CanGo Case Analysis

Team One
Jan Brown, Shekinah Hardeman, Djenaba Ka, Natasha R. Spears

Indiana Wesleyan University

MGT 541, Applied Marketing Management

MSM095

Professor Thomas Hewett

08/02/2010
Table of Contents
I. Situational Analysis……………………………………………………………………………….1
A. External Environmental Analysis
1. General Environmental Analysis……………………………………………………………1
2. Industry Analysis – Economic, Social, Political, Technological…………………………….2
3. Market Analysis………………………………………………………………………………3
B. Internal Environmental Analysis
1. Evaluation of the Mission……………………………………………………………………4
2. Evaluation of the Objectives………………………………………………………………….5
3. Evaluation of the Functional Areas
a. Marketing……………………………………………………………………………..6
b. Finance………………………………………………………………………………..7
c. Production…………………………………………………………………………….8
d. Human Resources……………………………………………………………………..9
4. Evaluation of Marketing Strategies
a. Target Market…………………………………………………………………………10
b. Product Strategies………………………………………….……… ………………..10
c. Pricing Strategies……………… ……………………………………………………11
d. Distribution Strategies………………………………………………………………..13
e. Promotional Strategies……………………………………….……………………….14
i. Advertising Strategies……………………………………………………...14
ii. Selling Strategies……………………………………………………………16
iii. Public Relations/Publicity Strategies………………………………………..17
iv. Sales Promotion Strategies………………..………………………………...18
C. Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis………………………20
II. Identification of the Problem………………………………………………………………….21
III. Development of Strategic Alternatives………………………………………………………..21
IV. Evaluation of the Strategic Alternatives………………………………………………………22
V. Recommendations……………………………………………………………………………..24
VI. Implementation……..…………………………………………………………………………25
VII. Works Cited…………………………………………………………………………………...28
I. Situation Analysis

Liz Barret launched CanGo in 1996, as a small internet music and book retailer. CanGo has

grown into an entertainment focused ecommerce site with products that include books, CDs, and

online games. Gen Xers comprise CanGo’s primary audience with some presence of Baby Boomers

and Gen Yers. With a successful IPO launch and entrance into online gaming, CanGo is poised for

growth.

A. External Environmental Analysis

1. General Environmental Analysis

According to the International Monetary Fund, world economic recovery will proceed at a

faster rate than previously expected; the world growth rate is now set at 4.5 percent (IMF, 2010). The

United States leads the industrilized nations in recovery rate and Asia leads the emerging nations.

However, speeds of recovery vary with the industrialized nations proceding at a modest rate while

recovery in emerging nations is taking off at a faster pace. The coupling of faster economic growth in

emerging nations with lower interest rates in advanced economies has revived the flow of capitol into

the developing world. CanGo will need to consider these factors within their growth plans.

High unemployment rates hovering at about 9% could spell trouble for CanGo. These rates

are expected to continue into 2011 and then begin to slowly decline. These rates hint at the true

problem facing organizations and society---what about the chronicly unemployed and

underemployed? High rates in these segments would decrease the amount of consumers willing to

pay subscription fees for music, books and gaming.

In 2000, when CanGo made their IPO debut there were less than 50 licensed music services;

In 2010, there are now more than 400 licensed services. In the U.S alone digital music revenues have

grown from $20 million in 2003 to over $4.2 billion in 2009 (Ifpi.org, 2010). However, those

positive numbers are not nearly as rosy when we consider the effect of piracy upon musical revenue.
“Despite the successes, digital is not offsetting the overall decline. Digital sales grew 940% since

2004, but the overall music market fell by around 30% in that period. Sales were down 12% in the

first half of 2009 and the full year figure is likely to show a similar trend” (Ifpi.org, 2010).

Piracy has hit the French, Spanish, and Brazilian markets hard. France has seen a 9% decline

in marketing and promotion for recording artists. In Spain, the government is apathetic towards

piracy, which has translated into a 65% drop in sales of Spanish artists between 2004 and 2009

(Ifpi.org, 2010). Today, 32% of Spanish internet users participate in illegal file sharing. That rate is

more than double the European rate of 15% (Jupiter Research, 2009). In Brazil, music sales have

fallen by over 43% between the years of 2005 to 2009.

The world is smaller because of advancements in technology and transportation. While

demographic mixes vary between each nation, the global trend is towards an aging population. Due

to advances in medicine, most people can expect to be healthy and active long into their elderly

years. Although CanGo’s primary market is Gen Xers, those born 1961-1981, they cannot ignore the

significance of the Baby Boomer market. CanGo must employ different strategies to reach this

market based on usability and psychographics. Usability and Psychographic segmentation is

applicable across CanGo’s primary and secondary markets.

Rapid changes in technology create opportunity for CanGo. Worldwide sales of Smartphones

reached 172 million in 2009, which is a 24% increase over the previous year (Gartner, 2010). This

represents an opportunity for CanGo to provide free streaming internet radio to Smartphone users.

CanGo can sell advertising to cover the cost of the free service. In addition to streaming radio,

CanGo can offer a subscription plan providing subscribers with free MP3 downloads and discounts

on future purchases.

2. The Environment Within the Industry

 CanGo is facing a steady economy, which will benefit the e-tailer. Federal Reserve Chairman

Ben Bernanke says that the U.S. economy will recover in 2010 as the unemployment and inflation

rates have started to decline. The nation's gross domestic product, the broadest measure of economic

activity, rose at a 5.7% annual rate in the fourth quarter, which is much stronger than expected and

provides another sign that a recovery in the economy is taking hold.

