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Marketing Plan of Entering Smartphone Market

Executive Summary

This marketing plan maps the ways of entering Bahrain’s smartphone market with the LifePhone product. Currently estimated at $92 million, this market is predicted to grow by 7 percent annually within the next five years. Customers have low brand loyalty and easily switch to products that better match their tastes. With a trial consignment of 1,000 LifePhones Deluxe and 3,000 LifePhones Basic, the company can win a 13 percent share of this rapidly growing market.

The plan provides a SWOT-analysis of the market and details of the product adaptation, promotion, distribution, pricing, and international trade issues that need to be considered for a successful market entrance.

A. Marketing Objectives

1. Target Market

The target market is Bahrain, a small high-income economy in the Gulf. This country has one of the highest mobile penetration levels in the world – 182 percent, with 2.45 million mobile subscriptions and 1.3 million population (International Telecommunication Union, 2014).

Smartphone sales in Bahrain reached $92 million in 2014, is the fastest-growing segment of the country’s consumer electronics market. The future growth is projected by Bizbahrain at $119 million by 2018, or by 7 percent annually. This forecast is rather cautious as it takes into account the possible escalation of political instability in the region, which currently does not affect Bahrein directly (Bizbahrain, 2014).

Bahraini customers traditionally view smartphones as a “vanity device,” preferring the latest and most luxurious models. The two leading brands are Samsung (about 60 percent of the market) and Apple (about 20 percent). However, brand loyalty is not particularly strong: Samsung managed to quadruple its sales and increase its market share from 23 to over 60 percent in just one year (Saxena, 2013). Such tremendous growth in Bahrain’s smartphone market also means that it is still far from saturation.

Overall, the general customer preference for luxury and fashion in Bahrain far outweighs that for particular brands, making this market promising for new entries that can meet the local taste. The continuing rapid growth of the market allows optimistic sales forecasts.

2. Sales Forecast Years 1–5

This sales forecast is based on the assumption that the trial consignment of 1,000 LifePhones Deluxe and 3,000 LifePhones Basic will be completely sold in the first year and in the coming years the sales will grow by 5 percent annually, which is consistent with the overall predicted market growth.

3. Profit Forecast Years 1–5

The profit forecast is based on the estimated profit margin of 30 percent. As LifePhone is positioned as a premium smartphone, the leader in this market segment, Apple’s iPhone was chosen as a basis for profit margin estimation. In 2014, Apple earned a 39.9 percent profit (Sullivan, 2015). However, since the iPhone is manufactured and sold in far larger quantities than LifePhone, the profit margin for the latter should be set lower. Under comparable variable costs per unit, Apple would have lower fixed costs per unit due to the scale effect. This consideration yields an estimated profit of 30 percent of sales throughout the first five years.

4. Market Penetration and Coverage

The product will be distributed through a regional hub as the market’s small size makes it cost-ineffective for establishing a local presence (Bizbahrain, 2014). With the first trial consignment of LifePhones, the company can gain a market share of 13 percent.

B. SWOT Analysis

1. Strengths

LifePhone has a unique, technologically innovative feature of being extremely flexible – it can be rolled up into a tube of about 1 inch in diameter. Not only this feature makes LifePhone stand out among competitors but also enhances customer value. In the rolled-up state, LifePhone can be carried inside clothes that have no pockets, such as shorts or bathing suits, while other smartphones have to be left when changing into such clothes. This feature will probably be appreciated by customers who want to stay connected under any circumstances.

The next key strength is the fashionable design that appeals to customers looking for luxury. LifePhone Deluxe is externally covered with gold leaf. This design should attract the upper-class customers in Bahrain who, like those in other Gulf countries, often indulge in demonstrative spending on luxury items. A more affordably priced version, LifePhone Basic with a white vinyl exterior, is available for middle-class consumers who also want a touch of luxury but have less money to spend.

Another strength is the distribution strategy. Up to this moment, LifePhone was available in the U.S. only. Bahrain is the only country to which it will be exported, which will further enhance the image of exclusivity – not only the product is exceptional but it also can be purchased only in two places in the world.

