Designing a New Product for IBM

Marketing Management Assignment

International Business Machines Corporation (IBM) is one of the largest technology giant that provides wide range of technology products and services to the global market. IBM is an expert in developing and manufacturing information technologies including computer systems, software, networking systems, storage devices and microelectronics worldwide.

In this report I will devise a new product / service for IBM and would then develop a marketing strategy for that product or service.

Devising a new product/service for IBM

IBM has got a huge market size as it provides business and information technology services to a large customer base starting from small and medium size businesses to the large corporations. IBM covers clients across multiple industries such as banking, telecommunications, automotive, construction, consumer products, media, electronics, travel and transportation, government, education and hosting services.

IT Market is growing very rapidly as the global environment is becoming highly tech-savvy thus emerging new areas for IT companies to cover. Lots of innovation and revolution have come up in IT sector over the last two decades. When it comes to devising a new product or service for a big organization like IBM, one becomes helpless because of their extensive lines of already established and successful products prevailing in the market. Still I assume if IBM can provide high-tech hardware assistance to different companies for developing a cutting-edge software system of ‘Paperless Proof of Purchase’ that would definitely going to help both parties and the consumers of course who plays a major role for eventually making a product or service successful.

Product/Service description

The ‘Paperless Proof of Purchase’ is an online receipt that a customer will get when he/she makes a transaction instead of usual printed paper receipt. It is assumed to be helpful both for the customers and the business itself. As it will allow the families to keep a track of the spending and on the other hand it will help the business to track each spending and also help the accountant of that particular business to reduce the billable hours by providing relevant accounting information. Each user will be provided a card that the particular business would scan before or after the transaction occurs.

DEVELOPING A MARKETING STRATEGY

Now I am going to establish a marketing strategy for the launch of ‘Paperless Proof of Purchase’ by IBM. This marketing strategy would help IBM to clearly identify the target customers for this specific service and reach them positively by using different kind of promotional activities. Following is the in-depth discussion of all the components required to develop a marketing strategy for this service.

Segmentation of the market

Market Segmentation will allow marketers at IBM to find a group of customers with a similar set of wants and needs. IBM can gain huge returns if it is successful in segmenting the market properly. Here IBM would target Rapid-Growth market segments. In this specific product, IBM can opt for lifestyle segmentation which will help the company to know their customers as people generally and this information will finally lead to develop effective marketing messages for their particular customer set.

IBM can use different approaches to segment the market by product or service needs, by sensitivity to price, by geographic area, by demographic segment or by lifestyles of people. Geographically IBM may cover a huge market starting from the small and medium enterprises to the larger organizations. Another approach to segmenting markets for IBM is by the customers’ technological needs. IBM’s customer base will cover a wide range of customers with multiple industries and different sizes. As an IT company, IBM will segment its market to be able to target specific customers having technological need for this product and having the fast lifestyle to opt for this time saving paperless technique which will save them time and hassle of finding old receipts in future if something goes wrong with their products.

Selecting the Target Market

The main target for this service would be the Retail Sector, Accommodation and Food Services Firms and essentially E-commerce. All categories will be covered for retailers starting from small to medium size organizations and big giants too. Moreover they shall cover the market both geographical and technological segments in order to ensure that the objectives are properly met and they are utilising their resources to the best. Wireless hardware can be used for restaurants and small retailers which will include a wireless handset, a wireless chip and the cards to be used by consumers. This wireless hardware is expected to be less expensive than the one that will be required for the larger retailers.

Product Differentiation

It is important for every organization to differentiate their products from those of their competitors’ in order to attract more customers and build strong customer loyalty. IBM can differentiate this product by being more convenient as its competitors require a lot of organization on the part of its consumers.

Moreover some of their competitors with the same kind of product are dealing with online receipts only, which reduce their convenience level if they think of expanding their services by including paper receipts. Whereas ‘Paperless Proof of Purchase’ would be more convenient and effective if launched in the form of a card that consumers will swipe prior to their transactions. One of its most convincing features is that it would entirely be paperless. All these features will be able to make IBM, a leader in “Smarter Intelligence” and sustainability initiatives.