Politically, there are two areas of concern. CanGo has seen an increase in the number of

political action groups seeking to control pornography, gambling, and violence on the internet. For

instance, in 2006, the U.S. House of Representatives passed H.R. 4411, the Internet Gambling

Prohibition and Enforcement Act, to make most types of online gambling illegal. The primary reason

for the bill is to curb criminal activities, which used online gaming as a front. Unfortunately, for

CanGo, although many videogames and entertainment products do not meet the criteria, interest

groups scrutinize and lump them together.

CanGo must also take sound action against copyright law infringement. Piracy, specifically

peer-to-peer affects record labels and retailers. Copyright infringement increased as use of the

internet began to grow in the early 1990’s and has brought about significant legislation.

Consumers are also becoming more concerned about theft of personal information as a result if

internet use. The Federal Trade Commission (FTC) is considering solutions and regulations to

protect consumers. However, these safeguards may make it more difficult and time-consuming for

customers to shop e-tail sites, which could adversely affect CanGo.

3. Market Analysis

CanGo’s Gen X target market appreciates a website that is easy to navigate, makes use of the

latest technology, and is up on trends. While price is important, it is not the determining factor for

purchases. CanGo consumers are primarily achievers and experiencers. The achievers gravitate

toward prestige products and the experiencers want the newest and the coolest items. Both groups are
sophisticated buyers who are suspicious of hard sells and products that promise more than they can

deliver. In order to maintain loyalty CanGo must design and market products towards both groups.

The market for CanGo’s products is geographically diverse because almost everyone likes

music, books, movies and games. However, most of the buying power will be concentrated around

the major metro areas. This would translate into the top ADIs; therefore, CanGo could consider

television ads during programs viewed by Gen XY. Advertisements on the G4, Style, Comedy

Central, and the Toon Network’s Adult Swim would all reach the target market.

A. Internal Environmental Analysis

1. Evaluation of the Mission

Mission statements are one of the most critical organizational documents that need to be

developed and shared with all stakeholders. “A clear thoughtful mission statement provides

employees with a shared sense of purpose, direction and opportunity,” (Kotler & Keller, 2007). The

enterprise mission statement is an important aspect in defining whom the company is, what it stands

for, and how it envisions itself in relationship to the corporate environment, it operates within.

As CanGo enters into the online gaming industry, new and existing stakeholders will be

anxious to review and understand the executive vision for the organization. Leadership should not

under estimate the critical step of casting vision. Although CanGo does not clearly articulate its

mission statement episodes, it appears to be to connect trendsetters to quality entertainment using the

latest and most innovative technology. This becomes more evident as CanGo prepares to launch into

the world of online gaming and as it seeks to adequately market to its primary and secondary

audiences – Gen Xers and Gen Yers.

The challenge, as Warren so adequately points out, CanGo does not have the capital to

compete against competitors like Amazon, CDNow and Barnes & Noble who also boast distribution

systems that can move five times the product that CanGo can. The CanGo team assumes the
impending IPO will help them close the capital gap and fund its launch into online gaming. This is a

risky approach to business and a clear indication that CanGo has done no strategic planning since its

original business plan was drafted.

A strategic planning process will help the entire CanGo team align itself to the mission and

vision for the company. Strategic planning is an organization's process of defining its direction, and

making decisions regarding the allocation of resources to pursue the strategy, including its capital

and people. A strategic plan is the road map that ensures everyone from the CEO to the custodian is

heading in the right direction. A focus on this will provide the staff clarity, remove the silo – people

and teams working in pockets without real consideration for others - approach adopted by some,

identify support systems, and provide an opportunity for members of the CanGo team to link the

mission to their own internal motivators.

2. Evaluation of the Objectives

CanGo’s objectives are to retain their primary market of Gen Xer’s or people 22 to 35 who

comprise 30 to 40 million of the population. They also wish to capitalize on their secondary and

tertiary markets - Baby Boomers, which are adults ages 36 to 51 totaling some 70 to 80 million

people and Gen-Yers, or children and young adults 9 to 21 of which there are 60 to 80 million. To

accomplish this goal CanGo must know the internal and external environment, which includes

conducting a demographic analysis. “Detailed population statistics identify and interpret the

economic and social/cultural factors that affect consumer behavior. Demographics can include

quantitative information on a variety of characteristics such as: age, education, income, gender, and

ethnicity” (Mastering Business, episode 2.)

Additional objectives includes conducting a SWOT analysis evaluating their strengths,

weaknesses, opportunities and threats and assessing the economic, scientific and technological,

political and legal, and social and cultural environments in order to strategize how best to reach,
acquire and retain customers. Andrew, CanGo’s Marketing Director, suggests a diversification

approach to a growth strategy that would introduce new products with technological or marketing

synergies alone with their current product offerings that may appeal to different demographics

without alienating the Gen-Xers.

CanGo’s strengths include being technologically well-informed, strong e-tailing presence,

brand recognition among Gen-Xers, and competitive pricing. To eliminate weaknesses CanGo plans

to create hassle free merchandise return policy for unhappy purchasers and revamp the distribution

system to become more competitive with larger firms. CanGo plans to capitalize on industry

opportunities that include providing product bundling services and targeting a broader crossover

segmentation of Boomers and Gen-Yers. To minimize threats, CanGo must remain current and use

data mining to capture consumers’ buying habits, use the increased number of shop bots to their

advantage, and remain current on copyright infringement laws. In the final analysis of objectives

CanGo is attempting to increase its product offering, of books, music, movies, videos, CD’s and

online gaming while providing better customer service and offering rewards and incentives.

