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Situation
-Stewart Company invented baking soda in 1915
-72% of Stewart's revenue is from household goods
-It is estimated that for 2007 Reliance Baking Soda will make $18,715 in profit and maintain a 34% profit margin
-In order to increase Reliance Baking Soda profits by 10%, profit margin will need to increase to at least 44%
Reliance Baking Soda needs to increase profit by 10%, by way of promotions and pricing strategy, in order to launch new Stewart Corporation products.
Our Criteria
Private Labels
-Retailer brand, priced 30% lower than Reliance
-Lead to the 5% decrease in Reliance market share
Specialized Cleaners
-Dynamo, Sparkle, WOW
- Spend more on advertising than Reliance
-Market Leader
-Low turnover (Average 2.5 boxes purchased annually)
-Most retail sales coming from trade promotions
-Boring product
-Inventor of baking soda, created the industry
-Industry Leader, 65% market share
-Household goods make up 72% of Stewart sales
-Loss of 5% market share from Private Labels
-Specialized cleaners advertising
-Low advertisement recall
-High consumer coupon use
-Multiple uses for baking soda
-High Brand Awareness and Loyalty
-Consumers are not price sensitive
-High consumer coupon use
Proceed with alternative 3
Abigail Swift and Rachel Wilkerson
Potential Implementation
Questions?
By increasing the price per box, we are able to recapture the profit loss from promotions (10%) while still maintaining growth in sales.
Additionally, by changing the marketing expenditures (-10% in trade promotions, +10% in consumer promotions) we do not spend any additional money, but can expect an influx of purchases made by consumers, furthering our growth in profit.
Option 1
Increase the price per box for every size, while maintaining our current marketing expenditures
Financial Justification
Price Increases:
8oz $8.28 per case
1lb $13.80 per case
5lb $59.64 per case
-No change to marketing budget
-Profit $28,222
-Profit margin 44%
-Push Strategy
Option 2
Reduce the marketing budget by 45% overall.
Option 3
Justification
-Lowering the overall marketing budget by 45%
TV Advertising $2,289
Print Advertising $347
Internet Advertising $248
PR/Media Production Costs $198
Consumer Promotion $220
Trade Promotion $1,651
Total Marketing Expenditures $4,953
-Profit $24,773
-Profit Margin 45%
-Pull Strategy
Decrease trade promotions and increase consumer promotions while increasing the price per box.
Justification
-Price Increases:
8oz $8.28 per case
1lb $13.80 per case
5lb $59.64 per case
-Marketing Budget Changes
Total Advertising (TV, Print, Internet) $4,757
PR/Media Production Costs $198
Consumer Promotion $1,101.50
Trade Promotion $4,954.50
Total Marketing Expenditures $11,011
-Profit $28,222
-Profit Margin 44%
-Pull Strategy