Problems and Methods in Marketing Management Calyx & Corolla Mar – 5805 Problems and Methods in Marketing Management HBS Case# 9-592-035 EMBA 11 - Team 7

Who are Calyx and Corolla's main competitors? Conventional Gift Retailers, Online Gift Retailers Conventional and Online Florist, Supermarket Chains Other Direct Marketing startups (Stillwater, Floral Gift Express) (MAR) FTD: a association of florists who share client base across geographic regions. Large supermarket chains Large national florists. (RJS) In addition, other conventional retailers (Wal Mart, Target, etc); Other direct marketing start ups (Stillwater; Floral Gift Express [Failed]); Local Florists; Other online florist (not FTD members) (MFC) While florists are their main competitors, C & C also competes with gift retailers. This would include online, catalog, and brick- and-mortar retailers, such as Things Remembered, Cherry Moon, Wine County Gifts, and Hale Orange Groves. Many such retailers combine at least two and perhaps all three channels of marketing. To the extent that potential customers have these options from which to select a gift, C & C competes in that same space. In the same way that online florists usually offer gifts other than flowers, C & C would likely extend it’s product line and compete even more closely with gift retailers.

How should Calyx and Corolla be positioned vis-a-vis the competition? Leverage Direct Marketing Efficient Distribution Superior Pricing Deliver Exceed competition quality and service Reliable freshness Meet consumer demands (MAR) Need to position themselves as being able to provide flesher flowers direct to door more reliably. (RJS) They must be in a position to meet customer demands and exceed the quality levels and available services of their competition, while delivering freshness and superior pricing. (MFC) C & C should leverage their efficient distribution channels and direct marketing strategies to position themselves in the market. These advantages provide the ability to deliver garden- fresh, exotic flowers direct from the growers.

Whom should Calyx and Corolla target? Traditional brick and mortar customers Online/Telephonic customers Holiday customer market Year round floral consumer market Corporate Customers Specific target markets (MAR) need to target distance purchasers who would normally use the internet or phone to send flowers   (RJS) They should target the current customers of online retailers, younger holiday customers (Valentine’s Day, Mothers day), growing year round floral consumer markets, and continued focus on corporate clients. (MFC) C & C has a wide range of potential new target customers – those who buy from florists, gift shops, and expands to supermarkets and large retailers. In addition, they have a base for potential repeat business from both corporate and promotional sources. Additionally during our call the specific target market of females 30 -55 with substantial income was identified as directly mentioned in the reading. These customers buy twice per yr on average.

How does Calyx and Corolla fare in terms of sustainable competitive advantage? Pro’s Resource relationship path dependency Brand/Reputation Pricing Con’s Complex and fragile system Easily copied Skills Maintenance Variety challenges (MAR) Poorly. They will be reliant on a complex and fragile system of agreements between growers, and shippers, which can be easily copied. Also the packing of individual arrangements for customers and shipping of flowers require skills which will be challenging to maintain, and once established, are at risk for competitors to take advantage of. If any competitor can come close to their pricing while cushioning the grower from the 'service' aspects of floral consumers, they will be placed in a difficult competitive position. They also will be challenged as to the variety of arrangement options, as growers will be unlikely to want to have a large variety of preparation options.  (RJS) I agree with Michael that sustainable competitive advantage will be a challenge. However, with a focus on operational efficiency (shipping cost and sales and advertising cost reductions), coupled with continued focus on grower and shipping resource relationship and process development the advantage could be maintained via a path dependency created in that area.  (MFC) Agree with both. Their operational advantages would need to be proven in the marketplace, then leveraged to give them a reputation with customers for freshness, fast efficient and delivery, and competitive pricing.

How should Calyx and Corolla grow? Current Customers Related Products Parallel Products Continuity Programs New Customers Targeted Marketing Unrelated Products (MAR) Targeting their current customer base to similar markets, such as offering parallel merchandise, like stuffed animals, or niche clothing    (RJS) They should focus on adding related products targeted to current customers as well as adding unrelated product targeted at new customers. Adding products to the existing catalog should be fairly easy and high margin products could help offset some of the advertising and sales costs.   (MFC) Agree with Rick. They apparently have the ability to add new gifts just like other online florists as per question 1. They also have potential for greater repeat business from corporate buyers. In addition, they should promote continuity programs to their existing retail consumers to stimulate repeat buying loyalty.

How fast does Calyx and Corolla need to grow? Summary P&L Statement (000) Current Projected Sales 10,259 15,163 Cost of Goods Sold 2,452 3,487 Gross Margin 7,807 11,676 Sales and Marketing 7,021 10,104 General and Admin 1,213 1,459 Net Profit (Loss) (427) 113 (MAR) They will need rapid market penetration to achieve name recognition over FTD, and local and national chains. (RJS) In year 2 a loss of 427K is significant. The current growth of 50% per yr may not be sustainable. A 113K profit is projected in yr 3 on the current P&L. Current growth rate of 50% should probably be sustained in order to maintain solvency and eliminate debt as quickly as possible.   (MFC) While we don’t have their balance sheet / cash / debt service data, C & C has losses that are not sustainable. Their projected Y3 profit of only $113K on $15M of revenue is very thin and makes them vulnerable to further losses if revenues do not rise as expected. While their profitability is driven by estimated sales growth, their cost structure could possibly be improved to sure this up. Therefore, the pressure for rapid revenue growth in Y3 could be eased. Market Penetration Name Recognition Sustain projected growth Improve operational efficiencies Sales and Marketing cost