Chapter 12: Using Ethnographic Research t o Understand Consumers


Overview

In this chapter, ethnographic research was used to develop a summary of consumer usage and attitudes in the baby shoe category. The objective was to understand the detailed habits and practices of mothers of infants as they related to the purchasing and usage of baby shoes. The procedure involved in-home discussions with respondents about their habits and practices, with videotaped observations of where the respondents kept baby shoes and how they were used included. The interviews were conducted in three cities: Boston, Chicago, and Los Angeles. A total of twenty-four interviews were completed.

There are times when the objectives of a research project call for identifying-subtle emotional dimensions that are almost impossible to uncover by simply asking questions. Participants may not even recognize their own behavior patterns and motivations. These are the times when ethnographic research should be the technique of choice, as was the case with Twinkle Baby Shoes.

Like projects involving traditional qualitative research, this project began with the identification of specific objectives. A screener was then created to recruit key informants who fit the requirements. These were respondents who were very knowledgeable about baby shoes and were able to clearly communicate with the ethnographers. A battery of psychographic questions was included in the screening questionnaire to help in identifying these respondents. The respondents also agreed to allow the researchers to videotape them in their home. A specialized recruiter network was used to carry out this unique recruiting.

As with focus groups or in-depth interviews, a discussion guide was written to ensure that all of the research objectives were covered with each consumer. In addition to questions, this guide also included a storyboard outline of the observations to be completed with the respondent. The objective was to observe as many aspects of the respondent s life as possible, then focus on the respondent s usage of and attitudes toward baby shoes. The verbal interview was conducted simultaneously with the videotaped observations to enable the respondent to explain her activities.

This chapter provides a marketing plan to sell a line of infant s shoes in retail stores under the brand name Twinkle Baby Shoes. The plan includes a detailed action program for each step necessary to bring the marketing program from management approval to implementation. The marketing plan is based on the completion of a detailed market review and on ethnographic research that identified a significant niche opportunity in the infant s shoe category.

The Twinkle Baby Shoes venture is an example of a business built around a positioning of the product as ˜ ˜fun in order to stimulate repeated purchases of baby shoes by parents and as gifts by friends and relatives.

Twinkle Baby Shoes are fun to wear and fun to give for holidays and special occasions. This chapter shows how the ethnographic research was used to discover the premise on which the complete marketing plan was based.

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Marketing Plan for Twinkle Baby Shoes Accola Shoe Corporation [1] December 1, 2001

INTRODUCTION

The purpose of this report is to develop a five-year marketing plan for a venture to sell a line of infants shoes in retail stores throughout the United States. This report is divided into the following sections:

  1. BACKGROUND. This section details the activities that led up to the development of this venture, and reviews the specific objectives and methodology used in completing this marketing plan.

  2. MARKET REVIEW. This section reviews the size and nature of the U.S. infants shoe market.

  3. CONSUMER USAGE AND ATTITUDES. This section outlines present consumer practices, desires, and expectations concerning the infants shoe category.

  4. TRADE PRACTICES AND ATTITUDES. This section reviews the trade s current involvement with infants shoes and its reactions to alternative marketing approaches.

  5. CONCLUSIONS. This section outlines the strategic implications of the findings from the market review, the consumer research, and the trade research.

  6. FIVE-YEAR MARKETING PLAN. This section presents a specific and detailed action program for each step necessary to move this venture from management approval to implementation.

  7. . FINANCIAL FORECASTS. This section presents pro forma profit-and-loss statements for the program.

BACKGROUND

A project to investigate the potential of a new incremental marketing opportunity for the Accola Shoe Corporation was started during the fourth quarter of 2001. The overall objective of this project was to develop a marketing plan that Accola could use to market a line of infants shoes in retail stores throughout the United States. The specifics of this objective were as follows :

  1. MARKET PROFILE. A review of the overall infants shoe market was conducted. The purpose of this review was to enable the venture to focus on those product segments with the greatest potential.

