VU University Amsterdam Faculty of Economics and Business Administration

Title: Course: Academic Year: Date: Group:

Marketing plan for 94wines International Marketing 2011-2012 18.04.2011 2.4

Student Student Student Student Student

Name Name Name Name Name

/ / / / /

ID: ID: ID: ID: ID:

Aleksandr Karev Jaroslav Urban Nitchanan Kangwolkij Nita Sujaritwatanasak Peter de Wit

(2120763) (2163586) (2162407) (2162393) (2087235)

Table of contents
Analysis of the target market ...............................................................1
The company and products ............................................................................1 Brief analysis of the export country ................................................................1 Basis of segmentation ...................................................................................2 Similarities between the local and export market ..............................................2 Differences between the local and export market ..............................................2 Business environment and strategy ................................................................3

SWOT analysis ......................................................................................4

Strengths ....................................................................................................4 Weaknesses ................................................................................................4 Opportunities ...............................................................................................4 Threats .......................................................................................................4

Entry strategy ......................................................................................5

Joint venture ...............................................................................................5 Indirect exporting .........................................................................................5 Wholly owned subsidiary ...............................................................................6

Export strategy ....................................................................................6

Standardization ............................................................................................6 Adaptation ..................................................................................................7

Integrated marketing communication strategy ....................................8

Communication objectives .............................................................................8 Communication message ...............................................................................8 Communication slogan ..................................................................................8 Promotional Strategy ....................................................................................9

Pricing strategy ....................................................................................9 Distribution ........................................................................................10 Product life cycle considerations ........................................................11 Implementation..................................................................................12 Bibliography .......................................................................................13

