Reference no: EM133379926

Case Study: Case - Popular Furniture

Susan Spade, the owner of Popular Furniture, is discouraged with her salespeople and is even thinking about hiring some new blood. Spade has been running Popular Furniture for 10 years and has slowly built sales to $3.5 million a year. Her store is located on the outskirts of a growing city with a population of 275,000. This is a factory city, and she has deliberately selected blue-collar workers as her target market. She carries some higher-priced furniture lines but emphasizes budget combinations and easy credit terms. She faces some competition from discount retailers (such as Wal-Mart). Walmart sells at very low prices, but her store carries a much greater range of furniture-which she feels gives her an advantage. She has heard rumors that Wal-Mart may be increasing the amount of furniture that it offers, but she doesn't think they will come close to rivaling her assortment. Spade is concerned that she may have reached the limit of her sales growth-her sales have not been increasing during the last two years even though total furniture sales have been increasing in the city as new factory workers move in. On the other hand, there have been economic worries, and she suspects that some people may fear losing their jobs. Her local cable TV spots, radio, Google, and Facebook advertising seem to attract her target customers, but many of these people come in, shop around, and leave. Some of them come back-but most do not. She thinks her product selections are very suitable for her target market and is concerned that her salespeople don't close more sales with potential customers. Several times, she has discussed this matter with her 10 salespeople. Her staff feels they should treat customers the way they want to be treated. They argue that their role is to answer questions and be helpful when asked-not to make suggestions or help customers make decisions. They think this would be a too "hard sell." Spade says their behavior is interpreted as indifference by the customers attracted to the store by her advertising. She has tried to convince her salespeople that customers must be treated on an individual basis and that some customers need more help in looking and deciding than others. Moreover, Spade is convinced that some customers would appreciate more help and suggestions than the salespeople themselves might want. To support her views, she showed her staff the data from a study of furniture store customers (see below) that she found on the website for a furniture trade association. She tried to explain the differences in demographic groups and pointed out that her store was trying to aim at specific people. Further, Spade announced that she is considering changing the sales compensation plan or hiring new salespeople if the present employees can't do a better job. Currently, the sales reps are paid $26,000 per year plus a 5 percent commission on sales. In addition to selling furniture, Popular Furniture also has a small interior decorating/furniture repair business called Popular Decorating & Repair. This is small compared to the furniture sales as it only represents 9% of the total revenues of both the furniture and decorating businesses. However, Spade believes it can grow as new people in the community are looking for ideas on how to decorate their homes and need a place to get broken old furniture repaired. For a small fee, one of the three decorators working for Popular will do a consultation with a new homeowner and recommend changes and of course, new furniture to purchase. The furniture repair business will fix most furniture within 1-3 weeks depending on the work needed to be done. So far, Spade has been disappointed with repeat business and gaining new customers from this segment of her company. She has been hearing feedback from customers that only one of the decorators, Katie, is dependable, knowledgeable, and trustworthy. Some customers complain that the other two decorators lack interior design knowledge, sometimes are not able to answer questions or are rude, and don't return phone calls. However, it seems the service level varies as some customers review the service online and are extremely happy with these other two decorators. One other issue is evident in the decorating and furniture repair business of Popular: clients often use the service but don't come to the store to check out Popular's furniture! For example, decorators go to the homeowner's house, offer decorating and design services, get paid, and then that's it. Spade wonders if it is because it is an intangible purchase meaning once the work is done there is nothing to show for it. Because customers don't have a physical good they forget about Popular. Spade wonders how this might be improved. One more opportunity has presented itself to Spade. She and her husband have developed a new line of memory foam mattresses branded Popular Premium Mattress (PPM). The new product is so innovative that she thinks that she can not only sell it in her store but she thinks PPM could be sold in additional channels of distribution. She wants to start by offering the mattress online through her separate e-commerce site. She is focusing on a queen-size mattress at the moment and wants to price each mattress at $1,100. She has budgeted annual marketing communication expenses of $55,000 along with $2,500 for website hosting charges. She has signed a contract with a warehouse and delivery company at a flat fee of $8,000 per year. The cost to make each mattress is only $200 and packaging per mattress costs $5. Perhaps opening a new store would be an easier way to achieve growth, if she can't improve her salespeople's performance. There is a neighboring city, about 40 km away, that is similar to her own; that city has little in the way of inexpensive furniture stores. Study results In Shopping for Furniture I Found (Find) That Group A Group B Group C Group D I looked at furniture in many stores before I made a purchase. 78% 72% 52% 50% I went (am going) to only one store and bought (buy) what I found (find) there. 2 5 10 11 To make my purchase I went (am going) back to one of the stores I shopped in previously. 63 59 27 20 I looked (am looking) at furniture in no more than three stores and made (will make) my purchase in one of these. 20 25 40 45 I like a lot of help in selecting the right furniture. 27 33 62 69 I like a very friendly salesperson. 23 28 69 67 Demographic Group Descriptions Upper class (Group A): Managers, business owners, executives, professionals, etc. Family income over $60,000. Middle class (Group B): White-collar workers: clerical, secretarial, sales clerks, etc. Family income of $35,000 to $70,000. Lower middle class (Group C): Skilled workers and semiskilled, etc. Family income between $20,000 and $45,000. No one in this group has above high school education. Lower class (Group D): Nonskilled employees, etc. Family income under $28,000. None has completed high school.

Provide a brief SWOT (using facts from the case). Limit each category to one item each, i.e. one strength, one weakness, etc. (you will have four items)

Questions: Targeting and Positioning Service

a. Based on the case, which demographic group (A, B, C, or D) do you think Spade should target? Why?

b. Write a positioning statement for Popular Furniture

Product Branding

a. What branding strategy does Popular Furniture use?

b. What benefit or challenge does this create for Popular Furniture? Explain your answer

Services

a. Considering concepts from Chapter 10, Managing Services, what are the two major issues with the service business of Popular (interior decorating and furniture repair).

b. What recommendations do you have to improve this business and attract more repeat sales or additional customers? Explain your answer.

Break-even

a. What is the purpose of doing a break-even analysis?

b. For the Popular Premium Mattress do a break-even analysis. Show your work. How many mattresses are needed to be sold to break-even?

Industry Sizing & Competition

Assume Popular Premium Mattress is only sold in Canada (hint: Requires secondary research to answer each of the 3 parts of this question. Use the most current data available)

. a. What is the total size of the industry?

b. Who are the top 3 competitors in the market?

c. What is the market share of the top 3 competitors in the market?

Spade thinks Popular Premium Mattress has a lot of opportunities to sell and distribute the product. Provide and explain two unique distribution channels for PPM, different from the one being considered by Spade. Be specific, not general. Provide the type/name of a channel of distribution based on knowledge of the course concepts. Be sure to defend your rationale using concepts in the course

Identify, describe, explain, and justify an IMC (integrated market communications) plan to help Spade grow sales of PPM. Given a budget of $55,000 allocate the money to each idea, e.g. $49,999 to advertising (radio and newspaper) and $1 to Personal Selling. Focus on the big 6 major components/tools of IMC (PR, Sales Promotion, Advertising, Direct Marketing, Social and Mobile Media, and Personal Selling). In your response, include the IMC tool/element (and tactic), $ amount to each IMC component, and reason for choosing the component. In your response, be sure to defend your recommendations.

Provide one major recommendation for Spade to grow revenue for Popular Furniture, Inc. For full marks, your recommendation must have the potential for a significant impact on the business, be consistent with the current marketing of the business, and be based on sound reasoning/facts from the case.