Marketing Analysis of Dexit Inc

Marketing Analysis of Dexit Inc Case Analysis Report: Dexit Introduction to Dexit Inc. In 2001 a privately held firm known as Dexit Inc. (the â€Å"Debit Express† company) was formed by Renah Persofsky, a former member of the Bank of Montreal’s e-commerce subsidiary had left to pursue opportunities more aggressively. The company’s goal was to provide customers with a new convenient and easy to use electronic payment system that would provide an alternative option to cash for low-value transactions. Dexit Inc. had expected that this electronic payment service to be used for a small transaction averaging a cost of approximately of $4, however in addition there was a belief that this service could possibly be used for purchases potentially as large as $25. The design of Dexit’s service would allow customers to pay for goods and services by waving an electronic tag near a specialized reader that would be placed at a retail counter that would communicate in a secure manner with Dexit’s central payment clearing system. This process would on average be completed in less than three seconds which would generate fast no- hassle payments that could also be tracked enabling users to monitor their low-value purchases. This system which has been extensively tested and deemed to be highly reliable would be based on Radio Frequency Identification (RFID) technology. With this technology a secure personal identification number in the customer’s tag would be read wirelessly by the merchant’s terminal. Problem Identification Flashing forward to today, Renah Persofsky (CEO) is facing critical decisions regarding the launch of Dexit Inc.’s electronic payment system. Currently Dexit has attracted two of Canada’s largest banks as early stage investors and as well Telus Mobility, the wireless subsidiary of the country’s second largest telecommunications firm. All three entities have expressed significant enthusiasm for Dexit’s wireless payment service however each wanted to see a firm marketing plan before commitment of further resources to Dexit. The key decisions that CEO Renah Persofsky faced in order to push ahead with the project had included: Deciding which merchants and consumers Dexit’s service would target which would  shape the other aspects of the marketing plan. Determining whether any additions or changes needed to be made to the product itself. Establishing the pricing strategy that Dexit would implement which would take into  account the value of the service to merchants and consumers and their willingness to pay. Create a promotional plan to reach each target audience and decide between a Toronto-only launch, regional launch, or national launch in major Canadian cities. SWOT Analysis Strengths: Dexit has major companies like two of Canada’s largest banks and Telus Mobility supporting them which gives them huge area to explore. The new system is much more effective than the previous ones launched in the market because it provides an efficient way to settle retail transactions. The transactions are very secure and takes just three seconds for transactions to work due to Radio Frequency Identification (RDIF) technology.The company is targeting retail businesses characterized by high-frequency and low-value transactions by providing them with system which provides ease, speed and security. They are also targeting consumers who make lots of small transactions. They are providing customers with username and password so they can access their own account and keep track of their transactions. As for merchants they will be able to register for an account by providing basic information about financial institution to settle payments which will be executed on a daily basis by tra nsferring funds electronically to the merchants bank. And for retailers they offered faster payment than cash, credits or debit. Weakness: The history of the product outside the firm has been unsuccessful due to merchants finding the payment process costly and inconvenient since they had to operate two separate terminals: a traditional swipe reader for customer who used debit transaction and second to read the card’s computer chip for stored value transactions. Also, with major company backing the company it is crucial for Dexit to provide them with positive result. Opportunities: Dexit has opportunity to establish itself in the largest market for digital transactions. It also has a chance to explore the global market as their long term plan which will help them to expand their market and develop sustained competitive advantages. It will also help Dexit to bring in new ideas, expand their horizons and strengthen their market value. Threats: Since it is not easy to replicate the domestic market success globally it might not have to same positive results. Other companies can also easily attain the technology which could increase the risk of losing customers to the rivals. There are many other companies that allow customers to make electronic payments. Those companies give cards instead of key tags which means that customers will most likely stick to using cards since they are used to it. Also Dexit has just entered the market so it will take a while for the company to get customers. The company will have a hard time dealing with its competitors. Segmentation, Targeting and Positioning Dexit Inc. are providing consumers an easier and faster methods of making their everyday transactions. The target for Dexit Inc. can be divided into the consumers and the merchants. Merchants can save a lot of time servicing a customer at a busy store and consumers could save a great amount of time avoiding line-up on their way to something important. Places like gas stations and fast food restaurants usually with a heavy customer traffic are potential merchant groups. Key tags will not only reduce the time it takes to processed with a transaction but will also reduce the amount of theft from the cash register since everything would be done by electronic money. This will enable them to take more customer by avoiding walkaways. Merchants such as Esso, Tim Hortons, Mcdonalds are possible businesses that would benefit having Dexit receives at their locations. Dexit’s consumer market can be segmented by their work and lifestyle and attitudes. A consumer’s perception towards a fast food restaurants is to attain a quick service, even when it comes to making the payment for their purchase. Customers that usually rush to Tim Horton’s are eager to either get to work or to an educational institute. The target market would vary from young adult to early 50s would are either employed or enrolled at an educational institute. According to Employment and Social Development Canada about 81.6 percent canadian from ages 25 to 44 are employed and about 71.3 percent canadians from ages 45 to 65 are employed. These employed canadian are always in a hurry to get to work on time and rushing back home to avoid traffic. OCUL on their website states about 458,251 student across Ontario alone on their updated statistics August 2014. Dixits main focus should be towards targeting Canadian student and employed customers who use electronic payment methods to make their everyday purchases smoother and quicker. Imagine not requiring to take out your wallet and being able t o make a payment through a key holder that is attached to you car keys, or being able to tell how much of you money was spend on everyday small expenses such as gas, coffee or morning breakfast. In Canada, the market size has been estimated to be about 536 billion dollars in the payment industry, with about 4.1 billion transactions made through debit and credit cards. These cards often get lost or stolen without consumer’s attention and are also misused by frauds that can