Analysis of the target market

The company and products On November 10th 2009 Lucas Tieleman and Sander de Jonge in corporation with Baarsma Wine Group Holding (BWGH) launched a new company called 94wines. It defines itself by combining a traditional wine product with innovative technology. The result is a great wine in a contemporary and striking bottle with a QR code. 94wines gives you a unique method to send a personal message. Every bottle is given a unique QR code which contain all sorts of files. Whether it is a text, photo or even a video, customer can upload files on the website and 94wines will make sure that the file is converted into a QR code and placed on the right bottle. The code can be read by using the camera of a mobile phone. The personal message can also be viewed by filling in the code on 94Wines.com. 94wines differentiates itself from their competitors by selling French wine in very unique and distinctively designed bottles. Their bottles have no traditional label, instead they use colored sleeve that is tightly attached to the whole bottle with unique number on the front that not only provides a striking appearance, but also constitutes a code for taste. Another distinctive feature 94wines offers is WineID-test. This test begins by taking a short quiz of six questions regarding customer likes and dislikes. That, in turn, produces their personal WineID, which can then be used to guide their choices from among the companys series of wines. The use of numbers and colors makes wine preferences easy to remember, while personal ID profiles allow friends to see each others preferences for gift-giving purposes. At the moment 94wines has 13 different types of wine in their assortment distributed within the Netherlands and elsewhere in Europe by request only. Their primary target is young people who concern not only about the inside content of the bottle but also about external factors, such as the bottle design and product uniqueness. In the conservative and traditional whine market 94wines is the first company who targets young people online with their innovative concept. In 2010 94wines sold 120,000 bottles of wine (Financieel dagbland, 2010). According to fooddrank.eu their approximate market share in Netherlands is 0.034%. Brief analysis of the export country The republic of Lithuania is a country located in Northern Europe. Its modern infrastructure, Ice-free Seaport and geographic location makes Lithuania ideal hub of a thriving import and export between Scandinavian, Baltic and West European markets within a 500 km radius. The European Union had also recognized Lithuania as the largest and most diversified market in Baltic States with the lowest tax rate and more than 50% GDP of the total market (Lithuanian Development Agency, 2007). British analysts of the Economist Intelligence Unit (the research subdivision of The Economist magazine) confirm Lithuania to be a country with very low economic and political risks. The country is a member of the EU and NATO and follows the Western model of internal and foreign politics. The International Monetary Fund (IMF) has ranked Lithuanias performance among the best within the European Union. Lithuania maintains an exceptional economic progress, based on macro stability and economic flexibility (NaiBaltics, 2009). Lithuania has been maintaining an average GDP growth of 7.8%.
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According to the Eurostat quoted in (the EU Statistics Agency) in 2005 Lithuanias GDP increased by 7.5%. In 2006 Lithuania had the biggest annual GDP increase of 8.6% in the EU and it has been forecasted that it will grow by 7.4% in 2007. The World Bank in its report Doing Business in 2006: Creating Jobs announced Lithuania to be the easiest place to do business among the Baltic States and all new EU members. The Internet usage and online purchase is the important factor of 94wines business, as this is their primary sales channel (NaiBaltics, 2009). According to (National Department of Statistics, 2011), 55% of the Lithuanian Internet users have access to the Internet that leads to 1,760,000 of the total population. What is more, 40% of the Internet users constantly seek for new products online and 10.9% makes online purchases, which are approximately 191,840 people. Our target market is people aged 18-35 that covers 36.8% of the online purchase group that leads to 70,597 users Basis of segmentation The target group for our product is occasional wine buyers without knowledge of the subject who also pay a lot of attention to the colors, design and shape of the product. We will focus on both male and female of all ages, especially teenage and working people, who are creative, fashionable and love to have unique products. In addition, there is a relatively high consumption of alcohol among young people in Lithuania because of the lifestyle and behavioral patterns common to a persons social group and economic welfare, which encourages alcohol consumption. It is important to note that the product may not only be sold in terms of consumption, but it can be also purchased as a present for special occasions. In Lithuania it is common to make a gift of alcoholic drink for various occasions including Birthday, Graduation and Funeral. As our product will be sold through the Internet, it is essential for our target group to have an access to the Internet and willingness to purchase online. This target group in Lithuania is similar to the target group in the country of origin, the Netherlands. Similarities between the local and export market Just like the Netherlands, Lithuania has a logistic hub function in Europe. It expectations for economic growth and welfare are positive for the coming years. Just like in the Netherlands, Lithuania has a very low economic and political instability risk, which makes it beneficial for foreign investment (Lithuanian Development Agency, 2007). Differences between the local and export market The average disposable income in the Netherlands in 2009 was 20,876 Euro per capita. In Lithuania, however, in 2009 it was only 11,386 Euro per capita. The price level of wine and beer is almost the same between Lithuania and Netherlands (Svennebye, 2009). A consequence of these statistic results is that the buying power for wine in Lithuania is approximately twice as low as compare to the Netherlands. Secondly, the growth of the disposable income in Lithuania was 7.8% between 2003 and 2008. As a result of the crisis, in 2009 it dropped to 4.2% (Svennebye, 2009).
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The growth of the disposable income in the Netherlands was about 4% per year between 2003 and 2009. Between 2008 and 2009, however, it dropped to 2.8%. In 2010, the wine consumption in the Netherlands was approximately 21.7 litters per capita (Distrifood, 2009). In Lithuanian, however, the results were much lower, with an average wine consumption of 5.4 litters per capita for the same period of time. The growth of wine consumption in Lithuania is approximately 6% per year (National Department of Statistics, 2011). In the Netherlands, the wine consumption is stable since the beginning of 2010. From these results it can be concluded that the wine consumption is growing steadily in Lithuania, which makes it a very attractive market for the export of wine. In the Netherlands, most wine is sold in supermarkets, where price is an important factor. Dutch consumers have always had a reputation for being extremely price conscious. Approximately 60% of wine sold in the Netherlands is below 3.50 Euros (Kolkman, 2011). In Lithuania, however, 93% of the wine sold varies between 4.5 6 Euros, with 57% of it being purchased in supermarkets (National Department of Statistics, 2011). This is because due to the high taxes an average price for wine in Lithuania is slightly higher than in Netherlands. Finally, it is important to take a look at the Internet usage in both countries. In 2010, in the Netherlands, 90% of the population had an access to the Internet, where 55% of these people were making frequent purchases through the Internet. In contrast to Netherlands, only 55% of Lithuanians had an access to the Internet in 2010. In addition, only 10.9% of these people were making frequent purchases through the Internet (National Department of Statistics, 2011). The growth percentage of Internet usage in Lithuania is 8% per year. It is expected that in four years time Internet accessibility in Lithuania will be the same as it is in the Netherlands.

