Case Solution for Giant Consumer Products
Market Analysis for case of Giant Consumer Products: The Sales Promotion Resource Allocation Decision by Yujun(Monica) Wang, ywang29@nd.edu; Ji(Shirley) Yang, jyang8@nd.edu
Background
As a market leader in frozen food industry, Frozen Foods Division (FFD) of Giant Consumer Product (GCP) has been proved very successful in the past 30 years, with national market share of 43% in the “Italian frozen dinners and entree offerings” subcategory. However in 2008, FFD were in sales trouble. The gross revenue through Aug 2008 was under plan by 3.6% (with the equivalence of about $14.5m) and marketing margin was also under plan by 4.1% (with the equivalence of about $6.5m).
In order to boost the FFD gross revenue as well as its marketing margin, Allan Capps, CEO of GCP is considering the option to field the FFD promotion. His final decision will be based on the recommendation from Mary, general manager of FFD and Sanchez, marketing director of FFD. Allan should make a choice among below 4 options:
1. Promote Dinardo’s 32-ounce packages
2. Promote Dinardo’s 16-ounce packages
3. Promote Natural Meals
4. No promotion
Recommendation and Reasoning
We recommend promoting Natural Meals. But we also need to remind Allan that only promoting Natural Meals still fail to have FFD achieve its 2008 annual plan with $6.5m margin gap. Here are the reasons:
1. Method. The standard of option screening is to make sure that the market margin of any potential option be positive.
Marketing Margin = Revenue – Cost=Incremental Volume Generated by Sales Promotion * Price to Retailer -Direct Expenses1 -Indirect Expenses2 =Marketing Margin Change from promotion-Marketing Margin Change from promotion of other products
Note: 1. Direct Expenses include Promotional Allowance, COGS and Distribution. 2. Indirect Expenses refer to Cannibalization Cost
2. Data. We use past sales and expenses data (Exhibit 1&4) to estimate the marketing margin from promotion for D32, D16 and
Background
As a market leader in frozen food industry, Frozen Foods Division (FFD) of Giant Consumer Product (GCP) has been proved very successful in the past 30 years, with national market share of 43% in the “Italian frozen dinners and entree offerings” subcategory. However in 2008, FFD were in sales trouble. The gross revenue through Aug 2008 was under plan by 3.6% (with the equivalence of about $14.5m) and marketing margin was also under plan by 4.1% (with the equivalence of about $6.5m).
In order to boost the FFD gross revenue as well as its marketing margin, Allan Capps, CEO of GCP is considering the option to field the FFD promotion. His final decision will be based on the recommendation from Mary, general manager of FFD and Sanchez, marketing director of FFD. Allan should make a choice among below 4 options:
1. Promote Dinardo’s 32-ounce packages
2. Promote Dinardo’s 16-ounce packages
3. Promote Natural Meals
4. No promotion
Recommendation and Reasoning
We recommend promoting Natural Meals. But we also need to remind Allan that only promoting Natural Meals still fail to have FFD achieve its 2008 annual plan with $6.5m margin gap. Here are the reasons:
1. Method. The standard of option screening is to make sure that the market margin of any potential option be positive.
Marketing Margin = Revenue – Cost=Incremental Volume Generated by Sales Promotion * Price to Retailer -Direct Expenses1 -Indirect Expenses2 =Marketing Margin Change from promotion-Marketing Margin Change from promotion of other products
Note: 1. Direct Expenses include Promotional Allowance, COGS and Distribution. 2. Indirect Expenses refer to Cannibalization Cost
2. Data. We use past sales and expenses data (Exhibit 1&4) to estimate the marketing margin from promotion for D32, D16 and