Key success factors to marketing and selling the FlogistonTM Chair in most channels are:
Given the prescribed criteria for success, the FlogistonTM Chair and subsequent products must be sold to end-users by reputable value-added resellers. It is critical to generate awareness and trial by placing the chair in showrooms. In these showrooms, the consumer requires information and assistance in making his or her purchasing decision. True Dimensions must educate its channel partners on the FlogistonTM Chair's features and benefits and enable them to perform the majority of the promotional functions.
No significant channel conflict exists among the different value added resellers which will sell the FlogistonTM Chair. In interviews with representatives from reselling organizations, the company learned that each channel views its customer base as having different fundamental needs. For example, ultra-contemporary retail outlets believe style and uniqueness of design drive the purchase decision for their customers. However, novelty/specialty outlets such as the Sharper Image feel that their customers purchase primarily for their unique functionality and high-tech appeal. By developing customized products designed to meet the needs of each reseller market, True Dimensions has an opportunity to pursue a multi-channel marketing strategy.
6.2 Marketing Strategies by Distribution Channels
True Dimensions has selected a variety of distribution channels to reach the end-user. The company will customize its marketing communications to different channels. This strategy will allow True Dimensions to build a dealer network in each channel. The FlogistonTM Chair will be sold through direct sales in the first year, then using the following retail channels: Novelty/specialty retail stores, ultra-contemporary retail outlets, interior designers, architects, and home audio/theatre retail channels.
Direct Sales Strategy
The FlogistonTM Chair has received a tremendous amount of publicity from which True Dimensions is currently leveraging in its direct sales. Although the FlogistonTM Chair has been seen by 1. 1 million people in Omni Magazine, NAM Tech Briefs, and Wired Magazine, it has only been produced on a limited basis by the designer of the chair. Anticipating future production, he has created and maintained a database of 1100+ interested customers identified through trade shows and responses to articles and advertisements in various publications. Given the company's need for an immediate source of working capital, it is using this database to generate direct sales.
True Dimensions has recently launched a direct mail campaign targeting the identified prospective customers from the database. The company has developed a brochure and order form that has been mailed to these people. A special introductory discount and a thirty day money-back guarantee trial period will enhance the buying incentive. The company is following up with these prospective customers to determine their interest in purchasing the chair and to gather additional leads.
The designer currently receives inquiries for the FlogistonTM Chair over the Internet. Mosaic home pages and electronic bulletin board advertisements will be used to enable Internet users and virtual reality aficionados to locate product and order information. In addition, utilization of list servers such as Fringeware Review will increase electronic exposure for the chair. The company will continue to seek coverage in virtual reality publications, high end audio magazines, interior design journals, and popular press.
Direct sales is the most significant channel for generating revenues during 1995, producing sales of 81 units. True Dimensions projects 2.5% of the existing database of 1100 prospective customers to purchase chairs, resulting in 28 unit sales. The additional sales will result from individual contacts, trade shows, and ongoing publicity. Direct sales will be phased out as a primary channel after the first year, concurrent with the development of reseller channels.
The novelty/specialty market represents the potential early "home run" for True Dimensions and FlogistonTM Chair sales. Given its customer base profile and the high-tech product mix found in retail stores, the upscale novelty/specialty channel appears to be an excellent match for the FlogistonTM Chair. The quality, functionality, uniqueness of the chair (especially when connected with NASA and virtual reality), and suggested retail price ensure a "good fit" according to Diane Cantera, a representative from Brookstone. The company will target Sharper Image as its first distributor in the novelty/specialty. Once the chair is accepted, Sharper Image will perform the majority of the marketing functions and flows. A key advantage of reselling products through Sharper Image and other novelty/specialty stores is gaining national distribution immediately upon acceptance of product. Through product education and personal use in their own homes, Sharper Image's salespeople become intimately familiar with each product's unique features and benefits in order to optimally sell to consumers. Sharper Image stores are referred to as "exploratoriums," meaning that everything can be used and touched by the customer on the showroom floor. This atmosphere will allow customers to try the FlogistonTM Chair and immediately feel the differentiable relaxation level provided.
True Dimensions will offer Sharper Image a technologically enhanced version of the FlogistonTM Chair for distribution. Working in conjunction with The University of Texas Electrical Engineering Department, the company is developing and testing simplified versions of "infrasound" technology which were originally developed for virtual reality applications. In this system a simple electromechanical device transmits therapeutic vibrations through the chair to provide the occupant augmented relaxation. True Dimensions is evaluating other emerging technologies that would meet evolving market needs. For example, the chair may also feature mounting points for remote controls, keyboards, and mouse pads for PC use at home. True Dimensions is preparing a marketing presentation for Sharper Image in October, 1995 and developing entry plans for other novelty/specialty outlets such as Brookstone and Hammacher Schlemmer.