Business environment and strategy

With the rise of wine popularity around the world the competition in this market gets more intense. Lithuania is not an exception. Being part of the European Union allows foreign companies to enter Lithuanian wine market easily. Due to the European Union trade policy, there is now a great variety of wine present in Lithuanian. However, our group strongly believes that the unique bottle design and extra features such as personal message on the bottle will differentiate 94wines and help it grow its share in this very intense market. According to the personal experience of one of our team members from Lithuania, most people in Lithuania purchase their wine in supermarkets and specialty shops. There are three main supermarket chains in Lithuania, which are: Rimi, Maxima and IKI. Their market shares in Lithuania are: 24%, 36% and 32% respectively. According to the data presented on their official website, Rimi currently operates 46 supermarkets and employing 2400 people in Lithuania. Maxima is currently the largest Lithuanian capital company and the largest employer in the Baltic States. Maxima currently accounts for 425 stores in total, of which 216 stores are located in Lithuania. IKI currently operates 185 supermarkets and stores in Lithuania and is known for its highest quality, impeccable service, and customer satisfaction. These three supermarket chains can be classified as our direct competitors. Since our primarily target market are young people, it is also important to mention here that many of them choose other alcoholic drinks instead of wine. Therefore, places that sell beer and other alcoholic spirits can also be classified as our indirect competitors.
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In addition to the traditional supermarkets there are numerous wine specialty chains in Lithuania. Vynoteka is one of the biggest and mostly known chains specializing in wine retailing. Vynoteka currently operates 16 shops throughout Lithuania.

SWOT analysis
Strengths

The bottle is designed to appeal to young generationmodern, colorful, stylish

and fashionable.

The company gives opportunities to customize your bottle of wine by adding

your personal message on it.

The company offers an online purchase to customers. The company has the WineID system, which identifies and suggests you the
type of wine you might like based on your taste and preferences in food.

There is a 94wine iPhone application, which allows you to have all of the
information and brief description about each type of wine 94wines offers. Weaknesses

Since the company has been operating for only one year, it has a weak brand
name with no history behind.

Due to the positioning of the product as a luxury good, its price should be set
above the average price for a bottle of wine in Lithuania, which is 4.5 - 6 Euros. Opportunities

There are opportunities to re-establish traditional wine bottles in order to attract

the interest of younger generation.

It is possible to form business alliances with other well-known retailers in

Lithuania. Threats

New regulations and policies on alcoholic drinks, which might be imposed in the
future, could affect sale performance as well as product promotion.

The increasing number of competitors entering the market with similar products
can affect sales.

Evidence suggests that only 10.9% of Lithuanians are in favor of using Internet
to purchase their products.

