Essay: Marketing mix for the services element of an internet car radio, including evaluation of macro and micro factors. And an evaluation of the product’s lifecycle.
Create a marketing mix for launching the services element of an ‘internet car radio’, duly evaluating the environment (macro and micro) and conducting diligent market research of competitors and customers in the UK. Evaluate the product life cycle of such a service product, given the fast obsolescence of technology.
The product is smartphone application that allows internet radio streaming to any existing car radio (head unit) that accepts usb, auxiliary, or bluetooth connection. The app will be able to store the users favourite channels on the head unit like an analogue radio. Once connected, the head unit can control the application, so that minimal distraction is created whilst driving. Additional revenue will be generated by sponsored radio stations paying for the ‘featured’ position in the application’s search results.
The core service of the application will be its ability to stream (and pre-stream) internet radio and store favourite channels, whilst the augmented service is helping customers make the transition to digital radio (Zeithaml, 2002). This includes connecting the device to the existing hardware, programming favourite channels, as well as guides to using other product features and user support. Other augmented services include; recommended stations based upon personal listening and GPS location, as well as integration with the users social media accounts.
Macro environmental factors will have particular impact upon the PLC. As the product is a car accessory, it must be considered that there is a relationship between automotive sales, and accessory sales. Mintel (2008) states that over the last 20 years, the number of households with access to a car has continued to grow, however after peaking in 2004, new car registrations are falling.’ After being hit by recession in Q2 of 2008, consumers disposable income has decreased, due to increasing inflation and unemployment (Direct Gov, 2011). To save money consumers are now purchasing more used cars (Which, 2010), and therefore fuelling growth in the car accessories market by bringing older cars ‘up to date’ with standard features on new cars, or replacing older accessories .
The market is likely to further grow due to the UK government aiming to discontinue analogue radio transmission in 2015. This will leave an estimated 20 million second hand vehicles without radio access (Mintel, 2010), thus creating huge potential for market growth whilst being a major lifecycle extension opportunity. This potential for growth will only actualise if the government discontinues analogue radio in 2015. “Achieving switchover will require a huge increase in the popularity of digital and DAB if the government is to hit its initial 50% reach target, and a position where it can realistically switch off the analogue signal for national radio stations without millions of listeners losing out” (Plunkett, 2009). Nonetheless, the transition to digital is inevitable. It must also be considered that launching too far from the transition date maybe difficult due to a lack of consumer awareness, which would impact the growth of the product.
Presently the digital radio market (internet and DAB) is small, and limited to a group of early adopters. In 2009 the market was estimated to be valued at £11.5 million, and accounted for 5% of the car accessory market (Mintel, 2010). 16-24 year olds are most likely to favour having internet radio in car, but are also the group least able to afford these solutions. Connectivity within in car systems is also being driven by 16-24 year olds. Over a third of the UK population owns an Apple iPod, and it is estimated further that 28% own a smartphone. USB and Bluetooth connectivity are in particularly high demand (Mintel, 2010).
The proposed 2015 switch off will leave consumers with the choice between a DAB or internet radio. Price competition between fitted DAB radios, analogue to DAB adapters, and CD players. These tangible products cost more than the smartphone application; DAB radios starting at around £70, analogue radios already be fitted, adapters starting at around £100, and CD players starting as low as £20 (Amazon, 2011).
Purchasing a smartphone is a large initial cost, however this product is targeting consumers that already own smartphones, and is essentially an augmented service of the smartphone. Therefore, relatively low cost barriers to switching and attrition place prime importance upon a quality service and the resulting word of mouth generated from it (Cohen and Whang, 1997; Rink and Swan, 1979).
Existing applications such as TuneIn Radio for IPhone, and Internet Radio Box, both priced at £0.59 and distributed via smartphone software stores provide significant competition (Apple, 2011). However, these are not dedicated in car solutions.
A penetration pricing strategy will be used to drive high adoption levels early in the product lifecycle (Solomon et al, 2009). This type of pricing strategy is also beneficial due to network externalities associated with this cross platform product product, such as social media integration. This means that the more people that use the product, the more benefit users will derive from it (Crawford & Di Benedetto, 2008). If the network effect can be stimulated, and consumers virally purchase the product, the longevity of the product lifecycle can greatly be increased (Katz & Shapiro, 1994).
The product will be distributed through smartphone application stores, with the objective of it entering the top 25 most popular applications. This is particularly important when customers cannot accurately evaluate the technical quality of service, and may substitute functional/process quality perceptions as a surrogate for technical quality (Zeithaml and Bitner, 2002; Caruna et al, 2000). The top 25 position advocates the quality of an application, and therefore may effectively drive sales.
