REAL SIMPLE MAGAZINE:

HAIER AMERICA STRATEGIC MARKETING PARTNERSHIP ACTION PLAN, 2015-2017

By: Jeremy Divinity

December 2014

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EXECUTIVE SUMMARY Haier America is in the business of providing sustainable home solutions. By partnering with Real

Simple Magazine for a strategic marketing partnership, Haier America will have a unique opportunity to

engage and capture the Real Simple audience. Real Simple’s target market also represents an

underrepresented niche segment in the Household Appliance market, which Haier America is prime to

take advantage of by providing multiple product and message opportunities to meet their needs. In an

industry where the four largest companies own 80% of the market share, creating and carving out a

niche market serves as a competitive advantage.

The Household Appliance industry is forecasted to continue to see improvement in revenue growth over

the next five years. Women make up 53% of all major appliance sales and 70% of all small kitchen

appliance purchases. By partnering with Real Simple Magazine, Haier America is in the perfect position

to take the next leap in the home appliance industry by inspiring, creating great products, and exceeding

our customer’s expectations. Recognizable brand names and reputation are driving forces behind

purchase decisions. In order to build brand recognition, a committed investment must be made in

marketing and promotional activity. With a budget of $25 million per year and through a customer-

customer driven marketing focus strategy, we hope to achieve an increase in annual revenue growth of

excess of 25%.

The emergence of new energy efficient appliances, SMART appliances, will continue to drive industry

revenue. Consumers are willing to pay 15% to 25% above the standard price for higher energy saving

appliances. Haier America will drive innovation in the market by designing products as energy saving

and cost-efficient in order to uniquely differentiate from competitors. The current trends in the industry

not only align perfectly with the strategic partnership between Haier and Real Simple, but also must be

taken advantage of in order to achieve our strategic goals. Consumers want appliances that make there

live easier. We are Haier to help, by providing Real Simple home solutions!

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Table of Contents I. Situation Analysis…………………………………………………………………………….……pg.4 i. Company Analysis................................................................................................................. pg.4 ii. Market Analysis.................................................................................................................... pg.5 iii. Competition..........................................................................................................................pg.6 iv. Critical Issues........................................................................................................................pg.7 II. Marketing Strategy……………………………………………………………………………….pg.8 i. Mission Statement...................................................................................................................pg.8 ii. Marketing Objectives.............................................................................................................pg.8 iii. Financial Objectives..............................................................................................................pg.8 iv. Distinct Competencies.......................................................................................................... pg.8 v. Value Proposition...................................................................................................................pg.8 vi. Target Market........................................................................................................................pg.8 vii. The Strategy..........................................................................................................................pg.9 viii. Positioning Statement..........................................................................................................pg.9 ix. Product Management.............................................................................................................pg.9 III. Goods & Services Mix. ………………...……………………………………………………….pg.10 i. Pricing Strategy......................................................................................................................pg.10 ii. Distribution Strategy.............................................................................................................pg.10 iii. Promotion Strategy..............................................................................................................pg.10 IV. Marketing Communications/Action Plan..................................................................................pg.11 i. Communication Channels......................................................................................................pg.11 ii. Action Plan...........................................................................................................................pg.11 iii. Media Plan...........................................................................................................................pg.12 iv. Marketing Research.............................................................................................................pg.12 V. Financial Projections.....................................................................................................................pg.13 i. Profit & Loss Statement.........................................................................................................pg.13 ii. Marketing Budget.................................................................................................................pg.13 VI. Implementation Controls.............................................................................................................pg.13

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I. SITUATION ANALYSIS i. Company Analysis

