Chapter 13: The Role of Trade Research in Marketing Planning | Powerhouse Marketing Plans(c) 14 Outstanding Real-Life Plans and What You Can Learn from Them to Supercharge [... ]aigns

Overview

Many marketing plans result in strategic programs designed to either obtain new distribution or achieve improved performance in existing retail outlets. Many of the marketing plans in this book have called for increased shelf space for product lines, focused on improved in-store visibility, or been intended to add value to retailer relationships. When these plans call for a change in retailers behavior, it makes sense to identify retailers attitudes toward these changes before they are included in the marketing plan.

You have seen in previous chapters in this book how companies have gone to great lengths to identify consumers attitudes. A similar process can be used to determine trade practices and attitudes. Normally the process includes a series of in-depth face-to-face interviews with retailers. Because these people are generally quite busy, these interviews normally take place in the retailer s office.

These trade interviews can be conducted by the sales force during regularlyscheduled sales calls. For most of the projects discussed in this book, however, trade interviews were conducted through a process outside of the normal sales operations. The interviews were typically conducted by consultants or marketing managers. In some cases top management was included in the interviews. This separate interviewing process was used to emphasize the importance of the meetings and to eliminate any effect of politics related to the ongoing operations.

This chapter provides a marketing plan for the expansion of a line of housewares products in supermarkets. The plan presents research results demonstrating that retailers who have switched to this housewares program have increased their revenues and total profit dollars from housewares sales 59 percent, with a unit volume improvement of 42 percent. There are two reasons for this increase in sales. The first is a distinctive display unit consisting of a series of two-sided rotating towers that provide much more display space than a flat rack wall unit. The second is a cleaver grid system that enables new housewares products to flow through each grid position without the store s having to change any of the information on the item in its computer. This allows for a constant flow of new products, which stimulate impulse sales. The complete marketing plan is included along with financial projections.

This chapter provides an excellent example of how trade research can be used to discover a premise around which an entire marketing plan can be created. By conducting a national series of in-depth interviews with supermarket executives, Zion Housewares Corporation discovered that many supermarkets were interested in taking advantage of impulse opportunities in the housewares category, but were hampered by a lack of available retail shelf space. Based on this research, Zion was able to solve the supermarkets problem by creating the Selecto Housewares Boutique, which doubles the retail space by utilizing rotating racks. In sum, the new displays enable consumers to see something new every time they visit the participating supermarket. Zion was able to significantly increase its sales through supermarkets by providing the consumer with a constantly changing series of alternatives in the housewares category.

Marketing Plan for: Selecto Housewares Boutiques Zion Housewares Corporation ^[1] January 15, 2001

INTRODUCTION

The purpose of this report is to develop a five-year marketing plan for a venture to sell a line of Zion Housewares Corporation s products in major supermarkets throughout the United States. This report is divided into the following sections:

BACKGROUND. This section details the background that led up to the development of this venture and reviews the specific objectives and methodology used in completing the marketing plan.
SUPERMARKET PRACTICES AND ATTITUDES. This section outlines present trade practices, desires, and expectations concerning the housewares category in supermarkets, as well as trade reactions to various marketing alternatives. This section also identifies trade attitudes toward accepting distribution of a Zion Housewares program.
PANEL TEST RESULTS. This section summarizes the results of a panel test in Seattle, Washington, and in Dallas, Texas, of a new Zion Housewares program designed for supermarkets.
CONCLUSIONS. These are key thoughts on opportunities for housewares in supermarkets in general, on the results of the panel test, and on what this means in terms of an overall opportunity for the Zion Housewares Corporation.
FIVE-YEAR MARKETING PLAN. This section presents a specific and detailed action program detailing each step that is necessary to bring this venture from management approval to implementation.
FINANCIAL FORECASTS. This section provides a forecast of the financial opportunity for Zion Housewares Corporation from expanding distribution in supermarkets nationally.

BACKGROUND

A project investigating the national distribution and sales potential for Zion housewares products was started during February 2001. The overall objective of this project was to prepare a marketing plan for the Zion Housewares Corporation aimed at expanding its distribution to national levels. The specifics of this objective were as follows :

DISTRIBUTION POTENTIAL. The number of supermarket organizations throughout the United States that would be both capable of and interested in taking on the Zion line was to be identified.
SALES POTENTIAL. A test market was to be conducted in a group of supermarkets. The purpose of this test was to identify the sales potential per store per week of each item in the Zion housewares line. This information was to be used to forecast the national volume potential of expanded distribution.
MARKETING PLAN. Based on the results of the distribution and sales investigations, a marketing plan was to be developed demonstrating how Zion should expand from a regional to a national level.

