In order to remain competitive in the market and increase hot tube sales, Surfside Leisurescapes must address the following. Failure to respond to these critical issues will decrease sales and weaken the quality of the employee workforce. * Seasonality – 78% of hot tub sales occur from April 1st to September 30th. In order to remain profitable overall, sales need to increase during the winter months. * Hydrotherapy – A potential value added service to recommend the therapeutic benefits of hot tubs. Surfside will need to penetrate into this market to increase market share. * No marketing plan - Increased competition – 12 new competitors have entered the market; 3 being direct. A lack of promotional strategy and no target demographic will result in a decreased market share (exhibit 1). Situation Analysis
Surfside Leisurescapes market size is decreasing. This is caused by new entrants entering the market as threat of new entrants is high (exhibit 2). The old grass roots marketing strategy has not been sufficient to deal with the new competition. Seasonality is a large issue, 78% of sales occur during the “on” season (exhibit 4). This issue is compounded because of the difficulty to retain quality salesmen during the “off season”. An unusually cold climate has also negatively affected sales. As a result, potential customers may have bought substitutes such as large jetted bath tubs that aren’t susceptible to climate (exhibit 2). Hydrotherapy is a critical opportunity. This is a new market segment that Surfside has not yet explored. 30% of Newmarket’s population consists of retirees over the age of 55 (City of Toronto, 2005). This represents a major opportunity to target a new demographic. Hydrotherapy can aid high blood pressure, and arthritis, a common concern amongst this age group (Natural Healers, 2006). A further critical issue is Surfside’s lack of marketing experience. Because surfside has had limited competition in the past, their marketing approach has mainly been grass roots. Surfside will have to develop a promotional strategy targeted to their target market demographic. Without a proper marketing strategy past clients will be stolen by the new competition. Surfside’s competitive advantage is that they are well respected and established within their community. They have a highly experienced sales team that is family oriented. This is backed with a Readers Choice award. Surfside’s hot tubs division had sales in 2004 of $749,800. They earned a net profit margin of 7% on this. Industry standard net profit margin is 12% (BizStats, n.d.). Decision Criteria
* Increase sales of hot tubs by 15% for 2005. This is meant to motivate employees by reaching a historically obtainable target. * Increase net profit margin to the industry average of 12% for 2005. Options
Option 1: Hire an additional salesman for the hot tubs division. An additional employee would cost an extra $72,490. This employee would have to sell an addition 23 units to justify his salary. This is an increase of 25% of unit sales (exhibit 5). Much higher than our target to increase sales by 15%. A further risk is that hiring an additional employee would create a competitive selling environment as a large part of their salary is commission based. This strays away from Surfside’s competitive advantage of offering a family friendly environment. Option 2: Hydrotherapy training
To train an employee in hydrotherapy would cost $2,000 for a week course (Natural Healers, 2006). Sales would increase from 10.8% to 20.6% increasing net income 12.9% to 14.6% (exhibit 8). Risks of this option include losing their primary target market and failing to raise awareness of hydrotherapy benefits. Customers would see this as a value added service; increasing customer loyalty. Also, this option addresses employee retention by smoothing sales throughout the year as these customers buy hot tubs for health reasons which are not climate dependant....
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