Keys To Success And Critical Issues Marketing Essay

Keys To Success And Critical Issues Marketing Essay Mcayain knives is owned and operated by Mark Hopper who is a Master Blade smith and experienced Blacksmith who has been in the Industry since the age of 15. Mcayain Knives will be a new venture for Mark Hopper whose main business is working on big architectural iron work for companies and home owners. Mcayain knives will be introducing a new product line of three designs of custom made knives that will target outdoor enthusiasts for example the fishermen, tactical groups and Hunters. The knives will be of high quality, tough, durable with a superb cutting edge. The knives will have edge holding abilities; this means with use they retain their sharp cutting edge and low edge wear guaranteed. The cryogenic steel making technology that Mcayain will use to make its knife is one that no other knife manufacturer is using at the present time, and will provide a knife that most outdoor enthusiasts will hopefully embrace to cater for all their needs without worry that they may have with other knives like edge holding capabilities. Mcayains marketing goal is to meet the needs of every outdoor enthusiast in the market in the future and to get their specialty knives out to every outdoor enthusiast including their target market of hunters, and fishermen. Mcayains will use pull strategy by advertising in Blade magazine, knife illustrated and Tactical knife Magazine which are the top knife magazines in the U.S on a monthly basis to drive consumer sales and brand awareness. Participating in trade shows and also driving consumers to check out their interactive website. Mcayain intends to sell 9,600 units and 10,560 units of Knives in 2009 and 2010 respectively. The units will bring sales of over one million dollars in the first year and hopefully increase at a 10% increase each year. As long as Mcayain keeps selling their knives at a steady rate then they will keep growing their profits as the years come. The most important factors for Mcayain to succeed in the business is for them to get notoriety for its quality of product being tough, offering a superior edge and having good design. With so many knife companies out there Mcayain will have to stand by their steel forging technology that provides a more superior outdoor knife that its competition and deliver the best interactive custom knives to their customers. Mcayain Knives fatal problems that they may incur would be Competition getting their technology and making similar products. Legislation of laws that may ban carrying and use of fixed blade knives. Mcayain would have to be a trend setter and move as the market moves and always be a step ahead of competition. Also a forum on their website for informing customers of existing laws and how it affects them then and how to lobby if needed. Product Mcayain specialty Knives will produce and Market a new product line of custom made knives that will target and appeal to customers, who are interested in high quality, tough, durable knife with a superb cutting edge. The knives will have edge holding abilities, this means with use they retain there sharp cutting edge and low edgewear guaranteed. Mcayain will offer designer style knives, which are not only good looking with great aesthetics but at the same time a knife that will function in any weather or climate. Through its marketing and promotion efforts, Mcayain knives will appeal to many customers who enjoy active outdoor lifestyles for example fishing, hunting and tactical exercises. The customers will have internet options that they can use to get interactive with the whole knife making process, they will have options as to what handle materials they want to use, the case materials and other accessories like fire starters and sharpening stones. Mcayain knives will offer three patterns of knives; the first one will be the skinning knife with a 3.5-inch blade, tactical life, with a 7.5-inch blade and the third one, which is a trout and stream knife with a 5.5-inch blade. The steel for the blades will be made using two types of technology mixed together, which are the old and the new. The old will be using forging techniques where steel is shaped by hammering and the new using cryogenic hardening which is using different temperature methods. These knives will have different steel finishes, one being a Teflon coating, which is a durable, non- reflective black finish which will appeal to a lot of the customers who enjoy hunting and who dont like a flashy knife. Another steel finish being offered is the tumbled finish, which is a matte, metallic finish. A mirror polish which has a high polished look and these will be targeted to customers who like shiny knifes. The last steel finish that will be offered will be the bead blasted finish, which