The information required to write this report was gathered in five stages. Each stage was designed to provide a systematic understanding of the overall housewares market from the trade s standpoint and to enable the development of specific marketing plans and strategies. The following specific steps were taken:

MARKET REVIEW. The project began with a complete review of the overall market for housewares in supermarkets. This included a review of data within the Zion Housewares Corporation that were pertinent to the preparation of this program. In addition, an exhaustive screening of industry data was conducted.
STORE CHECKS. Store checks were conducted in a representative group of supermarkets throughout the country. During these store checks, the product line carried, the store s breadth of involvement in housewares, and the nature of the store s overall housewares program were identified. Photographs were taken during most of the store checks to provide a permanent record of the stores housewares programs.
TRADE PROBES. Interviews were conducted with key executives in supermarket organizations throughout the United States. Meetings were held with executives at various levels within these organizations, including buyers , the directors of general merchandise, 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 trade interest in a Zion program, as well as the trade s requirements for such a program. In addition to retail executives, food brokers were contacted to identify their interest in participating in a Zion program.
IN-STORE TESTS. An in-store test was conducted in a panel of supermarkets in Seattle, Washington, and in Dallas, Texas. The purpose of this test was to determine the movement of a complete eight- foot section of Zion housewares products in supermarkets. The development of this panel test was completed in five separate steps. The following specific steps were taken:
1. Test organization. Arrangements were made with two major supermarket chains to provide one test store each in Seattle and Dallas. Arrangements were also made with a distributor in each market to handle the store servicing aspects of the test. In each case, the existing eight-foot housewares rack was removed and replaced with the Zion program.
2. Displays. Two eight-foot rotating displays were designed and manufactured for the test stores. These displays included rotating towers within each display to increase the holding capacity. In effect, each display held nearly sixteen feet of housewares in only eight feet of space.
3. Store setup. Arrangements were made for the local distributors , as well as Zion personnel, to properly set up each test store for the experiment. In both cases, the display replaced the store s existing eight-foot housewares program.
4. Test measurement. Each distributor was instructed to perform weekly counts of the merchandise sold off each display. These weekly store counts were transmitted to Zion Housewares Corporation, where the order was pulled and the data were recorded. Zion then produced an invoice delineating the sales of each item on the rack each week. The Zion invoices were used as the basic recording data to tabulate movement reports . The test began in Seattle on November 10, 2000, and in Dallas on December 1, 2000. The tests were concluded on January 15, 2001.
5. Data analysis. The data were formatted in such a way that an analysis of the overall display, of each category within the display, and, finally, of each product within the display could be conducted.
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 Zion to profitably expand to national levels of distribution.

