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Dexit- A Marketing Opportunity Case Solution
Renah Persofsky, the Chief Executive Officer (CEO) of Dexit Inc has numerous critical decisions on her plate that need to be taken for the new electronic payment system for retail transactions to be successful. Overall Renah must decide which merchants and customers to target for the product, product functionality, pricing strategy, promotion strategy and the distribution network for the product. The company must first decide who the target customers and the target merchants would be. The segmentation of these customers needs to be addressed based on the demographics, psychographics, lifestyles, etc. Retailers that need to be also targeted must be selected and whether they should be targeted based on volume or customer lifestyles is a question that needs to be answered.
Following questions are answered in this case study solution
What decision(s) have to be made?
What factors are working in favor of Dexit? What factors are working against it?
What is the market opportunity?
How could Dexit segment the market? Which segments could it target? What might be its positioning?
What course of action should Renah take, and why?
Given that course of action, what should Dexit’s marketing mix be?
Case Analysis for Dexit- A Marketing Opportunity
The product functionality must also be decided, and any additions need to be finalized to add further to the convenience for customers. Pricing is another aspect that needs to be considered carefully as charging customers may result in fewer customers signing up for the service and the major competitors that constitute debit and credit cards are not charging customers for the service. Next, a price charged to merchants also needed to be decided upon but for that, the costs to merchants need to be estimated.
Another major decision is the promotional plan for the company. Renah must decide whether a push or pull strategy must be adopted and figure out which one of these would be best suited for the company. The push strategy would need to engage merchants and would include sales promotions, direct marketing, and traditional advertising to these merchants. The pull strategy, on the other hand, would encompass television, billboards, posters, flyers, kiosks, etc. Hiring a sales force is another decision and whether it is necessary also needs to be decided upon. Corporate customers will also need to be targeted for which a trained sales force would be required. The sales force will also add to the costs for the company. Therefore, a decision needs to be made after considering the costs.
2. What factors are working for Dexit? What factors are working against it?
There are numerous factors that are working for Dexit and a few that are working on it. Firstly, Dexit, through its business plan proposition, has been able to attract two of Canada’s largest banks as investors. This highlights the potential for the business and the fact that these banks view it as a viable business option. Moreover, Telus Mobility, a subsidiary of the country’s second largest telecommunications firm has also shown a willingness to invest in the company. Investors for a startup are crucial, and the fact that Renah has been able to sell the business idea to these large companies is a very good sign for the future of Dexit.
The convenience factor that the company wishes to provide to customers using electronic tags is also a plus point for the company. Customers are now looking for swift checkouts and self-service at retail outlets, especially if its low volume purchases with average transaction costs below five dollars. The proposed system that utilizes Radio Frequency Identification (RFID) technology and creates a provision for fast, convenient and secure transactions is something customers will welcome.
The electronic payment industry is currently dominated by credit and debit cards and the fact that Canadians are the world’s heaviest users of electronic payment shows the market potential for Dexit. Whereas the debit and credit cards are used for high volume transactions, Dexit can tap the low volume transactions segment with ease as there aren’t any major competitors in the market for the same. Monday arrived in 1995 but has not been very successful due to the low customer receptivity of the product. This is one aspect that can work against Dexit as it would have to position the product amongst customers very carefully and market it diligently. The pricing of the product needs to be managed very carefully and if customers feel they are being charged for something additional they would not sign up for the service. Pricing, therefore, is a tricky decision for Dexit and would be one of the most important and crucial decisions.
3. What is the market opportunity?
There is a tremendous market opportunity for Dexit in the segment of high-frequency and low volume transactions. Customers are always exploring avenues whereby they can save time and effort and purchase products that would enable them to do so. The electronic payment industry currently is dominated by debit and credit cards but no such products are available for high-frequency low-volume transactions. Therefore, there is a market opportunity. Although other alternatives such as Mondex and VisaCash do exist, they haven’t been able to capture the target market completely. In essence, no one has been able to find a way to effectively service small-ticket purchases and Dexit can manage to make inroads into this market.
The market size in itself is expected to grow to $270 billion according to research. Of this, 60 billion transactions would be of average ticket prices of $4.50. This highlights the market potential and as urbanization grows this figure is expected to grow further. Moreover, as the case suggests, Canadians are the world’s heaviest users of electronic payment systems and the market is well inclined towards the use of technology to simplify and speed up transactions. Research has also revealed that the average volume of debit transactions was smaller in Canada when compared to other developed countries. Therefore, from a customer standpoint, the market is present and is expected to grow further.
From a merchant point of view i.e. the presence of retailers, there are around 350,000 retailers in Canada that accept payment via debit or credit cards. 20% of these that amounts to 70,000 retailers deal primarily with low volume transactions. In addition to this, the debit card users amount to 17.6 million people and even if half of these convert to Dexit it would be more than 8 million customers. This further emphasizes the market size and potential for Dexit to explore and capture given the correct promotional strategy.
4. How could Dexit segment the market? Which segments could it target? What might be its positioning?
For Dexit to be successful, it needs first to identify its target market and then design promotional campaigns to attract them towards the product. Defining the target market is yet another crucial decision for Renah and needs to be handled very carefully. If the target market isn’t defined appropriately, Dexit will not be successful. It needs to ensure that customers that they target would be willing to use the product and through its unique selling proposition, it needs to convince them to do so.
Renah needs to understand what problems the customer has with regard to electronic payment systems and how Dexit would be addressing these problems. Long check-out lines that lead to excessive time consumption are one problem Dexit can focus on addressing and highlighting in its promotions.
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