Funtime Film
Eastman Kodak Company
: Funtime Film
Prepared by Group D
Changhyun Lee, 20010398, agentofdrm@gmail.com
Hana Kim, 20063139, hanawind@neuron.kaist.ac.kr
Jaecheol Cho, 20060639, wowhacker@kaist.ac.kr
Jongjin Kim, 20040137, kjjgwp@msn.com
Li Xinxin, 20076011, star_lee85@hotmail.com
Li Xe, 20076010, dorislee22@hotmail.com
10 April, 2007
2007 Spring | BEP430 Marketing | Prof. Kim Wonjoon | Group D
April 10, 2007
1. Issues
Eastman Kodak Company is loosing its relative market share. It had decreased from
76% to 70% in United States [Exhibit 1]. There are reasons which causing the
market share loss:
a. The photo film industry is in its maturity stage in terms of product life cycle.
b. Increasing competitors in the film market, for example: Fuji, Konica, Agfa and
3M.
c. Competitors provide lower price films compare with Kodak and also sell films
on a private label basis.
d. Consumers view film as a normal commodity, often buy on price alone.
e. A growing number of price-sensitive consumers.
f. Kodak has not yet developed more competitive technologies.
g. Different film brands shows a general similarities in qualities.
h. Kodak’s dealer margin is relatively lower compare with its competitors.
2. Goals
a. Boost or remain market share
Due to fierce competition, Kodak is gradually losing its market share in the film
industry. It is important to remain a competitive advantage in order to gain more
market share. Also the more market share Kodak has, the better trade power in its
current marketplace.
b. Boost or remain contribution margin
Kodak needs a stable contribution margin because once contribution margin falls;
１
2007 Spring | BEP430 Marketing | Prof. Kim Wonjoon | Group D
April 10, 2007
it will be very difficult to reverse. Due to the fact that Kodak is holding a dominant
and leading position in current film market, it’s even harder to increase market
share as a result of strong competition, further more, most of the film quality is
relatively similar.
c. Development for a broader customer range
Kodak mainly serves superpremium and premium brands of films, however, the
number of customers are limited, therefore, profit generated is also limited. There
is a potential market demand for lower price films in the market. Most of the
people using conventional camera are non-professionals, in other words, the
economy segment has more growing potential which Kodak has previously
ignored.
d. Adapting and producing more advanced and innovative films and cameras
Since photo film industry has reached its maturity, it is important to develop new
products in order to remain growth instead of waiting to be exited from the market.
It is vital to remain a competitive advantage by differentiate its product and
services compare to its competitors.
3. Customer Segmentation
From various annual film usages rates, we can divide customers into 3 groups, light
users, medium users and heavy users. [Exhibit 2] Also Kodak categorizes their
customers into three groups by loyalty. [Exhibit 3] But tendency of treating films as a
commodity and glowing body of price sensitive consumers makes it harder to apply
this traditional customer segmentation to new film market, especially for Funtime
２
2007 Spring | BEP430 Marketing | Prof. Kim Wonjoon | Group D
April 10, 2007
strategy. So new segmentation will categorize customers as a very specific group,
including everyday use and casual picture takings. [Exhibit 4]
4. Alternatives
4.1 Without Funtime, status-quo.
If Kodak doesn’t lift a finger to maintain or boosting market share, Kodak’s unit
market share will certainly be changed. We employed the following procedure.
a. Calculate number of number of exposure consumed from total number of
exposures and market share of each company
b. Calculate the growth rate between 1992 and 1993.
c. Assume that the growth rates except for Kodak’s remain the same for 1994
d. Calculate the market share in 1994 using the information drawn above.
Finally, Kodak’s market share will be decreased into 69.2%. [Exhibit 5]
4.2 Without Funtime, having price cut on Gold Plus
As an alternative choice, we can propose a 15% price cut on Gold Plus without the
launch of Funtime. Discounted retail price is $2.97 and it’s a reasonable price that
reflects Kodak’s superior brand image over other brands, especially for Fuji’s,
$2.91. [Exhibit 6]
In this case, Kodak’s contribution margin will be decreased to 76% and to maintain
the market share, 478,380,000 products have to be sold out. [Exhibit 7]. Also Kodak
have to maintain 88.7% of market share to maintain profit [Exhibit 8] and contribution
３
2007 Spring | BEP430 Marketing | Prof. Kim Wonjoon | Group D
April 10, 2007
margin will be decrease about 11%. [Exhibit 9]
Synthetically, the price cut strategy is beneficial in the fact of that price premium
which is not supported by quality difference is a shortsighted strategy and people
will get it soon. Also, it will hold customers who are now trying other brands. The
chance of product change of customers will offer general viewpoints and people will
get a notion of that films are not differentiated.