is a satin metallic finish for all customers. As handle materials Mcayain Knives will offer black linen Micarta which is a tough durable synthetic material that is bonded together with linen cloth. This coarse texture helps for non-slip purposes and durability features. Another option will be the use of Cocobolo wood; this is a deep rich wood for those customers who want something pretty on their knife handles, paracord wrap/ carbon fiber and aluminum handles that are ductile, tough and offer non-slip features. The cases for the knives will be made from three different materials. The first one will be regular traditional leather. The next material for the cases will be Ripstop Nylon case, which is a lightweight case that packs close to the body and can be attached in different ways. The last option will be a Kydex case, which is a semi rigid form of plastic that is known to be tough and durable. All cases offer multiple hanging options, clips, leg harness and traditional belt loop. Mcayain Specialty Knives is offering its target market a product that is not being offered by the other knife companies in the business. The knives offered could withstand any climate or extreme condition and at the same time offer customers the options to build a customized knife according to their preferences from start to finish. A lot of Knives in the market which are being offered by top companies like Buck knives or SOG knives provide one or two of the options being offered by Mcayain knives. Industry Analysis The the last few years have been a time of transition for the knife industry. Forces within and outside the business have worked to reshape designs, materials and the industrys distribution channels (Calandra, B. (2006). On the cutting edge. Retrieved July 24, 2008 from http://www.sgblink.com). The fixed- blade segment of the industry, which is hunting, fishing and outdoor knives, has seen the most change. There has been increase in sales because of the new designs which use new technology, lighter, durable products with better cutting edges, (Calandra,B.( 2006). On the cutting edge. Retrieved July 24, 2008 from http://www.sgblink.com). According to ( Tabor, T.C. 2007).  January, Choosing the right hunting knife.  Countryside and Small Stock Journal,  91(1),  57-59.   Retrieved July 24, 2008, from Research Library  database) there is still the hardcore hunting, fishing and outdoor consumers who are buying the best quality, high tech knife with new steel and interesting blades and state of the art handles. With this in mind Mcayain knives as described in the product analysis will continue using the best steel and offer new designs that the outdoor consumer wants. The Knife industry continues to evolve with each passing, the outdoor market is looking at lightweight knives like water knives and durable, coated knives that can withstand a lot of water and tear, (Snow, J. 2007,  September. A Cut Above.  Review of Outdoor Life,  212(8),  78). Consumers of specialty knives are willing to spend money on a knife that will make their outdoor or everyday lives easier (Fowler, E. 2007). Knife Talk: The Art and science Of Knife Making. Iowa: Krause Publications). Many of them have multiple knives that they keep in their collections, trucks, boat or one on their belts (Fowler, Ed. (2007). Knife Talk: The Art and science Of Knife Making. Iowa: Krause Publications). Many people who are involved in outdoor activities or live in rural areas have a need for more than one knife and often make additional purchases where the initial purchase was made. A lot of business for specialty knives occurs during gift-giving occasions and when the hunting and fishing season begins (Fowler, Ed. (2007). Knife Talk: The Art and science Of Knife Making. Iowa: Krause Publications). A lot of businesses in the knife industry, even the small ones make sales in the millions each year, (Snow, J. 2007,  September. A Cut Above.  Review of Outdoor Life,  212(8),  78). Despite tight laws in knife carrying due to the senseless September 11 attacks, during which the knife industry worldwide experienced a slow in sales, knives are still selling and the knife market is here to stay with great potential for new businesses ( Kramer, B. (20   March). Buck Knives finds success through lean manufacturing.  Knight Ridder Tribune Business News,1.   