Topics: Sales, Retailing, Marketing Pages: 5 (752 words) Published: June 21, 2014
Market Background

100,000 specialty furniture and home furnishing stores, department stores, and mass-merchandise stores in the United States Furniture sales to retail outlets is center on manufacturer’s expositions Manufacturers spend approximately 3.5% of annual sales for advertising of all types Cooperative advertising: cost shared by retailers; newspapers, television, radio Trade advertising: directed toward retailers; brochures, point-of-purchase materials, technical booklets Consumer advertising: shelter magazines

Wood Furniture Industry – Consumer Behavior
Highly cyclical
Consumer spending linked to:
Incidence of new housing starts
Consumer confidence
Disposable personal income
Consumer wants:
More confidence in purchase decision (help to evaluate construction, quality, and price) Narrow selection of styles
Fair return policy
Moderate level of interaction with salesperson – helpful and knowledgeable but not pushy Consumer tendencies:
Associate high price with high quality
Get redecorating ideas or guidance from magazines
Read furniture ads before actually needing furniture
Enjoy buying furniture somewhat or very much
Haverwood Furniture, Inc. Background
Wood furniture manufacturer
Medium- to high-priced items
Bedroom, living room, and dining room furniture
Financial standing
2008 contribution margin will be 20%
Company objective of 5% net profit margin before taxes
Company policy of spending ≤5% of expected sales for total promotion expenditures Year
Before Tax Profit
Promotional Expenditures (≤5% of sales)


2008 (projected)

1,000 high-quality department stores and independent furniture specialty stores 10 full-time sales people; 2 regional sales managers
Committed to the company
Motivate retail sales-personnel to sell Haverwood line
Assist in setting up in-store displays
Give advice to retailers and their salespeople on a variety of matters related to the Haverwood brand Market Share
Market Definition
Furniture Dollar Sales
Haverwood Furniture Sales
Market Share
Total U.S. Furniture Market
$31 billion
$75 million
U.S. Furniture Sold at Specialty Furniture and Home Furnishing Stores $21.08 billion
$75 million
U.S. Wood Furniture Market
$12.4 billion
$75 million

Haverwood Furniture, Inc. SWOT Analysis
Break-even Analysis
Option 1
Option 2
Option 3

Problem: The amount of funds to be allocated to the promotion budget, and how those funds should be allocated within the budget. Option 1: Increase advertising expenditures by $225,000, all into consumer advertising program for ads in several shelter magazines Increase exposure

Convey quality and styling story to consumers
Increase brand awareness
Enhance company image
Cooperative advertising and trade advertising allowances remain at 2007 levels 2008 Promotional Expenditures ($3.975M)
Sales expense and administration – increase $75,000 ($1,070,500) Cooperative advertising allowance – no change ($1,650,000) Trade advertising – no change ($467,000)
Consumer advertising – increase $225,000 ($787,500)
Option 2: Additional sales representative to service company accounts (50 new accounts being added) Sales expenses and administration costs were expected to rise by $65,000 in 2008 Maintain level of customer (retailer) service that has made Haverwood successful in the past Cost of additional sales rep: $70,000 in 2008

2008 Promotional Expenditures ($3.975M)
Sales expense and administration
Cooperative advertising allowance
Trade advertising
Consumer advertising
Option 3: don’t change?
Industry Market
Household furniture industry (2007 $31B)
Upholstered (50%)
Wood (40% $12.4B)
Dining room suites
2007 industry sales grew 2.5% ($12.098B  $12.4B)
2008 industry...
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