Sales department

This form of representation would provide Vigour with direct contact with end customers and additionally they would be in full control of all the export activities. In other words, Vigour would work as an independent distributor in Singapore.

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The positive aspect of creating a sales department to expand internationally is a complete control over all the marketing activities, which will increase learning, thus Vigour’s internationalization ability.

Nevertheless, creating a sales department would be of a high financial cost and Vigour would need to reach a high sales volume before making profit. In addition, the risk will increase due to the uncertainty of how Vigour would be received by the customers in Singapore. It is important to mention that there exist a lot of other problem areas that Vigour must consider if choosing a sales department as an entry mode.

This option would not be the optimal entry mode for Vigour due to the high costs and risks.

Vigour must gain a foothold in their own market before considering establishing a sales department abroad.

In conclusion, our recommendation for Vigour’s entry mode is to seek an importer in the Singaporean market, as their representative. This is, however, on a short term basis. It is important to emphasize that Vigour must invest time in a proper screening process before making a decision on what importer is the most suitable for the task. In addition, Vigour should negotiate a favorable contractual agreement with the importer. This can for instance be keeping their own brand name and having an influence over the marketing activities.

However, in the long term, it might be interesting to consider an agent as this provides Vigour with more control of the marketing activities, in comparison to an importer.

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6.7 Channel Management

Along with deciding the type of entry mode, Vigour must establish an efficient distribution channel. The distribution channel’s purpose will be to distribute Vigour’s products from production in Norway to the end consumers in Singapore in the most efficient manner.

6.7.1 Distribution channel strategy

As mentioned, Vigour should go through an importer when distributing their products to Singapore. In order to do this in an efficient manner, Vigour has to decide what channel strategy they should apply.

There are two different strategies one can apply when deciding on a distribution channel strategy. These are push and pull strategies.¹¹⁰ The push strategy is when the company is pushing their products through the distribution channel intermediaries and out to the end consumers. This approach is the most common among smaller companies. The pull strategy involves creating a demand in order to get the end consumers to pull the products through the distribution channel. This approach is often used by bigger companies that have financial resources to engage in heavy advertisement to promote their service or products.

Amongst the two strategies, the push strategy would be the most suitable strategy for Vigour to apply. This is due to the small size of the company and the limited resources Vigour possesses. Another reason for choosing this strategy is because they have not yet established

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any reputation in the Singaporean market. Nor is there currently a demand for Vigour’s products. This strategy is also the most common among Norwegian companies when they are operating abroad.

When applying a push strategy it is necessary for Vigour to motivate the channel members, which in this case will be the importer. Channel motivation can be seen as challenging and requires effort. There exist several devices for achieving such motivation, where the most common is providing incentives to the channel members. If possible, Vigour should offer a better margin to the importer, in order to entice the importer in the channel to push Vigour’s products rather than the other products in the portfolio. This can also be achieved through bonuses, affiliate programs, and other types of support. In addition, Vigour should focus on establishing a good working relationship with the importer. This will most likely motivate the importer to make a better effort to sell Vigour’s products. We can again mention the

importance of guanxi in relationship building.

6.7.2 Potential Challenges in a Distribution Channel

There are several challenges that can arise in an international distribution channel. The main one would be the distance to the intermediary, both in regards to the geographical distance and the cultural distance. Communication amongst the different members in the distribution channel can be affected by these gaps, so it is important to be aware of their existence and how to avoid them.

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The cultural gap can arise when people from groups with different cultural values, beliefs, attitudes and social background are communicating. A way Vigour can minimize this gap is to make sure they are well prepared when they enter the Singaporean market, by enhancing their knowledge of the different cultural values and attitudes in the business setting. Having an importer would make the entry easier because he/she will already have knowledge of the market. Still, some difficulties may arise in the communication between Vigour and the Singaporean importer.

The distance gap can be a problem for Vigour because of both the geographical distances in addition to the time differences. This can affect the communication between Vigour and the intermediaries in Singapore.

6.7.2 Concluding Remarks

By applying a push strategy, with a continuous focus on motivating the channel members, and aiming to limit the cultural and geographical gaps, Vigour should be able to distribute their products in an efficient manner.

Chapter 7 –

Marketing Mix

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Marketing mix

The marketing mix provides an overview of the elements that contribute to creating competitive advantages for the company, and customer value. The traditional approach of doing this is by using the four P’s: product, price, promotion and place. As mentioned, creating awareness is identified as one of the critical success factors for Vigour’s success in the Singaporean market. This can be done by designing the marketing mix in an efficient way. Each of the 4 P’s will be discussed in the following section.

7.1 Product

As mentioned earlier, the aim for Vigour is to adapt a focused differentiation strategy.

This emphasizes the fact that the product has to be unique and of high quality in order to create a competitive advantage and differentiate itself from the rest of the competitors.

The core product

Vigour’s core product is health supplements that claim to enhance physical health.

