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EXECUTIVE SUMMARY COMPANY ORIENTATION COMPANY PORTFOLIO ISSUES TREATED PROMOTION OR NO PROMOTION? CANNIBALIZATION BRAND EQUITY EROSION FORWARD BUYING PASS-THROUGH STOCKPILING ENGEL’S LAW GENERAL REASONS TO CONDUCT A SALES PROMOTION PROMOTION FOR WHICH ITEM FINANCIAL ANALYSIS THANK YOU NOTE
Frozen food division (FFD) is the key contributor to Giant Consumer Product's (GCP) profits which have successfully grown over the past 30 years. The company has two main products lines, Italian frozen dinner “ DinardoTM”, and organic frozen foods “Natural mealsTM ”. However, recently FFD has encountered a shortfall in sales volume and gross revenues. Now, Allan Capps the CEO of GCP is hesitant about running a trade sales promotion with retailers. And if so, which brand should the marketing funds be allocated to?
(chief executive officer) Allan Capps disagrees with doing a sales promotion due to several concerns.
President of sales Bryon Flat suggests and supports doing a sales promotion featuring FFD brands on special retailer-instore weekly circular promotions that could generate a short-term sales lift.
General Manager of FFD Mary Davidson has to recommend whether a sales promotion should be launched or not and if so, identify the most item to promote. According to the CF0 (chief financial officer) the return on marketing investment (ROMI) should be greater than 100% or will not be considered profitable. Director of Marketing Mike Sanchez has the control over the two brands DinardoTM and Natural mealTM.
COMPANY’S PORTFOLIO (CONTINUED)
Dinardo’sTM Brand: Generates over $425 million revenues annually. Available in 3 sizes:
D32: inexpensive way to feed a family of four. D16: convenient for 2 people. D6 & D8: single consumers.
Natural mealsTM: Generates $150 million annually. It is an organic frozen food that is low in fat and does not contain any additives or preservatives. It is considered as a healthy meal and available just in one size 16ounce package.
To what extent should the concerns that Capps has raised regarding trade promotions (cannibalization, brand equity erosion, forward-buying, pass-through, and consumer stockpiling) effect the "go" or "no” decision to field a national sales promotion? Do you advise Sanchez to run a national sales promotion? If so, to which one of the items should the funds be allocated? a. Dinardo'sTM 32 -ounce packages b. Dinardo'sTM 16 -ounce packages c. or Natural mealTM
PROMOTION OR NO PROMOTION?
has gathered his team in order to decide whether to go for a national sales promotion or not. Believing that this approach could cheapen the brand, he has outlined several concerns:
Cannibalization: is a phenomenon that results when a firm develops a new product or service that steals business or market share from one or more of its existing products. Thus one product may take sales from another offering in a product line. It is the decreased demand for an existing product that occurs when its vendor releases a new and similar product. Thus, resulting in the reduction in the sales volume revenue or market share of one product as a result of the introduction of a new product by the same producer. ex: if Coca Cola wants to introduce a similar product (ex: Diet coke) this new product takes some of the sales share of the original coke.
this cannot be the case here, Dinardo’s and Natural meals appeal to two different target markets. The former, is an Italian meal prepared from high quality ingredients. The latter, was more favorable for health conscious consumers who seek organic and...
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