Group11_sectionb_clique Pens

Clique pens The writing implements division of U.S.Home

Background Company: ● ● ● ● ●

Formed in 1922 by two cousins Made fountain pens in the earlier days and shifted to ball point pens with time Pens for known for their utilitarian design Acquired by U.S. Home in 1980 It has grown steadily under U.S. Home

Customers ● ● ● ●

Households and Business customers Customers often choose brand, package size, etc. on impulse Not loyal to brands and buying decision is based on instincts Paid attention to price-off deals when posted at the point of sale

Competitors ●

BIC, Scripto, Pental, Pilot, Papermate and Sharpie to name a few Competitors provided a host of discounts and allowances to the trade in war for retail space Competitors fought for POS displays, end caps and cash register space

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Collaborators ● ●

Major collaborators are retailers The sales team offers different promotional discounts to retailers based on their relationship and the power of the retailer

Climate ● ● ●

Market is undifferentiated Generic product, purchase frequency is stable and sales are non seasonal, except for back-to-school period Limited innovation

Decision Problem ● ● ● ● ●

Various discounts, allowances and other deals have pushed the gross profit margin down to 36% in 2012, from 42% in 2010 Ferguson, the president of the writing implements, has to stop this decline and increase its overall gross PM by 4% She believed that the margin deterioration was due to ‘Trade discounts’ Consumers were increasingly inclined towards purchasing branded items but were not brand-loyal The biggest decision problem was whether to choose betwe en

Consumers or

Retailers ?

McMillan the VP of Sales Chen, the VP of marketing ● He believed that reducing trade discounts is the ● If trade discounts were reduced, Clique would lose shelf space and sales to competitors best way ● Instead of consumer advertising, reduce it to ● Divert the reduced trade discounts towards retail oriented MDF Consumer oriented MDF ● This would increase shelf space and market ● This would help in receiving full benefit of share, which in turn leads to greater sales and promotional dollars profits

Alternatives -

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Consumer Oriented MDF -

Funds that reach consumer

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Reducing trade discounts

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Consumer targeted marketing

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Advertising

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Instant coupons

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Increase price of product

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Take away warehouse and stocking allowance

Retail Oriented MDF -

Funds that reach retailer

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Trade promotions

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‘Deals’ for specific accounts

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Price-off promotions

Evaluation of Alternatives

Consumer oriented MDF

Pros

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Cons

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Sales Oriented MDF

Increase gross profit margin from 36% to 38% Consumers would stay in touch with the brand

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Increase market share by 0.4% Increased shelf life of the products Retailers will earn better margins

Decrease in sales of over 9% Unnecessary spending on advertising (30% more than required) Retailers would not accept price increase

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Decrease in gross profit % The consumers would lose touch with the brand Price increase would not affect the sales much

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Recommendations ●

Implement the trade discount strategy proposed by McMillian

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The expense of trade discounts for gaining

Advertisement

10%

shelf spaces could be covered by

Consumer Promotion

15%

restructuring the allocation of various

Trade Promotion

60%

Packaging

15%

expenses ●

Consumer promotion reduced to 15% since there are few price sensitive customers in the market

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Since, only 1.3% customers use coupons to buy Clique Pens, we scrap this strategy and instead focus on packaging and aesthetics

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Engage with customer segments such as students and launch cost effective guerilla marketing campaigns and competitions to improve brand perception and loyalty