The concrete product

The concrete product that Vigour wants to launch in Singapore is the concept, The Arctic Seaweed Complex series (ASC), as mentioned in the analytical part. This is

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communicated to the customers through the product packaging and the overall marketing communication provided by the company.

The extended product

Vigour’s extended product is to give the health conscious Singaporean consumers the opportunity to revitalize and boost their energy. The ASC-series is a set of lifestyle products that is meant to give the customers a sense of wellbeing.

7.1.1 Product Life Cycle

The Product Life Cycle describes the development of a product over a certain period of time. The Singaporean health supplement industry can be identified in the late growth stage, due to the fact that profits are declining along with a high degree of mergers and acquisitions. Vigour has yet to introduce their products to the Singaporean market, therefore their products will be in the introduction phase. This particular stage is characterized by the importance of stimulating primary demand, which is done by offering basic products. Vigour has stated that they will offer the Scandinavian market a broader product line than in their export markets. This is consistent with the notion that the introduction phase should emphasize having a narrow product line in order to save costs. ¹¹¹

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A brand name is used to identify and differentiate the brand from its competitors. Vigour has established three different product names under their Arctic Seaweed Complex-series; pure:DETOX, daily:PROTECTION and figure:BALANCE. These three names are set out to give the consumer an easy way of understanding the benefits of using the different products.

Since Vigour is a new brand on the market it is important to build the brand from scratch, which is time consuming. It takes time to gain recognition and awareness amongst the consumers. Ideas on how this can be done are elaborated on in the promotion section.

7.1.3 Packaging

The packaging of the product is important due to the fact that many consumers decide upon purchase when they are in the store. Vigour’s pure:DETOX product has a clean and minimalistic packaging on a white background. (See Appendix-6a) After visiting stores in Singapore it is clear that the packaging trend is more towards colorful packaging, with text in both English and Mandarin. The Singaporean society consists of 76.8% Chinese and to reach the population, that might not be fluent in English, it is important to include Mandarin as a language on the package. (See Appendix-6b)

One specific example is the Avalon detoxification product, as mentioned in the analytical part. Avalon Detox has a picture of the Aloe plant on the front and uses words like

“rebirth” and “wellbeing” on their packaging. (See Appendix-6c) It might be useful for

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Vigour to consider small alterations to their packaging to better suit the Singaporean market.

7.2 Price

When considering which price Vigour should apply, there are several factors that need to be taken into consideration. In order to establish this, the 7 steps proposed by Chiang and Keh (2004) will be used in the following discussion. These are: set pricing objective, establish demand and costumer perceived value, determine cost, examine competitor prices and costs, select pricing method, set price level and fine tune price structure.

“Price is the only element in the marketing mix that directly impacts revenue.”¹¹² This implies that it is a very important part of the marketing mix, as it has a direct impact on the company’s profits. Firstly, Vigour needs to decide which pricing strategy they should use. In the analytical part, we concluded that Vigour should proceed with their expansion in Singapore through niche markets. This might imply that they should consider a price-quality relationship as a pricing objective. By setting a relatively high price, the aim of this strategy is to position Vigour’s products as of high quality.

Secondly, it is important to estimate demand and the customer perceived value. The primary data presented in the analytical part showed that approximately 20% of the respondents stated that they were willing to buy health supplements containing seaweed, while 69% were neutral. Singapore´s health supplement market is relatively

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sensitive, and this is important to acknowledge when the company is considering the appropriate price for their products.

Thirdly, Vigour must also determine the cost of producing and marketing the product and it is important that the price for the products covers operating costs.¹¹³

In order to get some reference points for pricing, it is important for Vigour to examine competitor prices and cost. As mentioned earlier, one of Vigours competitors, Ultimate Cleanse charge S$69.50 for their product, and the Avalon detoxification product costs S$89.99. This might suggest that Vigour should operate in relation to this price range.

The survey conducted in the analysis states that most respondents were willing to pay S$20-29 for a product that contained seaweed, this is below the average price for detoxification products in the market, but as mentioned earlier, this research has limitations and we can therefore not generalize from the results.

Moreover, Vigour must decide what pricing method to use. The mark-up method is a commonly used approach. This method uses the unit cost and thereafter adds on a mark-up to the cost to give a desired return on sales.¹¹⁴ It might also be interesting to use competitive pricing, as the Singaporean market is fairly small and price sensitive. Vigour needs to have a price that can compete with similar products in the market, even though they are trying to reach a niche market with a focused differentiation strategy.

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Furthermore, both competitors mentioned above use psychological pricing factors, which means that similar prices will be perceived differently depending on its ending. (E.g.

$49.99 vs. $50) Vigour should consider this when setting the price for the Singaporean market.

Lastly, it might be interesting for Vigour to look into different kinds of promotional pricing, as this is very common in Singapore. For instance, using coupons or cash rebates might prove to be a useful strategy in Singapore in order to encourage first-time

purchase.

