Clique Pens Pricing: The Writing Implements Division of U.S. Home
-
Upload
demin-damian-wang -
Category
Business
-
view
81 -
download
2
Transcript of Clique Pens Pricing: The Writing Implements Division of U.S. Home
![Page 1: Clique Pens Pricing: The Writing Implements Division of U.S. Home](https://reader036.fdocuments.net/reader036/viewer/2022083109/58ebbe291a28ab622e8b45e5/html5/thumbnails/1.jpg)
Clique pens case analysis
![Page 2: Clique Pens Pricing: The Writing Implements Division of U.S. Home](https://reader036.fdocuments.net/reader036/viewer/2022083109/58ebbe291a28ab622e8b45e5/html5/thumbnails/2.jpg)
Introduction
• Clique was founded in 1922• Originally produced fountain pens• Switched to ballpoint pens in 1960s • By 1980 Clique was valued at $17
million• Pen industry = No brand loyalty• Gross margins drop from 42% in 2010
to just over 36% in 2012
![Page 3: Clique Pens Pricing: The Writing Implements Division of U.S. Home](https://reader036.fdocuments.net/reader036/viewer/2022083109/58ebbe291a28ab622e8b45e5/html5/thumbnails/3.jpg)
Company objectives
The Clique Pens Writing Division of US Home have experienced a 6% decline in the gross profit margin within 2 years, which made it critical for the president of the company to implement a new plan that could increase gross profits, work with retailers and motivate consumers. The company is confused whether to satisfy the needs of the retailers or the customers.
![Page 4: Clique Pens Pricing: The Writing Implements Division of U.S. Home](https://reader036.fdocuments.net/reader036/viewer/2022083109/58ebbe291a28ab622e8b45e5/html5/thumbnails/4.jpg)
Clique Dilemma• Debate between VP Marketing (Chen) and VP Sales
(McMillan) for use of the MDF• They need to compromise and come to a final decision
to grow Clique's brand equity
Marketing VS Sales
Marketing:
• Consumer oriented MDF• Consumer driven discounts• Price increase• Minimise deals with retailers
Sales:
• Discounts to retailers• MDF used to increase shelf
space• Retailers will no take a price
increase
![Page 5: Clique Pens Pricing: The Writing Implements Division of U.S. Home](https://reader036.fdocuments.net/reader036/viewer/2022083109/58ebbe291a28ab622e8b45e5/html5/thumbnails/5.jpg)
Customers and market demand• Currently 20 billion pens and pencils sold world wide• Good news: digital age did not kill sales• Sales would expected to grow 2% per year
Consumers:
1. Customers are not price sensitive
2. Consumers de not differentiate between products
3. Clique should target retailers
Retailer needs:
1. Quality of Clique products
2. Reliability of service/ Inventory
3. Offer incentives
Competitor analysis:
1. Threat of substitute products
2. Buying power
![Page 6: Clique Pens Pricing: The Writing Implements Division of U.S. Home](https://reader036.fdocuments.net/reader036/viewer/2022083109/58ebbe291a28ab622e8b45e5/html5/thumbnails/6.jpg)
Channels and competitors
• Pens and pencils were sold in many types of retail outlets such as supermarkets, mass retailers,drug stores, warehouse clubs, department stores, and specialty stores.
• Current have 50 major competitors in the market• On average, Clique allocated 15% of its total promotional
budget to advertising, 30% to consumer promotions, and 55% to trade promotions. Clique's competitors used similar allocations.
• Our competitors will continue to work on thin margins, and we'll lose to them. They aren't spending as much on advertising either, so they have a real advantage on us now, and you're proposing that we give them further advantage.
![Page 7: Clique Pens Pricing: The Writing Implements Division of U.S. Home](https://reader036.fdocuments.net/reader036/viewer/2022083109/58ebbe291a28ab622e8b45e5/html5/thumbnails/7.jpg)
Poter's Five Force Analysis
Industry Rivalry:Industry rivalry is at its peak because there are a number of manufacturers who are competing on prices and trade discounts.
Substitute:Since their are very small differences between different brand's products, all these pens or pencils could viewed as a substitute in the industry. Bargaining power of
Buyers:In this industry the bargaining power of the buyer is moderate to high because to sell out their products, a manufacturer needs to offer high trade discounts to retailers to get a shelf space.Both the retailers and consumers have no switching costs to other products which also increase their power.
Bargaining Power of Suppliers:The bargaining power of suppliers is low, because every manufacturer has a unique formula to produce and design the final product. Suppliers are only responsible for providing the raw material, which also has a fixed price in the industry.
Threat of new entrants:It is a mature market, and already have a lot of competitors in the industry, so the threat of new entrants could be ignored.
![Page 8: Clique Pens Pricing: The Writing Implements Division of U.S. Home](https://reader036.fdocuments.net/reader036/viewer/2022083109/58ebbe291a28ab622e8b45e5/html5/thumbnails/8.jpg)
Retailer model one: StapleThe buyer at Staples gets a bonus heavily weighted to his realized gross margin, so discounts off our wholesale are extremely important to him.
Current discounts:• volume allowance 5.5%• warehouse allowance 3%• stocking fee 1.5%• wholesale price $0.94• cost $0.46
Marketing MDF? yse!
Sales MDF? yes!
1. Coorperate with Staple to expand market, increase sales volumes.
2. Give Staple some discount to keep competitive among competitors.
![Page 9: Clique Pens Pricing: The Writing Implements Division of U.S. Home](https://reader036.fdocuments.net/reader036/viewer/2022083109/58ebbe291a28ab622e8b45e5/html5/thumbnails/9.jpg)
Retailer model two: Wal-martThe buyer at Wal-Mart pretty much lives with a set margin, around 35%, but is rewarded for obtaining things that affect cost, like warehouse allowances, roll-back promotions, and center-aisle programs.
If I went to the Wal-Mart buyer with MDF funds, she'd just laugh and tell me to discount our price more.
Marketing MDF? no!
Sales MDF? yes!
Wal-mart already have a great brand image.
All Wal-mart need is profit, profit, profit.
So, we should provide discount, discount, discount!
![Page 10: Clique Pens Pricing: The Writing Implements Division of U.S. Home](https://reader036.fdocuments.net/reader036/viewer/2022083109/58ebbe291a28ab622e8b45e5/html5/thumbnails/10.jpg)
Retailer model three: WalgreensThe buyer at Walgreens has a bonus with a component that rewards dating and payment discounts.
Marketing MDF? may be no!
Sales MDF? yes!
Just last week our Midwestern regional manager had the chance to buy out a competitor at Walgreens if he had had funds available to do so
1. They really care about the discount. So, sales MDF is necessary.
2. Just-in-time.
3. Marketing MDF may help, but they may don't like it.
![Page 11: Clique Pens Pricing: The Writing Implements Division of U.S. Home](https://reader036.fdocuments.net/reader036/viewer/2022083109/58ebbe291a28ab622e8b45e5/html5/thumbnails/11.jpg)
The price waterfall in 2012