Entry strategy
In order for a company to establish business and operate on the global scale it has to consider many different aspects including entry barriers and entry strategy. The choice of how to enter a foreign market can have a substantial impact on the results. Different entry strategies may be more applicable under various circumstances, and the chosen strategy is a critical factor in the success of the project. Among the vast array of different entry strategies available, we believe that there are three main strategies appropriate for our case, they are: joint venture, indirect exporting and the wholly owned subsidiary. Joint venture Joint venture is a separate business entity (e.g., corporation, limited liability company, or partnership) that allows two or more parties to collaborate in conducting specified business activities (Gutterman, 2000). In the present global marketplace, joint ventures have become a popular mode for entering foreign countries. Generally speaking, the objective of joint ventures is to put together complimentary resources of already existing firms. These types of resources normally incorporate not only "ordinary" financial, technical, human resources, but also "acquired" resources like goodwill, know-how, team spirit and other intangible assets (Chen, 1995). The reason why we believe joint venture is an appropriate mode of entry to Lithuanian market is because it will allow 94wines to access to expertise and establish connection with existing wine suppliers in Lithuania. In addition, by entering joint venture 94wines could make use of strong and widely accepted brand of their chosen partner. This market entry strategy is known to minimize potential risks associated with entering a foreign market. Economies of scale can also be achieved due to the sharing of knowledge and resources between organizations. Finally, joint ventures are less costly compared to many other entry strategies such as wholly owned subsidiaries. On the other hand, the problems associated with joint ventures may include cultural barriers, difficulties with corporative alignments and conflicts with partner(s). Indirect exporting For many companies, the easiest and lowest-cost distribution alternative when considering international marketing for the first time is that of indirect exporting (Colin Gilligan, 2005). Indirect export occurs when the exporting manufacturer uses independent organization(s) located in the producers country (Albaum, 2005). The obvious advantage of this method is that little or no international expertise is required, since the strategy is a little more than an extension to distributing the product domestically. This approach, however, would limit 94wines control not only over the markets selected but also over the marketing strategies used and the degree of commitment to each market.

Wholly owned subsidiary Wholly owned subsidiary is one in which 100% of the subsidiarys stock is owned by the parent company (Charles Hill, 2008). In order to establish a wholly owned subsidiary in a Lithuania, 94wines can either set up a completely new operation or acquire an established host country organization and use it to promote their products. This entry strategy would allow 94wines to reduce the risk of losing their knowledge, technology, ideas and control. We believe that it is very important for 94wines to remain full control of all operations because it will allow them to market and tailor their product the way that will work best for the Lithuanian market. However, establishing a wholly owned subsidiary is generally the most costly method to enter a foreign market. In this case 94wines will be responsible for all the costs and risks associated with setting up operation in Lithuania, whereas with joint venture strategy 94wines could share both the risk and the investment with their partner(s). It is important to say that acquiring an established enterprise in the host country will minimize the risks of entering a foreign market. On the other hand, acquisition may bring other potential problems such as trying to merge diverse corporate cultures, which in some cases can offset the benefits of acquisition. To sum up, we believe that the most appropriate entry strategy for 94wines to enter the Lithuanian market is by establishing a joint venture with already existing and wellknown Lithuanian organization. One of the options for 94wines is to create a joint venture with the company called Alita. This is Lithuanian brewing company based in Alytus, established in 1983. Alita is one of the largest producers of alcoholic beverages in Lithuania. Alita produces naturally fermented sparkling grape wines, alcoholic cocktails, ciders, vodka, brandy and concentrated fruit juice. This will allow 94wines to make use of the widely known and accepted Alitas brand in Lithuania. Last but not least, it is important to mention that 94wines can always begin by entering Lithuanian market through the joint venture and in case of success they can change the strategy or buy out the rest of the shares from their partner(s).

