marketing implimentation

8/13/2019 Marketing Implimentation

1/19

2013

Adivitya Sharma

NMIMS

12/2/2013


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TRADE SHOW: NATIONAL MINE SERVICE COMPANYCase overview:

This case describes how upper management of national mine service company looks at trade shows and

the selling and non-selling benefits it can derive out of such shows. It also deals with the different

products the company has to offer and how trade fairs can influence potential customer acquisition and

customer retention. Here the importance of monetary returns as per the investment in trade fairs by the

organization are analyzed and also different methods, matrix to determine where proper investment has to

be done are discussed. Marketing communication techniques that can help fetch results out of expensive

trade shows are discussed in the case. Traditional thinking of organizations about trade fairs is that being

in trade fair is important because competitor is there which is not correct .Here the importance of trade

fair as excellent place to meet customers and new prospects from overseas is also highlighted. The case

discusses that national mine service company should look beyond image building and concentrate more

on launching new products, boosting morale of younger executives and also its sole objective.

National mine service company:

The national mine service company is U.S based mine equipment seller with its headquarters in Chicagos

McCor-mick place. The company was organized into three major divisions: the mining machinery

division (MMD); distributors product division (DPD); Hydraulics division (HD). Approximately 90% of

the sales were from the U.S coal industry and remaining substantial sales from domestic and foreign

countries.

Personal selling was headed by Mr. William Hennessey (VP sales) and dialed in major capital equipment

sales such as continuous miners. The salesperson job here was to generate interest at the mine level

among mine superintendents, maintenance officers and machine operators. The DPD maintained a broad

product line containing 27000 products. The HD wing used a different sales and service approach calleddriver-salespeople where they visited mines with pickup trucks to deliver new mine hydraulic machines

and pick up hydraulic machines meant for servicing.

Trade shows

The coal mining industry is a close fraternity where buyers or manufacturers grew up in business and

formed relations and are generally resistant towards trade fairs which has potential to attract new

customer base. The competition is low in coal mine equipment manufacturing industry. Equipment

standardization and operation dominance was more visible in smaller mines as compared to large mines

Trade fair:

National mine service company took active participation in annual trade shows and expositions, butmajorly concentrated on much important American mining congress international coal show which was

held once in four years and attracted exhibitors and potential customers worldwide. This trade show

exhibited and promoted various mine machineries, coal processing equipment, transporting equipment,

supplies or services. This trade fair is not for profit educational activity where selling is prohibited and

booth sales personal where allowed information gathering and giving about new advances in technology,

machine design and new products.


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National mine service found this trade show to be a perfect and special place to launch its new product

Marietta 2460 Drum miner. But the problem was the fading interest of upper management towards

efficiency and potentials of these trade shows. This perspective needs to be looked by a new angle of

profitability and customer awareness.

Trade shows facilitated three major marketing communication activities: Personal selling, trade exhibition

and advertising/promotions. This trade show .NMS spent highly on sales promotions and gifting toexisting and potential customers.60% of advertising budget was spent on MMD products. Objective of

NMSs marketing communication was to maintain companies image and gain access to decision

influencers not available to companys sales force easily.

Upper Managements take on trade fairs:

Mr. Mac Vean: Though attendance is lower the desired amount of buyer awareness for complete product

line and 2460 miner is achieved. He also believed in Paretos rule that 80% of the customers contributed to

20% sales of the NMS and 20% contributed to several millions worth of equipment sales per year.

Mr. Mc Elhattan: The organization visits the Show because the competitor is there and you cantafford

not to be there and also because such trade shows are image builders to portray company as one whichservices needs of customer and introduces new and improved products.

There is a mix of opinions and perspective about trade shows and its future in upper management of

NMS. Senior VP believes that trade shows are terribly expensive and of limited value for business versus

the money spent. But he also maintains that management decision of backing out of trade show in past

years made customers believe that NMS was in financial turmoil and thus couldnt participate. This

affected reputation of the company in a negative way. On other side few optimistic upper management

officials in NMS believed that trade show gives a competitive edge and also exposes junior officials to

companys key accounts, builds image among customers and also gives platform to launch new products.