Retrieved August 09, 2008, from ABI/INFORM Dateline  database). Market Summary According to Dan Bumps from Blade Magazine the average specialty knife buyer is male and between the ages of 30-70 years old, with education beyond high school. Most are professionals (23.4%), proprietor/ self employed (13.7%), Managerial (10.6%), Technical (14.8%) and Blue collar (19.3%) with other (8.4%) ( D.Bumps, personal communication, July 28, 2008) An average outdoor enthusiast owns an average of 132 knives in his collection; and has a knife collection worth 10,089 dollars; they purchase an average of 27 knives annually and spend an average of 1,473 dollars annually on their outdoor hobby (D. Bumps, personal communication, July 28, 2008). Dan Bumps from Blade Magazine continues to mention that the average household income of this industry is 84,507 thousand dollars and are willing to spend money on a knife that makes their outdoor life easier(D.Bumps, personal communication, July 28, 2008). Mcayain knives will fulfill market needs by introducing their knives to three subsets. The first sub-market is the hunting enthusiastic who comprises of roughly 15% of the total target market. These are the individuals who enjoy deer hunting and want a good working knife for dressing animals, while offering exceptional cutting edge advantage which is durable, comfortable and easy to use. The second sub-market is for those customers who enjoy fishing and comprise of another 15% of our market; these are the sports fishermen and casual weekend users on the lake. They will use the knife for cutting bait, preparing the fish (scaling and gutting) and a knife that is comfortable, light, with superb quality. The final sub-market is for the outdoor enthusiasts who make up the most of our target market at 70%. They are the customers who have to have these kinds of knives whether for show or use. They are the individuals who are perceived serious about the outdoors and use different opportunities to show their knives and skills in outdoor sports or other challenges. Market trends show that outdoor enthusiasts are after knives that are user friendly and can perform multiple tasks. Todays buyer is after as much versatility and quality as can be packed into one package (Fowler, Ed. (1998). Knife Talk: The Art and science Of Knife Making. Iowa: Krause Publications). Market trends also show that the consumer wants multi tools, which is essence is a pair of folding pliers high breed with a Swiss army pen knife. This knife has utilitarian tools such as a saw, bottle opener, screw drivers, knife blade, scissors, and files (Troy, M. DSN Retailing Today, Oct 2, 2000,, Retrieved on July 18, 2008, from http://findarticles.com/p/articles/mi_m0FNP/is_19_39/ai_66034876 ). This market is something that has been well covered by other businesses and is not something Mcayain Knives is willing to venture into because the multi tool is essentially a pair of pliers and we strive to specifically make a hard working knife. Another trend in the knife industry is the tactical knife, which is a knife you have to make do with for whatever you need it at the time, whether that means to cut a person out of a wrecked car or defend yourself from an attack (Pohl, D. (2003). Tactical knives. Germany: Krause publications). This is going to be close to 50% of Mcayains Market. It is the fastest growing portion of the knife market today. According to blade magazine, 82% of consumers will increase or maintain knife buying level over the next 12months. There is potential Market growth in this knife industry that will come from new products, not old (Calandra, B.( 2006) On the cutting edge. Retrieved July 24, 2008 from http://www.sgblink.com ). Calandra says that this new growth will come from Outdoor recreationalist and not just from traditional hunting and fishing categories. The Competition Three companies lead the target market that Mcayain knives are venturing into. Primarily Buck Knives command the majority of all the recreational knife market in every genre. This for Mcayain knives would be like trying to topple coca cola but to steal 1% of their market would mean a huge profit to Mcayain. Buck knives competitive advantage lies in their over 100 years of knife making and 35million dollars in sales in the fiscal year of 2007 according to Hoovers(Buck Knives Inc. (July 15th). Retrieved July 23, 2008, from Hoovers Company Records  database). SOG knives are the second largest competition for Mcayain knives. SOG originally stood for Studies and Observation Group, an elite joint services military group designed for covert operations in the Vietnam War. Sanctioned to develop and purchase their own equipment, SOG created a knife for use in one of the harshest environments in the world. (SOGKnives, Retrieved July 23, 2008 from http://www.sogknives.com/store/index.html). SOG has a well established specialty market, they provide consumers with good quality products that have been brutally tested and designed by top military weapon designers (Hartnik, A.E. (2005). The Complete encyclopedia of Knives. New Jersey: Chartwell Books). SOG has an added advantage of having contracts with several areas of the military providing them with edged tools that can be used in combat situations or outdoor recreation. Cold Steel knives are the third largest