SUPERMARKET PRACTICES AND ATTITUDES

Supermarket chains can be divided into major and minor housewares vendors . Supermarkets that are major vendors have extensive housewares departments. These departments can range from eight feet of space in the store all the way up to over fifty feet. These major housewares vendors often use a number of different housewares suppliers. In some cases these major vendors buy from housewares distributors, while in other cases they buy directly from housewares manufacturers. Supermarkets that are considered to be minor housewares vendors generally limit their housewares selection to pegged housewares. These chains frequently have only one housewares supplier, and this is generally a distributor.
Boxed and pegged housewares are viewed differently by the supermarket channel. Pegged housewares are handled more successfully by supermarkets. Generally, one supplier handles the entire pegged housewares business. This is either a rack jobber or a supplier of a program similar to the current Zion Housewares program. Boxed housewares present a much more difficult problem in the supermarket environment. Space allocation is more difficult, and housewares selection becomes more critical. Most of the dissatisfaction mentioned in the interviews conducted with supermarkets in this study focused on boxed housewares.
Supermarkets compare housewares profits directly with the profits from other nonfood categories in their stores. Major housewares vendors feel that housewares generally outperform many of the other nonfood items in their stores. This justifies the major amount of space they allocate to housewares. Minor housewares vendors feel that housewares provide marginal performance. They find it very difficult to justify expanding the amount of space devoted to housewares. Some of these vendors have eliminated housewares for this reason.
Many supermarket chains have turned housewares over to a distributor rather than handling this category through their warehouse. This is especially true with pegged housewares. These chains allow the distributor or rack jobber to make all of the day-to-day decisions on housewares merchandising . Many of these chains have established a grid system exactly like the one currently used by Zion Housewares. Most programs rotate stock frequently. Both warehoused programs and programs that were handled on a direct-store-delivered basis were found.
Direct-store-delivered programs are almost always fully guaranteed . Most direct-storedelivered programs are handled by rack jobbers, and guaranteed sale terms tend to be standard practice in the rack jobber industry. With a guaranteed sale, any items that don t sell are simply returned to the distributor. The stock in these programs is constantly rotated , and damaged goods are picked up and credited to the store.
Many retailers rejected distribution of the traditional Zion housewares program because they felt that they already had a similar program. A presentation of the concept of taking on Zion Housewares products using the system that Zion Housewares now uses in its existing supermarkets was made to a number of supermarket executives. Many of these people saw the Zion Housewares program as nothing new. They felt that housewares was not a new category for supermarkets. The Zion Housewares system was viewed as already available. Some stores saw Zion Housewares as simply another rack jobber. Other supermarkets saw their programs as being bigger and more sophisticated than Zion Housewares program. A few retailers felt that Zion Housewares was not of interest to them simply because they did not like housewares, period.
A few of the retailers interviewed demonstrated interest in taking on the standard Zion Housewares program. Some of these chains were not familiar with the grid system that Zion Housewares uses, and saw this as something new. These chains saw a possible opportunity to warehouse housewares themselves . Others were dissatisfied with their current housewares programs and saw Zion Housewares as a possible replacement for their existing supplier. Some of the chains interviewed were simply looking for a competitive proposal.
Many of the supermarket chains interviewed would consider discontinuing their existing housewares suppliers if they found a better alternative. A few chains were quite loyal to their long- term suppliers of housewares and other products. Most chains, however, did not feel that their housewares supplier was irreplaceable. For strong enough reasons, most of the supermarket chains interviewed would consider switching suppliers. In some cases, these people were looking for better prices, while in other cases they were looking for improved service. A few retailers indicated that they were always looking for ˜ ˜a better deal.
Many of the supermarket executives interviewed recommended that the product on the current Zion housewares display be tightened. The executives were shown a photograph of the current Zion Housewares display. This was an eight-foot section on pegboard. Most people had a neutral reaction to this display. A header sign was seen as a possible improvement. The negative reactions generally centered around wasted space. These retailers indicated that they do not allow loose displays in their stores. Their other pegged displays look very tight, with the carded products neatly aligned very close to one another. They would expect the housewares supplier to achieve this same tightness.
Most food brokers and distributors were interested in working with Zion Housewares Corporation. The new Zion program was shown to a number of food brokers and distributors that could carry housewares, but currently did not. The distributors saw the Zion system as quite appealing. They felt that the system would enable them to enter the housewares business without having a great deal of experience in the category. Most food brokers do not now carry housewares. These people saw housewares as an incremental business.
Some of the supermarket executives interviewed wanted Zion to provide them with a proposal on a full housewares program. These supermarkets were not loyal to their current supplier. They welcomed the idea of Zion s bidding on their entire housewares department. This bid would be compared to their current situation, and a decision would be made as to whether or not to switch to Zion.
With the current Zion Housewares system, both a warehouse and a direct-store-delivery system must be available to the supermarket. The warehouse facilities of supermarket chains vary considerably across the country. Some chains have a warehouse that is appropriate for distributing housewares. The Zion Housewares system is ideal in this situation. The grid system and product rotating system enable the supermarket to enter the housewares business without a full housewares buying department. Other supermarket chains have inadequate warehouse facilities for a housewares program. Many of these chains have no nonfood warehouses or in some cases, no warehouse at all. For these organizations, a directstore-delivery system must be offered .
Whatever type of direct-store-delivery program is used in the supermarket environment, it must be competitive with rack jobbers. Damaged merchandise must be picked up and credited to the store. Goods must be preticketed with price stickers for each individual chain. Slow-moving items must be rotated out and eliminated from the display. Some form of guaranteed sale must be provided to the supermarket organization.
A system for removing existing housewares when a new Zion housewares program is installed must be provided. Most chains already have a housewares program. In some cases, these housewares are on a guaranteed sale basis. This makes replacement relatively easy, as the supplier simply takes back the housewares. In other cases, the supermarkets own the housewares. In these cases, an arrangement must be made to remove the existing housewares from the store and to provide some form of financial compensation to the retail chain.
Each supermarket chain would test a Zion program in a few stores prior to its implementation chainwide. Most retailers feel that it would be necessary for Zion Housewares to provide them with some data from a traditional test market. In addition, each chain would also want to retest the program in its own stores. These people feel that they must be able to compare the sales in their own stores to the test market data. Because of this, a test should be incorporated into every new sale prospect, and should be considered a standard procedure in entering a new chain.
It was indicated that incentives would be necessary in order to justify initial tests in a new supermarket organization. The supermarket trade views testing as a disruption to normal operations. An expense is incurred, in the form of both labor and paperwork. Free product or a trade allowance is often given to these retailers for tests. Guaranteed profits are also sometimes provided. Zion Housewares must plan on some form of compensation to the trade for initial testing.
Switching housewares suppliers was indicated to be a rather slow process. Supermarket chains generally do not modify all their stores at the same time. First, a new program, such as housewares, is presented to supermarket management. A test in a few stores is then the next step. This is followed by expansion of the program into larger stores. Eventually, the remaining stores are folded in. The entire process of going from zero distribution to the entire chain can take up to a full year.