Negative aspects of trade shows:

Unknown effectiveness and difficulty in measuring efficiency (no surety of customers) High and rising cost of participation Top managements cost of time lost is not taken into account for participation in trade shows For heavy machinery organizations the buying process is long and selling is prohibited in trade

shows. Only information gathering and giving is allowed

Positives aspects of trade shows:

Expositions are open to public which is of less use to such heavy machine manufacturingorganizations

Trade shows are meant for focused and invited target group like current and prospectivecustomers, suppliers, business associates and press

Trade shows provides successful and low cost face -to -face trade show contacts with potentialcustomers

Helps attract potential buyers easily Helps company know about its competitors product and technological innovations

Approach to be followed for effective trade shows:


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Set preshow objectives and goals to be achieved from trade shows i.e. introducing new product,

generating sales lead etc. The managers should look to trade shows as tool to maintain relationships with

key customers or tool to gather needed competitive intelligence gathering rather than mass personal

selling platform. Measuring efficiency of trade show is not dependent on traditional wisdom rather it is

dependent on satisfying complex selling and non- selling marketing functions. Selling objective can be

selling to new clients and also identification and access to potential clients. It may also include getting

information about how existing products are performing in market and also what potential and existing

customer need in the new products. Such informations are difficult to get other than trade shows. Non

selling activities like image building, gathering intelligence, enhancing corporate morale and product

testing can be achieved through effective trade shows.

Trade shows can serve the major purpose of the organization to boost the morale of staff members and

gives opportunity for sales members to rub shoulders with top management. Trade shows are meant to be

decided by company on two objectives: what is the target audience? And what kind of trade shows are

available for the desired results?

Thus targeted marketing communication can ensure effectiveness and can meet broad range of different

objectives simultaneously.

Conclusion:

Establishment or maintenance of trade show program only for image strengthening or for intelligence

gathering or for servicing current accounts is a bad investment. Rather companies should look at

marketing communication mix to satisfy its selling and non-selling objectives.

PRICING: HERTZ CORPORATION


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Case overview:

The case discusses the various trends followed in highly competitive car rental business and also explains

the reason behind Hertz to implement highly risky but highly potential pricing strategy of no -mileage

rentals across the board to all customers. The major objective of the case is to portray how Hertzmanaged to come to number one position in car rental industry in spite of tough competition in the

industry.

Hertz background:

Hertz Corporation was founded in 1924 and was a $1.3 billion company. It was known as far And away

the most profitable car rental firm in the world and was engaged principally in business of renting and

leasing automobiles and trucks to customers in USA(81%) and 19% of foreign countries. It is head

quartered in New York and is wholly owned subsidiary of RCA Corporation. RCA is among one of

nations largest industrial Corporation known for its high Technology electronics, communications,

television and radio broadcasting and vehicle renting and leasing.

Hertz Corporation has the reputation throughout the industry for being a well-managed company with

lean organization management with respect to personnel. They do least paperwork to avoid wastage of

valuable time. Hertz believed in involvement of representatives of all departments in decision making

process to yield best results for the organization. It was believed that these principles of company ensured

people working hard together to increase the productivity. Hertz car rental operations were conducted

primarily at major airports and at downtown locations in major cities. The predominantly company owned

structure allowed locations to maintain a consistent public image distribution structure of Hertz gave

flexibility to implement corporate policy changes quickly. It used cars which were produced in that

country for its fleet and also maintained fuel efficient car fleet to manage energy shortage issues.

Management believed that the profitability of the firm depended on ability of the firm to judge and react

to publics interest in cars.

Pricing: The Hertz Corporation

Hertz market consisted of leisure, commercial (large and small) and individual business customers with

small business segment contributing to the major revenue of company.

The Hertz company is organized functionally with Bennett Bidwell as CEO and president, Hal Bingaman

as VP of marketing and Craig Koch as GM of rental car division.

Industry analysis:

The automobile rental industry represented approximately $2.5 billion worth of business annually and is

highly competitive in terms of pricing and services offered. After 1981 the car rental market became

stagnated due to energy crisis and lagging economy.

Car rentals had a complementary demand as per air industry situation. Due to airline industry getting

affected in 1981 due to PATCO strike and low air travels even the car rental had to suffer losses and low

revenues.