The potential viability of this reseller channel is reinforced by Panasonic's annual wholesale revenues of $5 to 7 million. Although acceptance by these novelty/specialty retail firms would quickly give True Dimensions high sales levels with fewer company marketing and sales resources expended, it is probable that sales levels would taper off in congruence with the product's life cycle. Because placing a product in one of these retail outlets is typically a "one-shot" attempt, we are being conservative and not including novelty/specialty sales in the company's detailed financial projections. Instead we have performed a sensitivity analysis (See: Appendix D, Page 37) showing sales and income comparisons without novelty/specialty sales and with novelty/specialty sales (shown as "best case" scenario). If novelty/specialty sales do not materialize we will re-focus marketing efforts on the following channels.
Ultra-Contemporary Retailer Strategy
Ultra-contemporary stores target a customer segment which is also ideal for the FlogistonTM Chair. The consumer's purchase decision in this market is primarily driven by uniqueness of design and premium quality. True Dimensions has visited numerous ultra-contemporary retail stores throughout Texas and five other states. Upon viewing a photograph of the prototype, showroom personnel confirmed that the FlogistonTM Chair has the visual appeal their customers look for. Examples of ultra-contemporary retailers in Texas are Cantoni in Houston and Dallas and Austin's Trendz. Palazzetti has locations in 10 major metropolitan area across the US.
Due to the unique nature of their offerings, these retailers often desire an exclusive agreement among ultra-contemporary retail outlets to protect their image as well as their margins. Competing for market share, Cantoni and Palazzetti tout the exclusivity of their respective product lines. True Dimensions will engage in exclusive agreements with reputable ultra-contemporary retailers to support their marketing efforts in their competitive territories.
In its early years, True Dimensions will sell products directly to ultra-contemporary retailers. The company will establish a relationship with the store's buyer, deliver a presentation and product demonstration, negotiate terms, take orders, ship product, and ensure each store has adequate stock to maintain a chair an the showroom floor at all times. To maximize return on investment for both parties, the company will provide sales support through demonstration kits and sales training materials. True Dimensions will employ a direct sales force. By year 5, True Dimensions will employ 7 regional salespeople as shown in the Personnel Requirement Assumptions (page 30). The company will initially focus its selling efforts on ultra-contemporary retailers in the southwestern and southern regions, as they are convenient to Austin and are experiencing the highest growth (23% vs. 9% national average) in retail furniture sales.
Regional market centers are a focal point for marketing to furniture resellers in the US. True Dimensions will use regional market centers to introduce and expose its products to ultra-contemporary dealers. Dealers come to market centers to view and buy products manufactured by exhibitors at wholesale. In October, 1994, the company attended the International Home Furnishings National Market, the pre-eminent furniture industry trade show, in High Point, North Carolina. This market center exhibits home furnishings from more than 1,900 manufacturers representing all 50 states as well as 75 countries. At this show, over twenty independent ultra-contemporary sales representatives saw a photograph of the prototype, and they confirmed that the chair's unique style would have visual appeal to consumers in their market niche. True Dimensions has leased floor space to display the FlogistonTM Chair at the Dallas Home Furnishings Show in June, 1995. The company also plans to attend the San Francisco Home Furnishings Show in July, 1995 and the International Home Furnishings National Market in October, 1995. True Dimensions will target other major market centers serving extensive regional markets which are located in Atlanta, Chicago, Seattle, and Tupelo, Mississippi.
In the event that novelty/specialty sales do not fully materialize, sales to ultra-contemporary retailers represent 63% of the company's total projected revenues by 1999. Scheduled product introductions build a product line consisting of 7 models by year 5 (Detailed in Appendix D, page 31). After 1999, sales will level off as nationwide distribution is accomplished. Product introductions and deletions continue in accordance with customer demand. Individual dealer sales are projected at 5 units per location in 1996. As the number of models increases, the projection tapers to sales of 2.4 units per retail outlet times number of models in product line by 1999.
Interior Designers and Architects Strategy
True Dimensions will capitalize on the interior designers' and architects' customer networks to reach targeted end-users living in major markets and small to mid-sized markets not large enough to support a high-end retail outlet. In the trade, it is essential to place the chair in reputable ultra-contemporary showrooms during national and regional market shows for these resellers to evaluate. From interviews, interior designers expressed a preference for acquiring furnishings through these showrooms because it is more reliable than dealing directly with manufacturers. True Dimensions will implement creative programs at these market shows to prompt trial and encourage referrals.
