After completing situational analysis, we can recognize and identify several marketing challenges that the client company is facing on course of their operation at the moment.
While KDL scores high on sustainability, it has substantial problems with resilience. “Resilience refers to the ability to predict and adjust to market trends before any devastating impact to the business” (Hamel, Valikangas, 2003). We believe that ignoring new technologies evolving in digital dentistry causes the serious stagnation in KDL’s growth and development. Acquisition of CAD/CAM technologies by competitors results in the price reductions, therefore, the customers tend to choose to purchase cheaper products, and the fact that new technologies are used is also appealing to tech-savvy dentists.
Another serious problem of KDL is a failure to create a good channel for purchases and communications with the target market. Their website is hard to navigate, it is not catchy and the media does not evoke the will to purchase depicted products. In 2013 they created a Facebook and LinkedIn accounts. Still, they do not use its features to promote the laboratory. A customer nowadays is accustomed to being well-served and is always looking for the provider that maximally reduces their purchasing efforts. With that being said, a failure to provide a customer with accessible and appealing purchasing channels bans KDL from acquiring new dentists.
Moreover, the absence of the selling/marketing department leaves all promotional and marketing efforts on the CEO, who is not a professional in the field and, therefore, he is unable to determine and implement a marketing strategy that is flexible, running, targeted on the right segment, and ensure ROI is measurable and profitable.
To sum up, we believe that the problem with stagnant sales that KDL faces at the moment is due to their inability to provide the brand to the dental market in accordance with their positioning and premium prices.
KDL is a medium family business that has been operating since 1967 and is currently operating by the son of the founder, Ronald Klausz. The following is a company analysis for KDL.
Klausz Dental pride themselves on being in the dental lab business for almost 5 decades now. They believe that the foundation of their success relies on their strong relationship with their customers and the exceptional quality of their products that is “second to none”.
Product. The company’s product mix consists of 2 product lines. The broader one – is the line that caters to dentists as a client base and is a primary source of profit, the second product line provides products to the dentist’s customers. Some of the subdivisions included in the primary product line are Crown & Bridge/Ceramics, Dentures, Cast Partials, Implants ,orthotics, sleep apnea products. The latter product line is promoted & sold through KDL’s incidental website, and it includes products like denture cleansers. Price: Klaus Dental lab is admittedly priced highly, however a client is paying for a high quality product deserving of the price point. Promotion: Currently KDL utilizes their in-depth website, Facebook and Linkedin, they publish an e- newsletter 6 times a year , a four page printed newsletter, they host 1 seminar a year, they sponsor and exhibit study clubs throughout a year and also take advantage of word of mouth advertising. Place: KDL is located in North York, Toronto, and it occupies the high price high quality section of the market.
As primary consumers of KDL’s product are dentists, it is important to keep in mind that The dental industry has been growing for as long as it has existed. The industry will always survive due to the constant demand of people going to get their teeth fixed due to hygiene, cosmetic use, etc. New dental practitioners are going into business every day, globally, creating a higher demand for dental labs. In fact, with the increasing awareness about dental issues, and the increasing health issues that people are experiencing regarding teeth (ex: yellow teeth from smoking), the need for more dental clinics is growing as the demand for the industry itself is growing. The dental industry is affected by the technological industry, economical situations, social environment, and many other environments in a more indirect manner.
Main trend in dental industry is the growth in technology, more specifically digital technology. Many dental clinics are using the CAD/CAM technology. Not only does this make the experience for patients much more comfortable, it also reduces the turnover time. Another aspect of technology that is taking over the dental industry, is 3-D printing. Since the cost of 3-D printers has been decreasing lately, it is more likely that clinics will use this technology for everyday lab procedures in an accurate, and efficient manner.” (Flucke, D.J.(2016)) “Another trend that is entering the industry, is the tendency of clinics to be group-owned rather than sole owners. This makes it easier for labs to attract clients as now they can have a higher chance of being adopted as the lab of the clinic since they have multiple target customers now. Along with digital technology, digital marketing is also becoming a growing trend in the industry Digital marketing enables clinics to interact with their customers online and allows them to book appointments online.
Main competitors:
The following are competitors of similar size and sales to Klaus Dental Labs
Baluke Dental Studios INC: Much like KDL Baluke is a family owned business. They however employ 37 more employees than KDL. They offer a wide range of products and services. Their sales volume is $2,626,585.
ADL Dental Laboratory INC: ADL employs 40 employees. They offer a smaller more specialized range of products that prioritize quality. They have a sales volume of 2,334,742.