3. Evaluation of the Functional Areas

a. Marketing

The marketing strategies CanGo is trying to adopt seem appropriate as the organization has

demonstrated the ability to bring into focus a variety of issues important to businesses in general, and

particularly those engaged in the challenging world of e-commerce. The management team was

effective in reviewing CanGo’s product strategy and identified necessary changes and enhancements

of its product offering based on market research. In terms of marketing activities, the organization

has been responsive to issues pertaining to customer service satisfaction. CanGo has also been

flexible in developing a marketing plan to promote CanGo's products while overcoming consumers'

misgivings about shopping online.

 From an innovative perspective, CanGo has successfully developed a data-mining program,

expanded delivery options and handled customer service. One of CanGo’s strategies included

meeting with a representative of CanGo’s advertising agency to review its current marketing strategy

and evaluate needed changes to improve the product line. This evaluation will allow CanGo to

improve sales and increase market share.

CanGo has identified a growing trend in the gaming industry that will bring the company

added success. While CanGo retails an exciting array of products and services, ranging from books

and videos to online gaming, the best approach for the company is to continue its current products

and services and combine it with a detailed knowledge of the market with established market analysis

theories like SWOT, Porter and Kotler. By using information sources like printed literature, sources

available on the internet and branch organizations, interviews and questionnaires with qualities and

quantities methods, CanGo will be able to determine whether to expand internationally and make the

right marketing decisions aiming for a larger share of the market by using different marketing

models.

b. Finance

CanGo is a fast growing company experiencing the problem that a fivefold increase in

revenues year-on-year can produce. It has had some problems navigating the logistics of its growth

and it has some financial decisions to make. Key financial ratios to determine the financial health of

the company include:

 Earnings per share (EPS) defined as net income divided by the number of shares of stock

issued to stockholders. Higher EPS values indicate the company is earning more net income

per share of stock outstanding. CanGo EPS: $5.486mil/13mil issued shares=.422

 Return on average equity (ROE) ROE is defined as net income divided by the average

amount of shareholders’ equity investment—the average amount of shareholders’ equity

 investment is equal to the sum of shareholder equity at the beginning of the year and the end

of the year divided by 2. CanGo ROE: Not yet available as this was the first year stocks were

issued.

 Operating profit margin defined as operating profit divided by net revenues. A higher

operating profit margin is a sign of competitive strength and cost competitiveness. The higher

the percentage of operating profits to net revenues the higher the margin for covering interest

payments and taxes and moving dollars to the bottom-line. CanGo OPM: $8.44/$50 = .1688

 Net profit margin defined as net profit or after-tax income divided by net revenues. The

bigger a company’s net profit margin (its ratio of net profit to net revenues), the better the

company’s profitability in the sense that a bigger percentage of the dollars it collects from

sales flow to the bottom-line. A company’s net profit margin represents the percentage of

revenues that end up on the bottom line. CanGo NPM: $5.486/$50=.109

c. Production

CanGo’s operation is not working at capacity in the area of customer service. The latest

indicators from the Forrest Power index show CanGo’s ranking dropped from second place to sixth

place. CanGo’s management projected a slight drop in cost rankings, but the unexpected drops in

usability and delivery transactions are a major concern and of the utmost importance. Customer

complaints from the Christmas season are concentrated in operations with a wait time on the line for

a customer service agent and computer download crashes. Warren accuses Andrew of making

promises to customers that operations cannot keep. Liz concedes there is a service problem related to

a breakdown in what the customer is expecting and what they are actually receiving. She instructs

them to work together as a team on a GAP analysis to determine where the breakdown is occurring.

“Analysis builds on the idea that delivering quality service depends on successfully executing several
steps. Whenever a step fails, a gap develops that prevents the full service from reaching the

customer” (Mastering Business, episode 8.)

The GAP analysis revealed CanGo’s marketing strategies has been over stimulating

customers and operations needs to improve in the level of customer service and design a system to

resolve issues quickly. CanGo will institute new performance guidelines, standards of operations, and

monitor the quality of service provided. As CanGo continues to improve customer service issues a

Operations System Engineer, Jack shares with Warren that the warehouse should stock more

inventory for faster shipment and the need to update equipment by installing an automated system

that can retrieve items for processing faster. The installation of an AS/RS system could improve

inventory management, space efficiency, reduced labor costs and reduced costs of loss by theft and

misplacing (Aslam, Gardezi, & Hayat, 2009).

CanGo is an e-commerce company whose products are more than the tangible items and

services they sell. CanGo's product includes the consumer's experience on the site. The features and

design offered on the website are the first introduction the consumer has to CanGo. Appealing to the

senses is a key component of the CanGo experience. Attractive packaging for shipments and of the

online gaming site is another opportunity for the company to reach the consumer. Features, design,

packaging, branding and quality all are a part of the CanGo product. CanGo must improve customer

service and support offered both during and after making a purchase. This means the company must

focus on the augmented products they provide. This includes auxiliary services that come with the

product. "This includes many elements, such as: Warranties, Credit, Delivery, Installation, After-sale

service, Maintenance" (Prentice-Hall, Inc., 2000).

d. Human Resources

Human Resource policy includes compensatory and non-compensatory benefits that attract

employees, selection procedures, screening, performance appraisals, training/development,

compliance with laws and recruitment. CanGo complies with EEOC laws. However, selection and

other Human Resource Management programs such as recruitment, training/development, and

performance management have no formal policies in place. For example, one employee had over the

average amount of server failures; however, he did not receive the proper coaching to address the

issue. The manager was uncomfortable with giving honest performance appraisal. Poorly designed

selection programs are the causes of many organizational problems.

