Executive Summary
The report examines the markets of the United States, the United Kingdom, and Germany to determine the value proposition and sales opportunities for high-end refrigerators in each country. The results of the analysis show that the value propositions, and accordingly, the characteristics of the production and advertising of refrigerators for the states, are different. Nevertheless, such features as ease of use and superior product can be used for all countries. However, Germany is an unbeneficial market for high-end refrigerators selling, while the United States and Britain can make a profit in this industry.
A feature that can satisfy the needs of customers in all three countries is the introduction of new technologies to reduce the consumption of electricity, as well as simplify the use of the refrigerator, or rather store products longer. However, while these characteristics are the primary traits for Germany, in the USA, they only provide an additional advantage. Thus, this detail is not a priority for Americans and does not present the primary issue for the value proposition.
The main feature of a refrigerator for the United States is its design, functionally, and high cost, which emphasizes the status of luxury appliances. Britain and Germany, on the contrary, need a more modest and cheaper presentation of goods. For the UK, the most important characteristics are a high shelf capacity and an opportunity to build appliances into the wall, as well as the reduction in resource consumption. Consequently, although buyers in all three countries buy refrigerators for food storage and want them to be convenient, they give different priorities to different features.
The United States is the most profitable market for elite refrigerators because of high demand and product prices. Britain is also an option due to the purchasing power of the population and lack of competition. However, the German market is unprofitable because of the lack of demand for luxury goods and high external competition. Therefore, the company should not start selling high-end refrigerators in Germany.
Introduction
Any business, regardless of the purpose, subject, and method of its implementation, needs to analyze the market to which it is directed. This analysis includes an assessment of internal and external factors affecting the production and sale of goods, as well as the demand and buyer behavior. At the same time, the needs of customers are the basis for business, since their satisfaction is the essence of trade.
In this case, it is necessary to determine the specific features of the high-end refrigerators that should be designed by ACME as they will help to make a shopping offer. This type of offer is determined by the fact that the buyer selects and compares products of different brands, so ACME should propose the best option (UMGC, Offerings, 2019). Consequently, analysis shows that the markets of the USA, Germany and the UK have their characteristics such as demand for luxury products, energy-efficiency of devices, and integrability of appliances, respectively, which form their value proposition.
The U.S. Market
The Characteristics of Buyer Behavior
The US market is one of the most developed in the world since it presents a wide selection of goods and manufacturers, and the state itself has the highest GDP in the world. However, it is necessary to know some features of consumer behavior to satisfy their needs and sell such a narrowly targeted product as high-end refrigerators. Thus, the main features of the US market are the high demand for this type of product, the desire for luxury, and the use of stores for buying goods.
The first feature of the US market is that the demand for refrigerators is high. In 2017, the United States became the biggest importer of refrigerators by spending $9.1 billion on them (“Refrigerators,” 2018). Simultaneously, the US has many domestic companies that offer high-quality electronics and household appliances. Therefore, selling high-end refrigerators is a profitable business if a company can create a unique and useful product.
At the same time, the main feature of consumer demand for refrigerators is the presence of two or more doors and multiple sections, which increases their functionality (“Refrigeration appliances in the US,” 2019). The size and number of shelves are characteristics that will ensure a high purchase of products. These details will also bring benefits to the buyers by making the refrigerator unique and easier to use.
Moreover, the refrigerators that Americans buy should be not only functional but stylish and luxurious. According to Danziger (2018), most of the wealthiest buyers in the world are concentrated in the American market, and the potential of a luxury kitchen unit is very high. The end-user and buyer are usually the same people as they purchase refrigerators to satisfy their need in storing the food but not as a present. The age and gender of the buyer also are not determinative, since everyone uses fridges and, the desire to buy the luxury piece of furniture depends mostly on income level. Therefore, the benefit of high-end refrigerators should be both functionality and the ability to boast of a high-quality and expensive purchase.
Another interesting point is that despite the high popularity and relevance of online shopping, American buyers prefer to visit physical stores. According to Morgan (2019), many people first do an online search, but then go to showrooms to see and try the product with their own hands, and understand how it will match with their interior. For this reason, although online distribution channels are essential for selling high-end refrigerators in the United States, shops and showrooms should also be present on the market.
Disadvantages of the Market
The shortcomings of the market for high-end refrigerators in the United States are high competition and the rare purchase of goods. The second feature is logical, since the fridge usually works for many years, and sellers give a guarantee for their repair. Besides, although Americans are increasingly buying luxury household appliances, only a small part of the population can afford them. There is also no clear seasonality for such a product because people usually buy a fridge if they need a new one due to redecoration of the house or breakdown of the old appliance.