  2. CONSUMER USAGE AND ATTITUDES. Research was conducted to identify consumer attitudes toward infants shoes.

  3. TRADE PRACTICES AND ATTITUDES. Past and current experiences that the retail trade has had with the infants shoe market were identified. In addition, the criteria that the trade uses in making distribution allocations , as well as any problems that it may have been encountering, were also identified.

  4. FIVE-YEAR MARKETING PLAN. Based on the previous research, a specific and detailed action program was developed for each step necessary to bring the venture from management approval to implementation.

The information required to write this marketing plan was gathered in five stages. Each stage was designed to provide a systematic understanding of the overall infants shoe market from both the consumer s and the trade s standpoints and, finally, to permit the development of specific marketing plans and strategies. The following specific steps were taken:

  1. AVAILABLE INFORMATION SEARCH. A review of all the available data that were pertinent to the preparation of this program was conducted. In addition, an exhaustive screening of industry data was done.

  2. STORE CHECKS. Store checks were conducted in a representative group of retail stores throughout the country. During these store checks, identification was made of product lines carried, breadth of trade involvement in infants shoes, and so on.

  3. CONSUMER RESEARCH. Extensive qualitative market research was conducted with consumers on the subject of infants shoes. The purpose of this research was to develop an understanding of consumer attitudes in general and to explore both specific concepts and reactions toward alternative product lines.

  4. TRADE PROBES. Interviews were conducted with key executives in retail organizations throughout the United States. Meetings were held with executives at various levels within these organizations, including buyers , merchandising managers, and members of senior management. Organizations of different sizes were contacted, as were similar organizations in different geographic areas. The purpose of these interviews was to identify both trade interest in an infants shoe program and the trade s requirements if such a program were to be developed.

  5. MARKETING PLAN DEVELOPMENT. Based on the information gathered in the previous steps, a detailed plan was developed, including a step-by-step action plan that should enable Accola to profitably penetrate this incremental segment of the infants shoe market.

MARKET REVIEW

  1. The total market for infants shoes in 2000 amounted to $470 million in retail sales. Sports shoes was the largest segment of the reported infants shoe market in terms of dollar sales. Sports shoes represented $250 million in retail sales, or 53 percent of total dollar sales. Dress shoes represented the largest segment in terms of unit sales, with 61 percent of total unit sales. Table 12-1 summarizes the retail dollar sales and unit sales in dozens of this selected portion of the infants shoe market.

    Table 12-1. 2000 Selected Infants Shoe Market Units and Retail Dollar Sales (000)

    Item

    Retail Dollar Sales

    % of Total

    Unit Sales (Dozens)

    % of Total

    Sports shoes

    $250,000

    53%

    2,450

    28%

    Sandals

    45,000

    10%

    960

    11%

    Dress shoes

    175,000

    37%

    5,440

    61%

    Total

    $470,000

    100%

    8,850

    100%

  2. Discount stores represent the largest trade channel for infants shoes in terms of retail dollar sales. Discount stores account for 32 percent of overall retail dollar sales. Department and specialty stores are the second largest trade channel for infants shoes, representing 29 percent of total retail dollar sales. Sears and Penney together make up a substantial segment (26 percent) of the infants shoe market. All other trade channels represent only 13 percent of total retail dollar sales. Table 12-2 outlines the retail dollar sales in the infants shoe category by trade channel.

    Table 12-2. Infants Shoe Market by Trade Channel (000)

    Trade Channel

    Retail Dollar Sales

    % of Total

    Department and specialty stores

    $136,300

    29%

    Discount stores

    150,400

    32%

    Sears/Penney

    122,200

    26%

    Other

    61,100

    13%

    Total

    $470,000

    100%

  3. The geographic dispersion of the infants shoe market varies by geographic area as well as by product type within each area. The New York sales district has the highest sales of sports shoes and sandals. On the other hand, the San Francisco sales district has the highest sales of dress shoes. Table 12-3 provides the unit sales in dozens for sports shoes and sandals versus dress shoes for each sales region.