PANEL TEST RESULTS

A panel test of a new Zion Housewares program was conducted in two large supermarkets. The first supermarket was in Seattle, Washington, and the second store was in Dallas, Texas. A total of eight feet of shelf space was allocated to the test in each store. Existing housewares were removed from that eight-foot section in both stores. A six-spinner display was placed in each store. Each display had approximately 720 housewares items. The inventory value at trade prices was approximately $800 per store. The test ran for nine weeks in Seattle and for six weeks in Dallas.
Supermarket reactions to the Zion tests were quite favorable. Supermarket executives liked the panel test program. The display was the primary ˜ ˜hot button. They liked the way the display looked in their stores, and many favorable comments were received from store personnel as well as from customers shopping in the stores. The display was felt to make the program unique. It was felt that the Zion Housewares ˜ ˜boutique program outsold the stores previous housewares program.
A number of operational problems with the display were identified during the panel test. The six towers were located too close together in the prototype displays. This closeness prevented the towers from rotating properly. Housewares were constantly falling off of the displays, causing the packaging to be ripped and crushed. Restocking by the distributors took far too much time. This display did not have enough holding power because of the short hooks used. This frequently resulted in lost sales because of out-of-stock situations.
A number of solutions to the display difficulties were identified during the panel test. The display concept was considered very important by the supermarket people. They felt that rotating towers would provide maximum use of the store s shelf space. However, they felt that the number of towers should be reduced from six to four. Fewer towers would provide the ability to use longer pegs, which would increase the overall inventory. The bins at the bottom of the towers were felt to be too small, and should be enlarged to, again, improve holding power. The overall expense of the display was found to be high, and should be reduced.
Products did not all sell evenly on the displays in the panel test. In general, there was a fairly steady drop-off from the best-selling products down to the least-selling products. Products were also ranked by unit sales. The ranking of products by unit sales varied considerably from the ranking of products by retail dollar sales. Although there was a similar spread from the best-selling products to the least-selling products in terms of unit sales, the position of the actual products in these rankings differed.
Within each housewares category, the majority of the sales were accounted for by the few top-selling products. Almost a third of the sales of domestic housewares products were generated by the ten top-selling products. The top four imported housewares products generated over a third of the sales within that category. The top two domestic staples represented over 40 percent of the sales in that category. Nearly half of the seasonal goods sold were the top two products.
Sales in the panel test stores varied from one week to another. In Seattle, weekly sales ranged from $492 and $368 on the high side to $138 on the low side. These numbers were partially affected by special situations involving shipping times. Dallas sales were somewhat more consistent.
During the panel test of the Zion Housewares boutique, the average store generated weekly sales of $209.28. The supermarket in Seattle did considerably better, with average weekly sales of $241.79. The store in Dallas generated weekly sales averaging $176.77. The average store generated unit sales of 118 units per week.
The average monthly sales per linear foot was $28. This figure is computed by multiplying the average sales per week of $209.28 by 4.3 weeks, to arrive at sales per month. This figure is then divided by an average of thirty-two feet of linear shelf space, to arrive at $28.12 average monthly sales per linear foot.
The average dollar margin on the products sold in the panel test displays compares favorably with the margin on many other typical supermarket products. The Zion Housewares boutique generated an average dollar volume margin of $11.25 per month. This is higher than the margin on many other supermarket products, such as canned cat food, vitamins, denture adhesives, mouthwash, chewing gum, and shaving cream. Frozen pizza, ready-toeat cereal, and deodorants are examples of supermarket products that generate a higher average dollar margin than the Zion Housewares boutique.

