1. HOW WOULD YOU CHARACTERIZE THE HOUSEHOLD FURNITURE INDUSTRY? In 2004, the Household Furniture Industry’s annual growth was 4%, it was a $36. 4 billion industry. There a many competitors within the industry because of low cost imports from Asia and Mexico. The household furniture industry is also closely tied with the economy. After the housing boom in the early 2000’s, companies needed to focus on a more innovate and stylist product to get consumers attentions. Household furniture products are classified as wood (48%), upholstered (34%), and metal/other (18%).
They are then segmented by price and quality. In a survey, Consumers rated that they are more concerned about style, design, quality, and comfort. They are not loyal to one particular brand because 60% of them would switch brands when looking for a replacement. The consumers are also highly involved in the process of purchasing furniture, 60% of them talked to third parties and 70% visited more than one store prior to a purchase. They are also vary significantly on where they purchase their furniture. 2. What are the benefits and risks associated with the acquisition of PLFD?
Manchester Products Essay Example
The benefits associated with the acquisition of PLFD is, they have very strong brand equity and a recognizable name within the household furniture industry. They are associated with high quality and stylish products. 80% of consumers were aware of the brand. PLFD occupied the number one or number two market share position in several categories. They also had strong ties with all of the leading distribution centers. This is something that Manchester Products was lacking and could significantly help them to get their products onto the market.
Also the household furniture industry is a larger industry and has more steady growth than the office furniture industry. Some of the risks associated with the acquisition are Manchester and PLFD targeting two different markets. Manchester is primarily office furniture, home media, and recliners for the home, where as PLFC with Accent Pieces, Bedroom, Chairs/Sofas, Dining/Kitchen, Entertainment/Media, Home Office, and Tables. They have two different styles of furniture. Manchester offers conservative, functional designs, where as PLFD offer bold styles and fashionable colors, which would definitely be two different target markets.
Another risk is that Manchester can only use the Paul Logan name for 3 years. It is important that they use this name to their benefit because of the brand equity, but they also want their customers to be aware of their Manchester brand because that will ultimately be the brand name. Also a major risk is that competitors such as National Furniture are looking for an opportunity to capitalize on the acquisition and steel some of PLFD’s business. Once the acquisition is complete, MH needs to make sure that they come up with a strong marketing strategy so that they do not lose loyal or potential customers.
3. 4. What are the marketing problems raised in the brand transition? Which of the three brand transition options outlined in the case should Adams recommend? The major problems in this case are, the 2 different styles of furniture that MH and PLFD offer, target two different types of consumers, and how to transition from the Paul Logan name to Manchester name. Both MH and PLFD target customers in the Middle to Upper Price points, but their customers have 2 different styles. MH is conservative and PLFD is highly stylish.
The aspect that they need to consider is how to make both target customers happy. In order to transition the brand, it would be very helpful for MH to keep the Paul Logan name initially. MH has to be very cautious about their competitors because they are ready to capitalize on the acquisition. If they keep the Paul Logan name, customer will still recognize it and purchase it because of the brand equity. This will help MH to secure most of PFLS’s market share and help them to remain competitive.
Another reason why they should keep the Paul Logan name is because of the distributors. PLFD is a traffic builder in stores and distributors are concerned about the acquisition. MH needs to secure these distribution centers in order to close up the holes in their distribution network. Once they do this and start building relationships with the distribution centers then they can consider building their business on the MH name. Jeremy Campbell the VP of Strategic Planning suggested that it does not have to be all or nothing for 3 years.
Picking up one or two products at a time that lend themselves to low-risk brand transition and transitioning them to MH name gradually is a good start. MH may also want to develop two different names for their furniture styles. They will have 2 different target markets, conservative and high fashion. MH is associated with more conservative furniture, so it would help if they developed a new trendier name for Paul Logan’s furniture to reach their different target markets. 5. 6. Compare the marketing budgets for MH and PLFD. What difference do you see in the allocations of push vs pull expenditure?
Do you agree with Adams budget estimates and allocations? Reviewing the marketing budgets of MH and PLFD, PLFD allocated much more of its budget to push programs in the form of volume rebates and purchase allowances for trade compared to MH which put more of their budget into pull programs such as national advertising. In 2005 MH is planning on reducing PLFD’s push programs by 3. 8%, a total of $38 million. In addition to this they are increasing the pull programs for MH by 9. 7% of $45. 6 million. MH should reconsider this marketing budget.
One of the major issues that MH has had in the past is securing distribution for their products. By acquiring PLFD, they are in a very good position to secure more distribution, but at the same time, they do not want to turn off the household distribution outlets by not offering volume rebates and purchase allowances. These push programs are what helped PLFD have strong relationships with buyers from major furniture chains, department stores, and wholesalers. Adams should not make any significant changes to the pull programs that PLFD had in place. Instead, he should be adding more to both budgets.
During an acquisition and at a time that you want to build up your customer based, it is not a good time to be cutting back on your marketing. It is important that MH uses both push and pull strategies through this acquisition. PLFD’s closest competitor is looking to beef up advertising and price reductions. They are also looking at using an aggressive strategy to exploit the uncertainty associated with the integration. MH needs to come out with guns blazing. They definitely don’t want to turn off their distribution network because it is very important to get the product out on the market, but they also need to advertise