    Table 12-3. Selected Infants Shoe Market by Geographic Region
     

    Sandals and Sports Shoes

    Dress Shoes

    Sales

    Unit Sales (Dozens) (000)

    % of Total

    Unit Sales (Dozens) (000)

    % of Total

    New York

    1,709

    26.7

    238

    9.7

    Philadelphia

    730

    11.4

    273

    11.1

    Cleveland

    134

    2.1

    69

    2.8

    Boston

    499

    7.8

    198

    8.1

    Los Angeles

    410

    6.4

    125

    5.1

    San Francisco

    1,338

    20.9

    713

    29.1

    Dallas

    230

    3.6

    191

    7.8

    Denver

    115

    1.8

    66

    2.7

    St. Louis

    358

    5.6

    225

    9.2

    Chicago

    499

    7.8

    203

    8.3

    Atlanta

    378

    5.9

    149

    6.1

    Total

    6,400

    100.0%

    2,450

    100.0%

  4. A substantial number of consumers purchase infants shoes for their own children s use as well as for gift purposes. These usage patterns vary considerably from one type of product to another. Dress shoes are generally purchased for the consumer s own children s use.

About 85 percent of all unit sales were for the consumer s own children. Sandals are also frequently purchased for the consumer s own children, representing 65 percent of total unit purchases. Sports shoes are evenly divided between own use and gift purchases. Table 12-4 provides a breakdown of gift versus own use purchases by product type.

Table 12-4. Selected Infants Shoe Market Gift Versus Own Use Purchase
 

Sports Shoes

Sandals

Dress Shoes

Transaction

Unit Sales (Dozens) (000)

% of Total

Unit Sales (Dozens) (000)

% of Total

Unit Sales (Dozens) (000)

% of Total

Gift purchases

1,225

50%

336

35%

816

15%

Own use

1,225

50%

624

65%

4,624

85%

Total

2,450

100%

960

100%

5,440

100%

CONSUMER USAGE AND ATTITUDES

  1. Baby shoes were considered by consumers to include both basic and fanciful items. When asked about various baby shoes in their homes , respondents said that they viewed certain styles of shoes as ˜ ˜basics. These shoes were purchased on a routine and frequent basis. Other types of baby shoes were considered to be ˜ ˜fancy . These shoes were typically purchased or received as gifts associated with special occasions ”from baptisms to the baby s first birthday.

  2. Baby shoes were a popular gift item. Most mothers received baby shoes as gifts, especially for the first-born child. These gifts supplied up to 50 percent of a child s first-year needs. Sometimes, gifts were received that for one reason or another could not be used. In reviewing the respondents inventory of baby shoes, it was noted that there were often a number of shoes that appeared to have never been worn. Respondents indicated that they did not feel that these shoes were really practical, or they could not be used because of the child s size or sex.

  3. Sizing of baby shoes was considered to be inconsistent. When asked about specific baby shoes that had never been used, several respondents indicated that the actual size of the shoe was different from the size indicated and that therefore the shoe could not be worn. Sizing was a major complaint of many of the mothers interviewed. One respondent said, ˜ ˜Sizing is insane ”it makes no sense whatsoever. It was often felt that the sizes of baby shoes were not consistent between manufacturers, and in some cases were not even consistent within the same brand.

  4. A large portion of baby shoes were purchased by mothers. Frequently, baby shoes that were received as gifts covered only the newborn sizes or the first few months. Other shoes received as gifts were not felt to be practical. Even ˜ ˜hand-me- downs could not always be used because of differences in the size or sex of children. For these reasons, there was a large requirement for mothers purchases of baby shoes.