Social media will be the primary channel for promotion. Videos of the application being demonstrated, showing the benefits to the user will be uploaded to relevant channels. Katz & Shapiro (1994) state “When reputation is a valuable asset, firms will find it profitable to invest in it”, this is especially important due to the characteristics of the young target market’s likely knowledge of car accessory brands, but also their usage of social media. This is a pull strategy as promotional activity is being aimed directly at the consumer (Crawford & Di Benedetto, 2008) with the intention of tangiblising the service elements of the application, and further stimulating the network effect.
Adoption rates during the launch period also depend upon the timing of the launch, in relation to the analogue switch off, and the economic environment. If the product was launched in July 2012, with the switch off in the 2015, the product may complete multiple life-cycles. The first life-cycle may experience slower growth due the lack of a compulsive need, as well as macro economic difficulties. The product may then be relaunched at the the switch off and experience greater demand (Christiansen et al, 2010).
Brassington & Petit, (2006) state that “Physical evidence comprises the tangible elements that support the service delivery, and offer clues about positioning of the service product, or give the customer something solid to take away with them to symbolise the intangible benefits they have received”. By integrating the smartphone with social networking sites, users have the ability to share what they are listening to, as well as see what their friends are listening to, further stimulating the network effect, and making the service tangible.
This product is classified as a low contact service due to the small amount of employee/customer contact (Del, 2010). However, after sales support is still important to the product’s success. Rao (2007) states that “employees of a service firm constitute the major competency in undertaking business operations”. The internet will be the primary channel of communication for support. Due to the nature of the product, support will be facilitated via a chat feature within the application, and online discussion forums. Chat will be 1to1 support, particularly for questions that cannot be answered within the application’s discussion forums.
Support employees will be managed informally within the organisation. Skålén (2009) suggests that organisations who distance themselves from managerial practices have a better customer oriented service. People are equally important in the discussion forums and 1to1 chat. If there is a lack of participation in forums, 1to1 chat will be used over capacitised. The discussion forums will be positioned within the application as the first call for support to stimulate usage. This is known as self service participation and is frequently used when physical interaction is unavailable (Dan, 2010). But, if the forum is only support related, this may position the product as problematic, and may cause customer attrition, therefore reducing the longevity of the product lifecycle. Stimulating discussion other than support related questions will help to keep the product selling, by actively driving discussion and buzz.
According to Rao (2007) “process is a functional activity that assures service availability and quality.” Smartphone signal will directly impact the quality and reliability of the internet radio service. The radio will not be able to function if the phone has no signal. To combat this, the software will stream and buffer the audio in advance, so that if signal dropouts occur, radio will still be playing. If quality of signal is an issue, customers could be driven towards alternative hardware solutions. Software updates will be provided throughout the PLC to maximise compatibility with future head units to further enhance the process element, and acquire customers throughout the lifecycle
The radio stations are provided by intermediaries who broadcast online. The application finds these stations and streams them through the smartphone. Due to the the radio stations being provided by third parties, quality of service is hard to guarantee and is dependant upon the individual providers. Therefore the ‘promoted station’ feature, which also generates more revenue also helps to ensure minimise heterogeneity of the stations available and therefore minimise the risk of attrition, which would generate negative word of mouth.
During the growth stage “sales grow at an increasing rate, profits are healthy and many competitors enter the market” (Gitman & McDaniel, 2007, p.390). Therefore it is imperative to further build brand equity, this will be done by improving the existing product (Brassington and Petit, 2006). Minor product improvements will include the ability to download the currently playing track from the iTunes store, as well as extending the streaming abilities of the software to provide the user with radio when out of signal, therefore reducing reliability issues.
When the product reaches maturity, accelerated growth levels off and will have developed a loyal base of users, and those who are likely to be interested in the product should have tried it by now (Brassington and Petit, 2006). At the maturity stage major product modifications/improvements/expansions will be made to reach target groups that are not using the product yet (Siems, 2010). Customers will be able to modify the display on the car head unit, with many opportunities for personalisation. This should make the customer feel connected to the service as they would be directly integrated (Siems, 2010) and further extend the product’s lifecycle.
The point where sales and profits being to fall, is when the product has reached the decline stage in the lifecycle (Boone et al, 2010). To try and extend the lifecycle of the product, the application will be offered for free for a selected period to try and re-stimulate the network effect.