But it will give negative impacts on earnings by reducing customer margin. In other
words,it will erode Kodak’s brand equity by understanding that the brand isn’t
worth of premium it used to be. Also it needs sales increase and it will cause
extreme price competition.
4.3 Without Funtime, increasing advertisements
If Kodak increases advertisements rather than discounting, they can build their brand
equity. Also they can try to trade up to higher ISOs and concern about new emulsion
technology. However, Kodak is already spending goodish $50M and they are near
universal brand awareness now. Further more, there were not significant newly
changes existed. So eroding profits can be happened.
4.4 Funtime
There are many options established from Funtime strategy. Before analysis it all,
analysis about customer proportion must be ahead of. Let the total customer in
market as 100 %, which is increased from 1993 by 2%. We already assume that
proportion of Ektar in camera store is about 70%. So, Kodak’s 10% of sales
volume is consist of Ektar and other are filled up by Gold Plus. Both Ektar and Gold
４
2007 Spring | BEP430 Marketing | Prof. Kim Wonjoon | Group D
April 10, 2007
Plus customers are divided by three different groups, 50% of loyal customers, 40%
of samplers and 10% of price sensitive people.
Nevertheless, 10% of price sensitive person who had made a habit of buying Ektar
will not consider about appearance of Funtime. They will maintain purchasing of
high-quality films. But 40% samplers of Gold Plus will change their products
depends on cost of AD. It means, from 40% of customers of Gold Plus, 40% of
them will try to buy Royal Gold and remainders will keep purchasing Gold Plus. And
from 10% of price sensitive customers of Gold Plus will try to buy Funtime. [Exhibit
10] From the analysis above, the existing options on Funtime strategies as following:
a. No advertisement on Funtime and everyday Funtime selling
Contribution Margin(CM) of each products in Kodak can be calculated [Exhibit 11].
Royal Gold will make the best CM in three of them, Funtime will be lower than the
others. If they sold out Funtime everyday not seasonal, market share will be little
increased but CM will be decreased into 98.5%. [Exhibit 12] This result was obvious
that lower CM of product would generate lower total CM for Kodak.
b. No advertisement on Funtime and seasonal Funtime selling
By original way of Funtime strategy, when only 5 months were limited to Funtime, in
other periods, customers will return to Gold Plus or Ektar. In this case, market share
will be increased into 71.6% and CM of Kodak will be increased into 111.8%.
[Exhibit 13] Comparing both everyday selling and seasonal selling, seasonal selling is
in superior, we can consider about increasing AD on Funtime, too.
c. Having advertisement on Funtime and seasonal Funtime selling
We assumed that increased cost of advertisement will gather more people in
proportion to ratio. We already know that Fuji has spent quarter of $50M for
５
2007 Spring | BEP430 Marketing | Prof. Kim Wonjoon | Group D
April 10, 2007
advertising that targeted Economy brand. So to competing with Fuji’s economy
brands, Kodak have to spend $12.5M for Funtime advertisement. In this case, target
sales and CM will be highly increased by increasing number of customers. Market
share will be increased into 88% and CM will be increased into 122.8%.[Exhibit 14]
5. Recommendation
There would be two objects in the result. The first one is driving the competitions out
of the market with a proactive pricing strategy and second one is minimizing the
effect of price reduction on the bottom line.
