OfficeStar, a regional chain of office supply stores, has decided to launch its own ink cartridge line of products. The goal of the company is to compete with the usual actors in the market by offering a lower-priced product to its core customers, with which it hopes to capture significant market share in that business. The key figures for this market are as follows:
.. The market for ink cartridges in the region is approximately 2.3 million units sold every quarter (to simplify, we assume 2.3 million customers buy one ink cartridge each). .. The production cost of an ink cartridge is $6.50; it is sold at a price of $19.95 in stores, leading to a gross margin of $13.45. .. OfficeStar has a house list of 500,000 identified potential customers, to whom the company could send samples if that were deemed profitable. .. Sending a sample costs $3 in shipping and handling.
Just before launching the product line, OfficeStar hired a market research company to perform simulations and forecast the future market share of the product. Results were disappointing. The market research company has identified two key issues: .. Prospective customers are unwilling to try this product, and most appear likely to remain loyal to their current provider (usually, the printer manufacturer). .. Even for those customers willing to try the product, market research pretests show a low level of repeat sales. Exercise
As the new product manager of the OfficeStar ink cartridge product line, you wanted to identify the opportunities and ways to penetrate stronghold of OEMs. Data from 40 respondents was captured and is available in OfficeStar Data.xls file. Carry out segmentation study and report your findings in the form of 1 page memo.