Company’s Introduction:
Cottle Taylor came into existence from 1815 as hand soap manufacturer. By 2009 they have built-up more than 200 products to serve the needs of society into three consumer’s product categories: Personal Care, Oral Care and Home Care. Also, they have grown internationally and serving more than 200 countries with their products.
Current problem with Cottle:
Cottle is wishing to increase demand of its oral care product (toothbrushes) in India to recover domestic loss which arose due to the decline in U.S. revenues. For that purpose Cottle India needs to sale more units than currently to earn higher revenue contribution.
Current Proposal to solve problem:
- Increase advertisement expenditure by 3% to ensure growth in revenues at Cottle India
- Change in allocation of product promotion budget from existing.
Conclusion:
- As per Income Statement (excel sheet) currently Cottle India is earning net profit of 18% at 9% advertisement cost based on revenues, whereas when Cottle India changed its allocation of advertisement based on revenue from 9% to 12%, it came up with an increase in the revenue by 17% from last expected results due to advertising campaigns and awareness of oral toothbrushes to public at large, but at the same time Cottle India faces reduction of 3% in profit from operation probably because of the change in proportion of advertisement cost. In the long run this advertisement has a value as it will channel new customers with awareness of oral care product which will assist Cottle India to increase its revenue in future. If Cottle India can manage with low percentage of profit from operations initially in 2010 then this action may have a positive impact in the coming year.
As far as changing allocation of product promotion budget is concerned, it can be argued to change as large proportion of India’s population is not aware with Oral Care products and also because 80% of India’s population is living at Disposable Income of an average $2 per day. Their disposable income is restricting them to buy either expensive product such as Battery operated Brushes and/or to buy Mid-range Manual product due to having no or very little awareness. In order to increase Cottle India revenue it can be said, to raise awareness b/w people for the benefit of using toothbrushes. A large amount of people are not using toothbrushes and to make them aware about its use and benefits, it will assist Cottle India to drain high revenues.
Recommendation:
- Cottle India should see both views i.e. in short run and in long run. If Cottle India is focusing on Short run to earn revenues as early as possible, than the idea of Increasing Advertisement budget by 3% will not be advisable.
- Regarding change of allocation of promotion budget, as per above it can be advisable to Cottle India to change its promotion budget allocation and emphasize on (1) Persuading consumers to brush first time and to (2) increase the incidence of brushing. By this way Cottle India can manage to increase its Revenue..................
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