Comparing 4 different strategies, Funtime strategy with advertising would be the
best solution to be recommended. Maintaining the retail price of Gold Plus,
Launching the Funtime brand seasonally limited with more advertising will maximize
Kodak’s contribution margin. [Exhibit 15]
６
Appendix
Funtime Film
[Exhibits 01] Change of Kodak’s market share from 1989 to 1994
[Exhibits 02] Customer behavior on film market
User Category
Customer Behavior
Light Users
Less than 5 rolls (20%)
5~9 rolls (22%)
Medium Users
10~15 rolls (28%)
16~25 rolls (16%)
Heavy Users
More than 25 rolls (13%)
[Exhibits 03] Kodak’s Customer behavior
Customer Behavior
Percentage
Kodak-loyal
50%
Samplers
40%
Shop on price
10%
[Exhibits 03] Kodak’s Customer behavior
Criterion
Segmentation
Customer Behavior
Percentage
Price Level
Usage Context
Professional: Ektar
Non-professional: Gold Plus
Very Special
Everyday Use
Casual Picture Taking
2007 Spring | BEP430 Marketing | Prof. Kim WonJoon | Team D
7/10
Funtime Film
[Exhibits 05] Market Situation Analysis (unit: 1 Ro = 1 Roll = 24 exposures)
Brand
Number of
Ro (1992)
Share
(1992)
Growth
(1992~)
Number of
Ro (1993)
Share
(1993)
Growth
(1993~)
Number of
Ro (1994)
Share
(1994)
Kodak
455,339,805
69.3%
3%
469,000,000
70%
0.8%
473,039,011
69.2%
Fuji
64,086,957
9.8%
15%
73,700,000
11%
15%
84,755,000
12.4%
Polaroid
23,304,348
3.5%
15%
26,800,000
4%
15%
30,820,000
4.5%
Private
60,909,091
9.3%
10%
67,000,000
10%
10%
73,700,000
10.8%
Others
53,222,544
8.1%
-37%
33,500,000
5%
-37%
21,085,989
3.1%
Total
656,862,745
100%
2%
670,000,000
100%
2%
683,400,000
100%
[Exhibits 06] Change in Contribution Margin by price of Gold Plus (unit: $)
Price Cut
0%
5%
10%
15%
20%
Retail Price
3.49
3.32
3.14
2.97
2.79
Wholesalers Price (80% of retail price)
2.79
2.65
2.51
2.37
2.23
Cost (30% of retail price)
1.05
1.05
1.05
1.05
1.05
Contribution Margin
1.75
1.61
1.47
1.33
1.19
% vs. Present
100%
92%
84%
76%
68%
[Exhibits 07] maintain 70% market share, number of selling product it has to be
1993
1994
Total Market
670,000,000
683,400,000
Kodak(70%)
469,000,000
478,380,000
Ektar(10%)
46,900,000
47,838,000
Gold Plus(90%)
422,100,000
430,542,000
# Assumption
10% of Kodak selling product is Ektar and the others are Gold Plus. It is reasonable because 14% of films are sold at
camera shop. But for that camera shop, Gold Plus also will be sold. It assumed that sold products about 70% in
camera shop would be Ektar.
2007 Spring | BEP430 Marketing | Prof. Kim WonJoon | Team D
8/10
Funtime Film
[Exhibits 08] To maintain profit, prediction about Gold Sales and Kodak Market share (unit: rolls)
Price Cut
0%
5%
10%
15%
20%
Target Contribution Margin
736,564,500
736,564,000
736,564,000
736,564,000
736,564,000
Expected Sales
422,100,000
458,804,036
502,499,659
555,394,360
620,734,873
0
36,704,036
80,399,659
133,294,360
198,634,873
67.4%
74.6%
81.0%
88.7%
98.3%
Incremental Sales
Kodak’s Market Share
# Target CM, 0% = 422100000 * 1.75
# Kodak’s MS = 473,039,011 + Incremental sales / Total number of rolled consumed
[Exhibits 09] When Price elasticity is 1, Change in demand of Kodak Gold Plus (unit: rolls)
Price Cut
Expected Sales
Kodak’s Market Share
Kodak’s Contribution Margin
% vs. present
0%
5%
10%
15%
20%
422,100,000
458,804,036
502,499,659
555,394,360
620,734,873
67.4%
74.6%
