Calyx Flowers: Managing Profitable Growth

Calyx Flowers should pursue its strategy for increasing internet advertising out of its three marketing strategy options. This selection was evaluated on the basis of the following factors:

I. Return on Marketing Investment (ROMI)

The ROMI is based on several assumptions:

a) The extra (increase in) marketing cost for all three strategies is the same.

b) The yield/revenue generated per strategy is assumed to be the same.

c) The given 40% internet sales are due to online advertising only.

Per analysis in Appendix attached, the return on market investment is the greatest through internet advertisements (Appendix 1), which yield $1.65 for each extra dollar spent for ads, as opposed to $1.35 for direct mail/catalog (Appendix 2), and $1.11 for mass media ads (Appendix 3). Since internet sales are 40% of the company's total sales, any change in that media spend is likely to generate a greater return.

II. Weaknesses of other promotion options

If Calyx decides to increase its catalog to rented mailing lists, it only focuses its targeting to its initial women customers. This target market is only based on demographics. It provides no information on what this customer set values. While these catalogs may reach new potential customers for that demographic, it may also reach customers who value lower prices and ease of shopping over freshness and longevity. Similarly, with mass media advertising, Calyx may be reaching out to an even broader range of customers who have very differing needs when it comes to purchasing flowers. This would not be the best targeting tactic as the masses can select from a choice of many competitors in the market.

III. Identifying customers that value Calyx Flower's differentiating factors

The key differentiating factors of Calyx flowers subsidiary is that within the flower market, it leads on key qualities, i.e., flower variety, freshness, flower longevity, and customer service. While these qualities make their flowers expensive, it does not make them overpriced for events where quality trumps price (e.g., wedding, corporate gifting & events, other special occasions). Given the knowledge of its key differentiators and overall market, here are some reasons why Calyx Flowers should consider internet advertising:

* While Calyx's direct mail order roots were successful towards its current target market of women 30-55 yrs. of age, the firm should recognize that there exist additional segments of the market that may also value Calyx Flower's flower variety & quality. These new targets could be business and special occasion gifters that value Calyx's flower quality despite the high price. For many of these groups,