Tanning’s a Beach…

But Not with TanTech!

Nicole Swinkels

Stephanie Pinon

Xin Lau

Christy Tegarden

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Table of Contents

SWOT Analysis…………………………………….…………………………………………….………….…...…...….2 Segmenting, Targeting, Positioning | Part 1…………………………………………..…...........….........3 Segmenting, Targeting, Positioning | Part 2…………………….....…………………………...….…......4 Product Strategy..………………………………….……………………………….………………………………......5 Distribution Strategy……………………...……………………………...…….................................................6 Promotion Strategy…………………………………...……………...……..……..…..……..……..…………….....7 Pricing and Financials………………………………….……….......……..……..…………………………….......8 Appendix……………………..……………………………………..……..……..……..…….……........……….....9-23

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SWOT Analysis Strengths:

TanTech’s strengths include, experience, language diversity within its company as well as technology within its product. Stephanie has 3 years of experience with labor analysis, marketing, and sales with McDonald's. Being proficient with numbers, she can help the company create organized financial plans and find ways to minimize costs. Xin can speak 5 languages, which will allow her to get in contact with suppliers in other countries to potentially minimize costs in production. For example, China is one of the largest producers of plastic, manufacturing approximately 6 million tons of plastic products from August 2014 to August 2015 (National Bureau of Statistics of China). TanTech is different from those on market because it has the integration of speakers and device charging capabilities. In a consumer survey 92% of consumers said that technology is important when it comes to its product, this is how TanTech can differentiate itself from its competitors to attract consumers. (Qualtrics, 2015).1

Weaknesses:

Although TanTech has a lot of strengths, it does have weaknesses, which include being an all-female company, and only having 1 product. TanTech lacks the male perspective on this specific market of people who tan. In 2014 a total of 24,005 households tanned within a 6 month period- 10,394 males and 13,611 females. That is only a 3,217 household difference between males and females tanning in a 6 month period in 2014 (Experian). Another weakness TanTech has to face is the problem of only having 1 product and that TanTech does not have the money to spend on marketing for its product. It will be a challenge to expand and build the brand.

Opportunities:

Some of the opportunities that TanTech can take advantage of include the emerging market their part of and licensing opportunities. The emerging market of its product is large since there is only 1 direct competitor. The Podillow product is similar, but does not have the integration of speakers or phone charging capabilities. Licensing its product to a major sunscreen company that sells various tanning products is also a large opportunity for TanTech. For example, Edgewell Personal Care Company owns Banana Boat and Hawaiian Tropic, 2 major sunscreen and tanning products. If licensed, TanTech would be able to sell its product on their website and get promotions (Edgewell Personal Company).

Threats:

There are two main threats: popularity of its indirect competitors and the concern for skin safety. TanTech has strong indirect competitors consisting of all of the brands that promote self-tanning products as an alternative to tanning outside. These companies spend millions on marketing, for example Estee Lauder who spent $1.5 million just on the promotion of self-tanning products (Marigny Research group). Americans are also moving more towards skin safety. In a survey of 24,000 Americans the amount of people not tanning in a six month period from 2011-2014 has risen from 6% to 7.3% (Experian).

1 See Figure 4 - TanTech and Podillow Attribute Comparison in Target Group

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Segmenting, Targeting and Positioning | Part 1 Segmenting/Targeting:

The TanTech pillow can be used by many different segments of today’s market due to its versatility and functionality in multiple situations. 62% of the people who visit the beach once a week are female (MRI Reporter). This is why TanTech’s primary customers are women age 15-25, who live in warm, sunny climates. These women enjoy being outdoors, while still valuing comfort, style, and convenience. Because TanTech’s product is not a necessary tanning accessory, TanTech’s ideal customer would need to have a decent amount of discretionary income. The TanTech pillow can be used by a college student lying by the campus pool proudly sporting her school’s colors or sorority letters. Or maybe for a tech savvy teenager who needs to store and charge her phone while at the beach with her friends.

Although TanTech’s primary customers are women, TanTech doesn’t want to limit itself to just one demographic. Men can also benefit from the features and comfort of TanTech’s product while displaying their favorite sports teams on their customized TanTech pillow. According to the MRI Reporter, 43% of people who attended the beach in the last 12 months were male, making them an important market segment to consider.