HAIER AMERICA Headquartered in New Jersey, Haier America is the US sales and marketing arm of Chinese home appliance and consumer electronics giant Haier Group. Haier has experienced rapid growth from a simple refrigerator factory into leading multinational consumer electronics and Home Appliances Company. The company also has a research and development center in South Carolina. Large retailers such as Wal-Mart, Bed Bath & Beyond, Best Buy, Office Depot and Target sell Haier’s products. In 2013, Haier America established new leadership and transformation in their organization structure. Under the new leadership, Haier Group is focus on the U.S. market in 2014-15 and beyond. Product Offer Haier focuses on understanding consumer drivers, decisions and uses of products and services through their entire life cycle. Haier Group makes refrigerators, freezers, wine cellars, air conditioners, dishwashers, laundry machines, and small appliances. Future Products The ability to compete on product features, quality, and performance is influenced by the level and quality of R&D and design activities. By utilizing the new Research and Development manufacturing center in Camden, SC, Haier will be able to design complete home solutions for consumers. SWOT ANALYSIS HAIER America is continually re-examining their business model to ensure that they leverage their position as a leader in the market. Below, we have identified the opportunities and threats in the environment, as well as our particular strengths and weaknesses that will enable success:

Strengths • Reach and exposure of Real Simple platforms. • Real Simples audience has highest HHI among

women’s magazines. • Highly targeted and receptive audience of RS. • Both brands have same objectives based on

healthy/eco-friendly lifestyle. • New Management and leadership put in place, New

Head Quarters - Haier. • Haier America has injected a new culture of

innovation. • Real Simples strategic partnerships with Retailers. • Haier’s expertise in home appliance industry.

Weakness • Domestic audience is the primary market of R.S. • Narrow Base. • Crowded ad space in RS magazines. • Customers, who lost loyalty, no longer in purchase

decision – Haier. • Poor Consume Affairs. • Products that don’t work. • Poor customer service & service repair, poor

management of warranties • Low Product Scores.

Opportunities • Gain higher reputation by partnering with R.S. • Acquire influential audience (higher income). • Improve consumer confidence level. • Resource sharing with retail partners of R.S. • Branded Content in RS editorials. • Licensed, co-branded products. • Use R.S. social media platform to gain more

awareness. • Product placement in R.S. event. • Coupons/Promotion through R.S. • Utilize Research & Development Center in Camden,

South Carolina • Energy Star Program through U.S. Government.

Threats • Haier’s bad reputation in the U.S. / consumer

perception. • Stronger competition and low brand recognition. • Price war with competition. • Power of suppliers in industry supply channel. • The possibility of low recognition degree – bad

quality.

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ii. Market Analysis

Haier America operates within the Household Appliance Manufacturing Industry that includes cooking appliances, refrigerators and freezers, laundry, dishwashers, trash compactors along with other home appliances. The Household Appliance Industry is highly globalized; domestic and global brands have strong brand recognition and compete aggressively for market share in the U.S. In order to build brand recognition, a committed investment must be made in marketing and promotional activity. The sections below discuss our analysis of the segmentation, the target market, environment, and our competitors. Target Market Segmentation The target market is defined by the customer needs that create the market and the structural forces that establish industry operations. Environmental Factors The following factors define the environment in which Haier America hopes to succeed: Wealth, Price of Goods, and Household Trends. Market Demographics The profile of Haier America’s and Real Simples target customer during the partnership consists of the following geographic, demographic factors and segmentations based on psychographic/lifestyle:

Geographic Demographic United States Sex: Females

Age: 18-54 Single or Married

College Educated Employed

Average HHI of $60,000 Psychographics & Segments: Wellbeing-oriented – Highly educated and high-income individuals, who are environmentally health conscious, prioritize health when shopping. Social-Dining Oriented – Housewives from dual household incomes who prefer to eat out and show little interest toward kitchen appliances. They are less sensitive to price. Family Oriented – Women who are devoted to household chores. Interested in the cleanliness of kitchens and appliances and are not reluctant to purchase new and large-sized kitchen appliances. Innovation Oriented – Strongest need to make improvements and changes in their lives. They take interest in large-sized kitchen appliances, and value family and the environment. Price Conscious – Have little interest in new products and are highly price sensitive; HHI is relatively low. They lack enthusiasm in kitchens, cooking, and appliances. Convenience Oriented – This group favors convenience in life over family health. Interested in modernized kitchens and kitchen appliances. Mainly interested in large kitchen appliances.

