- End consumer quality perception is derived from their quality perception of the distributor at time of retail.
- A British Standard does not presently govern the safety of Air-care candles. The current market products manufactured by competitors in this sector, Glade and Haze, burn at higher temperatures. Colonial have developed a candle that burns more stably at a low temperature. The candle will be safer.
- The main threats facing Colonial Candles
- A large number of competitors exist in the candle market, offering a variety of products. Intense competition has eroded away the market share of even those manufacturers that used to be market leaders.
- A combination of more reliable electricity supply and the use of a battery-powered torch as a source of light have caused a decline in the demand for emergency candles.
- Fragmentation of demand with increased consumer choice.
- The distribution base is increasingly complex, with the emergence of specialist and discount factory stores (stores which sell off either excess or sub-standard stock), together with a variety of smaller gift shops.
- As the candle market reaches maturity, there is likely to be a consolidation of the producers in pursuit of greater market share and, take-overs will occur.
- The candle market is seasonal, with over 75% of turnover being generated during the 3 months prior to Christmas.
- Competitors in the Air-care sector would react quickly to any new product within the market.
- Expensive advertising campaign required establishing product features, to break down any barriers to entry in the Air-care sector.
- The main strengths of Colonial Candles
- Mass-production of a ‘safe’ scented candle will occur within 2 months.
- The company has sole rights to the technology and methods being developed in partnership with a University for use in the production of a ‘safe’ Air-care candle.
- Strong company ethos regarding the importance of quality and safe products.
- All candles are hand finished. The quality of the finishing to the candles can be adapted to the needs of the customer.
- Older manufacturing machinery provides a greater degree of flexibility in the production of candles, enabling quantities to be matched to the demand of each sector.
- Family owned firm with sizeable financial resources for internal investment. No shareholders to which to justify expenditure.
- A company name is not well known among the younger consumer groups, enabling the dropping of the brand name on all products except Emergency Candles.
- Factory working at only 50% capacity, providing capability to expand without the need to invest in new machinery or hire new labour.
- The emergency candle packs contribute 20% to profits. The product can be viewed as a ‘cash cow’, as defined by the BCG matrix, providing the ability to reduce investment expenditure whilst retaining good levels of revenue over the short-term
- The main weaknesses of Colonial Candles
- The present product range is limited with only table and emergency candles produced and sold direct into target sectors.
- Poor history in the investment in the research and development of new methods and products.
- Quality of the candles produced are not demonstrably better than that of competitors given that buyers view them as being expensive by comparison.
- The company name, Colonial Candles, is seen as a negative rather than a positive facet by the firm.
- Market and product positioning of the company does not fit the demand of the present candles market. Colonial Candles needs a unique selling proposition.
- Colonial Candles has budgeted only 2% of its sales revenue, £40,000, for advertising and promotion, falling well short of its competitors.
- Presently 80% of company profits is realised by the sale of Colonial’s Table Candles making the company vulnerable to increased sector competition and, fluctuations in consumer demand.
The Vision - Business Mission Statement
The Concept of Operations - Strategy Formation
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The Future Strategy. In the shadow of considerable growth in the candle market (see fig 1), revenues and profits have steadily declined at Colonial Candles, owing to shrinking demand for the product line and the perception of quality against the costs being unfavourable when evaluating a purchase of a Colonial Candle. Total revenue for the Company’s Candle sales in 1999 was down 10% to £0.8million, with profits of £150,000 after tax. Inward investment has been marginal, with little in the way of new products launched or enhancements to production processes being made. The company name is associated with an out-of-date product - the emergency candle pack - with brand awareness existing primarily with the older generation of consumer who associate the product with power cuts. Current market research shows that this age group is now the smallest of all of the consumer groups. Whilst the present trading situation for the company is not terminal, securing a long-term future for the company will require changes. The business has fairly sizeable financial reserves to draw on. The machinery is dated but permits flexibility in the production process. Presently company production is at 50% capacity, with a work force of 25 and, therefore, there is the flexibility to support product development. No job losses are envisaged.