Export strategy
When companies expand their market internationally, they have to consider standardization and adaptation of their marketing program (Jobber, 2001). Adaptation is a strategy regarding change of the marketing program, in other words the companys product, price, place and distribution, for each international target market. Standardization is an international marketing strategy where the company uses the same marketing program for all their international target markets (Tina Nordstrand, 2005). Standardization Those in favor for standardization mean that this makes sales higher because of a consistent product image across different international markets (Bradley, 1999). The costs can be reduced by having a standardized product and move the production to low cost locations (Tina Nordstrand, 2005), (Michael Czinkota, 2009) add that this also can result in economies of scale and that this is a driving force for companies to make markets more unified.
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(Michael Czinkota, 2009) say that a firm may identify target markets where products can be marketed with little or no modification, that is, markets where standardized products can be used. The benefits of standardization and sell the same product worldwide are cost savings in production and marketing. Economies of scale are therefore one of the main forces behind making markets more unified over the world using the standardized approach (Tina Nordstrand, 2005). Adaptation (Jobber, 2001) says that adaptations most likely improve the performance of businesses. Those in favor of adaptation argue that markets are not exactly alike and that it is essential to tailor your marketing mix in order to ensure that sufficient variety exists to satisfy buyers needs in each market. There are without a doubt differences in customer needs between different countries and cultures. The amount of product adaptation that is required depends both on cultural differences as well as economic conditions. A well-known example of product adaptation is Uniliver who created cheaper packages to their high quality products because they found out that Indians desired them but could not afford them. Uniliver therefore developed a package that only cost a few pennies instead of the regular $5.00 package. In order to decide which strategy is the best to use, three factors are compared (Michael Czinkota, 2009).

1. Are the needs of consumers across markets similar or different? 2. Could conditions surrounding the product use affect company expansion
strategy?

3. Can the target market customers afford to buy the product?

Based on our primary research, which is summarised in the analysis of the differences and similarities between the local and export market, we can conclude that all of these three factors are very similar between both the local and the export country. It is, however, important to note that our analysis showed that the buying power for wine in Lithuania is approximately twice as low compare to the Netherlands. Due to the exclusive positioning of the product, its price should be set above the average price for a bottle of wine in Lithuania, which is 4.5 - 6 Euros. It is important to remember that there is no right strategy for all the different situations. The right export strategy depends on the situation. Based on our extensive analysis we suggest 94wines to keep their marketing program unchanged except for the price, which should be lowered down a little bit so that the Lithuanian customers would be able to afford it. This will help them to benefit from both the cost reduction and economies of scale. As we already mentioned, 94wines is a relatively new brand and a small company, therefore it will be beneficial for them if they could reduce the costs associated with entering new market. In addition, by adopting standardization approach 94wines will be able to improve their quality since all of the efforts will be concentrated upon the same products. In the long run, however, nothing stops 94wines to change their export strategy if it will be needed.