Wellbeing-­‐oriented    25%  

Social-­‐Dining    Oriented  11%  

Family  Oriented  16%  

Innovation  Oriented  20%  

Price  Conscious    11%  

Convenience  Oriented  17%  

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Value Drivers: Recognizable brand names and reputation are driving forces behind purchase decisions. Market Growth The Household Appliance Industry is a multi-billion dollar industry and has seen recent improvements in revenue growth over the past five years. According to IBISWorld, the industry revenue will grow at an average annual rate of 2.3%, and in 2014 the total revenue for the industry is $18 billion. The growth in sales is attributable to the improving housing market and an increase in disposable income. The emergence of new energy efficient appliances, SMART appliances, will continue to drive industry revenue. Market Trends The latest trends in the Household Appliance industry consist of the necessity of product innovations, such as energy saving appliances such as SMART Appliances. Major companies are noticing the change in consumer purchase behavior. A preference is placed on style, energy efficiency and technology. Market Needs Buyers in the U.S., want sophisticated appliances, and also need a full kitchen solution. Within the Household Appliance industry there are a number of product benefits that consumers value and that Haier America wishes to fulfill: Color, Design, Connectivity, Efficiency Product & Market The Household Appliance Industry includes major domestic appliances such as: air conditioners, dishwashers, dryers, freezers, microwave ovens, refrigerators, stoves, vacuum cleaners, and washing machines; plus minor domestic appliances such as: blenders, coffee machines, food processors, grills, stand mixers, toasters, and fans. Market Size: Market concentration has decreased in the last five years and is forecasted to continue for the next five years. The decrease in consolidation can be attributed to the introduction of new products and the emergence of new manufacturers entering the US market. Potential for Profit: To expand the customer base, Haier America must create variations and innovations of products aimed at specific market segments.

iii. Competition Industry Competitive Analysis The Household Appliance industry is highly concentrated. The concentration in the industry is a characteristic of the economies of scale in production and the importance of large retailers, who only stock their appliances from a few manufacturers. Buyer Power

• Few important buyers in the industry • Low threat of backward integration • Product supplied is not a commodity • Buyers cost is high due to competitive market/distribution channels

Supplier Power

• Very few suppliers • No substitutes of home appliances • Presence of powerful buyers reduce the profit of the industry overall

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Channels of Distribution In the Household Appliance industry, many manufacturers produce, and distribution and retail their own products. Manufacturers sell finished household appliances to appliance distributors (wholesale) and also directly to large retailers who then sell them to end-consumer households. Due to consolidation in the industry, retail chains only stock appliances from a few manufacturers to leverage their suppliers. New Entrants The high concentration in the industry and dominance of existing manufacturers makes it difficult for new entrants to enter the market. Direct Competition Competitive Rivalry:

• Global industry, industry competes with diversification • Products have threat of getting old in terms of technology, design, and features • Competition in US is very high due to technology and product innovation

Competitors: Whirlpool –Whirlpool remains dominant in the U.S. market with almost a third of the market share and accounting for 40% of all industry revenue. GE – GE is one of the largest and most diversified industrial corporations in the world. GE holds a 12.6% market share in the household appliance industry. LG – LG produces are range of home appliance products, including refrigerators, washing machines, microwaves, and vacuum cleaners. In the next five years, LG is expected to introduce a range of new smart appliances. They hold a 5.3% market share. AB Electrolux – 75% of the brands North American sales are generated in the U.S. The company holds a 23.5% market share in the industry.

iv. Critical issues Key Success Factors in Industry: 1. Establishment of brand names 2. Market research and understanding of consumer & retailer needs 3. Development of new products 4. Control of Distribution 5. Economies of Scale External Forces The U.S. market for home appliances is changing dramatically, although the industry is expanding, economic and technological forces are molding both consumers and appliances into something different than what the industry has previously been. Energy Efficiency/Government Regulation –Manufacturers are increasingly developing appliances through the ENERGY STAR program of the U.S. Government that provides tax credits for companies that manufacture energy efficient appliances. Technology – Technological changes are very high, companies are competing through technology they introduce SMART products. Economies of Scale – Manufacturers are heavily engaged in renovating and building production facilities to improve quality and reduce labor and material cost to gain economies of scale.

