Portable Heating Pad

1
Portable Heating Pad

• Presented by THE SLACKERS
• Michael Anstey
• Kwaku Nyantakyi
• Stephanie Paul
• Francis Rossiter

2
Background of Case

• This case is about Mark Tanner, owner of the
  Tanner Company, who buys the Canadian rights to
  Portable Heat Pad
• The heating pad have many advantages over its
  competitors and has a patent to prevent other
  people from using them
• However since the product is new in the heating
  pad market and it is very stable, Mark hires
  Richard Mckay, a marketing manager, to conduct
  focus groups and come up with marketing ideas for
  the product.

3
Issue

• A new innovative product using patented
  technology is being considered to be introduced
  into a market. The management of Tanner Company
  must decide if the product is viable and develop
  a marketing strategy for Portable Heat Pad in an
  existing and highly stable market, that has not
  changed in a number of years.

4
Objectives

• In the short term break even, and in the long
  term gain 50 of the market share.
• To successfully introduce the product into the
  target market(s).
• To produce an advanced technologic product that
  creates brand equity.
• Enter the market aggressively.
• Establish a price that is highly competitive
  without incurring a loss

5
Internal Analysis
6
Importance in Company

• Portable Heat Pads has some importance to Tanner
  Company since they invested 250,000 into this
  venture for the manufacturing and distribution
  rights.
• Also, they obtained the patent for a 17-year
  term, suggesting that they have long-term goals
  and expectations for the product.
• However, it is possible for the Tanner Company to
  resell the patent, allowing them to get out of
  the business with minimal losses.

7
Marketing Mix

• Product
• Price
• Promotion
• Distribution

8
Product

• Product a vinyl bag containing nontoxic
  chemicals that produced a constant level of heat
  had a variety of therapeutic uses, including
  treatment of muscle injuries and relief from
  arthritic pain.
• Portable and controlled heat
• Variable temperatures
• Flat
• Durable

9
Product

• Durable
• Reusable
• Use for as long as 3 hours
• Flexible
• No leaks
• New
• Eases Pain
• 3 possible sizes (20cm x 45cm, 20cm x 20cm, 10cm
  x 10cm) and a mitt shape

10
(No Transcript)
11
Price

• Focus groups showed that market would be willing
  to pay 40/unit at retail price.
• Product must be sold through distributors or
  salespeople
• Retail markup of 25
• Distributor markup of 15 or 3 salespeople at
  60,000 each 180,00/yr
• With Distributor, price 27.83
• With Salespeople, price 32, adding 180,00/yr
  to fixed costs.

12
Promotion

• The product would require a warranty for private
  clinics to remove liability. The focus group also
  believed that a warranty was essential
• Promotion could focus on advantages over
  competition
• Salespersons
• Commercials
• Flyers

13
Distribution

• Tanner Company could use 3 salespeople at
  180,00/yr or use distributors and incur a 15
  markup fee.
• Institutional market would require 29,332 units.
• Home market would require 189,000 units/yr (2700
  outlets x 70 units).
• Short term break even
• Long term 50 market share would sell roughly
  109,166 units/yr.

14
Business to Business Marketing

• Consists of organizations that buy products and
  services to make other products and services,
  resell them to business users or consumers, or
  conduct operations of an organization.
• Portable Heat Pad is sold to retailers and
  distributors, who resell them to consumers.
• Portable Heat Pad has a Horizontal business
  market because the product can be used in
  different industries (medical, personal warmth,
  heating inanimate objects).

15
External Analysis

• Macro Environmental Forces
• Demographics
• Economic
• Socio-cultural
• Competitive
• Technology
• Political Legal

16
Demographics

• Canadian baby boom population
• Population is aging
• More middle age persons

17
Economic

• In introductory/prosperity stage
• Unemployment

18
Socio-cultural

• More health and fitness conscious (Quality of
  Life)
• Baby Boom generation is aging
• Higher instances of arthritis and other
  associated disorders
• Concern for environment
• Desire for convenience

19
Competitive

• Direct Competition
• Electric Heating Pads
• Hot Water Bottles
• Instant Hot Packs
• Reusable Hot Packs

20
Competitive Analysis
21
Competitive

• Indirect Competition
• Massage
• Medication
• Hot Tubs
• Competition for Buying Power
• Other daily conveniences

22
Technology

• Similar products could be created at a cheaper
  manufacturing cost

23
Political and Legal

• Any safety policies or regulations that must be
  met

24
Any Questions?
25
(No Transcript)
26
Market Penetration
27
Market Penetration

• Short term Dogs, low growth rate, low market
  shares
• Long term Cash Cows, low growth rate, high
  market share

28
(No Transcript)
29
Product Growth Matrix

• Product Development stage
• New product in an existing market

30
Push or Pull Strategy

31
Alternatives

• Status Quo (Do not enter market resell patent).
• Sell to retailers using sales people and price of
  32.
• Sell to institutions using distributors and price
  of 28.57
• Sell to both groups using both methods

32
Analysis of Alternatives

• Break even analysis
• Breakeven Analysis.xls

33
Analysis of Alternatives
Alternative 1

• Market is never entered
• Resell Patent
• Minimal losses or a slight chance at profit if he
  can sell the patent at a higher price then it was
  bought for.

34
Analysis of Alternatives
Alternative 2

• Sell to retailers using sales people
• Price 32.00, VC 8.00, FC 548,000.00, UC 24
• Short Term Break Even 548,000.00/24.00
  22,834 units
• Long Term 94,500 units (50 home market) x 24
  2,268,000 profit

35
Analysis of Alternatives
Alternative 3

• Sell to institutions using distributors
• Price 28.57, VC 8.00, FC 368,000.00, UC 20.57
• Short Term Break Even 368,000.00/20.57 17,891
  units.
• Long Term 14666 units (50 institution market) x
  20.57 301,679.62, loss of 66,320.38

36
Analysis of Alternatives
Alternative 4

• Sell to both groups using both methods
• Price 32.00 and 28.57, VC 8.00, FC
  548,000.00, UC 24.00 and 20.57 (avg 22.29)
• Short Term Break Even 548,000.00/22.29
  24,586 units
• Long Term 109,166 units (50 market share) x
  22.29 2,433,310.14 profit

37
(No Transcript)
38
Recommendation

• We decided to go with alternative 4
• Sell to the retailers using sales people and sell
  to institutions using distributors

39
Implications for Implementation

• The Firm can
• Intensively market by highlighting the many
  advantages of using Portable Heat Pad to its
  competitors
• Stress safety of the product (no toxic chemicals
  or electricity involved)
• Maximize profit by using sales persons and
  distributors within inst. and home markets within
  Canada.
• Have distributors and sales people push sales
  on markets while using promotions to pull on
  consumers

40
Questions? (Critique Group)