Clocky Case - Grade: B+ PDF

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Summary

This is a marketing paper for a made-up product called "Clocky."...

Description

1.

In the Clocky: The Runaway Alarm Clock Case study, the founder Gauri Nanda is faced

with a decision on how to segment her product. There are two possible routes for segmentation of her product, Clocky. The first segment can be to market for people who need the product’s function directly. The core benefit of segmenting the product this way is that it directly serves the needs of its consumers by having an item that wakes them up in the morning in an efficient manner. A disadvantage to the need market is a limited target market. The majority of the people who have sleep issues are young adults between the ages of 1829. Outside of this group, there is not so much of a necessity for an advanced alarm clock. This way of segmentation ignores the “Fun” and innovative experience that is unique to Clocky. The other way of segmentation that is mentioned is the “Fun Market”. If this is used Nanda can then focus on the cozy, pet-like features that make her product more than just a way of getting up in the morning. This added experience and relationship can resonate with consumers who are tired of using the same old alarm clocks and want something new. This method of segmentation will attract more consumers since it can focus to include children by using different patterns and designs to make the clock look more lifelike, and will include older consumers who are looking to buy presents for their family. The core benefit of this is that it can fulfil the simple service of waking one up in the morning while also creating an added experience to it. The “Fun Market” can be concerning due to its potential to be a fad in the market. If consumers value the product as just a trendy fad there will not be longevity on the product’s success. By segmenting Clocky towards consumers in the “Fun Market,” that will differentiate themselves from other alarm clocks due to their niche of having a pet-like feature. Clocky’s effective and unique way of waking people up in the morning will not end in a fad, but rather it will create an opportunity for long term success.

2. Traditional alarm are very bland with limited features and few modifications have been made to update the alarm clock to be more appealing for the consumer and client. By

positioning Clocky by attribute, it will target a much wider market and could turn to a larger amount of people. In general, only 18-29 year olds use alarm clocks because they have a need for it, but now, Clocky will broad the market to include children and older people; A segment of the population that had previously been less contact with. Children will desire this because of the pet-like, cozy feature that the product offers. Additionally, older people purchase Clocky as presents for all types of occasions. The by attribute of the product is the cozy, pet-like features which trying to make the waking up as un experience a fun one, instead of the old and outdated basic alarm which made it a burden. This is a very practical position strategy for Nanda because it fits along with her goals, capabilities, and resources. Her goal is to have Clocky give the ultimate fun experience of waking up and giving people a robotic household pet. Nanda has the resources and capabilities to excel in the fun market, such as her access to the MIT lab and the huge gain of interest from the media regarding her product. Moreover, Nanda has been approached by major retailers such as Walmart and Target for licensing agreements. Nanda’s positioning allows her to be expansive and generate higher revenue income for Clocky.

3.

To create an efficient and effective marketing launch for Clocky, Nanda should use

segmentation to target different demographics of her customers. By targeting and advertising to adults and children separately, she can more efficiently sell Clocky products to a wider variety of consumers. Nanda can use Clocky’s fun and playful nature to reach kids and it's very practical yet quirky nature to connect with adults. Since adults prefer other methods of advertising than kids, there needs to be a variation in how Nanda uses advertising channel to reach these two demographics. This would include for example commercials on children's TV channels and ads tagged to children-related content on Youtube. To reach adults, she might be reach out to technology related magazines such as Wired and Popular Mechanics for featured articles on the product. Also she should try to get social media attention online using

websites such as Facebook and Twitter. The ads for adults should have Nanda demonstrate how Clocky works and why it would improve people’s wake up routine so they can be ready to start better their day and work. Also launching another more mature version of Clocky with a darker color scheme or a different design should help appeal to the older demographics. I would also create a “Back To School” marketing campaign for the kids. Distributing commercials on a pulse schedule, showing them mostly before school starts. The ads would show how useful Clocky is when it comes to waking up your kid for school with a smile and a good way. Bringing Clocky into retail would be the next step. Target and Walmart are perfect locations because they advertise and designate sections of their store for back to school items. So all the parents that take their kids shopping for the new school year will see Clocky and be influenced to buy it. Parents will see a fun and unique way to help their kids get ready for school in the mornings and kids will see a fun toy. Since alarm clocks are not usually over $10 Nanda should not push such a high price point on the Clocky. Since it takes roughly $18 to make and to explicit how its a high value product, in that it won't break easily and is built with quality materials. To establish that message without taking it too far the Clocky should have a price of about $40. She would earn close to $8 from retail locations for each product sold, but to gain more revenue she must attract customers to buy from her website. Offering sales as low as 15% exclusively on the site Nanda could influence people to order straight from her, making a larger profit margin.

4. a)

The variable costs that would be required for Nanda to manufacture each Clocky are:

cost to make Clocky is $15, shipping cost is $1, Warehousing and Packaging fees is $1, Credit Card and Processing fees is $1, and the box for each Clocky costs $.50. So the total cost for you to sell one Clocky is $15+$1+$1+$1+$.50=$18.50 which is the UVC. The retail

price for selling each clocky is $50. There are different distribution channels: mass merchandisers, specialty retailers, and direct to consumers via her own website. If Nanda was taking the mass merchandisers approach by using Target, she would need to take into account the Average Markup for Target, which is 144%. That means that if the price Target pays Nanda is $X, then $X*1.44=$50 or $X=$50/1.44. So Target paid Nanda $34.72 for each Clocky. She can then calculate her profit (per unit) for each Clocky, since she knows it costs her $18.50 to make each Clocky, plus $1 to deliver to Target (since when delivering in bulk, delivering cost is less): $34.72 (revenue) $19.50 (cost) = $15.22 (profit per unit). If Nanda was using the specialty retailer approach by using Brookstone, she would need to take into account The Average Markup for Brookstone, which is 168%. That means that if the price Brookstone pays Nanda is $X, then $X*1.68=$50 or $X=$50/1.68. So Brookstone paid Nanda $29.76 for each Clocky. She can then calculate her profit (per unit) for each Clocky since she knows it costs her $18.50 to make each Clocky, plus $1 to deliver to Brookstone (since when delivering in bulk, delivering cost is less): $29.76 (revenue) - $19.50 (cost) = $10.26 (profit per unit). The Average Markup for Direct website is 100%. That means that Nanda earns the full revenue of each Clocky which is $50. She can then calculate her profit (per unit) for each Clocky since she knows it costs her $18.50 to make each Clocky, plus $3 to deliver to each consumer’s house (since when delivering to each consumer individually, delivering cost is more): $50 (revenue) - $21.50 (cost) = $28.50 (profit per unit). b) Since Nanda’s goal is to break-even five years after her launch, her costs, including opportunity costs like her forgone salary as an MIT engineer and actual incurred costs over this time period total $600,000. So her fixed cost total is $600,000. The BEQ (break-even quantity) formula is BEQ = FC (Fixed Cost) / (P(Profit) – UVC(Unit Variable Cost)). For Nanda to break-even if she was doing a mass merchandising approach at Target would require her to

sell $600,000 (FC) / $15.22 (P-UVC)= 39,422 Clockys (quantity). To break-even if she was doing a specialty merchandising approach at Brookstone would require her to sell $600,000 / $10.26 = 58,480 Clockys. To break-even if she was doing a direct consumer approach online would require her to sell $600,000 / $28.50 = 21,053 Clockys....