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Vermont Teddy Bear Case: Calyx And Corolla

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Question: Describe about the Vermont Teddy Bear Case Study?     Answer: Vermont Teddy Bear Company has diversified its horizon and acquired Calyx and Corolla, a company that ship flowers through mail catalogues. The floral distribution industry includes more than 75,000 florists (Hunter). This industry is a seasonal industry as different flowers bloom in different seasons. The wholesaler sells the flowers to retailers at a discounted rate and further it is distributed among different retailers. Calyx and Corolla is one of the retailers, which deal in online trading of fresh flowers. Their shipper is Fed Ex. This company deals with partnership in three ways- the flowers growers, Fed EX and the company itself. The new distributional challenge is achieved by preparing special boxes of perfect flowers and shipping it right away to customers (De Hertogh). 1. Computation of Acquisition Cost Here, CAC for Calyx and Corolla is done based on customer receives the catalogue and places the order. An order is assumed complete when the customer places the order. No costs and revenue after that are included. The following excel sheet will help in identifying the cost of acquisition of a customer. Assumption: Sending cataloges to rented mailing lists only taken into consideration A customer becomes a prospect customer when he receives the catalogue and places the order. Yield taken is the percentage of prospect customers. Advertising costs are not taken into consideration. Costs and Revenues are not taken after placing the order According to the strategy given by Calyx and Corolla, the mailed recipients being mailed online are 13 million in which the rent mailing yielded in 1% (according to the strategy). The production and mailing cost of each catalogue is $0.048 and cost of mailing list rental is $0.06. The prospect customers are according to the yield came out to be 130,000. The total cost of mailing came ot to be 0.54 and the marketing spend for 130,000 customers where 70,200. The cost acquistion without wages came out to be $0.54. Whereas if hypothetically we take marketing and sales staff as 10 and with salaries paying each staff as $100. The total cost came ot to be $ 1000. Though with headcounts, the customer acquisition was more or less the same as 0.54769 ≈ 0.548. Equations Cost and production of mailing per customer= Production and mailing cost of each catalogue + cost of mailing list material. Prospect customers= Total rented mail recepients X Rented mailing yield. Marketing Spend= Prospect customers X cost and production of mailing per customer. Total Headcounts= No. of sales and marketing staff X Cost per employee. Cost Acquisition without headcounts= Marketing spend/ Prospect customers. Cost Acquisition with headcounts= (Total Headcounts + Marketing Spend) / Prospect customers. 2. Calyx and Corolla’s Customer Life Value Assumptions: Customer Retention= 90% per year Infinite time horizon Time-vale-of-money issues ignored. Stability of numbers Only catalogue channels of sales to be considered. Cost and Revenues of flower recipients not to be included Assumes cost of goods of bouquet of flowers Ignore all costs related to shipping, packing and processing. Each order is assumed to be priced range between average value between $40 and $60  As revenue margin decreased to 50% Cost of goods sold Average of bouquets ranging from $44 to $126 = 85 Average of considerable offering from $40 to $60 = 50 For a year= 12 months Gross margins= Revenue-COGS/ Revenue= (70200- 85 X 50 X 12)/ 70200 = 19200/ 70200 = 0.2735% As revenue margin is decreased to 50% of  gross margin= 0.13675%  The formula applied for lifetime value is CLV= Gross margin X   (Solomon, 2012) Here, r= customer retention percentage D= discount rates Hence, CLV= 0.13675 X 0.9/1-0.9 = 1.23075 Hence, Cost Acquisition should be 1/3rd of CLV As Cost Acquisition is 0.54, according to CLV, Cost acquisition value is coming as 0.41. According to the above study, certain limitations can be done: Many assumptions are taken into consideration that is why the appropriate value is a little deviated. Hence, here customer retention as an asset is quite low. Given the study, it needs revision. The management sales, wages, and others are not taken into consideration leading to change in values. The retention of customer value is quite high not applying realistically.   3. Segment Selection for Calyx and Corolla The selection of the type of segment to be selected would depend on several parameters. These parameters are as follows: What would be the volume of demand associated to each of the segment? What would be the frequency of demand for each segment? Who would be the target customers for each segment? On complete analysis of these questions, it has been estimated that every segment is associated with some benefit. On focusing on the first question regarding the volume of demand, it can be assumed that Weddings and Funerals segments are associated with the huge bulk of orders. An elaborate display of flowers on a huge scale is commonly observed in the type of rituals (Maureen and Stringer). Comparing to the segment of ‘Romantic Gifts’, it can be analyzed that the volume increases to a certain hike on special days, but not as much as the wedding segment. On the other hand, the home décor segment is associated to low transactions and depends on personal demands (Christopher, Martin, Adrian Payne, and David Ballantyne). Relationship Marketing. Taylor & Francis, 2013. Hence, targeting this segment would influence bulk order for Calyx & Corolla. Based on the second question, it can be analyzed that the frequency of demand is highest in Home décor segment. This is because these sectors involve regular utilization of flowers. On the other hand, the frequency of demand associated with the segment of romantic gifts and wedding fluctuates considerably (Skok) , it cannot be compared directly. Analysis of the final question highlights towards the most important sector for marketing (Qiu), i.e. identification of the target audiences. The Romantic Gift segment is associated with the males, who purchases bouquet in a definite
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