  5. Many mothers considered shopping for baby shoes to be entertaining. When asked where specific baby shoes were purchased, mothers indicated that many of the shoes had been bought during special trips that were really social events. One respondent indicated that she felt it was ˜ ˜more fun to buy shoes for the child than for yourself. Many respondents indicated that they enjoyed shopping for their infant s shoes. Some arranged special trips just for this purpose. It was often felt to be ˜ ˜a great way to get out of the house.

  6. The baby shoes purchased during recreational shopping were typically ˜ ˜fancy rather than ˜ ˜basic shoes. During these in-home interviews, respondents were asked about each of the different types of baby shoes in their homes. In most cases, the ˜ ˜basic shoes were purchased during routine shopping trips. The ˜ ˜fancy shoes either were received as gifts or were purchased during special trips that were considered to be fun-filled recreational activities.

  7. Many of the respondent s favorite ˜ ˜fancy baby shoes were associated with special occasions. One of the advantages of this ethnographic research was that the researcher was in the home and had the opportunity to ask questions about specific baby shoes. Respondents were asked to pick their favorite baby shoes, and then explain why these were their favorites. In some cases the favorite shoes were associated with holidays such as Christmas, Valentine s Day, and Easter. In other cases they were associated with special occasions such as birthdays, a christening, a baptism, or even a memorable baseball or football game.

  8. Baby shoes were purchased in a variety of retail outlets. For those baby shoes that had not been received as gifts, respondents were asked where they purchased each of the different baby shoes in their homes. Many of these shoes were purchased in outlets that specialize in children s shoes and clothing. Department and discount stores were also popular outlets for purchasing baby shoes. Other outlets mentioned were toy stores, drugstores, and supermarkets. A variety of factors influenced where the mother would shop, including good selection, price, and convenience.

  9. Most respondents indicated that they generally preferred national brands of baby shoes over unknown brands. It was observed , however, that nonnational brands were often included in the baby shoe inventories of the respondents visited. When asked to explain this, respondents indicated that they would purchase an unknown brand if the quality of the shoe could be examined and seemed appropriate and if the design of the shoe was of interest. Another factor warranting consideration of an unknown brand was a lower price point.

  10. Most of the respondents in these in-home interviews recalled seeing advertising from both manufacturers of baby shoes and stores selling baby shoes. Advertising by manufacturers was seen as creating a quality brand image in the mind of the mother. One participant stated that ˜ ˜manufacturers ads plant in your head that it s a good brand. Advertising by retail outlets was felt to announce a sale. These advertisements were felt to be strongest when a particular brand was featured on sale. Most respondents indicated that they do respond to store advertising, and that an ad will motivate them to go to a particular store.

TRADE PRACTICES AND ATTITUDES

  1. In an effort to provide a wide variety for their customers, retailers are constantly searching for new programs. The trade believes that a key to attracting new customers to their stores is variety. Without variety, the retailer runs the risk of losing customers. Therefore, the trade is generally receptive to new products and ideas.

  2. Most of the retailers interviewed recognized the rising birth rate. The trade recognizes the growth in many infants products, including shoes, toys, diapers, and baby food. Because of this, many retailers have expanded these departments. Growth is also seen in children s food products.

  3. The trade believes that infants shoes are a growth category. Among retailers, it is generally believed that the infants shoe category is growing. Many feel that this category should be evaluated, and would be receptive to a new program.

  4. A new line of ˜ ˜special occasion, ˜ ˜fun baby shoes was seen by the trade as a great idea. The trade viewed this as creating a whole new business for stores. Some retailers felt this was ˜ ˜a long time overdue. This concept seemed to hit an emotional ˜ ˜hot button, and it was universally felt that the concept should be pursued.

  5. Displays creating a complete ˜ ˜fun infants shoe section were preferred. Most retailers preferred a four-foot in-line display. An eight-foot or twelve-foot display might be used in larger stores, while a two- foot display might be used in smaller stores. The display should be flexible enough to accommodate various store formats, with a forty-eight-inch height for low-profile stores and a sixty-six-inch height for high-profile stores.