81.0%
88.7%
98.3%
847,248,500
822,205,307
791,269,598
754,441,373
711,720,632
100%
97%
93%
89%
84%
# Kodak's MS = (Expected Sales of Gold Plus + Ektar Sales) / Total Market Size in 1993
# Kodak's CM = (Expected Sales of Gold Plus x Unit CM of Gold Plus) + (Ektar x Unit CM of Ektar)
[Exhibits 10] Changing proportion by starting Funtime
Ektar
Glod Plus
Portion
Detail
Portion
Royal Gold
10 + 14.4 = 24.4%
10%
Kodak-loyal 5%
Samplers 4%
Price sensitive 1%
Glod Plus
45 + 21.6 = 66.6%
Funtime
9%
90%
Kodak-loyal 45%
Samplers 36%
Price sensitive 9%
<After Funtime Strategy>
<Before Funtime Strategy>
[Exhibits 11] Unit Contribution Margin of Funtime products (unit: $/rolls)
Royal Gold
Gold Plus
Funtime
Retail Price
4.19
3.49
2.79
Dealer’s Margin
0.84
0.70
0.56
Wholesaler’s Price
3.04
2.79
2.23
Cost (30%)
1.26
1.05
0.84
Unit CM
1.79
1.75
1.40
# Wholesale Price of Royal Gold = Wholesale Price of Gold Plus x Premium(1.09)
2007 Spring | BEP430 Marketing | Prof. Kim WonJoon | Team D
9/10
Funtime Film
[Exhibits 12] Everyday Funtime Strategy and No Advertisement on Funtime
Royal Gold
Glod Plus
Funtime
1.79
1.75
1.40
Advertisement ($)
20,000,000
30,000,000
0
50,000,000
71.4%
Break Even Point (rolls)
11,192,693
17,191,977
0
24,738,346
CM vs. present
Target Proportion
24%
67%
9%
100%
98.5%
Target Sales (roll)
116,724,720
318,601,080
43,054,200
478,380,000
Contribution Margin ($)
188,573,068
525,958,885
60,060,609
774,592,561
Unit Contribution Margin($/roll)
Total
Remark
Market Share
# BEP = AD inverstment / Unit CM
# Target Proportion of Royal Gold = 24%
# Target Proportion of Gold Plus = 66.6%
# Target Sales = BEP + (Kodak's Total Sales x Proportion)
# Contribution Margin = (Target Sales x Unit CM) - AD investment
[Exhibits 13] Seasonal Funtime Strategey and No advertisement on Funtime
Royal Gold
Glod Plus
Funtime
1.79
1.75
1.40
Advertisement ($)
20,000,000
30,000,000
0
50,000,000
71.6%
Break Even Point (rolls)
11,192,693
17,191,977
0
28,384,670
CM vs. present
Target Proportion (funtime season)
24%
67%
9%
100%
111.8%
Target Proportion (off season)
24%
76%
0%
100%
Target Sales (roll)
115,927,420
345,629,550
17,939,250
479,496,220
Contribution Margin ($)
359,679,177
494,971,344
25,025,254
879,675,774
Unit Contribution Margin($/roll)
Total
Remark
Market Share
# New Customer of Funtime = (Market Size x 30% x 50% x 1/11)
# Target Sales of Funtime = Everyday Funtime Quantity(56,036,346) x (5 / 12)
[Exhibits 14] Seasonal Funtime Strategy and More Advertisement on Funtime
Royal Gold
Glod Plus
Funtime
1.79
1.75
1.40
Advertisement ($)
20,000,000
30,000,000
11250000
61250000
88.0%
Break Even Point (rolls)
11,192,693
17,191,977
8064516
28384670
CM vs. present
Target Proportion (funtime season)
24%
67%
9%
100%
122.8%
Target Proportion (off season)
24%
76%
0%
100%
Target Sales (roll)
142,590,727
425,124,347
22,065,278
589,780,351
Contribution Margin ($)
234,792,518
711,841,985
19,531,062
966,165,564
Unit Contribution Margin($/roll)
Total
Remark
Market Share
[Exhibits 15] Contribution margin comparison of different strategy
Strategy
Price cut of
Gold Plus
Launch Funtime
Everyday, No AD
Launch Funtime
Seasonal, No AD
Launch Funtime
Seasonal, AD
Contribution Margin ($)
754,441,373
774,592,561
879,675,774
966,165,564
2007 Spring | BEP430 Marketing | Prof. Kim WonJoon | Team D
10/10