The well-thought supplemental product line will enable the company to generate extra profit from accessories sales. Phone covers (vinyl for Basic and calfskin for Deluxe) and charging strips (single or double) have been developed to match the unique features and size of these LifePhone models. As these accessories add to the convenience of using the product, the market is anticipated for them as well.

2. Weaknesses

Currently, the main weakness of LifePhone is that it supports the CDMA standard only. Meanwhile, the more advanced LTE standard was used in Bahrain as of 2014 and supported by all latest smartphone models, including iPhone 5 and 6 and Samsung Galaxy. However, full-fledged mobile communication is still possible through a phone that supports CDMA, so this feature would not have a significant impact on customers’ experience. LifePhone’s technical team is working to solve this problem and make the next models compatible with LTE as well.

Another weakness is LifePhone’s being a new brand to Bahrain and not tested anywhere except for its home in the U.S. As a new brand, LifePhone has no supportive local audience that can become an initial vehicle for sales growth. The marketing strategy development involves multiple issues related to a different culture, language, and legislation. As the product has never been marketed to audiences in the Gulf countries, there is a considerable risk that the promotion strategy is not fitted to the local needs well enough. However, the prospects in the Bahraini market are attractive enough to compensate for the risk of entering this absolutely new segment. The low brand loyalty of local customers means that a new entry will not be at a significant disadvantage against established players.

3. Opportunities

The predicted market growth by 7percent annually within the next five years will enable LifePhone to constantly increase sales volumes. The sales growth is ensured by high incomes of the Bahraini and their strong purchasing patterns in luxury items. The premium smartphone users have already a habit to change them often for newer models, so the demand for LifePhones, once formed, is likely to become regular.

The growing global preference for Windows operation system, which is used in LifePhone, is another valuable opportunity. In 2012, Windows smartphones only held 11 percent of the Bahraini market (Hutchins, 2012), but by 2014 this share grew to 17 percent. LifePhone can win customers from other Windows smartphones, as well as those who decide to shift to this operating system from iOS or Android. As Microsoft app store develops and becomes more competitive, there will probably be more and more smartphone users considering it. LifePhone can take advantage of this trend.

4. Threats

The world’s most famous brands, such as Apple and Samsung, are present in this region and actively developing their presence. In particular, Samsung opened 13 new retail facilities in Bahrain in 2013, ranging from service to experience centers (Saxena, 2013). Since the potential of Bahrain’s market attracts global manufacturers and makes them invest in this region, LifePhone will face intense competition. This challenge can be addressed with a well-thought marketing strategy.

The recent downfall in oil prices might diminish consumer capacity. With the country’s economy hugely dependent on oil exports, potential customers might experience a decrease in their personal income and postpone expensive purchases until better times. However, this adverse factor can only have a short-term impact on LifePhone sales. As the oil price goes up again, so will the consumer markets in the Gulf countries. To address this challenge, the company should have a sufficient financial reserve to survive the times of low consumer activity without leaving the market. The management should understand the short-term nature of these demand fluctuations (no downward oil price trend in recent history has lasted longer than several months) and evaluate the market from a strategic perspective.

Another serious threat is political instability of the region. The Arab Spring of 2011-2012 brought civil disorder to Bahrain as well as many other Gulf countries. Although suppressed soon, the riots had a strong restraining effect on the growth of consumer markets. To address this risk, LifePhone needs a financial reserve and safe market entry strategy, e. g. using retail middlemen instead of establishing own stores.

C. Product Adaptation

1. Core Component

The core component is the LifePhone, which is offered in two versions – Basic and Deluxe. The basic version has white vinyl exterior, while Deluxe is covered in gold leaf.

Both modifications share the following features:

· 6-inch diagonal screen

· Virtual keyboard with touch screen

· Microsoft operating system

· Compatibility with all Microsoft apps

· 128 GB internal memory

· 16-megapixel camera with front and rear lens

· Video capability

· Built-in Wi-Fi as an option

· Built-in projector that can project up to the 24-inch diagonal image

The product has no external ports and can be charged through a special charging strip, which is manufactured and sold by the same company.

