MEM Company, Inc.

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Issue

How to increase sales of the company¡¦s line of men¡¦s toiletries.

Discussion

Gary Mayer, president of MEM Company Inc. and other MEM executives believed that periodic new product introductions were essential in the men¡¦s toiletries market to maintain consumer and trade interest and to sustain sales growth. It had been over two years since Racquet Club had been introduced in 178. A new brand, tentatively name Cambridge, was under consideration for introduction in 181.




Mayer believed Cambridge would gain sales primarily at the expense of British Sterling and other brands in the $7 to $10 range.

Yet, the level of advertising expenditures which would support a Cambridge introduction was still unresolved. The company¡¦s advertising agency had been asked to develop three media plans for high, medium and low expenditure. Mayer believed that the lowest expenditure level represented the minimum necessary to achieve this 181 target of $ million in factory sales.

Not all MEM executives were enthusiastic about the Cambridge program. Some argued that even the lowest of the media budgets was unaffordable and that the level of advertising needed to launch the new brand could be greatly reduced if the well-known English Leather name was included both on the packages and in the advertising. These executives wished to call the brand ¡§Cambridge by English Leather.¡¨

Other believed that the potential of Racquet Club had not yet been exhausted and that other new product in the medium-price range would be wasteful. They pointed out that Racquet Club¡¦s initial sales were made largely at the expense of Lime, Musk, Timberline, and Wind Drift, because many retailers, especially chain drug buyers, had not been willing to provide additional shelf facings for MEM products.

Some of those who favored a product launch believed that MEM should give first priority to a low-priced brand to penetrate food stores. During 170s, many major food chains merged with or established their own drugstore chains. As a result, their direct buying from men¡¦s toiletries manufacturers increased. Mayer knew that food chains typically stocked only the high-turnover items in a product line and that they pressed for frequent trade deals and year-around national television advertising. He wondered, however, whether the MEM sales force should now attempt to sell to the major food chains, particularly those that emphasized assortment and service rather than low prices. If he proceeded in this direction Mayer wondered which, if any, items in the six existing lines should be offered to the food chains or whether a new brand would be more acceptable.

On December 0, 180, Mayer learned that Shulton was planning to launch its first new brand of men¡¦s toiletries since the introduction of Old Spice in 16. Under the brand name Blue Stratos, and after-shave and cologne would be available for shipment to the trade in March 181, to be followed by a bath soap, stick deodorant, shave cream, and body talc, a 4-ouchce bottle of cologne would carry a suggested retail price of around $10. The advertising would feature the slogan ¡§Unleash the sprit¡¨ and use a hang gliding motif to symbolize the freedom and adventure of the sky. Shulton announced that the Blue Stratos national rollout would be supported by a $1 million communications budget targeted at all men aged 18 to 4.

Recognizing that Blue Stratos was targeted at the same market as Cambridge, Mayer wondered whether he should cancel or delay the Cambridge introduction and commit his entire 181 communications budget to reinforcing the six existing lines.

Alternatives

1. A new brand, named Cambridge, to be introduced in 181.

„U In the medium-price range ($7 to $10).

„U The low expenditure level of advertising expenditures which would support a Cambridge introduction.

. To include well-known English Leather name, both, on the packages and in the advertising. To call the brand ¡§Cambridge by English Leather.

. Commit the entire 181 communications budget to reinforcing the six existing lines.

4. Priority to a low-priced brand to penetrate food stores

Analysis of Alternatives

1. Proceeding with introducing the new brand ¡§Cambridge¡¨ in the medium-price range will adversely affect the existing brand ¡§Racquet Club¡¨ targeted at the same market age segment (18 ¡V 4) and medium price range ($7 - $10).

The potential of Racquet Club had not yet been exhausted and that other new product in the medium-price range would be wasteful.

Moreover, it will affect the sale of existing brand such as Lime, Musk, Timberline, and Wind Drift, because many retailers, especially chain drug buyers, had not been willing to provide additional shelf facings for MEM products.

Even the highest media plan with budget of $,000,000 for the launch of new product is no match with the advertising budget of the Shulton¡¦s Blue Stratos national rollout to be supported by a $1,000,000 budget targeted at all men aged 18 to 4.

. This was a good solution if Shulton was not launching Blue Stratos with such a massive budget. Since it would have reinforced the ¡§English Leather¡¨ brand and directly and indirectly will increase visibility for all the product line of MEM.

. Would recommend committing the entire 181 communications budget to reinforcing the six existing lines.

4. Would recommend penetration of a low-priced brand into the food stores.

Recommendations

Propose to MEM management to commit the entire 181 budget to reinforce the six existing lines and to penetrate the low-priced lines (English Leather, Racquet club - based on price and recognition) into the food stores.

To increase sales focus on Department stores since there is only .% of its total sales share (mainly gift packs, Acqua di Selva, Racquet Club).

To increase sales focus on Mass merchandisers & discount stores, since there are still 4000 stores with no MEM presence. MEM could push for rack space in the stores where it is not present.

To increase sales focus on Chain drugstores since there are still 4,500 stores with no MEM presence.

Closing Note

Please refer to the financial analysis attached.

If MEM did decide to follow the recommendations, it will have a brand new market of Food Stores with estimated market potential of $ millions. Moreover, the MEM sales team is highly versatile and experienced and is one of the best in the industry.

Chain and independent drugstores have a potential market of $14 millions.

Mass merchandisers and discount stores have a market potential of $64 millions.

And English Leather has strong presence and growing in these two sectors.

Financial Analysis (Based on 17 data)

Mens Toiletries for Three Classes of Trade, 17 (dollars in millions)

Market Options for After-shave and Cologne Retail Dollar Sales Market Share MEMs Percentage MEMs Share



Chain and independent drugstores $ 14.00 61% 14.50% $ .00

Mass merchandisers and discount stores $ 64.00 6% 1.70% $ 8.00

Food Stores $ .00 1% 0% $ 0.00

Total $ 46.00

„U Total Toiletries Market = Total dollar value of After-shave and Cologne retail sale/Percent of the After-shave and Cologne market of total toiletries market.

„U Total Toiletries Market = 46/.8 = $00,000,000.00

„U Dollar Value of After-shave and Cologne in Food Store Market = $ millions

„U Dollar Value of Mens toiletries in Food Store Market (assuming same percentage of the total market share as that of its percentage in the After-shave and Cologne market = 00 millions x 1% = millions

„U Dollar Value of MEM share in Food Store Market = $0 millions

„U Percentage market share of the competitive brands in the Food Store Market = 6.6%

„U Dollar Value of the Market Opportunity for MEM in the Food Store Market = $ millions x 6.4% = $14 millions

„U Department stores

o Number of Headquarters Account Sold = 17

o Number of retail outlets penetrated = 00

o Estimated Total Number of Retail Outlets = 000

o Percentage of Total MEM Dollar Sales = .%

„U Mass merchandisers & discount stores

o Number of Headquarters Account Sold = 5

o Number of retail outlets penetrated = 6,000

o Estimated Total Number of Retail Outlets = 10,000

o Percentage of Total MEM Dollar Sales = .8%

„U Chain drugstores

o Number of Headquarters Account Sold = 56

o Number of retail outlets penetrated = 6,000

o Estimated Total Number of Retail Outlets = ,500

o Percentage of Total MEM Dollar Sales = .%



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