boots: hair-care sales promotion ppt
TRANSCRIPT
Title : BOOTS: HAIR-CARE
SALES PROMOTION
Venue : Nottingham, England
Date : November 2004
Protagonist : Dave Robinson
(presumed sales manager)
Case : He has to decide the promotion strategy
for next month for Hair-care products of
his company Boots. He has 3 alternatives
and information about them and other
market opponents.
Found in 1849 by John
Boot as a company
trading medicinal
herbs, Boots today has
1300 stores in the U.K.
and exports healthcare
products to 130
countries.
Boots in 1996
entered the Hair-
care market
partnering with
celebrity Hair-
Dressers to create
or/and manufacture
and retail Hair-care
products.
In 2000, over 60
major brands of
hair care products
were available in
the U.K. market.
None of which
had more than a
nine per cent
market share.
Product brands
Premium brands Mass-Marketed brands
Avg. pre-promotional
brand price is £ 3.99
with avg. 40% retail
margin and avg. 10%
manufacturing
margin.
Hence net gain = £2.
Avg. pre-promotional
brand price is £ 2
with avg. 25% retail
margin and avg. 10%
manufacturing
margin.
Hence net gain =70p.
• The scheme
employed should
ensure maximum
profitability during
the promotion period
while trading up
customers from a
lower-value brand to
Boots’ brands.
GWP (Gift With Purchase)
On-Pack Coupon (50p off)
3 for 2
• A small size product
sample will be packaged
with a regular sized
product.
• For example, a sample
size conditioner will be
given with a regular size
shampoo bottle.
• Sales are expected to rise
to 170%.
• The avg. cost for the
sample and its packaging
would be 93p per unit.
• This scheme is feasible
with premium products
where there is a £2
margin gain but not for
mass-marketed products
where the margin is 70p.
• Hence the sale could
produce LOSS instead of
profit!
• A 50p off coupon that can
be redeemed during the
current purchase will be
provided.
• Sales are expected to rise
to 150%, 50% of which
would come from Boots
customers that would have
otherwise not purchased
Hair-care product.
• The cost would increase by
50p per unit.
• Hence the margin on
premium products would
be £1.5 per unit on an avg.
and on mass-marketed
products would be 20p.
Multiplying them by a
factor of 1.7 because of
surge in sales we get £2.55
and 34p respectively.
• Not a bad option!
Lets keep this on hold.
• On a purchase of 2 regular
sized items of a brand a 3rd
would be free. Hence if 3 items
of the same brand are
purchased the least expensive
one will be given for free.
• Sales are expected to go up to
300%, 60% of which would be
from Boots customers who
would have otherwise not
purchased a Hair-care product.
• Hence the scheme
attracts more customers
comparatively.
• Now for premium
products, the cost was £2
and price was £4. Since
only 2 are charged on a
purchase of 3, the cost
becomes 2*3, £6 and
price paid is 4*2, £8.
Hence margin is £2.
Multiplying the margin
by 3 to offset for the
surge in sales, the final
margin is £6.
• For mass-marketed
products, the cost was
£1.3 and price was £2.
Now for this promotional
scheme, cost becomes
£3.9 and price is £4.
Hence margin is 10p.
Multiplying the margin
by 3 to offset for the
surge in sales, the final
margin is 30p.
• This option is clearly
Dave’s best bet.
GWP (Gift With Purchase)
On-Pack Coupon (50p off)
3 for 2
Case Question
Decision Criteria
Analyzing Alternatives and taking Decision
