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MARKETING MANAGEMENT

Marketing Plan-Final Draft

for

Mark Marlow Construction

February 21, 2010

By

Juli Elliott

I.

EXECUTIVE SUMMARY Mark Marlow Construction is an independently owned and operated licensed general

contractor that provides remodeling services to residential customers in the Silicon Valley, California. Mark Marlow Construction's philosophy has been to deliver a quality product on time and in budget. Their mission is:  To perform for their customers the highest level of quality construction services at fair and market competitive prices.  To ensure the longevity of their company through repeat and referral business achieved by customer satisfaction in all areas including timeliness, attention to detail and serviceminded attitudes.  To maintain the highest levels of professionalism, integrity, and fairness in their relationships with their suppliers, subcontractors, professional associates and customers. Mark Marlow Construction evaluates projects for constructability, provides cost estimates, helps maintain project scheduling, and works with owners to meet quality and time objectives. They also suggest cost effective means of construction and help select the best subcontractors for each project. Once a project has begun, Mark Marlow Construction maintains a full-time foreman who is responsible for scheduling, quality review and timeliness of subcontractors, conducting meeting and maintaining good communications with the owner/customer. Mark Marlow Construction services will be priced in the mid range of the scale for the construction service industry. This is intended for reflection of the quality and workmanship of their services. Marketing costs for the first year of operation is expected to be around $25,000 to secure estimated gross revenue of $400,000 per year.

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II.

PRODUCT/SERVICE DESCRIPTION, SITUATION ANALYSIS

Mark Marlow Construction will provide remodeling services to residential customers in the Silicon Valley, which consists of Los Altos, Los Altos Hills, Mountain View, Sunnyvale, Cupertino, and San Jose, California. They build with yesterday’s values, today’s technology and tomorrow’s future in mind. Long term experience and a team of well qualified craftsmen who are committed to quality of work as well as customer service gives them the competitive advantage over other contractors in the same field. Mark Marlow Construction’s specialty is high-end kitchen and bathroom remodels; job with budgets of $45,000 or more for a kitchen and $15,000 for a bathroom. High-end kitchen remodeling consists of solid wood custom cabinetry that is built to customer’s specification and desires, brand name top of the line appliances, such as Bosch, Miele, Thermador, Decora, and Sub-zero, granite countertops and fixtures to accent and bring out the richness of the décor. These high-end appliances package can cost in the neighborhood of $20,000 (Maher, L., 2006). a. Situation Analysis: Kitchens have become the focal point in some homes. Contractors have been able to transform them into a great room setting by removing walls separating major gathering areas of the home. The powder rooms are most used by guests, so customers are selecting foreign imports of fine furniture vanity style, such as Ball and Claw vanities, French provincial style sink chests, and hand-painted and hand-carved furniture sinks to convey a bevy of elegant to wow their guests (Bathroom Vanity Tips, n.d.).

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The challenges for any job of this type are meeting and exceeding customer expectations while staying within a desired budget and timeline. Since kitchen and bathrooms are the most usable rooms in the home, they must be functional, durable and elegant all at the same time.

b. SWOT Analysis: Strengths:  In today’s economy, people are more apt to remodel the home they are in than to “buy up” as in previous years.  Not locked into just kitchen and bathroom remodels, they are versatile enough to do other projects such as room additions, window replacements, and new home construction.  Flexibility and skill level of some employees allow for more than one project to be worked on at any given time.  Not limited to just the high-end remodels, but able to do minor or midrange upgrades.  Access to three cabinet builders to meet any and all customer’s different needs and style. Weaknesses:    Not having enough capital in reserve or a credit line at the bank. Not enough qualified supervisory experience can delay projects. Lack of expertise level of some employee for certain projects.

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

Limited number of employees prevents this company to service a larger geographical area.

Opportunities:  New projects as economy improve as well as lower interest rate availability.   Mismanagement or lack of qualified individual in the same field. Unscrupulous contractors give this company the opportunity to step into jobs lost to other bids.  Threats:  Newly licensed contractors willing to sacrifice profit for the opportunity to get a foothold in this business.  False advertisement from other contractors in the field who offer high quality, but produce substandard work.  Economic times, some people who normally would do remodels are not doing so due to fear in the state of our economy.  Weather conditions, delivery of products, and downsizing of vendor’s employee pool can cause work and material delivery to be delayed.  Changes made in the uniform building code can cause price increases in building materials that customers are not willing to pay for. Dissatisfied customers of other contractors.

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III.

