Deck 12: Small Business Marketing: Product

Question 1

Healthy Grub for Man's Best Friend
Some small businesses gain instant fans, often because their products or services strike a nerve to customers or generate buzz. But getting those customers to become loyal fanatics can be a challenge.
Marco Giannini's natural dog treat company, Dogswell, had seen annual sales of items such as Happy Hips and Mellow Mut grow from zero to $17 million in five years. With that kind of loyalty, he wanted to take Dogswell into the much bigger market for natural pet food
Marco was fresh out of business school and had experience starting one company, a natural beverage company called Clear Day, had gone bust in 2003. Giannini had overspent on an unproven concept-forcing him to fold the business, give up his apartment, and sack out on his father's couch. That was where he decided to launch Dogswell later that year. The idea was to create healthy dog treats enhanced with supplements to help fight conditions such as arthritis and hip dysplasia-something Giannini's childhood dog, Emily, had suffered from.
Giannini attributes the success of Dogswell to the "no frills" attitude of the product packaging. "It's about simplicity. It's a simple product line with easy-to-read ingredients. We make everything easier for the customer, even the product names. The Breathies are for a dog's breath. The Hippies are for a dog's hips-it's very selfexplanatory and that's what people appreciate."
Dogswell had seen more than 100 percent growth each year since its launch in 2004. The company had 21 employees, 60 varieties of treats, and revenue of $17 million. So all was well, but Giannini felt he had outgrown the dog treats niche. "I wanted to become a household name, and I figured, food was the way to get us there," he says. Many of Dogswell's customers had the same idea: For years, they had sent the company's Los Angeles offices e-mails asking when Dogswell was going to introduce a line of dog food.
In the spring of 2008, Giannini decided the timing was right and he had enough cash on hand to take the plunge. He hired food scientists who worked on recipes for kibble, and after settling on one that seemed right, he contracted with a food manufacturer. He sent the kibble to a testing facility to stage a series of canine "focus groups." The result: Dogs preferred Dogswell kibble 15 to 1 over the leading natural-food brand. "That's what made us press the Go button," Giannini says. Meanwhile, his sales team hit the dog parks and retail stores to quiz people about packaging.
With product developed, Giannini had to figure out how to launch it. Obviously, he couldn't personally drive his product to customers, as he had in 2003. Dogswell was a national brand now, with successful accounts at retailers such as Whole Foods and Target. He would need national distribution and a full-blown marketing plan immediately.
Dogswell bought a warehouse on the East Coast and hired 15 employees, most of them in sales. Finally, in September, Dogswell shipped its first bags of Happy Hips kibble to about 1,000 stores nationwide. To entice customers, the company offered coupons for a free $10.99 bag of kibble with every purchase of a 15-ounce bag of treats, which retails for $16 to $20.
It didn't take long for the rollout strategy to begin straining at the seams. Salespeople complained that their take-home pay wasn't what they had been promised. Credit memos from stores looking for their rebates from those free $10.99 bags of food were starting to pile up.
"I felt like I was losing control of the company," Giannini says. "I felt like I was losing control of everything."
Upping the ante even more, Dogswell was scheduled to have its first board meeting with its brand-new private equity investors in March. The investors knew that the dog-food rollout had been troubled. Soon, they were going to want to know how Giannini intended to fix things. He had three months to come up with a plan.
Regrettably, Giannini wasn't around much to deal with these problems. He and Berenice Officer, Dogswell's chief financial officer, were busy making the rounds of private equity firms, in a drive to raise capital to finance the company's brand-building efforts. At least things had been going well on the funding front-especially with TSG Consumer Partners in San Francisco. Most private equity investors had grown cautious, but TSG was continuing to invest and liked Dogswell's track record of rapid growth. By late November, TSG appeared close to signing a deal.
The fact that Dogswell's numbers were slipping wasn't immediately apparent to either party. "They asked for updates, but it was hard to detect what was different," says Officer. Indeed, Dogswell closed a deal with TSG on December 31.
But when Giannini and Officer sat down a few days later with the fourth-quarter results, the damage was clear. They had less than three months to stop the food line from siphoning off the profits from the next quarter. And they had to figure out what they were going to tell their new investors at TSG.
Dogswell's marketing plans were ambitious, but were not working. What is their primary problem

Answer 1

The following are the primary problems of D Company that have been identified:
• Lack of knowledge about global competitors
• Failure to adopt good product strategy
• Ineffective inventory management system
• Failure to determine the level of customer expectations about the product

Question 2

Many small businesses are built around one product. What risks does this approach impose How can small business owners minimize those risks How can a small business develop new products

