As of 1995, we believe that Calyx & Corolla should adopt a high premium pricing strategy and have also identified tactics it should implement in order to improve on its product, price, place, and promotional activities. We arrived at our conclusion by analyzing Calyx’s marketing strategy, perceived value or willingness to pay, competitors’ prices, and the company’s costs. First of all Calyx & Corolla is in the floral industry, a multi-billion dollar business comprised of growers, wholesalers, and retailers.
It started when founder Ruth Dowses created a mail order business selling garden implements and accessories. After selling the business to Williams-Sonoma, a direct mail and retail seller of cookware and other kitchen merchandise, Dowses continued working there for 4. 5 years, gaining a substantial understanding Of business operation models. After resigning from Williams- Sonoma, Dowses started Calyx & Corolla. She recruited the UP of Operations, Fran Wilson, from her old employer to design the operations system and to be in charge of operating issues.
Also, she hired a marketing specialist with 20+ years of experience, a former creative director at Roger Worth, to oversee all the marketing activities. Fast forward to the present, Calyx’s currently operates by buying flowers from growers in Florida, California, and Hawaii, and then delivering the flowers directly to customers via Faded. This success in designing its distribution channel was the key to the compass success up until now. In the floral industry, customers want to get fresh and long lasting flowers.
These demands have determined the company’s choice of distribution channels. By linking growers directly to end-users and successfully bypassing middle layer distributors, Calyx & Corolla provided not only longer-lasting flowers, but also rower costs because multiple mark-ups were avoided. The keys that allowed it to carry out the abovementioned business model are the following: i) A strong relationship with the grower and ii. A strong relationship with Faded. However, the retail florist industry has been facing numerous changes within the past few years.
The supply of flowers has shifted to developing countries. New technology poses as both threats and opportunities. Customer tastes have changed, and the threats of new substitutes are increasing. For starters, suppliers in the industry have power over the prices of flowers sold to retailers. Depending on the season and the demand for particular flowers, suppliers are able to adjust the prices accordingly. In order to counter this and to neutralize supplier power, Calyx & Corolla should not be dependent on just a few suppliers.
What has worked for Calyx was that it signed exclusive contracts with them and then educated the growers on how to execute the order accurately and efficiently; Calyx also provided them With additional support such as giving them shipping boxes, vases etc. This had the double benefit of providing value for both the grower and Calyx. The grower got training and a guaranteed customer while Calyx received the ream of the crop from an exclusive vendor. Communications between the company and growers were also very key and necessary.
Calyx & Corolla gave demand forecasts to its suppliers, and in turn us pliers notified the company of any low yields or excessive yields. As a result, Calyx could plan ahead by either using other suppliers or making special promotions to its customer base. Therefore because the company can predict what will be in heavy demand, it was possible to implement economies of scale. However, we propose that in addition to the compass suppliers concentrated mainly in Florida, California, and Hawaii, Calyx & Corolla should consider other sources of growers/suppliers, like growers in Mexico.
It can give the Mexican growers the same sort of mutually beneficial relationship it has with its American growers and also possibly receive the same (if not better) discounts for bulk purchases. Other problems include new entrants and established rivals. New entrants offer new competition, while facing barriers to entry. They face higher costs because of supply-side economies of scale. Because Calyx & Corolla has an established clientele and large orders to fill, it has the benefit of economies of scale. Furthermore, Calyx’s relationship with Faded, constantly improving, operates now as both an asset and a weapon to deter new entrants.
The relationship has blossomed to the point where prices can now be negotiated by weight, and Faded leaves trailers with major growers during the peak season, replacing them when full. Calyx has communicated to Faded about its business enough so that Faded employees know not to leave packages in the winter cold if no one is at home. Finally Faded has a computer terminal with an online tracking system set up in Calyx’s office so that shipments could be traced. Because of their great working relationship, Calyx can enjoy better economies of scale than new entrants can.
Moreover, new entrants also face other incumbency advantages. Without the necessary experience and an established clientele, new entrants lack any reputation to establish a good client base. Established rivals have power through price competition. In order to counter established rivals, Calyx & Corolla should find new niches or offer different products/services that differ from their competitors. For example, substitutes to floral arrangements pose a major threat to florists. Since floral arrangements are perishable and inedible, they are seen as luxury goods to many consumers.
