Running head: ASSIGNMENT#1-MARKET SEGMENTATION & PRODUCT POSITIONING

Student: Instructor: Course Title: Date: MKT500-Marketing Management

ASSIGNMENT#1-MARKET SEGMENTATION & PRODUCT POSITIONING

Marketing Objectives: The introduction of a new product from Industrial Sound, the uBox. With the uBox, Industrial Sound expects to capitalize on the desire of individuals to have access to, and share, their own customized library of music, via iTunes, at public venues . This pay-per-use service through our uBox product will enable us to tap into this market. It is a post-modern version of the Juke box of old. Through this initial device, we will be moving the organization into a wider market, admittedly served by numerous products, but none with our (at the moment) unique feature. It is where we expect to get the attention of new business organizations and young music enthusiasts. The raising of our Q-score or relative recognition will be both a goal and metric to evaluate our campaign. With a two year timetable, we expect to raise the mid-West score to 3 and plan to raise our Los Angeles/West Coast score to 3.5, putting it on par with New York/North East. Marketing segment: Industrial Sound will be presenting itself to a wider audience with the introduction of uBox. We will targeting restaurant owners/managers whos clientele include significant numbers of iPod owners via the B2B installation of our new product. Our initial foray shall be in franchise restaurants that have a theme of pop-culture and flair; Applebees and TGIFridays being the most obvious. While potentially difficult to break into a franchise-wide distribution, the market is rather lucrative. While these locations may have a pre-existing music service, we feel the willingness of this group to express themselves through the display of their musical tastes, for a fee, is an opportunity we & the restaurateurs can exploit.

One can see the breakdown if iPod users by age in Fig.1. While the 18-24 year olds are not the largest group, they do encompass these desirable traits; Eat out and use alcohol outside the home more often than other age groups. Their smaller households eat out more often than bigger households.

ASSIGNMENT#1-MARKET SEGMENTATION & PRODUCT POSITIONING

Age of iPod users

18-24 25-34 35-44 45-54 55-64

Fig. 1 A second avenue involves installation of the devices in select, individually owned/operated establishments. High end hotels will have a lounge, often with live music. However, the musician typically will play a 30 minute set, and break for 30. In the right venue, this dead air is an opportunity for the patrons to express themselves and share their musical tastes, especially the younger iPod owners. The family owned diner or bar would be another sighting location, for the similar reasons above. Though they have live music much less frequently, we would have to ensure our selection of locations strikes a balance with our desired level of exclusivity /price-point and visibility to the end-user public.

Target market: While dining out has remeined relativle stable, any sound business practice should include the plan to increase your customer base as well as retention of present clientel. Part of our method will be to demonstrate how and why the uBox will generate indirect income (revenue form more than the proce of using the device.) The breakdown of iPod users by income (Fig 2) show the substantial amounts they have available. Our new product can provide another way for restaurateurs to not just attract but to maintain their presence in their establishment for a longer time. The key to keeping them in and keeping them coming back, to spend more, is keeping them happy. It is for these reasons our target market is select, high-end lounges in major metropolitan areas and franchise restaurants in the mid-west.

ASSIGNMENT#1-MARKET SEGMENTATION & PRODUCT POSITIONING

Income of iPod users

less $25,000 $25,000-$50,000 $50,000-$75,000 $75,000-$100,000 above $100,000

Fig. 2 SWOT STRENGTHS Rapid design-to-product cycle Agile production facilities Experience with entertainment/audio equipment No need to track music trends Patented technology OPPORTUNITIES Expansion into a market filled with 1324 year olds. Users of iPods have higher incomes WEAKNESSES No distribution chain history with restaurant franchises Diffuse opportunities with owner/operator diners

THREATS Limited need for present products Effect of economy on going out

STRENGTHS Rapid design-to-product cycle: Our in-house design staff, with the aid of 3D prototyping, can bring a design from Q-Gate 12 to Q-Gate 8 in 60 days, if we maximize our use of use COTS. Agile production facility: Our ODM/OEM facilities have the ability to shift ~25% of manufacturing from one product to another per 7 day period. (if logistic support present) Experience with entertainment/audio equipment: Our first 10 years have been spent providing durable, high quality/high-power audio projection equipment to industrial/large entertainment venues. Our engineering and sales departments have built up a reputation of reliability & service

