HARVARD BUSINESS SCHOOL-CASE STUDY ANALYSIS

SITUATION??Dave Robinson, Boots-Marketing Executive In Dilemma!!

1.Either Buy 2And get 1 free-”3 for 2 strategy”

2.Onpack coupon worth50pence

3. Gift with Purchase

What Should

I do?

Objective- Boots is trying to –

# Hair care market share should increase in UK

# Gain a brand equity among consumers without degrading its brand value due to promotions!!

# Drive sales volume and trade up consumers from low value products by promotions.

BOOTS-Competitors 1.P& G -8.4% Market share.

2.Alberto culver-2000 stores, 6% share

3. L'Oreal- 5% market share in UK hair care market

Retail Competitors# Tesco 1800 store

#Morrison's 400 stores , Lowest Price

#Sainsbury 700 stores

Sales of the brands were directly proportional to Advertisements Expenditure……..

Competitive strategy:

- Collaboration with celebrity hair dressers.

- Developments of products with Eminent Celebrity hair dressers who have high positioning of brand names.

Boots market share in UK’s market85% of UK’s

Women Likes shopping from boots stores……..

Consumer’s Mind space:1.Customers are not brand loyal2. Demands varying in brands.3. Changing preferences,4. Can’t identify differences in brands5.Lucrative market share of professional brands-mostly women 25-35 age)

Decisions Made!!!!!

Target segment for promotions:1. Current boot customers.

2. Existing purchasers of mass- Marketing.3. No media advertisings except flyers and signage.4. Stock should be placed at mid aisle.

Avg. Bottle size-250 ml.Pre-promotional price- £ 3.99

Avg. retail margins on:#Premium brands-40%.

#Mass market brands:Avg. retail price-£2Retail margins-25%.

3 for 2 strategy:

1. All 3 items should be of same brand.

2. Free item-Cheapest of 3.3. Sales increases to 300%.

4. Competitors can’t copy this strategy due to lack of Technology at POS.

5. 60% increase in BOOTS customer’s sales.

GWP:-Product sample along with regular purchase.

-Sales up to 170%. -Cost-90pence/ unit of product + 3 pence/unit for packaging.

-40% increase in the boot customers.

On-pack coupon-50p

-Sales up to 150%.

-December (Christ mas) season of discounts onMASS MARKETS BRANDS

-50% increase in the BOOTS CUSTOMERS……………

LET US ASSUME, there were

INDIVIDUALS ENTERING IN BOOTS STORE PER DAY,BEFORE THE PROMOTIONS!!!!

All calculations are done for 1 day:1. 3 for 2 strategy:Cost of 1 bottle for BOOTS:60% of selling price.So, cost of manufacturing=£2.39Profit gained in selling 3 bottles to 1 customer=((2*3.99)-(3*2.39))=£.81So, profit from 300 individuals sales=(300*.81)=£243.This is the profit per day…..

Profit for whole December=243*31=£7533….

2. GWP STRATEGY:Boot customers up by 40%....Cost price of the bottle same as =£2.39.Plus the cost price of sample=.93 pence.Total price of manufacturing=2.39+.93=£3.32.So, net profit for 1 sale=3.99-3.32=£0.67Net profit from 170 customers/day=170×.67=£113.9So, net profit for whole December=31×113.9=£3530.9

3.Redeem coupon worth 50pence..Boot customers up by 50%...Cost of the bottle same as £2.39.Redeem a coupon means reduction in selling price by £0.50.So, NET profit in one bottle=3.99-0.50-2.39=£1.1So, net profit from sales of per day= 150×1.1=£165So, net profit gained for the whole month of December=31×165=£5115…..These all results were for premium products….

3 for 2 is The best Strategy Boots can Imply to Drive Sales !!

Conclusion for the premium items:The best strategy to imply is:3 for 2…. and as the competitive Advantage:- is other retailers are not Technology assisted at POS so, this Strategy can’t be copied.

Moreover, Increase in sales is 300% which is much greater…..

And the Rate of customer purchase also Increases due to increase in sales

VOLUME…..

Now, lets analyse mass Market products….

Avg. Retail price=£2

Retail margin=25% On cost of products…

Cost price for Boots of Mass market products =0.75×2=£1.5

1.3 for 2 strategy analysis:Cost price for boots:£1.5So, profit gained from sales to One customer(3 for 2)=(2×2)-(3×1.5)=(-)0.5 i.e. loss of £0.5/ sale of 3 bottles

So, this strategy is not good for the Mass market products …..

2. GWP strategy:Cost of the bottle for boots same as=£1.5Profit from a single sale to a customer=2-(1.5)-(.90+.03)=(-)0.43It also represents a loss:,If this strategy is applied!!

3.Redeem coupon strategy Worth 50pence:Cost of the bottle for boots=£1.5So, Profit on sale of one bottle=2-.5-1.5=£0That’s means there is no profit no loss on using this strategy;Of Course the, Strategies are used For earning profits and driving sales so this strategy doesn’t have a valuable result, these strategies can only be used for premium products

Conclusion:Dave’s strategy can only be implied for premium products…..

There will be no effect on basic products, its better for Boots to Implements private labels Strategy to drive more profits.. As the consumers are not thorough with the products specifications………

1.HBR business case From Harvard business School.2. http://www.cwlondon.com3. http://www.johnfrieda.com4. google.com5. www.boots.com