Let’s Go Aero Travel Trailers: A Case for Incorporating the New Model of the Organization into the Teaching of Budgeting Sally Wright University of Massachusetts-Boston
Let’s Go Aero manufactures travel trailers bought primarily by young families and retirees interested in a light, low-cost trailer that can easily be pulled by a mid-sized family car. The market for travel trailers has expanded nicely over the past few years due to the number of families seeking a relatively low-cost, outdoor vacation experience. But in the view of Let’s Go Aero’s president, Mark Newman, the real growth in the future is in the retiree market. Newman believes the vigorous health of the average retiree, coupled with the national trend toward a return to nature, will translate into continuing sales growth for Let’s Go. As Newman loves to say, “camping recently moved from number seven to number six on the list of top 10 leisure activities in the United States, and the baby boomers are getting older every day.”
U.S. population. According to the U.S. Census Bureau, in 2006 baby boomers represented 26% of the populace. In that year there were just under 78 million boomers living in the United States, with the largest populations living in California, Texas, New York, Florida, and Pennsylvania. Research indicates that for an organization to meet the needs of the senior market, including baby boomers, the following must be addressed: Independence and control, • Intellectual stimulation and self-expression, • Security and peace of mind, • Quality and value. •
Seniors respond to benefit-driven messages; to attract them, advertising has to communicate tangible benefits rather than features and amenities.
THE RETIREE MARKET
Baby boomers (born between 1/1/46 and 12/31/64) carry a lot of consumer clout. According to the National Opinion Research Center at the University of Chicago, 74% of boomers (aged 47—65) own their own home, 46% are satisfied with their financial situation, and 56% are married. The spending power of this demographic is likely to increase. People who are 50 years old and older are expected to inherit an estimated $14 to $20 trillion dollars during the next twenty years. Also, baby boomers make up a significant part of the total IM A ED U C ATIO NA L C A S E JOURNAL
MARKETING AND SALES
The forecasted increase in Let’s Go’s sales can be seen in the company’s sales projections presented in Exhibit 1 (actual for the years 2005 through 2010 and projected for the years 2011 through 2015). Although the weather can have a significant impact on the travel trailer industry (i.e., hurricane season, flooding, and even droughts have had negative effects on the sales and rentals of travel trailers), Let’s Go’s management believes these problems will be mitigated in the future by global warming. All sales projections are done by Mark Newman in his role as Let’s Go’s president. 1
VOL. 4, N O. 1, ART. 3, MARCH 2011
To keep from losing sales, the company maintains finished goods inventory on hand at the end of each month equal to 300 trailers plus 20% of the next month’s sales. The finished goods inventory on December 31, 2010, was budgeted to be 1,000 trailers. Jim West, Let’s Go’s vice president of marketing and sales, would rather see a minimum finished goods inventory of no less than 1,500 trailers. Jim refuses to talk to Tom Sloan, Let’s Go’s production manager. Tom is always trying to get Jim to consider adopting flexible inventory levels, which Jim is certain would affect his yearly bonus. The vice president of sales and marketing is eligible for a 20% bonus based on sales. Unfortunately, Jim did not receive a bonus in 2010. Sales were up, but Mark refused to give Jim the bonus, although it was earned, due to the high number of customer complaints. Jim was really steamed when he heard “no bonus.” Didn’t Mark know those complaints were for poor quality? All of Jim’s efforts to grow sales...