Submitted by-

Rahul Rai
PGSF1928

Case Analysis: Clique Pens: The Writing Division of U.S. Home

Abstract:
The Clique Pens Writing Implements division of U.S. Home is a manufacturer of a full line of
pens, pencils, markers, and art supplies. Despite solid sales, division president Elise Ferguson
has seen gross margins drop from 42% in 2010 to just over 36% in 2012 as a result of various
discounts, allowances, and other off-invoice deals. She is now considering a move away
from these discounts in favour of Market Development Funds (MDF), which would be used
explicitly to promote retail merchandising activity for Clique and in theory provide the
company with more control of trade promotional dollars to influence consumer behaviour.
Along the way, Ferguson must consider the structure and problems of various trade
promotions and the conflicting needs of her sales and marketing departments. This case
introduces basic elements of promotion and pricing policy and the challenges of marketing
through major mass retailers.

Situation Analysis:
Using customer-oriented MDF (Market Development Funds) as suggested by Logan Chen,
division VP of marketing, is one way to increase profit with higher sales. He also believes
that consumer-directed marketing and co-op advertising campaigns, such as instant
coupons, brand awareness advertisements may drive sales and increasing prices could help
to improve profits both for clique and its retail buyers. Consumers are not price-sensitive
and they also do not have strong brand loyalty. Therefore, any price changes will not result
profit loss. As Logan Chen suggested 6% price increase would result only 1% reduction in
sales.
Despite the facts given above, McMillan believe that implementing retailer-oriented MDF
will increase market share by gaining more shelf space in retail centres. He stated that the
company spends 30% more on advertising activities than necessary amount. In competitive
environment only way to get more market share is to offer discounts and use additional to
take advantage of opportunities.

Solutions:
The Clique Pens Writing Division of US Home is one of the well-known manufacturers of a
full range of pens, pencils, markers and art supplies. In 2010 the company’s gross profit
margin was 42%, which declined to 36% in 2012 due to various discounts, allowances and
off-invoice deals. The competition in the industry is very high; therefore, the company needs
to implement a strategy that could help them in increasing their gross profits. The increasing
challenges of the industry and high power of the retailers forced the president Elise
Ferguson of Clique Pens Writing Division of US Home to revise the current strategies, costs,
marketing, sales plans and other initiatives to eliminate their excessive costs as well as to
increase the shelf space and life for their products.
If the strategy suggested by Logan Chen implemented the sales and profits may increase,
however this consumer-based strategy may result in losing of considerable shelf space and
sales to competitors as a result of ignoring additional allowances and discounts to retailers.
It has to be admitted that retailers have a strong power in the market and their dominance
make Clique Pens to compromise in some degree. Possible benefits to retailers can be just-
in-time deliveries to decrease their stock problems and seasonal discounts. In comparison to
electronics it is not obligatory to sell Clique Pens products if the same product types –
substitutes offered by competitors. As stated, that only 1.3% of consumers use coupons to
buy Clique Pens. Continuing this strategy to gain consumers is extremely useless and costly
for company and this type of wrong decisions can push company out the market. Therefore,
it is not a good strategy mainly to focus on consumer-oriented MDF by offering discounts
and coupons also showing ads to consumers.

Another Hybrid solution could be, according to the business nature and market situation it is
difficult for each company to sustain by focusing only on single strategy. As retailers,
consumers and advertising each component is very important for the company in order to
generate more sales. Generating more sales is not the primary goal of the company.
Company is trying to regain its profit margin ratio which is declining from least two years
due to increase in promotional expenses. Therefore, company need a set of comprehensive
elements which should increase the profit margin of the company along with the sales.
Therefore, in addition to identify the appropriate spending ratio of promotional budget it is
necessary for the company to increase its selling price in order to achieve desired goals as
the customers are less sensitive to pricing.