Central Dental Laboratory (Toronto): CDL is a relatively new competitor to KDL, it opened in 1996. They currently have a medium number of employees at 20. Their products and services are quite extensive considering their size, and they self-proclaim to give; “a full service laboratory”. Sales volume is currently $875,528.
PRO-ART Dental Laboratory: PRO-ART has a large team of 65 employees. They are focused on customer relations and providing state of the art technology. A lot of their products and services are very similar compared to KDL making them their biggest competitor. They are currently the industry leader and bring in sales of 3,793,956.
Overall, the competitors appealing to their target market that they promises a ‘full’ and ‘comprehensive’ dental service. They emphasize they will be a reliable, knowledgeable and updating partner that through successful collaboration between the dentist and the dental lab for patients’ satisfaction. To compete with such labs, KDL needs to implement some changes to its technology to become more up-to-date with fast-paced technological advancements.
We identified 2 segments that KDL ca take advantage of targeting. Segment 1. Established dental practitioners. Established dental practice (+10 years of operation); Sole practitioners or associates in such; Not price-conscious; These dentists are most likely to be in their 40s – 50s. According to the National Household Survey (2011), in Canada, men represented 65% of workers in Dental occupation. This proportion becomes more uneven with the aging of dentists, thus, the largest part of this segment are men in their 50s – 60s. They are Security conscious conservatives, who seek reassurance of risk reduction. (Wilson (1971). They are geographically located in Toronto; the closer to KDL – the better to fulfill the segment’s need for security and affiliation. There are 744+ Dental offices agreeable with segment and geographic characteristics (according to Simply Analytics). By serving this segment, KDL fulfills their needs in risk aversion, establishing long-lasting partnerships with supplier and providing them with established predictable quality products.
Segment 2. Medium volume of production/sales dental offices with sales 200,000 – 350,000 $. Majority of practices’ revenues fall into that range. There are around 861 Dental offices in the GTA with such sales volume, which constitutes around 25% of the entire number of offices in the GTA according to Simply Analytics. We believe this segment to be worth considering by Klausz, because they are enough established not to crave for the lowest prices and at the same time are always looking for better deals – transaction buyers(price/value consideration). As for demographics, a typical representative of this segment could be a man as well as a woman aged within the range of 35 – 45. According to Canadian Dental Association data, dentists within that range differ just slightly in gender, so both sexes must be taken into account. Geographically, they are spread all around the GTA; In the distance acceptable for carrier services.
As for the current position of KDL in the market, they are pursuing a Product Leadership corporate strategy. They value traditions and maintaining good customer relationships. Positioning statement:
“For established dental practitioners, who value quality over price, Klausz Dental Lab is the unprecedented leader in delivering professionally hand-crafted dental appliances and restorations on order due to their over 50 years of experience.”
Klaus dental labs offers a more personal experience, with professionals who are able to give sound advice and treat their clientele like family.
Strengths:
Weaknesses
. Even though KDL has a good USP, they are not taking advantage of it
Opportunities
. KDL can adopt and utilize the newer technology that has become available in recent years.
. A growing number of price conscious consumers, who are likely to pass over KDL in favor of its more affordable competitors.
To identify the objectives of the marketing plan we need to address the problem statement. So far, we defined “inability to provide the brand to the dental market in accordance with KDL’s positioning and their premium prices” as the main trouble for KDL. To solve this problem the following objectives must be achieved:
Improvement of Customer Relationship Management. Market Penetration. Areas to focus on and excel from the competition – retention of the existing client base, finding and reaching out to the desired target segment(established practitioners, who are not price sensitive), providing those with premium services around the core product(improvement of communication channels), establishing educational seminars.
This first marketing strategy is all about polishing the image of KDL in order to provide the brand to the dental market in accordance with their positioning and premium prices.
Advantages of their hand craft technique must be proven and communicated to the potential client, as a final result of this strategy. This strategy revolves around the idea of a welcoming environment so that relationship-oriented dentists will choose KDL over its competitors. The focus rests on 2 main aspects: creating appealing visual representation of the business and hosting house-events (with predetermined consistency), that invite target practitioners around the vicinity of the business and provide them with knowledge on the trends and opportunities with dental supplies. Appealing website and some essential forms of media are inevitable to trigger the clients’ will to try out what KDL has to offer. KDL will have a chance to network with potential clients during the events, promote its products and also be able to get a feedback, which is helpful for further operation of the business.