Answer 2

Product in small business:
A product can be defined as an item or object that is available for sale. It may be a tangible product or intangible product or a combination of tangible and intangible.
"Many small businesses are built one product in the marketplace."
Risks involved in this approach:
The following are the risks involved in this approach:
• Number of competitors will be high in the marketplace, selling substitute products at a lower price.
• Customer's preference and taste will differ from time to time. This may lead to a loss of existing customers.
The above risks should be minimized by developing new and innovative products in the market.
Developing new products:
New products should be developed based on the latest trends, technology, and other expectations of the customers. The following are the factors that should be taken into consideration while developing new products in the market:
• Product designs
• Value analysis
• Creating innovative product
• Product price
• Impact of new product

Question 3

What factors should be considered when purchasing for a small business

Answer 3

Factors that should be considered when purchasing for a small business:
The following are the few factors that should be considered when purchasing for a small business:
• Alternative selection: Before buying any product from the market, the buyer should have several alternatives.
• Quality product: Right and quality product should be chosen that satisfies the needs of the customer.
• Place: Channel of distribution for the product.
• Price: The price of the product should be more attractive to the customers. It may differ from one supplier to another.
• Suppliers: Supplier is the most important factor while purchasing for small business. Select the suppliers who are more suitable for a particular product.

Question 4

Costume Specialists, Inc.
Storybook characters like Madeline, Babar the Elephant, and even Stinky Cheese Man come alive under the watchful eye of Wendy Goldstein of Columbus, Ohio. Her company, Costume Specialists, fashions the complicated costumes for these characters from scratch and sells the creations to book publishers and bookstore chains. Each costume takes about 60 to 80 hours of artistic effort and costs up to $3,000 in materials and labor to produce. Goldstein's business brings in $600,000 annually.
Catch the Wave
Catch the Wave is a marketing information and graphics design firm located in Minneapolis. The company designs Web pages for clients wanting to get on the Internet. Its 20 employees have varied experience in design, advertising, writing, photography, and computer graphics. Prices charged to clients depend on the sophistication and interactivity desired for their Web sites. The popularity of the Internet and World Wide Web has sent the company's annual revenues soaring to $7 million. This figure is expected to continue to rise as more and more clients want to "catch the wave."
Margaritaville Store
Of course, it has to be in Key West! Where else would you expect to find Jimmy Buffett's 400-square-foot shop, Margaritaville Store And what would you expect to find there except T-shirts and other beach paraphernalia The first store did so well that Buffett expanded the retail operation and even added a café in New Orleans. Total annual sales revenues for Jimmy Buffett's empire exceed $50 million. That's a lot of CDs, tapes, books, T-shirts, trinkets, and food-even in Margaritaville!
Select one of the companies described and write a short paper (no more than two pages) about the type of inventory control techniques that the business should use. Explain what would be an appropriate number of suppliers for this company and why you chose this number.