cost consumes a great amount of money. Key tags on the other hand are quite secure since their have less chances of getting lost and consumers can easily notice if key tag is lost. Consumers would be feel more safe and secured to make smaller everyday transaction. Product Strategy The core benefit in using Dexit’s payment system is to make is easier for consumers and merchant to make small amount purchases more efficiently. Small Purchases ranging from a dollar to about 25 dollars. This for everyday consumer would speed-up their ordering time and for merchants would speed-up the selling process. The product would also help consumer keep track of their small purchases with security. Key chain fob with the RFID technology is a very good payment system. Consumers would find it easier and more convenient to use keychain to make their small purchases. Consumers and merchants save time and also the risk of losing money. Consumer will no longer need to worry about giving exact change or worry about losing pocket change on their way to a nearby store. Place Strategy Since Dexit’s key tag is a brand new idea in the market, it would be better if the product is first tested out in a smaller market. Having Dexit Inc. promote their product nationally would be costly and very risk. If product not successful it could cost Dexit a huge amount on loses. To ensure the product is successful it would be beneficial is the company decided to introduce the product only in Ontario first. Dexit should focus on attracting market share in Ontario, since it already has a bigger population than other provinces. In 2001, the amount of interac direct payments equaled to about 755 million traction only in Ontario. There are about 6,551,298 interac direct users with about 116,241 merchants that also use interac. Currently in ontario the unemployment rate is about 6.9 percent, which is quite low. Student in Ontario have a quite large population. Price Strategy Dexit Inc. requires to strategize the price they would charge the consumers and their merchants. Effectively balancing payments between consumers and merchants will lead to adoption by both and prevent them from seeking alternatives. To do this it is important to not charge either side in a way that they will perceive as detrimental. Consumers will not be charged upfront for registering or to acquire the RFID tag. This avoids creating an initial investment barrier between consumers and their service. Consumers won’t need to invest to try out Dexit. Instead they will be charged a small fee for each transaction. They will be attracted to use Dexit because of it’s convenience and time-saving capabilities. They won’t mind paying the small transaction based fee. Instead they will focus on the opportunity to use a new, innovative, time saving technology. Merchants won’t be charged a transaction based fee. This will encourage them to promote Dexit to customers using payment methods that do charge a transaction fee like debit or credit. This is one of the ways Dexit will use a push strategy. Instead they will be charged an upfront cost to have the reader installed in their store. Merchants are more likely to be ok with an upfront cost, seeing it as an investment to attract customers that use Dexit and a competitive advantage in terms of convenience. Customers who value their time and prefer convenience will choose locations that have Dexit readers installed. This is one of the ways Dexit will employ a pull Strategy. By balancing the costs between merchants and consumers Dexit can encourage adoption among both groups. By receiving short term payments from merchants and long term payments from consumers Dexit can smooth out their revenue, allowing them to better plan for future expansions and investments. Promotion Strategy The main goal of Persofsky’s promotional strategy was to reach her chosen target markets. This could be determined by either a Pull or Push strategy. With a Push strategy, merchants are given incentives to promote the Dexit service. With a Pull strategy, a buzz is created around the product and helps increase the demand from consumers. A Pull strategy would work well for Dexit, based on the fact it is a product of major convenience, one that could catch on in the marketplace when promoted properly. When â€Å"buzz† is created around a product that can offer consumers something quick and tangible, it has a habit of catching on and allowing other consumers to see the benefits for themselves. With minimal cash flow, Dexit is forced to get creative with the promotional aspect of the product and company. Traditional advertising can be considered, along with sales promotions and direct marketing. Traditional advertising is effective because it can be used on so many different channels, such as radio, newspapers, magazines and television. By using traditional advertising, Dexit can reach a large number of consumers through the wide variety of channels. Final recommendation With Dexit being a new product, and this type of technology being new to consumers, it will be important to generate a high volume of sales in the early stages. This will require Dexit to penetrate the marketplace with low initial prices to gain as much traction as possible. The most plausible revenue model it to charge consumers a small percentage to use Dexit services. The consumers will most likely use Dexit due to it’s convenience and time-saving capabilities. Consumers will sacrifice the small percentage they will be paying for each transaction to save time at the checkout. In addition merchants can be charged when they purchase the Dexit POS terminals, this will create extra revenue for the company. Merchants will be likely to purchase the terminals because they want to attract consumers who are using Dexit, in hopes of having them enter their store instead of going to a competitors location. It will be important to try and sell the terminals to chain stores, who will place the Dexit terminal in all of their stores, and also receive a discounted price for bulk orders. Consumers should be able to receive the RFID tags for free, this will give the consumer a sense of nostalgia with the product and be more likely to keep it and attach it to a key-chain or store it in their wallet. If the consumers have to pay for the tag and then pay a charge each time they use it, they may feel like they are being taken advantage of and decide to use traditional forms of paying. Many consumers are very price sensitive and the additional tag charge may be ll it takes for them to stay away from Dexit. Contingencies With any type of business plan it is important to plan for unexpected events or sudden changes in the marketplace. These contingencies can stem from any part of the company or product that is being launched into the market and how they will change the original marketing plan that was developed before the launch.In the case of Dexit, there are many different contingencies that should be thought out and planned before launch. Firstly, a contingency should be developed in the case that the equipment or software that is used in the Dexit tag is faulty or has some issues. This is a common type of problem with any product that involves technology as there is no way to guarantee with 100% certainty that the product will not falter. Secondly, a contingency should be developed in case the consumers do not catch on to the Dexit product and sales are lagging form initial estimates. This may include switching up the promotional strategy or targeting a different consumer group than originally thought. It will only take a short time period to see whether or not consumers are beginning to use Dexit or not and at that point a decision will be made to stay the course or switch up the marketing plan.