Haverwood Furniture Case Notes - Group PDF

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MAR 499 Markovitz Advanced Marketing Management Fall 2020...

Description

Tentative 2008 ad program proposal: ● Increase ad expenditure by $225,000 ○ Put entire amount into consumer ad program ● Sales historically follow industry sales almost perfectly ○ Prediction of 4% increase for 2008 - despite stock market collapse last fall Rationale for putting more into consumer ad: ● Increase brand awareness + enhance image i.e. quality of furniture ● As baby boomers age they replace older cheaper furniture w/ more expensive longlasting pieces ○ Baby boomers make up 47% of all US household ● Contribution margin will fall to 20% due to rising material costs Develop a well thought out recommendation on the issues and a step by step description of the logic used to arrive at that recommendation. Company: ● Manufacturer of medium to high priced wood bedroom, living room, and dining room furniture. ● Formed in early 1900s by Charlton Bates’ great grandfather ○ Family business - took over for his father ● Year end net sales in 2007 = $75mil w/a before tax profit of $3.7mil ● Sell through 1,000 high quality department stores and independent furniture specialty stores nationwide ( all stores do not carry company’s entire line) ○ Company is very selective in choosing retail outlets ■ “Retailers should mirror the high quality of our products” ■ Does not sell to chain stores or discount outlets ● Employs 10 highly regarded full time sales reps and 2 regional sales managers ○ Base salary + small commission on sales ○ Different from industry standard but is positive as (household furniture)competition for retail floor space requires more support ○ Highly regarded in terms of furniture knowledge and willingness to work with buyers and retail sales personnel ○ Bates think call frequency of sales reps should be increased to push the haverwood furniture line more - retail accounts not carrying the complete furniture line ● In 2008 merged with Lea-Meadows inc - manufacturer of upholstered furniture for living + family rooms ○ Smooth merger - two firms able to maintain autonomy and filled a gap in the haverwood product mix (retained its own identity and brand names) Do we give the upholstery line of chairs/sofas to the sales force or continue using sales agents? Lea-Meadows inc:

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Small privately owned upholstery furniture manufacturer More than 75 years old High quality Employs 15 sales agents to represent its products (they also represent several manufacturers of noncompeting furniture/home furnishing) ○ Agents get 5% of net company sales ○ Agents only spend 10-15% of their instore time on Lea-Meadows products Still do not sell to discount houses - specially furniture and department stores only

Household Furniture Industry: ● Household furniture industry divided into: upholstered (50%), wood (40%), and other (10%) i.e. ready-to-assemble and casual furniture ● Industry sales in 2007 estimated to be $31billion @ manufactures’ prices ● Exports are not a major factor in us household wood furniture industry ● US Outsource furniture manufacturing ● Consumer spending closely linked to new housing starts, consumer confidence and disposable personal income ○ Wood furniture expensive and often sold in sets ● Consumer feel they enjoy furniture shopping but lack the confidence in their furniture knowledge i.e. evaluate construction, quality, price ○ Difficult to choose among the styles i.e. worried they will make the wrong choice ○ Difficult for consumers to evaluate the price or quality of furniture - education is needed

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■ AR? Inexperienced furniture consumers base their furniture choice(s) on price ■ 84% of subscribers from better homes and gardens believe “the higher the price the higher the quality” ■ 72% window shop or browse even when they don’t need furniture ■ 85% read furniture ads before they actually need furniture

Distribution: ● Independently owned furniture stores have declined while chain stores have grown ● Web is being used more but worry about cost of shipping returns ○ Gallery concept - showroom ■ Dedicating an amount of storespace to displaying products ■ High percentage of consumers get ideas and buy from gallery style displays...