Integrated marketing communication strategy

Integrated Marketing Communications (IMC) has been defined by the American Marketing Association as a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time (interMedia Strategic Marketing Services, 2008). The purpose of Integrated Marketing Communications (IMC) is to join together all the elements of your organization such as: advertising, customer service, sales, public relations, direct marketing etc. into a unified components rather than having these different departments all work independently from each other so that they can work together in harmony. All of these communication tools work better if they work together in harmony rather than in isolation. Integrated Marketing Communications allow you to have a single brand message across all your marketing channels. Among the vast array of different communication strategies we believe that the most appropriate one for them would be to simply extend their current strategy used in the Netherlands to Lithuania. The reason for this is because both of these European countries are very much alike and since their current strategy seems to work in Netherlands we can therefore assume that it should be successful in Lithuania too. Communication objectives Communication objectives are the goals that an organization seeks to achieve through its promotional program in terms of communication effects such as creating awareness, knowledge, images attitudes, preferences or purchase intensions (Marketing MiMi.hu). The setting of communication objectives is important for the three main reasons. First, they provide means of communication and co-ordination between groups e.g. clients and agency working on different parts of campaign. Second, these objectives also serve as a guide for decision-making. Third, objectives are served as a benchmark so that relative success or failure of a program can be determined. For 94wines it is important to show their target market that the products they offer can serve as perfect gifts for those who they care about. Therefore, the objective is to show that their products are more than just a bottle of wine, it is a perfect gift too. As we discussed previously, in Lithuania youth prefers beer to other alcoholic drinks. Hence, it is logical for 94wines to make an attempt to convince youth that wine is a better choice. Communication message The core communication message of the marketing campaign should be that 94wines is a wine with unique and attractive bottle design that can be purchased not only as means of consumption but also as a gift to someone you care about. Communication slogan The slogan 94wines is using in the Netherlands is: sinfully delicious. We believe that it might not be the best idea to use the same slogan in Lithuania. This is because of the relatively high percentage of christian citizens (87% according to the Lithuanian
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Department of Statistics) in Lithuania. In other words, the original slogan might not be widely accepted in Lithuania. The appearance of the slogan is desirable to be used in conjunction with the communication strategy. We believe that the slogan should reflect or even enrich the communication message. Another important factor is language. We reckon that it will be better to come up with Lithuanian slogan so that every potential customer can understand it. One possibility for the slogan is: Puiki dovana js mylimiems monms, which translates to: The perfect gift for your loved ones. Promotional Strategy In the process of developing a promotional strategy it is crucial to make sure that the different communication channels are carefully integrated and coordinated to deliver a clear, consistent and compelling message about the organization and its products. In todays world, people are continuously bombarded with various messages. There is no time for a person to evaluate and act on all these messages so we pick and choose between them. This makes the choice of promotional tools extremely important for an organization. There are five main promotional tolls, which are: advertising, personal selling, sales promotion, public relations and direct marketing. In case of 94wines, the most appropriate promotional tools would be direct marketing and public relations. The reason for this is because there are very strict regulations in terms of alcohol advertising in Lithuania. For example, the newly amended Law foresees the complete prohibition of alcohol advertising in all media in Lithuania as of 1 January 2012 (Iemantait, 2010). Due to the restriction of alcohol advertising 94wines will need to put more emphasis on other promotional tools to reach their target audience. It is essential for 94wines to gain brand awareness, while at the same time educate their customers about the products they offer. It is important to note that advertising in shops and cafes with posters and cardboard displays is not currently forbidden in Lithuania. Therefore, it could be considered as an option for 94wines to quickly gain brand recognition. Although, since our product will be sold through the Internet, it is essential for 94wines to advertise on the Internet. Our primary research has shown that the most frequently visited Internet portals in Lithuania are: www.delfi.lt, www.lrytas.lt, www.alfa.lt and www.one.lt. Therefore, we suggest 94wines to focus primarily on the above-mentioned Internet portals. Moreover, with the help from the joint venture partner: Alita, 94wines could open small corner shops within well-known Lithuanian shopping malls, such as Panorama, Akropolis and Ozas; which are similar to de Bijenkorf in the Netherlands. This will allow them to educate buyers about the product and quickly gain brand awareness. In addition, personal interaction with customers will allow 94wines to receive customer feedback, find out more about their preferences, thus allowing them to tailor a better marketing mix.

Pricing strategy
In today's very competitive marketplace a pricing strategy that insures a consistent approach to offering your product in a way that will outsell the competition is critical.

Small businesses such as 94wines can ensure profitability and success by paying close attention to their pricing strategy. According to (Michael Czinkota, 2009) price is the only element of 4Ps that generates revenue, all others are costs. Ultimately, the pricing strategy used for marketing wines should be based on the demand for wine, as consumers are not directly concerned with the cost structure in producing a wine they are interested in. There are three main pricing strategies that 94wines could choose from, such as: skimming, penetration and market pricing. But in our report we will focus on later one. As there are similar wine products in Lithuanian market, market pricing would be the best reactive approach that 94wines can use. The average price of competitors wine product is determined to be around 4,5 - 6 Euros, so by considering the ceiling price and pricing 94wines product just above the average should lead to successful market entrance. This pricing policy strategy allows 94wines to set prices quickly with and efficiently, since it does not require as accurate market data as other strategies. Setting a low price is not the best option for a small business because the bigger competitors in the market can easily defeat it. By choosing market pricing, and discouraging two other models 94wines would avoid potential negative consequences, such as: price war with big domestic Lithuanian wine companies that could lead to running out of business. Price policies related to wines are not homogeneous. It is argued that the price is a signal of wine quality to the consumer, that is why entrepreneurs should consider their winery strategies carefully before making final decision of setting in to the wine market (Jones & Storchmann, 2001).

