Reliance

Baking Soda: Optimizing Promotional Spending

Strategic Management Hunter Kerkes 3/20/2012

Executive Summary
This reliance baking soda case is a discussion of the how Anna Regnante becomes the Domestic Brand Director for Reliance Baking Soda (RBS) and in turn is faced with the challenge of putting together a 2008 budget P&L that would result in a 10% increase in profit (before SGA, overhead, and taxes) over the 2007 estimates. The challenge to this task is that although RBG was doing well with over 85% of U.S. families with an income of $25k+ using the product in 2006, their product was being threatened by similar private label products, and specialty cleaning products. Consumers were turning to new products because baking soda is not a natural traffic builder and the product hasnt changed in almost 100 years. This along with a 11% increase in raw material costs makes for a very daunting challenge for Anna.

Problems
I didnt find this case overly riddled with problems but just more of a few things that could be improved to help RBS in moving forward. 150-person sales force/Small base salary With only a 150 person sales force covering the retail and wholesale Household division it makes it difficult for these people to sell a lot of product. With a small base pay it makes the sales force less motivated. Not very attractive incentives to the trade Randall Todd a senior account manager for several major grocery chains stated, RBS needs a lot of push marketing to stimulate trade interest. Baking soda is not a natural traffic builder, it does not have high turnover, and it is boring. The product hasnt changed in almost 100 years. The only way Im going to make my quotas is if we offer attractive incentives to trade. Limited Internet Advertising With everyone having access to some type of computer or smart phone RBS is not taking advantage of the opportunity to advertise on the internet more. Only advertising on the company website seems like a poor decision. Poor Consumer promotions RBS is offering some consumer promotions but making them difficult to obtain or a hassle to redeem. Consumers are getting more and more lazy and arent willing to go the extra mile just to save a buck.

Recommendations
The above problems are not helping Anna to reach her 10% goal for 2008 and Im sure there are more problems that I have overlooked but here are a few of my recommendations below: Hire a larger sales force and pay them better Hiring a larger sales force would only increase the amount of RBS that the company will sell, along with providing more of a push strategy that would benefit the company. With more sales people you are pushing your product even more. A larger salary would also motivate their sales force to push themselves to sell more products and still bet their bonuses. Offer better Trade incentives With RBS having no direct control over how the trade managed its inventory or how it priced its products. It makes it difficult for them to pass these savings on to the consumer. Only 46 RBS ads vs. 260 competing products ads were run by trade advertising support making it difficult for RBS to compete. With better trade incentives they may get more ads run in favor of the competing products. Advertise throughout the internet Like I mentioned before baking soda in general is seen as a boring product but even a boring product can be advertised more. With RBS only being advertised on the company website they are missing out on many many consumers who dont visit their website. RBS should incorporate much more advertising on the internet. Whether it be through social media or any other type of internet advertising getting their name out there could only benefit them. Improve consumer promotions The consumer promotions that RBS are currently offering are more of a bother than anything else. Consumers dont want to have to buy two 5lb boxes which they wont use for quite some time just to save a dollar, or have to bring back a glass container to get it refilled. By offering coupons at the time of purchase and maybe offering a bigger cash refund RBS would improve customer loyalty and spread word of mouth about their product.

Justification
The recommendations above are in my mind things that could be achieved fairly easily and would benefit the company as a whole. Below are the justifications that I feel would help. More Sales and Happier employees If you keep your employees happy you are bound to have more success. By offering a higher wage your employees are more willing to come to work and do the best that they can to sell as many products as possible. If you only offer bonuses for exceeding sales quotas your employees may be inclined to work as hard to achieve that bonus if they feel like they are not already getting compensated well enough for their time. Sell more RBS to trade With 73% of factory shipments being sold during a trade promotion the company is losing lots of money throughout the year when they do not offer trade promotions. Not to mention the free cases they are throwing in along with these trade promotions. If Stewarts were to offer better trade incentives throughout the year the trade would be more willing to buy from them and also advertise more for them. Make RBS a well-known brand More people get there news and information from the internet than ever before, making it easier for RBS to advertise their product. Only a .9% response was achieved from the Sunday supplement and magazine ads that they ran. An internet advertising strategy would put their product in front of peoples faces way more often than old methods of advertising. The more a product is seen the better. Customer loyalty By offering better consumer promotions you are going to improve customer loyalty and potentially attract new customers to your product. Customers want the easiest shopping experience they can find, along with ways to save money that dont involve buying more of a product then they need or want and having to collect or send in proof of purchase just to save a dollar.

Argument
Every recommendation can have a problem associated with it. Because people have differing opinions on everything and dont always agree on what best for a company I have come up with some arguments to my recommendations. More expensive for the company By adding new employees and offering a better wage it will cost Stewarts more money to both pay new employees and also pay larger salaries. Losing money to incentives By offering better trade incentives the company could potentially spend money on having incentives all year and by sending our more and more free products. Spending money on advertising The cost of starting a whole new advertising campaign on the internet would cost the company money and they would have to hire new employees to start this campaign. Once again cost the company money By offering consumers better incentives they are more willing to use these incentives. Stewarts is already spending $174,643 on consumer incentives and by offering more they would be spending more.

Conclusion
I didnt think this case was overly complicated and didnt have that many problems. The problems I saw may be trivial but I think that they could help the company improve their circulation and keep consumers happy.