©2008 by Alexander Chernev. Professor Alexander Chernev (Kellogg School of Management, Northwestern University) prepared this case solely as the basis for class discussion. This case is not intended to serve as an endorsement, source of primary data, or an illustration of effective or ineffective management. The data presented in this case have been modified and should not be used beyond the scope of a case discussion. To request permission to reproduce materials, e-mail firstname.lastname@example.org. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without a written permission of the author. Rev. 4/1/2012 Case 0845 ALEXANDER CHERNEV
Calyx Flowers: Managing Profitable Growth
ohn Gilbert, President and CEO of the Vermont Teddy Bear Company, was reviewing a report prepared by his marketing team. The report indicated that the financial performance of one of its subsidiaries, Calyx Flowers, had not reached its full potential despite gross margins of nearly 50%. To address the issue, the report identified several alternative action plans designed to improve Calyx Flowers’ financial performance.
The Vermont Teddy Bear Company
The Vermont Teddy Bear Company was founded in 1981 on the premise of providing their customers with “the best possible experience when they choose to send a gift to someone they care about.”1 In 2008, Vermont Teddy Bear’s operations included four business units: BearGram, PajamaGram, and TastyGram gift delivery services, and Calyx Flowers.
The BearGram service involves sending personalized teddy bears for special occasions such as birthdays, anniversaries, weddings, and the birth of a baby, as well as holidays such as Valentine's Day, Christmas, and Mother's Day. Vermont Teddy Bear positioned its BearGram gift delivery service as a "creative alternative to flowers." Teddy bears are offered in a variety of sizes and colors, and buyers may choose from approximately 156 different teddy bear outfits to customize the gift. Orders are placed by calling 1-800-829-BEAR or online at vermontteddybear. com. The Bear-Gram gift delivery service is promoted primarily using direct response radio advertising, print advertisements, and nearly 2 million catalogs mailed primarily to Bear-Gram customers. Approximately 66% of BearGram gifts are purchased by men, often at the last minute. For example, the day before Valentine's Day, the company shipped teddy bears at the rate of nearly 4,500 bears an hour, which generated nearly $4 million in company sales in one day. The PajamaGram service, launched in April 2002, provides customers with a convenient gift chosen from a broad assortment of pajamas, gowns, robes, and spa products. The service is targeted to appeal to female customers in order to broaden the Vermont Teddy Bear Company's predominantly male customer base. PajamaGram gifts can be ordered by calling 1-800-GIVE-PJS or ordered online at pajamagram.com.
The TastyGram service, launched in October 2002, offers a variety of regional food specialties such as New York Carnegie Deli Cheesecake and Gino's Chicago Deep Dish Pizza. Customer orders are processed and forwarded electronically via the Internet to the supplier. The supplier then prepares the product for shipping, with TastyGram labeling a personalized card. Orders are placed by calling 1-800-82-TASTY or at tastygram.com.
Calyx Flowers, a flower delivery service that ships fresh flowers direct from the growers, was added to Vermont Teddy Bear’s portfolio of services in September 2003 when it acquired the flower catalog company Calyx and Corolla. This acquisition represented an important component of Vermont Teddy Bear’s growth strategy.
Calyx & Corolla shares our commitment to delivery of unique, top quality gifts. With the addition of exquisite Calyx & Corolla flowers to our product line, we can now offer a...
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