  6. Trade evaluations of an infants shoe program would be subjective . There was no fixed rule on performance requirements. The key was generating enough incremental profit to justify the space. A trade profit of $40 per store per week was mentioned by some retailers, and this can be used as a benchmark for a four-foot section.

CONCLUSIONS

  1. A niche can be created by positioning the line as shoes that are fun to buy, fun to give, and fun to wear. A large portion of the baby shoes identified during the in-home interviews had been received as gifts or were purchased during recreational shopping trips by mothers. Most of the baby shoes received as gifts and bought during recreational shopping fit the ˜ ˜fun positioning. Baby shoes are a popular gift item, and this positioning would be appropriate for gifts of baby shoes, which account for up to 50 percent of a child s first-year needs. Baby shoes bought during recreational shopping were also a large portion of the inhome inventories.

  2. A ˜ ˜fun product line should consist of ˜ ˜fancy, rather than ˜ ˜basic, baby shoes that are appropriate for holidays and special occasions. Many of the respondents favorite baby shoes were associated with special occasions. These special occasions included holidays such as Christmas, Thanksgiving, and Easter and special occasions such as birthdays and a christening or baptism. The shoes designs should include such images as Santa Claus, Christmas trees, and Easter bunnies, as well as short messages such as ˜ ˜happy birthday.

  3. The sizing of each different model of baby shoe should be consistent with that of other models in the line to eliminate a current negative in the category. The sizing of current baby shoes was felt by many respondents to be inconsistent, both between manufacturers and even within the same brand. The sizing of all Twinkle Baby Shoes should be consistent.

  4. A ˜ ˜fun product line should be distributed in stores where recreational shopping is typically done. These include stores that specialize in children s shoes and clothing and department stores. Discount stores, drugstores, and supermarkets currently sell baby shoes. These types of stores, however, were mainly felt by respondents to be appropriate for basic baby shoes that are bought during routine shopping trips.

  5. Consumer interest and distribution opportunities can be maximized with a brand that is nationally advertised and promoted. Most respondents indicated that they preferred national brands of baby shoes over unknown brands. Brand advertising and store advertising would help build excitement for the Twinkle Baby Shoes brand and would help to maximize sales and distribution.

FIVE-YEAR MARKETING PLAN

  1. The Accola Shoe Corporation should develop and launch a national program to sell a new line of ˜ ˜fun to wear and fun to give infants shoes. The findings of the research in this document clearly indicate that such a new infants shoe program offers the company the opportunity to increase its share of the infants shoe market by a substantial proportion. We believe that such a program will generate ongoing sales on a stable basis. We also feel that the cost of launching such a program will not be prohibitive for the company. Finally, we believe that Accola can launch such a program on infants shoes without any significant disruption to its normal day-to-day operations.

  2. The product line for the new line of infant s shoes should be made up of ˜ ˜fancy baby shoes that are most appropriate for holidays and special occasions. This should include dress shoes, sports shoes, and sandals. The most popular current colors should be utilized, including white, blue, pink, yellow, and brown.

  3. The pricing of this new product line should be kept to as few price points as possible. The prices recommended are $6.99 at retail for dress shoes, $3.99 for sports shoes, and $1.99 for sandals. These prices were evaluated during national store checks, and were found to be competitive. All of the financial forecasts in this marketing plan are based on these prices.

  4. The licensed name Twinkle Baby Shoes is recommended as the brand name for this program. This name comes from an established manufacturer that has high credibility within the infants categories. It is believed that a licensed brand name will be of substantial assistance in gaining distribution. A licensed name will reduce the required consumer advertising for the program. It will also be much less expensive to utilize a licensed name than to create a famous brand name through expensive advertising on a national basis.

  5. A modular in-store display is recommended for the program. This display should provide an insert for the in-line store shelving. This insert must accommodate stores with both threefoot sections and four-foot sections. The display should provide a uniform look for all stores. It should include an attractive header sign that clearly identifies this section of the store as being for infants shoes. The display must be provided free to the retail trade, as this is the customary practice in these channels of distribution.