At the current time, all employees seem to have the proper knowledge, skills and abilities

needed to complete their jobs. Moreover, CanGo does not have a problem with high turnover. Most

employees are willing to build a career with CanGo. Nevertheless, some problems are beginning to

emerge. Issues with job design are resulting in a low motivation and morale. In addition, formal

policies to govern selection, training, and performance management are vital for protecting the

company from litigation.

4. Evaluation of Marketing Strategies

a. Target Market

The majority of CanGo’s customers are the Gen-Xers and the Gen-Yers, who enjoy the latest

in online gaming and entertainment. CanGo services consumers under 18 years of age responsibly by

requiring adult permission for online purchases.

While CanGo has heavily targeted the Gen-X consumer segment, it recently realized that

another market could generate a significant amount of revenues: Baby boomers. With 60-70 million

people born between 1946 and 1964, baby boomers constitute one of the largest population groups

ever to flood the marketplace, and some members of this group have shown interest in CanGo. As a

result, the organization’s marketing team has developed segmentation alternatives and a marketing

campaign aimed at effectively capturing more market share.

 How to segment and target a vast and potentially profitable market is not an easy task.

CanGo must determine how to divide the entire market into segments of consumers they define on

the basis of demographics, psychographics, usage and benefits as precisely as possible. Only by

doing so are they able to focus their marketing efforts effectively and maximize resources.

b. Product Strategies

CanGo offers a product mix that includes books, music—CD’s and Mp3s, DVDs, and online

gaming. While their product mix does not conflict, there are gaps in their offerings. This organization

should offer a wider product mix—specifically complementary products. For example, the

Smartphone market has grown by 56.7% over one year, according to research by the International

Data Corporation (IDC, 2010). The company must take advantage of the diverse ways to access

digital music (subscription, bundled access, smart phones, etc.).

CanGo can become an e-tailer of Smartphones, and Mp3 players. In addition, CanGo needs

their online gaming segment to encompass apps for two of the fastest growing Smartphone

manufacturers: Apple and Android. The use of Smartphone apps are currently the fourth most

popular use of Smartphone (Kafka, 2010).

 Building a subscription and free music indexing site accessible via desktop, Smartphone, or

mobile device is of vital importance. The site would be similar to Pandora.com, so it would make

music suggestions through the music plasma project. The key difference is that the subscriber can

choose when each song plays and can access them without being online. CanGo would house each

subscriber’s unlimited music library and a user could upload music to any device for a monthly

subscription fee. The free version of the site could be supported via ads and would not offer

cataloging or a choice of when each song plays. The success of the indexing site depends upon the

government instituting stronger anti-piracy laws.

c. Pricing Strategies

After CanGo’s IPO, they spent millions of dollars acquiring Webjouster, which is not a

physical product, making it difficult to determine price per unit. Games played, subscriptions

purchased, or evaluated units in dollars or by minutes. CanGo’s initial pricing strategy should begin

with determining what constitutes a unit of item in their online gaming offerings. Once this is

accomplished, the next considerations for CanGo are selecting pricing objectives.
 CanGo must evaluate demand and determine which pricing levels lead to different levels of

demands for their online gaming offerings. Associated with evaluating the demand for products and

services are the demand curves and the elasticity of the demand. CanGo must also estimate

production costs. There are several types of costs and production levels. Organizations consider fixed

costs or overhead, variable costs, total costs and average costs as factors when developing a pricing

strategy. CanGo’s production costs are extremely limited because of their online gaming.

CanGo needs to analyze competitors’ prices. Since market demands help determine prices

which are flexible and wide ranging CanGo must remain flexible in changing their prices as well,

realizing their competitors will do the same. CanGo will choose one of the following methods for

pricing before selecting the final price; Markup pricing, Target-return pricing, Perceived-value

pricing, Value-pricing, Going- rate pricing or Auction-type.

There are ethical considerations to pricing. Pricing objectives are not all just profits verses

loss. CanGo must remember its customers and not price gouge. CanGo must also follow government

rules and regulations on pricing to avoid any legal charges that may result in serve fines and penalties

that might lead to financial ruin or even prison. CanGo must never participate in any illegal pricing

practices.

CanGo needs to price their product offering at a level sufficient to cover cost of production

and marketing, and that will generate a profit. What consumers are willing to pay drives prices. We

refer to this concept as “the price the market will bear”, a term used to describe the perceived value

of products and services through the eyes of the consumer; CanGo needs to analyzes and/or survey

the market and evaluate what their perceived value is to their targeted consumer. “The perceived

value is created by a product or services established reputation, marketing messages, packaging, and

sales environments, when advertising campaigns are successful they create customer demands which

in turn is valuable in determining pricing” – smallbusinessnotes.com.

 d. Distribution Strategies

CanGo needs to redefine their distribution channels after the debacle they experienced during

their first big e-tail holiday season. Getting the products from the producers to the customer proved to

be a challenge for which CanGo was not entirely prepared to handle. Running out of shrink-wrap,

CanGo used rushed order shipments for items at a much higher cost. Andrew and Warren team up to

review CanGo's distribution structure in order to devise a new strategic distribution system.

Enhanced performance and cost savings are also important elements both managers consider while

researching alternative distribution channels.

During the interview process with an intermediary who would serve as a distribution, channel

partner with CanGo, a representative from Amusink points out several time wasting practices in

CanGo’s distribution process. CanGo’s dealings with multiple publishers means they have multiple

sales meetings, with different sales representatives, placing multiple orders, receiving and stocking

multiple orders from multiple shipments, and then repacking and shipping to customers. Amusink

offers to streamline CanGo’s distribution functions cutting CanGo out of the distribution process

entirely. If CanGo selects this type of distribution channel, they will save time and capital in the end

with the added efficiency of the overall distribution process. Amusink’s claim of proficiency in

product delivery is due delivery focus only approach to business; a niche they have cornered in the

market. Selecting a distribution channel partner CanGo needs to consider costs, fit with the firm’s

products and marketing strategy. Amusink would be responsible for break and accumulate bulk,

create assortment, reduce transactions, transportations and storage, provide a means of

communication (in both directions), and provide facilitating services.