Positioning this product in the customers’ minds

The basic mission of IBM for the launch of ‘paperless proof of purchase’ must be to create brand awareness in the target market so that people clearly get to know of the service and can differentiate it with the same service provided by other companies, which depends on how IBM positions it’s product in their minds. For effective and strong positioning of this service, IBM can establish following positioning statement:

“As companies grow, operating expenses are becoming harder and harder to manage. In this tough time this paperless proof of purchase is a promising money-saving service.”

Furthermore IBM will have to focus on the product specialization of ‘paperless proof of purchase’ to their market segments that require providing special features and enhanced quality to make it stand above all other competitors. Only then they would be able to achieve their target successfully.

Marketing Objectives

IBM has a vision to make information accessible to everyone irrespective of any boundaries to business around the world. However they aim to achieve a sustainable competitive advantage keeping in mind that customer satisfaction is the main goal for IBM. Senior management at IBM is highly passionate about diversity of the marketplace. They are focusing on newer segments including small and medium businesses in order to increase its market share and gain a competitive edge over its rivalry which is what they refer to as the strategic mission of the IBM Team.

However IBM’s basic marketing objectives for ‘paperless proof of purchase’ includes following:

• To provide economically intelligent system
• Promising a money saving service for businesses
• Being fast and efficient in product introduction to the market
• Gain competitive edge over other players offering the same kind of service
• Gaining huge marketing share globally
• Creating brand awareness and getting the product information to customers quickly and efficiently using cost effective methods
• Achieving high returns in terms of profitability
• Reducing time-to-market and the cost of introducing this service in the market
• Managing the development of this service throughout the entire lifecycle from its initial design to product build to post-sale service.
• Increased sales through longer sales life
• Increased product loyalty in terms of customer satisfaction and retention
• Increasing brand recognition and getting greater market responsiveness
• Satisfying new or changing customer needs
• Staying ahead of competition
• Maintaining effective integration and coordination among multiple functional areas, including product design, planning, processing, sales and marketing.

Marketing mix

Like every organization, IBM uses some sets of marketing tools to achieve its strategic and marketing objectives and that combination is known as ‘marketing mix’. These tools represent the strategic position of IBM’s products in their target market and are modified as ‘four Ps’ consisting of product, price, place and promotion. Below I will explain each of these P’s with reference to the specific service of ‘Paperless Proof of Purchase’.

Product

Here the product we have is ‘Paperless Proof of Purchase’ which is basically a service dominant product. By name it is quite clear that this is expected to be the receipt of purchase without paper, which will be online receipt that would help to keep a record of transactions. It is called paperless because it is not a common printed paper receipt rather it is online receipt. It would help both the customers and the business itself as it will provide accounting information to reduce billable hours of an accountant for a particular business. It is designed particularly for the consumer convenience. This will also allow retailers and even credit card companies to track your purchases.

Price

The pricing of this service will depend on different factors including the cost of installation at different places i.e. geographical factors, average frequency of the consumers of those surroundings and many more. However IBM will have to look what prices are offered by their competitors for the same kind of services. Then depending upon the speciality of their service and considering their differentiation factors, IBM can adjust the pricing accordingly. In other words it can be said that IBM will determine the price of this product/service by calculating its cost, estimating the benefits to consumers, and comparing the product, service and prices to others that are similar. Moreover IBM can give discounts for trial runs to different retailers by offering their service free of charge for 2 months or so to their testing retail stores.

IBM can also provide free hardware to the retailers in this testing phase and then charge once the retailer decides to keep it after the trial period. This will give the retailers an initial competitive edge over their competition. IBM can develop a pricing strategy by the help of breakeven analysis which is calculated as ‘fixed costs divided by (revenue per unit-variable costs per unit)’. For example suppose that the fixed costs for producing 10,000 devices were $50,000 a year. The variable costs are $20.00 materials, $20.00 labour, and $10.00 overhead, for a total of $50.00. If they think of selling a single device for $100.00, then $50,000 divided by ($100.00-$50.00) equals 1000 units. This is the number of devices that have to be sold at a selling price of $100.00 before IBM will start to make a profit.

