Reliance Baking Soda Case Study
TO: DR. MICHAEL PREIS – VICE PRESIDENT OF HUTCH CORPORATIONS
FROM: MAXIMILIAN PAHN – SENIOR CONSULTANT
SUBJECT: EXECUTIVE SUMMARY
1) Since Hutch Corporations is targeting the lower-middle, middle-income range and no specific ethnic group, the two possible locations Dalton and Hinesville seem to be the good match for a new store according to Exhibit 2. Hutch´s target market of women between the ages 18 and 40 years, fits very good to the data that is given about these two cities. As you can see the biggest shares of inhabitants is from the age of 21 to 44. Even the relatively low percentage of women, living in these cities does not …show more content…
Since 73% of our factory shipments were sold to the trade on promotion, RBS should introduce a performance based promotion like a “bonus system” to incentivize customers. This system summarizes all purchases of the retailer and gives a bonus on the next purchase, resulting in more regular purchases and a rising sales volume, assuming 2900 units for the year 2008, due to a high brand awareness and recognition. Regular promotions, comparable to an every-day-low-price strategy would not incentivize customers, leading to lower sales volumes.
c) As seen in the consumer survey from 2006, 40% of heavy users respectively 50% of light users could not recall the price paid for their last baking soda purchase; we can assume that consumers are not very price sensitive. Furthermore RBS is only purchased few times a year and 80% strongly agreed that baking soda is inexpensive. This gives RBS the opportunity to increase its prices by 5%, resulting in higher gross sales and a higher profit in the end by assuming that the variable manufacturing cost per case does not change. For the year 2008 we assume that the 1 lb. case will capture 50% of the company’s unit sales and the 8 oz. and 5 lb. will capture the rest by 25% each the new prices for the boxes will be $7.56 (8 oz.), $12.62 (1 lb.), and $56.99 (5 lb.).
Taking all the stated figures into