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Transcript

Big Picture

Stewart: A Brief History

Situation

Decision Statement

-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

  • Find the optimal promotional mix to boost sales
  • Maximize the profitability by changing marketing expenditures and price

Competition

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

SWOT

Strengths

Weaknesses

-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

Threats

Opportunities

-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

Reliance Baking Soda

Final Recommendation

Proceed with alternative 3

Abigail Swift and Rachel Wilkerson

Potential Implementation

Questions?

  • Q1 2008
  • Price Increase
  • Consumer Promotions
  • 33% of Budget ($364)
  • Trade Promotions
  • 17% of Budget ($842)
  • Q2 2008
  • Consumer Promotions
  • 17% of Budget ($187)
  • Trade Promotions
  • 33% of Budget ($1,635)
  • Q3 2008
  • Same as Q1
  • Q4 2008
  • Same as Q2

By increasing the price per box, we are able to recapture the profit loss from promotions (10%) while still maintaining growth in sales.

  • Allows us to achieve a 44% profit margin while meeting the goal of 10% profit increase.

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.

Alternatives

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.

Decrease trade promotion by 70%, consumer promotion budget by 40%, TV Ad budget by 40%, and print ads by 50%)

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

Reliance:

Profit, Promotions, Pricing, and Products

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