In September of 2003 the Vermont Teddy Bear Company sought to expand on its current service offerings by acquiring the flower deliver service company Calyx and Corolla. A few years later, in 2007, the company was renamed to Calyx Flowers and in its time of operation has served as a healthy profit center for the Vermont Teddy Bear Company. However, while experiencing gross margins near 50%, the company does not believe that Calyx is performing to its full financial performance potential. The marketing problem lies in how Calyx maximizes/ sales revenue while being limited by a lack of resources to pursue multiple marketing approaches. To date the company has primarily focused its marketing efforts around catalogs mailed to existing customers, previous flower recipients, and other non-customers fitting the demographic of current customers. The Calyx marketing team identified increasing the catalogs mailed, increasing mass-media advertising (i.e. radio and television), and increased internet advertising as three potential avenues for future growth. The following is an argument for increased use of internet marketing to bolster the company??™s exposure and sales revenue.
The most important goal of Calyx Flowers is to maximize sales revenue while under the impediment of limited resources and marketing budget. To obtain increased sales revenues the company must be focused around increasing and retaining customers. At the present, the floral industry is fragmented meaning no single enterprise has large enough market share to influence the industry??™s direction. Calyx Flowers, however, has pioneered the concept of shipping flowers directly from the grower to the recipient. Currently, Calyx Flower??™s customer demographic tends to be 30-55 year old females with middle to upper level salaries and higher than average levels of disposable income. The typical customer expects the freshest flowers, most unique arrangements, longest lasting and largest selection variety, and affordable pricing. Like other companies in the floral distribution industry, the demand is seasonal and peaks around popular holidays. Understanding the industry and the basic similarities of the average customer, the smartest growth strategy for Calyx is to focus on increased internet advertising.
The potential to reach new and existing customers through internet marketing greatly exceeds that of the catalog mailings and television/radio ads potentially considered. The greatest reason for this is the ability to segment the market through various tools and services offered on the web. Perhaps the most differentiating aspect of marketing through the internet is that it allows customers to seek you out rather than you focusing on finding the customer. Through web search optimization companies can increase the visibility of their webpage in a typical search for ???flower delivery??? or ???Valentine??™s Day gift???. Tools like Google AdSense can view a personal computer??™s history and strategically advertise towards past web searches, this presents constant reminders for past customers. Another internet marketing strategy is email marketing to send promotional offers and coupons to existing customers and past recipients. Previously the company was spending $0.68 per catalog and an additional $0.06 per name for mailing list rental. At 10 million catalogs sent annually, their expense came in just under $7 million with return on investment of only $188,800 or a 2.7% yield. Email marketing allows the company to greatly increase the number of customers receiving offers as well as the number of advertisements sent annually at a significantly lower cost. Finally, perhaps the most important tool for market segmentation is the use of affiliate marketing. Through affiliate marketing, the business rewards an affiliate for each visitor or customer brought about by the affiliate??™s own marketing efforts. Calyx can offer this benefit to advertise on affiliate websites that have demographic, life cyle, income, occupation, and psychographic similarities. The prospective for internet marketing greatly exceeds that of continued catalog mailings and radio/television marketing because of the increased potential in reachable demographic markets and the increased likelihood of new business through customer searches.
While there is pressure to maintain current customers, for Calyx to continue to grow and see financial performance exceed that of their competition, they will need to develop new markets with different demographics. The use of internet marketing can help them to achieve this. Suggestions include looking to target men by strategically advertising on sports sites, podcasts, and in business journals. While this market??™s purchasing power varies, it is currently very large and continuously growing. Affiliates can be established with such sites as ESPN and Sports Illustrated. ESPN airs internet radio and records podcasts on an hourly basis that can feature promotional offers and increase advertising around popular holidays. Calyx should also look to create customers through promotional offers on discounted daily deal websites similar to Groupon. They should strategically place these promotional offers during the non-holiday seasons to stimulate off-season sales revenue. Once new customers experience the ease of use and quality of product, they will be more prone for repeat business without requiring promotional offers. The marketing team of Calyx should chose internet marketing over increased catalog mailings and mass-media advertising to position them for future growth.