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Kodak Case Study

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Kodak Case Study

  1. 1. Team O Eric Edmonds, David Graham, Deborah Mendez, Chris Priebe, Carolina Thomas KODAK Funtime Film
  2. 2. •Decline in Kodak’s market share from 76% to 70% over 5 years (1989 – 1994) •8% decline in Kodak’s stock due to rumored price reduction in film •15% increase in U.S. dollar sales for both Polaroid and Fuji compared to Kodak’s 3% •lower priced brands such as Konica and Fuji were gaining market share faster than Kodak The Problem
  3. 3. 670 Million 24-Exposure Rolls = 2x $3 average/roll $Billion Market Size from the Last Year The Photo Market
  4. 4. 19% 11% 70% Market Share Kodak Fuji Other 0% 5% 10% 15% Average Kodak Fuji Polaroid Private 10% 15%15% 3% 2% Annual Growth Rate The Photo Market
  5. 5. •Fuji and Kodak sold only branded products •Suppliers 3M and Agfa sold branded products and private labels •Polaroid sold a branded product manufactured by 3M •Despite Kodak’s U.S. market share, Fuji was a strong competitor in worldwide sales ($10 billion v. Kodak’s $20 billion) The Photo Market
  6. 6. 6% 2% 9% 13% 14% 24% 32% Distribution Channels Department/Discount Drug Stores Camera Shops Supermarkets/Convenience Wholesale Clubs Mail Orders Other The Photo Market
  7. 7. 4 Price Tiers Market and Pricing Polaroid High Definition, Kroeger, Walgreen’s, York, Clark Color, Kmart Focal, Target Fujicolor Super G Konica Super SR ScotchColor Kodak GoldPlus Agfacolor XRG Fujicolor Reala Kodak Ektar Superpremium Price: $4.27-$4.69 Premium Price: $3.49 Economy Price: $2.69-$2.91 Price Price: $2.91-$2.49
  8. 8. •Kodak Gold Plus •Industry standard •Premium price tier at $3.49 •An estimated 70% gross margin •Fujicolor Super G •Leader in Economy tier •Priced at 17% less than the Premium tier at $2.91 •An estimated 55% gross margin •Price Brands •Priced about 30% less than Premium brands •Offered higher margin for dealers Market and Pricing
  9. 9. The Photo Consumer By yearly usage, the consumers were segmented as follows: Annual rolls Percentage of Consumers 0-4 20 5-9 22 10-15 28 16-25 16 >25 13
  10. 10. The Kodak Advantage •Over 70 years in film market •70% of U.S market share •Kodak’s 35mm negative film buyers: •50% brand loyal – “Kodak-loyal” •40% “samplers” – heavy reliance on Kodak •only 10% price shoppers •Kodak positioned as a high-quality product •Brand 1 - Ektar for professionals & serious amateurs •Brand 2 - Gold Plus for the rest of consumers
  11. 11. •Private brands are growing rapidly •Retailers obtain a higher margin by selling private brands •1/2 of “picture takers” know little or nothing about photography •10% of Kodak buyers are price shoppers •Consumer Reports’ tests did not find actual quality differences among products The Key Issues
  12. 12. •To launch Funtime Film - a product to compete in Economy tier and be priced at 20% less than Gold Plus •Offered twice a year at off-peak times (2-3 months starting in April and then again in September) •No advertising support •Available in limited quantities and in only 2 film speeds (ISO 100 and 200) •Packed in “value packs” •2-rolls of 24-exposures or 4-roll packs with 3 rolls of 24-exposures and 1 roll of 36-exposures The Option
  13. 13. The Option •Reposition Ektar as a brand, not for professionals and serious amateurs, but for the “very special” moments •The newly positioned product would be branded as Kodak Royal Gold •It would receive 40% of the total advertising budget •Maintain Gold Plus, the flagship brand •Would maintain same pricing strategy and 60% of the advertising budget
  14. 14. •As the brand with largest market share in a category dominated by premium brands, Kodak should exercise the “high road” strategy that implies high levels of innovation and “judicious pricing” •If Kodak starts to compete on price, they run the risk of transforming the category into a commodity •As the market leader, Kodak should not react desperately to movements of small competitors, but it should protect its market •Kodak must align its interest with those of the retailers •Sell on brand’s equity and image – promise consumers that although they can’t see perfection, it exists The Analysis
  15. 15. •DON’T launch Funtime •Questionable pricing strategy •Priced in the middle of the Economy category and not competitively priced with Private category •Could spur brand cannibalization •Kodak’s existing buyers are predominantly brand-loyal – giving them a lower-priced Kodak- branded option could subsume higher-margin lines The Solution
  16. 16. •Lack of advertising support and limited availability create consumer confusion and retailer headaches •Consumers will only see the product by happenstance, and lack any communication regarding its merits. •If purchasers are pleased with the product, Kodak’s higher-priced lines may be the only Kodak film product available for repeat purchase, ie. bait and switch? •Retailers will have to deal with the potential customer confusion due to this inexplicable seasonal film product. Other seasonal product retail complexities apply as well. The Solution
  17. 17. •DON’T use proposed nomenclature •Instead of Royal Gold, disambiguate the two “Gold” lines and rename Ektar as Kodak Platinum and Kodak Gold Plus as simply Kodak Gold. By having Gold and Platinum, the company clearly communicates quality differences to the consumer •Widen channels - Distribute Kodak Platinum through all the channels, not only through camera shops The Solution
  18. 18. •Launch an advertising campaign that emphasizes long-term quality over short-term savings and educate the consumer. •The company should focus its efforts on innovation in all product lines, thereby justifying and maintaining its premium market position. •Innovation is the only way Kodak can fight their product becoming a commodity. The Solution
  19. 19. •Product launches may be supported by promotional activities and materials that further educate the consumer about the superiority of Kodak products. •Implement a customer loyalty program to convert “samplers” into Kodak-loyal consumers and increase the number of rolls purchased per year. The Solution
  20. 20. • Customer perception ultimately defines market • An increase in market share does not necessarily mean an increase in profitability • A company’s pricing strategy should consider the impact on its brand equity The Takeaways
  21. 21. Thank You

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