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ALLROUND BRANDS MARKETING PLAN YEARS 10-12 The continuing legend of a resurrected company lies within. What the future holds is uncertain, but the plan to get there is not

Loren Bronczyk, Matt Latham, Sarah O’Dell, Stacy Sorensen

TABLE OFCONTENTS EXECUTIVE SUMMARY ......................................................................... ERROR! BOOKMARK NOT DEFINED. SITUATION ANALYSIS ........................................................................... ERROR! BOOKMARK NOT DEFINED. KEY STATISTICS .................................................................................. ERROR! BOOKMARK NOT DEFINED. INDUSTRY ANALYSIS ............................................................................ ERROR! BOOKMARK NOT DEFINED. CHANNEL ANALYSIS ............................................................................ ERROR! BOOKMARK NOT DEFINED. IMPLICATIONS FOR NEXT TWO YEARS ....................................................... ERROR! BOOKMARK NOT DEFINED. MARKET DEMAND .............................................................................. ERROR! BOOKMARK NOT DEFINED. PRICE COMPARISON ............................................................................ ERROR! BOOKMARK NOT DEFINED. KEY MARKET INFORMATION ................................................................. ERROR! BOOKMARK NOT DEFINED. PERCEPTUAL MAPS ............................................................................. ERROR! BOOKMARK NOT DEFINED. SWOT ANALYSIS ............................................................................... ERROR! BOOKMARK NOT DEFINED. GOALS/OBJECTIVES ............................................................................ ERROR! BOOKMARK NOT DEFINED. MARKETING STRATEGY ........................................................................ ERROR! BOOKMARK NOT DEFINED. MARKETING MIX STRATEGY .................................................................. ERROR! BOOKMARK NOT DEFINED. IMPLEMENTATION .............................................................................. ERROR! BOOKMARK NOT DEFINED. MARKETING BUDGET AND PROJECTIONS .................................................. ERROR! BOOKMARK NOT DEFINED. KEY STATISTICS ............................................................................... ERROR! BOOKMARK NOT DEFINED. BUDGET FOR YEAR 11 ...................................................................... ERROR! BOOKMARK NOT DEFINED. BUDGET FOR YEAR 12 ...................................................................... ERROR! BOOKMARK NOT DEFINED. PERFORMANCE EVALUATION – MARKETING METRICS ................................. ERROR! BOOKMARK NOT DEFINED.

1

Executive Summary From its inception, Allround Brands floundered around as a weak, unfocused manufacturer of a single cold treatment in a combative arena of aggressive competitors. Desperate for outside assistance, a new brand management team was employed and immediately wielded Allround Brands’ arsenal of weapons with proficiency. Under the new team’s command, the end of the first period saw a shift in power like never before and, over time, the marketplace was forced to accept Allround Brands as its master. The warpath was set and the company marched unimpeded towards its goal of market dominance for ten periods while gaining new products and seeing increases in important metrics across the board. The driving force behind this movement is the utilization of Allround Brands’ competitive advantage: its leading position in market share, brand awareness, and higher-than average customer satisfaction. These important numbers formed an impenetrable wall around Allround Brands’ profits. Try after try of competitors attempts to scale these walls were thwarted by the disadvantageous forces of the industry and the company’s direct intervention. At the end of period 10, these walls have been built up to the point that it would take a disaster of unfathomable magnitude to bring them down. The future of this marketing machine remains uncertain, but its plans have been set and detailed in the pages to come. The most obvious part of the plan is to continue aggressive growth on a scale most likened to Alexander the Great’s far reaching empire. This growth can only be fueled by market penetration, market development, product line extensions, or diversification. Given these options, the brand management team performed an analysis that will be outlined herein and decided to continue market penetration while introducing a new product to be positioned as a children’s cold medication. Doing so will mark the acquisition of the final, currently untapped sector of the familiar cold product category. With these lands under control, Allround Brands will have to seek growth in foreign lands—countries that still have a market to takeover—so an analysis of the most profitable nations is set to be conducted. Supporting the feasibility of this grand plan, financial projections have been included and everything checks out. Come this time two years from now, Allround Brands will have expanded its conquest, know which market is ripe for the picking, and be prepared to launch an invasion.

