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SNHU - MBA-560 - Marketing and Strategy
Written by: Chris Bell - July, 2017

Brand, Need and Pricing

BRAND

WesBell Electronics has been in business for 30 years buying and selling copper wire products for customers that connect the wire in order to conduct electricity. Original Equipment Manufacturers (OEMs) receive the wire, cut it to length, strip the insulation from both ends, connect terminals, insert them into a plastic housing and use the completed wire harness in appliances and equipment. WesBell is eager to start a production line with the latest equipment and technology in order to provide completed wire harnesses to these OEMs.

Defining Features

The key defining features of WesBell's brand and mission have always been dedicated to quality whether it comes from quality customer service or quality products. Their business decisions are driven by customer requests and their urgency. For example, depending on the customer's urgency, those on the west coast may receive a package with complimentary expedited shipping because it normally takes 5-6 days to ship from coast to coast. WesBell likes to have satisfied customers, big or small, by giving over-the-top service with the help of their Customer Relationship Management (CRM) system. "Forward vertical integration occurs when a firm moves downstream in terms of the product flow, as when a manufacturer integrates by acquiring or launching a wholesale distributor or retail outlet. (Mullins & Walker, 2013)" By starting a production department and using forward vertical integration methods to expand their product line, WesBell will start to compete with about 20% of their customer base and therefore need to plan ahead for that loss of revenue as they calculate new profits for their services.


Fit

Production lines and assembly lines of all sorts and sizes depend on quality and efficiency so it fits well within the quality parameters that WesBell already sets for itself. In fact, WesBell already has a few small pieces of equipment that have the ability to cut wire to length, but their customers continue to ask for additional services, such as full wire harness assembly work, that WesBell unfortunately has to decline. With numerous requests from current customers WesBell has decided to invest in the necessary equipment, technology and staff to fulfil the requests of its customers and to market their services to the rest of the industry.

Effectiveness

The effectiveness of WesBell's existing branding efforts began during the first 20 years with two owners, one inside sales and one outside sales, and grew by having one of them travel throughout New England visiting current customers and soliciting new customers. They had a small brochure of their products but lacked a real branding campaign to grow substantially outside of New England. Dean Westover (The "Wes") retired and sold his portion of the company to Kenneth Bell (The "Bell" part) around the same time Ken's son Chris completed college and started working for him full time. Chris quickly began working online by creating an eBay account and a new website to promote the company worldwide. He spent the next ten years branding the company by growing the website and joining online communities and networks, all while getting a Master's Degree in web design to grow his knowledge. During that time sales grew from $3 million to $8 million and repeat business was flowing in.

Ten years later, WesBell has quite recently hired a marketing company to create a new logo, new website with increased functionality, build sales kits and compete in the top online search results pages. The entire campaign will lead back to the company's website which will no longer be a simple "add products to cart" format, but instead offer their services as well. After buying a spool of wire the user will be prompted to cut the wire to length, along with many more services, with pictures, before completely checking out. This is sure to brand the company as more than a distributor of products. WesBell has been known to change and adapt to changing times, technology and updated equipment to provide exceptional service to their customers.

NEED

Target Market Basic Demographics

The key demographic features of their target market range based on size, employee knowledge, technology, equipment, buying power, quality and service. WesBell will be adding new competitors by offering services in addition to their distribution of products but they aren't interested in competing with the major players just yet. As much as companies try not to, they usually start to lose sight of the smaller customers as they continue to grow revenue numbers into the millions and billions. WesBell takes advantage of that smaller target market with increased customer service and quality for those smaller companies.

Not only does WesBell partner well with smaller companies, but they can also charge premium prices for high quality service and product, as stated by Mullins and Walker in Marketing Management - A Strategic Decision-Making Approach, "Thus, a premium price strategy is most appropriate when target customers attach relatively greater importance to quality or service attributes than to price, such as business travelers who are willing to pay more for flights convenient to major cities." They plan to use this approach as they move into the new market of contract manufacturing. Sure, there are hundreds of million dollar contract manufacturers (CMs) that crush WesBell in terms of equipment, technology and staff, however, they can't crush them on personal attention to specific needs along with much smaller minimum orders, no annual contracts and a dedicated customer service agent. WesBell will target the smaller companies that don't have equipment or technology and that need more personal attention that they can't get from big CMs.

Target Market Behavioral or Psychographics

The behavioral and psychographic characteristics of WesBell's target market range from hobbyists in their basement completing projects, businesses with less than 10 employees in a small office, small businesses with added capabilities and large OEMs. The switching costs will be lower when WesBell solicits smaller companies, and it will be easier to build a quick quality relationship with key decision makers such as the owner of a small business. It's a natural behavioral tendency for humans to be known by name rather than a long account number and WesBell believes that their personal attention psychologically builds a strong relationship and repeat business. For instance, their sales people are instructed to verbally confirm the receipt and quality of each shipment with each customer, which sets them aside from the big mysterious corporate companies.

Want or Need

Broadly stated, the need is a quality product and the want is personal attention when desired. Because WesBell desires to be a quality CM, they are ISO 9001 certified which is a big quality step for a small company in their industry. Being certified means quarterly audits, annual re-certifications and hopefully the automatic understanding from customers that quality and organization have become a way of life. Next in line comes pricing, timely delivery and customer service which have all become expectations from a vendor rather than perks. We've all been mistreated as customers from vendors, retail stores or restaurants and no longer tolerate it in the least. We'll stop buying from the vendor, let our friends and family know what happened and possibly post bad reviews on their website or on social media websites. So, while there are wants and needs from vendors, there are also expectations and utter demands from customers.