Place

Place is all about distribution and convenience of the product and service, IBM products and services already have unlimited dynamics. IBM will sell this product to a diverse market which includes all sectors including communications, distribution, financial services, and the industrial and public sector. IBM will always play its effective role thus covering a huge market both geographically and technologically.

The main target place where they can start the launch of this service can be the UK and USA market initially as life being very fast in these regions.

Promotion

Promotion is yet another very essential component of marketing mix as this is where the company is required to use all the marketing and promotional tactics to reach and convince the target market to start using their product. Firstly IBM should spread the general information about their service in the market so that people come to know of what it exactly is. This will be done by ‘word of mouth advertising’. With the use of different websites like face book, twitter and Google, they can increase their word of mouth advertising. This would be rather free advertising and it would come from a reliable source.

Once people like the feature they will think of using it and they will tell other people about this service and eventually IBM will wind up with a large customer base which is their ultimate goal. After their word of mouth method starts attracting customers, they can move their marketing strategies to the internet, television and radio. Making an advertisement on Internet can help them reach out to billions and billions of people who come online from all over the world and attract customers to their product.

Another strategy that IBM can adopt is the lobbying strategy. For their retail target market they start lobbying business and consumer retailers to start testing their products in their stores, this might give them competitive edge over their competition. In case they are not satisfied by the service then IBM can lobby one of their competitors. Furthermore they can think of giving discounts for trial runs.

In addition to that, they can also opt for good will marketing to reach out to their customers for which they can be environment friendly as well by planting a tree for every one thousand pounds that they make.

Cost of the marketing strategy and when to expect return on Investment

IBM does not have to incur heavy costs on their marketing strategy as the company already possess established brand name for years and have been successful in having strong customer relations and loyalty. However product design, development and execution will involve some cost. Again advertising will involve considerable cost to let people know of their new service and its distinct feature that helps IBM stand ahead of its competitors. For TV advertising, time of the day you advertise and commercial time length affects the price. IBM may think of starting with small advertisement but with frequency i.e. if they decide to advertise in the local business journal, the cost to run in their publication for a six month term for a ¼ page ad with no colour is $10,000 (round number). However IBM will need to balance its available human resources, capital investment and available time slots to fit with the market demand.

However it will be cost-effective for IBM to go for networking, Internet marketing and public relations. Also they may think of not doing all the activities at once i.e. advertising using all these means may not allow them to keep a track and proper measure. That is why the need to be flexible enough for allocating their budget so that they can move the investment from an activity that is not performing to another that may yield a better result.

The major start-up cost will be equipment manufacturing whereas variable cost will involve marketing expenses, sales, repair and maintenance and some miscellaneous start-up costs relating to administration.

IBM is likely to get a return on their investment as soon as they enter the market with this strategy and action in place as people already love to use products and services offered by IBM for being reliable and user-convenient. For highest return on their investment, IBM needs to target the right publications. Then that return on investment on each marketing activity will enable them to better determine whether to keep them running or stop them and try something else.

Conclusion of marketing assignment

Coming up with the ‘paperless proof of purchase’ IBM would be offering a cost-effective, less risky way of buying to consumers. This will also be a more agile and responsive way of making transactions as it will reduce the waiting time of getting a printed receipt and then of course it will relieve the customer from keeping all the receipts safe for any emergency use in future as it will provide an online record keeping for that. However for getting the strategy in right direction and successful eventually IBM must understand their customers, know the competition around, be aware of the market, review their offering on a regular basis and get their business known and trusted by new and potential customers in their target market.

Reference

Hollensen, Sven. (2004) Marketing Management: a relation approach and marketing in practice.

Doyle, P. Stern, P., (2006) Marketing Management and Strategy. 4th ed., Prentice Hall.

IBM Global Business Services, http://www-935.ibm.com/services/uk/index.wss/home

[retrieved on 19th Nov. 2009]

Parmerlee, D. (1993) Developing Successful Marketing Strategies. McGraw-Hill.

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