119.
McMillan, Rob. State of the Wine Industry 2018. 2018. Web.
Porter, Michael E. “The Five Competitive Forces that Shape Strategy.” Harvard Business Review. 2008, pp. 78-93.
Rohan, Dennis, and Jocelyn Hornblower. “Identifying Venture Opportunities.” Stanford Graduate School of Business. 2008, pp. 1-14.
Schoemaker, Paul J. H., and Philip E. Tetlock. “Superforecasting: How to Upgrade Your Company’s Judgment.” Harvard Business Review. 2016, pp. 72-78.