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Radical Changes. The future success of Colonial Candles lies in a radical change of perspective. Having completed an Ansoff’s matrix analysis of the market, rather than producing branded candles for the end customer, the focus of the company should be establishing itself as a business-to-business supplier of quality candles for the retailer to brand with individual marketing mixes. This focus will enable the wide scale penetration of the market geographically as well as demographically. Such a change will be based on a comprehensive review of the candles produced; establishing a greater degree of ‘market fit’ (products produced achieve a greater degree of satisfaction in response to market demands) with the introduction of new lines together with the removal of obsolete products from the range offered. This process, which involves substantial changes in all areas of the business, will draw upon inherent strengths within the business to exploit emerging opportunities in markets such as the Air-care sector.
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Company Brand Name. Colonial Candles does not possess a strong brand name similar to that is enjoyed by the likes of Prices, in fact, it is felt that the name may even have a negative facet. To address this, with either a change of name or a marketing campaign to create a brand image would require substantial financial resources. Even then, the results may not necessarily be measurable for some time, nor success guaranteed. It is felt, therefore, that this perceived lack of identity be used to the company’s advantage. A typical customer displays limited or no brand loyalty when purchasing a homogeneous item such as a candle. In the majority of cases, any perceived quality is derived from the retail outlet from which the homogeneous product is bought and the packaging in which it is presented. Given these factors, a business-to-business approach would facilitate the company in focusing on the production of quality candles, which retailers can brand and market according to their customer base. In keeping the name of the company for the foreseeable future, it is intended to protect the psychological attachment that employees may have with the company’s history.
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A Business-to-Business Producer. Evidence supporting this change is found in the Mintel report, with data indicating that there is increasing fragmentation of the demand by the end customer. By becoming a business-to-business manufacture, selling direct to large retail and large card and gift retailers, and also into grocery stores, a substantial proportion of the market can be penetrated in all sectors (see fig 5). By allowing the retailer to self-brand each candle as their own, with individual tailored marketing-mixes, there is less likelihood of a cannibalisation of the products between retailers (where sales of candles made by Colonial by one retailer directly reduces the sales of the company’s candles by another retailer), since each selected retailer will be distinctly focused on their own market segment. It is also envisaged that an increase in market penetration will be achieved with the exploitation of the consumer trend in seeking value-for-money products against that of the established brands. Examples of this own-brand success can be seen with the success of own-brand baked beans in a market previously dominated by Heinz.
Fig 5. UK Retail Distribution of Candles, by Value, 1994-98
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Cash Flow Advantages. A further advantage of business-to-business sales is added stability to the cash flow and planning processes. The candle market is seasonal in demand, with the likes of Prices selling 75% of their candles in the 3 months leading up to Christmas. This puts a strain on all company resources in satisfying the increased demand during a short period of the calendar. To remove the total effects of this ‘pull’ by the end customer by attempting to shift attitudes towards seasonal buying would be extremely difficult, but by entering the air-care sector an all year round product, the demand for products will be more evenly distributed throughout the year. In addition, market research is to be carried out to establish customer demands for seasonal colours, i.e. Spring, Summer, and Autumn, with a review to increase demand during these periods.
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New Products and Markets. New products are to be developed to enter new sectors. The primary new product is to be a safe scented candle, targeted at the Air-care sector. This sector alone has grown 500% during the last 5 years. Competition within the sector would be from competitors such as, Glade and Haze. By allowing retailers to self-brand a popular selling product, the marketing burden will be off set, enabling entry barriers to be overcome. The Product Life Cycle (PLC) of the Air-care products currently on the market are in the growth stage, and the introduction of the new safer candle will seek to gain rapid market share. The long-term PLC for the product is anticipated to be a ‘growth-slump-maturity pattern’ (see fig 6).
Fig 6 Growth-slump-maturity Pattern
The product will be produced for a number of high, medium and low market retailers, with variations in ingredients and hand finishing differentiating the candles from those competitors. The establishment of these product alliances will be exploited to gain a valuable distribution base expansion for the Table Candle Range, with an extended range of styles available. To further enhance the perceived ‘quality’ of the table candles, a sales promotion of candles in the respective military colours is to be launched, aimed at securing supply contracts to Military Messes for all their social functions. This promotion will not be aimed at adding to the bottom line of the company directly, more at establishing credentials as a manufacturer of ‘bespoke’ hand crafted table candles.