The high competition exists as such large companies as the Whirlpool, Haier Group, and GE Appliances operate in the country, and they are recognized as the best manufacturers of smart refrigerators in 2019 (“Smart refrigerator market,” 2019). They are the main influencers on the market for goods since they create new trends. Therefore, ACME needs to offer high-tech and functional refrigerators with unique characteristics and brands to surpass existing companies.
The German Market
The Features of Buyer Behavior
The German market is complicated for foreign companies as German buyers prefer local producers, which have a wide variety. This fact is especially important for the appliance market, since such giants as BSH Hausgerate, which includes Bosch and Siemens, as well as Liebherr and Miele, exist in Germany. In addition, the market features are the transition to energy-efficient technologies, the popularity of online shopping, and the relatively low cost of goods.
The first feature of high-end refrigerators in Germany is customer demand for energy-efficient appliances and technologies that use alternative energy sources. The second type of electronics has not yet been developed on the market, since not individual devices, but whole houses usually use alternative energy. However, refrigerators with lower energy consumption are more relevant. Studies show that German buyers more often acquire household appliances and cars that save fuel or electricity (Long, Mills, & Schleich, 2018).
In addition, according to a report by Euromonitor International, demand for freezers fell in Germany, since buyers prefer fresh food (“Refrigeration appliances in Germany,” 2019). Consequently, the main features of refrigerators for the German market should be new opportunities for saving resources as they bring benefits in saving money and protecting the environment.
Disadvantages of the Market
The problems of the German market are a competitive environment, which affects the characteristics of the product, and the residents’ desire to pay less. The first feature exists because there are influential leaders in the refrigerator market, and Germany is one of the largest exporters in the world (“Refrigerators,” 2018). At the same time, the Germans prefer to buy goods from local manufacturers at a low price, since they are confident in their quality (Simpson, 2019). For example, in October 2018, the top products purchased by Germans on Amazon cost just over £250, and 68 percent of Germans have bought only local goods (Simpson, 2019).
This fact creates a problem for foreign companies because they need to offer a unique product at a low price to maintain their market position. Moreover, this feature occurs because of cultural factors more than socioeconomic as Germany is a country with a high-income level. Besides, except for the native population that has no interest in luxury goods, the high percentage of the population consists of refugees and migrants who cannot afford expensive products.
Furthermore, a large number of Germans use online shopping to save time and want fast delivery of goods, so foreign firms need to open production or at least warehouses in the state. E-retailers are the most popular distribution channels, although stores and hypermarkets are also important in the supply chain (“Germany Consumer Appliances Market,” 2018). The end-user and buyer also usually the same, since people do not have a tradition to present expensive gifts, so they buy high-end refrigerators for their use regardless of season (Simpson, 2019). Therefore, ACME must offer unique high-end refrigerators with energy-efficient technologies at a low cost to satisfy the demand of customers. The goods also must be available online and have a quick delivery function.
The UK Market
The Challenges of the Market
The main factors that influence the UK market today are political and socio-economic instability due to the upcoming Brexit. Changes that occurred after the referendum and will happen soon affect both the mood of the buyers and their financial situation. For this reason, the main features of high-end refrigerators in the UK should be relatively low cost, integrability, and energy efficiency.
The referendum on Britain’s secession from the EU has already brought negative consequences for the country’s economy. According to Breinlich, Leromain, Novy, and Sampson (2019), the prices increased by 2.9 percent that changed the market conditions. Many foreigners are forced to migrate to other countries or are afraid of forced migration because of political changes; hence, they do not want to buy such large household appliances as a refrigerator.
Inflation also makes some residents think about the need for expensive purchases, so the demand for elite refrigerators is also falling. The main social group of buyers and end-users who can afford luxury purchases also feel changes, yet it has not experienced extreme changes (Breinlich et al., 2019). The average income rate in the UK is still high, so the demand for luxury products exists.
The Characteristics of Buyer Behavior
The features of the refrigerator market in the UK are determined by the changes of the past few years. According to Euromonitor International, due to the reduction in the housing area, many UK residents prefer refrigerators that are easily integrated into the apartment and need little space (“Refrigeration appliances in the United Kingdom,” 2019). Nevertheless, the space inside of the fridge increases, since people prefer fresh and organic food.
Moreover, the devices that reduce the consumption of electricity and can work autonomously are in demand, as well as they are in Germany. This feature arises because of the country’s transfer to a new energy production system. At the same time, supplies of energy from the EU cause difficulties, and therefore there is a risk of frequent power outages and blackouts (Casey, 2019). Even if these risks are unjustified, a low-energy refrigerator brings benefits by saving money for its owners and protecting the environment.