Warren’s team discovers one of their competitors has gone to a value-chain management

system online, which means in addition to collaborating with Amusink CanGo needs to research

additional alternate distribution channels. Owner of the channel is an important factor for CanGo
because it entitles them to contribute to the distribution process in differing stages in an effort to

reach customers with their competitive advantage including. This process includes merchandise

selection and presentation, specialty stores, department stores, cost efficiencies, discounters/mass

merchandisers, warehouse stores, chain stores, and convenience.

Location Strategy – Selective Distribution

CanGo needs to utilize selective distribution strategies to sell their products in the best

performing outlets. Selective distribution tailors consumer preferences to specific products. Unlike

intensive distribution, which focuses on a range of brands to choose from, or exclusive distribution,

used certain geographical areas, CanGo’s specialized product offerings align with the selective

distribution processes.

With an impending threat of a buyout of a large book supplier CanGo’s supply-chain

management analysis recognizes the need to revamp their overall method of distributing material and

considers finding a warehouse to carry larger inventory and cut out the middleman (wholesaler).

Warren is successful at selecting a location that is close to CanGo’s major vendors and shipping hub.

e. Promotional Strategies

i. Advertising Strategies

In an effort to increase market share and build a strong customer base, CanGo must dedicate

some significant effort to market research, branding and strategies on ways to attain its target market.

Market research is a critical component needed to make good decisions. CanGo must perform some

preliminary research on its product line and its focused area including online gaming. What do the

different groups targeted really want? Effective research could suggest multiple options for CanGo

for introducing new products or entering new markets. Just as a well-built house requires a strong

foundation to remain solid, CanGo’s marketing decisions need the support of research to be

perceived favorably by customers and to stand up to competition and other external pressures.
 Product branding is a one of many key parts of advertising and marketing. It is about creating

an image for your product. One of the difficulties in advertising products corresponding to CanGo’s

product line as an online retailer is that the company must convince buyers to purchase a product,

which does not exist in bodily kind. For this reason, CanGo must develop a reliable and effective

website that nicely displays the credibility of its products. In contrast to physical books, consumers

are unable to flip through pages when purchasing online. Therefore, CanGo must assure a properly

designed cowl that touches on the benefits of the products and what options those supply to ensure

success.

One area CanGo needs to focus on is to find parties to promote their products. One strategy

to find partners is to affix Affiliate Marketing Network such as ClickBank.com to advertise and

promote their products. Click Bank is a successful digital product distribution service, which is on

the market to everyone who both wishes to advertise the vendors' merchandise or promoting

individual digital products. It is extremely easy to create a personal affiliate product account with

Click Bank. Although a nominal processing payment of $50 is charged to arrange an affiliate product

account, the service offered will allow CanGo to create a hyperlink system for affiliates and statistics

to monitor its sales.

Similarly, other ways of advertising CanGo’s products can be done through radio and/or

newspapers ads. In her article on radio advertising, Michele Pariza Wacek, owner of a Marketing

Communications and creative agency, asserted, “Regardless, radio should not be ignored because it

does work. And many marketing consultants will probably tell you radio is an excellent medium to

reach a local market” (Wacek, 2010).

ii. Selling Strategies

 A critical aspect of CanGo’s selling strategy must be to transform transactions into

relationships; converting one-time purchasers into loyal customers. This begins with the shopping

experience. Buyers begin to form an impression about a brand while they research products, skim

catalogs, and make a purchase. Relationships are a two-way street, it is just as important for the

customer to remember CanGo as it is for CanGo to remember the customer. CanGo must establish a

clear path of communication to its customers. This will allow them to serve better the customer by

proactively communicating to them information regarding promotions and product offerings of

interest to them. It will also help you to treat them not as a new customer, but a valued, loyal

returning customer on their next visit. Customer newsletters, preferred customer coupons or

discounts and other customer retention strategies are all ways of accomplishing this. Understanding

consumer behavior, attracting and keeping them comes down to visibility.

CanGo must understand what products are selling, the percentage of shoppers that become

buyers, the percentage of online shopping carts that are left open, and other vital statistics about the

selling process. The CanGo marketing team must also understand what products are selling for how

much and how often, to guide merchandising. Finally, CanGo must tie sells activity to inventory and

selling cost data to provide profitability information.

Smart merchandising requires that CanGo utilize the information above and design the

appropriate offers that optimize price-points and target markets to maximize profits. Create listings

that use the four P´s - price, promotion, place, and product - to create a unique offer that will help

them maximize profits. CanGo should incorporate branding in the promotion of any offer to help

customers identify and find additional value in the offer. CanGo cannot afford to give away the farm

in an attempt to attract customers. The motions offered must attract customers and allow CanGo to

make a profit.
 iii. Public Relations/Publicity Strategies

“A public is any group that has an actual or potential interest in or impact on a company’s

ability to achieve its objectives,” (Kolter & Keller 2007). Public relations (PR) involve the

cultivation of positive relationships for organizations and products with its key stakeholders using a

mix of communication channels and tools. Publicity can build positive consumer responses in ways

advertising and promotions cannot. Advertising and promotions can get lost in the flood of today's

available information. In addition, advertising and promotions can suffer from consumer skepticism.