Positioning:

There are few competitors that rival the TanTech Pillow. The Podillow offers a similar product addressing the problems of comfort and storage, but lacks the technological aspect that the TanTech provides. The simple beach chair offers comfort for the consumer, but is often difficult to transport and speakers and charging capabilities are nonexistent. What makes the TanTech pillow stand out from its competitors is its convenience and innovative features. Many people experience the difficulty and hassle of lugging around big beach chairs, and bulky speakers when going to the beach or pool. With the TanTech pillow, the consumer will bring comfort, storage, speakers and a phone charger with them in one small, easy-to-carry item. As you can see by TanTech’s positioning map, its product surpasses its competitors in both convenience and innovative features.2

2 See Figure 2 - Positioning Map - STP | Part 1 & 2

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Segmenting, Targeting and Positioning | Part 2 Segmenting/Targeting:

The TanTech pillow can be used by many different segments of today’s market due to its versatility and functionality in multiple situations. Sixty-two percent of the people who visit the beach once a week are female (MRI Reporter). According to TanTech’s consumer survey, 66% of the respondents live in a seasonal climate, and 32% live in a mostly sunny climate (Qualtrics, 2015). Thus, TanTech’s target customers are women who live in moderately sunny climates. These are women who enjoy being outdoors, while still valuing comfort, style, and convenience. Because TanTech’s product is not a necessary tanning accessory, TanTech’s ideal customer would need to have some discretionary income.

Although TanTech’s primary customers are women, TanTech doesn't want to limit itself to just one demographic. Men can also benefit from the features and comfort of TanTech’s product while displaying their favorite sports teams on their customized TanTech pillow. According to the MRI Reporter, 43% of people who attended the beach in the last 12 months were male, making them an important market segment to consider (MRI Reporter). TanTech can also target college students. The TanTech pillow can be used to lay down by the campus pool proudly sporting the consumer’s school colors or sorority letters. According TanTech’s consumer survey, 89% of the respondents are in age range 15-25. This is why TanTech will target customers that are in age range 15-25. Positioning:

There are few competitors that rival the TanTech Pillow. The Podillow offers a similar product addressing the problems of comfort and storage, but lacks the technological aspect that the TanTech provides (Podillow). As compared to the Podillow, survey data depicts that TanTech ranked higher in both technology and storage within TanTech’s target age group (Qualtrics, 2015). Data also shows that technology, a feature that is absent in TanTech’s competitors, is an extremely important attribute to people below the age of 25 (Qualtrics, 2015).

From the survey that was conducted, people have said that they prefer the TanTech pillow to its competitors when it came to convenience and innovative features (Qualtrics, 2015).3 Many people experience the difficulty and hassle of lugging around big beach chairs, and bulky speakers when going to the beach or pool. With the TanTech pillow, the consumer will bring comfort, storage, speakers and a phone charger with them in one small, easy-to-carry item. TanTech’s other competitor, the standard beach chair, offers comfort for the consumer, but is often difficult to transport and speakers and charging capabilities are nonexistent. TanTech’s product surpasses its competitors in both convenience and innovative features.

3 See Figure 4 - TanTech and Podillow Attribute Comparison in Target Group

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Product Strategy

TanTech aims to solve the common problems people face during a typical day of sunbathing, which include being comfortable, storage of valuables, and integration of technology. Consumers who go to the beach are constantly looking for ways to be comfortable while lying in the sun. TanTech has created a soft, luxurious pillow to allow for more comfort and relaxation. It also provides storage for the consumer’s phone and any other small items that might be brought along when tanning. This allows the consumer to lay in the sun without the stress of having to worry about their valuables getting lost, stolen or damaged.

TanTech has chosen to incorporate technological features into its product to accommodate the 174 million people living in the United States that own a smartphone (Scarborough). 80% of TanTech’s target age group uses their cell phone to play their music which is why TanTech has incorporated built in speakers (Pew Research Center). If the consumer wants to use headphones instead of its speakers it has a small hole large enough to run the cord of the headphones through while still keeping the consumer's phone safe in the TanTech pillow. The average daily media use in the United States with cell phones and tablets are 134 hours and 163 hours (Statista). TanTech has incorporated solar charging capabilities for electronic devices to accommodate this usage. With all of these beneficial features, the consumer can now leave the beach with not only a great tan, but also a fully charged cell phone and a convenient way to carry their belongings.