In order for Vigour to be successful in the Singaporean market, it is crucial that the right price is set. The Singaporean health supplements market is relatively price sensitive, but Vigour´s aim should be to attract the less price sensitive niche market. Nevertheless, since Vigour´s products are new on the market, they need to consider their competitor´s pricing and cost in order not to overprice their products. Furthermore, Vigour might consider implementing a promotion pricing strategy in order to create more value for the consumers.

7.3 Promotion

Increasing competition to reach both retailer and end consumer will have significant effects on companies’ chances of getting their message through. The big players will have the opportunity and advantage to invest in costly methods of advertisement, such as TV commercials and other promotional competitions. This has resulted in a blizzard of

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price discounts and other promotional efforts in the market. For players in the

Singaporean market this has resulted in lower unit prices, thus eroding the companies’

margins.¹¹⁵

When deciding on a promotional strategy, Keh and Chiang (2004) provide six steps. ¹¹⁶ These will briefly be discussed in the following section.

7.3.1 Target audience

When identifying a target audience, customer attitude and awareness of Vigour and its products will be of importance. Based on the fact that Vigour has yet to start up its business in Singapore, awareness is non-existent. Attitudes towards Vigour will therefore be difficult to determine. From the analysis we could also see a fairly low awareness (36%) when it comes to products containing seaweed as a base component. (See

Appendix-3a) This will have implications for Vigour in setting promotion objectives. By choosing the appropriate target audience, Vigour might reduce the promotional cost of increasing attitude and awareness towards such products. When considering the importer as the recipient of promotional efforts, Vigour will need to induce the same amount of awareness and positive attitude, as for end consumers.

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7.3.2 Promotion objective

Due to the high competition in the Singaporean health supplement market, awareness of Vigour and its products, in addition to knowledge and trial purchase, will initially be the most important promotion objectives for Vigour. Good promotional objectives should also satisfy five criteria. The objectives should be specific, measurable, attainable, relevant and time-bound.¹¹⁷ An example of a promotion objective for Vigour, which includes the five criteria, could be: to increase customer awareness amongst the target audience in Singapore by 15 %, within one year, to further be able to build brand attitude.

7.3.3 Message strategy

Moreover, when it comes to designing the message, this is really what and how Vigour should convey their message. In a price sensitive market, Vigour could try to reduce the importance of price by focusing on other aspects, such as high product quality, through their design of the message. The importance of country of origin in promotion should be further explored by Vigour, although our research showed limited knowledge and perception of Norway, and Arctic Norway respectively.

7.3.4 Promotional budget

There are different ways of determining an appropriate promotional budget. In Vigour´s case the initial promotional budget will be part of the company´s overall budget of

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S$326.000 set aside to go into Singapore. This approach of determining a promotional budget is called the “All You Can Afford Approach”. Since the amount budgeted through this method may vary from year to year, this will result in difficulties for Vigour to commit to long-term plans for promotion. Therefore, other types of approaches to budget should be explored for the following years, such as the “Fixed Guidelines Approach”.

This method of determining promotional budget is based on sales, or forecasted sales. A budget proposal will be presented later in this chapter.

7.3.5 Promotional mix

When making decisions on the promotional mix, there are several categories to choose from. Some of these are: personal selling, advertising, sales promotion, public relations, trade shows and Internet promotion.

In general, the limited budget for Vigour will serve as a hindrance for choosing freely between the different communication tools. This will, for the most part, leave out extensive advertising and public relations, including various sponsorships. Still,

informational advertisement directed at importers could serve as a form of advertisement, and should not induce too high a cost. Furthermore, considering importers as the buyer, this makes trade shows an attractive venue for promotion. Personal contact with the potential importers can thus be established through trade shows and personal selling. The importance of personal contact is further supported by the importance of guanxi,

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mentioned earlier. The low cost of Internet promotions will also enable Vigour to use this category in the mix.

An example Vigour can make use of in order to attract end consumers, could be to offer a

“value pack” consisting of pure:DETOX and figure:BALANCE. This is a fairly normal promotional technique in the Singaporean market, like the Avalon example presented.

7.3.6 Evaluation

The last step in deciding on a promotional strategy will be, for Vigour, to evaluate the results and effectiveness of the strategy compared to the investments made. This might include surveying the retailers and importers for awareness and attitude towards Vigour and its products. A survey these channel members could then conclude whether Vigour has reached their exemplified goal of 15% awareness.

7.4 Place

“Marketing channels are sets of interdependent organizations involved in the process of making a product or a service available for use or consumption.”¹¹⁸ It is important that Vigour identifies the most efficient distribution channel for entry in Singapore. This has already been thoroughly discussed in the sections on International Entry Mode and Channel Management, and will therefore not be emphasized on here.

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However, due to Vigour’s development of a web-shop, we found it interesting to discuss how this would work in Singapore. A web-shop would be an inexpensive option to offer

However, due to Vigour’s development of a web-shop, we found it interesting to discuss how this would work in Singapore. A web-shop would be an inexpensive option to offer

In document Vigour: bringing you the essence of Norway (sider 112-0)