This strategy mostly deals with Segment 1 – established dental practitioners, who are desired customers by the CEO. Since these practitioners are well established and have numerous years of experience, they are not as price conscious, when it comes to the quality and reliability. These practitioners are not expected to search for updates on the industry trends online, as they prefer traditional methods of communication. They will likely be members of ODA(Ontario Dental Association), which can be used by KDL as a platform for communications. Thus, they would greatly benefit from the well-presented material provided to them personally and exclusively by their supplier. Moreover, there is also the potential that profitable practitioners would hire new grads for help(because they can afford extra help), and pass on a good word about the supplier – KDL.
In terms of Integrated Marketing Strategy, we believe KDL will benefit most from re-establishing its website, making use of Custom Audience feature on Facebook, Ad Targeting on LinkedInn and direct reach out to the potential clients. Website – is a digital business card and it must be memorable, easy to navigate, place orders or book appointments, learn about upcoming events etc. The option of using Search Engine Optimization is a good idea to boost visits from the targeted search by key words. Traditional social networks are widely used for mass reach and must not be completely ignored in the modern business environment. Another way to invite dentists to collaborate is to send mail invitations(in the form of a postcard or with a little gift from their incremental product line) to practitioners with the details of the event. We recommend KDL to become a member of a dental associate, particularly the Ontario Dental Association (ODA) so that they can receive discounts on advertising their events in their magazine. By advertising in a magazine that is intended for practitioners only, they are likely to reach their target market and raise awareness of their existence. No change should be made to the production strategy. As for the distribution, we suggest a slight change – marking all the delivered products with KDL’s branded stickers.
Advantages of the Strategy #1
Disadvantages of the Strategy #1
Becoming more innovative. Product development. This strategy involves improvements in technology of operation as well as the switch from traditional to strategic digital marketing.
This strategy has 2 major alterations in KDL’s operation, which may seem to require huge budgets. However, establishing and maintaining decent media activity inquires insignificant costs. What Klausz need to do is hire a young professional( a student, or a new grad, who will be willing to work for minor reward and hands-on experience) to take care of all aspects of the strategy. On the path of on-line advertisement some costs will be incurred, but again, they are insignificant, when talking about the return that media advertisement can bring. On the other hand, the main improvement to make this strategy work is the change in the core of the business. After we analyzed the market, competitors and the trends where dental lab industry is moving, we recommend that the Management considers investing in CAD/CAM, 3-D printers machinery. Firstly, automated production is a step to the new level of production. One cannot double level of outputs, while resting on the same level of production. Secondly, “technology is taking over the dental industry” (Flucke, D.J.(2016)). If KDL is planning to sustain the competition, it must adjust to the trend, which most labs are taking advantage of already, otherwise, with time they will be locked out of customers, whose primary goal is efficiency after all. Through this strategy of acquisition of newest and most demanded technology and diverse advertising techniques, KDL will succeed not only in reaching their profit goals but by appealing to a whole new target market, which will result in prospective profitability and sustainability.
New Target Market is segment 2 – medium volume of production/sales dental offices (tend to be group-owned). They are technology savvy and looking for new innovative ways to run their business, seek for reliable, trustworthy, and consistent manufacturing partner in restorations on the Net and rely heavily on the influencer’s opinion. These relatively new practitioners are seeking to find a the best deal in terms of price/quality.
In relations to integrated marketing communication (IMC), KDL will continue to use Facebook, LinkedIn and their Website. New IMC channels that KDL will implement are YouTube, Instagram and Twitter. YouTube will be used to provide the testimony of one of their loyal customers(acts as an influencer) and a discussion on their personal experience with KDL as well as some videos showcasing KDL’s operation and insights to provide education and prove their expertise. Instagram is the most frequently used SM and must be adopted to gain the highest possible reach. All SM provide their own features that use users’ data to provide business with relevant analytics, but they always need to be intertwined and consistent with each other to create a complete experience for a client, no matter to which media source he reached out to KDL’s. We are not going to explain each one separately, but statistics show that targeted marketing on social networks bring good benefits to businesses.
With the significant change in Technology, product itself will change from piece by piece handcraft to scale automated production, bringing efficiency and cost reductions. Eventually, KDL will be able to reduce their prices and thus, promote to wider markets. In terms of distribution(place), with the higher level of demand and production, KDL may benefit from acquiring a truck and establishing scheduled deliveries to different parts of the GTA.
Advantages of strategy 2
Disadvantages of Strategy 2
To ensure we suggest more optimum strategy for KDL, two strategies stated above evaluated in terms of 4 perspectives, which are reach, cost, measurable, easy to maintain. Each criterion is weighed on a scale of one to five based on its importance of criteria. As number is close to value of 1, it indicates that the strategy is less reachable to the target market, less cost efficient, hard to measure marketing effectiveness, difficult to sustain in the future. On the other hand, the rating close to value of 5 will be considered to be an adequate way to reach target audience, more cost efficient, measurable, easy to maintain. The strategy that earns higher total number between two alternative strategies will be considered a better strategy to conduct to achieve objectives of our marketing plan.
