[Class #12]

Distribution Strategies:
Calyx & Corolla

MARK4210: Strategic Marketing

2014 Spring, Section L1/L2

MARK4210, 2014 Spring, L1/L2

 Case Learning Objectives

 Examine intricacies of distribution systems, and

opportunities for restructuring inefficient systems

 Identifying new segments that leverage current

capabilities/competencies

 Financial and marketing implications of reaching

new markets

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 Key Questions for Discussion
1. What’s the traditional channel of distribution for flowers
(conventional florists, FTD, 1800-Flowers)? And what’s the
distribution channel for Calyx & Corolla? Please draw the value
chain for each showing the distribution of flowers from growers to
consumers. Include all the various members of the distribution
channel and any information about margins and prices available
in the case.

2. What are the strengths and weakness of Calyx & Corolla’s

business model? What advantages and disadvantages does
Calyx & Corolla’s distribution model offer the consumers?

3. Customer lifetime value (CLTV) is an important analysis for

companies to figure out the dollar value associated with the long-
term relationship with their customers. Let’s try to calculate the
CLTV of a Calyx and Corolla customer.

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 Customer Lifetime Value (CLTV)
 To calculate CLTV, use the following approach and ignore taxes; if a number you need is given as a
range in the case, use the midpoint for simplicity.
 First, think about the net acquisition cost of a new customer. To calculate this, you need:
• (1) how does C&C acquire customers and how much does it cost to acquire a customer (not the cost to
reach a prospect); and
• (2) the average contribution of one order
Next, think about the discounted net value each customer can bring in their lifetime. Assume that
each customer acquired stays with Calyx & Corolla for 5 years. To calculate this, you need to:
• (1) calculate the cost of retaining each customer every year (think about how C&C retains customers )
• (2) calculate the contribution from the orders each customer place in a year.
• (3) calculate the net value of each customer in a year (that is, Contribution – Cost),
• (4) do the same calculation for year 1 through year 5; and
• (5) calculate the discounted net value of one customer over the 5 years =
(Year1 net value) / (1 + i) + (Year2 net value) / (1 + i)2 + …… + (Year5 net value) / (1 + i)5.
Use a discount rate of 10% (i = 10%) to make this calculation.
The following table might help you: Year 1 Year 2 Year 3 Year 4 Year 5
Cost
Contribution
Net Value
Discounted Net Value

 Finally, the CLTV of a Calyx and Corolla customer is: Discounted net value of one customer
over the 5 years – net acquisition cost.

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IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

1.a. Traditional flower distribution?

Channel Structure

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MARK4210, 2014 Spring, L1/L2
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

1.a. Traditional flower distribution?

Costs & Prices

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MARK4210, 2014 Spring, L1/L2
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

1.a. Traditional flower distribution?

Delivery Time

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MARK4210, 2014 Spring, L1/L2
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

1.b. C&C flower distribution? Channel

Structure

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MARK4210, 2014 Spring, L1/L2
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

1.b. C&C flower distribution? Costs &

Prices

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MARK4210, 2014 Spring, L1/L2
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

1.b. C&C flower distribution? Delivery

Time

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MARK4210, 2014 Spring, L1/L2
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

2. Strengths & Weaknesses of C&C

business model?
Strengths Weaknesses

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MARK4210, 2014 Spring, L1/L2
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

3. CLTV: Part I – Net Acquisition

Cost of New Customer (1)
 Net Acquisition Cost per New Customer
= Total Acquisition Cost per Customer – Average
Contribution per Customer

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MARK4210, 2014 Spring, L1/L2
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

3. CLTV: Part I – Net Acquisition Cost

of New Customer (2)
 Total Acquisition Cost per Customer (i.e., cost of getting
paying customer) =

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MARK4210, 2014 Spring, L1/L2
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

3. CLTV: Part I – Net Acquisition Cost

of New Customer (3)
 Average contribution per Customer (i.e., the unit contribution
on average for actual paying customer) =

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MARK4210, 2014 Spring, L1/L2
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

3. CLTV: Part II – Discounted Net Value

of Customers in lifetime (1)
 Note: Assume each acquired customers stays with
Calyx & Corolla for 5 years
 First, figure out Cost of Retaining each Customer
(i.e., costs associated with getting each consumer to
continue to be active)

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IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

3. CLTV: Part II – Discounted Net Value

of Customers in lifetime (2)
 Second, figure out Contribution from the successive
orders each customer places per year (i.e., unit
contribution based on actual potential orders, on
average)
 Contribution from each successive Customer order per
year =

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MARK4210, 2014 Spring, L1/L2
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

3. CLTV: Part II – Discounted Net Value

of Customers in lifetime (3)
 Then, figure out the Net Value (i.e., net or resulting
value between Contribution & Cost)

 Net Value =

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IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

3. CLTV: Part II – Discounted Net Value

of Customers in their lifetime
 Finally, calculate Discounted Net Value per Customer over
5 years: (Year1 net value) / (1 + i) + (Year2 net value ) / (1
+ i)2 + …… + (Year5 net value) / (1 + i)5.
(Note: Assume discount rate i = 10%)
Year 1 Year 2 Year 3 Year 4 Year 5
Cost
Contribution
Net Value
Discounted
Net Value

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IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

3. CLTV: Final Part III – CLTV of Calyx &

Corolla Customer
 CLTV of a Calyx & Corolla customer =

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