Because there is one distinct competitor with a similar product, packaging, branding, and product recognition are very important, this competitor is called the Podillow. The Podillow’s logo is located on its product, but in white, which makes it hard to see from a far distance. The Podillow also has a bag that the consumer has to place the Podillow in to carry it around. TanTech will prominently display its logo on the side of the plastic base to make it easy for the public to recognize and learn the brand. TanTech consumers will be able to carry their TanTech pillow with the convenient rope handle that integrated into the product.

Each TanTech pillow will be packaged in an individual box, which will enlighten the customer on the product details as well as highlight the additional technological features. A large picture of the TanTech pillow and TanTech logo will be on the front of the box, with smaller pictures of how and where it can be used. One side of the box will highlight TanTech’s free three month warranty, one year warranty for an additional five dollars and three year warranty for an additional ten dollars. This optional warranty extension, which is available when purchased online, will replace your TanTech pillow with a new one if the technology stops working or is damaged after your three month promotional warranty ends.

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Distribution Strategy Online Sales:

Based on TanTech’s consumer survey, 90% of its target age group would purchase its product online (Qualtrics, 2015). This is why TanTech will benefit most from its online sales, a one year test of explicitly website sales will give more insight as to how to proceed in the future. Distributing and selling through its website will also help TanTech effectively reach its target market of women aged 16-25 (Qualtrics, 2015). This age group is easily targeted via social media such as: Facebook, Twitter, Instagram, and website marketing. This is proven through TanTech’s consumer survey, 96% said they would expect to hear about the TanTech pillow through these forms of social media (Qualtrics, 2015).

Selling the product online supplies TanTech with a relatively short distribution channel; TanTech’s product goes from the manufacturer, then directly to TanTech’s warehouse, then to its consumer. Being a startup company, TanTech is looking to use cost-effective strategies wherever possible, which includes outsourcing to China. In order to retrieve product from its manufacturers, TanTech will use FedEx as its primary international shipping company. FedEx offers efficient, reliable, customs-cleared service, allowing international shipment to run smoothly (Service Guide). FedEx also proposes multiple international freight options, including International Priority Freight which gives TanTech time-definite delivery of freight shipments, as well as International Economy Freight which delivers typically within 5 days (Service Guide). Distribution Warehouse:

TanTech’s distribution warehouse will be responsible for getting the TanTech pillow to the consumer. TanTech will be able to take charge of its inventory through a SKU system. The SKU used on TanTech’s products will organize its product by color and design. This will enable TanTech to manage its stock levels and be able to see what color it needs to produce more of or discontinue due to lack of sales.

Delivering directly from the warehouse to the consumer also requires reliable ground shipping. TanTech’s initial roll out strategy will be focused on its US customers only. TanTech has decided to choose UPS to deliver routine shipments to its US customers, as it is prompt, dependable and cost-effective (UPS Connect). UPS provides Guaranteed Express Service in which it ships high-priority items, allowing customers to receive their TanTech pillows in a timely manner (UPS Connect). Both of the shipping companies TanTech has chosen to use offer a money back guarantee when it comes to the liability of TanTech’s product during shipping. If the product is damaged, FedEx will compensate the full amount that the product is worth as long as a claim is filed within fifteen days of shipment (UPS). FedEx’s policy also guarantees that products will be shipped on time and that if they are even sixty seconds late they will guarantee full return of money (FedEx).

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Promotion Strategy

Push Strategy: Based on TanTech’s consumer survey, 87% of the respondents would purchase its

product online.4 This is why TanTech will be using a push strategy by selling its product on Amazon. Featuring an introductory promotional price on both the company website and Amazon, TanTech will be able to generate demand and build a customer base, after this six month period the product will sell at the normal price. After the first year, TanTech will use the revenue from selling on Amazon to attend trade shows across coastal areas in the United States to boost business-to-business sales. TanTech will be using trade promotions with Banana Boat and will have a booth in a beach wear’s trade show. Companies will be able to get 20% off from the retail price during this trade show. After successfully selling the TanTech pillow online and at trade shows, the long term goal would be to continue to sell online.