The company will also use the American Society of Interior Designers (ASID) database of 20,000+ names to build a network of designers focusing on high-end, contemporary clients. A recent ASID report states that over 50% of its registered interior designers are interested in seeing new residential furniture products. In addition, advertising in industry publications such as Interior Design, Interiors, Architectural Review, and Architectural Digest will be used to encourage purchasing the chair in 1996.
Interior designers and architects are expected to generate revenues equivalent to 15% of the volume sold by ultra-contemporary retailers.
Home Audio/Theatre Retail Outlets Strategy
True Dimensions will target upscale dealers of consumer electronics specializing in high performance branded technologies such as Lucasfilm. Home THX Systems, Linn, NAD, and Magnepan. These specialists provide full custom design and installation of home audio/theatre systems to affluent households. Lounge seating is an integral part of the home theatre mock-ups that provide the experiential element needed to close the sale. Like ultra-contemporary retail, these stores are "high touch, high customization" outlets for their customers.
Creston Funk, owner of Concert Sound, San Antonio's exclusive Linn dealership, ordered 3 chairs. One was earmarked for his home listening pleasure, the others are for the store's theatre mock-up. Funk's goal is to provide his customers with lounge seating that is as unique as the entertainment systems he designs.
True Dimensions views this channel as a first-mover opportunity, as most contemporary furniture manufacturers concentrate primarily on the traditional retail outlets. Displaying and selling the FlogistonTM Chair provides these audio electronics outlets with an incremental profit opportunity not typically utilized in this trade. Recently, True Dimensions has been contacted by several audio stores and currently is filling orders for 5 more chairs.
The sales processes for home audio/theatre and novelty/specialty retail outlets are similar. However, True Dimensions will take a specialized approach in educating and selling the salespeople (mostly audiophiles and technologically inclined people) on the differentiable benefits of the chair in the context of home audio/theatre environment. The company will accomplish this, with sales materials and end-user seminars. In addition, True Dimensions will attend a few targeted consumer electronics trade shows to exhibit the FlogistonTM Chair and subsequent products.
An enhanced version of the FlogistonTM Chair introduced in 1996 for home audio theatre will result in rapid sales growth. True Dimensions plans to have the listening chair installed in 100 retail outlets by the end of 1997.
Future Channels Strategy
As previously mentioned, True Dimensions is evaluating the opportunity and making plans to position itself to market the FlogistonTM Chair in three potential emerging markets in 1997:
Revenues from these channels are not currently figured into the financial section of this business plan due to the long term developmental nature of each. In time, they will each provide strategic opportunities for the company to pursue.
6.3 Promotion Strategy
In 1995, press releases and product reviews will be the primary means of advertising. The company recently sent out a public relations packet to numerous community, business, furniture, and technical publications. hi upcoming years, True Dimensions will advertise in industry specific trade publications which encompass the channels previously discussed. The company will develop creative promotions at national and regional market shows and consumer electronics trade shows as a means to prompt trial of the FlogistonTM Chair. True Dimensions is seeking additional public relations opportunities for the FlogistonTM Chair such as placement in modem museums of art, design competitions, and miscellaneous appearances. For example, the chair was showcased on The New Price Is Right television game show in December, 1994.
6.4 Pricing Strategy
Upholstered furniture customers can be divided into three separate segments:
True Dimensions will target the unique piece purchaser segment in selling the FlogistonTM Chair. The FlogistonTM Chair must be competitively priced in this price segment. True Dimensions will employ a manufacturer's suggested list price of $2,800 to minimize any suggestion of conflict between channels. Normally, furniture retails at or just below manufacturers list price. Sale prices are often 75% of list price.
True Dimensions is evaluating alternate materials and construction techniques which would allow the company to offer a lower priced FlogistonTM Chair to the value purchaser customer segment. In addition, the company is considering the option of selling a higher-end, higher priced version of the FlogistonTM Chair with the strategy of offering a full-line of chair options for the consumer, which historically increases the sales of the standard version.
True Dimensions is also researching potential competitors to determine annual volume and profitability. The company will use this information to further evaluate its price positioning relative to competition. Price ranges for specific chairs are illustrated on the next page.
|True Dimensions, Inc.|
|Table of Contents||Appendices|
0. Executive Summary|
1. The Company
3. Market Analysis
4. Technology & Operations
5. Customer Interviews
6. Marketing Strategy
8. Risk Analysis
|All information herein is confidential and belongs to True Dimensions, Inc.|