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The Phasing Out of the Emergency Candle. The manufacture of Emergency candles is to be phased out over the next 3 years. The sales revenue that this product contributes to the company is anticipated to continue to fall over this period. To off set any fall in profits, investment and marketing expenditure will be reduced to a minimum. This process is called ‘harvesting’. This will ensure that the maximum profit can be ‘harvested’ from the sale of this type of candle. This product will continue to be sold as it is today under the brand name as this enjoys limited recognition from the elderly, who make up the principle market for the emergency candles.
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Three Years from Now. Within 3 years Colonial Candles will have ceased production of the emergency candle, with the available production resources being focused on the production of candles for the Enhancement or Air-care sectors. In 3 years, Colonial will be an established manufacturer of candles for self-branding sales into retail in the air-care and enhancement sectors. Coverage of the whole of the UK will be achieved with the careful selection of a diverse distribution base, ensuring that the identified demographic segments are penetrated.
Objectives From the Main Mission Statement
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To achieve, in the 1st year of production for the ‘safe’ scented candle, a 4% share of sales in the Air-care sector, increasing to 7% in the 2nd year.
- Expand the number of distribution outlets in all sectors by 20% year on year for the next 3 years to counteract any maturity within target markets.
- To phase out the direct selling to discount stores of Colonial Table Candles, keeping existing discount outlets as a distribution base, for the short-term continued production of the Emergency Candle Pack.
- Sales focus will be securing supply contracts to identified larger retailers with candles for self-branding.
- To develop quickly the reputation for the production of high quality products, at a reasonable price, through the marketing of the products direct to the identified distributors.
- To introduce new products in the Air-care and Enhancement sectors, at both the high price and low price of the existing product line.
- To divest the marketing mix of the end product to the outsourcer or the distributor, creating a cost saving, with no marketing beyond the distributor except that for the Emergency Candle.
- Production of the Emergency Candle Pack to be phased out over a period of 3 years. However, the retention of the flexibility in production of this candle is to be maintained to accommodate changes in market demand.
Tactical Plan – The Programme Formulation
Intelligence Needs. A market research agency is to be commissioned to compile information regarding the competitors’ product programmes and reviewing potential means of distribution to establish the following:
- Identify the present candle product range and volume sold by the following:
- High quality - Harrods, Fortnum’s, John Lewis.
- Medium quality - Tesco, Asda, Sainsburys', and M&S.
- Lower quality - CO-OP, Clintons Cards.
- To establish the duration of existing contracts with targeted retailers.
- To establish whether competitors will be launching any new products at this year’s trade shows.
- Consumer preference regarding colours, size, shape and fragrance for the new safe scented candle.
- To determine the size and potential value of contracts for the supply of candles for social functions to the military.
Implementation Plan
- This section of the report will detail the marketing plans for each of the products, which Colonial Candles will produce. In doing so, it is recognised that there is some duplication in some of the aspects of these plans and, therefore, for each section, the product that relates to the stated action or parameter will be identified. To ease the identification of the products the following will be used:
Product A - Air-scented Candles
Product B - Table Candles (Non-Military)
Product C - Table Candles (Military)
Product D - Emergency Candle Pack
Outline Plan. This section will address the general plan for each of the products:
Products A & B These products would be a business-to-business product, targeted at demographically and economically segmented consumers. Product alliances will be sought with High, Medium and Low quality retailers who wish to brand the candle as their own, designing their own market mix for their customers. Long-term supply contracts are to be negotiated, offering incentives for unit volumes and longevity. By selling one type of product to a retailer, the intention is to use this as a route in for the selling of the other product.
Product C This product would be sold direct to identified customers, most likely to be Military Messes and their associated caters.
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Product D The production of emergency candles is to be drawn down with production ceasing in 3 years. The manufacture of the candles is to continue at the present levels, selling into existing markets. Only very limited investment and marketing support will provided for the candle. As sales fall, excess production capacity will be made available to other product lines.
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Customer Segmentation. This section will detail the planning regarding customer segmentation for each of the products.
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Products A & B Segmented will be based on available demographic and economic data. From the initial data provided in the Mintel report, it has been identified that product alliances should be pursued and developed with the following retailers (subject to the outcome of further market research), all of which sell to the identified target end consumer groups:
- High quality - Harrods, Fortnum’s, John Lewis and M&S.
