Calyx Flowers: Managing Profitable Growth
This analysis focuses on Calyx Flowers, a subsidiary of Vermont Teddy Bear Company. It is a flower delivery service that ships fresh flowers direct from 18 growers in Florida and California. This permits Calyx & Corolla to provide fresher, longer-lasting flowers to consumers. This distribution channel gives them an edge over other conventional companies like 1-800-FLOWERS.COM and FTD. This also helps them to sell them at premium with 50% gross margin. In order to have a wider variety of flowers, some of them are flown in from farms in Ecuador, Columbia, and Holland to growers’ warehouses in US. Calyx also provides vases and other floral accessories in addition to flowers. They also have continuity programs wherein you can subscribe for a monthly delivery of flowers for a year. Calyx & Corolla appears to have a strong potential for a bright future, but the company also have some apparent weaknesses in their business.
Calyx Flowers promoted its offerings primarily through the ten million catalogs. Of the 10 million, 5 million goes to prior customers, 2 million goes to flower recipients and 3 million goes to potential customers. This is very inefficient considering the cost of $2.2 1million for sending out 3 million catalogs to acquire new customers. And this group yield was only 1% per mailing. Effective and cost-efficient segmenting can help Calyx to optimize their marketing expenditure. Value based segmenting helps Calyx to identify the customer groups based on their needs and benefits they seek from Calyx. Freshness, longevity of flowers and speed of delivery are the core competencies of Calyx. They will have to identify the customer group that values these qualities through strategic positioning. Through value-based segmenting 2and strategic targeting3, Calyx should expand size of potential customer base and Increase brand awareness. Calyx has positioned themselves as a slightly upscale provider of flowers vs. the traditional FTD retail shop. Calyx’s continuity programs targets a more planned purchase, whether from an individual or company account. Although positioned to be affordable, the extra care and service for the product and customer does reinforce the slightly higher prices versus the retail shop.
Calyx will continue to target its traditional customer, the slightly affluent, age 30-55 female. Strategic positioning with a focus on attributes freshness, longevity and service will help them reach the following three new target markets: 1) Proactive males: Active males comfortable with scheduling, but time pressed to order flowers. Travel or active lifestyle does not always allow access to known flower outlets.
2) Affluent Social/Entertainment: Couples that place value on social standing. Frequent home entertainment; use flowers to enhance home furnishings and personal image.
3) Corporate Accounts: Companies with flowers and plants in boardrooms, offices; corporate gifts to important customers or individuals within company; producers of tangible products enhanced by flowers.
Catalog as marketing channel seems to be inefficient for Calyx. Internet on the other hand is cheap and is an easier media to implement targeted marketing. Competitors - FTD and 1-800-FLOWERS.COM are a spending more advertising dollars on mass media rather than catalogs. Mass media advertising has higher cost at the same time is difficult to target specific market segment. It is also ineffective in gauging effectiveness of their target audience receiving message. Both these constraints can be effectively by increased internet promotions. Internet sales already accommodate for 40% of the revenue. Hence it will ideal for Calyx to spend less on catalogs and more on targeted internet promotions. Most flowers are purchased on special occasions like birthdays, anniversaries, weddings etc. The demand for flowers is seasonal, with peaks around holidays. Vermont Teddy Bear Company’s’ other subsidiary BearGram also have the demand for Teddy bears seasonal, with peaks around holidays. But its average customer has a very different profile than Calyix. 66% are men making last minute purchases. Cross promoting Calyx flowers with BearGram can help acquire new customers. By implementing a good positioning strategy4, customer will perceive flowers as a complementary product rather than a substitute.
1. What is the primary cause of Calyx’s problem? What is the key actionable reason for the weak performance? The flower delivery market is fragmented and therefore heavily competitive. It is easier to get flowers from other competitors. In order to acquire and retain customer, they should be aware of Calyx value proposition. Calyx is lacking a proper marketing strategy.
They don’t have effective strategic targetings. Promotions are done primarily through catalogs and mainly to existing customers. They also lack a positioning strategy focusing on their main strengths freshness, longevity and Service. This limits Calyx from acquiring value customers which results in lower revenue. 2. What is important to people when they buy flowers? What attributes/benefits do they care about when choosing a flower retailer? The attributes important to customers from a product perspective are longevity, Variety and freshness of flowers. Presentation, speed of delivery, ease of ordering and price are the important attributes of a retailers service. Calyx positioning is supported by their product differentiation, which includes the following attributes: Freshness, Longevity, High value (less frequent orders due to longer lasting product), High quality package (to preserve and protect the product), Guaranteed delivery on date promised, Exotic flowers Of these, the most significant differentiator is the freshness of the flowers. This powerful attribute is achieved by removing the intermediate from the supply chain by which the growers send flowers directly to the customer.
3. What should John do? It is evident that the failure of Calyx Flowers to meet its financial performance goals is due to the ineffective marketing campaign they are currently utilizing. In order to improve financial performance, we feel it is imperative to increase Calyx’s current customer base by targeting other market segments as well as communicating in a more cost efficient and effective manner. We recommend implementing a marketing strategy by advertising and communicating primarily through the Internet. We propose eliminating all direct mail catalogs for non-customers entirely and communicating via e-mail with current customers who currently purchase online, thereby reducing advertising costs. This requires lower capital and is a very efficient media to do targeted marketing. We also recommend cross-promotional advertising campaigns with other Vermont Teddy Bear Company subsidiaries.
References 1. Calyx flowers: Managing Profitable Growth, Alexander Chernev 2. Strategic Marketing Management, Alexander Chernev