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II. Marketing Strategy Strategy & Implementation Summary This partnership is a great fit for Haier and a unique opportunity to engage and capture Real Simple’s audience. While Haier will take the lead on design and manufacturing, Real Simple will handle the marketing by advertising across our online and offline platforms in a very authentic way and providing editorial coverage as we see fit. We have taken priority in aligning our strategy to offer a wide array of options from Haier’s product lines, while also innovating new products, to meet consumer’s wants and needs. By focusing on customer-focused design and marketing, we can customize each consumer experience by providing products that align with their values. Consumers today have a deeper need for efficiency, as they have things to do and tweet! We are Haier to help, by providing Real Simple solutions.

i. Mission Statement Haier America’s mission is to be the leader in providing cost-efficient and sustainable home solutions in the Household Appliance industry. We are committed to service, excellent relationships, and the duty of listening to our customers in order to fulfill needs. Dedicated to corporate social responsibility, Haier America is much more than products that we produce.

ii. Marketing Objectives 1. Increase brand awareness and customer engagement for all three-target segments to achieve a 70% awareness rating after two years. 2. Deepen penetration in the US market by increasing market share from 2% to 4% in the first year and to 6% in the second year.

iii. Financial objective 1. Increase annual revenue growth rate by 25% each year.

iv. Distinct Competencies By implementing a focus strategy, Haier America will primarily concentrate on a niche target segment based on the lifestyle, value, and needs of the selected group(s); Haier will gain a competitive advantage through product innovation and tailoring the marketing mix to the specialized markets.

v. Value Proposition Haier America is…EFFICIENT, SUSTAINABLE, AFFORDABLE, PROMISING.

vi. Target Market Haier America will market its products to three distinct market segments. Each target market segment needs great customer experience, as well as multiple branding and marketing message opportunities, to build a lifelong relationship with Haier America. Segment Demographic Psychographic/Lifestyle Values Needs The Bachelorette

Female, 18-25 1st time purchaser, 1st apartment, not brand loyal, heath conscious, student

Wellbeing oriented: prioritize health, quality, style

Integral solution, affordability, chic

The New Woman

Female, 25-35 Single or just married, professional, busy lifestyle, condo or loft, everything is about her

Convenience oriented: quick & easy, efficient, design

Environmental friendly, cost efficient, time saving

The Housewife Female, 35-55 Married, family, “soccer mom”, makes most home purchases decisions, disposable income, dedicates time to the home.

Innovation oriented: high standards, large appliances, cost efficient

Reliable, performance, eco friendly

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Although, we have segmented our target market, they all have the same underlying characteristics and values: “Smart and busy consumers who want creative and simple solutions to everyday challenges”.

vii. The Strategy The underlying objective is to re-position Haier America as the go-to brand for easy and sustainable solutions in the Household Appliance industry. Haier will strive to aggressively increase their market share through the process of re-positioning, product development, and creating innovating to meet consumer demands. The marketing strategy will seek to first create customer awareness regarding the offered products, develop brand communities “Haier Loyalists”, and work toward improving product lines by offering co-branded innovations and features with Real Simple. The message that Haier America offers the most efficient, innovative and reliable household appliances will be communicated by several methods. The first method is by implementing a social media campaign through various platforms. The second method is by displaying Hair products and advertisements at Real Simple events and platforms, off-line and on-line, and providing branded content creation with Real Simple’s editorials and publications. The third and fourth method is by seasonal television and OOH advertisements. The last method is by building brand communities and the use of a mix of digital media.

viii. Positioning Statement

For smart and busy customers who need resourceful solutions to everyday challenges, Haier America is the number one provider of sustainable home solutions in the Household Appliance Industry.

ix. Product management Haier America will be able to develop multiple product lines for the following segmented target groups based on their needs: Haier provides integrated solutions, rather than individual products or services. Target Segment Product Opportunity The Bachelorette -­‐ Small Kitchen Appliances (Branded Line with R.S.); Juicers, Blenders,

Microwaves, Coffee Makers. -­‐ Compact Fridge -­‐ Window AC

The New Woman -­‐ Small Kitchen Appliances (Branded Line with R.S.); Juicers, Blenders, Microwaves, Coffee Makers

-­‐ Wine Cellars -­‐ Energy Efficient Appliances (SMART/STAR)