Since companies themselves pay for ads and promotions, the messages they convey can seem tainted

by an organization’s personal interests. Publicity reaches consumers through an unpaid third party,

such as a newspaper or radio station. Since the third party decides whether to distribute the message,

its contents appear more genuine. However, organizations lose some control with publicity and have

little influence on what message circulates.

Public relations is used to address several broad objectives including building product

awareness, which is important when introducing a new product such a online gaming or relaunching

an existing product. CanGo can use PR to generate consumer attention and awareness through special

events that attract the online gaming community. CanGo can provide customers with more in depth

information about products and services using articles, collateral materials, newsletters and websites,

which will provide information to customers that can help them gain understanding of online gaming

and free licensed downloads. A positive article in a newspaper, on television news shows or

mentioned on the Internet, often results in an increase in product sales. Public relations can also assist

CanGo with brand reinforcement. Maintaining positive relationships with customers and company

stakeholders will aid in building a stronger image as the team prepares for the IPO. CanGo has so

many irons in the fire that it is even more important that they increase their brand equity. A strong

image helps the company build its business and it can help the company in times of crises as well.
 CanGo’s product offerings are primarily electronic which often requires technical support.

CanGo may elect to either provide tech support themselves or outsource it to a private firm. To

reassure customer’s post-purchase confidence CanGo should employ the most important elements of

the IMC mix public relations, direct marketing, personal selling, events and experiences. The

integrated approach will best serve CanGo and secure post-purchase reassurance if used as follows:

Maintain a sound reputation; keep customer’s confidence levels up and build on

Public Relations brand loyalty.

Direct Marketing Post purchase customer reassurance could entail sending postcards, follow up
phone calls, and/or email inquires of customer satisfaction.

Personal Selling Post purchase stage involves communications designed to solicit other
purchases. Personal selling post purchase added a familiar and comforting
touch
Post-purchase reassurance may include, networking, meet and greet, trade
Events & shows, other promotional and advertising events.
Experiences

iv. Sales Promotion Strategies

Marketing campaigns should include sales promotions. “Promotion is now more accepted by

top management as an effective sales tool, more product managers are qualified to use sale

promotion tools, and product managers are under greater pressure to increase current sales” (Kolter,

Keller 2007). Sales promotions are a collection of strategically calculated short-term incentives

designed to stimulate sales of a firm’s products and/or services. Sales promotions develop customer

preferences and stimulate purchase behavior. There are specific tools intended to provide incentives

for consumers known as promotional tools. Marketing promotional tools consist of three major

categories Consumer, Trade, and Business/Sales-Force Promotion Tools.

Marketers use the consumer promotion tool of sales promotions combined with advertising

campaigns, which is found to be most effective. Types of sales promotions would include; discount

coupons, samples, cash refund offers, rebates, prizes, rewards, free trials, point-of-purchase displays

and demonstrations. “In one study, a price promotion combined with feature advertising boosted
sales volume by 19 percent; when point-of-purchase display was added, sales volume increased by

24 percent. CanGo is offering buy 5 books get one free deal as a consumer promotion tool and 10

free minutes of online game time as an introductory sampling and when customers return to the

gaming site then they will be charged a fee.

Trade promotion tools include prices off, advertising allowances, display allowances, and

free goods. Other forms of trade promotions include persuading an intermediary to carry the product,

persuading an intermediary to carry more units, inducing retailers to promote the brand by fearing,

display, and price reductions, and stimulating retailers and their salespeople to push the product

(Kolter & Keller p. 304). Trade promotions can be an effective sale-promotion tool; however, they

are filled with complexities, difficult to administer and manage, and may produce lost revenue.

Business and sales-force promotions are ideal for trade shows; this type of promotional tool

produces business leads, impresses and rewards customers. Contests for sales representatives and

specialty advertising are typical for this type of sales-promotion tool. The purpose of sales promotion

is to attract new customers, reward loyal customers, to increase the rate of repurchases of occasional

customers, and entice consumers to try new products. The benefits of sales promotions to

manufacturers include adjusting to short-term variations in supply and demand, adapting programs to

different consumer segments, testing how high a list price they can charge, and selling more than

they normally would at list price during promotions.

CanGo has major decisions to consider when strategizing sales promotions campaigns.

Establishing objectives they need to convince retailers to carry high levels of inventory, offset

competitors’ promotions, build brand loyalty, and gain entry into new retail outlets. As the marketing

department at CanGo develops promotional programs, they need to consider the following program

size, conditions for participants, length or duration of program, timing, total sales-promotion budget

costs.
 CanGo has secured an underwriter to sponsor a gaming contest and game designers to

conduct chat sessions as part of their business promotions. The next stage for CanGo is to pretest the

promotion program by using consumer information data to rate or rank special deals they offer in

specific geographical locations with trial offers. Once a pretrial promotion program is successful the

program is ready for implementation on a more wide spread basis. Finally, CanGo should conduct an

evaluation to measure the successes and/or failures of the program. CanGo’s philosophy is promotion

does not equate to discount, they are not a discount house. CanGo views promotion as added service

benefits; customers should pay full price. To test their theory CanGo can use sales data, customer

surveys and experiments to evaluate the effectiveness of a sales promotion program and can conclude

if the promotional sales program is successful if they win over or attract competitors’ customers.

A. Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis

Internal
Strengths
 Technologically savvy, understands far
better than its competition what kinds of
technological features its target
consumers want to see on the e-tailing
sites they frequent. It employs the latest
technology in Web site development and
product innovation.
 Data mining allows for updated customer
profiles, which results in stocking the
latest products customers want and need.
 CanGo has strong brand recognition with
target market--Gen-X &Y.
Weaknesses
 Unlike larger companies such as iTunes
and Amazon, CanGo does not have the
advantage of economies of scale so it can
pass on lower prices to its customers
 Minimal capital for research and
development, relying heavily on the
success of the IPO for a shift in this area
 Customers are both Experiencers and
Achievers, which could divide CanGo’s
value chain focus

External
Opportunities
 Stable inflation rate at 3% will allow
CanGo to stretch their dollar and
purchase more goods.
 Implementation of a product bundling
and customer recognition/incentive plan
could increase profits
 Emerging markets – “crossover” with
Baby Boomers and Gen Next
Threats
 The increase in the number of shop bots
will increase consumers’ price sensitivity
and decrease loyalty.
 Because of an increase in copyright law
infringement and lawsuits for online
providers, CanGo must take extra steps to
ensure material is being properly licensed
and protected from being illegally copied.
 Failure to understand surge of interest in
Japan indicates CanGo needs to better
 research consumer behavior in emerging
markets.

II. Identification of the Problem

Success begins with planning and CanGo lacks a strategic plan, which is an organization's

process of defining its direction. Strategic planning is the analysis of the threats and opportunities

facing a business, the process of creating a vision of the company’s desired future position, and

identifying actions to bring about the desired outcome. Simply put, strategic planning takes into

consideration the environment, creates a new vision, and develops an action plan. A strategic plan is

important to a successful company because it guides and focuses all staff to specific goals and

establishes a course of action to achieve them. Strategic planning also serves as a way to ensure that

all departments within the organization share a common goal. A strategic plan is the road map that

ensures everyone from the CEO to the custodian is heading in the right direction.

Strategic planning defines and creates a future for the organization. The strategic planning

process allows leaders to look into the future and attempt to understand the internal and external

business, political, and legal environments that will face an organization. Once the success equation

for the future is defined, an action plan is created to make the CEO’s vision become a reality. It is the

responsibility of the CEO to cast vision as part of the strategic planning process and the vision needs

to be shared by all the stakeholders. Strategic planning is a powerful tool that links resources –

capital and human, activities, strategies and finally the vision, which all work together to meet the

needs of the customer.

III. Development of Strategic Alternatives

Our team considered three strategic alternatives for CanGo. They are presented here in summary.

Alternative One

To review effectively CanGo’s product strategy, the management team must reevaluate its

product offering to identify changes and enhancements to institute as those will affect all layers of
CanGo's product line its core product, its actual product, and its augmented product. Furthermore,

CanGo must aggressively continue to focus on providing outstanding customer service through

excellent quality and the on time delivery of their products.

Alternative Two

CanGo’s fundamental internal challenges include the absence of a strategic plan to guide

growth and allocate resources, adequate and consistent measurement of consumer buying behavior,

and fulfillment process flow. The absence of a strategic plan causes senior management to entertain

all new ideas instead of aligning them with the goals of the organization. Additionally, Marketers

must continually revisit the consumer buying process, refresh their understanding of it, and use their

ever-evolving insights to construct messages that appeal to consumers' developing needs. CanGo is

not in a position to spend a great deal of capital on this type of research only to find out what they

already know. Finally, CanGo could benefit greatly from technology that will improve lead times,

cost, and flexibility. Other challenges include the decline in CD purchases and digital media and the

ability to compete with online retailers like Amazon.com and CDNow.com (an Amazon company).

Alternative Three

Key internal challenges at CanGo include an insufficient performance appraisal system, a lack

of consumer behavior research into emerging markets, and problems with customer service and order

filling. Key external challenges include the proliferation of shop bots, illegal downloading of

copyrighted material and competitors’ expansion into gaming and music markets. CanGo’s core

competencies are its technological capabilities, innovation, and understanding of the Gen X market.

To meet critical internal and external challenge and grow CanGo must stay at the cutting edge of

technology.

IV. Evaluation of Strategic Alternatives

 The three preceding alternatives do not adequately address CanGo’s problems. Using the

Delphi method to increase consensus we have blended the best of the preceding alternatives to

develop a fourth. Key issues include:

Lack of a Strategic Plan - CanGo must implement a strategies team composed of leaders from

each business unit. This team will conduct regular SWOT and GAP analysis to stay ahead of trends

and identify deficiencies before they become strategic weaknesses. Line employees will regularly be

polled to gauge their feelings on company strategies and suggestions on how to improve.

Logistics and Distribution Gaps - A 24hr Customer Call Center will be outsourced to

reduce costs. An AS/RS (automated storage and retrieval system) will provide improved inventory

management, space efficiency, reduced labor costs and reduced costs of loss by theft and misplacing

(Aslam, Gardezi, & Hayat, 2009). CanGo will also implement 24-hour shipping and expand their

receiving department to handle increased demand.

Illegal Downloads and Copyright Infringement – To combat the losses incurred by illegal

downloads the company must build a subscription and free music cataloging/introduction site that

can be accessed via desktop, Smartphone, or mobile device. This site will introduce users to new

music and allow unlimited music catalogs to subscribers. Subscribers will receive 10 downloads a

month; additional downloads will cost between .50 - $1.69 a song. He thinking behind this plan is to

wean consumers back into purchasing music. In addition, CanGo must join others in the industry in

lobbying congress to institute stronger copyright protection laws.

Lack of Consumer Behavior Research into Emerging Markets - The marketing

department will build an internal team dedicated to data mining in emerging markets. This will

ensure that CanGo is not surprised by growing demand in new markets. The backbone of this

marketing system will be the VALS system (SBI, 2010). This system identifies and predicts future
opportunities by segmenting the marketplace based on the personality traits that direct consumer

behavior.

