The Marketing Environment

 

             The Cannabidiol (CBD) market is rapidly growing attracting entrepreneurs wishing to capitalize on the growth. The reclassification of the substance by the World Health Organization has led to countries such as South Africa legalizing the use of CBD for medicinal purposes. However, there are strict regulation that must be complied to operate in the country (IV V.O.F., 2019). Our company is aiming to take advantage of this market gap, however a good marketing strategy is essential to ensure short-term and long-term survival of the business.

Question One

Gaps in the Marketing Process

            CBD products are relatively new products in the South African market, hence the need to focus educating customers to foster understanding. Most consumers do not understand the nature, working, benefits, and safety of the products. The gap has led to increased misinformation and misunderstandings impacting the market negatively (Roetzer, 2014). The second gap that exists is ensuring compliance to the regulations and compliance measures in place. The company will have to ensure it sets up testing laboratories to ensure the products only contain CBD. The company will also have to source its products only from reputable suppliers in order to compete favorably with established businesses such as GooLeaf. The standards will ensure the company delivers a quality finished product resulting in consumer loyalty.

The third marketing gap identified is establishing vertical supply chain. The ministry of health is stringent in the application of regulations despite CBD products being legal. The company growing its own products will mitigate the risk of low quality raw materials from suppliers. The company may have to outsource the farming because it is still illegal to grow hemp in South Africa. But the benefits outweigh the risks because it might be difficult to find a supplier that meets the rigorous standards required of the finished products. The company can also venture into organic hemp products, thereby becoming a market leader in the country and the region in future.

Macro-environment of the Business

            The first macro-environment variable that affects the business is the political and regulatory factor. There is uncertainty concerning future legality of the products as wholesale distribution was only passed on temporary resolution. The department of health also places stringent operating standards that if the business does not adhere to can lead to it losing its license. Another variable is technological factors. The company has to invest in the latest technology such as in its lab testing laboratories to ensure it adheres to set standards and delivers a superior finished products. The variable is the legal aspect such that the company can face crippling lawsuits especially for a product that is less understood. The final variable is economic factors. Although the market for the products is growing, consumer needs and preferences can change overnight leading to losses especially for an expensive venture such as cannabidiol products.

Question Two

Behavioral Segmentation

            The segmentation classifies the South African CBD oil consumers into groups based on the behavioral patterns they display. The first behavioral trends classified are those who use CBD oil to maintain their skins through using CBD oil skin care products. They use the oils as skin care products to protect against skin conditions such as acne and inflammations. The other behavioral segmentation is that of sportsmen and third segment is those who want to care for the children and the pets. The segment of consumers purchases CBD oil products because of the benefits they derive and satisfaction they get by using the company’s products. Over time they develop loyalty for the brand because they cannot products of the same quality elsewhere.

Positioning Method

            The first positioning method that suitable to the market as a company that offers high quality products and value. By offering products that meet the needs of the targeted market such as sportsmen and those suffering from various conditions such as insomnia and anxiety, the company will be able to position itself strategically. The products also complying to set standards in the market will be able to position itself as one that significant value at the market price (Pertwee, 2016). The company also using a vertical supply chain will ensure consumers only receive the best products. The raw materials are grown in ideal conditions to produce the best quality of CBD oils currently available in the South African market. The products undergo rigorous testing at the laboratory to ensure there is no presence of harmful substances such as metals.

            Another way the company will position itself is against competition. The main competitor in the South African market is Goodleaf (Motumi, 2020). The company is the market leader and has already established market niches that it targets. The new company will have to gain the trust of CBD oil consumers by offering all the relevant information through multiple channels such as online and in store. The company aims to offer quality products at a competitive price to effectively compete with already established businesses in the market. Furthermore, the company will have to diversify its product offering to serve various segments in order to compete effectively. Finally, the company will engage in an aggressive expansionary plan in Cape Town and Johannesburg to be closer to the customers they serve.

Question Three

            The first stage will be aggressive marketing campaign to create awareness among CBD oil users about the availability and value proposition of the company’s products. Creating awareness lets the targeted consumers of the availability of the new product. The second stage will be creating interest in the products. The stage communicates the value proposition to the customer letting them know that the product can perform better than those already available in the market. Customers will then evaluate the products to make a decision whether to purchase. At this stage, the customer will make a decision to buy the company’s product to see whether it is better than already available in the market. Therefore, the fourth stage is the trial phase where the consumer tests the product to find out if it meets his or her expectations (Ferrell & Hartline, 2014). Finally, having tried the products, they can now adopt it making frequent and full purchases (Kurtz et al., 2019). The marketing department will try to help the customers in the market move through these stages as fast as possible.

            The product life cycle implies to the time takes for the product to move from introduction to being retired from the shelves. The four stages include introduction, growth, maturity, and decline. The product life cycle will hopefully move from introduction, growth, and then maturity. To ensure that the product does not enter the decline phase early, the development and testing will be very vital to ensure that the company introduces a quality product that solves an existing problem in the market. The company will also strive to competitively price the new product to fuel growth and then maturity. The set price can determine the sales as consumers may find cheaper substitutes available from competitors.  However, all products phase out at some point due to factors such as competition, saturation, and falling sales. The company will invest in research and development to ensure that there are new product offerings to replace any product that may be experiencing the decline phase. Information about the life cycle of the product will inform decision-making regarding pricing, promotion, expansion, and cost-cutting measures. 

Question Four

            The appropriate pricing strategy for this new product will be price skimming. The company will first set a high price above the market average as most consumers in the South African associate a higher price to improved quality (McGrath & Gourlay, 2012). The company will then determine the average number of consumers willing to pay the higher price and lower it stepwise to derive maximum profits from each segment. As a result, the initial sales of the new CBD oil product will be lower, but the company will be able to break-even quickly because of higher profits realized.

            The pricing strategy will strive to enhance sales of the products as well as creating a foundation for future growth of the company. The guidelines for setting the prices will consider the target customers of the company’s products, the relationship between price and quality, and the prices charged by the competitors (Pride & Ferrell, 2014). The pricing strategy will be pegged on the ability to drive revenues through sales rather than merely setting price. Though the company will set a price above the market price, it will eventually lower it to an equilibrium that attracts the optimal sales.  

 

 

 

 

 

 

References

Ferrell, O. C., & Hartline, M. D. (2014). Marketing strategy: Text and cases. Mason, OH: South-Western/Cengage Learning.

IV V.O.F. (15 Nov. 2019). CBD Oil is Legal in South Africa. Here’s What You Need to Know. BizCommunity. https://www.bizcommunity.com/Article/196/398/197975.html. Accessed 12 Oct. 2020

Kurtz, D. L., Berston, S., & Boone, L. E. (2019). Contemporary business. John Wiley & Sons. Print.

McGrath, R. G., & Gourlay, A. (2012). The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business. Boston: Harvard Business Review Press.

Motumi, M. (24 Mar. 2020). Cannabis Oil Business on the Rise in South Africa. IOL. https://www.iol.co.za/the-star/news/cannabis-oil-business-on-the-rise-in-south-africa-45452872. Accessed 12 Oct. 2020

Pertwee, R. G. (2016). Handbook of cannabis. Oxford University Press. Print.

Pride, W. M., & Ferrell, O. C. (2014). Marketing. Australia: South-Western Cengage Learning.

 Roetzer, P. (2014). The marketing performance blueprint: Strategies and technologies to build and measure business success. John Wiley & Sons. Print.