Batesmanor Furniture Case Study
The industry’s distribution of independently owned furniture stores have declined while furniture store chains have grown. This is a negative for BatesManor because they sell through independent furniture specialty stores and these stores have declined. However, the decision to only distribute to independently owned furniture stores demonstrates the high quality of their furniture. Add Another Sales Rep: BatesManor employs 10 full-time salespeople and two regional sales managers. Their employees are expected to motivate retail salespeople, assist in setting up displays in stores, and give advice on a variety of matters.
An additional sales representative is needed because 50 new accounts were being added for 2008. It is important to have enough employees for the amount of work that is expected. This statement is true because BatesManor’s experience has shown that sales efforts in the retail store by company representatives account for as much as one-half of the company’s sales in any given year. Not hiring an additional sales representative could affect furniture sales because of the lack of help, and other employees potentially being overworked.
Also, a finding from the Better Homes and Gardens survey states, “99% percent of the subscribers agree with the statement,” “When shopping for furniture and home furnishings, I like the salesperson to show me what alternatives are available, answer my questions, and let me alone so I can think about and maybe browse around. ” The high percentage of people who agree with the statement shows how important a salesperson can be. However, the estimated cost of the additional representative, including salary and expenses, would be at least $70,000 in 2008. Promote New Styles of Furniture:
BatesManor has planned to introduce several new styles of living room and dining room furniture in 2008. The Better Homes and Gardens consumer panel report states that 88% of the respondents think carrying the style of furniture they like is a very important factor when selecting the store to buy furniture. However, this panel report is biased because the respondents appear to only be females and only Better Homes and Gardens readers. Also, the Better Homes and Gardens survey says, “95% of the subscribers say they get redecorating ideas or guidance from magazines. These new items would require consumer advertising in shelter magazines to be launched successfully. Shelter magazines are the typical format used to highlight new furniture. Drawing funds from cooperative advertising allowances will help gain more money towards consumer advertising in shelter magazines. Deducting $225,000 from the cooperative advertising allowance and adding $112,500 to the consumer advertising fund and $112,500 towards galleries helps to advertise the furniture in the most successful way.
Push/Pull Strategy for Promotions: Trade promotions and cooperative advertising are part of a push strategy. Trade promotion is directed towards retailers and takes the form of catalogs, trade magazine advertisements, booklets for consumers, and displays. Using gallery stores will attract and serve their target customers, the 40- to 59-year-old homeowner with an annual household income over $100,000. Also, 78% of the survey respondents state that displaying furniture in individual room settings is somewhat important to very important.
Half of the $225,000 deducted from cooperative advertising will be added to the trade promotions fund. Also, an amount of $12,000 is added to the trade promotions fund to assist their salespeople servicing the 50 new accounts. The trade promotions fund will have a total of $591,500. Cooperative advertising is usually spent on newspaper advertising in a retailer’s city. The reduced funds of cooperative advertising for BatesManor will diminish the amount of newspaper advertisements. Consumer advertising is directed towards potential consumers through shelter magazines.
Examples of shelter magazines are Better Homes and Gardens, House Beautiful, and Southern Living. Since BatesManor has planned to introduce several new styles of furniture, it is incremental to advertise the furniture in shelter magazines. Adding $112,500 to the consumer fund will make it possible to advertise the new furniture. The net profit goal for BatesManor is $3. 9 million because it is 5% sales of the forecasted revenue of $78 million. The recommendation for the advertising ends up following BatesManor goal with a forecasted net profit of $3,978,000. Recommendations: Add another sales representative to assist with the 50 new accounts * Promote new styles of furniture with consumer advertising through shelter magazines * Add $12,000 to the trade promotions fund * Subtract $225,000 from the cooperative advertising fund * Add $112,500 of the money from the cooperative advertising fund towards the consumer advertising fund. * Add $112,500 of the money from the cooperative advertising fund towards the trade promotions fund through galleries. * Add $70,000 for salary and expenses because of an additional representative