  6. It is recommended that a consumer and trade promotion and advertising program be developed for the infants shoe line. This program should include trade allowances, advertising, and publicity. Upon introduction of the line, a strong effort should be launched to motivate the trade to take the line into distribution. At the same time, consumer advertising and promotion should be launched to strongly introduce the program at the onset. Finally, a publicity program should be coupled with the advertising to supercharge the introduction. A second flight of similar activity is recommended for month 8, so that the program is revitalized during the second half of the first year.

  7. It is recommended that the heaviest funds be allocated to advertising and promotion during the introduction of the program. This will provide the maximum opportunity for distribution and sell-through of the program. It is recommended that, of this front-end loading for month 1, $924,000 be spent on promotion and $572,000 be spent on advertising. During month 8, it is recommended that all monies be spent on promotion. Table 12-5 summarizes the recommended spending during year one.

    Table 12-5. Year One Promotion Plan Cost (000)
     

    Month 1

    Month 8

    Promotion:

    Trade

    $799

    $190.5

    Consumer

    125

    412.5

    Total

    $924

    $603.0

    Available for advertising

    $572

    $ 0.0

    Total money

    $1,496

    $603.0

  8. Television advertising is recommended during the introduction of the program. The purpose of this television advertising will be to give consumers the news about the new line as well as to show them what display to look for when they go to the store to shop for infants shoes. In addition, this television advertising can be put on diskettes to be used in sales meetings with the trade. The concept of television advertising has been found by the sales force to be the most powerful vehicle for sell-in with the trade.

  9. The initial trade promotion should provide the trade with an incentive to take the initial display into distribution. It is recommended that an initial buying allowance be provided, giving the trade one free product with every twelve purchased. In addition, an advertising allowance of 10 percent of the initial purchases is recommended. This will enable the trade to participate in announcing the introduction of this exciting new program to their customers. Table 12-6 provides an example of the costs of this initial trade promotion.

    Table 12-6. Initial Trade Promotion
     

    Total Dollars (000)

    Factory ˜ ˜sell-in volume

    $4,616

    Cost of:

    Buying allowance @ 1 free with 12

    384

    Advertising allowance @ 10%

     

    (90% trade performing)

    415

    Total cost

    $ 799

  10. 10. Upon introduction, a fifty cents off next purchase promotion is recommended. The purpose of this promotion is to provide trade excitement and to motivate the consumer to purchase the line on an ongoing basis. Consumers will receive a sticker on every pair of shoes telling them that they may mail in a proof of purchase and receive a fifty-cent coupon that can be used for their next purchase. Coupons that will be good the next time they shop for infants shoes will then be sent to the consumer.

  11. During the second six months, a fifty-cent in-ad coupon is recommended as a consumer promotion. The trade will be provided an advertising allowance on ten weeks purchases of product. In addition, the trade will be authorized to place a fifty-cent coupon, which is store redeemable, in advertisements. This will enable the trade to participate in a pull-through consumer promotion.

  12. It is forecasted that the Twinkle Baby Shoe program will receive distribution in a total of 9,801 retail outlets. The retailer will require a 33 percent margin off retail price. Distributors will take 25 percent off the retailers price. This is equal to approximately 17 percent off retail price for the distributor. A 2 percent cash discount will also be required by the trade.

  13. To effectively manage national distribution to 9,801 stores, a sales-specific organization will be required to handle the ongoing activities of this large distribution network. Each member of the sales organization should have a unique and distinct function. The following organization has been designed to ensure that all 9,801 stores plus the supporting service organizations will be appropriately supervised. Specifically, the different functions are outlined as follows:

    1. National sales manager. This individual has the primary and overall responsibility for development and implementation of all sales activities. The national sales manager is responsible for the construction of volume forecasts and annual sales plans. Additionally, he or she has line responsibility for the entire sales organization to ensure that the objectives and results of the marketing and sales plans are achieved.