Pull Strategy:

TanTech will also be using an online pull strategy through email and social media ads featuring its slogan: Tanning’s A Beach… But Not With TanTech.5 This slogan appeals to its target market of 16 to 25 year olds and can aid in brand recognition. Some of the pull promotions TanTech will be using include email subscription benefits, and a sweepstakes. An email subscription option for consumers will allow TanTech to stay connected with its consumers on a monthly basis by sending information on future promotions, new products, and coupons. As of January 2015 “email is the preferred marketing communication according to consumers in the United States” (PR Newswire). TanTech will choose to only send one email a month based on a survey in 2015 that showed that 86% of consumers prefer to have only one promotional email sent to them per company, per month (PR Newswire).This form of promotion will enable TanTech to tell its consumers about future promotions and future products created by the company and build a loyal relationship with the consumer. TanTech will also use a sweepstakes to promote the purchase of the TanTech pillow. The promotion of this sweepstakes will encourage the purchase of TanTech’s product by offering a chance to win a five day cruise to the destination of their choice. When a consumer purchases the TanTech Pillow the consumer will receive a code that will allow them to participate in the sweepstakes. An advantage of having a sweepstakes is it will ask the consumer to enter their email address, phone number, name, and mailing address (Hein). TanTech will also use the form the consumer needs to fill out to add more consumers to its email subscription list. 4 See Figure 5 - Target Group Point of Purchase Preference 5 See Figure 10 - How Target Group Expects to Hear About TanTech Pillow

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Pricing and Financials Competitor Orientation Pricing Method:

Because the TanTech pillow is an all-in-one item, TanTech has researched the prices of products that it has incorporated into the product to determine the target price. It is using a competitor orientation pricing method, a pricing method in which a seller uses prices of competing products as a benchmark instead of considering own costs or the customer demand (Business Dictionary). This will ensure the TanTech pillow can compete with the competitors of the various individual components of its product, such as portable speakers and solar chargers. Because the product is new, it also wants to focus more on starting brand-awareness rather than profit maximization. Based off of the survey conducted through Qualtrics, the price elasticity of the TanTech pillow was 15.96, which indicates that the price is elastic. This means that the quantity demanded is sensitive to the price of the product, which indicated an inelastic demand meaning that price is not sensitive. These promotions could include a 10% off discount during the first month of launch, as well as free shipping on sales through TanTech’s website. TanTech also plans to elicit a Kickstarter campaign in order to raise money towards its manufacturing and distribution strategy. This campaign will allow small investors to donate money to the growing business in exchange for rewards. For example, if someone were to donate $100, they would receive a free TanTech pillow and donating $200 would entail two free TanTech pillows and an eight ounce bottle of suntan lotion, etc. Promotion and assistance with funding distribution would be the main focuses of this campaign. Financials:

The comparative prices of the different individual components that make up the product can help determine a price point that is up-to-date with the current market. The current market price for a portable solar charger is around $15.57, with the price of portable speakers being close to $15.95 (Vafru, Amazon). With these values in mind, as well as taking into consideration the other parts of the product, we can establish a price that will be able to compete in this emerging market while still being profitable. Based on the results collected from the survey, the target price for the TanTech pillow will be $64.99. This price is based on TanTech’s consumer survey that showed 90% of its respondents said they would purchase the TanTech pillow at this price than at $49.99 (Qualtrics, 2015).6 Since the wholesale cost is $36, each pillow will make a profit of $28.99. Of the money that will be received through sales and investments, TanTech will allocate $20,000 for the marketing expenses such as advertising and promotional events. It will also contribute to costs such as shipping, the wholesale costs, warehouse rental fees, salaries and wages of employees and any purchase returns that may come up.7

6 See Figure 6 – Price Comparison 7 See Figure 3 – Financials

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Appendix

Figure 1 - Logo

Figure 2 - Positioning Map - STP | Part 1 & 2

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Figure 3 - Financials

First Year Profit Estimates Revenue (10,000 units) $649,900 Investments $50,000 Variable Costs Wholesale Cost ($36/unit) $360,000 Shipping (from China) ($26.10/package) $26,100 Shipping to Customers ($11.10/5 lbs.) $111,000 Salaries and Wages Expenses $140,000 Purchase Returns & Allowances $2,000 Marketing Expenses $20,000 Fixed Costs Rent on Warehouses/year $3,660 Net Profit $37,140

Figure 4 - TanTech and Podillow Attribute Comparison in Target Group

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Figure 5 - Target Group Point of Purchase Preference

Figure 6 - Price Comparison

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Figure 7 - Target Market Tanning Frequencies a Month

Figure 8 - Target Group Climate Conditions

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Figure 9 - How Target Group Expects to Hear About TanTech Pillow

Figure 10-16 - Qualtrics Survey

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Figure 17-26 - PowerPoint Slides

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