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The Orthopedic Motor Market Minnesota Micromotors, Inc. and Brushless Motor Technology Case Solution
The major product of Minnesota Micromotors which is responsible for the market the most of the revenues of Minnesota Micromotors is Orthopower Micromotor. The revenue generated by this product is originated from five types of customers segments. Around 70% of Minnesota Micromotors revenue was originated from customers who prefer to purchase in bulk. This segment of the market is further divided into four sub-segments. The customers buying in high volume account for 72% of the total market and worth around $130 Million. The other segment is small volume customers who do not buy in higher quantities.
To execute an accurate segmentation strategy, it is important to consider the following strategy. The company needs to decide on product specifications, which customer groups the company wishes to target, which brand attributes it wishes to research into, company’s analysis of the brand awareness levels, what amount of market share it wish to capture, intended profitability, which supplies its product, where it places the product, what margins it offers and how much costs it wishes to incur in R&D and other expenses.
Following questions are answered in this case study solution
Segmentation Strategy and Positioning
Buyer Behavior and Satisfaction
Case Analysis for The Orthopedic Motor Market Minnesota Micromotors, Inc. and Brushless Motor Technology
Orthopaedic OEM in the industry is produced as a result of a joint effort between the marketing and R&D Department. While the marketing department analyses demand in the target segments, the R&D Department develops internal capacity to produce a product with the relevant features.
Consumers evaluate each product on a set of 3 attributes. Each segment has its set of ideal attribute points and tries to purchase products that they perceive are closer to these points. If the consumer cannot find the desired product, they will substitute it for the next best alternative that is available at that sales channel.
The market department needs to be responsible for building a healthy perception of the company’s products in the minds of the relevant customers. While original attributes of a product are at the core of attracting the targeted segment, brand perception is what translates ideal products into sales. The company can build a strong product but if the target market does not perceive that the product is superior, it will lag behind products that are perceived to be superior. Therefore, an effective segmentation strategy will find the potential segment of the market and build a strong perception about the product in that segment.
By carefully analyzing the Motor Market customer segment size, it can be seen that in the large-volume customers, MM has the highest market share in segment A and this segment generates revenues around $4 Million. The second largest market share in the large-volume belongs to the Segment D, which generates around $2 Million of revenues. The Segment D is the untapped segment as of now and possesses huge potential for profitability. The industry revenue in this segment is around $39 Million and MM is only able to generate 2$ Million revenue. There’s plenty of room in this segment to capture the customers. The segmentation strategy should focus on this segment.
Moreover, the small-volume customer segment also seems very profitable. The industry revenue under this segment is around $30 Million and MM can get only 3$ Million of revenues. Therefore, as it is clear that the company should focus its marketing efforts on the segment D and the small-volume customer as these two segments have huge potential for revenues
While a positioning statement has an impact on all segments, if selected carefully it can help significantly boost the perception of a specific attribute in the minds of a specific segment. The positioning statement of the company should focus on the needs of the customer belong to segment D and small-volume customers. As the customers belong to this segment, are very price sensitive therefore the pulse of the positioning statement should be low prices. Thus, to offer low prices to these segments, MM should take extra care while assigning the margins to each channel because margins are paid from profit.
2. Buyer Behavior and Satisfaction
There are several attributes that go in to deciding the customer decision to purchase of motors. The customer usually needs a customized product which requires electrical engineer at original equipment manufacturer to interact with the application engineer at the motor manufacturer. The reason for this interaction is that the buyers usually needs a design that is compatible with their parameters. The design process of the motor is very complex and a lot of sophistication is required to build the small orthopaedic power tool. Therefore, the buyer behavior is significantly determined by these value added services.
The original equipment manufacturers usually demand impeccable performance and functionality. There criteria for purchase depend on three features. Firstly, the thermal heat resistance is the foremost essential feature in the manufacturing of the motor. To make sure that this feature performs well, the company must ensure that the motor’s rating must be maximum so that the expected load cannot cause the motor to heat up quickly and break down. Therefore, a safe measure would be to design a motor that cannot reach its maximum operating temperature in the device that is carrying the motor.
Secondly, the purchase behavior of the buyer is influenced by the power to size ratio of the motor. Usually, the customer prefers a higher power to size ratio. Thus, these motors with a higher power to size ratios are very useful in making devices where space and weight are critical factors. Mostly, during the demanding orthopaedic procedures, small and light weighted devices are preferred by surgeons. Therefore, while designing the motor both of the above factors thermal resistance and power to size ratios are very critical as they derive the customer satisfaction. In this case, the customers from segment A are willing to pay a premium for the higher power to size ratio. Segment B preferred motors with higher thermal resistance and power to size ratio. Customer D and small volume customers are more price sensitive.
The customer buying behavior can also be influenced the sales representative and the channel where the product is available at. For example, the segment A’s customers require higher sales support as they require customize product that is not possible without the interaction of the sales staff with the customers’ team. Hiring a pool of talented sales team members is a critical part of the sales strategy. A sales team member plays an influential role in ensuring that customers are willing to stock the product. By offering unpatrolled sales support, MM as a company can ensure greater product availability. The Sales department is responsible for dealing with the customers to ensure that merchandise is available at respective channels and corresponds with any marketing push. Successful companies often view retailers as 3rd customers since historical trends suggest that a “push strategy” can work as well as a “pull strategy”.
Since the marketing strategy focuses more on the segment D and small-volume customers, therefore the attributes that derive satisfaction of these two segments must be ensured. This would result in the increase in the market share of MM and hence derive the profitability. It can be seen from Table 2 that as a result of targeting these two segments the sales are increasing for the next quarter. As shown in Table 2, the existing customers in small-volume customer segment increase from 1491 to 1573 in the first quarter of 2013. At the same time, the company can make new customers as well. The new customers of the company increase from 6806 to 7524. Thus, a strategy design for the two segment who prefer lower process seems to be successful.
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