In order to adapt the core component to the Bahrain market, Arabic should be set as the default language of the operating system.

2. Packaging Component

Considering the packaging component, the price of the product needs to be set at a level high enough to cover shipping and import costs. The LifePhone logo needs to be checked for possible undesirable connotations in Bahrain culture and, should any be discovered, removed from the product package and all associated materials.

The packaging, phone cover, does not need any adaption. It is optional (not included in the product price) and offered in two versions: Basic and Deluxe. Basic cover is smooth vinyl available in four colors: black, white, light blue, and red. Deluxe cover is calfskin leather available in three colors: black, tan, and dark brown. Both modifications match the size of a respective core component. It is supposed that Basic cover will be purchased by customers who buy LifePhone Basic, while Deluxe cover – by those who buy LifePhone Deluxe.

3. Support Services Component

Considering the support services component, the user manual needs to be translated into Arabic. Besides, the technical support center needs to be staffed with personnel who speak Arabic so that they can communicate with customers in their native language. The Arabic version of the LifePhone website should be developed.

D. Promotion Mix

1. Advertising

a. Objectives. The objectives of advertising are to introduce LifePhone to Bahraini audience and to build brand awareness.

b. Media mix. The advertising will use the media mix of billboards, TV clips, and Internet placements. The costs of TV advertising in Bahrain are comparatively low, and penetration is much higher than that of print media. Internet advertising, especially on social media, remains the most efficient means to reach younger audiences.

c. Message. The advertising message will put an impact on luxury rather than convenience. The American LifePhone slogan emphasizes comfort: “LifePhone – it fits your life, closely.” The Bahrain slogan can sound as “LifePhone – pure gold of staying connected.” This message links to both the gold leaf cover of the luxury model and the smartphone’s ability to be carried anywhere – the two core competitive advantages of the product.

d. Costs. The total advertising cost for the first year is estimated at $25,000.

2. Sales Promotions

a. Objectives. The objectives of sales promotion are to introduce the brand to customers and motivate them for immediate purchase.

b. Coupons. Discount coupons will be published in the most popular fashion men’s and women’s magazines. Bringing the coupon to a store, the customer can buy a LifePhone at a discount of 5 to 15 percent.

c. Premiums. The first 50 buyers in each sales point will receive a phone cover free of charge, as a gift. The Basic model will be supplemented with a vinyl cover, the Deluxe model – with a leather cover. This premium offer should act as a pleasant surprise for customers and stimulate them to tell their friends or colleagues about their purchase.

d. Costs. The cost of premiums is estimated at $7,500 and the cost of discounts at $4,500, hence putting the total cost at $12,000.

3. Personal Selling

Personal selling will be conducted by the hired local sales staff in the shopping centers. Hiring Bahraini or third-party national Arabic staff is preferable because they have a better knowledge of the local communication style and can deal with potential buyers most efficiently. Bahrain is definitely a relationship-oriented culture and, as a result, requires the most complete relationship knowledge possessed only by natives (Cateora, Gilly, & Graham, 2012, p. 496).

E. Distribution: From Origin to Destination

1. Port Selection

a. Origin port. The origin port for LifePhone is Houston. It was selected as an airport that serves international shipping to the Gulf region and is geographically the closest to the company’s U.S. manufacturing facilities.

b. Destination port. The destination port is Manama – the capital and largest city of Bahrain that has a container terminal. The major sales points for LifePhone are also located in Manama, so the transportation route from the destination port will be as close as possible.

