Situation Overview
Our customers care about the following buying factors: longevity, presentation, speed of delivery, ease of ordering, freshness, and price. Our customers are 57% women between 30-55 years of age with high disposable income who want to send not only flowers but love. Calyx offers our customers premium mail-order gifts. We differentiate ourselves from competitors by delivering our product directly from growers to customers, ensuring we offer the freshest flowers with the most longevity.
Problem Identification: The Awareness Gap While we have gross margins of 50%, and a premium product compared to our competitors, we do not reach full revenue potential. We have a desirable return on direct mail from current customers, but our returns from rented lists are low. Because our current customers are seasonal, and will most likely not increase the annual number of purchases substantially, the growth potential of our current customer mail lists is low. We are stagnating, just pitching to our old customers, and not reaching our growth potential.
To achieve full potential, we need to reduce the awareness gap; few consumers recognize the premium value of Calyx Flowers or even recognize the brand. Our new strategy should focus on educating potential consumers about the premium value of Calyx.
Potential Marketing Strategies
Option 1: Increase the number of catalogs.
- Pros:
Catalogs are a familiar mode of advertisement – we can confidently predict how much revenue we will receive from an increase in catalogs.
Also, we can bundle Calyx Flowers catalogs with those of the BearGram Service that we are already mailing.
- Cons
Increasing catalogs is not cost-effective. More importantly, this option does not address the underlying problem of not targeting new customers.
Option 2: Increase Internet advertising.
- Pros:
Internet advertising is low-cost and convenient for customers to click and purchase. More targeted market segmenting is possible than with the other two options, and we have a higher target reach.
The Internet is also good for attracting new and younger customers.
- Cons:
Internet advertising is not a premium media, so it lessens the premium feel of our high-end product.
Similarly, we have little control over which other products are advertised alongside ours, which may also compromise the premium feel. Overall, Internet advertising may not effectively communicate the benefits and quality of Calyx Flowers.
Option 3: Increase mass-media advertising.
- Pros:
Mass-media advertising reaches a wider audience and is a premium media, which aligns with our brand perception.
Customer targeting is possible, and we can also target by time (ex: additional commercials close to Christmas, Valentine’s Day, etc). Mass-media marketing has been successful in the past with other Vermont Teddy Bear brands and also used extensively by competitors.
- Cons:
Mass-media is the most expensive for advertising. There is a higher risk of spending money to reach customers who are not interested in Calyx Flowers.
Preferred Strategy
Mass Media Advertising Mass-media advertising would entail print, television, and direct-response radio ads focusing on the premium quality, freshness, and longevity of Calyx Flowers. While mass-media advertising is expensive, we have 50% margins right now, providing sufficient leverage to mitigate cost risk. Mass-media advertising best addresses the problem of stagnating growth caused by a customer awareness gap of the existence and value of Calyx Flowers because of its high audience reach.
Mass-media advertising provides many of the benefits associated with the other two options but maintains our brand’s quality image at the same time. Our high-end product gives us a clear competitive advantage over FTD and 1-800-Flowers.com to customers with large disposable income, and mass-media advertising can best showcase this advantage.
[ 1 ]. (calculation: increase revenue by 3000000 *. 01 = 30000.0* $80 = $2400000.00; increase profit (not including cost of flowers) by $2,400,000 – (. 74 * 3,000,000) = $180,000.00).
