- 15 Marks
Question
Ade John is a graduate of XYZ University. For his final project work in the Department of
Electronics and Electrical Engineering, he designed a cell-phone that is rugged, cheap,
handy and not sophisticated.
During his national service year, he kept toying with the idea of manufacturing the cellphone. To ascertain that there is a market for the phone, he carried out a series of market surveys among rural farmers, artisans, market women, etc. Each time, he was convinced that a market actually exists for his design. He also made contact with some manufacturers of cell-phone components. He entered
into an agreement with CKT Japan to import cell-phone accessories to enable him
assemble them in Nigeria. DAB phone is the first of its kind in the Nigerian market and
production and assembly commenced in a small room in his uncle‟s house at Ikare.
The first batch of phones manufactured by DAB Company was supplied to cell-phone
vendors in cities on „sale or return‟ basis. To encourage distributors to accept the
phones, a 15% margin was allowed. In addition, independent sales persons (hawkers)
were given between 10 -12% margin to sell the product. In spite of the low price of DAB
phones, demand was disappointing at the end of the first year. Nevertheless, Ade John is
still optimistic about the commercial viability of the phone if only he could develop an
effective strategy to market the DAB phones
Required:
a. Identify and explain TWO reasons for the slow growth of sales of DAB phones. (4 Marks)
b. With the aid of an S-shaped growth curve, evaluate market development of DAB phones. (6 Marks)
c. Recommend the strategies that Ade John can use to improve sales. (5 Marks)
Answer
a. Reasons for Slow Growth of Sales of DAB Phones
- New Product Stage – As a new product, sales are initially slow because few early adopters are likely to purchase at this stage.
- Distribution Strategy – Using city-based vendors and hawkers limited reach to the target market (rural farmers and artisans), impacting effective distribution and sales.
b.
(Note: S-shaped growth curve is the same as S-shaped product life cycle
curve. The curve‟s origin is 0,0 point of the diagram).
S-Shaped Growth Curve for Market Development of DAB Phones
| Stage | Description |
|---|---|
| Introduction | Slow initial sales, as only innovators (7% of users) adopt the product. |
| Growth | Sales increase as early adopters and the majority begin purchasing. |
| Maturity | Sales peak as the remaining majority and laggards buy the product. |
| Decline | Sales drop due to market saturation and competitors’ activities. |
- Current Stage for DAB Phones: Introduction
- Evaluation: Due to inadequate marketing, DAB phones remain at the introductory stage. Effective strategies are essential to achieve growth.
c. Recommended Strategies to Improve Sales
- Product Quality Monitoring – Regularly assess and improve product quality.
- Penetration Pricing – Maintain low pricing to attract the target market.
- Focused Distribution – Channel distribution efforts toward rural farmers, artisans, and market women.
- Competitive Margins – Increase distributor margins above those of competitors to incentivize promotion.
- Targeted Advertising – Use radio, TV, and periodic promotions to increase brand awareness.
- Tags: Market Entry, Product Development, S-shaped Growth Curve, Sales Strategy
- Level: Level 2
- Topic: Corporate Strategy Formulation
- Series: NOV 2015
- Uploader: Kwame Aikins