Reliance Baking Soda: Optimizing Promotional Spending Harvard Case Solution & Analysis

Reliance Baking Soda: Optimizing Promotional Spending Case Study Solution

Identification and Evaluation of Alternatives

The alternatives which are available to Anna Regnante to increase the sales growth target of 10 percent are:

1. Increase in price of Reliance Baking Soda.
2. Decrease in advertising and marketing budget.
3. Decrease in consumer promotional and trade promotional activities.

Increase in Price of Reliance Baking Soda

Increase in the price of Reliance baking soda consists of various pros and cons that are discussed below:

Pros

• Revenue will be inclined with an increase in prices.
• Higher revenues will enable the company to conduct trade and consumer promotional activities which in turn increases the consumer demand.
• High revenues will enable the company to hire experienced and talented sales staff which could contribute to the increase in sales of the company.

Cons

• Increase in prices can lead to hamper the sales because consumers could diverge to different brands.
• High price of a Reliance product can also result in less usage of baking soda which can result in decrease sales of the Reliance baking soda.

Decrease in Advertising and Marketing Budget

The decrease in advertising and marketing budget will have positive and negative consequences on the sales of the company which are mentioned below:

Pros

• The hampering of advertising and marketing budget will assist the company in decreasing the cost; which will eventually increase the revenue of the company.
• Although decrease in marketing and advertising budget can hamper the sales and revenue of the company, but the strong brand reputation of the Reliance baking soda can result in stable revenue growth rates.
• The profit before SGA expense and taxes can increase, which will assist Anna Regnante to achieve her target of 10 percent growth in profit for the year 2008.

Cons

• The decline in marketing and advertising activities can result in loss of sales.
• Decreasing market and advertising budget will make the company unable to target the new market and different consumer segment.

Decline in Consumer and Trade Promotional Activities

Consumer and trade promotional activities affect the sales of the company. Hence, consumer and trade promotional activities have positive and negative consequences, which are mentioned below:

Pros

• Decline in consumer and trade promotional activities can result in decreasing the cost of the company in offering promotional and trade discounts, which can further result in low cost for the product.
• Although the reliance baking soda is already an inexpensive product, therefore declining a promotional activity of a brand will not result in hampering the sales of the product.
• Due to strong brand recognition of Reliance baking soda, reducing the trade and promotional activities will not result in hampering the sales of the product for the company.

Cons

• Consumer and trade promotional activities are a source of attracting customers of different brands by offering different type of discounts and promotional activities such as offering prices through lucky draw. Hence, reducing those activities could result in declining customer growth for the company.
• Reducing consumer and trade promotional activities can also result in declining the sales of other products of the company because different products are linked with the trade and promotional activities.

Decision Criteria

The three alternative which are identified and evaluated above are further evaluated based on the decision criteria in order to determine which alternative is best suitable for the company. Moreover, it will be identified through allocating points to the different alternative out of 5 based on their positive effect on sales, cost and profitability of the company.

Hence, it is recognized through decision criteria alternative 2 has scored highest number in terms of providing positive effect to the company.

Recommendation

The identification and evaluation of different alternatives which are determined based on the components of sales, cost and profitability of the company. The most favorable alternative for the company appears to be alternative 2 i.e. decline in the budget of marketing and advertising activities. Moreover, with the presence of Stewart Corporation in the market for more than 100 years and with strong brand reputation in the market, it is least likely that the decline in marketing and advertising activities result in hampering the sales of the company, because according to the result of survey it was found that the company possesses loyal customers who are not affected by marketing and advertising activities. Furthermore, the alternative 1 i.e. increase in sales price can hamper the sales of the company as the increase in price can diverge the consumers to prefer other brands, which are available at low prices in the market, in comparison to Reliance baking soda. The alternative 3 i.e. reducing marketing and promotional activities would not incur much cost in comparison to advertising and marketing budget,and it would also assist the company in selling other products which are classified as weaker brand of the company. Therefore, adoption of alternative 2 i.e. reducing the advertising and marketing budget appears to be the most feasible alternative for Stewart Corporation and Anna Regnante.

Action Plan

The action plan that should be followed by Anna Regnante in order for the implementation of alternative 2 i.e. reducing the marketing and advertising activities to increase the profit by growth by 10 percent after SGA expense and taxes. Hence, the implementation plan should consist of the following steps:

• Within the first month the company should target every possible target customers through marketing and advertising in different customer segments.
• Within the time of 1 to 6 months the company should determine through survey that how much the consumers are affected by the advertisement and marketing activities.
• The company should then reduce marketing and advertising expense by the end of second month.
• Consumer and trade promotional activities should also be reduced to some extent, which will also contribute to the profitability of the company.
• One it is recognized that reducing advertising activities would not hamper the sales, then the company should focus on reducing TV advertising as it is one of the major advertising expense of the company.
• Hence, within the period of 18 months reducing advertising expense can result in increased profitability due to less advertising expense and Anna Regnante can be able to meet the target of increase in growth of profit by 10 percent........

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