TARGET MARKET The target market for Mark Marlow Construction is residences in Silicon Valley,

California. There are three classes of residences within this market: 1. Single family homeowners looking to upgrade and improve the value of their home through remodels. Should these customers decide to sell their home at a later date, they can expect to recoup an average of 85% to 102.2% of their investments (Clemence, S., 2006). 2. Owners of residential investment properties, such as a rental house, duplex, triplex, or condominium. By remodeling, these investors can gain high profits by charging more rents for an upgraded unit or by selling it. 3. First time home buyers. These potential customers save money by buying a fixer upper, receive a basic home of their liking and remodeling it to their taste, thus saving money on their initial investment of home ownership.

IV.

COMPETITORS AND SUBSTITUTES Two of Mark Marlow Construction’s competitors are Harrell Remodeling, Inc. and

International Kitchen & Bath. Harrell Remodeling, Inc. is located in Mountain View, California. Their strength is in maintaining a secure and challenging work environment for their employees, thus bringing out the best in them (Harrell Remodeling Inc., 2007). Their weakness is their overhead and the size of their staff. This causes them not to be competitive when bidding for jobs. For example, Mark Marlow Construction’s standard bid is cost plus ten percent. The size of the staff at Harrell Remodeling causes their bid to be more towards cost plus 20 percent.
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International Kitchen & Bath is located in Sunnyvale, California. Their strength is having a showroom where customers can come in and visually experience their stunning cabinetry on display. However, Mark Marlow Construction’s potential customers are always invited to many previous customer homes where they can experience many different layouts and settings. International Kitchen & Bath’s weakness is that they offer cabinetry manufactured by only one company, Wood-Mode. (International Kitchen & Bath, n.d.). The substitutes are unlicensed contractors that can charge a lower rate because they don’t have to pay for licensing, bonding and insurance, but they cannot be held accountable for their lack of quality workmanship.

V.

PRICING Mark Marlow Construction will price its services to produce a reasonable profit margin

on material and labor. Remodeling jobs in general are so specific to the conditions of the building and tastes of the homeowner that no square footage pricing will ever be realistic (Building Materials 365, n.d.). Mark Marlow Construction provides a kitchen remodel at a base price of $40,000 and $15,000 for a bathroom remodel. A basic addition to a home starts at a price of $250 per square foot. A kitchen remodel includes all permits and plans, inspections and fees associated with them. It also includes demolition of existing kitchen or bathroom, roughing in any and all electrical upgrades as needed, plumbing and ventilation, wall preparation, new flooring which can consists of tile or hardwood, custom cabinets built and installed, new counter tops and backsplash, new appliances in kitchens, new fixture (i.e. lights, faucets, switches), all trim work (i.e. crown, base and any casing associated, and painting). All this work is basically the same for
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a bathroom remodel. This is only a base price set prior to meeting with the customer. However, after meeting with the customer, the price could decrease as much as $10,000 dollars if they only want to reface instead of replacing the existing cabinets and upgrading the countertop material. The price could increase as much as $20,000 dollars depending on the customer’s personal wants and needs. According to the article “Cost vs. Value Report 2008-09” in Remodeling magazine, the 2008-2009 national average in major kitchen remodel is $56,611 (Cost vs. Value, 2008-09). This includes upgrading an outdated 200-square-foot kitchen with a functional layout of 30 linear feet of semi-custom wood cabinets, including a 3-by-5-foot island; laminate countertops; and standard double-tub stainless-steel sink with standard single-lever faucet. It also includes energyefficient wall oven, cook top, ventilation system, built-in microwave, dishwasher, garbage disposal, and custom lighting. Add new resilient flooring. Finish with painted walls, trim, and ceiling. According to the article “Best Investments For Your Home”, the table below will show West Coast averages for Kitchen and Bathroom Remodels along with percentage of cost customers can expect to recoup during resale of their home (Clemence, S., 2006).
Size of remodel Upscale Major Kitchen Remodel Midrange Major Kitchen Remodel Minor Kitchen Remodel Upscale Bathroom Remodel Midrange Bathroom Remodel Job Cost $83,720 $45,242 $15,328 $27,172 $11,025 Resale Value $77,812 $45,353 $17,209 $26,778 $12,340 Cost Recouped 92.9% 100.2% 112.3% 98.5% 111.9%