Furthermore, there are practically no local manufacturers in the UK, and household appliances are imported from other countries. The most popular are Beko and Bosch, which are Turkish and German companies (“Refrigeration appliances in the United Kingdom,” 2019). So, although competition is still present, the leading influencer is the government that determines taxes, and the market, in general, is open to new foreign companies. Statistics also show that residents of the UK have begun to order more online, and although physical stores are still relevant distribution channels, the main focus is on online shopping (“Statistics Explained,” 2018).
Thus, although the group of end-users and buyers is limited by the high-income level, the demand for the product is present, especially if it meets all the needs. Consequently, the main features of high-end refrigerators in Britain should be energy efficiency, integrability, and relatively low cost, which will bring buyers financial and environmental benefits.
Value Proposition
Such a product as high-end refrigerators belongs to a narrow segment of the market, which residents of different countries perceive in different ways. Firms often segment markets to form value propositions as customer requests usually vary (UMGC, Strategic Planning, 2019). In the case of the USA, the UK, and Germany, this approach is also appropriate, although some characteristics can be applied to several markets at once.
The main feature of refrigerators for the markets of the USA, UK, and Germany should be technologies that save energy consumption. Demand for this function exists in all countries since it brings benefits by reducing the cost of electricity checks and protecting the environment. The development of modern technologies also requires the improvement of all household appliances; therefore, refrigerators that are positioned as high-end must have unique technical characteristics. These improvements can be either advanced technologies that allow people to keep food fresh longer or the functions that smart refrigerators already have. Consequently, ACME can form a universal value proposition for all markets based on new functions and technologies that protect the environment.
A common feature for Germany and Britain is the relatively low price. High-end refrigerators a priori cannot be cheap because of their status, as well as the fact that they are bought regardless of the season but once in a few years. However, a value proposition, in this case, may consist of the fact that the price is only slightly lower than competitors’ offers. This approach coincides with the cultural and socioeconomic characteristics of the inhabitants of Germany and Britain.
At the same time, the price of this product in the United States should be above average, since people who buy high-end refrigerators themselves want to emphasize their status of success and prosperity with a high price, design, and brand. The benefit of a high-end refrigerator for Americans is the chance to show their friends and society that they have achieved prosperity and have financial opportunities, as well as that they can prove it by getting a new car.
Moreover, the advertising of these refrigerators should be focused on various aspects. In the USA, the main emphasis has to be put on demonstrating luxury and style; in Britain and Germany, more attention must be paid to the simplicity in using the appliance and its energy efficiency. Germans also prefer minimalism and laconicism, so both design and advertising should be restrained (Simpson, 2018).
While Americans would like to see the picture of a wealthy life and the typical ‘American dream,’ British people also appreciate elegance, although the image should not be pompous or too posing. Thus, the message and implementation of the marketing strategy for these markets have to be different to interest the target audience.
In general, ACME can formulate a value proposition for different markets by using all four of its types. These types are low cost, a superior product, ease of use, and expert service, three of which have already been discussed (UMGC, Value Proposition, 2019). Low price is an important aspect for Germany and the UK due to the cultural characteristics of buyers or socio-political changes in the country.
The superior product offer is formed for all markets based on new technologies that reduce energy consumption, and ease of use is a consequence of the introduction of new functions of smart refrigerators. The only aspect that is not particularly important for any market is expert service because it is understood as a standard feature. Modern buyers are used to the fact that all equipment has guarantees for repairs, so this detail is not considered significant. However, if ACME offers special conditions of service, such as a more extended period of warranties, this feature may also be part of the value proposition. Therefore, the primary value proposition for each market is built on the different characteristics of buyer behavior and their priorities.
However, no matter how different the markets are, refrigerators should be equally high-quality and functional for all of them. In general, the primary motive for buying household appliances is the need to use them. Consequently, even the most luxurious refrigerator for Americans, or an eco-friendly technique for Germans, will not satisfy their needs if it does not keep food fresh. Therefore, the main value is the quality of the product, yet it should come with an emphasis on different features according to the culture of the markets.
Recommendations
Analysis of consumer behavior in the markets of the USA, Germany, and Britain showed that each of them has its advantages and disadvantages. At the same time, the British and American markets are generally suitable for the sale of high-end refrigerators, but for Germany, this product may be economically disadvantageous. The most profitable market is the American one because demand remains high, despite the competition, and buyers are willing to pay large amounts of money. In addition, ACME can offer features that other companies do not use and benefit customers. The British market, although it does not have such high demand, has the advantage of low competition.
Moreover, although political and economic instability can affect all parts of the population, high-end refrigerators will always have a cost high enough to make a profit. The German market is not profitable because of enormous competition and the cultural characteristics of the population, which does not want to spend large amounts on any purchases. Therefore, ACME should refuse the production of high-end refrigerators for the German market.
References
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