Section I: Summary of Background and Facts
Reliance Baking Soda was discovered by James Stewart Augusta in 1915. He called it the “miracle compound.” It was founded to serve as a leavening agent in baked goods to let them rise properly. With the invent of self-rising flour and instant cake mixes, baking soda’s original use importance declined. With this decline, Stewart Corporation started promoting baking soda for a myriad of other uses, which include household cleaner, laundry aid, and deodorizer. Reliance baking soda holds a 70% market share. They produce three box sizes, 8oz, 1lb, and 5lbs. The 1lb box holds almost 50% of the sales volume. Reliance has excellent brand awareness and customer loyalty. Stewart Corporation is comprised of four divisions. Reliance Baking Soda (RBS) is in the household division. Anna Regnante was promoted Domestic Brand Director for RBS. She was placed in charge of increasing Reliance’s profit by 10% in 2008. The Household Division is planning to introduce two new product launches in 2008. According to Chris Dale, Managing Director for Stewart’s Household Products Division, they need the incremental profit increase from RBS to “fund the marketing launch expenses for the new products.” (Quelch & Beckham, 2009, p1) Regnante needs to figure out how she can generate the required profit growth for the old-fashioned, mainstay product of baking soda.
Section II: Statement of the core problems
Regnante’s core problem is figuring out what marketing mix to use to increase Reliance Baking Soda’s profit by 10% in 2008. One of the main problems with RBS is the current lack of advertising. Regnante’s predecessor had cut the consumer promotion budget in half. Advertising is a key component in making sure the brand’s product is marketed to its consumers. RBS did not properly advertise the significance for what all baking soda could be used to do, which includes outdoor cleaning, baby care, pet care, and a myriad of other things. RBS had established brand awareness and loyalty with customers; but, they needed to educate the customers and position the brand through advertisements which can give RBS more of a competitive advantage. Decreasing the amount of money allocated towards advertising was not a wise choice, especially, when the company needed to revamp how baking soda was marketed. The trade promotions were effective in moving the product; however, they accounted for around 73% of total sales. This led to the company only selling around 25% of RBS at regular prices, which could be leaving RBS a lot less profitable. The trade was overbuying during the promotional periods, which caused inconsistencies in regular purchasing patterns of the product. Another issue was with the cooperative advertising program. Regnante was concerned that RBS was not getting sufficient advertising in exchange for the trade promotions. In fact, she found that “Advertising trade support for RBS is much lower than our branded competitors.”(Quelch & Beckham, 2009, p.5) RBS also rarely advertised in retail stores, magazines, or television commercials. If RBS was more diverse with advertising, then, they would be able to capture their target audience in other ways.
Section III: Secondary Problems
Reliance Baking Soda lacked in providing different promotional discounts to grocery stores. By not providing promotional discounts for grocery stores, the store managers did not have a creative way to attract customers into the store to purchase baking soda. Grocery store chains thought that the Reliance Baking Soda needed to market their products better because baking soda was a boring product. Reliance Baking Soda does not manufacture for private label brands. Therefore, their market share decreased. This lack of going after the private label market has caused the RBS to lose 5% of its market share to private label brands. Reliance...