2

SITUATION ANALYSIS Current Performance Review

1) The following segments are currently being targeted: Allround - Cold Young Singles Young Families Mature Families Empty Nesters Retired

Allround+ - Cold X

X X

X X

X

Allright–Cold/Nasal X

X X

Table 1

Allround 

Allroundstarted by targeting young families and mature families in the cold product category o At the start of period 6, however, the realization was made that Allroundhad potential to be a leader in the retired segment, so it was added to Allround’s focus

Allround+ 



At the inception of Allround+ in period 4, the mistake was made of straying from Allround Brand’s core-competency in the cold product category and labeling it as an allergy medication o Correcting this, Allround+ was shifted back to the cold product category The targeted segments for Allround+ were determined by the assumed appeal of the formulation to the different segments and by the desire to target the remaining, untargeted segments o It seemed intuitive that young singles, mature families, and empty nesters would prefer a 12hr capsule to avoid the necessity of repeated medication

Allright 

Deciding to stay within the cold product category, the introduction of Allright as a cold nasal product helped to fill out the cold product category and establish AllroundBrands as the leader in that category

2) Our share of cold sales indicates that Allround is the number one product in the cold product category with Allround+ and Allright having larger and equal shares respectively to their direct competition.

3

Figure 1

 

Allround is and has been the market leader for the last ten years Allround + has seen solid growth since its introduction

Figure 2





Allright has demonstratedincredible growth since its introduction, making it tied for the number one spot in the nasal spray market o With the current linear trend, it will be the leader in period 11 Year 10 summary o Allround has a 40% market share in the cold market, Allround+ has a 9.6% market share of the cold market, and Allright has 38.9% of the market share of the nasal spray market o Total market share based on Manufacturers Sales of Allround is 26.5% o Total market share based on Manufacturers Sales of Allround+ is 6.2% o Total market share based on Manufacturers Sales of Allround is 4.2% o Allround Brandsconstitutes 36.9% of the market in Mfr Sales 4

3) The following symptoms and market segments are targeted:  Allround is targeted at the cold market: promising to relieve aches, clear nasal congestion,   

suppresses coughing, and minimize side effects Allround+ is also targeted at the cold market; promising to relieve aches, clear nasal congestion, dry up runny nose, and minimize side effects Allright is targeted at the nasal market; promising to clear nasal congestion, dry up runny nose, minimize side effects We believe that our productsdeliver on these promises. We have made very slight alterations to our Value propositions over time, to reflect what we feel that we accomplish. We do not wish to make major changes, so as to avoid sending mixed messages. However, we do want to be sure that our product does what we say it does.

4) We focus our products in the following ways:  Allround- A cold medicine that will help cure most conditions, but whom is targeted specifically at cold symptoms. We decided to remove alcohol early on in order to reduce side effects so that the product would be more kid friendly.  Allround+ - All the Great benefits of Allround but in a twelve hour capsule form. This is targeted at those who don’t have time to take a dose of the liquid every four hours.  Allright – A cold spray for when the nose is the primary problem, and targeted at those who want a cold spray over the liquid or capsule form. We have captured a large segment of the nasal market in relatively short time, and we hope that we will continue to do so.  We sell our products primarily in grocery and chain drug stores.  In general, we have intended to price our product as a premium brand. Allround and Allround+ are not the most expensive on the market, but are close. We decided to enter the market with a price penetration strategy with the launch of Allright. Thus, Allright is priced comparatively lower than other products, but this has helped us capture a large part of the nasal market.  We have promoted our products with a heavy emphasis on point of purchase expenditures. We have used trials when a product is first launched, but try to reduce that to zero over about two years after launch. We avoid Co-op advertising as we do not believe it benefits our brand. We had heavy coupon use early on, but moved away from that in later years. About 50% of our overall marketing budget went to Advertising, using a premium ad agency. About 30% of our marketing budget went to promotional allowances. The remaining 20% was spent on sales and administration.