Question 5

Healthy Grub for Man's Best Friend
Some small businesses gain instant fans, often because their products or services strike a nerve to customers or generate buzz. But getting those customers to become loyal fanatics can be a challenge.
Marco Giannini's natural dog treat company, Dogswell, had seen annual sales of items such as Happy Hips and Mellow Mut grow from zero to $17 million in five years. With that kind of loyalty, he wanted to take Dogswell into the much bigger market for natural pet food
Marco was fresh out of business school and had experience starting one company, a natural beverage company called Clear Day, had gone bust in 2003. Giannini had overspent on an unproven concept-forcing him to fold the business, give up his apartment, and sack out on his father's couch. That was where he decided to launch Dogswell later that year. The idea was to create healthy dog treats enhanced with supplements to help fight conditions such as arthritis and hip dysplasia-something Giannini's childhood dog, Emily, had suffered from.
Giannini attributes the success of Dogswell to the "no frills" attitude of the product packaging. "It's about simplicity. It's a simple product line with easy-to-read ingredients. We make everything easier for the customer, even the product names. The Breathies are for a dog's breath. The Hippies are for a dog's hips-it's very selfexplanatory and that's what people appreciate."
Dogswell had seen more than 100 percent growth each year since its launch in 2004. The company had 21 employees, 60 varieties of treats, and revenue of $17 million. So all was well, but Giannini felt he had outgrown the dog treats niche. "I wanted to become a household name, and I figured, food was the way to get us there," he says. Many of Dogswell's customers had the same idea: For years, they had sent the company's Los Angeles offices e-mails asking when Dogswell was going to introduce a line of dog food.
In the spring of 2008, Giannini decided the timing was right and he had enough cash on hand to take the plunge. He hired food scientists who worked on recipes for kibble, and after settling on one that seemed right, he contracted with a food manufacturer. He sent the kibble to a testing facility to stage a series of canine "focus groups." The result: Dogs preferred Dogswell kibble 15 to 1 over the leading natural-food brand. "That's what made us press the Go button," Giannini says. Meanwhile, his sales team hit the dog parks and retail stores to quiz people about packaging.
With product developed, Giannini had to figure out how to launch it. Obviously, he couldn't personally drive his product to customers, as he had in 2003. Dogswell was a national brand now, with successful accounts at retailers such as Whole Foods and Target. He would need national distribution and a full-blown marketing plan immediately.
Dogswell bought a warehouse on the East Coast and hired 15 employees, most of them in sales. Finally, in September, Dogswell shipped its first bags of Happy Hips kibble to about 1,000 stores nationwide. To entice customers, the company offered coupons for a free $10.99 bag of kibble with every purchase of a 15-ounce bag of treats, which retails for $16 to $20.
It didn't take long for the rollout strategy to begin straining at the seams. Salespeople complained that their take-home pay wasn't what they had been promised. Credit memos from stores looking for their rebates from those free $10.99 bags of food were starting to pile up.
"I felt like I was losing control of the company," Giannini says. "I felt like I was losing control of everything."
Upping the ante even more, Dogswell was scheduled to have its first board meeting with its brand-new private equity investors in March. The investors knew that the dog-food rollout had been troubled. Soon, they were going to want to know how Giannini intended to fix things. He had three months to come up with a plan.
Regrettably, Giannini wasn't around much to deal with these problems. He and Berenice Officer, Dogswell's chief financial officer, were busy making the rounds of private equity firms, in a drive to raise capital to finance the company's brand-building efforts. At least things had been going well on the funding front-especially with TSG Consumer Partners in San Francisco. Most private equity investors had grown cautious, but TSG was continuing to invest and liked Dogswell's track record of rapid growth. By late November, TSG appeared close to signing a deal.
The fact that Dogswell's numbers were slipping wasn't immediately apparent to either party. "They asked for updates, but it was hard to detect what was different," says Officer. Indeed, Dogswell closed a deal with TSG on December 31.
But when Giannini and Officer sat down a few days later with the fourth-quarter results, the damage was clear. They had less than three months to stop the food line from siphoning off the profits from the next quarter. And they had to figure out what they were going to tell their new investors at TSG.
Would money from the new investors solve the problem What other options do they have

Question 6

Purchasing products or materials is obviously an important part of running a small business. What are the pros and cons of developing a relationship with a single vendor from which to purchase most of your products versus using multiple vendors and not depending on just one other company

Question 7

Explain how the Pareto rule is important to a small business owner.

Question 8

Costume Specialists, Inc.
Storybook characters like Madeline, Babar the Elephant, and even Stinky Cheese Man come alive under the watchful eye of Wendy Goldstein of Columbus, Ohio. Her company, Costume Specialists, fashions the complicated costumes for these characters from scratch and sells the creations to book publishers and bookstore chains. Each costume takes about 60 to 80 hours of artistic effort and costs up to $3,000 in materials and labor to produce. Goldstein's business brings in $600,000 annually.
Catch the Wave
Catch the Wave is a marketing information and graphics design firm located in Minneapolis. The company designs Web pages for clients wanting to get on the Internet. Its 20 employees have varied experience in design, advertising, writing, photography, and computer graphics. Prices charged to clients depend on the sophistication and interactivity desired for their Web sites. The popularity of the Internet and World Wide Web has sent the company's annual revenues soaring to $7 million. This figure is expected to continue to rise as more and more clients want to "catch the wave."
Margaritaville Store
Of course, it has to be in Key West! Where else would you expect to find Jimmy Buffett's 400-square-foot shop, Margaritaville Store And what would you expect to find there except T-shirts and other beach paraphernalia The first store did so well that Buffett expanded the retail operation and even added a café in New Orleans. Total annual sales revenues for Jimmy Buffett's empire exceed $50 million. That's a lot of CDs, tapes, books, T-shirts, trinkets, and food-even in Margaritaville!
Effective inventory management also means being ready to cope with problems. Divide into groups based on the companies you selected in Question 1, and discuss how you could design an inventory system that would adapt to "shocks" like the ones described here.
Costume Specialists, Inc.
Your long-time supplier of flexible costume mouthpieces has just been purchased by a Japanese conglomerate that has strict purchasing guidelines and wants you to use EDI.
Catch the Wave
You were hoping it would never happen, but now it has. A computer virus has wiped out all but two of your firm's computers.
Margaritaville Store
Trouble in paradise comes in the form of hurricanes. Even though you've been lucky so far, the last hurricane season came a little too close for comfort.