competition for Mcayain knives. They are very meticulous in making their knives, there choice of metal is very specific and their hardening and tempering process is chosen for their superior qualities in cutting abilities and blade strength. Their steel is specially made; all their blades are forged and cryogenically hardened which provides them with a very innovative and technologically advanced process which most knife manufacturers have deemed too complicated and expensive to undertake (Pohl, D. (2003). Tactical knives. Germany: Krause publications). Cold steels market share includes the martial artist which opens up a totally untapped market by Mcayain Knives. Another added advantage is that cold steel offers San Mai III, which is laminated steel used in making their larger knives, tougher, more flexible and virtually unbreakable while still retaining their high quality cutting edge. No other knife manufacturers offer this because it is too complicated to do.( Pohl, D. (2003). Tactical knives. Germany: Krause publications). Future competition for Mcayain knives comes from Diamond Blade Company. This company is an up and coming company whose innovation in cutting edge technology has taken the knife industry by surprise (Knives Illustrated, 2008, Retrieved July 23, 2008, from http://www.knivesillustrated.com/ ). They have spent the last five years developing a way to create differential hardeners in their knives and improve the edge holding ability exponentially from traditional knives. Diamond Blade Company has managed to develop steel that is over 300% more wear resistant than conventional D2 steel but still flexible enough to bend at 90 degrees without breaking, which ensures a superior knife(Knives Illustrated, 2008, Retrieved July 23, 2008, from http://www.knivesillustrated.com/ ). Keys to success Critical Issues There are several things that Mcayain knives need to do to succeed:- Mcayain needs to get notoriety for its quality of product being tough, a superior edge and having good design. This will be done by editors of magazines having the product for destruction testing. Mcayain needs a superb advertising strategy that brings awareness of the quality and diversity of its products. This would be both in print media and electronic media targeting not only the conventional knife user for example the hunters, fishermen but also cyclists, gun collectors, golfers or runners who might be interested in a specialty knife. Mcayain will need to design and produce products that meet market demand. Mcayain has to pay attention to the following critical issues:- Constantly monitor customer satisfaction, ensuring that the growth strategy will never compromise service and satisfaction levels. Mcayain has to establish itself as a market innovator that listens to its customers desires and needs. Mcayain needs to pursue controlled growth that dictates that all expenses will never exceed revenue base, this will help protect against recessions. Marketing strategy Mcayain has a limited budget, so the marketing strategy will be simple. Mcayains goal is to meet the needs of every outdoor enthusiast in the market in the future and to get their specialty knives out to every outdoor enthusiast including their target market of hunters, and fishermen. Developing visibility and brand equity is the key. To do so, Mcayains will use pull strategy by advertising in Blade magazine, knife illustrated and Tactical knife Magazine which are the top knife magazines in the U.S on a monthly basis to drive consumer sales and brand awareness. Participating in trade shows and also driving consumers to check out their interactive website. Mcayain is offering three knife patterns, the skinning knife with a 3.5-inch blade, tactical knife, with a 7.5-inch blade and the third one, which is a trout and stream knife with a 5.5-inch blade. The pricing structure of the knives is based on a tumbled finish blade and a cast aluminum handle in a rip stop nylon case. The basic price for the skinner is 130 dollars, trout and stream price is 140 dollars and the tactical knife will be 150 dollars. Additional blade finishes, additional handle materials and case options are add- ons that will increase the price of the knives according to customer needs and preferences. Using its interactive internet site, Mcayain will offer consumers chances to win free custom made knives by having competitions on who will introduce the most customers to the site, discounts for customers who purchase knives on a regular basis using their customer database to increase and drive sales. Marketing objectives The Knife Industry is a very competitive industry which is always changing. It is vast and diverse with many different levels of businesses from the large manufacturer to the single custom maker. Over the next three years Mcayains is targeting