Clique Pens: The Writing Division of U.S.

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Situation Analysis

This case study’s analysis is based on the company named “Clique Pens” and their internal
dilemma between Sales and Marketing departments in the most profitable period of the year (back-
to-school sales). This dilemma came up because of the decision of president of writing implements
division of U.S Home Elise Ferguson to stop the decline in gross profit margin percentage and
grow its overall gross profit by 4%. She hoped to accomplish this by growing revenues and
increasing the gross profit margin. After the discussions with Marketing department, Mr. Chen
and his team, and Sales department, Mr. McMillan and his team, she understood that the solutions
which they suggested were totally opposite.
Marketing department suggested to build the strategy of the company basing on the
consumer interest and make it customer-oriented. He believed that the strong advertisement and
discount coupons will increase the interest of the customers in their product. As well he suggested
to increase the prices, as the customers are not price sensitive. He added that this decision will
increase the sales and profit of the company and retailers and 6% of price increase will produce
only 1% of sales deduction.
Mr. McMillan from Sales department was not happy with this decision and presented his
version of strategy which was based on the retailer-oriented actions. He dedicated that company is
spending 30% more for advertisement that it is needed in real and it will be much profitable to
provide discounts to the retailers. In competitive environment only way to get more market share
is to offer discounts and use additional to take advantage of opportunities.
The main challenge for Ferguson was to choose the option which will provide the keen
cooperation between marketing and sales departments. As well as to increase the profit and solve
the situation of the “war on the shelves”.

Possible Solution

Despite the fact that BIC Pen Company used aggressive strategy in pricing and promotion
to become the leader of the market in 1970’s and even if we will take as example the “secret
formula” tactics of Clique Pens to increase the sales in the past, it should be mentioned that “war
on the shelves” among such gigantic retailers as Wal-Mart, Walgreens, Target, CVS and Kroger
requires the rational allocation of funds and shows that it is much important to be retailer-oriented
that consumer-oriented.
If the company will apply the strategy suggested by Chen it will result as the sales and
profits increase, however this consumer-based strategy may result as lose of important shelf space
and sales. It should be mentioned that retailers have a huge power in the market and their
dominance. Possible benefits to retailers can be just-in-time deliveries to decrease their stock
problems and seasonal discounts. As it has been mentioned before, in the period of 1980-2013
situation with retailers pushed the companies to decrease the marketing departments spending and
reduce advertisement by reducing profit margin. It shows us that the power of retailers has great
big influence on the sales even of the biggest companies. In addition, special packing and
marketing tricks will be complicated for the manufacturers and they may the interest to work with
this company. As Ferguson know that 80% of Clique’s sales come from deals with retailers and
suppliers are highly dependent on retailers, in the case of broad variety of the same product types
in the market funding for shelf space is the only way to survive and maintain profits. In the case if
the company will decide to reduce the discounts and attempt to bargain with retailers, retailers may
change their suppliers. As retail companies know that customers in this market are not brand loyal
and price oriented, it will be easy decision to change the potential suppliers.
So, in this case is recommended to implement the strategy of McMillan and his team. But,
it also can be the combination of McMillan and Chen as discounts for retailers and price increase
for customers. In this case they shouldn’t be worries about the loyalty of the customers. In
comparison to electronics it is not obligatory to sell Clique Pens products if the same product types
– substitutes offered by competitors. However, in electronics, it is highly demanded to have Apple
products because Apple has a sustainable brand loyalty on its customers. Coupons strategy is
useless as well because of the amount of customers which use it (1.3%). After getting a strong
place on shelf spaces and maintaining gross profit margin increase it can be an option to engage
with some consumer segments.