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Reliance Baking

Soda Case
Group 2
Ashlay Kalra
Gaurav Raj
Saurabh Mantri
Jatin Sadana
Anshul Jain
Abhishek Shetty
Paul
Situational Overview

The strength of the RBS brand is that they are well known. They also obtain majority of the
market, 70% of it. The only competitor customers were fully aware of was Reliance. RBS
obtains brand awareness, recognition, and brand loyalty. They are well known and well
established for decades in the industry. Consumers have purchased these RBS products and
have other uses for them other than just odor neutralization or cleaning use. The weakness
of the RBS brans is lack of awareness of these products multiple use. Advertising and
promoting this awareness is necessary to educate customers on possible various and
numerous uses. Promoting this awareness hasnt increased as it should and therefore an
increase in sales have not increased. RBS increased its prices yet customers purchases
remain constant along with the time they buy it.
What are the strengths and weaknesses of the RBS brand?

Market Leader
A cash cow in Stewarts household division
Targeted a wide audience due to its multi-
Strength functional utility
s High brand recall in product category
High distribution penetration

Increasing threat of private label brands had


lost a market share of 5% in the last decade
Weaknes Relatively low advertising recall of the brand
ses Needed a lot of push marketing to stimulate
trade interest
Analyze the effectiveness of past RBS consumer and trade promotional events.
How have the promotions strategies impacted sales volumes? What kind of
return on investment is the company getting for consumer promotions and trade
promotions?
Consumer and trade promotions have had a positive impact on sales for RBS. Consumer
promotions arent favored as much as trade promotions in RBS. Though most of the years
they have been successful, expect for in 2007 when they cut the consumer promotion
budget, sales decreased that year. In the exhibits shown in the article, it shows that trade
promotions are more effective than consumer promotions, about 30% more in terms of ROI.
Trade promotions are also overall successful yet two out of six years there was a loss for the
company. My opinion is that two out of six years is a big factor in which RBS has to be
cautious about. The comprehensive report that the analyst created is helpful yet it does not
reflect the effects of advertising spending in each model, therefore specifics arent detailed.
Analyze the effectiveness of past RBS consumer and trade promotional events.
How have the promotions strategies impacted sales volumes? What kind of
return on investment is the company getting for consumer promotions and trade
promotions?
Return on Investment in
Net Incremental Consumer Promotion
Month, 2006 Budget Allocated to RBS Contribution activities
January 398,580 63,852 16.02%
April 174,643 22,785 13.05%
June 253,390 50,615 19.98%
September 253,390 60,820 24.00%
Total 1,080,003 198,072 18.34%

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.
Analyze the effectiveness of past RBS consumer and trade promotional events.
How have the promotions strategies impacted sales volumes? What kind of
return on investment is the company getting for consumer promotions and trade
promotions?

2007 2007 2007 2007 2007 2007


Manufacture Suggested Actual retail Retailer Retailer 2007 Retailer
selling price ($ retail price ($ price ($ per revenue ($ profit ($ Sales (in overall
Case Size per case) per box) box) per case)* per case) cases) profit ($)
8 oz. 7.2 1 0.9 10.8 3.6 714,000 2,570,400
1 lb. 12.02 1.67 1.503 18.036 6.016 1,226,000 7,375,616
5 lb. 54.28 7.54 6.786 81.432 27.152 648,000 17,594,496

2007
2007 Manufacture 2007 Manufacture Manufacture 2007
selling price($ per variable manufacturing profit($ per 2007 Sales (in Manufacturere
Case Size case) cost($ per case) case) cases) overall profit ($)
8 oz. 7.2 3.05 4.15 714,000 2,963,100
1 lb. 12.02 5.03 6.99 1,226,000 8,569,740
5 lb. 54.28 22.34 31.94 648,000 20,697,120

* 1 case =12 boxes


Analyze the effectiveness of past RBS consumer and trade promotional events.
How have the promotions strategies impacted sales volumes? What kind of
return on investment is the company getting for consumer promotions and trade
promotions?

As per exhibit 9, Trade promotion during May-June resulted in $215,729 incremental


