BECAMEX BUSINESS SCHOOL

Question 1&2
Case Study 8:
Reliance Baking Soda: Optimizing Promotional Spending

Course code: MKTG 467 (Marketing Strategy)

Lecturer: Dr. Vo Thanh Long

Team 2

Huynh Phuong Thao. IRN: 1332300353

Nguyen Thi Ngoc Tram. IRN: 1532300417
Nguyen ThiThao Nguyen. IRN: 1342300022

Concentration: Marketing

Quarter 1/ Year 2018

I. Introduction:
1. Company overview:
Stewart Corporation was founded in 1915. It had four divisions including
Household, Beauty, Foods and International. In 2006 the company generated $150
million in net income and $558 million in profit before SGA, overhead, and taxes.
Household Division, which included RBS, was responsible for $400 million gross
sales in 2006 and included baking soda, laundry detergents, window cleaners and
disinfectant wipes.
Reliance Baking Soda(RBS) was a clear market leader in the baking soda category,
capturing 70% share.More than 85% of families in the United States with income of more
than $25,000 used the product
Through the consumer survey, RBS was indicated as an excellent brand awareness
and loyalty but low advertising recall. And the heavily users were women aged 35-55
years old.
2. Problem identification:
Main Goal: Anna Regnante has to develop a 2008 budget P&L that would result
in a 10% increase in profit over 2007 estimates.
Limitations:
- Private label selling at 30% lower price.
- RBS had lost 5% of its share to private label brands in the last decade.
- Baking soda is considered as a low traffic and boring product to trade.
- Low Advertising Recall
- Specialized products cannibalizing baking soda.
- No direct control over how trade manages inventory
- Majority products sold during Trade Promotions.
- Consumption patterns remained unchanged for the last 3 years.
- Old fashioned mainstay product.
- Overstocked Trader Inventory.
- After brainstorming and analysis of past year data.
Problems consideration:
1. Distributor:
 How can the sales force encourage merchandisers to implement the consumer
promotion campaigns during their trade promotion?
2. Advertising:
  How running a successful cross-channel campaign to reposition the RBS product as
"more than baking soda"?
3. Customer promotion:
 How much should Anna Regnante spend on consumer promotions?
 Should the timing of the consumer promotions overlap with the trade promotion
offers?
4. Trade promotion:
 How trade managed its inventory or how it priced the product?
 What incentives are available to promote conformity with the intended objectives of
the trade promotion programs?
II. Market analysis:
1. SWOT analysis of company:
a. Strengths
 RBS is the brand leader in the market segment.
 Besides that, Clear Market Leader has a 70% market share with 85% US household
penetration.
 RBS product enjoyed high distribution penetration in the market. (90% of grocery
stores and mass merchandisers, 85% of warehouse clubs, and 80% of drug stores)
 RBS promoted for a wide range of uses including household cleaner, laundry aid, and
deodorizer.
 Widely viewed as a substitute for specialized cleaners, air fresheners, and laundry
detergents.
 RBS had an excellent brand awareness and loyalty.

b. Weaknesses
 In the last decade, the increasing threat of private label brand had lost 5% in market
share.
 Low advertising leads to low recall of the brand. So, they needed lots of push in
marketing to stimulate their trade interest.

c. Opportunities
 80% of the customer belief that Baking Soda is an inexpensive laundry product than
others.
 RBS's trade promotion events have produced attractive results in the past.
  Baking Soda already promoted by RBS as pet care, pool care, outdoor cleaning, baby
care. Around 50% of the customers used it as a multipurpose product.
 Users also used baking soda for sports equipment cleaning (66% males and 48%
females use sports equipment). And there are around 27000 gyms in the USA.
 There are 95% off the customers mentioned RBS when they were asked about Baking
Soda.

d. Threats
 RBS loss 5% market share from the market label and low advertising recall.
 High consumer coupon use.

Strengths Weaknesses
RBS is the brand leader (70% market Low advertising leads to low recall of the
share).RBS had an excellent brand awareness brand.
and loyalty.
RBS product has high distribution
penetration.
RBS promoted for a wide range of uses
including household cleaner, laundry aid, and
deodorizer.

Opportunities
80% of the customer belief that Baking Soda
is an inexpensive laundry product than
others.
Users also used baking soda for sports
equipment cleaning.
Threats
Few competitors had entered the market.
- Private label selling at 30% lower price.
- RBS had lost 5% of its share to private label
brands in the last decade.

2. Customer Analysis:
RBS concentrate on the female, especially household women aged 35-55 who viewed
baking soda is a must-have thing in the laundry.
Based on the selected results from a 2006 consumer survey with 750 female who
purchased baking soda a year, it shows that 75% of heavy users bought the 1lb box or larger.
80% of the consumer strongly agreed with the statement “baking soda is inexpensive” to use
in laundry. Especially, when the cónumer was asked about the trúted brand name about
baking soda, 95% mentioned RBS.
III. Question and answer:
According to Regnante’s analysis, we had to first determine if predecessor’s
consumer and trade promotion strategies were effective and if a price increase would have
any bottom line benefits.
Question 1: How much should Anna Regnante spend on consumer promotions?
Effectiveness of Consumer Promotion
Month, Budget Allocated Net Return on Investmentin
2006 to RBS IncrementalContr ConsumerPromotion activities
ibution
Jan $ $ 16%
398,580 63,852
Apr $ $ 13%
174,643 22,785
Jun $ $ 20%
253,390 50,615
Sep $ $ 24%
253,390 60,820
Total $ $ 18%
1,080,003 198,072
 Effectiveness of Consumer Promotion in 2006
$1,200,000 $1,080,003 30%
$1,000,000 24% 25%
$800,000 20% 20%
18%
$600,000 16% 15%
$398,580 13%
$400,000 $253,390 $253,390 10%
$174,643 $198,072
$200,000 $63,852 $50,615 $60,820 5%
$22,785
$- 0%
Jan Apr Jun Sep Total

Budget Allocated to RBS

Net IncrementalContribution
Return on Investmentin ConsumerPromotion activities

Chart analysis:
- Consumer promotion in September were more effective than any other consumer
promotion done by RBS as ROI is 24% which is highest.
- June and September months had same budget for promotion, but September consumer
promotion provided better net incremental contribution for RBS
- September consumer promotion: $1.5 refund offer for a proof of purchase from
advertisement featuring RBS and two other household division brands.
- Thus, refund offers are more effective for RBS as compared to twin pack refund offer
in June. So, the proportions can be adjusted accordingly

Question 2: Should the timing of the consumer promotions overlap with the trade promotion
offers?
Answer:
Trade promotions and consumer promotions should not go together because of the
following reasons:
Retailer may get the chance to jack up their profits by increasing the price when both trade
and consumer promotions are in place. This will have the following repercussions:
- The possibility of losing on many price-sensitive customers => Volume will reduce.
- Promotes the retailer to enjoy double benefits which are neither passed on to RBS nor
to the consumers
- Contributes to too much variation in the price of the products which doesn’t allow
reference prices to be formed in consumer’s mind (ReferPoint 7 in Exhibit 3)
Illustration:
During the month of January in 2006, both consumer and trade promotions happened
simultaneously. Retailers exploited this opportunity and raised the prices of the products