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Upscale Major Kitchen Remodel for a 200 square-foot kitchen includes installing highend custom cherry cabinets with pullout shelves, cherry crown and cherry base; customer’s selected knobs and pulls; installing stone countertops, imported ceramic or glass tile backsplash, built-in refrigerator, cook top with separate oven or a 36-inch commercial-grade range, vent hood, warming drawer, trash compactor, microwave/convection oven, undermount sink with designer fixtures and water filtration system, custom lighting, tile or hardwood flooring as well as new paint to existing walls. Upscale Bathroom Remodel is expanding a 35 square-foot bathroom into an 81 squarefoot bathroom. Add a window, move a tub and replace with custom dual shower with high-end fittings and full-body-wash shower wall, tile, glass block surround and glass door. Move and replace existing toilet; add a bidet, custom vanity with stone tops, twin designer undermount sinks and designer faucets, linen closet, ceramic floor, textured walls and paint, baseboards, general and spot lighting and automatic exhaust fan. Mark Marlow Construction pricing strategy is based on the Going-Rate Pricing. Based on our text, Marketing Management, the Going-Rate Pricing is based largely on competitor’s prices and it is most popular (Kotler & Keller, 2009). “Where costs are difficult to measure or competitive response is uncertain, firms feel that going price is a good solution because it is thought to reflect the industry’s collective wisdom” (Kotler & Keller, 2009). Discounts to customers Mark Marlow Construction can offer is 5-7% off the Midrange Kitchen Remodel if done at the same time as a bathroom remodel. This allows for cost cutting by having the electrician, plumber and tile subcontractors in the same place as well as having the cabinets built all at the same time.

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Prices are driven by competition. At this point there is a certain amount of price inelasticity in this service. Customers are very sensitive to pricing changes. With the current level of competition, Mark Marlow Construction must be careful not to price oneself out of the market. On the other hand, if they offer additional services they can open up other opportunities to increase income. Pricing will be reviewed on a quarterly basis.

VI.

CHANNELS OF DISTRIBUTION Channels of distribution for Mark Marlow Construction will be a zero-level channel, also

known as a direct-marketing channel because they sell their services directly to the customer (Kotler & Keller, 2009). Although they have no physical facility as a service provider, their services are provided at customer homes where the remodeling or building is being completed. Mark Marlow Construction is not a distribution channel for any of their vendors either. For example, in their pricing of $40,000 for a kitchen remodel, $5,000 of it is allocated toward appliances. So, customers would visit an appliance store and pick out appliances of their desire within that budget. If the customer exceeds that budget, then there’ll be an increase in the total of the final bill. Currently, new customers have been contacting Mark Marlow Construction for their services based on referrals from previous customers. In the initial meeting with a potential customer, Mark Marlow Construction can explain all the services provided for whatever job is being discussed. To allow for tangibility, Mark Marlow Construction can also provide potential customer with the ability to see work previously performed by inviting them to visit past customer’s homes. How Mark Marlow Construction packages their services has been discussed previously in the Pricing section of this marketing plan.
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Other forms of referrals come from retail distributors such as tile retailers, plumbing retailers, and appliance retailers who have had previous working relationship with Mark Marlow Construction. These are not paid referrals, yet items used on any given job are purchased from them, thus giving these retailers business in response to their referrals. Additionally, Mark Marlow Construction has an ongoing business relationship with local realtors and referrals from them are usually paid a commission of 1-2% of the gross revenue of the job.

VII.

PROMOTION Mark Marlow Construction marketing strategy will incorporate plans to promote their

line of services through several different channels and on different levels of use. They will make use of referrals, visits to customers and advertising. They also plan to utilize their website as a selling tool. Advertising tools Mark Marlow Construction will utilize include brochures and targeted advertisements. To better reach the local market, Mark Marlow Construction will meet with home owners, realtors and property managers to present their track record of success. In addition, they will use traditional advertising medium for construction service providers such as signs, ads in the PennySaver magazine, post cards, flyers, brochures, and community boards in all the retail and home improvement stores in the area. They will budget $1,500 for a PennySaver ads for each fiscal year. The PennySaver is delivered to over 9 million households in California and it is a 100% direct mail approach (PennySaver.com, n.d.). By using the PennySaver for direct mailing approach, it gives Mark Marlow Construction the ability to target given communities or neighborhoods that can most benefit from their services.
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Mark Marlow Construction recognizes that the key to success requires extensive promotion. Advertising goals include all of the following:
   

Position the company to become one of the premier contractors in Silicon Valley. Increase general awareness of their company and its outstanding track record. Maximize efficiency by continually monitoring media effectiveness. Maintain an ad in the Yellowbook of Santa Clara County and consider an ad in the Internet Yellow Pages.