Distribution
Distribution channels refer to the ways in which products move from the manufacturer to the end user. Distribution channels consist of wholesalers, retailers, sales agents and have a strong impact on the companys success and can increase efficiency and reduce costs (Charles Hill, 2008). Many product and services manufacturers or providers use multiple channels of distribution that allow them to target wider customer audience. For example, Apple products might be bought via online store, Apple store or through several independent retailers. In our report we have decided to use horizontal distribution through the mass multi channel (Diagram 1) that will increase the sales of our product as we will be able to reach our customer not only through the online store, but also through the corner shops in the biggest Lithuanian malls e.g. Panorama, Ozas, Akropolis.

According to (Nibler, 1984) there are two different marketing systems to chose from: vertical and horizontal. We will focus on the horizontal system, as it is more flexible and allows suppliers and intermediarys work close together instead of competing with each other.
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While entering market through joint venture with Alita and using horizontal marketing system 94wines will be able to broad their knowledge about Lithuanian wine consumers, plan delivery schedules, quality levels, promotions and prices more efficiently. Moreover, as Alita is well established company in Lithuanian market it will be able to push the product more efficiently through its distribution channels and introduce the in corner shops within well known Lithuanian shopping malls, such as Panorama, Akropolis and Ozas. This marketing system will also allow to reduce the transportation costs as 94wines could be bottled at Alitas factory that would lead to improved efficiency in distribution and lower transaction costs.

Product life cycle considerations

Every product goes through a series of steps from the time it is first originated and the time the manufactured product is retired or rejected. The first stage for every product lifecycle is introduction. During this stage a product is introduced to the public for the first time and is usually heavily promoted to create customer awareness. Since 94wines is not currently present in Lithuania it will also require to go through this stage. The problem with creating awareness for 94wines is that in Lithuania it is restricted to promote alcohol drinks that have more than 5.5% on TV and other common media channels. This might have a huge impact on 94wines sales during the introduction stage. However, as we discussed previously in promotional strategy section, there still are possible ways for 94wines to promote their products and increase their brand awareness. It is important, however, to note that during the introduction stage marketing costs may be high in order to study the market, launch and promote the product, develop a market for the product and set up distribution channels. In terms of the distribution during introduction stage, we suggest 94wines to focus mainly on their online store and open their first small corner shop in Panorama shopping mall. This should allow them to start their business in Lithuania at the minimum cost incurred. There are two most common and widely used pricing strategies for the introduction stage, which are: price skimming and penetration. Price skimming refers to the pricing, where a firm charges the highest initial price that early adopters will pay with the intention to lower it down when demand from early adopters falls. Price penetration, however, refers to the pricing strategy, where a firm sets a relatively low initial entry price, often lower than the eventual market price, to attract new customers. In this case, the objective is to attract as many customers as possible and to increase market share. However, neither price skimming nor penetration strategy is appropriate for 94wines. The reason why price penetration strategy is not appropriate in this case is because it might lead to the price war with existing competitors and therefore, might drive off 94wines from the business. In addition, price skimming would not be appropriate because the demand for alcohol products in Lithuania is elastic as there are many substitutes to choose from e.g. other wine products. Therefore, we suggest 94wines to set the price for their products above the average price for the wine products and keep it constant during the entire product life cycle. Although, as we mentioned earlier, the price should be determined with great care, therefore, it might be reasonable for 94wines to try setting slightly different prices over time and see how the demand will change. This should allow them to determine the best price and demand combination which will lead to the highest profits.

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Implementation

2011

2012

June July Aug Sep Oct Nov Dec Jan Feb Mar April May June July Aug Sept Oct
Forming Joint Venture With Alita Production set up with Alita Launch Website

Communication campaign Website advertising Open first corner shop Inform the audience

Social media promo;on * Shaded boxes indicate the implementation period for the given task.

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