Medium - Tesco, Asda, Sainsburys’.
Lower quality – CO-OP, Clintons Cards, other gift retailers.
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Product C This is a clearly defined market segment, based on a perceived niche. There is at present no data available and, therefore market research will be necessary.
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Product D The emergency candle will continue to be sold into the present market segments (see Mintel Report).
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Market Selection. This section addresses how each market will be selected.
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Product A & B Using the data supplied by the additional market research, the retailers are to be prioritised dependent on their attractiveness and likelihood of forming a product alliance for the safe scented candle.
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Product C As a niche market there is very little scope for further market selection. From the research conducted, information detailing the social function calendar of each respective Mess can be used to identify potential ‘heavy’ users of candles.
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Product D This product will continue to be targeted as it is presently.
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Product Development. This section details each product and the respective future development.
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Product A The product is to be sold into 3 distinct ‘quality’ segments. A selection of colours and fragrances are to undergo market testing. Design and size are also to be considered. Different levels of hand finishing are to be investigated, in order to create a degree of differentiation. A range of different fragranced candles, in an assortment of colours and sizes, are to be produced for the sales team. Investigate a fire brigade testing of the candles burning temperature. Test findings to be supported with media coverage and supporting documentation.
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Product B The product, similar to Product A is to be sold into 3 distinct ‘quality’ segments. A selection of colours, designs and sizes would undergo market testing. Different levels of hand finishing are to be investigated, in order to create a degree of differentiation between each product.
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Product C Investigation of printing the regimental cap badge on each of the candles.
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Product D In line with the long term objective to phase out the product, there will be no further investment in product development. Flexibility is to be retained should market demand change.
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Pricing This section details pricing strategies for each of the products.
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Products A, B & C Candle prices are to be dependent on the quantity ordered, together with the quality of the hand finishing and ingredients used for the fragrance coupled with the size of the candle. To encourage commitment on behalf of the purchaser, discounting will be offered on a sliding scale dependant on a number of factors. The longer the contract signed, the greater the discount over and above any concession made for quantity. A contract over a 12 month period to supply will attract a further 0.75% discount, whilst over 2 years, a 2% discount would be awarded. The PLC of each product will have to be considered when evaluating the suitability of price changes over a period of time.
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Product C In addition to the sales discount being offered to the Military Messes, individual orders placed by serving, or retired, servicemen/women, will attract a discount against the normal retail price.
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Product D Pricing of this product will be consistent with that already in place. Towards the end of production, prices should be reduced to maximise the number sound before production ceases.
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Distribution. This section outlines the distribution of each product.
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Products A & B These candles would be shipped direct to the retailer’s chosen packaging company by using a delivery service. In the absence of the customer having a preferred packaging company, an investigation is to be made to identify a potential packing company with which to pursue an alliance. This would enable the candles to be packed to the customers requirement prior to being shipped either to the customers warehouse or direct to the store.
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Product C In reducing costs to a minimum, these candles would be packed basically on site. They would then be shipped direct to the end customer.
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Product D These candles are to continue to be packed on site, before being shipped to the distributor (discount stores).
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Sales Team. This section details changes to the sales team. A change in focus of the company, with a move to establishing business-to-business sales, will cause a serious of changes as detailed:
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Product A & B The sales team is to undergo further training in the skills required to sell direct to large retailers. The sales team task will be to co-ordinate the relationship between the customer and the firm. There will be the requirement to provide an internal sales function, which will support the external sales team.
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Product C An external sales team member would be allocated a group of customers based on geographical location. This would lead to the development of a working relationship with the principle members of the Military Messes.
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Product D An internal sales team member will deal with the sales of the Emergency Candle Pack. Additional training will be provided to increase competencies in areas of account management.
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Marketing Promotion This section will outline the marketing plan for each product.
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Product A Using the data provided from market research and the Mintel report the following promotion programme would be implemented:
- Mail shot to all the identified retailers inviting them to view the launch of the ‘safe’ scented candle at the next trade show.
- Follow up calls by the sales team to determine interest for the launch. Appointments to be made for during the show.
- Prior to the trade shows, advertisement taken out in trade publications announcing the launch of the product. (Endorsed by fire brigade).