The customer target segments are as following:-

Leisure users: rent cars for vacations, holidays, emergencies


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Business users: corporates or individuals who rent cars for business tripsThe major revenue to the car rental companies came from car rental companies located in Downtown

areas of most cities and major airports.

The four major players in the industry comprised of Hertz, Avis, National and budget rent-a- Car. Avis is

number two car Rental Company and mostly operated through licensees. Avis mainly concentrated itsefforts on gaining wider distribution through franchising and also it obtained three quarters of its business

at airports. National car rental was in third place with market share of 20.1% out of which 50% was

licensee operated. National stressed on quality and service in the company advertisements. Budget rent a

car has 12% market share and was totally a franchising operations. It had fastest rate of growth in volume

and profits and became a tough competitor with military like strategy and research based marketing. They

believed in quality service and stressed on the customers being their number one preference.

The car renting companies applied different selling strategies to leisure customers and the corporate

segments. Leisure customers were obtained via travel agent suggestions, advertising and promotional

events whereas rental companies usually employed a Salesforce to obtain corporate accounts.

Challenges involved in entry to this sector:

New entrants had to deal with lack of airport parking space due to major players utilizing 90% ofspace as per FTC decree

Large capital was needed to finance and maintain car fleet Government controls related to price, labor matters, charge card operations, environmental

protection and used vehicle sales

Pricing policies adopted in industry:

Car rental rates were historically charged on basis of time and mileage. Special holiday or weekend rates

were offered on no-mileage charge to spur off-peak demand. Pricing policies depended upon the

frequency of rentals and the volume generated by the corporate accounts. Larger the volume, larger the

discount rates the corporate received. Most large companies had discount arrangements with several

different car rental companies due to which the car rental companies had to maintain competitive pricing

strategy.

Events that forced Hertz to change its pricing policy:

In 1980 Hertz raised its large commercial account rates by 25% to increase the profit margins. But this in

turn gave an upper hand to its competitors like national. National went on to increase its market share by

servicing major commercial accounts with low pricing strategy. National, Avis and budget also took

advantage of the situation and increased the advertising budgets and upgraded their fleets and improved

their facilities and airport distribution. Hertz suffered a market share slip of 40% during 1980.Hertz got a

negative feedback and repute of being low value for money service.

National and Avis further deteriorated the conditions for Hertz by announcing new flat rate program me

(nomileage charge) for smaller commercial accounts.

Hertz pricing strategy (bounce back):

Hertz went on to become the first company to offer no mileage rentals across the board to all customers. It

took the risk of implementing this strategy with the contingency plan that it will creatively go back to its

old time plus mileage pricing strategy if new pricing policy backfires in market. The pricing strategy was


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implemented to make sure Hertz remains as number one in market. Bidwell, Koch and Bingman believed

that Hertz needed to make an innovative move.

But they had a tough time deciding whether to follow the leader strategy (i.e. no mileage pricing with

conditions) or innovate pricing strategy. Hertz came up with guaranteed pricing strategy (no mileage

pricing with no stipulations to all customer segments) with increased advertisements and promotions to

ensure publicity.

New pricing comprised of three parts:

It offered customers flat rate based on the number of days cars would be used without mileagecharge

Flat charge for one-way rental based on differential between renting and checking cities The no frill no mileage pricing was available to all major customer segments.

Outcomes of implementing no-mileage charge strategy:

New pricing strategy increased the ease to customers wherein they could calculate how much therental would be in advance.

Ease of administration because of simple calculations Company could predict their travel budgets in advance due to flat pricing Improved service quality Hertz came back to number one position Makes selling easier for travel agents Waiting time reduced for customers

Challenges of new pricing strategy:

Customer can exploit the pricing strategy by extreme usage of car Lower margins possible Worn autos No enough cars to meet the demand

PROGRAM MANAGEMENT: NORTH AMERICAN PHILLIP LIGHTING CORPORATION

Case overview:

The case discusses about the failure of project shopping cart program by NAPLC even after successful

test marketing and potential market status. It describes how new Norelco light bulb launched by the

organization failed in its main objective of establishing a substantial shelf space in grocery stores. North

American Philips lighting corporation (NAPLC) was a division of the North American Philips


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Corporation (NAPC) and was affiliated with N.V. Philips of Holland, the world largest lighting

manufacturer. APC ranked among the 150 largest industrial companies in United States in the year 1980,

with the sales $2.7 billion. NAPC concentrated its efforts in the field of consumer electronics. Philips

outside United States had been making light bulbs since 1891 and sold more than 40000 lamp types

through 70 sales organizations in 59 countries.

NAPLC company profile:

NAPLC had been manufacturing lights since 1891 and sold over 40000 lamp types through 70

organizations in 59 countries. NAPLC was the fourth largest lighting manufacturer in USA. NAPLC was

a division of NAPC (North American Philips corporation and affiliated with N.V Philips of Holland, the

worlds largest lighting manufacturer. NAPC ranked among the 150 largest industrial companies in

USA.NAPLC focused its efforts in field of consumer electronics which included sub-brands like

Magnavox, Philco, Genie, and Anchor Brush. NAPC concentrated its efforts in the field of consumer

electronics under the brand name Magnavox and Philco. NAPCL was established as a separate division in

the year 1968 and had become the fourth largest lighting manufacturer in United States with sales of

$30.1 million. Its headquarters was in Hightstown, New Jersey. The company had three manufacturing

plants and six product distribution center located across United States. It manufactures incandescent,

fluorescent, and HID (High density discharge) lighting fixtures, and miniature and optics projection

lamps.

The product mix includes incandescent, fluorescent and HID (high density discharge) lighting fixtures,

miniature and optic projection lamps.

Type A: General purpose household bulbs like Norelco (for grocery, department stores and drugstores)

Type B: candle bulb used in candelabra Type C: Straight and show widow lamp bulbs Type D: bowl reflector silvered top bulbs Type E: Tubular special purpose lamp bulbs Type F: frosted or colored lamps

Norelco was Type A category and was the major product whichNAPLC planned to launch in its project

shopping cart targeted mainly towards grocery shops.

Program management: North American Philips Lighting Corporation

The target market includes retail, industrial, commercial and original equipment manufacturer (OEM) in

United States. Consumer lighting company also manufactured and packaged bulbs under Norelcos name

and also did private labelling. NAPLC successfully implemented private labeling marketing program in

1974 which accounted for approximately 40% of consumer group sales.

There are four main manufacturers like GE, Westinghouse, Sylvania and Norelco competing for lightbulb representation in grocery market

Reason for implementation of project shopping cart:

When Norelco management first confronted the issue of developing a new light bulb program, the major

market share (approx. 57%) was from the grocery store segment. Grocery stores contributed to much

larger bulb sales as compared to non -food stores. Norelco management believed that this private label

had potentially vulnerable position to grow. No product of NAPLC till 1977 had a shelf space in grocery


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stores and the growth was quite slow as there was tough competition by market monopolist GE.GE

dominated the light bulb market in terms of brand awareness and product shelf space. The attributes

which consumers associated with GE brand were high quality, long lasting and better for eyes. Thus

without a program management like project shopping cart it was difficult for Norelco to attain its desired

market share mainly in grocery stores. NAPLC believed that one way of increasing the reach and

distribution of product was to launch private labels which also helped in moving the inventory at a faster

rate. This strategy was never used by competitors which Norelco could use. Norelco believed that there

was no real consumer advertising awareness for light bulbs and a low level of interest in consumers.

Company believed that manufacturers sales representatives can attract the target audience required.

Managements ground research before implementation:

The upper management found out that women were the primary purchasers of type A products and

mostly bought it from supermarkets and groceries. The major problem with consumers perception due to

which newer brands did not get a chance to showcase its brand was that they thought that light bulbs are

all the same and brand does not matter. This revealed consumers lack of knowledge and information

about new light products.GE remained as monopoly in this market due to its breadth of distribution and

brand awareness. NAPLC upper management believed that bulbs were purchased on basis of need rather

than brand preference. Lighting products were categorized into planned purchase and impulse purchase.

The wholesalers and distributors made quantity purchases and then sold the bulbs in smaller quantities to

retailers.18 percent of grocery stores accounted for 75% of sales.

Challenges faced in implementation:

Grocery channel sells bulb for suggested retail price (low price) and is the only segment that does this.

They work on low margins and the manufacturer has to use pull strategy to influence consumers so that

the retailers stock the product. For grocery store shelf space the manufacturer has to again use consumer

advertising, couponing and rebates. Push based which is easy can be used for hardware and discount

stores. The grocery stores are highly dependent on margins from bulbs and it contributes to major profit

here. The grocery stores are very happy with high margins, and product which sells always no matter

what the brand is.GE maintained a high price which yielded low margins to grocery stores who generally

kept only one brand which was mostly GE. Thus buying process or trade decisions for new products in

grocery stores was more complex than it was needed. The buying and shelf space decisions were

authorized by buying committee where buyer had no say.

Project shopping cart:

Although grocery total sales increased, the light bulb share of market declined whereas the non- food

segment had a steady growth. As per the conditions in market Norelco came up with strategy that their

sales would increase for type A products only if they can successfully convince grocery channels that

reason for loss of market share is due to high retail pricing of GE and lack of other brand bulbs form

which customers can choose. Norelco planned to become second brand name bulb that these stores

carried.

Norelco designed new, different and creative approach in packaging and merchandising of bulb. Survey

was done to implement the customersmost soughed attributes. They switched from cardboard to plastic

packages, up to date look, more eye appealing color, closed ends to ensure added protection, more

information, color coding of wattage information.


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Retailers preferred merchandising the bulb via self- service racks. They thought that rack held more

products and encouraged impulse buying. Thus Norelco offered racks to retailers which increased the

sales. This racks where designed such that SWP and SW bulb would be at consumers eye level.

This program was also promoted through food market institute trade shows and Special Olympics.

NAPLC drilled down on each detail before finalizing the strategy as previously Westinghouse even with

brilliant free standing merchandizing and packaging idea failed with its newly launched Turtle liteproduct.

The pricing strategy for shopping cart was to stay with policy pricing (not more than 58% to 63% from

list price)

Failure of project shopping cart:

Even though the company spent on merchandising, promotions and packaging and expected that this

would appeal customers, it failed.

The program did not meet the goals as the grocery retailers were not ready to take risk to put up Norelco

along with GE. They though that GE is the only company which is and will always be the market leader

in bulb. The major problem was also that bulb industry had just few areas to differentiate its product from

its competitors.

Norelco got a chance to get placed in shelves of Kroger chain and ShopRite supermarket but campaign

had no significant impact on sales. Even reduction in price would not help the situation.

The company lost 630000$ and had an excess inventory of 300000 packaged light bulbs. Two objectives

were achieved i.e. product mix had improved and Norelco got on shelf space. But the main objective of

penetrating the grocery segment was not met .Thus even after proper program management, the project

shopping cart failed.

The total market for light bulbs was pegged at $248 million, and 57% of the sales came from the grocerystores, about 19% sales came from discount stores and departmental stores etc. and another 16% from

Hardware stores. But over a period of time the sales in the grocery stores had slipped down to about 49%

which was worrying the companies and the store owners. There were a number of other players in the

market, where a number of chains had launched the bulbs under their brand name, this was also one of the

areas that NAPCL was exploring and it gave the company about 40% of the sales, by 1978 the company

was manufacturing light bulbs for almost 15 chains across the nation. On the other hand amongst the

competitors only Westing house manufactured bulbs for Sears in the US market. Even though the

contributions from the grocery stores were dropping the management knew that they had to be present in

the grocery stores to be able to grab a higher market share, and hence they conducted a survey in the

grocery stores to understand the consumers and their buying behavior in the segment. The study revealed

that maximum buyers were women, who bought the products from the stores most frequented, GE wasagain the market leader in terms of the brand recall and also the important attributes which were seen in

the research were, high Quality, Long Lasting and better for eyes. This study also showed that in

most household, they stock about 6 bulbs at home and it was based on the needs. The study also showed

that 59% of the consumers did not have a brand preference and about 58% of the consumers did not have

a brand in mind when they went to make the purchase in the segment. Further studies show that the

customers were looking for more attractive packaging and had different ideas about the packaging like a


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closed end of the cardboard boxes and plastic covers, they wanted the covers to be coded in a certain

format so that it is easier to decode the wattage of the bulb and so that it is easier. On the other hand the

grocery stores were looking at a better revenue per footage, they did not care about any new brand since

they have been doing business with GE for a couple of years and on the other hand most of the chains had

their own brand of bulbs which were procured from companies like GE, so the only way to penetrate in

the market was through the grocery stores.

With this information the management decided to introduce the lighting range in a completely new

format, with a changed packaging and a different design of dispensers which would attract the customers

and this was done on the basis of the research that, the brand loyalty is low in the segment and hence the

decision. This new program was called project shopping cart, NAPLC was planning to enter the grocery

stores by convincing the grocery stores, saying that the drop in the sales in the bulb category is due to a

single brand GE and also because the price of the product was higher than the competitors, this got them

the into the grocery stores in the initial stage and they could test the market in the country. NAPCL

decided to launch this product PAN America in one go and also the pricing of the product was kept much

lower than that of the other competitors in the market, they believed that this was a great opportunity for

the company to be the second brand name known in the market of and would achieve the sales figure thatthey had forecasted. With this program the company decided special stands for the brand Norelco which

could hold enough stock of all the products keeping in mind the most moving or selling product. These

were specialized stand which had to be placed in the grocery stores.

The company followed the launch and the salespeople were really excited about the product and the new

packaging for the same and the distributors also had a very good response for the product. But the results

which were expected did not really match the projections, to make further corrections to the program the

company hired third party agencies to conduct a research in the grocery store, which showed that the

consumers had a positive response but then the sales did not really go up to the extent expected. Further

there was a lot of resistance from the retailers since they thought that the sales did not increase to the

extent that NAPCL had portrayed and also the they believed that addition of a new brand in the productcategory would not increase the sales and they were reluctant to keep any other brand apart from GE,

overall the program was well planned and designed and was very well executed in the market, but the

strategy did not work in this segment because the market was dominated by a single player which was GE

and at the same time it also had the loyalty of most of the customers and had a great perception about the

product. According to one of the studies conducted in the program there were store which were playing

certain commercial for the product and the sales in the particular were higher than those which did not

have an the commercial. Probably the new product packaging and the offering if launched in the market

with a supporting promotion activity for the consumers, which was something which missing in the

program, though they did a wonderful job on the trade promotions part but they failed in the consumer

promotion. This according to me was the biggest problem with entire program which was launched by

NAPCL.

FROM PROGRAM TO POLICIES: ALCAN ALLUMINIUMCORPORATION BUILDING PRODUCTS DIVISION


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Case overview:

The major issue discussed in this case is whether Alcan should start setting up industry new vinyl

capacities along with its existing Aluminum siding products, against companys mission of maximizing

aluminum production. The case discusses how delaying the decision to enter into vinyl BPD (building

product division) at right time caused problems for Alcan. The case amplifies the John Edwards dilemma

in taking decision wherein he had to align to Alcans mission to maximize aluminum sales and at thesame time being president of Building products division(BPD) take care of the increasing sales and profit

for company in tough market conditions where the New vinyl products were slowly eating away

aluminum demands.

ALCAN overview and industry analysis:

ALCAN is a Montreal (Canada) based company incorporated on May 31, 1928. Alcan was recognized as

one of the low cost producers of Aluminum due to ownership of hydroelectric plants. These plants also

powered many Canadian smelting operations. Alcans distribution cost was however higher than its

competitor Alcoa whose smelting operations were close to market.

Alcan management felt that companys strength resided in its diversified international base andmanagement; its well-balanced raw materials position; its market access as experienced ingot seller and

fabricator.

Aluminum is a versatile material with applications ranging from kitchen foil wrap to tanker armor. It was

produced in two stages where the first stage was chemical process refining bauxite into alumina followed

by electrolytic process converting alumina into Aluminum ingots. Companies like Alcan who could

locate its smelting operations close to low cost power benefited in the market. Aluminum gained

importance during World War 2 when defense and armament demands increased. This segment grew a lot

due to heavy demand in containers and transportation, Aluminum cans, light weight automobile

manufacturing where steel was used instead of Aluminum. Aluminum competed on cost effectiveness

over steel and copper.

From program to policies: Alcan Aluminum corporationbuilding products division

Aluminum was majorly used in siding BPD industry but gave up to increasing demand of vinyl siding

products. Alcans principal products were bare, embossed, coated aluminum sheet and coil, plates, rural

and commercial building products.

Five operating divisionsincluded building products (BPD);

Alcan cable Alcan ingots and powders metal goods Alcan sheet and Plates.

ALCAN BPD was one of the major producers of residential aluminum siding market. Vinyl siding was

cheaper than Aluminum due to which few members in Alcan suggested that they open up vinyl capacities

to stay number one and a competitive force in BPD market, but they ignored the importance of setting up

Vinyl capacity due to which Alcan suffered in sales. Alcan also fabricated and converted Aluminum to

end products like sheet, plate, foil, wire and rods. They also served other firms with aluminum ingots.


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ALCAN BPD distribution channel:

Independent Manufacturerowner Others

Problems faced due to delayed decision:

Vinyl was making inroads in BPD especially in residential siding industry as compared to diminishing

demand of aluminum. Vinyl manufacturers enjoyed higher gross margin due to low cost of production.

The other problem was that independent distributors preferred buying vinyl directly from manufacturers

in bulk volume as the cost would further reduce as compared to aluminum. Salesforce could not convince

independent dealers. Alcans marketing myopia (short sightedness) that setting up vinyl capacities will

cannibalize their own aluminum siding BPD, dealt a heavy blow to them as they suffered low aluminum

product sales and late entry into vinyl BPD products gave the Salesforce a tough time to penetrate into

much advanced and flourishing vinyl market in terms of both new customers and existing customers. The

existing influence and position in market was fading for Alcan which they had built on aluminum BPD

superiority. Independent distributors were not ready to stock Alcan vinyl sidings as the variety was low.

Moreover the competitors provided much better co-operative advertisement schemes.

Improvements recommended:

More variety in vinyl products in terms of colors, designs. Better distribution channels over independent

distributors. Making use of aluminum distribution channel if needed. Better sales strategy and promotions

to penetrate the BPD market through its vinyl products. Coming up with better vinyl quality that does not

expand under normal heat. Making changes to products and process leads to competitive edge in market

place. Alcan should try to concentrate on huge orders rather than independent distributors. Salesforce

should be properly guided with regards to the process required to sell vinyl sidings.

NATUREVIEW FARMProduct Profile


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Emphasis on natural ingredients and its strong reputation for quality and great taste

No artificial thickeners and rGBH mixed milk

Comparing to the other products 30 days shelf life, Natureviews yogurts will remain fresh for 50 days

8 Oz has 12 Flavors and 32 Oz 4 Flavors.

Customer and Competetion

SWOT ANALYSIS

Strengths

Major and trusted brand in natural foods Product Quality Strong relationships in natural food market Channel leader Relatively Rapid revenue growth Longer product shelf Life

Weakness

Owns Small portion of the yogurt market Not ventured into supermarket channel High dependence on brokers for distribution and promotion. Inefficient nature foods distribution channel

Opportunity

Supermarket channel provides significant potential of growth Natural foods sales expected to grow by 20% Opportunity for lowering customer cost

Threats

Lack of Capital Main competitor (Horizon) is getting stronger No expertise in supermarket channel

Customer Brand Sensitive Natural Foods Customer Taste savvy Less Price Sensitive

Woman (Single and with Kids) take 74%Market Share

Customer loves Natureview Yogurt

Competition Main competitor HorizonRecent IPO

Flush with Cash

Bigger than Natureview


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Company may have to reposition Risk Inter Product cannibalization

Issues

Nature view Farm needs to choose between 3 pricing options to increase its revenues to $20 million

before the end of 2001 from $13 million reported in 1999.

Recommendation:

Natureview Farm should choose Option 2 in this case.