CONCLUSIONS

Broad-scale distribution is not available with the current Zion Housewares program. Housewares in supermarkets are not considered new. Retailers have been exposed to a variety of different programs. The current Zion Housewares program is considered just another housewares program. There were a small number of exceptions to this in various parts of the country; however, the number was not great enough to consider broad-scale distribution opportunities.
A dramatically new program is needed to get the trade interested in a Zion product line. Zion Housewares must differentiate itself from other housewares suppliers. A program is needed that looks totally new, helps solve current trade problems, and gives supermarkets a reason to shift from their current housewares supplier to Zion Housewares. In sum, a revolutionary new approach to marketing housewares is needed.
The boutique display that was used during the panel test did differentiate the Zion program from standard housewares programs. The trade responded quite favorably to the display concept. Supermarket employees believed that it made the housewares department look brand new and improved the look of the stores. The display served as a focal point for the entire program. The trade saw the display as a reason to make a change. This was partly because of the attractiveness of the display. The rotating tower made the Zion Housewares program a unique entry into the supermarket s nonfood business.
The boutique display also enabled the trade to better utilize shelf space. The biggest problem in the supermarket industry is available space. There are constant demands for increased space within the supermarket, and the amount of space is fixed. The Zion Housewares boutique display was seen as a solution to the trade s continuing need to find additional space. The spinners were viewed as literally doubling the amount of available space within that eight-foot section. This extra space utilization provided a powerful motivation for the trade, and should be the basis for a Zion Housewares marketing campaign.
With the right marketing program, Zion has many opportunities for expanded distribution in the supermarket channel. There are a number of potential new customers throughout the United States. Some of these organizations are ready for a new push on housewares with the right program. Others are simply tired of their old supplier. Although many people were not interested in taking on a program that they viewed as the same as the one they already had, many organizations indicated that they would be interested in switching housewares suppliers for an exciting new marketing venture.
The display boutique program included in the panel test demonstrated the potential to become a viable program. The Dallas store averaged $176.77 per week from this program, and the Seattle store averaged $241.79 per week. The trade considered these results to be an improvement over the existing situation. Both supermarket organizations indicated interest in expanding the Zion Housewares program within their chains. The distributors involved in the panel test were also interested in expanding the panel test program.
In developing expansion plans, Zion should plan on a step-by-step sales approach. Taking on a new program is a major decision for a supermarket chain. The initial step is for the buying committee to review proposals submitted by the housewares suppliers. Each new customer would probably require a test prior to broad-scale expansion. This would be followed by gradual expansion within the chain. A somewhat custom approach will be required for each supermarket account.
Food brokers should be included in an effort to gain distribution for the Zion Housewares boutique program. Food brokers are in contact with every major supermarket chain in its respective markets every week. This frequent exposure is ideal for identifying prospects and making initial sales efforts. Brokers also provide ideal follow-up on sales prospects and management of the account once it is sold. Brokers generally have strong credibility with chain management, and their expense is on a variable-cost rather than a fixed-cost basis.
Distributors should be included as part of the overall Zion Housewares boutique program. Zion Housewares Corporation can distribute product to some retail accounts in appropriate geographic areas. Where this is not possible, distributors can perform the same function. Seattle is an excellent example of this, because it would be geographically unwise for Zion Housewares to attempt to service that market. In addition, some retailers will do business only with certain distributors because they do not want additional suppliers coming into their stores. In these cases, it is absolutely necessary for Zion Housewares to use a distributor. The boutique program fits many distributors requirements, and many of them view the Zion Housewares program as incremental business. Finally, distributors can assist in the difficult task of selling in new accounts.
Food brokers can also be used to assist in store servicing. Most large food brokerage organizations have a field servicing force. These people are routinely in every supermarket, either weekly, biweekly, or monthly, depending on the store size . Because of this, brokers can be used to offset distribution gaps. When there is no distributor, product can be shipped directly to stores via UPS. Orders can be taken by broker personnel, and product can be put up on the shelves by store people. This system can enable Zion Housewares to cover those parts of the country that it cannot service itself, or where there is no distributor available.
A substantial profit opportunity exists in each new retail chain account. Many supermarket chains have between 25 and 200 stores in a market. Each store represents potential sales roughly equivalent to the panel test results. Because there are many potential retail chains across the United States, Zion Housewares has a strong opportunity to grow. Growth not only represents improved profitability, but also represents security in broad-scale distribution.
Zion should proceed to implement a housewares boutique program on a national basis. The display should be the centerpiece of the program because of its ability to completely differentiate Zion Housewares from other suppliers. Trade incentives should be built into the prices so that effective merchandising can be achieved. Food brokers should be added to the sales force to help in selling and maintaining the program. Distributors should be included for those accounts in the geographic areas where Zion Housewares cannot service stores itself. A step-by-step rollout plan should be launched that increases the program in manageable bites.

