Recommendations for Kodak
In January of 1994, Kodak’s new CEO, George Fisher, had important strategic decisions to make to ensure a prosperous future for Kodak. Although Kodak was dominating the consumer photographic film market at this time, because of a 6% decline in market share over a five-year span, Kodak was faced with changing their positioning strategy in order to deal with increasing competition.
I recommend that Kodak recover its market share that has been lost to competition by introducing Kodak Funtime Film, to an emerging market and a demographic segment that it had not previously targeted, the casual film users. In order to do this, Kodak must successfully launch a line extension, allocating advertising support, as well as selling the product year-round and in sufficient demand quantities.
The most important goal for Kodak is to recover its market share that has been lost to the competition over the past 5 years. In order to do this, Kodak must first analyze this market share potential. A calculation of the market share shows that Kodak has the potential to have 77.3% of the market share (See Appendix A). Next, Kodak must determine the most successful way in which to launch a line extension to attract this new market, identifying and focusing its resources on marketing channels that will allow the extension to acquire new customers through Kodak brand awareness. In order to defend their position as the market leader, Kodak needs to re-evaluate its current film product offerings and examine consumers’ needs and buying behavior.
The primary impediment to this goal is its competition. At this time, the competitors, such as Fuji Photo Film Company, and Konica Corporation, are becoming increasingly successful at courting their consumers with lower-priced economy films, creating a niche in this market, as well as increasing brand awareness. There may be major concerns with the Funtime Film strategy, as consumers have not been exposed to a Kodak offering of an economy film brand.
In order to effectively launch this line extension, Kodak must build on its core promise, broadening it to new users. Kodak should launch this slightly different product with distinct characteristics, while depending initially, at least, on the customer recognition of the established brand name. This extension will enable brands to increase profitability, and positively impact the brand associations. Line extensions are usually simple to launch, but Kodak still needs to address many concerns with the line extension prior to implementing (Braig and Tybout, “Brand Expansion Strategies”, p. 1). Kodak needs to segment the film-purchasing buyers further by adding a category of price-sensitive, casual users, who cannot afford expensive products and do not necessarily care about the best quality film. Kodak needs to tie the value back to the core brand, in order to keep the new target group from becoming confused and purchasing the competitor’s product. To do this, the product should be positioned as a standard film with a new low price, marketed as innovative technology yet inexpensive. This will ensure that the consumers are secure with their purchase, as they will still be receiving the Kodak brand with the Kodak quality, but at a lower price point.
In addition, Kodak should employ point-of-purchase materials, coupons, and advertisements displaying the low price. This would serve as an effective method to encourage purchase and product line awareness. The advertising campaign for the current offerings, such as the snow angel campaign during the 1994 Olympics, would also be sufficient for the Funtime Film product line, because it maintains the Kodak Brand image. This product should be offered year-round, and in sufficient quantities, since price-sensitive consumers would want more film, not better quality film, during vacation and holiday seasons, as well as for everyday use. Since consumers will have instant recognition of the parent brand, they will be more likely to try this new product. Because of this, the promotional costs can be kept relatively low.
The arguments for and against other solutions are as follows:
* Argument #1: Instead of launching a line extension, Kodak should focus on recovering its lost market share by focusing on marketing and advertising of Kodak Gold Plus.
Counter-Argument: While efforts should be made to retain the customers which currently utilize the Gold Plus product, both Fuji and Polaroid’s U.S. dollar sales have grown at 15% in the past year, while Kodak’s sales have grown at 3%. As there are a “growing number of price-sensitive consumers (Case),” Kodak must address these consumers by keeping a “line on price (Case)”.
* Argument #2: While Kodak should launch this line extension, they should focus no efforts on advertising, leveraging the current Kodak brand to carry the new line.
Counter-Argument: Because Kodak’s flagship Premium brand, Gold Plus, was the standard of the industry, and the Superpremium brand was targeted towards advanced amateurs and professionals, Kodak needs to target a market that addresses the needs of the casual, price-sensitive user. The easiest way to target this group is through advertising directly to consumers who view Kodak as only having a higher-priced product. By enabling the line extension to have brand-image relevance, Kodak’s image as the quality standard would overlap to Funtime Film. Again, the promotional costs can be kept low, because of the ability to leverage the parent brand.
* Argument #3: While Kodak should launch this line extension, they should offer this product only twice a year, at off-peak film use times, in limited quantities, and in value-packs only.
Counter-Argument: Selling this new product year-round would encourage repeat purchases among the price-sensitive consumers. In addition, having continuous shelf space presence and availability would be advantageous, specifically for consumers who are price-sensitive and not yet brand-loyal. With the film not on the shelf at certain times of the year, these consumers may be tempted to look at competitors. Finally, offering only value-packs may intimidate this target market; offering single packs would encourage trial of this new product.
* Argument #4: Launching the line extension will allow cannibalization (i.e. launching a new product which attracts one’s existing customers rather than new ones).
Counter-Argument: There is a clear consumer need for this economy product tier, as demonstrated by Fuji’s 15% growth in the past year, largely because of its key brand in this economy tier, Fuji Color Super G. Kodak “must… use their best judgment in deciding whether to launch a given line extension…until feedback data provide(s) a clearer market assessment” (Braig and Tybout, “Brand Expansion Strategies”, p. 14). Based on this need, as well as the “growing body of price-sensitive consumers, (Case)” Kodak should capitalize on this opportunity.