Analysis

Analysis of the three pricing options has been provided below:

TABLE 1: Margin Chain for Manufacturer Selling Price (Natureview Yogurt)

Supermarket Channel 8oz 32 oz

Retail Price $0.74 $2.70

Retail Margin 27.0% 27.0%

Retail Purchase Price (RPP) $0.54 $1.97

Distributor Margin 15.0% 15.0%

Distributor Purchase Price (DPP) $0.46 $1.68

Manufacturer Sales Price (MSP) 0.459 1.675

Cost Per Unit 0.31 0.99

Contribution per Unit Sold 0.149 0.685

Manufacturer Gross Margin 32.46% 40.91%

Natural Foods Channel 8oz 32oz Multipack


16/19

Retail Price $0.88 $3.19 $3.35

Retail Margin 35.0% 35.0% 35.0%

Retail Purchase Price (RPP) $0.57 $2.07 $2.18

Natural Foods Distributor Margin 5.0% 5.0% 5.0%

Natural Foods Distributor Purchase

Price $0.54 $1.97 $2.07

Wholesaler Margin 7.0% 7.0% 7.0%

Wholesaler Purchase Price (WPP) $0.51 $1.83 $1.92

Manufacturer Sales Price (MSP) 0.505 1.832 1.924

Cost Per Unit 0.31 0.99 1.15

Contribution per Unit Sold 0.195 0.842 0.774

Manufacturer Gross Margin 38.66% 45.96% 40.22%

Table 2: Evaluation of Growth Options

Option 1 (8 oz.) 6

SKU to

Supermarket

20

Supermarket

Chains

2 Regions

Ad Plan $2,400,000

Sales 16,065,000

Slotting fees $1,200,000

Gross Profit $4,470,000

Less Ad Costs $2,400,000

Less Incremental SGA $320,000

Less Slotting Fees $1,200,000

Trade Promotion Expense $640,000

Less Broker's Commissions $642,600

Profit Contribution (-$732,600)


17/19

Sales Growth $16,065,000

Option 2 (32 oz.) 4

SKU to

Supermarket

64

Supermarket

Chains

4 Regions

Ad Plan $480,000

Sales 9,214,425

Slotting fees $2,560,000


Less Ad Costs $480,000

Less Incremental SGA $160,000

Less Slotting Fees $2,560,000

Trade Promotion Expense $1,024,000


Profit Contribution (-$823,152)

Sales Growth $9,214,425

Option 3 (Multipack) 2

SKU of

Multipack

to Natural

Foods


18/19

Channel

Ad Plan $250,000

Sales 3,462,878

Free Cases (slotting) fee $86,572


Less Ad Costs $250,000

Less Free Cases $86,572


Profit Contribution $826,955

Sales Growth Year 1 $3,462,878

Table 3: Market Share Analysis of Yogurt Market: Channel, SKU and Regions

Market Dollar Size

Annual Growth

Rate

Total Refrigerated Yogurt Market $ 1,800,000,000

Supermarket Channel 1,746,000,000 3.0%

Natural Foods Channel $ 54,000,000 20.0%


6 oz. & 8 oz. 1,332,000,000 3.0%

32 oz. 144,000,000 2.0%

Children's Multipack 162,000,000 12.5%

All Other $ 162,000,000


Northeast 468,000,000

Midwest 102,960,000

Southeast 25,740,000

West 6,949,800


19/19

As can be deducted, Option 3 does not satisfy the objective of increasing revenues to $20 million

although the profit is positive in this case. However, in case of Option-1 and Option-2, the negative profit

is due to the high slotting fees which is a just a one-time payment and gets eliminated after the first year.

Both Option-1 and Option-2 satisfy our objective(Option-1: Expected Revenue = $29.065 and Option-2:

Expected Revenue = $22.214 million). We prefer Option-2 because of the following reasons:

In case of the 8-oz market, competition is greater and expansion into this segment might be viewed as a

greater threat by Natureviews competitors.

Advertising costs which is a recurring cost is $2.4 million in case of Option-1 and is much greater than

the $0.48 million of Option-2.

Launching a 32-oz offering will be noticed by competition and can acquaint supermarket customers with

the brand before Natureview pursued the 8-oz size in the supermarket channel at a later stage.

marketing implimentation

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