a Market share of roughly 2%. This may seem as a small percentage but in actuality it will give Mcayains a profit in the millions. Considering our main competitor Buck knives Inc, made $35 million in sales in 2007, and just to claim 2% of their Market would give Mcayains a profit of $700,000. This would just be one of the competitors Market share not including the rest. This will be done by Maintaining steady growth in each month by developing new products and features and allowing the customers to have more influence in the creation process of their knife. Also Mcayain will grow through increase in new customers who are turned into long-term customers. Financial Objectives Table 1: Production cost for Mcayain Tactical Knife (Most Expensive in the line) Manufacturing cost $ D2 Steel 6 Aluminum Handle 1.50 Handle Bolts 3.50 Rip stop Nylon 1.50 Press studs .75 Drill bits 2 Carbide chip 5 Ceramic belt Forging time:- 5minutes Machining of blade:-30minutes Sharpening:- 15minutes Heat treating :- 10 minutes 7 1.70 10 5 3.40 Machining Handle:- 10minutes Making case:- 30 minutes Assembling parts:- 5minutes Power TOTAL COST 3.40 10 1.70 20 82.45 The price unit of a tactical knife is $150; it costs Mcayain $82.45 to manufacture it. Advertising, Insurance and Workshop Rent are ongoing monthly expenses which equate to $7640. From the Manufacturing costs calculations, Mcayain can make 800 knives a month this divided into the ongoing monthly expenses gives an additional cost of $9.55 per knife. The total production cost for a knife is 82.45+ 9.55= $92.00 This gives Mcayain a profit of $58.00 per unit. This is a profit Margin 38.7% Mcayains major in-house expenses would involve new dyes for the forging process, CNC programming for machining centers for blades and handles. The dyes would cost $2,000 a piece per design ($6,000). CNC programming would cost $1,000 per design ($3,000). This would be a total of $9,000 in expenses. Taking our profit of $58.00 per unit and dividing into our total expenses of $9,000 we would need to sell 155 units to make profit. Mcayain would expect to be profitable within two months of advertising. Positioning Strategy The knife Industry is quite competitive and always changing, in order for Mcayain to obtain a good market share it should create PODs (points of differences in their knives. The number one thing going for Mcayains knives is the superior quality of steel and the cryogenic way of forging it that no other knife company is doing right now. As a web-based company it will offer interactive features that the customer can get involved in. Customers will be able to go in and design their knife from scratch to finish and change features as they wish and Mcayain will custom make the knives according to the customers preferences and mail it to them. Mcayain intends to keep up with customer needs and add new features and interactive capabilities to their Website and Knives. Marketing Mix Mcayain intends to use more than one marketing channel to increase market coverage and decrease any channel costs that they may incur. To do so they will use a multi-channel market system (Kotler, P., Keller, K.L. (2008).Marketing Management, 13e. (p.468-470). Upper Saddle River, NJ: Pearson Prentice Hall). The company will use direct marketing by selling all its 3 kinds on knives on line. The customer as mentioned before will be able to design their knife from the first stage to the final stage according to their preferences. If customers do not want to custom make their own design then they will have options to simply buy the ready-made knives. Customers will be able to go online, read reviews and get every detail of information about the knives. If they have any questions they can either email write or call and customers will be able to order knives through mail and phone. Advertising is one of the major channels that Mcayain intends to use and spend a lot of money on in pushing their product and creating brand awareness. Mcayain intends to advertise in the top three Knife magazines in the US market which are, Knife Illustrated, Blade Magazine and Tactical Knifes. The advertising cost for a 4 color full page advertisement is going to cost Mcayains a total of $ 10,920 a month in all three publications. Mcayain intends to send samples of their knives to Knife magazine editors, outdoor teams and Military tactical teams to test their product. Mcayain believes their product is superior and will sell itself through these channels. Word of mouth will help spread the word about the knife and hopefully drive customers to the Internet site. The company will use the magazines advertising to promote sales by offering customers to send in design ideas and vote on the best, and whoevers design gets chosen receives a free custom made knife. This will drive traffic to the site and