Upstream Marketing November 2011

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CONTENTS Objective ......................................................................................................................................................................... 2 Problem Statement (Goal) .............................................................................................................................................. 2 Key Findings .................................................................................................................................................................... 2 SWOT Analysis ................................................................................................................................................................. 2 Competitive Analysis ....................................................................................................................................................... 3 Target Market ................................................................................................................................................................. 5 Behavioural ................................................................................................................................................................. 5 Demographic ............................................................................................................................................................... 5 Geographic .................................................................................................................................................................. 5 Potential Market Segments......................................................................................................................................... 6 Alternatives ..................................................................................................................................................................... 6 Penetration Pricing ...................................................................................................................................................... 6 Advantages .............................................................................................................................................................. 6 Disadvantages ......................................................................................................................................................... 6 Target Profit Pricing .................................................................................................................................................... 7 Advantages .............................................................................................................................................................. 7 Disadvantages ......................................................................................................................................................... 7 Yield Management Pricing with Quantity Discounts .................................................................................................. 7 Advantages .............................................................................................................................................................. 7 Disadvantages ......................................................................................................................................................... 7 Solution ........................................................................................................................................................................... 8 Implementation .............................................................................................................................................................. 8 Price ............................................................................................................................................................................. 8 Product ........................................................................................................................................................................ 8 Promotion ................................................................................................................................................................... 9 Place ............................................................................................................................................................................ 9 Conclusion ....................................................................................................................................................................... 9 1 | P a g e
OBJECTIVE The objective of this report is to analyze the current positioning of Eco-Flex and provide various pricing strategies for the introduction of their new gymnasium flooring product, codenamed “Gekko”. PROBLEM STATEMENT (GOAL) What pricing strategy (supported by an appropriate market strategy) should Eco-Flex use Gekko, to generate a minimum of $300,000.00 profit in its first year in the market, sell at least 10,000m 2 of product, and capturing a 12% market spend share during its first year? KEY FINDINGS Eco-Flex, an Alberta, Canadian manufacturer of rubber based products derived from recycled rubber tires, has proposed the feasible development of a new product code-named, “Gekko”, based on a Request for Proposal as well as analysis of potential markets. This new product combines a rubber techno-material with a bamboo backing to produce a flooring piece. Bamboo flooring products are increasing in North America as they are more dimensionally stable compared to red oak flooring and laboratory-made laminated bamboo lumber (Lee & Liu, 2003). In addition, bamboo-based flooring is more environmentally sustainable because it can be harvested earlier i.e. - within 5 years as compared to decades for hardwood trees (Kaiser, 2004) . If the product is manufactured under the proper guidelines, it can obtain LEED certification, the international standard for green building designs, as per the bulk of Eco-Flex’s other product lines. Increased corporate sustainability practices have been placed in the spotlight in the past few years, as 93% of CEOs surveyed recognize this need for the future success of their companies (Singh, <strong>2011</strong>) Eco-Flex’s Gekko flooring is the first of its kind and can tap into the growing market for sustainable business products and practices. Gekko’s cost of production is composed of a variable cost of $18.97/m 2 and monthly fixed costs of $8,799/month (Refer Appendix: Table of Fixed & Variable Costs vs. Profit). Sophie’s conservative estimate sales forecast for Gekko is 500m 2 , requiring a retail price of $36.57/m 2 to break-even. If the quantity demanded for Gekko reaches Eco-Flex’s production capacity of 2000/m 2 , a retail price of $23.37/m 2 is needed to reach the break-even point. With a predicted demand of 500m 2 , the calculated manufacturing break-even price is $36.58m 2 (Refer to Appendix “Table 1: Break Even Analysis”). Taking into consideration all calculations of Eco-Flex’s production capacities with price of $45.00, the estimated break-even volume is 338 units. SWOT ANALYSIS Eco-Flex is in a very niche product market, and as such careful attention must be paid to the changing landscape it offers. It must constantly be aware of its own strengths and leverage these to counter weaknesses. The current social climate favours innovative, sustainable companies such as Eco-Flex which presents massive opportunity, but growing competition and keeping up with new innovations, all while balancing costs and consumer demand, is not to be taken lightly. 2 | P a g e
Page 1: Eco-Flex Gekko Pricing Strategy Ups
Page 5 and 6: Eco-Flex 1 1.) Ecoflex Safety Floor
Page 7 and 8: POTENTIAL MARKET SEGMENTS In terms
Page 9 and 10: SOLUTION The alternative that will

Upstream Marketing November 2011

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