In conclusion, this product is likely to have a strong lifecycle, and will possibly be further enhanced by macro environmental factors. However the product is ultimately dependant upon the service quality provided by the organisation and intermediaries.
Word count: 2156
Amazon., 2011, Amazon Car Radios, Available from: http://www.amazon.co.uk/s/ref=nb_sb_ss_c_1_9?url=search-alias%3Delectronics&field-keywords=car+radio&x=0&y=0&sprefix=car+radio.
Apple., 2011, Mobile App Store, Available from: http://www.apple.com/iphone/apps-for-iphone/.
Batchelor, R. & Dua, P., 1998, Improving macro-economic forecasts The role of consumer confidence, International Journal of Forecasting, 14, 71-81.
Boone, L. E., Kurtz, D. E., Mackenzie, H. F., & Snow, K., 2010, Contemporary Marketing, Nelson Education.
Brassington, F. & Pettitt, S., 2006, Principles of Marketing, Prentice Hall.
Caruana, A., Money, A. H., & Berthon, P. R., 2000, Service quality and satisfaction – The moderating role of value, European Journal of Marketing, 34, 11/12, 1338-1352.
Christiansen, J. K., Varnes, C. J., Gasparin, M., Storm-Nielsen, D., & Vinther, E. J., 2010, Living Twice: How a Product Goes through Multiple Life Cycles, Journal of Product Innovation Management, 27, 797-827.
Cohen, M. A. & Whang, S., 1997, Competing in Product and Service: A Product Life-Cycle Model, Journal of Management Science, 43, 4, 535-545.
Dan, M. I., 2010, Impact Of Service Encounters Customer Participation On Perceived Service Quality, Revista Tinerior Economisti (The Young Economists Journal), 1, 14S, 69-74.
Gitman, L. J. & McDaniel, C., 2007, The Future of Busines: The Essentials, South-Western College Pub.
Gov, D., 2011, Office for National Statistics, Available from: http://www.statistics.gov.uk/instantfigures.asp.
He, H. & Li, Y., 2011, Key service drivers for high-tech service brand equity: The mediating role of overall service quality and perceived value, Journal of Marketing Management, 27, 1-2, 77-99.
Hildebrandt, J., 2009, The Advantages Of 4G Wireless, Article Alley, Available from: http://www.articlealley.com/article_1315993_81.html.
Johnson, B., 2009, Newly asked questions: When will we move to 4G mobile phone networks?, The Guardian, Available from: http://www.guardian.co.uk/technology/2009/aug/25/4g-lte-mobile-phone-network.
Katz, M. L. & Shapiro, C., 1994, Systems Competition and Network Effects, Journal of Economic Perspectives, 8, 2, 93-115.
Merle Crawford, A. D. B., 2008, New Products Management, Mc Graw Hill.
Mintel., 2011, Mobile Phones and Network Providers, Available from: http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=545199.
Mintel., 2010, In-car Entertainment – UK – December 2010, Available from: http://academic.mintel.com/sinatra/oxygen_academic//display/&id=479846.
Mintel., 2008, Car Accessories – UK – February 2008, Available from: http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=227683/display/id=324387#hit1.
Parkinson, A., 2010, The trend towards connectivity and mobility is driving consumer technology renewal and sector growth, GfK Tech Talk, Available from: http://www.gfktechtalk.com/2010/09/21/the-trend-towards-connectivity-and-mobility-is-driving-consumer-technology-renewal-and-sector-growth/.
Plunkett, J., 2009, Digital Britain: Analogue radio switch-off set for 2015, Available from: http://www.guardian.co.uk/technology/2009/jun/16/digital-britain-analogue-radio-switchoff.
Rao, K. R. M., 2007, Services Marketing, Dorling Kindersly (India).
Rink, D. R. & Swan, J. E., 1979, Product Life Cycle Research: A Literature Review, Journal of Business Research, 219-241.
Siems, F., 2010, Extending the life event cycle to relationship marketing: New implications for products and services, International Journal of Business Reearch, 10, 2, 81-96.
Skålén, P., 2009, Service marketing and subjectivity: the shaping of customer-oriented employees, Journal of Marketing Management, 25, 7-8, 795-809.
Solomon, M., Marshall, G., Stuart, E., Mitchell, V., & Barnes, B., 2009, Marketing, Real People, Real Decisions, Pearson Education.
Which., 2010, Annual car ownership cost rises by over 6%, Available from: http://www.which.co.uk/news/2010/11/annual-car-ownership-cost-rises-by-over-6-237419/.
Zeithaml, V. A. & Bitner, M. J., 2002, Services Marketing, New York: McGraw-Hill.