    2. Zone managers. Each of the three zone managers is responsible for three district managers and an average of twenty service organizations. In addition, the district managers are responsible for approximately 266 retail headquarters within each of their zones. The zone manager is responsible for achieving overall distribution and volume objectives in his or her geographic territory. The zone manager also bears the responsibility for recommending the addition or deletion of promotion or marketing plans in order to maximize the venture s volume and profit from his or her geographic area.

    3. District managers. Each district manager bears the responsibility for the overall performance and accomplishments of approximately seven service organizations. In this respect, the district manager is responsible for providing ongoing supervision, evaluation, and motivation of his or her individual service personnel. The district managers will be expected to work at retail level, both with service personnel and on his or her own, to determine the effectiveness of the service persons efforts. The district manager will also assist his or her service people in making headquarters calls and sales. If necessary, the district manager will have the responsibility for recommending the termination of an individual service person and for the screening process to determine his or her replacement.

    4. Service personnel. The individual servicing organizations will bear the primary responsibility for introduction and ongoing selling and servicing activities at headquarters and retail levels.

  14. It is estimated that the national sales organization can be operated for 5 percent of net sales. On a going-year basis, this cost would be approximately $1,270,000. Table 12-7 outlines the direct and indirect costs of the national sales organization on an ongoing basis.

    Table 12-7. Projected Going-Year Sales Expenses (000)

    Headcount Costs:

     

    National sales manager @ $60,000

    $60

    3 zone managers @ $45,000 each

    135

    9 district managers @ $30,000 each

    270

    3 secretaries @ $16,000 each

    48

    Total

    $513

    Headcount welfare plan @ 26% of income

    $133

    Overhead expenses @ 52% of salaries and welfare

    336

    Travel expenses ”13 managers @ $1,846/month

    288

    Total

    $1,270

FINANCIAL FORECASTS

  1. The total annual forecasted sales for the Twinkle Baby Shoes program on a national basis is $52 million in retail dollar sales. It is assumed that sales will vary by store size. In $12 million and over stores, an average of $130 per store per week is forecasted; $110 per store per week is forecasted for $8 to $12 million stores; $100 per store per week is forecasted for $4 to $8 million stores; and $70 per store per week is forecasted for $2 to $4 million stores.

  2. It is recommended that the initial inventory on each display be 166 items with a retail value of $703.34. This level of inventory will represent over a one month s supply in a typical store. This is felt to be sufficient, because a typical store will be serviced on at least a weekly basis.

  3. It is felt that the pipeline sales on introduction of the program on a national basis will amount to approximately $5 million in sales at factory levels. This represents the inventory to be placed on displays in 9,801 stores and backup inventory at the warehouse. Warehouse inventory is assumed to be 50 percent of display inventory. Table 12-8 outlines the calculated pipeline sales for the introductory year at retail prices.

    Table 12-8. Pipeline Sales Calculations for Introductory Year at Retail

    Number of stores

    9,801

    Inventory/display

    $703

    Total display inventory

    $6,890

    Warehouse inventory (50% of display inventory)

    $3,445

    Total pipeline sales ”$ retail

    $10,335

    Total pipeline sales ”$ net factory (49% retail)

    $5,064

  4. Based on the forecasted $52 million in annual sales at retail, the venture will account for a total of 11 percent of the overall infant s shoe market. The program will generate a 7.9 percent share of the sports shoe market and a 7.7 percent share of the dress shoe market. The share of the sandal market will be 41.7 percent. These shares assume virtually no increase in the overall market size.

