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Unit 4 Assignment

Matthew Rhoades

Kaplan University

May 16, 2016

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Abstract

According to Harvard Business Publication (2014), Minnesota Micromotors, Inc. (MM)

is a company that manufactures motors used in medical devices. MM’s revenue had been

growing at the industry average for the last three years until the most recent quarter when they

suffered a decline in revenue. The leading features for MM’s product are a high thermal

resistance and power-to-size ratio. This paper will discuss a marketing strategy for MM.

Marketing Strategy

In MM’s current market, a large amount of their business comes from modified rebuys.

MM’s current customers buy spare and replacement parts for their existing machines as well as

parts for new machines. According to Winer and Dhar (2011), a modified rebuy is a purchasing

decision where a customer is buying the same product but some of the details in the sale have

changed (pg. 132). For MM’s customers, the purchasing situation is constantly changing because

of innovations at MM and the changing needs of their customers. In modified rebuy cases, it

must be considered that customers will consider other suppliers before making a purchasing

decision (Winer & Dhar, 2011, pg. 132). It is imperative for MM that a marketing strategy

considers the needs of current customers so market share is not lost.

There were some disturbing trends in the previous quarter. While small customers and

most of the large customer segments were satisfied with the price of the motors, segment D

found them to be too expensive. Segment D’s discount was increased from 16% to 18% reducing

the price of the motors to $116 in that segment. Segment B was not satisfied because some of

their motors overheated. Because MM relies on the thermal heat resistance for differentiation,

the thermal resistance feature spending was increased by $10,000. Because this increase in

funding created a deficit in the budget, salesforce training was decreased by $10,000. Although

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segments B and D were satisfied at the moment, they had complaints about their technical

support after sales. In an effort to provide more support from applications and sales engineers,

spending to retain large customers was increased to 54% while spending to acquire large

customers was reduced to 46%. Small customers were very satisfied so no adjustments in their

budget was necessary.

Results

MM’s marketing strategy was marginally successful. Revenue growth this quarter was

2.44%. The average revenue growth in MM’s industry has been 5.5% (Harvard Business

Publications, 2014, pg. 1). While MM didn’t achieve the average level of growth, there was no

drop in revenue as with the previous quarter. Sales to large customers increased by 5% while

sales to new customers increased by 1%.

There were some successes and some failures in the marketing strategy for this quarter.

The increase in discount for segment D proved successful, market share increased by 1.2%.

However, the spending increase for the thermal resistance feature was not successful; segment B

is still dissatisfied with motor quality. In addition, the increased spending on after-sales support

was not successful, customers are still complaining about after-sales support.

Improvement Strategy

Because of MM’s reliance on differentiation as a competitive advantage, complaints

about motor failures can cause lasting harm in the market. MM’s reputation for quality must be

protected. One strategy that could lead to marked performance improvements would be

reengineering business processes(Lamb, Hair, & McDaniel, 2014, pg. 24). Such a reengineering

of the thermal resistance feature would involve restructuring in sales and engineering to make

customer needs more of a factor in the engineering of this feature. A large investment would be

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required in this feature for such reengineering to occur. To accommodate this, $30,000 can be

transferred from the power-to-size feature and moved to the thermal resistance feature. The

power-to-size feature seems to be more fully developed and doesn’t require large investment at

this point.

A customer in segment D has reported that they have found an overseas supplier offering

a motor of similar quality for a cheaper price. This is a disturbing trend, while it’s not causing a

large effect on the market right now, it has the potential to cause grave damage to future

business. While we may not be able to compete with price, there are some strategies that can be

effective against such competition. To combat such competition, businesses need to tout the

advantages of dealing with local vendors as opposed to looking overseas (Dawar & Frost, 1999).

Dawar and Frost (1999) contend that companies can differentiate their products by expanding

their relationships with customers and frequently adjusting the product to meet their needs. In

addition, MM may be able to find ways to differentiate their products in ways their overseas

competitors would not anticipate by examining their customers’ total experience (McMillan, &

McGrath, 1997). According to McMillan and McGrath (1997), to find new means of

differentiating, marketers should start by mapping customers’ total experience with the product

and analyzing their experience. To accommodate this project, the salesforce will need to be

trained to analyze and report on the customer experience. $30,000 should be taken from power-

to-size research and applied to integrated marketing communication and training. Additionally,

the sales force emphasis should be adjusted to 28% in segment D and 24% in each other

segment.

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Derived Demand

According to Winer and Dahr (2011), for industrial products, demand is often derived from the

demand for a consumer product it is associated with. An example of derived demand would be a

company that sells fasteners to companies like IKEA who make furniture for the consumer

market. The demand for their product is derived from the consumer market. Marketers must

make decisions based on not only the demand for their own product, but also from consumer

markets from which their demand is derived. Because MM’s product is a component used in

OEM medical equipment, its demand is derived from the medical device industry. MM must not

only be concerned with buying behavior not only in their market, but in medical device market.

NAICS

Lamb, Hair, and McDaniel (2014) contend that the North American Industry

Classification System (NAICS) is a tool for marketers that can help analyzing and segmentation

a target market. The North American Industry Classification Standard for (NAICS) is 335312,

“Motor and Generator Manufacturing” (NAICS, 2016). According to NAICS (2016), that this

category is primarily made up of businesses that manufacture electric motors and similar

electrical devices such as generators.

Conclusion

The previous quarter’s marketing strategy lead to a decline in revenues and market share.

Some changes were required to get the business back on track. MM’s market strategy for the

current quarter focuses on modified rebuys from their current customers while still providing

resources for the acquisition of new customers. This strategy showed some improvement,

revenues increased but not in line with growth from previous years. To further improve, MM

should consider reengineering of the thermal resistance feature. Additionally, MM should

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consider a robust strategy for competing with overseas vendors. MM still has a strong business

model and with astute management can continue to show growth.

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References

Harvard Business Publications. (2014). The Orthopedic Motor Market: Minnesota Micromotors,

Inc. and Brushless Motor Technology.

Dawar, N., & Frost, T. (1999). Competing with Giants: Survival Strategies for Local Companies

in Emerging Markets. Harvard Business Review. Retrieved from

https://hbr.org/1999/03/competing-with-giants-survival-strategies-for-local-companies-

in-emerging-markets

Lamb, C. W., Hair, J. F., & McDaniel, C. (2014). MKTG7. Mason, OH: Cengage.

McMillan, I., & McGrath, R. (1997). Discovering New Points of Differentiation. Harvard

Business Review. Retrieved from https://hbr.org/1997/07/discovering-new-points-of-

differentiation

NAICS. (2016). 335312 Motor and Generator Manufacturing. Retrieved from

https://www.naics.com/naics-code-description/?code=335312

Winer, R.S., & Dhar, R. (2011). Marketing Management (4th ed.). Boston: Prentice Hall.

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Appendix ADecisions

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Appendix BResults of Decisions

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