The Housewife -­‐ Energy Efficient Appliances (SMART/STAR) -­‐ Wine Cellars, -­‐ Large Appliances; Double Door Refrigerator, washer, dryer, dish washer,

oven

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III. Goods & Service Mix i. Pricing Strategy

Haier America product price is based on offering high value to our customers compared to most price points in the market. Value is determined based on the best quality available, efficiency, and brand reliability. We will develop different price range for each segmentation and corresponding products, relatively lower than our major competitors.

ii. Distribution Strategy The Haier and Real Simple co-branded products, such as the small kitchen appliances, will be available at Bed Bath & Beyond and Wayfair.com as apart of Real Simple’s retail partnership. All other products will be sold directly through our large retail accounts: Wal-Mart, Bed Bath & Beyond, Best Buy, Office Depot and Target; and also online at HaierAmerica.com

iii. Promotion Strategy Haier America’s four main marketing strategies are: 1. Engage consumers through social media campaign.

• Introduce Haier to target segment by having social media influencers shoot videos/take photos using Haier products and Real Simple recipes.

o Videos and photos will be posted and shared on Real Simple’s Facebook, Pinterest, Instagram, and Twitter with link and hashtags relating back to Haier. #HaiertoHelp #HaierKitchen #HaierCares

2. Connect with customers through on-line brand community. • “Haier Kitchen”

o Virtual kitchen; share tips for saving energy, recipes, how to’s; special promotions; Crowd Funded Customization; gifts

3. Generate reach through seasonal traditional promotion campaigns. • Seasons Targeted: Holiday’s & Summer

o OOH Campaign o Television

4. Inspire audience through Real Simple’s platforms, off-line & online. • Branded editorial content, advertorials, advertisement spreads/banners, and videos.

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IV. Marketing Communications/Action Plan Based on our segmented target markets, each marketing strategy will be able to offer multiple marketing message opportunities based on the segments needs, values, and product offered.

i. Communication Channels

ii. Action Plan

When What Target customer(s) Objective(s) Cost (if any)

Annual 2015-2017

Social Media Campaign

The Bachelorette, The New Woman, The Housewife

Engage Target Audience

$300,000

Annual 2015-2017

Real Simple – Website/Social Media Page(s)

The Bachelorette Inspire Target Audience

$400,000

Dec-Feb/June-Aug (2015-2017)

Real Simple – Print

The New Woman, The Housewife

Inspire Target Audience

$4,000,000

Annual 2015-2017

Brand Community

The Bachelorette Connect with audience to increase loyalty

$400,000

The  Bachelorette    

Social  Media  

Real  Simpe  (Website  &  Social  Meida  Pages)  

Brand  Community  "Haier  Cares"  

OOH  Awareness  Campaign     The  

New  Woman  

Social  Media  

Real  Simpe  (Print)  

Brand  Community  "Haier  Cares"  

OOH  Awareness  Campaign    

Television  

The  Housewife    

Real  Simpe  (Print)  

OOH  Awareness  Campaign    

Television  

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Dec-Feb/June-Aug (2015-2017)

OOH Campaign

The Bachelorette, The New Woman, The Housewife

Increase reach and awareness of seasonal promotions

$4,000,000

Dec-Feb/May-Aug (2015-2017)

Television The New Woman, The Housewife

Increase reach and awareness of seasonal promotions

$6,000,000

iii. Media Plan

The following media plan is to be implemented for both the 2015-2016 and 2016-2017 fiscal years.

iv. Market Research

During the initial stages of the marketing plan development; Hair America held multiple focus groups with customers who fit our target segments. The goal of the focus groups was to find our more about customer purchase behaviors, values, and needs. Overall, the focus group provides Haier with dependable information about consumers and is significant to the launch of the new campaign and partnership with Real Simple.

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V. FINANCIAL PROJECTIONS i. Profit & Loss Statement

ii. Marketing Budget

VI. Implementation Controls

The following performance metrics should be implemented involving key performance indicators reported on a regular basis:Sales Metrics: Number of Retained Customers, Number of New Customers/Sales. Marketing Metrics: Customer Retention Rate, Customer Satisfaction, New Customer Retention Rate, Customer Awareness Rating