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Breeze – Marketing Strategy
Breeze acknowledges a primary and a secondary market for its technology. The company’s primary market is the footwear manufacturers and wholesalers. The secondary market is the end-use consumer. The needs of the secondary market were discussed earlier in this report. In meeting secondary market demand, the technology will be pulled through the primary market. Breeze’s strategy for marketing its technology to it’s primary market is now considered.
Personal selling of the technology to top executives of the target footwear manufacturer is the chosen strategy . Breeze first commissioned the development of prototype shoes to allow independent testing and verifying of O’Dwyer’s initial test data (see Appendix C). This verification came from subsequent testing at the Australian Institute of Sport (see Appendix II). Additional prototype shoes were then manufactured in the shoe size of senior executives at the targeted footwear manufacturer. An animated video which explains the technical aspects of the technology was also developed. This was considered the superior method of communicating the physical dynamics of the technology. This video will be used, as necessary, in conjunction with the prototypical footwear, in selling the technology to industry executives. A technical manual was also compiled which provides the test data and specifications. This material is available to the research and development department of the targeted company for in-house evaluation of the technology.
4.1 Pricing Strategy
In acknowledging that both primary and secondary markets exist, two pricing issues arise. In respect of the primary market, the cost to a manufacturer of incorporating thc Breeze design into their shoes is restricted to thc cost of the royalty (see Exhibit 7) and could well be offset by reductions in manufacturing and material costs. With porous upper materials rendered unnecessary, the manufacturer is free to experiment with new and superior materials and manufacturing methods. These may well be more cost effective than present methods and include, for example. the injection-molding of uppers and sole in a single operation using a synthetic, substitute material.
The retail price to the end consumer is dependent upon the strategy of the shoe manufacturer, who may wish to pursue a premium pricing strategy. This strategy would appear consistent with focus group results which indicate consumer willingness to pay for the additional benefits. This strategy is also supported by the competitor content analysis and discussions with top executives in the athletic shoe industry. If the manufacturer chooses, instead, to pass on their royalty cost (a maximum of 67 cents per pair in year one), then the retail price of a pair of premium shoes would be not expected to rise more than $3.00.
Breeze will negotiate a pricing strategy which includes a commitment or option fee, plus a royalty based on wholesale invoice price and a diffusion incentive structure. Breeze has retained a professional negotiator to join in this phase of the negotiations. The negotiating team will bring to the attention of the potential licensee the magnitude of cross-segment diffusion possibilities the substantial likelihood of increased market share and the inevitable revitalization of their product life cycle curve. The licensee will also enjoy the benefits associated with being identified as a technology leader by consumers.
While negotiations are continuing, the financial projections in this plan are based on conservative estimates of the commitment fee and royalty rates, as detailed in the financial section later in the plan.
The first phase of Breeze’s R&D strategy is to adapt the existing technology (and subsequent developments) to different segments of the footwear market in order to assist the licensee in diffusing the technology across the full range of footwear products.