The 4 decision criteria conducted in order to evaluate and suggest recommendation. The first criterion is effectiveness reaching the target audience. The perceived reachability is one of the most important factors to consider when we are choosing alternative. KDL has two approaches; one seeks a precise target market and one seeks broader and higher reach. Strategy 1 has received a rating of 5 out of 5 since hosting seminars will be a direct way to communicate with the client’s primary target audience. Considering the characteristic of the target segment for Strategy 1, in person engagement remains an effective way to approach them. By inviting dentists to KDL’s seminars, it would offer natural opportunities to build brand awareness among dentists. It also gives KDL a good way to position themselves as lifelong partners with dentists, as opposed to maintaining a simple business to client relationship. It will generate solid customer relationships and seminars are a place where consumer recommendations happen often, therefore increasing message reachability. For Strategy 2, usage of social media and diverse online platform would be considered as a means to reach relatively young dentists by communicating with them interactively. It will make it possible to communicate with a larger and wider customer base. However, it is hard to anticipate that the message will be delivered to the main target segment effectively through social media. There is some possible restrictions, such as not reaching out to the chosen target segment(elder dentists are less likely to use social media to find suppliers for their business) and another constraint is the limited information they can share online. For those reasons, it is rated 3 out of 5.
The second criteria is related to cost effectiveness. The importance rate is 4 since KDL dental lab is categorized as a small business that has a limited marketing budget. Strategy 1 is rated 2 because operating workshops or seminars are costly for a small company. Nevertheless, hosting dentist from the target segment is a good opportunity to meet and impress potential business partners for KDL. On the other hand, the rating for this criterion is 4 for Strategy 2. Posting contents on Facebook, LinkedIn and websites will require less expenditure by leveraging existing online media for free or implementing its promotional features for low fare. It will extend reach to target market because many of people familiar with the usage of social media networks and online advertisements and offers.
The third criterion rates how measurable success is for the given strategy. It is important to figure out if the strategy is working in the industry by monitoring it. Therefore, the strategy should be easy, accurate and measurable. Thus, its importance rating is 3. Success of Strategy 1 can be measured by attendance and feedback rates. Attendees of the seminar can pre-register on KDL’s website. One challenging aspect of Strategy 1 is that it’s hard to measure the strength of customer relationships exactly, but leads from the seminar can be easily tracked. Strategy 2 can be measured through Cost Per Click or Click through rate, earning followers. Furthermore, it is mainly based online it would be easier to track the buying cycle of customers by the means of tracking provided by various networks. This system is highly automated and precise.
The fourth criterion is how long this strategy can sustain and survive. Operating or managing strategy is as important as building strategy to raise the effectiveness of plan. In terms of time and financial commitment, Strategy 1 has much meaning and value to create. Events connect and communicate with the primary customer segment regularly and add to the stronger customer retention, which eventually will support sales growth. Commitment and consistency is two important factors to make that strategy profitable for the company.
The most concerning factor for Strategy 2 is how much it can impact the sales growth for KDL since they already have social network accounts on Facebook, but it is not managed in an effective way. It is common in dental lab industry since it is not customer-based industry, but more likely closed B2B industry. Thus, It is hard to expect to create an interactive online communication and high degree of sustainability over time. KDL currently does not have a strong foundation on social networking. Therefore, it is expected that the strategy will be ineffective unless KDL invests in a resource to manage these social accounts more effectively.
According to evaluation of alternatives, we reached the conclusion that Strategy 1 is considered as more appropriate and effective way to reach the target segment and deliver their desired message because it is more suited to their industry and customer base. Strategy 1 is more reasonable in terms of various perspectives. It has high reachability to target audience by communicating them directly. The expense can vary depending on their management creating greater possibility to decrease expenditure. The strategy is easy to monitor and measure with higher sustainability over time.
In the best case scenario, if KDL holds at least 1 monthly event hosting 10 new dentists each time, providing them with samples and little gifts, we anticipate 4 dentists to get back to KDL with a trial order(48 dentists a year), according to the existing statistics 20% will become regular purchasers(10 dentists) and 10% to order occasionally. We also expect around $150,000 from clients, who reach out KDL’s renewed website. Together with increasing present sales volume with the existing customers by 10%($165,000), KDL will be able to hit and exceed their sales target of $2 millions.
