MARKETING MANAGEMENT CASE STUDY

Preliminaries

On average this should take between approximately 3 to 4 hours to complete.. Do not consult any online resources, other students or resources.

I expect that you will do very well on this. given the quality of work that has been submitted thus far. Having said this, it is challenging and requires careful thought and application of course principles. Take your time and do your best!

· Please show your workings clearly. We cannot award credit for something we do not understand. If you want to report computations you did in Excel, you can create appropriate tables in Excel and copy and paste them as exhibits into your Word file. For each entry in your table, make sure you write out the equation you used, where in the case you found the entry, or what assumption the entry is based on. Do not just show numerical entries without explanation. We won’t be able to figure out where the numbers came from, even if they seem obvious to you.

· The short answer questions follow those for the case. There questions relate to in-class discussion, readings and lecture material. Please answer these questions as briefly as possible.

Please read the Vermont Teddy Bear case carefully. (Note that we have redacted some information to shorten the case and to reduce ambiguity.)

Answer the following four specific questions.

Question 1 (10 points)

Please compute the acquisition cost (i.e., the cost to acquire a single new customer) for Calyx and Corolla (C&C).

Notes:

1. Assume customers are acquired only by sending catalogs to names from rented mailing lists. Ignore the costs of other tools such as advertising. Ignore acquisition by sending catalogs to flower recipients. A prospect becomes a customer when that prospect receives a catalog and picks up the phone to place an order. For this question, ignore the costs and revenues of anything that happens after the prospect picks up the phone and starts dialing.

2. Every prospect that picks up the phone to place an initial order is assumed to complete that order, and hence become a customer. The term “yield” in the case refers to the percentage of prospects that really become C&C customers. (After becoming a customer, “yield” indicates the probability that a customer responds to receiving a catalog by placing an order.)

3. Ignore any costs that are not explicitly stated in the case.

4. Show your work and clearly state your assumptions. Write out all your equations in the greatest possible detail. If you make assumptions, state those clearly and explain why and how you made them wherever appropriate.

Question 2 (20 points)

Please compute the Customer Lifetime Value for the Calyx and Corolla customer.

Notes:

1. Use the acquisition cost from Question 1.

2. Assume a retention rate of 90% per year (we know that’s unrealistically high, but let’s assume this anyway).

3. Assume Calyx & Corolla has an infinite time horizon.

4. Assume that cash flows do not need to be discounted in time. Ignore all time-value-of-money issues.

5. Assume that numbers are stable over time.

6. Look only at the catalog channel and at sales of fresh flowers. Ignore any promotion tools other than sending catalogs. Ignore anything done over the internet. Ignore all costs and revenues related to products other than fresh flowers.

7. Assume all customers are acquired through rented mailing lists and generate money only through buying flowers themselves (for their own use or as gifts for others). Thus, do not include any costs and revenues related to flower recipients (i.e., people who had not bought from C&C themselves but had received products from C&C) in your calculations.

8. Note that Calyx & Corolla only rents a name from a list when sending out catalogs to prospects (i.e., people who are not customers yet but that C & C wants to acquire). As soon as a prospect becomes a customer, Calyx & Corolla no longer has to rent that person’s name.

9. Assume the cost of goods sold (COGS) of a bouquet of flowers, as a percentage of the revenue per order, is equal to Calyx & Corolla’s current gross margins mentioned on p. 4.

10. Ignore revenues and costs related to processing, packing, and shipping orders (because the $14.95 shipping fee per order the customer pays is equal to the actual costs to process, pack, and ship the order. The $10 fee for Saturday or super-rush delivery is equal to the fee FedEx charges Calyx & Corolla for that service).

11. Ignore any other costs that are not mentioned in the case. Also ignore costs that are mentioned in the case but that cannot be computed based on data given in the case or in the exam notes.

12. Assume each order involves a single bouquet of flowers (nothing else), priced in the middle of the price range of a typical offering.

13. Use exact fractions. Do not round anything.

14. Show your work and state any assumptions clearly.

Question 3 (20 points)

Assume Calyx & Corolla can target its fresh flowers product at only one of the following segments:

1. Romantic gift segment. This segment consists mostly of males who occasionally buy one bouquet at a time for their romantic partner to show their love (e.g., on a holiday or anniversary).

2. Home décor segment. This segment consists mostly of women who love flowers, know a lot about flowers, and buy flowers on a regular basis to decorate their own home.

3. Weddings and funerals segment. This segment consists of consumers who need elaborate displays of lots of flowers for a one-time, large event, such as a wedding or a funeral.

If Calyx & Corolla could target only one of these three segments, which segment should they target and why?

Notes:

1. Much more than your final choice of segment to target, we are interested in your analysis so please show your analysis in detail. What were the questions you asked yourself (include questions even if you find little data in the case to answer those questions)? What were the answers to those questions? We need to be able to see how you structured your analysis and how you made your decision.

2. For answering this question it is reasonable to assume benefits that are important to each of the segments, even if data are not provided in the case.

3. Assume there are no other companies that have exactly the same business model as Calyx & Corolla. That is, assume Calyx & Corolla is the only player selling flowers through mail order catalogs shipping fresh flowers directly from grower to consumer.

Question 4 (15 points)

What would be your recommended position for Calyx & Corolla for the target segment you picked in question 3?

Note:

1. In addition to telling us what your chosen position is, please explain why you chose that position. Why is your position a good position? We need to be able to follow your reasoning and the process behind your final solution. Also, include a positioning map to illustrate your recommendation.

The following questions are independent of the case questions above and pertains only to course material discussed in class sessions, including both PowerPoint and lecture material.

Question 5 (10 Points)

You have been appointed CMO of Tesla car division and are considering how to grow car sales over the next few years. The current car models include those depicted in the graphic below along with their general selling prices:

Note that there are some major “gaps” in pricing within the car models, offering a $39,000 model and a $80,000 model, but nothing in between. In the SUV market, a moderate and expensive model is being offered. Thinking about the target market, percieved value and vehicle affordability what do you think should be the focus? Can you descibe the target market in terms of demographics and psychographics that you would want to attract to the line? How would you position your choice of offering(s)?

This is a question that requires your marketing intuition, understanding of basic focal concepts and it is not expected that you would perform an extensive analysis of sales figures or other metrics.

Question 6 (10 points)

Our class visitor, Jeff Crilley, shared his philosophy for gaining public relations coverage for his clients. As distinguished from “professional” public relations companies, his firm, RealNewsPR uses a different approach. Briefly describe the main elements that he uses to gain access to TV, Radio and Newpaper coverage.

Question 7 (10 points)

Brand equity is the most important attribute that marketing managers use to assess value. It is comprised of elements, that together, combine to capture a consumer’s “relationship” with the brand. Explain these elements, provide an example, discuss the correlation between brand equity scores and market share/revenue trends. How do marketers build equity for their brands? Finally does strong/weak brand equity affect the price of a product?

Question 8 (5 points)

What did you feel was the most valuable learning from this class and what aspects of the class made it most enjoyable?