FIVE- YEAR MARKETING PLAN

It is recommended that Zion Housewares Corporation move to launch a national program, using the boutique concept developed for the panel test to sell its products through supermarkets. From the research included in this document, it has been determined that a boutique program offers Zion Housewares the opportunity to increase its share of supermarket distribution by a substantial proportion. It is believed that such a program will help to generate sales on a stable basis. This marketing plan will show that the cost of launching a boutique program would not be prohibitive to Zion Housewares. Finally, it is believed that Zion Housewares could accomplish the launching of a boutique program without any significant disruption of its normal day-to-day operations.
The entire program should be centered around the display concept developed for the panel test. This display differentiates Zion Housewares from other housewares suppliers. It provides the trade with a reason to switch to Zion Housewares, and it improves the housewares department s in-store look. The display also increases the amount of merchandise that can be put in the housewares section. In sum, the display becomes the basis of the sales and marketing campaign.
An eight-foot display with rotating towers is recommended. Towers provide the trade with the perception of space savings. The trade believes that approximately sixteen feet of product can be placed in an eight-foot section with the towers. This is a powerful selling point. The display also looks very unusual within the housewares industry. Four spinners are recommended for each eight-foot section. The recommended budget is $420 per display, with the initial forty displays costing $630 each.
The product line for the boutique program should focus on pegged housewares. All of the product should fit on the rotating display, with bulk housewares being placed in bins at the bottom of each tower. The housewares selection should be made up of the fastest -moving domestic and imported housewares products.
The current Zion merchandising system using a grid should be used on the display boutique. Each location on the display should have a unique slot number. The first row should consist of locations A-1, A-2 . . . A-32, and so on. Each additional row should follow the same pattern. These slot numbers should be included on each package, and also on all order sheets and price sheets. Warehouse slots should use the same numbers.
The Iong-term packaging should include the Zion logo. The eventual goal should be to present Zion Housewares as a manufacturer, rather than a distributor. It is recommended that the packaging eventually be custom made for Zion Housewares. The card sizes should be designed to fit the display, and each card should have the Zion Housewares logo printed on it. This will make the Zion Housewares program stand out, and will simplify the process of selling through distributors.
The products on the boutique should be rotated periodically to keep the display fresh. The core product will remain basically fixed throughout the year. Some product changes should be made each quarter, however. This will cause the consumer to view the Zion Housewares display as a dynamic system. The stores and distributors will not be affected by product changes because of the grid system. Card sizes, pricing, and location numbers will all remain the same. This will mean that no decisions will be required of either the distributor or the trade on an ongoing basis.
Price levels should be increased to include marketing expenditures. Current housewares industry pricing is set at commodity levels. The retailer buys at the lowest possible price, and there is no money left for displays or promotions. Currently, the best supplier is simply the cheapest. It is recommended that the Zion Housewares system offer an alternative. It should be a first-class housewares department for the supermarket that promotes its products just like any other successful nonfood program.
The Zion boutique should offer a superior value, even though the pricing has been increased. Because of the premium display, it is believed that the consumers will perceive the housewares being sold as being of superior quality. Rotating the housewares and promoting them throughout the year will ensure that the feeling of newness will always surround the program. Co-op advertising and publicity will help stimulate this feeling of newness and excitement. The trade will receive higher profits because of the premium pricing. Because of the planned high servicing levels, current labor costs will actually decrease.
It is recommended that the pricing be simplified from that of the normal housewares industry. The base price should include all of Zion Housewares costs and profit requirements. All marketing expenditures should be added to this base price. Fixed expenses, such as displays and introductory allowances, should be designed to be paid off within a one-year period. It is recommended that all products carry the same margin. This means that the distributor would generally get a 35 percent profit margin on every product in the line. Similarly, retailers would generally get a 40 percent margin on all products throughout the line. This means that the entire display will carry the same margins.
Retail pricing on the Zion boutique program will be higher than on the current system. The current housewares industry does not include marketing expenditures in its pricing. The new system will build in a total marketing campaign. The trade will be provided with advertising, promotion, and displays. Funds will be provided for a national sales force through food brokers. Because of this, the consumer price will be inflated slightly. This should not affect impulse purchases, and we do not believe that it will affect Zion s net factory sales.