2. Mode Selection

a. Railroads. Railroads will not be used as a transportation mode for LifePhone. The weight of an individual case pack varies from 9 oz (a case pack with a single LifePhone Deluxe) to 130 oz (a case pack containing 12 double charging strips). At such small weights of the cargo, motor carriers are preferable.

b. Air carriers. Air shipment will be used as a primary transportation mode to get LifePhones from the U.S. to Bahrain. This mode of transportation will allow the fastest delivery of the product and the elimination of warehousing expenses. The transportation fees will be relatively small, due to the small cargo weights.

c. Ocean carriers. Ocean shipment will not be used as a transportation mode for LifePhones, because of long delivery times and frequent delays.

d. Motor carriers. Motor carriers will be used a supporting transportation mode to get LifePhones from manufacturing facilities to the origin port and from the destination port to sales points. Considering the distances to be covered, fees, and cargo weights, motor carriers are more cost-effective than railroads.

3. Packing

a. Marking and labeling regulations. To comply with the legislative requirements of the country of destination, all packages should be labeled in Arabic.

b. Containerization. No containerization is needed in the case of air transportation.

c. Costs. The costs of packing the trial consignment are estimated at $3,200.

4. Documentation Required

The documentation to be received from the carrier for each container includes a bill of lading, dock receipt, and air bill. The documents to be completed by the company and submitted to the U.S. customs office include the commercial invoice and shipper’s export declaration.

While negotiating with the Bahraini shipment receiver, it might be needed to complete a pro forma invoice. This document details the contents and costs of goods to be shipped. It is legally binding but with a possibility to change the price later. The pro forma invoice is needed for the customer to know what actually they are paying for. As LifePhone is not known to Bahraini wholesale middlemen, they might require the company to complete and send this kind of invoice.

No statement of origin or other special documentation is required for this kind of product according to Bahraini legislation.

5. Insurance Claims

The cargo will be insured with a U.S. company against common transportation risks.

6. Freight Forwarder

As the company does not have a transportation department, a freight forwarder will be hired to handle the shipping. Although reducing the company’s control over the shipping process, hiring the forwarder will allow conducting shipping in a more professional way, cutting tariffs and delivery times where possible. Freight forwarders have a great experience in international shipping, unlike the company’s staff. They have established business connections with carriers and warehouses, which allows them to effectively manage the cargo throughout the delivery process.

F. Channels of Distribution

1. Retailers

The product will be delivered to 5 large shopping malls (electronics departments) and 10 specialized electronics shops. The retail makeups in both kinds of stores will be roughly equal – between 25 and 30 percent. Both kinds of stores will accept payments by cash and credit cards. The shopping malls are expected to sell 70 percent of the shipped LifePhones, while smaller shops the remaining 30 percent.

2. Wholesale Middlemen

Three Bahraini wholesale companies will act as middlemen, organizing the distribution of LifePhones to retailers in respective regions (the north, including the capital city, the center, and the south). The normal wholesale markup for electronics is about 15 percent. Wholesalers accept payments only by credit cards. Each company is expected to handle about one-third of the consignment.

3. Import/Export Agents

A Bahraini company specialized in electronics imports will act as an import agent. It will receive the cargo and transfer it to the wholesale companies.

4. Warehousing

No warehousing is required as the shipments will be received by the import agent right in the destination airport.

G. Price Determination

The retail price will include the shipment cost of goods, the transportation costs, the loading and unloading charges, insurance costs, customs duties, import taxes, the value-added tax, wholesale and retail markups, and discounts, and the company’s gross margin. The recommended retail price for LifePhone Basic is $1,995, for LifePhone Deluxe – $5,995.

H. Terms of Sale

The terms of sale should be negotiated with the import agent. EX works cannot be used because the import agent, located in Bahrain, would not be able to conduct the export procedures. The preferable terms of sale are FOB as it puts less responsibility on the seller – only to clear the goods for exports and deliver them to the port. The least desirable is CIF where the seller has to pay for the insurance and international freight.

I. Methods of Payment

The Letter of Credit should be used as a preferred payment method as it offers the best possible protection to both the buyer and the seller. The only drawback of this method is a relatively high cost, but it is compensated with the greatest transaction safety. The company will get money before the goods are actually shipped, being hence insured against any buyer’s violations of the contract.

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