Marketing Strategies for Flanders of Springfield Essay Example

a catalog without making a purchase, or received a gift from an active customer. The average order size is $50, but our focus will only be on the active customers for this case discussion. Professor Arthur Schlemiel Jr. created this case as an example for class discussion purposes and not as a demonstration of effective or ineffective administrative handling.

The text presents a copyright notice from 1993 by the President and Fellows of Harvard College. To request copies, please contact (617) 495-6117 or send a written request to the Publishing Division at Harvard Business School in Boston, MA 02163. Reproduction, storage, use in a spreadsheet, or transmission of any part of this publication is strictly prohibited without permission from Harvard Business School. Additionally, it notes that Flanders plans to reduce marketing expenses in hopes that the cost reduction will offset any potential decrease in sales.

The Flanders catalogs are printed in full color on high-quality glossy paper. Each catalog features a distinct watercolor painting that has been specially commissioned by the company. The printing process is outsourced to an external contractor. The costs involved in producing 3,000,000 catalogs (to be distributed to active and inactive customers) can be categorized into various components: design layout cover, photography, printing, and bulk mailing. The total cost amounts to $300,000 for the design layout cover and $200,000 for printing (including fees paid to artists). In total, 3 million catalogs are produced.

Flanders management conducted an investigation into the production and distribution expenses to determine if distributing catalogs to active customers is cost-effective. The company questioned whether it was worth excluding certain catalogs from being sent to these customers, despite

their average revenue of $7.50 per season. However, they recognized the importance of publishing four seasonal catalogs annually as a unique feature of their product line.

The article investigates if customers' purchases can impact the catalogs they receive and if this would result in a corresponding decrease in catalog quantity. It also explores whether customers who don't receive a previously received catalog would switch to a competitor for their purchases. To explore these questions, an experiment was conducted with 40,000 active customers selected randomly as a sample. The experimental sample was divided into four subgroups of 10,000 each for the years 1991 and 1992.

The text discusses estimating the reduction in purchases for an

active customer in 1992 who received only two catalogs per year instead of four, and the regression used for this estimation. It also mentions estimating the change in contribution for a customer in 1992 who received two catalogs per year instead of four, and the regression used for this estimation. Additionally, it suggests considering the output of Regressions 3, 4, and 5 to maximize contribution in 1992, assuming all customers receive the same number of catalogs, and the regression used for this estimation. In Part B, it explains that after deciding to include an item in their Fall 1993 catalog, Flanders needs to determine the quantity of each item to order from their supplier, Homeric Designs. These orders are binding commitments regardless of demand, and cannot be placed once the season starts. Finally, it mentions Flanders' idea for a new wool cardigan sweater.

The sporty-looking sweater is targeted towards fashion-conscious women in Flanders. Sally Jacobson, the buyer for the sweater, predicts that demand for it could range from 600 to 2,400 units. Although Flanders has agreed to feature the sweater in their Fall 1993 catalog, they have not yet decided on the final price. Jacobson is considering two options: pricing it at either $100 or $120. The trade-offs are apparent – setting the price at $100 would lead to higher demand than if priced at $120.

Jacobson's analysis shows that the unit contribution is higher at $120 compared to $100. The analysis considered three demand levels: 600, 1,200, and 2,400 sweaters. Two different prices were examined: $100 and $120. For example, when priced at $100, there was a .30 probability of demand being 600 sweaters,

a .40 probability of demand being 1,200 sweaters, and a .30 probability of demand being 2,400 sweaters. Table 1 presents the price-demand relationship for both prices: $100 and $120. Furthermore, there is a .10 chance of expected demand equaling 1,200 sweaters. Like all items in the catalog, Flanders must commit to a specific number of waters.

Homeric charges Flanders $40 for quantities up to 1,000 sweaters and $35 for quantities exceeding 1,000. If Flanders orders 1,400 sweaters, the cost will be $40 for the first 1,000 sweaters and $35 for the remaining 400 sweaters, resulting in a total cost of $54,000. Any unsold sweaters at the end of the season will be sold off for $15.53 each.

Considering a scenario where Flanders prices the sweaters at $100 and orders 1,200 sweaters; we need to determine the contribution under different demand scenarios: if demand is 600 sweaters or if it is 1,200 sweaters.

The text discusses various questions and decisions regarding the pricing and ordering of sweaters by Flanders. It also mentions a catalog featuring two new dresses made of a wrinkle-free cotton-linen blend, with one dress designed for active women (Type S) and the other for office wear (Type P).

Flanders places an order to Homeric, its supplier, for various items. Regardless of the demand, Flanders is obligated to fulfill the order. Homeric charges Flanders $50 for up to 1,000 sporty dresses and $46 for quantities above 1,000. Flanders intends to set a price of $100 for Type S dresses. Any remaining dresses at the end of the season are sold at a price of $16. Type P dresses have additional styling features and are more

expensive to produce, with a catalog price of $150. For quantities up to 500, Homeric charges $60 per dress, and quantities over 500 cost $54 each.

The excess stock can be liquidated for $24. Greg Little, the buyer for dresses, is of the opinion that the two dresses would likely appeal to different market segments and therefore, one dress would not substitute the other in the event of a stockpot. However, Little also believes that if the new material is successful with one segment, it would also be appealing to the other segment. In other words, if there is high demand for S, Little expects high demand for P as well. Table 2 shows Little's probability assessment for the different levels of demand for both types of dresses. For instance, if demand for S is low, meaning 1,000 dresses, Little believes there is only a 30% chance that demand for P would be high (i.e., 1,000 dresses). Conversely, if demand for S is high (1,500 dresses), then the probability that demand for P would be either 500 dresses or 1,000 dresses is not mentioned. Assuming that Flanders wants to maximize their expected contribution, they should determine how many type S and type P dresses to order from Homeric. Greg Little suggests that Flanders could save money by agreeing to a two-stage commitment with Homeric.

First, Flanders would purchase an established quantity of the new material. This material could be used to create either sporty or professional dresses. A limited number of dresses from each category would be created and completed to meet initial demand. However, Little would wait for this initial demand to become apparent

before making a definitive commitment to cutting more dresses. It was widely acknowledged that early demand was a highly reliable indicator of overall seasonal demand. For simplicity, Little has presumed that early demand would allow IM to accurately forecast the exact level of demand for each dress type.