The name ˜ ˜Selecto Housewares Boutique is recommended for the program. It is recommended that the Selecto name be legally registered as a trademark. This will result in Zion Housewares Corporation s legally owning the name. The name should then be used as a consumer brand name. This means that the name will be featured prominently on display headers, and eventually on all packaging. The name will also be used in all consumer advertising, promotion, and other publicity. All sales brochures and other trade communication devices will also use this registered trademark.
Trade promotion is recommended to enhance distribution. Trade promotion is customary in the supermarket industry. Introductory allowances on new programs help to offset the initial cost to the trade of taking on a new program. Advertising allowances permit trade participation in promoting new brands. Trade promotion makes Zion Housewares competitive with other suppliers of nonfood products to supermarkets. This maximizes the overall distribution opportunities for Zion Housewares.
It is recommended that distribution be opened up with a sell-in allowance in the form of free goods to the trade. The purpose of this allowance will be to help get initial distribution. This allowance will be used in lieu of buying back the trade s current inventory. The allowance will also help reduce the costs to the trade of changing housewares programs. Giving the trade free goods could provide a value to the trade at retail prices equal to twice the cost to Zion Housewares Corporation.
Consumer promotion should be part of the sales program for the Zion Housewares boutique. A full calendar should be laid out for the trade at the time of the sell-in presentation. Each quarter should have a new promotion. This will include on-pack coupons , dump bins with special promotional products, and special features on the display itself. Point-of-purchase material should also be used to flag promotions. Finally, these promotions should be featured in co-op ad slicks given to the trade along with advertising money.
The advertising should consist primarily of a co-op program. It is recommended that 5 percent of sales be accrued as a market development fund for each market the program is in. This money will be used to pay for the advertising. The trade will be provided with ad slicks outlining what Zion Housewares wants the trade to say in that advertising. Quarterly allowances will be paid to the trade to run these advertisements based upon the 5 percent accrued money. It is recommended that this advertising be tied in to the consumer promotion.
A public relations campaign to boost the advertising is recommended. Zion Housewares should become part of a national publicity tour launched on the subject of nonfood products in supermarkets. The Zion Housewares boutique would be used as an example of a new nonfood product in the supermarket. This will provide exposure on television, on radio, and in print. Tapes and reprints of articles will be given to the trade. The consumer exposure will help sell product at the store level, while trade exposure will help generate interest in taking on the program in distribution.
A variety of distribution systems will be required for the boutique program. In some cases, it will be appropriate for Zion Housewares to distribute the product to stores the way it currently does. In other cases, a local rack jobber will be required. In many areas the use of a UPS system will be required. In this case, orders will be taken by local food brokers, and then distributors will ship the orders directly to the store via UPS. The final alternative will be chain warehouses, which will be necessary in some areas.
A network of food brokers will be required. The food brokers will help Zion Housewares to gain initial distribution. They will also help broaden distribution on an ongoing basis. The brokers will present quarterly marketing programs to chain management, and will oversee the program in each store. The brokers will be paid a 5 percent commission for this service. In some cases, brokers will take orders at the store level, and will be paid an additional fee by the distributor for doing this.
A separate sales organization is recommended for the boutique program. A network of twenty food brokers will be required to roll the program out. They will service eighty headquarters locations and two thousand retail stores. All of this will be pulled through approximately ten regional distributors. This will require a separate sales function.
Two additional people will be required to manage the expanded boutique program. After the program is launched, a national sales manager will be required, who will maintain constant sales supervision for the program. We envision the sales manager s being assisted by a marketing assistant, who will provide internal coordination of the program.
A formal sell-in presentation to launch the program is planned. Replacing eight feet of instore space is an important event to the supermarket trade. Several retail executives within each chain will have to approve the decision, and, in some cases, the approval of the entire buying committee will be needed. Because of this, a formal presentation to launch the program is recommended. This presentation should dramatically explain the benefits of the program. It should place proper emphasis on the importance of the program, and it should demonstrate all of the benefits.
Sales literature will be required as part of the sell-in presentation. The development of a four-page brochure to describe the program is recommended. The brochure should also include a picture of the display that will be used. Price sheets will be part of this package. The package will also include the promotional calendar and the initial advertising slicks, coupons, and so on. The trade will keep this package after the formal presentation has been concluded.
Activities should be started now to ensure that the program can be launched into the first rollout markets by April 1, 2001. It is recommended that the program be started with forty stores on 4/1/01. In order to accomplish this, it will be necessary to begin broker meetings in February. The other key dates recommended for the program include the following:

