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OVERVIEW
1. Financial Problems
2. Operational Problems
3. Financial Objectives
4. Catalog Scenarios
5. Market Opportunities
6. Gains Chart Analysis
7. Direct Marketing Opportunities
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
FINANCIAL ANALYSIS
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
Financial Problems
Rate of increase in profits has been declining.
Rate of increase in sales dramatically outpaces rate of increase in profits
FINANCIAL ANALYSIS
Over 6 years, sales increased 170%, while profit increased only 66%
Customer acquisition costs are rising at a higher rate than gross revenue, likely stemming from H.E.L.P’s ordinary acquisition channels peaking
PRIOR YEAR 6 CURRENT YEAR
Sales: E$10MM
Profit: E$3MM, 30% of sales
Sales: E$27MM
Profit: E$5MM, 18.5% of sales
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
Operational Problems
Processing standards are subpar. Management sometimes fails to meet standards.
Extensive customer information database is not being used properly. No connection between customers and merchandise picks. Only two segmentation models: age and profitability. Desired segmentation model to include: purchasing power, behavior (four kinds of buyers)
OPERATIONAL ANALYSIS
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
OPERATIONAL ANALYSIS
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
• No behavioral segments (high-value deal seeker, habitual shoppers, etc.)
• Not testing customer segments
•Only modest improvement from creative variations
FINANCIAL OBJECTIVES
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
Financial1. Increase sales by 203MM over the next 5 years
2. Increase average profit per customer from $15.21 to $20.21 over next 5 years
$16.21 per customer per year in year 1
$20.21 per customer per year in year 5
Five-year schedule ($MM)
Year 1 2 3 4 5 Total
Sales 28.6 40.7 42.5 44.4 46.4 202.6
Profit 4.5 6.9 7.6 8.4 9.2 36.8
1. Additional Catalog RemailAdditional mailing to the top deciles each season.
2. Increase List RentalIncrease customer acquisition mailings to lists
3. Larger CatalogAdd an 8 page signature in each of the next 4 seasonal catalogs
CATALOG SCENARIOS
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
HELP has developed three possible catalog modificationsto address their financial problems.
Largest increase in buyers over 5 year period
Largest increase in net sales over 5 year period
Proportion of increase in net sales to increase in buyers is highest
CATALOG SCENARIOS
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
Based on our analysis, a larger catalog with a signature insertwill have the best effect on sales and profit.
MARKET OPPORTUNITIES
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
HELP can leverage their existing resources in new waysto open new market opportunities.
1. Use customer database to overhaul segmentation model.• Current segmentation is based on age alone
• Analyzing relationships between customer variables will aid HELP in profiling their customers
• Most profitable customers
• Underserved, high potential segments
• A more robust segmentation model will help identify causes for underperformance in the bottom four customer deciles.
• Reduce circulation expenses
• Improve product mix
MARKET OPPORTUNITIES
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
Demographics Geographics Psychographics Behavior
Women, 20 – 29 Central Europe
Habitual Shoppers Shops frequently, brand loyal
Women, 30 – 39 Western Europe
High-value deal seekers
Wait for limited time sales, trust retailers
Women, 40 – 49 Eastern Europe
Variety-loving shoppers
Buy on impulse, shop as entertainment
Women, 50 – 64 Northern Europe
High-involvement shoppers
Consider numerous product attributes, sometimes motivated by event
MARKET OPPORTUNITIES
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
HELP can leverage their existing resources in new waysto open new market opportunities.
2. Duplicate business model in a new market.
• HELP is based in Europe
• US market is large, wealthy, consumption driven and untapped
• Entry requires only a US distribution center – use most elements of existing business model
• New campaign requires cultural research & testing to avoid ethnocentrism
MARKET OPPORTUNITIES
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
US Market Entry Test Plan
Offer/Bribe Product Format Creative Media
Control None European selection
Catalog with signature insert
European styling Mail
2 None Americanized selection
Catalog with signature insert
European styling Mail
3 None European selection
Catalog with signature insert
Americanized styling Mail
4Free shopping
tote with $100+ purchase
European selection
Catalog with signature insert
European styling Mail
5Free shopping
tote with $100+ purchase
Americanized selection
Catalog with signature insert
European styling Mail
6 None Americanized selection
Catalog with signature insert
Americanized styling Mail
MARKET OPPORTUNITIES
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
HELP can leverage their existing resources in new waysto open new market opportunities.
3. Offer in-house financing to select customers.• Analyze database to identify customers amenable to financing
• Credit card users
• Low-volume purchasers
• Can increase sales volume by enabling income-sensitive customers to purchase in larger quantities, more frequent intervals
• Assuming effective risk management, interest income provides an additional revenue source without higher acquisition costs
• In-house financing opens many incentive opportunities
• Low-interest for X periods
MARKET OPPORTUNITIES
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
In-House Financing Test Plan
Intro Rate Offer Purchase Rate Minimum Order Copy Location Bribe
Control None None None None None
2* None 29.9% None Mail-in None
3* 0%, 3 months 29.9% None Mail-in None
4 None 29.9% E$ 100.00 Mail-in None
5 0%, 3 months 29.9% E$100.00 Mail-in None
6 None 29.9% None Catalog cover None
7 0%, 3 months 29.9% None Catalog cover None
8 None 29.9% None Mail-inNo interest if
paid in full in 12 months
9 None 29.9% None Catalog coverNo interest if
paid in full in 12 months
*Test is necessarily dyadic or triadic.
GAINS CHART ANALYSIS
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
Line Segmentation Gain Chart
Decile Sales/000 Cum. Sales Profit/000 Cum. Profit
1 3.10 31.0% 6.80 68.0%
2 1.70 48.0% 2.80 96.0%
3 1.27 60.7% 1.66 112.6%
4 1.04 71.1% 1.10 123.6%
5 0.94 80.5% 0.81 131.7%
6 0.79 88.4% 0.21 133.8%
7 0.47 93.1% -0.44 129.4%
8 0.26 95.7% -0.91 120.3%
9 0.29 98.6% -0.81 112.2%
10 0.14 100.0% -1.22 100.0%
1. If there are no trends, cease promotion to the bottom four deciles.
2. Otherwise, modify promotion to divert attention to lower cost sales channels.
GAINS CHART ANALYSIS
FINANCES OPERATIONS OBJECTIVES SCENARIOS MARKET GAINS OPPORTUNITIES
Habitual Shoppers: Sending new product offers often that will introduce them to similar and relevant products
High-Value Deal Seekers: Emphasizing on promotions and deals more heavily
Variety loving Shoppers: Offering different product recommendations that will satisfy their various interest
High Involvement Shoppers: Focusing on communicating the individual features and benefits involved in using the products