Mini Case

Kids Market Consulting Case study

Presented by Ayush Agarwal Prof Suzanne Powers UC Berkeley Extension BUS ADM X415 Marketing Strategy March 11, 2015

1. Porters 5 Force Model 1.1)

Threat of New Entrants Artificial barriers for the field of marketing research are low in Ukraine. The Ukrainian Marketing Association (UMA) developed regulations to ensure that the Research firms adhere to legal regulations, stabilize pricing policies. However, the regulations were not stringent enough to pose barriers to entry for the new entrants. Ukraine witnessed poor tax accounting practicing due to which mispricing was possible. Hence, threat of new Entrants was low.

1.2)

Bargaining power of buyers No firms in Ukraine except KMC targeted the population segment of kids. Even though, only few local companies had brands oriented towards kids, they hardly had 1 Co. to perform the market research for them. As a result, the bargaining power of buyers- the local companies was very low.

1.3)

Bargaining power of suppliers Concentration of suppliers: Ukraine had around 30 market research companies. None of the firms focused solely on the market research of children. Also, advertising agencies started performing market research to meet the client requirements. Hence, there was low bargaining power among the sellers due to low differentiation. Switching cost: The switching cost would depend on the terms and agreements with the local companies. Brand Value: As the number of supplies was high and consisting of big, established players; establishing a brand value would be difficult compared to a situation when the number of players are low. Forward integration: The market research firms all worked towards satisfying the customer needs. They were involved in advertising, branding and market agencies. They did a forward integration which would increase the bargaining power of the suppliers.

1.4)

Competitive Rivalry Ukraine witnessed several sources of competition. It had around 30 market research companies. The major for companies had global sales of 747 million. AC Neilson also conducted its operations in Ukraine, it being the largest market research firm in the world. Advertising agencies joined the competition by doing market research to meet the client demands. Also, independent consultants did market research work.

1.5)

Availability of substitutes The substitutes to marketing research firm could be research performed by the local companies themselves. This could be through field engineer feedback, customer surveys, magazine surveys, and online forms. However, the local

companies will find the task tedious to perform as it is expensive, and is time consuming. Hence, availability of substitutes is low.

2. SWOT Analysis: Strengths:  Better equipped to train the customers for specialized workshop Child targeted marketing  As KMC was initially a part of DDI, it was possible for them to use the corporate resources at reduced rates.  KMC were able to use DDI’s experience and customer base when they entered the market.  Cost efficiency as a result of sharing office space with SC-DOM in Kyiv.  KMC shared the advertising platform with DDI which resulted in additional cost savings. Weakness:  KMC faced challenges due to its first mover position in the kids, tweens and teens niche.  Difficult to obtain information from children.  Difficulty in interpreting and articulating information from the kids.  Due to lack of available information among the local companies about the children niche segment, the clients initially had low level of knowledge Opportunities  Expand globally so as to reach out to global customers.  Using the latest mobile technology to reach to the niche market  Exploring other niche segments. This could include products for retired population.  Developing techniques for better interpretation of information shared by children. Threats  High competition exists in Ukraine. AC Neilson, Worlds largest market research firm also has its presence in Ukraine. Along with the 30 marketing companies, independent consultants, and advertising agencies also conduct market research to meet customer demands.  Extensive government intervention can affect the accountability of the company. The government regulates the pricing.  Like every other industry, recession could hit the market research industry as well. This would lead to the plummeting of the marketing expenditures by the customers and would affect research firms adversely.

3. Advantages & Disadvantages By treating pre-adolescents as independent, mature consumers, marketers have been very successful in advertising the products effectively to the target consumers. According to the 2008 YTV Kids and Tweens Report, kids influence:  Breakfast choices (97% of the time) and lunch choices (95% of the time).  Where to go for casual family meals (98% of the time) (with 34% of kids always having a say on the choice of casual restaurant).  Clothing purchases (95% of the time).  Software purchases (76% of the time) and computer purchases (60% of the time).  Family entertainment choices (98% of the time) and family trips and excursions (94% of the time). As a result, industry spending on advertising to children has exploded over the past two decades. In the United States alone, companies spent over $17 billion doing this in 2009 – more than double what was spent in 1992. Parents today are willing to buy more for their kids because trends such as smaller family size, dual incomes and postponing having children until later in life mean that families have more disposable income.

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Advantages involved in targeting kids, tweens, and teens for marketing research: Today’s kids have more autonomy and decision-making power within the family than in previous generations, so it follows that kids are vocal about what they want their parents to buy. Targeting them directly guarantees parents acting as gatekeepers will be not be the only ones influencing buying decisions. With the help of well-paid researchers and psychologists, advertisers now have access to in-depth knowledge about children’s developmental, emotional and social needs at different ages. So now marketers know well their target populations to plan marketing events effectively Having developed brand recognition in very early age leads to life long relationship with the consumers. According to the Centre for a New American Dream, babies as young as six months of age can form mental images of corporate logos and mascots. Disadvantages involved in targeting kids, tweens, and teens for marketing research: Budget shortfalls are forcing school boards to allow corporation’s access to students in exchange for badly needed cash, computers and educational

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materials. School is expected to be the place where student should be protected from the advertising and consumer messages but not anymore. Kids are often online alone, without parental supervision. Some small companies can use the internet medium to influence them for products not suitable for them and affect their physical and mental health. The marketing of adult entertainment to children has been, and continues to be, an ongoing issue between government regulators and various media industries. Marketers are using child psychologists to target kids for wrong reasons. Direct access to the kids, teens make them vulnerable and lead to unethical practices.

4. Next steps for KMC In my opinion KMC has already passed the initial challenge of being first mover position in the kids, teens and tweens niche. Even though there has been increasing competition from the non-specialized firms in their niche market, they clearly have better knowledge and experience handling kids, teens and tweens market. KMC should continue working towards strengthen the current niche market knowledge base. Teenagers are an obvious prime audience for digital marketing strategies, given their avid use of mobile phones, media players, blogs, online video channels, social networks such as Facebook and Twitter, and other digital media platforms and devices. Some of the key areas which KMC can explore apart from maintaining their prime position in their niche market: Location-based mobile marketing: - Young people in particular rely on mobile devices for a growing number of services: phone, web and social network access, maps and directions, entertainment, and more. The ubiquity of mobile phones gives marketers the unprecedented ability to follow young people throughout their daily lives, delivering enticing marketing offers that are designed to elicit impulsive behaviours. According to the Pew Institute, “74% of adult smart phone owners ages 18 and older say they use their phone to get directions or other information based on their current location.” KMC should focus on exposing latest technologies available to reach out to the kids to perform marketing operations. Rapid In-Market Experimentation (RIME): Standard concept and producttesting research is replaced by rapid, in-market experimentation (RIME) with prototype products rapidly introduced into physical and virtual test markets to better gauge consumer interest. Marketers frequently try exploratory research altogether. Instead, they follow the lead of their online design communities, take the highest valued products on their prediction market, and begin experimenting. Expanding geographical limits: In order to increase the profit margins KMC requires having deep insights in nearly every market simultaneously. Smaller

suppliers with only a national footprint cannot compete in this future, and the large suppliers win comfortably based on their global reach and local depth. Although it could be possible for client side insights functions to piece together many local suppliers, it is simply too time consuming. Large, global suppliers win because they can execute face-to-face interviews in Bahrain and Sao Paulo simultaneously with elite indigenous staff.