Doug and Paul When Marketing the Eco - Shack

EXECUTIVE SUMMARY

This report identifies and analyses the problems faced by Doug and Paul when marketing the Eco- Shack. The report will then explain the related marketing concepts and provide several suggestions to overcome the problems.

The main problem that can be extracted from the case study is incorrect marketing strategy which leads to several sub problems. These problems include incorrect brand positioning, segmenting and targeting. In addition, the price of an Urban Eco- Shack is higher than its competitors and lastly, Doug and Paul did not highlight the unique features of their product.

After analysing, we had identified that for the consumer market, the green consumers segment will be interested in Eco- Shack. The four primary bases in this segment are geography, demographics, psychographics and behavioural (QuickMBA 2010). Meanwhile, for the business market, two segments that could be interested in Eco- Shack are businesses that are looking for an office site and those who are concern of the environment. There are many segmentation bases in business market which includes company size, industry, operating practices, culture and geographic.

This report will further analyse on cost based pricing, a type of pricing strategy currently used by Eco- Shack developer. This strategy is commonly used by smaller firms because it is easy to be implemented and allows firms to estimate their profit margin more accurately. However, this strategy does not respond to market change, thus we can say that the price of Eco- Shack is less competitive compared to competitors’ price.

To solve the problems stated above, this report had suggested some marketing strategies that can be applied by Doug and Paul. Firstly, they can use micromarketing –a technique that involves tailoring and customising services to individual needs (Verdino 2010). We also recommend that they should be more concern of the quality since they had stated that the Eco- Shack can last 50 years. Apart from that, providing product support services may help them to achieve a competitive advantage

In terms of pricing, Doug and Paul can use value based pricing. The reason is, Eco- Shacks are environmental friendly and unique thus, consumers may perceive a higher price. Another strategy that can be used in conjunction with the value based pricing is market skimming pricing. Before there is other competitor, they should set a high price to maximise their revenue. When the number of competitors increases, they can drastically drop the prices so that competitors will lose out.

Besides that, Doug and Paul should consider changing the brand name because the current name ‘Eco- Shack’ has positioned the product incorrectly. Lastly, we recommend them to use Integrated Marketing Communication where different advertising media like Youtube and QR code are used together, to increase reach as well as frequency.

As a conclusion, a complete marketing research should be done to understand the marketplace well enough; otherwise time and resources will be wasted. All in all, after completing this research we believe that the Eco- Shack has the potential for success given the correct marketing strategy and patience.

1.0 INTRODUCTION

Recently, the New Zealand government had regulated a rule on building as a part of sustaining the environment. Some might find it troublesome to further insulate their homes but for Doug and Paul, it is an opportunity to market their new products; the standard Eco-Shack and the Urban Eco- Shack. Generally, Eco- Shacks are small, transportable off-the-grid buildings, which fulfil most of the ‘environmental friendly’ criteria. While both of them thought that New Zealanders will be interested in their Eco- Shack, the reality is the reversed. The responses were very low even after they advertised it.

The purpose of this report is to identify and analyse the problems faced by Doug and Paul. After discussing the related marketing concept, this report will provide several suggestions to overcome the problems.

2.0 PROBLEM IDENTIFICATION

After analysing the case study, the main issue that can be identified is that Doug and Paul have insufficient knowledge about marketing strategy thus, there are no buyers for Eco- Shacks. This can be further divided into several sub problems.

Firstly, the brand ‘Eco- Shack’ does not fit into an ideal brand name characteristic. The word ‘shack’ actually refers to a small hut that is not built properly (Oxford Wordpower Dictionary 2000), but the Eco- Shack is a well-built cabin with complete specifications. This might spoil the image of Eco- Shack in the eyes of potential customers.

Wrong brand positioning will then lead to the next problem, which is incorrect segmentation (36creative 2013). Since Doug and Paul are concerned on two markets; consumer and business, there should be two different bases of segmentation. However, both of them only focus one segment only which is the auctioneers.

Because Doug and Paul only advertise on auction-based websites, their targeted audience are too narrow. This means that there is a problem with their promotion strategy or more accurately, the advertising media. There is a possibility that Doug and Paul do not know about integrated marketing communication, a type of advertising that combine different advertising media together (Sharp 2013).

Next, the price of an Urban Eco-Shack is $2500 more expensive than its competitors. Although Doug and Paul do not see this as a problem because they believe that their product is of better quality, it actually makes the product less competitive in the market. Also, the consumers are not well- informed of the unique features of the Eco- Shack and are not aware of the benefits they ought to gain from the higher priced product.

Overall, Doug and Paul failed to develop a proper marketing strategy due to insufficient research and knowledge.

3.0 ANALYSIS

3.1 Market Segmentation

The market consists of consumer market and business markets.

By tailoring to the different needs of people by using different products, price, styling, packaging, promotions and distributions, the products fit more closely to the customers thus long term relationship can be created (Sharp 2013). Market segmentation is dividing market into distinct groups with different needs and characteristics who might require separate products and marketing strategies (Adam et al. 2011).

3.1.1 Bases for segmenting marketing-Consumer market

Market can be segmented, which consumers can be grouped and served based on four bases. The bases for market segmentation are geography, demographics, psychographics and behavioural.

Consumers segment in New Zealand that could be interested in the Urban Eco-Shack can be described as green consumers segment because they willing to pay more for environment friendly products (Laroche et al. 2001).

A market segmented using geographic variables will be divided into different geographic units, such as states, regions, countries or cities. Consumers who live in urban area in New Zealand would be interested in the Urban Eco-Shack because recent regulation changes allow units fit less than 10 square metres to be placed on a section without council permit.

Demographics variable is used to segregate the market based on the differences of age, family size, family life cycle, income, occupation, education, race and religion. Balderjahn (in Laroche et al. 2001) reported that the used of eco friendly products are more intensive among men. Henion (in Laroche et al. 2001) agreed that consumers with medium or high income level would be interested in green products. Furthermore, since the price of Urban Eco-Shack is higher than portable cabins and Cabin Fever, thus it will hardly be the option for people with low income level. Besides, green consumers are being older than average (Roberts in Laroche et al. 2001).

Psychographics segmentation segregates a market based on social class, lifestyle or personality characteristics. People who are having status above average in the social class are more conscious towards environment friendly products (Anderson in Laroche et al. 2001). Besides, consumers who are having environment friendly lifestyle will choose Urban Eco-Shack.

Behavioural variable is used to divide a market into groups based on consumer knowledge, attitude, use or respond to a product (Adam et al. 2011). Amyx (in Laroche et al. 2001) found that consumers who knowledgeable about environmental issues and who are having attitude which perceived the importance of ecological issues would have more willingness to pay a higher price for green products.

3.1.2 Bases for segmenting marketing-Business market

Business markets can be segmented based on company size, industry, operating practices, culture and geographic (Market Segmentation Unit Guide 2012).

Businesses segment that could be interested in the standard Eco-Shack is business which small in size thus they need temporary or permanent small-in-size office. The industry which could be interested in the standard Eco-Shack includes consultancy firms, graphic designing business and information technology developing business.

Besides, businesses which are having operating practice and culture of concerning on environmental issues would be interested in standard Eco-Shack and they would be willing to pay a premium price for it (Just Cabins 2013). This is due to the reason that Eco-Shack is selling environmental friendly concept and the price is higher if compared to Portable Rooms and Cabin Fever.

3.2 Advantages and Disadvantages of using Cost-oriented pricing approach

There are three types of pricing strategies, which are cost based pricing, market based pricing and value based pricing (Adam et al. 2011).