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Reliance Baking Soda: Optimizing Promotional Spending Case Solution
Anna recently was promoted from Stewart’s house hold division to domestic brand director for reliance baking soda. She, as brand director, is provided target to increase profit by 10%. In order to do that, she has to take many steps, like increasing advertising budget to create a pull. This step will also help in getting rid of inventories. In addition to that, she will have to increase consumer promotion and cut budget for trade promotion as trade promotions are long term activities. She will have to decrease the amount of product and might have to increase prices to catch up with the target provided.
Following questions are answered in this case study solution
What are the strengths and weaknesses of the RBS brand?
Analyze the effectiveness of past RBS consumer and trade promotional events. How have the promotions strategies impacted sales volumes? What kind of return on investment is the company getting for consumer promotions and trade promotions?
Compare the relative merits of a push vs. pull strategy of the marketing of a low-involvement (low price) grocery item in a mature market setting.
What is your recommendation for how Regnante can achieve her 2008 profit target? What if any changes should be made to trade and consumer promotions to make them more effective? Develop a pro forma income statement (see template in Case Exhibit 10) and be prepared to address the long-term strategic implications of your decisions.
Case Analysis for Reliance Baking Soda: Optimizing Promotional Spending
1. What are the strengths and weaknesses of the RBS brand?
RBS baking soda is a market leader within it category capturing 70% of the market share. It’s a multipurpose brand with consumer using it for different purposes. In addition to that, RBS is an established brand while there are few competitors within this category. Consumer survey showed that RBS has excellent brand awareness and loyalty. Not only these, RBS is backed up with strong distribution capabilities penetrating 90% of grocery stores, 85% warehouse and 80% drug store. RBS distribution consists of strong and motivated sales force. RBS marketing department responded to changes in the market and focused on new uses for top of mind recall. Addition to that, there were many other steps taken to ensure the sales of their product like offering discounts, free cases with a minimum purchase order.
On the other hand, RBS has faced with the problem on the increase in price for last 3 years, which increased the price for the product. This price increase is alarming, and Stewart will have to look ways to reduce cost. Addition to that, because of RBS being multipurpose its facing an increase in the competition, RBS already lost 5% of its market share to private label brands. Cost of production is rising while; private label brands are competing on lower cost. Addition to that too much consumer promotion led to increase in the inventor at market.
2. Analyze the effectiveness of past RBS consumer and trade promotional events. How have the promotions strategies impacted sales volumes? What kind of return on investment is the company getting for consumer promotions and trade promotions?
RBS has been active and aggressive in consumer promotion since last three years. Reason being, it has realized the importance of these activities due to rising competition. Because of such activities, RBS has gained lots, and it has become a strong brand with widespread penetration. With the success of these activities, RBS can proudly state that it is the market leader capturing 70% of market share. These consumer promotional events brought consumer loyalty, and it has taught consumer with different uses of RBS. As a result of that, this product moved in different categories and became multipurpose. Within its trade promotions, discounts are given on big orders; this motivates the procurement and retailers to buy more as they can get more profits.
A glimpse over the effectiveness of these trade promotions suggests that, these activities are successful and worked for RBS. Exhibit 8 provides a success story of trade promotion. These trade promotion activities have increased trade participation dramatically for last three years. The average trade participation activities, for example, for a 8oz box have increased to an average of 79% as compare to an average of 62% for 2003-2004. Because of such increase in trade participation there is an increase in the overall contribution. There are some losses in 8oz box, but overall these promotions led to positive contributions.
As a result of these efforts, RBS has a strong brand loyalty and has attained a position of market leader. This caused increase in demand or the pull and, as a result, increased overall contribution. These activities like consumer promotion have increased brand awareness, but not recall. While, promotion activities are quite successful and increased trade participation. These have brought a return in monetary as well as non monetary form like positive brand image etc.
3. Compare the relative merits of a push vs. pull strategy of the marketing of a low-involvement (low price) grocery item in a mature market setting.
Push and Pull strategies have their own merits and both of them can be a powerful marketing tool. In case of RBS both of these strategies were used and both of them have a positive effect on brand. Pull strategy in case of RBS has brought in an increase, in loyalty and taught consumers, the different uses of this brand. Because of pull consumer become aware of brand and its uses, so, it increased its sales and made it multipurpose brand for the customers. As a result of these activities, RBS became a market leader taking on about 70% of the market share. However, RBS has been changing the essence of brand from time to time, and it’s deviated from concept of brand as a single idea, and because of that brand there is a lower recall for the brand.
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