  5. On an ongoing basis, it is estimated that the infants shoe program will generate slightly over $2 million in annual profit before tax for the Accola Shoe Corporation. This profit assumes gross sales at factory to be 50 percent of retail sales. A 2 percent cash discount is included, as well as 0.5 percent of gross sales for returns and allowances. Advertising and promotion is assumed to be 6 percent of net sales. Displays will be purchased at approximately $100 each, amortized over a three-year period. Sales cost is assumed to be 5 percent of net sales, and distribution cost within the Accola organization is assumed to be 6 percent of net sales. Royalties assume that the program utilizes a licensed brand name. Table 12-9 gives an estimated income statement for the going year.

    Table 12-9. Estimated Income Statement for Going Year
     

    Going Year

     

    $(000)

    %

    Retail sales

    $52,112

    Retail margin (33% retail sales)

    17,197

    Distributor margin (17% retail sales)

    8,859

    Gross sales at factory

    $26,056

    Cash discount (2% gross sales)

    521

    Returns and allowances (0.5% gross sales)

    130

    Net sales

    $25,405

    100%

    Cost of goods

    15,751

    62%

    Gross profit

    $ 9,654

    38%

    Operating expenses

    Advertising/promotion

    $ 1,524

    6%

    Display depreciation (3 years )

    326

    1%

    Marketing and administration

    1,270

    5%

    Sales and distribution

    2,795

    11%

    Royalties (6% net sales)

    1,524

    6%

    Profit before tax

    $ 2,215

    9%

    Notes: 1. Retail sales are based on the national sales forecast.

    2. Cost of goods is an estimated average of all products provided by the Accola Shoe Corporation.

    3. Display depreciation assumes an average display cost of $100 in 9,801 stores depreciated over 3 years.

    4. Marketing and administration includes sales management and corporation overhead.

    5. Sales and distribution includes broker expense (5%) and normal Accola distribution expense (6%).

    6. Royalties are for use of the name ˜ ˜Twinkle Baby Shoes.

  6. It is felt that it will take three years to achieve the going year sales level. It is forecasted that total sales will reach the $41 million level during Year 1 and will gradually build to $49 million in Year 2, and finally to $52 million in Year 3. Pipeline sales will all occur during Year 1. Table 12-10 illustrates how the program will be expanded if national distribution occurs all at one time.

    Table 12-10. Prototype Income Statement Total National Expansion Based on $52,112,000 Going-Year Retail Sales (000)
     

    Year 1

    Year 2

    Year 3 & Going

     

    1st Half

    2nd Half

    Total

    1st Half

    2nd Half

    Total

     

    Retail sales

    $20,438

    $20,602

    $41,040

    $23,268

    $26,238

    $49,506

    $52,112

    Factory net sales

    Consumer

    5,992

    8,998

    14,990

    11,354

    12,804

    24,158

    25,405

    Pipeline

    3,982

    1,056

    5,038

    Total

    9,974

    10,054

    20,028

    11,354

    12,804

    24,158

    25,405

    Available (15%)

    1,496

    1,508

    3,004

    1,703

    1,921

    3,624

    3,811

    Spending

     

    Advertising/promotion

    1,496

    603

    2,099

    681

    769

    1,450

    1,524

    Profit before tax

    $ 905

    $ 905

    $ 1,022

    $ 1,152

    $ 2,174

    $ 2,287

end sidebar
 

[1] Disclaimer: The specific information in this sample marketing plan was compiled for intended use as an example only. Although this marketing plan is based on actual products from a real company, the specific information in the plan is hypothetical and is not intended to compete with or to divulge proprietary ideas, company structure, or the financial status of any company. The names , numbers , and some of the facts in this marketing plan have been changed because of the confidential nature of the information. The information is intended to be used as a guide only.




Powerhouse Marketing Plans(c) 14 Outstanding Real-Life Plans and What You Can Learn from Them to Supercharge [... ]aigns
Powerhouse Marketing Plans(c) 14 Outstanding Real-Life Plans and What You Can Learn from Them to Supercharge [... ]aigns
ISBN: 735621675
EAN: N/A
Year: 2006
Pages: 172

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