5

KEYSTATISTICS Here we have a number of key tables, showing results broken down by product, and with our overall totals for the ten years we have been in business. Sales Revenue ($ in Millions) Year 1 2 3 4 5 6 7 8 9 10

Allround 438.8 461.2 493.1 542.7 595.8 636.8 685.5 723.7 788.6 879.5

Allround+ 24.1 42.0 81.1 111.3 140.6 171.4 206.8

Allright 15.6 37.9 68.3 101.0 138.5

Total 438.8 461.2 493.1 566.8 637.8 733.5 834.8 932.6 1,061.0 1,224.8

Table 2

  

We are seeing good growth in all product areas Our weak point is that so much of our sales is still based on Allround Diversification via more consistent sales across product will help limit any sudden market shocks that could impact Allround

Gross Margin (%) Year 1 2 3 4 5 6 7 8 9 10

Allround 49.1 51.1 50.0 49.0 50.2 50.7 52.5 52.1 52.5 53.8

Allround+ 55.5 56.5 57.0 57.7 57.3 57.6 58.8

Allright 54.4 56.9 56.7 57.0 58.1

Table 3

 

We make the largest % margin on Allround+ and Allright Increasing our sales of Allround+ and Allright will mean higher profits overall, as they have a higher margin % then Allround

6

Gross Profit ($in millions) Year 1 2 3 4 5 6 7 8 9 10

Allround 215.6 235.7 246.5 265.9 298.8 322.7 359.6 377.0 413.8 472.8

Allround+ 13.4 23.8 46.2 64.3 80.6 98.7 121.6

Allright 8.5 21.6 38.7 57.5 80.4

Total 215.6 235.7 246.5 279.3 322.6 377.4 445.5 496.3 570.0 674.8

Table 4

 

Our overall profit is made largely off Allround If we are to continue our strong profit trend, Allround is going to either need to keep growing, or our other products are going to need to see a much larger revenue figure

Marketing expense ($ in millions) Year 1 2 3 4 5 6 7 8 9 10

Allround 26.7 36.5 41.8 43.0 43.6 46.0 45.0 47.0 53.3 60.0

Allround+ 13.1 13.0 18.8 19.0 22.0 25.0 31.0

Allright 14 14.9 19.3 21.0 27.1

Total 26.7 36.5 41.8 56.1 56.6 78.8 78.9 88.3 99.3 118.1

Table 5

 

Marketing expenses are going up, but it’s in line with our increase in revenues More money spent on marketing has seen a solid Return

7

Sales and Admin expense ($ in millions) year 1 2 3 4 5 6 7 8 9 10

Allround 24.2 26.1 28.9 30.9 32.3 34.1 34.5 35.7 38.3 39.9

Allround+ 1.5 2.5 4.8 6.4 7.9 9.5 10.7

Allright 1.1 2.5 4.3 6.4 8.1

Overall 24.2 26.1 28.9 32.4 34.8 40.0 43.4 48.0 54.2 58.8

Table 6

  

Note that specific numbers for Sales and Admin per product are not available. The information provided assumes that the expense is broken up according to the % of units sold. We have has about 20% of our marketing budget go to S & A over the last ten years We believe that our high sales force (both direct and indirect) have helped us gain a dominate position in the market

Net Marketing Contribution ($ in Millions) Year 1 2 3 4 5 6 7 8 9 10

$ 50.9 62.6 70.7 88.5 91.4 118.7 122.3 136.3 153.5 177.0

% 11.6 13.6 14.3 15.6 14.3 16.2 14.7 14.6 14.5 14.4 Table 7

 

Marketing has had a varied initial run Marketing contribution as a % has stabilized over the last 4 periods

8

Market Share (%) Year 1 2 3 4 5 6 7 8 9 10

Allround 23.7 24.1 24.6 25.4 25.3 25.1 25.5 25.4 26.0 26.5

Allround+ 1.1 1.8 3.2 4.1 4.9 5.6 6.2

Allright .6 1.4 2.4 3.3 4.2

Total 23.7 24.1 24.6 26.5 27 29 31 32.8 35 36.9

Table 8



Our products are dominate in the market; overall and by market segment

Customer retention (%) Year 1 2 3 4 5 6 7 8 9 10

Allround 58.2% 64.6% 64.5% 65.9% 65.3% 65.7% 66.1% 66.1% 66.2% 66.6%

Allround+ 53.5% 53.4% 53.5% 54.3% 54.6% 55.3% 55.7%

Allright 46.7% 47.2% 47.5% 48.2% 48.6%

Total 58% 65% 65% 65% 64% 64% 63% 62% 62% 62%

Table 9

  

Total % reflects weighted average based on unit sales Allround is driving our high customer satisfaction level Allround+ and Allright need to have increased customer retention in order to help drive up sales

