CLIQUE PENS: THE WRITING

IMPLEMENTS DIVISION OF U.S

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Section-B Group 6

Ajay (190201006)

Akshita (190201012)

Debatra (190201030)

Lakshay (190201057)

Tejesh (190201115)
CASE SUMMARY
Elisa Ferguson, the president of the writing division of Clique Pens was in dilemma about
what could have gone wrong in strategy, that the gross profit margin of the company is
declining. She discusses this issue with various members of her company, and she finds that
the deterioration of the margin is mainly due to the trade discounts.
One of her VP of marketing and his team, Logan Chen, felt that the trade discounts should be
reduced, and this capital should be diverted to development of the market so that the
company can gain more revenue and increase the gross profit margins.
One of her VP of sales, McMillan had a different opinion, he says reducing trade margins
will affect the company badly as the company will lose out on the retail shelf space
competition. He suggests that the company should reduce the consumer advertising and then
reinvest the capital in the Market Development Fund to increase the sales and profit.
Ferguson knows that both are correct because in a matured market losing out on retail shelf
space is not an option and trade discounts once offered is very difficult to track back. Balance
of both marketing and sales spheres is what she is hoping for.
Ink Formula was Clique pens competitive advantage. Pens and Pencils were seen mostly as
commodities, so brand loyalty was low, and this resulted in a hyper competition. Retailers
had power in their hands, and they demanded the price and allowances like just in time
delivery, shelf detailing, stocking, special promotions. For manufacturers it was becoming
less and less profitable.
They usually allocate 15% to advertising, 30% to consumer promotions and 55% to trade
promotions. They had to allocate more to the trade promotions because of the aggregations of
major retailers. Most of the advertising often tagged with retail partner. Consumer
promotions like coupon redemption rates were 1.3% lower than most other consumer
products.
Clique occasionally worked together to promote something like special pen and pencil pack,
and this also increases the cost as much as 10%. Clique also found that social media also had
less response rate so this a minor part in marketing.
She believed deals did little to obtain real merchandising support and price discounts, were
the most effective if they want to reach the final consumer. After discussing with few
retailers, she understood that pricing issue was a concern. Retail Channel management was
delicate in this case as stock-outs were common. Predictability of inventory replenishment is
still an issue in this industry. If the display were empty than it will badly affect the company’s
sales. Clique’s salespeople maintained the accounts individually, so they were many
inconsistencies. Company’s customer service was in trouble and didn’t know how to solve
this problem.
Consumers responded to innovations and special seasonal sales like back to school. When the
three met at Ferguson’s office, Chen estimated that consumer based MDF could generate an
additional increase in five percent and increase the gross profit margin by two points. He
wanted to introduce more customer-based discounts like “instant coupons”.
The main motivation for this meeting is to set the clear objectives that is compete for retail
space, and brand recognition in the mind of the consumer. This can be done only by
decreasing the prices.
Q1. Should Clique be more concerned with retailer needs (requirements) or consumer
needs? What factors drive this decision?
Ans 1 Both retailers and consumers are equally important for the company. As these products
were considered as commodities, retailers and consumers had more power as they can easily
shift to another brand easily and brand loyalty is low. It is known fact that without the retail
shelf space, they manufacturer would not succeed. But considering the goal of increasing
sales revenue, price discounts seemed the most effective way.
Packaging and designs are an important factor to influence the consumer, keeping in mind the
size of the product. Brand recognition happens if the advertisements are focused around price
discounts and features as they distinguish between the competitors. Thus, Price discount
promotions at point of sale could have a bigger impact.
Providing Discounts to retailers can be driving factor for satisfying retailers needs as to
succeed in the market or increase the market share. Considering that the retailers have more
bargaining power, funds should be allocated in such a way that we can acquire more shelf
space and also incentivise the retailer for the product placement, so this is an important factor
for consideration

Q2. Should Clique institute MDF as a marketing initiative or another means for sales to
compete for retail shelf space? If marketing how will it be funded? If sales how will it be
funded?
Ans 2 Clique should institute retailer oriented MDF as another means for sales to compete for
retail shelf space. The customer-based strategy will result in reduced shelf space and sales to
competitors. It is clear that the retailers have strong power here and in order to remain and
compete Clique Pens will have to adjust some bit. Pens are a convenience product hence
require very low decision-making effort. People generally pick and buy what they see. It is
very rare that people form loyalty for a brand of pens. In such a scenario what customers see
they buy. In a highly competitive environment, it is better to improve your delivery channels
rather than spending on social media. It is given in case that 80% of company’s sale come
from deals with retailers making them a important part in business. If the company decides to
cut the retailer benefits the buyers (retailers) will shift to other manufacturers because their
customer is not brand loyal and are not price sensitive. As the customers are not price
sensitive company should use pricing to fund MDF. As suggested by McMillan the retailers
drive the sales and increased sales will lead to increased revenue and better gross margin.
Q3. If clique were to fully implement MDF oriented to consumers, how should Ferguson
go about obtaining retailer support? What kind of competitive response should be
expected?
Ans-3 If clique implement MDF oriented to consumers it will enhance the brand image and
visibility hence attracting customers and increasing gross profit margin. However, retailers
will object as some o them have demanded a 5% increase in order to maintain same order.
Taking all this in consideration the company should convince retailers by stating that the
funds will be used to attract customers which in turn will increase sales hence will help
retailers restore lost margins. Apart from this the other incentives like percentage share in
profit. Such a strategy will also help boost the profit of the company and margin of the
retailers.
Competitors can react by launching more products to increase their portfolio and visibility.
They can also lure customers by providing heavy discounts to attract customers but such a
move won’t help as the writing segment is not very price sensitive. The competitors can
advertise more to pull customers and also give a share a profit margin to retailers for short
run so as to gain shelf space.

Q4. How should Ferguson manage the pull/push conflict between the marketing
department (Chen) and the sales department (McMillan)?
Ans-4 The strategy that should be implemented is retailer MDF followed by consumer MDF.
The sales department should focus on retailers while the marketing department should focus
on consumers. To make sure that there are no glitches a shared communication system would
help to build trust among sales and marketing departments. Also, Evaluating the business
model so as to eliminate inefficiencies, following long term goals which can be profitable to
both the departments.