  

Continually update their brochure to explain their services and company. Consider using a direct mail approach. Use a mix of media to saturate the marketplace. One of the primary means of creating awareness will be their website. The website will

contain information about the services they sell, contact information, and colorful pictures and reviews from past customers. They will budget $1,000 for the website creation and $180 for website maintenance each year. $1,000 will be set aside to do online banner advertisements on websites such as Google.com and Yahoo.com. Mark Marlow Construction will also use E-mail advertisement as a means of reaching potential customers. E-mail advertisement will highlight their services. The ads will be created by a low cost marketing firm and only use email addresses that potential customers have submitted on Mark Marlow Construction’s website to save on the cost of procuring a list. They will budget $400 for the creation of E-mail advertising for the first fiscal year. This will increase to $600 for the second and each additional year of business. Additionally, Mark Marlow Construction will attend one or two 3-day Home & Garden Show per year. This is an expensive way to promote a service as the cost for a 10x10 booth is as
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high as $1,450 for Santa Clara Show in January and $875 for San Mateo County show in the Fall. Promotional material to be given away at these shows will be Sticky Note Pads, printed at 5,000 quantities per show to be given out over a period of three days per show. After all initial development of promotional material is created; the overall promotion budget will be $1,933.75 per month. The amount of kitchen and bath remodels done per quarter will determine whether that budget should increase or decrease. The integrated and consistent message is: building with yesterday’s values, today’s technology, and tomorrow’s future in mind.

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VIII. PROMOTION BUDGET Mark Marlow Construction will set aside their promotion budget as follows: Brand and Logo Development (logomojo.com) Website Development for the Internet (Vistaprint.com) Website maintenance (Yahoo.com) $ $ $ 295 1,000 120

Advertisement/Marketing Communications Brochure (500/month from Vistaprint.com) Business cards (500/month from Vistaprint.com) PennySaver Ad (PennySaverusa.com) YellowBook Ad (Yellowbook.com) YellowPages Ad (Yellowpages.com) $ $ $ $ 1,800 960 1,500 9,000 free

Sales Promotion Tradeshow Expenses Santa Clara Country Home & Garden, January San Mateo County Home & Garden, October Sticky Note Pads for Trade Shows (5000/show) Total Promotion Budget $ $ $ $ 1,450 875 7,500 23,205

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Bibliography Bathroom Vanity Tips, n.d. Retrieved January23, 2001 from web site: http://www.remodelingmyspace.com/bathroom/bathroom-vanities-vanity/bathroomvanities-reflects-good-taste-in-bath-design.htm Building Materials 365, n.d. Retrieved February 3, 2010 from web site: http://www.jiancai365.cn/decorating/Determining-a-Kitchen-Remodeling-Budget.htm Clemence, S. 2006. Home Improvement; Best Investments for Your Home. Forbes.com. Retrieved January 23, 2010 from web site: http://www.forbes.com/2006/07/11/toprenovation-investments_cx_sc_0712home.html Cost vs. Value Report 2008-09. Remodeling Magazine. Retrieve February 2, 2010 from web site: http://www.remodeling.hw.net/2008/costvsvalue/article/majorkitchenremodel.aspx Harrell Remodeling, Inc. 2007. Retrieved February 2, 2010 from web site: http://www.harrellremodeling.com/index.php?page=thecompany.home International Kitchen & Bath, n.d., Our Process. Retrieved January 23, 2010 from web site: http://www.internationalkitchen.com/kitchens/process.htm Kotler, P., Keller, K.L (2009). Marketing Management, 13th Edition. Pearson Education, Pearson Prentice Hall. Loco development. Retrieved February 6, 2010 from web site: http://www.logomojo.com/Logo_design_packages.html Maher, L., 2006. Cutting-Edge Kitchen Gear. Forbes.com, Retrieved January 23, 2001 from web site: http://www.forbes.com/2006/10/02/kitchen-luxury-appliances-lifere_cx_lm_1003hicook_print.html PennySaver, n.d. Retrieved February 7, 2010 from web site: http://www.pennysaverusa.com/advertising/ Stirtz, K., n.d. Sell More by Making Your Service Tangible. BusinessKnowhow.com. Retrieve February 5, 2010 from web site: http://www.businessknowhow.com/marketing/sellservice.htm
Vistaprint, n.d. Retrieved February 7, 2010 form web site: http://www.vistaprint.com/vp/ns/default.aspx?GP=2%2f21%2f2010+4%3a16%3a57+PM

Yellowbook, n.d. Retrieved February 7, 2010 from web site: http://corporate.yellowbook.com/products/value-of-advertising/
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