ASSIGNMENT#1-MARKET SEGMENTATION & PRODUCT POSITIONING

with arenas, hotels, stadiums & government facilities. We believe we can leverage this into an almost-retail product. No need to track music trends: Stepping into this area traditionally requires a servicing of the equipment in place to update the library. We will continue to provide quality audio entertainment systems and musical selection, but still remain clear of managing the library. Patented technology: Though not a technology in the engineering sense, our technique of library access has been patented. If we choose to risk diluting our uniqueness, we can gain a revenue stream through the licensing of our patents. This may be a more viable path if we start seeing market saturation. WEAKNESSES No distribution chain history with restaurant franchises: $ has no experience in this area. Our sales staff would have to be bulked up with persons with a background dealing with the restaurant/bar business, or acquire contacts/training in the same. Diffuse opportunities with owner/operator diners: Similar to above, except without the centralization of franchise communication, our sales staff would have to contact individual diner/bar owners to secure a location for uBox. OPPORTUNITIES Expansion into a market filled with 13-24 year olds: While we acknowledge there is a plethora of manufacturers to provide retail and commercial audio products, this is a chance to move into an expanding market. The demographics of iPod users indicate 69% are 13-24. By making Industrial Sound visible to them, we expect a familiarity and loyalty as they age through different segments. Though only less than 15% of the U.S. population, we believe it to be a viable move for the future. Users of iPod s have higher incomes: Fully half of iPod owners annual income exceed $50,000. This low end is at the median national household income of ~$49,500. This is a demographic with what appears to be substantial income to be disposed of. THREATS Limited need for present products: Our past strategy has been for large scale, relatively low volume products. In this time of municipal austerity, few new venues are being considered for construction. Renovation of existing ones may retain their legacy systems. Effect of economy on going out: At the present time, the recession has had minimal effect on dining out behavior, especially as income increases, but the looming double dip recession may change that

ASSIGNMENT#1-MARKET SEGMENTATION & PRODUCT POSITIONING

Market position: Industrial Sound is a supplier of primer audio equipment, known to the major players in the industry, we must become suppliers of the same quality to a broader, but still select audience. We can, and will, leverage our large, though not widely know presence in the same manner as B&O or Alpine. Be advised; Alpine can serve as a cautionary tale of the risk of appealing to a broad market with broad distribution. The loss of their exclusivity shows in their unit price and reputation. We will avoid that in the near term by limiting ourselves to the Business-2-Business market. While there are many electronic devices an establishment may have in situ, none are quite like ours. As explained under the separate product sheet for the uBox., no other device allows access to the end-users iTunes library. Though one may think you can have similar access to someones music via an audio connector from their player to the sound system, you are still limited to the finite size of the devices memory block. Our long standing brand recognition with audio professionals may have limited draw outside the field, but just like Marshall, Moog and Bang & Olufsen, are now well known to the general public, so too will Industrial Sound.

By limiting our initial offering to select, high-end lounges in major metropolitan areas and the franchise restaurants in the mid-west, we can both maintain our exclusivity on the coasts, while simultaneously broadening our name recognition in the heartland. While we do not have the Q score of competitors, we have the agility to bring products to market faster than others. We have also learned how to leverage innovation in the integration of proven design with bleedingedge applications.

ASSIGNMENT#1-MARKET SEGMENTATION & PRODUCT POSITIONING

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 New York Los Angeles Dallas Chicago $ B&K B&O Carver Holton

Fig 3. Relative recognition score between major U.S. audio brands by region.

While we do not plan on moving into retail products at this time, Industrial Sound should consider the opportunity and remain flexible in the uncertain future.

Attributions Fig. 1 & 2 http://www.emarketer.com/Article.aspx?R=1004938

ASSIGNMENT#1-MARKET SEGMENTATION & PRODUCT POSITIONING Musics demographic problem http://paidcontent.org/article/419-the-music-industrys-demographics-problem/

Restaurant demographics http://www.foodservicewarehouse.com/education/restaurant-marketing/demographics.aspx

Effect of recession on dining out http://www.gallup.com/poll/113617/restaurant-dining-mostly-holding-despite-recession.aspx

Age/Sex breakdown, US Census http://www.census.gov/prod/cen2010/briefs/c2010br-03.pdf Income breakdown , U.S. Census http://www.census.gov/hhes/www/income/income.html Electronic Cash Cows http://www.nightclub.com/music-entertainment/equipment-systems/electronic-cash-cows

ASSIGNMENT#1-MARKET SEGMENTATION & PRODUCT POSITIONING