In the most-likely scenario, KDL hosts events quarterly, inviting 20 dentists each time, also providing them with samples and little gifts, we anticipate 40% return rate(32 dentists a year), 6 of whom will stay with KDL and 10% will be occasional clients. Maintaining the revenue coming from existing customers on the same level, adding twice more new permanent customers from events and around $150,000 from clients, who reach out KDL’s renewed website, will let KDL hit their target revenue.
In the worst-case scenario, KDL holds events 2 times a year hosting overall 40 dentists. Out of 20 dentists who will try out the lab, 5 will stay for the prolonged period. Somewhat 5 clients will be occasional ones and revenue of $100,000 will come from the internet users. Together with maintaining excellent customer relationships with existing clients and maintaining revenue from those at around $1,600,000, KDL will still exceed its existing profits and get closer to their target profit point.
Assuming KDL plans to host an event for 20 dentists for the lowest cost, they will not have to go to the agency in such case. This will approximately equal to $1,000(venue)+$300(promotional print)+$200(LinkedIn CPS)+$200(Facebook 5-day “low frequency event” ad)+$500(hired intern)+$200(light refreshments, snacks)+ $400 (trial gifts and other expenses) = $2800. This is the price exclusive of agency fees, catering services and other advancements, which may be implemented, if the management wishes to do so. Costs of hosting a seminar may go up to $10,000, but as shown above, it does not have to be as expensive.
Event agents use different ways to structure their fees: hourly rate, % of event expenses, flat project fee etc. However, the most widely-used way is by hourly rate, as it helps to really reward the work done. The cost of hiring a professional will be unavoidable, if KDL plans to host high-end events with more dentists invited and catering services involved.
Some other costs that may be incurred on the way of operation:
To sum up, quarterly seminars($2,800×4) + ODA membership($2,021) + Hiring marketing prof.($4,080) + permanent media exposure ($100×12) = $18,500.
All the numbers are flexible to the extent of frequency and quality of seminars and publications, and to the period of hiring a young professional from the marketing field.
Metrics are extremely important in tracking the company’s progress and evaluating the how close the company is to its goals. KPI metrics allow for the production of an information system and a measurement system that KDL can follow:
Key Performance Indicator should alter according to what stage you are in and what are the state’s primary objectives. As we are suggesting implementation of a new marketing strategy rather than operational, we will focus on the inputs and outputs in this field only. The next step would be to measure the input in marketing the lab, how much is Klausz investing in the advertising, by training, purchasing promotional materials, hiring external help and paying for the delivery services? This will provide an insight of the overall costs and expenditures done by the lab on monthly or quarterly bases. In order to maximize the profit, the costs should be minimized, but not at the cost of the quality. Next, KDL should measure the output KPI, both financial and nonfinancial, including revenues generated, dentists gained as clients and dentists lost as clients. As with any business the goal is to maximize output, it is important to remember that the increase of the client base is directly proportional to the increase of revenues. In order to measure the client base a measurement of the customer retention rate, MRR (monthly recurring revenue), customer churn rate and customer lifetime value (CLV) should be conducted.
Although future activities are important, past activities are detrimental in determining the level of the overall performance. So, before building a new metrics system, Klausz needs to systemize its past performance. Every following period by checking on the predetermined performance benchmarks, KDL will be able to evaluate and measure success and failure rates; eliminate unsuccessful efforts and add new approaches to the central strategy and follow the performance of those by the end of the period. Customer retention and brand awareness are critical when it comes to Klausz Dental Lab, because the more people are aware of the lab, the higher the WOM, the richer the client base will become. Through measuring the outcome KPI, the quantification of performance is produced to measure benefits. Finally having both qualitative and quantitative KPI are very important for the growth of the company.
Conclusion
In the concluding note, it can be said that under the current market situation, the KDL is facing high level of competitive challenges from the rival brands like Baluke Dental Studios INC, ADL Dental Laboratory INC and others. The major marketing strategy for KDL includes segmentation, where they are able to decide upon the price depending on the quality of dental service. The major strength of the company is due to the premium and reliable quality of dental service. The higher levels of precision by the medical experts also helped them to improve the market value. The fluctuation in the growth rate is the major weakness and threat for future. There is also the added risk, where the company will face challenges in adopting with the new types of technology.
Improving the customer relationship and using innovative techniques will help in market penetration. The company is also planning to use the social media platforms for advanced marketing communication. The main advantage of the given marketing strategy is to acquire new customer segment. The major challenge is however due to higher cost that is involved implementing advanced technology for dental care service. The sale forecasting plan recommends the company to hire more number of experienced dentists. The budget plan includes the cost of annual membership cost for all types of dental services.
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