The Proliferation of Shop Bots - To combat the loss of loyalty that shop bots encourage

CanGo needs to establish a buyers' club. By providing subscribers with 'insider' information on new

music, video, and book releases, along with discounts on purchases CanGo can build loyalty. The

development of online gaming sites linked to social networking and Smartphone apps will help

CanGo garner more of their target market. A focus on its brand equity, which includes positioning,

service mix, visual impact, pricing, customer service and marketing will help CanGo compete.

Customer Service Gaps - The majority of CanGo’s customer service problems stemmed

from the failure to meet the next day shipping promises and underestimating consumer interest in the

Asian Pacific market. If CanGo implements the aforementioned suggestions, a great deal of their

customer service issues will vanish. CanGo must stick to its focused differentiation strategy and

actively engage their target market.

CanGo’s core competencies are its technological capabilities, innovation, and understanding

of the Gen X and Y markets. To build a sustained competitive advantage CanGo needs to be where

their target market is—namely on social networking sites, and on the app stores of Apple and

Android. CanGo marketing needs a social networking department to build buzz on sites like

Facebook and Twitter. The online gaming department needs to build gaming apps for mobile

devices.

An employee rewards program will be instituted that rewards employees for exceeding

customer service and departmental standards. Catering to consumers will naturally improve customer

service. Lastly, an employee rewards program will be instituted that rewards employees for

exceeding customer service and departmental standards. By implementing these suggestions CanGo

can and will grow well into the 21st century.

 V. Recommendations

CanGo’s senior level management should develop a strategic plan design to incorporate

online gaming with their current product offerings. Advertising and sales programs should be

implemented to promote products and services to new customers. In addition, customer retention

strategies must be employed to include an integrated marketing strategy directed at retention as a

measurement for success. To increase sales, CanGo must ensure customers are happy with their

experience. Otherwise, it must try to turn them around with a discount, a free product, or some other

benefit. This is especially important with online purchases where customers are nameless faces.

We do not recommend CanGo to conduct any further market research at this time, a GAP

analysis should be conduct semi-annually to keep them current on the latest trends. It is further

recommended the company use integrated marketing communications between cross-functional

departments including human resources, finance, operations, accounting, productions, administrative

support, etc in implementing their latest strategic plans.

Web developers should redesign CanGo’s site to be more attractive to Baby-boomers and

Gen Yers without alienating their market segmentation of Gen Xers, their current source of income.

A good quality web site design can improve the chances of achieving higher profits in the

international site region and for CanGo to begin an overseas marketing campaign. They have

successfully researched the general e-Tailing marker in Japan, Music and video e-tailing in Brazil,

online e-Books in India and the MP3 market in China call of which show promise if CanGo enters

these emerging markets successfully.

In spite of the different types of challenges CanGo continue to face, CanGo is ready to

expand and has the most current technologically advanced systems required to succeed. We

recommend that CanGo be innovative in every part of their business including pricing, personnel

policies, distribution, sales and promotion.

VI. Implementation

CanGo’s mission appears to be to connect trendsetters to quality entertainment using the

latest and most innovative technology. However, the absence of a strategic plan causes senior

management to entertain all new ideas instead of aligning them with the goals of the organization. In

conjunction with the IPO, the launch of the online gaming site and other emerging markets, Liz

should tap into her Board of Directors and senior management team to execute a strategic planning

process. The process should take no more than 60 to 90 days and will include SWOT and GAP

analysis, which will then be conducted twice per year.

Upon completion of the strategic plan, Andrew and his team must draft a Marketing Plan that

details how CanGo will track consumer behavior and monitor emerging markets. Developing this

plan should take no more than 30 days, as much of the work will have occurred during the strategic

planning process. CanGo can ensure no surprises occur by growing demands in new markets by

establishing a team whose focus is data mining. Using the VALS system, which classifies people into

eight basic lifestyle groups CanGo’s marketing team can develop messaging appropriate for its most

current market segment.

CanGo’s core competencies are its technological capabilities, innovation, and understanding

of the Gen X market. To build a sustained competitive advantage CanGo needs to be where their

target market is - on social networking sites, and on the app stores of Apple and Android. CanGo

must create a social networking department whose focus is to build buzz on sites like Facebook and

Twitter.

Once CanGo has clear plans regarding the mission and vision of the organization, how to

track consumer behavior and monitor emerging markets, they can focus on logistics and distribution

gaps. CanGo can outsource a 24-hour call center to reduce costs. An automated storage and retrieval

system (AS/RS) will provide improved inventory management, space efficiency, reduced labor costs
and reduced costs of loss by theft and misplacing (Aslam, Gardezi, & Hayat, 2009). CanGo will also

implement 24-hour shipping and expand their receiving department to handle increased demand;

however, to minimize employee costs, this division of CanGo will operate using three shifts. Each

shift will have no more than two full-time supervisors and will rely on part-time employees working

rotating schedules. Instituting the storage and retrieval system and increasing the number of bodies in

distribution should minimize customer service gaps.

Upon completion of critical issues such as strategic planning, marketing and distribution,

CanGo can focus its energies and resources on the areas of customer service - where the primary

issue of failing to meet next day delivery will be resolved with the new AS/RS system – illegal

downloads and copyright infringement, and proliferation of shop bots. As noted by Liz’s

management team, no real planning has occurred sense the company’s launch more than ten years

ago. If CanGo wants to compete with Amazon, CDNow and ITunes, it must do so strategically and

not jump on the “what’s hot” bandwagon. Doing saw will exhaust capital and alienate CanGo’s

current customers. Implementing the above detailed suggestions will provide CanGo strong footing

to compete the 21st century.

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