hopefully get Mcayain some sales. Mcayain also plans to attend craft/ trade shows to show case their knives to all the knife enthusiasts attending. In the US a lot of knife shows are held throughout the calendar year. This will introduce the knives to any new potential customers and anyone else who would be interested in knowing about the Knives. Financial, Budgets and Forecasts The following sections provide the breakeven analysis, sales forecast, and expense forecast for Mcayain Knives. As a benchmark Mcayain knives will use the Tactical knife pricing to calculate its profit and loss because this is the more time consuming of the three designs, so the comparable percentages or profits of the knives are the same which is 38.7%. 12.1 Break Even Analysis With an estimated fixed cost of $445,640 for, 2009, the breakeven is: Break Even = Total fixed costs/ Unit contribution= 445,640/ 58 =7684 units. Mcayain Knives targets to sell 9,600 knives this comes from calculating how many knives they can make in a year. (800* 12). Therefore the profit for 2009 becomes: Profit = (9,600* 58) 445,640) = $111,160 The calculations are same for years 2010 and 2011. Table 2 shows the break even and profit for the next three years. Table 2. Break even and profit Impact for the next three years. Year Units sold Fixed costs Break Even Profit 2009 9,600 knives $ 445,640** 7684 knives $111,160 2010 10,560 knives* $ 436,640** 7529 knives $175,798 2011 11,616 knives* $ 436, 640** 7529 Knives $237,046 **Fixed costs are estimated for all three years. * Units sold for 2010 and 2011 are estimated assuming 10% market increase every year. 12.2 Sales Forecast Table 4 provides the sales forecast for the next three years for Mcayain Knives. Sales for 2009 are calculated using the following equation: Sales= Price per unit* units sold= $ 150 * 9,600 knives = $1, 440,000 Table 3:- Sales forecast for the next three years. Year Units Sold Price Per Unit Sales 2009 9,600 units $ 150 $ 1,440,000 2010 10, 560 units $ 150 $ 1,584,000 2011 11,616 units $150 $ 1,742,400 12.3 Expense Forecast Table 4 gives the expense forecast for the next three years. Expense for 2009 is calculated using the following equation:- Expense = (variable cost per unit * units sold) + fixed costs = ($92 * 9,600) + $445,640 =$1,328,840 Table 5:- Expense forecast for the next three years Year Units sold Variable cost per unit Fixed costs Sales 2009 9,600 $92 $445,640 $1,328,840 2010 10,560 $92 $436,640 $1,408,160 2011 11,616 $92 $436,640 $1,505,312 Marketing and Sales Organization As of right now Mcayain Knives has no sales or Marketing force in the Organization. The manager/ Owner of Mcayains, Mark Hopper intends to do all the initial Marketing of the product by attending trade shows, dealings with knife magazines and sales pitches to any potential clients. The reason for this is that all the other staff are production staff except for the secretary who makes sure all knife orders are fulfilled and shipped to customers. Mark Hopper who designed and developed the products and the processes that involve in making the knives, feels that his knowledge and experience of theses knives puts him in the best position to communicate the qualities and the designs to his future clients. Therefore he is the best for Marketing Mcayain Knives. In the future Mcayain Knives would like to have a specialized team of people who move upward from their original production positions into sales, management and product design and development positions. This will give the staff in these positions in-depth knowledge of the production processes and the product, which will aid them greatly in their new roles. Contingency Plan Mcayain knives is versatile enough to move with the trends of the market as well as being a trend setter. This is due to the fact that coming up with a new product would only be a $10,000 investment in CNC programming, tooling and die making. Right now Mcayain knives produces only fixed blade knives rather than folding knives or multi-tools, so it does not cover all aspects of the knife market, this could be seen as only having a single sale strategy. Another risk could be caused by legal legislation outlawing the carrying and use of knives; this would have a detrimental effect on Mcayains market. Competition is always a concern; this is because it is very simple in the knife industry to take someones idea and develop it further. To minimize the Market moving and Competition, Mcayain Knives has to be a trend setter in the interactive designs of knives. They have to make sure their products are always exceptional and constantly developing. Keeping the customers excited in what they will do next. For legislation laws Mcayain Knives intends to open a forum on their website informing people of proposed legislations and possible movements within the law.