Kodak

Executive Summary

Kodak is considering a marketing strategy to regain market share in the consumer film market. The leading strategy under consideration is based on offering Funtime film to the price-sensitive market segment currently untouched by Kodak. Kodak should abandon the Funtime film strategy and concede the price-sensitive segments. Kodak should be more concerned with increasing revenue and profit rather than regaining lost market share. Kodak should expand the premium market segment by offering a mid-grade film between the "Gold Plus" and "Royal Gold" products to bolster brand equity and yield higher gross margins.

Analysis

We examined three alternatives (i) give Funtime time to build market share (ii) Abandon Funtime completely and (iii) Reposition Kodak product line.

Alternative 1 - Give Funtime film time to build market share

Pros

Ð'* Enter a market (economy) not serviced by Kodak

Ð'* Capture some market share (as consumers move out of the premium category)

Ð'* No advertising costs

Cons

Ð'* Lower gross margin (see Table 1)

Ð'* Tarnish Kodak brand name (brand equity) - Perception of Kodak as quality standard could be damaged as they compete in this market segment.

Ð'* If customers believe that quality is equivalent to other low-price products, they will have no incentive to return to Premium category in peak season.

Ð'* If customers believe Funtime is same quality as Premium category, they will begrudge the premium price during peak season.

Ð'* Cannibalize Kodak's Gold Plus market share in the premium category

Ð'* Logistical concerns associated with seasonal availability; also, buyers may change brands when the price they are accustomed to is not available from Kodak during peak period.

Ð'* This approach does not grow the market.

Ð'* Moves average film prices downward lowering industry profitability

Alternative 2 - Abandon Funtime film and concede economy market segment

Pros

Ð'* Retain Kodak's respected brand equity

Ð'* Condensed product line

Ð'* Maintain higher average margins on sales

Ð'* Avoid additional cost of seasonal promotion

Cons

Ð'* Concede economy market segment, extent of long-term growth is unknown

Ð'* Continued loss of market share

Ð'* Growth of individual competitors strengthens their brand equity (and perhaps diminishes Kodak perceived quality edge)

Alternative 3 - Reposition the overall Kodak product line to skew toward the higher end products. Concede the economy market and offer a film between "Gold Plus" and "Royal Gold." Replace "Funtime" with "Gold Premium Plus."

Pros

Ð'* Retain Kodak's respected brand equity, no new product or packaging to detract from image as quality

Ð'* Higher gross margins (see Table 2)

Ð'* Distances perceived quality divide between Kodak and low-price competitors

Ð'* Maintains Kodak's reputation as a market leader, as opposed to a "me too" strategy of following competitors

Cons

Ð'* Concede