Launch publicity and initial promotion on 4/11/01, begin expanded sales campaign 5/2/01, and begin second rollout 7/1/01.

FINANCIAL FORECASTS

It is forecasted that the Selecto Housewares Boutique program will eventually receive distribution in a total of 2,000 supermarkets throughout the United States. This would be 4.7 percent of all supermarkets and would represent 7.3 percent of the over $12 million a year stores and 3.5 percent of the $8 to $11.9 million a year stores.
Based on the panel test results, it is believed that the new boutique will eventually achieve total annual retail sales of $21.3 million. This assumes that the $12 million and over stores will continue to do $242 per store per week in retail sales. Similarly, this assumes that the $8 to $11.9 million stores will continue to do $177 per store per week in retail sales. This means that in the total 2,000 stores forecast, overall sales will be $410,000 in sales per week and $21,320,000 in annual sales.
When the program is fully rolled out to national levels, a net profit before tax on an annual basis of $1,922,000 is forecasted. The going-year assumptions include a retail margin of 40 percent of retail sales and a distributor margin of 35 percent of trade sales. This would generate gross sales at factory of $8,477,000. As will be outlined shortly, the pricing recommended will result in a cost of goods of 59.25 percent. This will generate a gross profit annually of $3,454,000. Assuming 18 percent for marketing, this will generate 22.75 percent for profit, or $1,922,000.
An annual budget of $175,000 is recommended for the sales administration expense. This assumes a salary level of $60,000 for the sales manager and a $30,000 salary for a marketing assistant. A 50 percent overhead factor is assumed for office and other expenses, and $40,000 a year for travel expenses is also assumed.
Using the Dallas test store as an example, it is assumed that the total inventory on the boutique display of 719 items will have a trade value of $807.47. It is recognized that this will be adjusted when the display is modified; however, this inventory level will provide an excellent vehicle for developing pipeline cost assumptions.
Based on an assumed inventory value of $807.47 at trade cost, it is envisioned that the total inventory for all 2,000 displays will be $1,614,940. In addition, it is envisioned that there will be a warehouse inventory at distributors of 50 percent of this value, or $807,470. This will result in total net factory pipeline sales of $1,574,000 for the Selecto Housewares Boutique.
It is recommended that the cost of goods be calculated based on a price that will yield Zion an ongoing profit after the first year of 12.45 percent of net sales. If the program were to be rolled out in 300 stores over a one-year period, this would generate sales of $841,000 during the first half of the year because of pipeline sales. During the second half of the year, net factory sales will be $636,000, making total sales for the year $1,477,000.
It is recommended that Zion Housewares begin by budgeting a profit for this year of $184,000, or 12.45 percent. This profit will be less during the first half of the year than it will for the second half of the year. Displays and introductory allowances will all be taken during the first half of the year. Other marketing expenses will be a fixed percentage of sales. This means that the total expenses for the first half of the year will be $315,000, leaving $498,000 for cost of goods. Similar calculations for the second half result in cost of goods being $377,000, or, in each case, 59.25 percent. It is felt that the pricing should be set to build advertising and other marketing expenses above cost of goods to generate a net profit at the end of the first year of 12.45 percent.

^[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.