contribution. on other hand, consumer promotion during same time yielded
incremental contribution of only $ 50,615.
Consumer promotion was given on 1lb. case which is a higher selling product and
gave higher margin($6.99 per case) to manufacturer, but lesser contribution indicated
lower sales volume. Hence, consumer promotion are lesser effective.
During same time trade promotion on 8 oz. case, provided higher sales volumes even
though it did not have higher margins( $ 4.15 per case)
Compare the relative merits of a push vs. pull strategy for the
marketing of a low-involvement (low price) grocery item in a mature
market setting.
Consumer promotions are also known as the pull strategies and trade promotions are known as the
push strategies. Such strategies in a low-involvement marketing, and as a low-price grocery item is
hard to reflect maximum profits. Consumer promotions pull are created to pull thecustomers to
purchase the product. Some examples that RBS used were sales promotions, coupons for larger
boxes, advertising of other products in their product line, addition usage of the product, and
awareness about the product. RBS also used a premium which was when they had the product in a
stylish vase for the consumer to reuse and draw into them purchasing the product. These strategies
will help sales and help pull consumers to purchase the products. Such strategies may start
consumer loyalty with free samples or discounts to purchase and futuristically continue to use and
buy RBS brands. Any type of promotion does increase traffic to the stores in which to purchase the
product or types of products.
Trade promotion push strategies are ways to push the product to the customer, make it more
visible more appealing. The priority of push strategies are to maximize product margins and speed
the time it takes the product to get sold off the shelves. Methods that RBS has used in such an
environment are price discounts on the product, coupons, ads in magazines and local newspapers.
These strategies are used instead of increased retail margin, so therefore passed onto the consumers
in various forms.
Compare the relative merits of a push vs. pull strategy for the
marketing of a low-involvement (low price) grocery item in a mature
market setting.
Helps in generating sales and increasing the topline of the
company
Stimulates dealer and channel involvement
Main objective is to create an immediate sale and not to
create product involvement
Optimal for product categories with low brand loyalty & low
differentiation like baking soda

It lures customers from competitors products by


differentiated positioning & consumer promotions
In a low involvement product category it helps to
attract the price sensitive consumer
Builds up consumer demand even though it is a low
involvement product

The optimal strategy in a low involvement category would be an optimal


mix of both push and pull advertising, which ensures that the retailers
push your products over competitors products and at the same time the
customers prefer your products over that of the competitors'
What is your recommendation for how Regnante can achieve her
2008 profit target? What if any changes should be made to trade and
consumer promotions to make them more effective?
Our recommendation for Regnante to achieve her 2008 target profit is as follows.
For her to achieve her goal of increasing profits by 10% than last year she must improve trade and
consumer promotion strategies and reallocate budgets for promotions and advertising.
Strongly promote the wide range of uses for baking soda like household cleaner, laundry, and
deodorizer. Increase consumer promotions with a price increase, advertise in top rated magazines,
and offer redeemable coupons.
Add additional information on the product(s) on their website for additional uses; add customer
friendly games, recipes, and ideas.
For trade promotions continuing to give free cases with minimum orders is successful.
Purchasing in bulk with an incentive of free cases or discounts, to gyms for example, is also an
effective strategy. Incentives or improved packaging to sell twin packs, also to give discounts with the
local ad present is a positive strategy.
These improvements in consumer and trade promotions should make them more effective for the next
fiscal year.
What is your recommendation for how Regnante can achieve her
2008 profit target? What if any changes should be made to trade and
consumer promotions to make them more effective?
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:
Possibility of losing on many price-sensitive customers- Volume will take a hit
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 doesnt allow reference prices to
be formed in consumers mind (Refer Point 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
What is your recommendation for how Regnante can achieve her
2008 profit target? What if any changes should be made to trade and
consumer promotions to make them more effective?
Gap between trade promotions should be higher
Illustration:
During the trade promotion on the 8 oz. box in October, 2006 (after 15 days from the
previous promotion), even after offering a better trade discount from the previous
offer the incremental contribution declined (negative)
Successive trade promotions for the same size of the product should not be carried out
Illustration:
During the trade promotion on the 5lb. box in April, 2006 (after trade promotions
offered on all box sizes previously), even after offering a better trade discount from
the previous offer the incremental contribution declined to less than half
What is your recommendation for how Regnante can achieve her
2008 profit target? What if any changes should be made to trade and
consumer promotions to make them more effective?
Increase the proportion of trade promotions (by 10%) and cut down the consumer promotions (by
25%)
Trade promotions found to be more value adding as compared to consumer promotions
Reduce the cost of TV advertising (35%) and increase the cost of print advertising by 10%
RBS is not getting much advertising and merchandising support in exchange for trade
promotions anyways
Effective consumer promotions involve the use of coupons which can be cut off from the
magazines
In long run, they may increase the TV ad spending when they sort out the suspect creative
issues with the ad agency. This will then increase the already low advertising recall.
Develop a pro forma income statement (see template inCase Exhibit
10) and be prepared to address the long-term strategic implications

of your decisions.
2006 Gross Sales $ 42,400 $ 54,125 $ 55,051 $ 55051-
Variable Manufacturing Costs $ 20,258 $ 25,354 $ 25,325 $ 25325 -
Gross Margin $ 22,142 $ 28,771 $ 29,726 $ 29726 -
52% 53% 54% 54%

Advertising
TV $ 2,862 $ 4,453 $ 3,815
Print $ 687 $ 950 $ 694
Internet $ 76 $ 238 $ 248
Total Advertising $ 3,625 $ 5,641 $ 4,757 $ 4757 -
PR / Media Production Costs $ 191 $ 297 $ 198 $198
$551
Consumer Promotion $ 424 $ 1,080 $ 551
Trade Promotion $ 4,240 $ 5,938 $ 5,550

Total Marketing Expenses $ 8,480 $12,956 $11,011 $ 5506-
Profit before SG&A, Overhead $13,662 $15,815 $18,715 $ 24220 -
and taxes
32% 29% 34% 44%
Thank You