Reliance Baking Soda: Optimizing Promotional Spending

Reliance Baking Soda: Optimizing Promotional Spending

Bree Hood, Camaryn Jackson, Annie Mullins, Nela Prifti

Brenau University

September 24, 2015

Reliance Baking Soda: Optimizing Promotional Spending

        Founded in 1915, by James Stewart Augusta, Stewart Corporation included four major divisions: household, beauty, foods, and international. Stewart discovered the “miracle compound” of NaHCO3, more commonly known as baking soda. Though initially used for and marketed as a staple for baking, the compound eventually was promoted as a household cleaner, deodorizer and disinfectant. Reliance Baking Soda (RBS) was a market leader and “enjoyed high distribution penetration” (Quelch & Beckham, 2009, p. 1). In her new role as Domestic Brand Director for RBS, Anna Regnante’s immediate deliverable was due in three weeks: “to develop a 2008 budget P&L that would result in a 10% increase in profit (before SGA, overhead, and taxes) over 2007 estimates” (Quelch & Beckham, 2009, p. 1). Regnante would have to review past marketing tactics and promotional strategies to determine how best to position the old, boring RBA product in order to achieve the increase in profit.

        Core Problem

        The core problem of this case is determining the most effective marketing mix and allocating the appropriate budget for this mainstay product. Regnante must determine how much money to spend on consumer promotions and she must to consider if the consumer promotions should overlap with the trade promotions (Quelch & Beckham, 2009, p.4). Historical data highlighted the market share of the product including its high point and then its fall as it competed with private label brands. Survey data indicated that while brand awareness for RBS was high, the brand suffered low advertising recall. The low brand awareness recall may have been the result of a combination of steps taken by the previous brand director. This director cut the consumer budget in half and had engaged in a significant amount of trade promotions. While the trade tactics helped increase the total quantity of product in stores, “RBS had no direct control over how the trade managed its inventory or how it priced the product” (Quelch & Beckham, 2009, p.4). The downside to the frequent trade promotions translated into high inventory in stores but no ongoing cash flow for Stewart. The inventories also made those stores not need to buy new product, which also impacts Stewart’s bottom line.

Secondary Problems

Constraints and Limiting Factors

Alternative Solutions

Reliance Baking Soda needs to implement new measures if they are to increase their profits (Quelch & Beckham, 2009). These measures can be classified as alternative solutions to the already existing ones... Consumer and trade promotion strategies need to be realigned if the company is to remain competitive. Advertising is also another area that needs to be realigned. This paper seeks to analyze alternative solutions and present the best one for the company to maintain profitability.

First, the company should plan to open more offices countrywide and serve the residents from a closer proximity (Quelch & Beckham, 2009). This may be expensive initially but at long last, the company will have a wider coverage to sell its products. It will also identify where the markets are readily available. It would also help RBS consider manufacturing products for private labels consumers. This would allow it to reclaim some of the five percent stake lost to private label brands. The company would also rejuvenate its marketing arena by increasing the remuneration of salespeople who just received little bonuses. Increasing their wages would uplift their morale when working for the company.