9

Customer life (years) Year 1 2 3 4 5 6 7 8 9 10

Allround 1.8 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.1 2.1

Allround+ 1.7 1.7 1.7 1.7 1.7 1.7 1.7

Allright 1.4 1.5 1.5 1.5 1.5

Average 1.8 2.0 2.0 1.9 1.8 1.7 1.7 1.7 1.8 1.8

Table 10



We can expect that a customer is going to keep using our product for an average of two years

AcquisitionCosts ($ in millions, % of sales) VsRetention Costs ($ in millions, % of sales) – this table shows how much money we spend per year to acquire new customers, and how much we spend per year to retain existing customers. It is worth noting that normally it is expected to cost about five times as much to acquire a new customer as to retain an existing customer. The data suggests that we are more interested in retaining customers, and thus, our dominate market position, than growing our market base. Year

Acquisition Cost $ 14.9 18.0 29.4 29.5 46.8 37.1 38.7 41.5 50.4 50.4

1 2 3 4 5 6 7 8 9 10

Acquisition Cost as % of sales 3% 4% 6% 5% 7% 5% 5% 4% 5% 4%

Retention Costs $ 21.6 23.8 26.7 27.2 32.0 41.9 49.6 57.8 67.7 67.7

Retention Costs as % of sales 5% 5% 5% 5% 5% 6% 6% 6% 6% 6%

Table 11

Strategic Implications    

The breakdown of the marketing budget has been very effective Our company is showing solid growth Revenues and profits are both increasing More money is spent on retaining customers than acquiring new ones, which has been effective

10

INDUSTRY ANALYSIS Explanation (all answers are relative to Allround Brands) Threat of New Entrants

Threat of Substitutes

Threat of Consumer Buying Power

Threat of Distributors’ Buying Power Threat of Supplier Power Threat of Rivalry

Product Life Cycle Position

Overall Attractiveness

Low 

Efficiencies from economies of scale reduce competitive advantage possibility of new entrants  High startup capital isrequired  Partial saturation of the market already Moderate  Those affected by colds can seek alternative treatments  There are many prescription drugs available Low  Consumers have the unimpeded ability to buy whatever cold medication they want  Allround Brands’ exceptionally high customer satisfaction tends to create customers who prefer Allround Brands Low  Distributors depend of Allround Brands to fill their shelves  Allround Brands’ products are demanded by consumers Low  Suppliers produce commodity chemicals and sell at near competitive- parity Moderate  There are many successful companies in the industry  Having the highest market share, customer satisfaction, and brand awareness reduces this threat Growing  Constant levels of about 8% growth per year  This is expected to diminish in the near future as the industry starts to enter the mature phase High 

Because the market is still growing and all the threats are low or moderate, the industry Is highly attractive Table 12

11

CHANNEL ANALYSIS Channel Distributions for Allround Brands 35.0% 30.0% Indep Drug

25.0%

Chain Drug 20.0%

Grocery

15.0%

Convenience

10.0%

Mass Merch Wholesalers

5.0% 0.0% Allround

Allround+

Allright

Figure 3

   





Channel Analysis reveals that most of our sales are to Chain Drug, Grocery, and Wholesalers. Convenience and independent drug stores are probably not worth investing much capital in. Mass merchants are worth some investment, but focus should stay on the big three. Sales force should be highly focused on both Grocery Channels and Wholesalers, as well as supporting any needs they might have. We should plan on putting about 65% of our personnel budget into these areas. Chain Drugstores and Mass Merchants should not be neglected, as they make up a total of about 30% of our buyers; so about 30% of our personal budget should be devoted to this channel. Promotions by channel should be determined by who we sell to. Thus, about 30% of our Allround sales come from Grocery, so about 30% of the promotional budget should go to Grocery, in so far as dollars can be distributed via channel

12

IMPLICATIONS FOR NEXT TWO YEARS  

Average growth rate for over the last 10 years is 8.64% overall Average growth rate for over the last 10 years for the cold industry is 9.7%

   

Average growth rate for over the last 10 years for the cough industry is 3.0% Average growth rate for over the last 10 years for the allergy industry is 8.6% Average growth rate for over the last 10 years for the nasal industry is 11.9% Growth last year was over 10% for grocery, and over 9% for mass merchant and independent drug Keepa focus on Grocery, chain Drug and Wholesalers for the next two years. This is consistent with our current strategy.

  



Ignore Convenience and Independent Drug stores for next two years, then revisit data The nasal industry has the largest growing market segment. Keep our nasal product (Allright) in a dominate pos...