Question 9

Healthy Grub for Man's Best Friend
Some small businesses gain instant fans, often because their products or services strike a nerve to customers or generate buzz. But getting those customers to become loyal fanatics can be a challenge.
Marco Giannini's natural dog treat company, Dogswell, had seen annual sales of items such as Happy Hips and Mellow Mut grow from zero to $17 million in five years. With that kind of loyalty, he wanted to take Dogswell into the much bigger market for natural pet food
Marco was fresh out of business school and had experience starting one company, a natural beverage company called Clear Day, had gone bust in 2003. Giannini had overspent on an unproven concept-forcing him to fold the business, give up his apartment, and sack out on his father's couch. That was where he decided to launch Dogswell later that year. The idea was to create healthy dog treats enhanced with supplements to help fight conditions such as arthritis and hip dysplasia-something Giannini's childhood dog, Emily, had suffered from.
Giannini attributes the success of Dogswell to the "no frills" attitude of the product packaging. "It's about simplicity. It's a simple product line with easy-to-read ingredients. We make everything easier for the customer, even the product names. The Breathies are for a dog's breath. The Hippies are for a dog's hips-it's very selfexplanatory and that's what people appreciate."
Dogswell had seen more than 100 percent growth each year since its launch in 2004. The company had 21 employees, 60 varieties of treats, and revenue of $17 million. So all was well, but Giannini felt he had outgrown the dog treats niche. "I wanted to become a household name, and I figured, food was the way to get us there," he says. Many of Dogswell's customers had the same idea: For years, they had sent the company's Los Angeles offices e-mails asking when Dogswell was going to introduce a line of dog food.
In the spring of 2008, Giannini decided the timing was right and he had enough cash on hand to take the plunge. He hired food scientists who worked on recipes for kibble, and after settling on one that seemed right, he contracted with a food manufacturer. He sent the kibble to a testing facility to stage a series of canine "focus groups." The result: Dogs preferred Dogswell kibble 15 to 1 over the leading natural-food brand. "That's what made us press the Go button," Giannini says. Meanwhile, his sales team hit the dog parks and retail stores to quiz people about packaging.
With product developed, Giannini had to figure out how to launch it. Obviously, he couldn't personally drive his product to customers, as he had in 2003. Dogswell was a national brand now, with successful accounts at retailers such as Whole Foods and Target. He would need national distribution and a full-blown marketing plan immediately.
Dogswell bought a warehouse on the East Coast and hired 15 employees, most of them in sales. Finally, in September, Dogswell shipped its first bags of Happy Hips kibble to about 1,000 stores nationwide. To entice customers, the company offered coupons for a free $10.99 bag of kibble with every purchase of a 15-ounce bag of treats, which retails for $16 to $20.
It didn't take long for the rollout strategy to begin straining at the seams. Salespeople complained that their take-home pay wasn't what they had been promised. Credit memos from stores looking for their rebates from those free $10.99 bags of food were starting to pile up.
"I felt like I was losing control of the company," Giannini says. "I felt like I was losing control of everything."
Upping the ante even more, Dogswell was scheduled to have its first board meeting with its brand-new private equity investors in March. The investors knew that the dog-food rollout had been troubled. Soon, they were going to want to know how Giannini intended to fix things. He had three months to come up with a plan.
Regrettably, Giannini wasn't around much to deal with these problems. He and Berenice Officer, Dogswell's chief financial officer, were busy making the rounds of private equity firms, in a drive to raise capital to finance the company's brand-building efforts. At least things had been going well on the funding front-especially with TSG Consumer Partners in San Francisco. Most private equity investors had grown cautious, but TSG was continuing to invest and liked Dogswell's track record of rapid growth. By late November, TSG appeared close to signing a deal.
The fact that Dogswell's numbers were slipping wasn't immediately apparent to either party. "They asked for updates, but it was hard to detect what was different," says Officer. Indeed, Dogswell closed a deal with TSG on December 31.
But when Giannini and Officer sat down a few days later with the fourth-quarter results, the damage was clear. They had less than three months to stop the food line from siphoning off the profits from the next quarter. And they had to figure out what they were going to tell their new investors at TSG.
What do you recommend Giannini do to save the company

Question 10

How can shrinkage affect an inventory system

Question 11

Assume that you are the owner of the sporting goods store used in the example of EOQ inventory control on page 331. You typically sell 14,500 sweatshirts per year. Your ordering costs are $10 per order. Holding costs are $0.60 per sweatshirt per year. What is your EOQ for sweatshirts How many sweatshirt orders would you place per year

Question 12

When would an ABC classification inventory system be appropriate

Question 13

Aside from reducing inventory levels, what does the JIT philosophy promote

Question 14

What is the difference between a pull system and a push system of inventory control

Question 15

Consider the make-or-buy decision. Give three examples of situations in which a business should make, rather than buy. Give three examples of situations in which a business should buy, rather than make.