Simulation Managing Segments & Customers
It is factual that the market segment that Minnesota Micromotors Inc. serves exhibits stiff competition where more than 100 counterparts operate and focus on differentiation as a tool of obtaining competitive advantage. Manufacturers of BLDC (Brushless, direct current) motors in this market segment tend to offer different but similar products which resulted to their classification in three different categories. These categories include multinational tier 1, 2 and tier 3. Being in multinational tier 3, Minnesota Micromotors manufactures BLDC motors used for orthopedic purposes only. As an aspect of their differentiation strategy, Minnesota Micromotors decided to extend their customer base by offering unique custromers services, increasing product functionality and suitability among others. This attracted the sense of uniqueness by other competitors in tier 3 market segment where most of them started producing high torque motors. Precisely, these newly introduced motors were coil multilayered and they were designed to operate under high temperatures efficiently. Thus, this called for impelemenation of appropriate marketing strategies for Minnesota Micromotors Inc.
Go-To-Market Approach
The typical customer-reaching strategy employed by Minnesota Micromotors is based on two channels. The first channel is direct sale to original equipment manufacturers (OEMs) and the second channel is indirect sale to OEMs through distributors. The sales force for the wholesale buyers of the motors encompasses 11 staff members. The budgeting for sales and administrative expenses under go-to-market approach is approximately over $2.5 million annually. On the other hand, the company spends $200,000 on research and development annually.
Therefore, in order to improve customer relations, Minnesota Micromotors Company ought to increase the size of the sales force by at least 33%. This is based on the fact that the number of the employees serving the customers determines the time taken during the selling process. Citing from the fact that most of the large-volume purchasers bought motors from the distributors, the company ought to centralize or focus basically on direct selling without high dependence on intermediaries (distributors) in order to effectuate the strategy of increasing the size of sales force.
Furthermore, under the distribution channels, Minnesota Micromotors ought to extend these channels to be more than just two. This means that annual expenses budgeted on sales should be diverged to extending the distribution channel. This will bring the company closer to their customer base and advance their relations. Thus, it is noteworthy that depending on distributors in order to reach their customers is one of the factors that affect the competitive advantage of the company significantly. This is exhibited by the fact that most of the large-volume purchasers buy MM’s motors from their distributors but not from the retail outlets of the company. This means that the relationship between the company and its customers has not been close enough. Therefore, extending the distribution channel will bring the company closer to their potential clients.
The other implementation that the company ought to make under this approach is to increase the annual expenses budgeted for research and development. The $200,000 spent on market research can be added to approximately $300,000 which will help in assessing the preferences of the customers with regard to the distribution channels and relations with the company. This might be argued from the perception that if the customers have a direct contact with the company, the discounts offered on the products bought is higher than that offered by the distributors.
Elements of the Product
It is factual that citing from the purchasing criteria in the market, the features of a motor that the customers focus most includes thermal resistance, cost and power-to-size. Citing from the differentiation strategy that was adopted by the competitors in tier 3 market segment, one of the features that was advanced was ability to operate under high temperatures effectively. Therefore, one of the features that Minnesota Micromotors should advance in their motors is the torque together with the rating of the motor. The torque should comply with the rating of the motor in order to prevent heating up and breakdown. On the other hand, citing from the application of BLDC motors, Minnesota Micromotors should emphasize on power-to-size factor during manufacturing of their motors. In orthopedic medical application, power, size and weight are critical factors that customers consider while purchasing the motors. Therefore, through research and development, Minnesota Micromotors should assess the ratio of torque to the size of the motor used by the competitors in the market. This means that if the company minimizes the ratio, the motors will be regarded to be more efficient thereby increasing the competitive advantage of the company. Some of the things that should be assessed in research and development include the market demands with regard to the size and power of the motors, sizes and power of motors produced by the competitors, and cost effectiveness level.
Pricing and Market Positioning
Minnesota Micromotors Company deals with the famous Orthopower Micromotor which costs $142 with discounts ranging between 4 – 16%. However, it is factual that other competitors sell their motors at $118. This shows that even though the competitors do not offer higher discounts as Minnesota Micromotors does, the discounted value of this company is higher than that of the competitors. If the price of MM’s single motor is discounted at 16 – which is the highest, the price becomes approximately $119; a dollar above the undiscounted value for the competitors’ motors. Consequently, it is factual that the only way to increase the competitive advantage is to lower the cost of the product slightly below that of the competitors. Discounting might not be sufficient for Minnesota Micromotors since the figure is higher regardless of the high discount offered. Therefore, citing from the fact competitors have advanced the features of their motors, Minnesota Micromotors ought to take pricing strategy as a reinforcement of their product differentiation strategy. In this case market positioning for the company can be achieved through strategic pricing. Therefore, the company ought to do away with the discounts offered for their products and offer fixed prices that are slightly lower than those of the competitors. Precisely, Minnesota Micromotors should sell their motors at $115; 3 dollars below the price of motors from other 3 tier market companies.