- Ensure that the launch of the product is profiled in the exhibition magazine.
- At the trade show launch demonstrate the safety feature of the candle in comparison with the competitors’ products. Have some information from the fire brigade regarding the number of fires started by the use of the competitors’ candles with the higher burning temperature. Hire a safety expert for trade show stand to discuss implications of the safer candle.
- Sample candles made up, complete with packaging, for each of the selected retailers aimed at the identified consumer segment based on demographic data. The packaging would be designed to illustrate the fact that these scented candles will be an all year round seller, as opposed to another seasonal purchase.
- Sales team to emphasis the fact that there would be very little competition between stores selling the product, as each retailers’ candles would be differentiated by their own choice of packaging, quality of ingredients, design and price.
- Follow up visits by a trained sales person in the following weeks to the trade show.
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Product B Using the data provided from market research and the Mintel report the following promotion programme would be implemented:
- Mail shot to all the identified retailers inviting them to attend a presentation to be given at the trade show. If desired this presentation can be given at the company’s chosen location.
- Follow up calls by the sales team to determine interest for the launch. Appointments to be made for during the show.
- Prior to the trade shows, advertisement taken out in trade publications. Advertising to be taken out in the exhibition magazine.
- Sample candles to be provided at the show, complete with packaging, for each of the selected retailers aimed at the identified consumer segment based on demographic data. The packaging would be designed to illustrate the fact that the table candles will be an all year round seller.
- Sales team to emphasis the fact that there would be very little competition between stores selling the product, as each retailers’ candles would be differentiated by their own choice of packaging, quality of ingredients, design and price.
- Follow up visits by a trained sales person if the following weeks to the trade show.
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Product C This plan would be based on further information provided by market research. The main features of the promotion are as follows:
- Mail shot to the regimental mess secretaries and to the identified caters’ of the mess’s.
- Follow up calls made by area sales rep.
- Samples sent
- Posters made up and sent to the Mess’s to be displayed with ordering details by post.
- Regiments are to be invited to visit the factory to see how their candles are made.
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Product D This promotion plan would be reduced. Very limited expenditure would be made available. The following are the main features of the promotion:
- Mail shots to present customer base.
- Internal sales team member to follow up each account on a regular basis.
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Advertising. This section will detail the different forms of advertising to be implemented in support of each product.
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Products A & B Colour adverts are to be taken out in the run up to the trade show in trade publications. On completion of the show, having signed up to supply to some retailers, no further advertising would initially be required. On establishment of a product alliance, close co-operation would be essential with the retailers marketing department, to facilitate their own marketing requirements.
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Product B Regular adverts are to be taken out in trade publications in the run up to the trade show in trade publications. There after, advertising would be placed in trade press 6 months prior to Christmas.
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Product C Regular advertising is to be placed in military journals such as Soldier magazine.
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Product D Mail shots, together with limited trade advertising will be used. Advertising to peak in the run up to the winter months.
Control and Communication
Customer Feedback Study Investigations are to be made into the design and implementation of a ½ yearly business customer feedback study that will be used to provide accurate information on a variety of factors regarding the relationship between Colonial Candles and the distribution base. All departments in the company to improve product and service quality will use this information.
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Market Research Market research into new products, and fragrances, demanded by the end customer will be completed on an individual basis and, as part of the product alliance with a business customer. In doing so costs can be shared, together with knowledge within the company. Independent information, where appropriate, will be shared with all of our product alliance partners.
Internal Sales Support The setting up of an internal sales department will provide the customer a point of contact in addition to the designated sales team member. An additional responsibility of the internal sales team will be to deal with complaints.
Internal Communications With a work force of 25 internal feedback will be by a series of meetings. In the future, it may become necessary to consider newsletters if the workforce were to increase in size. These feedback sessions will be used as a means to keep the workforce fully appraised of new business and, over all company performance.
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Sales Incentives Sales incentive schemes should be designed and implemented were by external and internal sales are rewarded with bonuses when securing larger orders.
Bibliography
Marketing Management Philip Kotler
The Millennium Edition
Marketing Jan 2000
(MBA Leicester University Course Notes)
Mintel Marketing Intelligence Report (Candles 26/4/99)
Notes from Interview with the MD and Sales Manager of Colonial Candles
Information contained at: