RELIANCE BAKING SODA: OPTIMISING PROMOTIONAL SPENDING

By: Raghav Sagar Pratyush Rohit Pooja Patel Palak Behl

EXECUTIVE SUMMARY

This reliance baking soda case is a discussion of how Anna Regnante becomes the domestic brand director for reliance baking soda and in turn is faced with a 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 US families with an income of $25000 plus using the product in 2006, their product was being threatened by similar private label products and speciality 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 materials cost makes for a very daunting challenge for Anna.

KEY FACTS

1. RBS market share 70% 2. Price increase in last one year 13% 3. No change in manufacturing cost for 2008. 4. Significant brand awareness as of 2006 survey. 5. Aggressive consumer promotions since 2005. 6. Increase sales due to trade promotions.

ISSUES

1. 15O-person sales force/Small base salary With only a 150 person sales force covering the retail and wholesale household division it make it difficult for these people to sell a lot of product. With the small base pay it makes the sales force less motivated. 2. Not very attractive incentives to the trade RBS need 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. 3. 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. 4. 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 lazier and are not willing to go the extra mile just to save a buck.

SWOT ANALYSIS

STRENGTHS: 1. 2. 3. 4. 95% brand awareness. Market share of 70%. Substitute for higher priced household cleaning products. Consistent demand throughout the year.

WEAKNESSES: 1. Requires a lot of push marketing. 2. Perceived to be a boring product.

3. Promotions not performance based. 4. 73% of factory sales happen during trade promotions.

OPPORTUNITIES: 1. New uses of baking soda can be investigated. 2. Minimum advertising expenditure required.

THREATS: 1. 2. 3. 4. Price increase of 13%. Private label eating into market share. Cannibalization of baking soda by other household products. High inventory in stores from 2006 promotions.

RECOMMENDATION

1. 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 the push strategy that would benefit the company. With more sales people, you are pushing the product even more. A larger salary would also motivate the sales force to push themselves to sell more products and still get their bonuses. 2. 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 the savings onto the consumers. Only 46 RBS ads vs. 260 competing product ads were run by trade advertising support making it difficult for RBS to compete. With better trade incentives they may get more ads run. 3. Advertise throughout the internet Like we have mentioned before baking soda is seen as a boring product but even a baking product can be advertised more. With RBS only

advertised on the company website they are missing out on many consumers who do not visit their website. RBS should incorporate much more advertising on the internet, whether it is through social media or any other type of internet advertising getting their name out there could only benefit them. 4. Improve consumer promotions The consumer promotions at RBS is currently offering are more of a bother than anything else. Consumers dont want 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 may be offering a bigger cash refund, RBS would improve consumer loyalty and spread word of mouth about their product.

CONCLUSION
Anna must first evaluate the effectiveness of past consumers and trade promotions and determine if a price increase will have net bottom line benefits. Then she must decide on the optimal allocation of her marketing budget, taking into account the brands apparent cash cow role in the household division of Stuart Corporation. The following approaches need to be adopted:

1. Evaluate the respective roles of price, advertising, consumer promotions and trade promotions in marketing a mature product. 2. Develop quantitative analysis skills needed to evaluate consumer and trade promotions expenditure. 3. Explore different approaches to marketing expenditure allocations and consider the implications of those allocations.