Based on WesBell's 30 years of experience in the wire and cable distribution business, servicing smaller customers and giving them personal attention, they believe that there is a demand for the same type of vendor in the contract manufacturing industry. The customers want and need personal attention to details, additional phone support, face-to-face meetings about product development, small quantity purchases, prototype builds and help with their specification sheets (CAD drawings) that detail each requirement of the wire harness. Corporate companies will give that attention to other big corporate companies but not to smaller companies for smaller orders, and therein lies an opportunity for WesBell. Their target market will not be the biggest corporate companies, but rather the smaller companies that are growing and require an attentive vendor.

Why

In defense of WesBell's target market relative to product success it will be helpful to understand how they've had the same success in the distribution business. WesBell has received great compliments for attention to detail, stolen business from large competitors due to their lack of service and had customers laugh at them for visiting their facilities that happen to be in the basement of their homes. When the sales people at WesBell make a four hour trip to New York to visit a few potential leads they also visit with plenty of smaller, up and coming, businesses because when a vendor shows that they care about a small business imagine how much they will care about the business when it grows. An analogy for WesBell's target audience would be similar to the ugly duckling story, where WesBell pays attention to those that are being pushed aside for more attractive businesses. Then, when the ugly duckling becomes a beautiful swan it stays loyal to their vendor forever into the future.

We all want VIP treatment without the added cost and there are plenty of small and medium sized businesses that have these characteristics, needs and wants from a vendor that are difficult to find. WesBell made a trip from NH to San Francisco, CA to visit 10 customers, big and small, and the best opportunities came from companies with less than 30 employees. A small solar company focusing on research and development of solar products used almost $50,000 worth of wire harnesses each year along with additional R&D prototypes that may become additional business. This particular company was in the process of being bought out by Vivint Solar, a national solar panel installation company, that wanted this small company as a research and development firm dedicated to just their company.

PRICING

Cost

After the investments in equipment and technology WesBell's fixed costs associated with the new services include labor, employee benefits, heat and electric expenses associated with the work environment, rent for the space used and some monthly fees for technology and tooling leases. Some of the variable costs associated with the production department include maintenance for equipment, bonuses during profitable quarters, warehouse related supplies such as boxes, packing and cleaning materials, temporary employees during busy months, and time (labor) spent with customers during the development of new products.

These costs fit in with the company objectives because they want a full service production department with dedicated space and employees. Not only will WesBell be able to sell spools of wire and cable but the sales staff can also offer services that cut wire to length, soldering, crimping and full wire harness assembly. It's quite common for their target audience to need the services due to their low capacity and lack of capital expenditures, so it can be a quick increase in revenue. The employees will be rewarded through quality objectives rather than quantity due to WesBell’s mission of quality products and quality service. Quality service can be easy when your customers always receive quality products.

Marketing and Strategy Variable Costs

Marketing and Strategy Fixed Costs

Pay

It will be difficult for WesBell to judge what the target market is willing to pay for copper wire harnesses due to the fact that copper fluctuates as a commodity, there are various processes involved in building harnesses and that every harness is unique to the device it’s being used in. However, some of these same problems existed in their distribution business and they dealt with it by determining their costs, their lowest profits margins and the most competitive prices online. Since WesBell has trouble matching the prices of their largest competitors, they make up for it with quality product and service. For example, WesBell may only have 1% of the full market share but their customer retention rate is well over 80% due to how the transaction was handled.

Based on previous distribution business margins near 30%, WesBell is forecasting 30% average margins after costs of material and labor. A minimum margin 10% for certain products that are less related to their core business and a high point of 50% margins for core business items directly related to cutting and servicing wire that they already buy in bulk for distribution. There are very few completed wire harnesses online or promoted publicly in any way so WesBell has been asking their current customers if their serving-pricing matches up with their competition, and they've had good feedback in line with their forecasting.

Preferences

WesBell has determined that their customers are willing to pay more for the close support during research and development, same-day deliveries and proactively lowering process when copper (as a commodity) is lowering publically. According to the American Marketing Association, "Marketers shouldn’t assume that all consumers behave the same way with respect to price. (Wyner, n.d.)" WesBell has a long history is loyal customers in New England because they complete and deliver products to their door when customers are in need. That can't be done from big competitors, usually even when they are in fact down the street. WesBell has always paid close attention during R&D in order to show that they care about the customer's business and in hopes to receive orders at a slightly higher price later on. Convenient stores know that they can't compete with WalMart but they're convenient for the customer and still offer fair pricing. WesBell doesn't just have a catchy customer service slogan, they actually go out of their way to support their customers in hopes of gaining a customer for the next 30 years.

Strategy

Based on customer feedback, cost analysis, minimal online information and distribution history, WesBell's pricing strategy near 30% profit margins should work out to be the average each month. Some services will be more profitable and WesBell will get more efficient each year, but it's justified at this early stage. There isn't exactly a price selection for the services offered other than a dedicated labor rate for each service, but WesBell has created an Excel form with a list of services and prices associated with each. For example, one product might need to be cut and crimped with a hand tool, so those two services will be added to the cost of the wire to generate a price. Their online website offers this form to customers and separates the cost of the wire from the services as well. The customer can check out with the wire or both the services and the wire. WesBell is the first online merchant to offer these services with a quick "add to cart" checkout, while most of their competitors simply offer a "RFQ" form and must wait for pricing. There's a premium price for receiving prices "right now" that the customer will be willing to pay.


References:

Mullins, J. W., Walker, W. C. (2013). Marketing Management. A Strategic Decision-Making Approach. (pp. 51). New York, NY: McGraw-Hill

Mullins, J. W., Walker, W. C. (2013). Marketing Management. A Strategic Decision-Making Approach. (pp. 285). New York, NY: McGraw-Hill

American Marketing Association. (n.d.). Pricing and brand strategy. Retrieved from:
https://www.ama.org/publications/MarketingNews/Pages/pricing-brand-strategy.aspx