Marketing Plan for Pet Shop with a twist
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Today’s pet industry is doing very well. Pet Market has been a specialty retailer for the last 10 years. Our current product line includes large and small breed dogs, pet food, supplies, grooming products, toys, and vitamins. Changes in the external environment called for Pet Market to develop a new marketing strategy. Pet Market conducted a SWOT analysis and performed quantitative research to identify areas of opportunity. The results helped us decide on these strategic changes: 1) eliminate large breed dog inventory (only sell small breed dogs), 2) develop new products (pet gift baskets), and 3) add delivery services.
Our competitors carry a wide variety of pets, such as large and small breed dogs, cats, birds, fish, reptiles, and rodents. The four major differences between Pet Market and the competition are that the competition does not: 1) deliver pets or pet products, 2) create personalized gift baskets, 3) offer personalized internet sales, and 4) provide a full 30-day money-back guarantee for products and services.
The target market for Pet Market’s brand new products and services are within a 100-mile radius of any one of our three store locations, in both Missouri and Illinois. We plan to market products and services to our target market groups via various mass marketing, personal selling, and direct mailing techniques.
While making a profit, Pet Market will continue to provide quality and value to its customers. Additionally, customers can shop at Pet Market for products and services not offered by other retailers. Therefore, we can charge higher prices for these products and services until our competition enters the market. Once the competition enters the market, our contingency plans includes adding stores, enhancing Pet Gift Baskets, creating a new pet food line, and broadening our product line to increase variety of small breed dogs.
Analysis of Current Situation
Market Situation. Today’s pet industry is doing very well. Major retailers are experiencing consistent growth through demand for dogs and basic supplies. According to CBS Market Watch, “PetCo expects same-store sales growth to exceed the high end of previous projections of 5 to 6 percent.” CBS also reported that according to Pet Age, “In 2004, Americans will spend about $34 billion on pets, and dog supplies and accessories are the highest growth category.” Industry sales have continually increased each year. The Oakland Press reported, “Ten years ago sales were $17 billion.”
The report further stated, “In 2003, pet sales were led by food with $13.7 billion followed by vet care with $7.9 billion, supplies and medicine for $7.2 billion, animal purchases for $1.5 billion and other services such as grooming and boarding for $2.1 billion.” The pet store industry leaders are San Diego-based PetCo and Phoenix-based PetsMart. A recent American Pet Products Manufacturers’ Association (APPMA) survey (www.biz.yahoo.com), “estimates approximately 64.2 million U.S. households (62% of all households) currently own a pet, with approximately 46% of these households owning more than one pet. The most popular pets are dogs (39% of all households) and cats (34% of all households). The above survey estimates that there are approximately 378 million pets in the United States.”
Pet Market has been a specialty retailer of large and small breed dogs, premium pet food, supplies, and services for the last 10 years. We operate three conveniently located stores in the St. Louis area: 1) South County Schnucks Plaza, 2) Chesterfield Commons Shopping Center, and 3) Shoppe at Cross Keys in North County. To meet changing customer demand, the company has decided to discontinue selling large breed dogs, add delivery services, and offer three levels of personalized gift baskets that contain pet essentials. Adding new products and services to the existing product base serves to keep the company focused on initiatives that engage customers and our dedication to excellence in associate training and animal care continue to be unsurpassed.
Changes in the external environment called for Pet Market to develop a new marketing strategy. Over a one-year period, the company experienced a noticeable sales decline for large breed dogs, compared with an increase in sales for small breeds. Pet Market’s current products include pet food, supplies, grooming products, toys, and vitamins. Current services include “Doggie Day Spa,” canine education (obedience training), and limited veterinary services (routine vaccinations). The company combines pet and merchandise selection and everyday low prices with the location and customer service typically found in neighborhood pet supply stores. Pet Market’s new primary product and service combination is to sell and deliver small breed dogs with a personalized gift basket containing pet essentials, to the new pet owner. With every sale, customers will receive the full 30-day money-back guarantee that the company has offered customers since opening in 1994.
Competitive Situation. Many successful pet stores carry a wide variety of pets, such as large and small breed dogs, cats, birds, fish, reptiles, and rodents. These stores also carry supply items, including pet food, carriers, toys, and nutrition items. The four major differences between Pet Market and the competition are that the competition does not: 1) deliver pets or pet products, 2) create personalized gift baskets, 3) offer personalized internet sales, and 4) provide a full 30-day money-back guarantee for products and services.
New Product Description. Pet Market will sell two categories of small breed dogs: 1) mixed variety, and 2) AKC registered. Generally, small breed dogs will weigh 10 to 15 pounds at full size. The age of the dog will vary, but the youngest age will be eight weeks. Only the following AKC registered breeds will be offered: Maltese, Miniature Dachshund, Chihuahua, Miniature and Toy Poodle, Yorkshire Terrier (Yorkie), Jack Russell Terrier, Miniature Pinscher, and Shih Tzu. Pet Market will collaborate with the St. Louis Humane Society and the Adopt-A-Pet Association to offer mixed breed dogs at $65 each. Pet Market will collaborate with local specialty breeders to offer AKC registered dogs at $450 each. Sales price includes a required initial vaccination for all dogs.
Pet Market will also sell a three-tiered personalized Pet Gift Basket that
contains essentials for the new pet owner.
Tier-One Pet Gift Basket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50.00
Pet-specific book (e.g., “The Maltese”)
1-lb. bag Premium Dog Food
Collar and Leash
Personalized Identification (I.D.) Tag
$5.00 Pet Market Gift Certificate
Tier-Two Pet Gift Basket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $75.00
Pet-specific book (e.g., “The Maltese”)
3-lb. bag Premium Dog Food
Collar and Leash
Personalized Identification (I.D.) Tag
Plastic Food and Water Dishes
$10.00 Pet Market Gift Certificate
Tier-Two Pet Gift Basket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $125.00
Pet-specific book (e.g., “The Maltese”)
3-lb. bag Premium Dog Food
Collar and Leash
Personalized Identification (I.D.) Tag
Gourmet Food and Water Dishes
Portable Pet Bed
$15.00 Pet Market Gift Certificate
Customers will save 15 percent off merchandise by purchasing a gift basket (Tier-One Pet Gift Basket savings is $7.50, Tier-Two savings is $11.75, and Tier-Three savings is $18.75). Customers can substitute gift basket items to design a completely personalized basket (pricing will vary according to items selected, less 15 percent gift basket discount). We will deliver products to customers within a 100-mile radius of either of its three store locations. As noted below, delivery pricing is based on mileage.
Up to 30 miles . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31 – 50 miles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50.00
51 – 100 miles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $75.00
Company Resources Used to Market Products and Services
In planning for our new products and services, we know that certain business products will be necessary. For instance, to implement the new delivery service, we need one delivery van for each of the three store locations we operate. Because we want to take advantage of low maintenance, repair, and operating (MRO) costs and replace the vans at low mileage intervals, leasing is preferred over purchase options. Therefore, we will lease three 2004 Ford Freestar vans at $23,595 each, with no money down. The cost reflects a $1,000 savings (for each van) offered by the dealer for the three-van package. Each of the three 36-month leases will cost $765 per month, including taxes, licensing fees, and a maintenance policy. Note that each lease adequately allows for 20,000 miles per year for each of the three years, so we plan to exchange each vehicle at the end of the lease period. The major benefit is that leasing will require no initial capital, which helps to keep our new service start-up costs at a minimum.
No additional store equipment will be necessary to support the new product (personalized gift baskets). However, we will add wicker baskets, tissue paper, cellophane, and ribbon to our current supplies. To ensure fair pricing and adequate supply for these items, we have contracted with Baskets R Us for 60 percent of the inventory, and the remaining 40 percent will come from Basket Weave Co. We have contracted with a local expert to conduct two on-site training sessions to teach our associates how to assemble gift baskets.
Application of the Marketing Research Concepts
Upon determining that Pet Market was experiencing a decline in sales revenue, our company performed a SWOT Analysis to find new opportunities for growth. SWOT results indicated that our company’s strengths are that we: 1) provide great customer service, 2) operate three store locations, 3) have 10 years industry experience, 4) offer unique services (e.g., Doggie Day Spa and home delivery), and 5) maintain 40 percent market share. Our weakness is declining large breed sales. We identified these opportunities: 1) eliminate large breed dog inventory (only sell small breed dogs), and 2) develop new products (pet gift baskets) and services (delivery) to meet customer demand. The SWOT analysis identified industry competition as a threat.
As a specialty retailer, Pet Market has decided to add to its product mix by selling and delivering small breed dogs and personalized Pet Gift Baskets. In addition to the SWOT Analysis, we conducted extensive marketing research to ensure a success launch of the new products and services. Over a six-month period, we asked existing customers about the addition of a personalized gift basket and pet delivery service. We also mailed surveys to potential customers, asking them to return the completed survey to our store (see Appendix A). For every completed survey returned, we offered a ten percent discount on store merchandise and an entry for a prize drawing. The majority of responses from the mailers indicated that customer focus has shifted from larger breed dogs to smaller breed dogs. In speaking to the existing customers, we found that most would consider buying personalized gift baskets and delivery service including a small breed dog. Based on all the research done, we believe this service and product has the potential to be a huge success.
Application of the Marketing Mix
Products. Currently, no other companies offer the new products and services that we are offering our customers. Pet Market sells an excellent variety of quality pets, products, and services. The intangible attributes that the company brings to the marketplace include consistently meeting and exceeding customer expectations. We take great pride and exude a high level of confidence in excellent performance and a job well done. We demonstrate the ability to anticipate and satisfy the customer’s needs and wants. These attributes give Pet Market a competitive advantage in the industry.
Price. Pet Market’s name and reputation are synonymous with quality, and because of this, we enjoy a strong customer base. The premium price range for our products and services reflects the value of these services. However, pricing is completely flexible because of the customer’s personalized order.
Placement. Pet Market currently has three locations in the St. Louis area and offers delivery services to anywhere within 100 miles of the location in which the order is placed. The fact that there are three locations already in existence offers a selling advantage. By attracting customers from several different counties, we make our products and services available to a very wide target area, which promotes future growth opportunities.
Promotion. Since 80 percent of our customers are repeat business, the bulk of promotional expenses should focus on the new personalized Pet Start-up Basket and delivery. Television, radio, and printed advertisements in the targeted geographic areas will call on potential pet owners to consider doing business with us. Pet Market will strategically place advertisements to reach the target audience at the appropriate time of day.
There are several partnership opportunities when entering into this type of service area. Pet Market will collaborate and maintain a good relationship with local breeders, Adopt-A-Pet, and the Humane Society to obtain optimal pricing. We may also collaborate with dog food companies such as Iams or Pedigree to receive preferred pricing on dog food in return for placing their food in gift baskets, as well as product placement on the store shelf.
Market Segmentation Strategies
The target market for Pet Market’s brand new products and services are within a 100-mile radius of any one of our three store locations, in both Missouri and Illinois. Demographics of the target market for the personalized Pet Gift Basket and delivery include both men and women with household income levels of at least $35,000 a year for a single person, and at least $50,000 a year for a family. The age for the single person is at least 18 years old, and the younger couple with children under six years old. Pet Market will also target single parent households with children of all ages. Occupations, education status, ethnicity, and social class will not limit marketing efforts.
Psychographics of the target market for the products and services Pet Market now offers are that the customer will be satisfying several needs at once. They may need a convenient way to purchase a pet and all of the start-up supplies, or they may need the pet to fill a psychological requirement of a child while simultaneously satisfying a social need. We are the only specialty retailer in the St. Louis area to offer Pet Gift Baskets and pet delivery services, so it is not necessary for customers to shop around.
Geographically, our stores are located in the St. Louis area and provide delivery service to Missouri and Illinois locations within a 100-mile radius of the store. With strategically located stores, Pet Market has an advantage to advertise and offer products and services to two states, while being considered a local specialty retailer. There is much opportunity for success with our new products and services in this geographic area because of a large target market population of approximately 750,000.
Our company plans to market products and services to our target market groups via the following methods:
Mass Marketing Personal Sales Direct Mailings
Internet Website In-store Displays Pet Market Newsletter
Billboards Customer Contact Chamber of Commerce
Chamber of Commerce
Business Directory Sales Brochures
Radio Store Coupons
We have established the advertising budget at $100,000. To minimize costs, we conducted advertisement research and hired a local marketing consultant. Our existing Internet website provides customers with the convenience of online product viewing and ordering. We placed a banner advertisement on our Internet homepage to promote our new products and services.
Pet Market will also use billboard advertising to market to mass audiences. We accepted Viacom’s bid of $20,500 per year for each of the two billboards. We identified two locations as meeting our location requirements: 1) Intersection of I-270 & I-70, and 2) Intersection of I-270 and I-55. The major advantage of marketing with billboards is that we will repeatedly get our message to existing and potential customers.
As noted under Communication Strategies, we joined three area Chamber of Commerce organizations. The annual membership dues cost $213 per organization, which includes the benefit of listing Pet Market in the Chamber’s Business Directory.
Pet Market will also have a radio advertisement on FM-97.1 Talk radio. We have arranged for a sixty-second spot during prime time listening (4:00 p.m. – 6:00 p.m.) each weeknight at $125 for each spot. The estimated cost for the radio station to create our sixty-second radio commercial is $300. The commercials will run each weekday evening for ten weeks.
We will continue to focus on personal selling by having knowledgeable store associates available to answer customer questions and provide suggestions. Display stations will be located at the entrance of the store, featuring Pet Gift Baskets so customers can see before they buy. Additionally, stations will be conveniently located throughout the store to offer coupons and sample products to customers as they shop.
Coupons, brochures, flyers, and newsletters are examples of the direct mailing techniques we will use to promote our products and services. We will mail a monthly Pet Market Newsletter to all customers in our database; it will feature sale items and important information for pet owners. Additionally, we will have quarter page advertisements in three local Chamber of Commerce monthly newsletters at $265 each.
The first pricing consideration is that Pet Market must make a profit. Next, we want to provide product quality and value to our customers. We can provide quality and value while allowing the customer a 15 percent discount on Pet Gift Basket contents, which results in increased pet supply revenue. Customers can shop at Pet Market for products and services not offered by other retailers. We can charge higher prices for these products and services until our competition enters the market. However, when the time comes, we will adjust our prices to stay competitive.
Pet Market forecasted 2005 sales for the new products and services by looking at past sales and the buying power index (BPI) for our market area. However, because we believe the best method of forecasting is the jury of executive opinion, we asked our executive team to help us develop an average estimation for sales increase. Our executives have a wide range of experience (e.g. marketing, production, finance, and purchasing), so we have a high level of confidence in their opinions. We also used the input from thousands of surveys we received to determine the likelihood that a customer will purchase a small breed dog and/or a Pet Gift Basket. Using this information, we decided that the forecasted sales for Pet Gift Baskets, small breed dogs, delivery services, and all related expenses (e.g. advertising, vehicle leasing, basket supplies, and employee training) should result in approximately a 23 percent increase in sales revenue.
In the rollout stage of our new products and services, we will have 100 percent market share for this niche in the industry. We expect that our competitors will watch our success carefully before adding these products and services to their product mix. Pet Market expects competitors to begin entering this part of the market within a year of our launch. They will come in at lower prices or try to offer something extra or different than we do. This will dilute our market share since customers will have the option of shopping with Pet Market or a competitor.
Product Life Cycle
Market Introduction. In this stage, we anticipate low sales volume because this idea is new to consumers. We know that consumers are not necessarily looking for the products and services that we are offering. We expect an initial loss during this stage because of increased spending for promotion, product, and place development.
Market Growth. We expect sales to grow fast in this second stage, but we further expect a normal up and down sales pattern to follow. As soon as our competitors tune in to the profit opportunity by copying our ideas, our sales should level off. However, our well-developed strategic plan will ensure strong profit growth before competition causes profits to decline during the last part of this cycle.
Market Maturity. Sales should level off and we will experience reduced profits due to tougher competition during this period. To ensure continued market share, we have planned to intensify promotional spending during this period. If the competition reduces prices to attract our customers, we will adjust our pricing. We expect this period to last for several years, or until new products are developed.
Sales Decline. Our strategy includes long range planning for replacing products and developing new ideas. Through effective advertisements and promotions, customers will identify our store with good quality and customer satisfaction, so we will continue making a profit until new product plans are developed. We will address this more in our contingency plan.
The table below reflects sales growth during each of the four Product Life Cycles. The Market Introduction period will experience profit loss due to new products and services start-up
costs. The second stage reflects a period of rapid sales and earnings growth. In the market maturity stage, we expect sales to level off. During the final stage, our projection is for a steady decline in sales.
Knowing that competition will grow significantly, we must be prepared to overcome potential reduced market share. By opening more stores, we can widen our consumer base. Pet Market could add stores in heavily populated areas near competitor locations. Some additional ways in which we can grow our business and differentiate ourselves from the competition are:
Develop partnerships with local veterinary clinics to establish in-store services (one-stop shop)
Enhance Pet Gift Basket to include veterinarian gift certificates
Create new pet food line
Establish direct channel with manufacturers for regular supplies
Broaden product line to increase variety of small breed dogs
Expand Doggie Day Spa into Doggie Weekend Camp
Although we know the competition will duplicate our ideas, and continually lower prices to lure customers, we are confident that our customers will be happy with the relationship we have established with them.
Pet Market – New Product / Service Research Survey
Return Completed Survey to store for 10% discount and entry in Prize Drawing!
1) What is your age category?
18-25 years old
50-57 years old
26-33 years old
58-65 years old
34-41 years old
65+ years old
42-49 years old
2) What is your Marital Status?
3) What is your average yearly household income?
$25,000 – 45,000
$45,001 – 65,000
$65,001 – 85,000
$85,001 – 105,000
4) Do you currently shop at Pet Market?
5) Do you currently own a dog?
6) If yes, what breed of dog(s) do you own?
If no, would you consider owning a dog in the future?
7) What size dog(s) fit your lifestyle best?
I would prefer not to own a dog
American Pet Products Manufacturers’ Association (APPMA): Survey. Retrieved October 17, 2004, from http://biz.yahoo.com/bw/040914/145189_1.html
CBS Market Watch: Pet stores purr on profit prospects. Retrieved October 24, 2004, from http://cbs.marketwatch.com/news/story
Mary. Telephone interview with employee of Florissant Chamber of Commerce on October 20, 2004.
Perreault, Jr. W.D. & McCarthy, E. J. (2002). Basic Marketing: A Global Managerial Approach, 14/e. New York: McGraw-Hill.
The Daily Oakland Press: Pet store plans 43 new stores in 2 years. Retrieved October 24, 2004, from http://theoaklandpress.com/cgi-bin/printme.pl
Viacom. Telephone interview with an employee at Viacom, on October 20, 2004.