Popular substitutes to send as gifts are fruits and cookie bouquets/basket. In order to compete, Calyx & Corolla should buy and advertise flowers with longer lifespan so cons_Seems can more likely feel that they are getting their moneys worth. Moreover as of the present, 70% of Calyx & Corolla’s revenues comes from catalogs sales. By circulating catalogs 6 times every year and targeting those who have purchased at least twice in the past year, Calyx & Corolla has sold mainly to working women with substantial disposable incomes.
Based on their analysis, the largest potential group of clients were those who are unaccustomed to buying via mail orders. These customers have the power to purchase goods, negotiate prices, or purchase goods from another competitor. In order to respond to customer power, Calyx & Corolla should expand their services to better suit their target customers. By offering services like discounts for return customers and large orders, customers are less likely to seek out other florists.
It can send reminders to customers about special upcoming days, like holidays, birthdays, and anniversaries. It can utilize the strategy of sending reminders to customers, especially husbands and boyfriends; as a result it can better compete in the market. By providing special services and quality work, Calyx & Corolla can add value to their business and gain/keep customers. Other marketing approaches are attracting corporate clients from promotional tie-ins, which has a major opportunity for incremental sales and broadening the customer base.
Also publicity like positive press releases and journal article coverage are also carried out by Dowses herself. The promotion strategy therefore should be based on different customer hypes, cycle, and also need to create customer demand (flowers are extra and unnecessary spending so we may need to tell enticing stories to bring out more demand for flowers). The main promotion focus should therefore be on existing customers for the normal days (cheaper and more effective) and target new customers during the special holidays.
We propose thus the following plan: Resource Existing Customers New Customers Media Exposure 15% Holiday advertise campaign on newspapers, radio and television would be the effective way to attract clients to dial in directly to order products. It will be effective for new client acquisition. Direct promotion 35% Constant direct mailing (monthly or quarterly) and shipping of catalogs to existing clients to stimulate repurchase. Mail catalog on special holidays. Only send to target audience, ex. Send to families on Mothers Day.
Leads conversion -Existing customer outbound – depends on inventory and mainly do it on non- peak seasons. -Segment existing customers by the reason of past purchase (design questionnaire when clients purchase), and promote base on that reason. For example, if a client bought flowers on Valentine’s Day, call him to remind “show constant care to the girlfriend. ” Obtain customer leads from vents like flower exhibitions, attend events and collect names with questionnaires, and finally store into potential customers into company’s database.
Outbound or mail the customers for the holiday campaign and promotions. BIB campaign Build relationships with corporate clients, ally with welfare departments and HER to either offer discount campaign for employees or to sell flowers to the company for special events Forge strong relationships with firms like restaurants and wedding companies to use or sell Calyx’s flowers. Finally, the current distribution channel that Calyx & Corolla should head towards is inline. For starters, Calyx does not even have a physical stores and even a distribution center that customers can shop in.
By pursuing virtual channels, Calyx’s customers can either order by phone, by fax, online, or by mail. We suggest that Calyx keeps the same strategy in order to keep the cape low. The company can then use the cash flow to invest in its products and promotions. Calyx can also extend its market to service BIB clients. For example, it can forge a business deal with certain companies like restaurants, giving these companies fresh flowers to sell to their own clients on the holidays. It would not only increase product sales but the clients would also play a role in making up the “physical channels” of Calyx & Corolla.
Doing so also markets to potential clients the physical experience of Calyx’s flowers, and hopefully preparing them for future purchases via Calyx’s virtual channels. Therefore according to Calyx current position in the market, it should set a higher price consistent with higher positioning in the flower industry. Utilizing its abovementioned competitive advantages, Calyx & Corolla can provide high-quality (or at least perceived high quality) products. Quick delivery is a ore value in flower industry, so the perceived value will be higher than that of its competitors.
In addition, a higher price itself will enhance the perceived value. Because customers buy flowers as gifts in many cases, customers require appropriate quality and they draw inferences about its quality from price. Contrary to the microeconomics assumptions, high pricing can lead to higher demand in this particular case because it signals a higher quality in this situation. Also, customers tend to not be as price-sensitive when they buy gifts. Therefore a high price will not decrease the demand so dramatically.
Although its price will be higher than its competitors, a higher price will differentiate Calyx & Corolla from its competitors and make the positioning of Calyx more distinct. In this case, it is not a good idea to follow the pricing of competitors. To develop a new way of selling and communicate with newly segmented customers will cost Calyx & Corolla a significant amount. Hence, a higher price unique to Calyx’s perceived value seems the appropriate way to retrieve the costs and to develop new marketing strategies. That approach in addition to the proposed tactics listed above will propel Calyx to further growth into the future.