Reliance Baking Soda: Best Promotion
Problem
Anna Regnante, the new Domestic Brand Director for Reliance Baking Soda must determine the
effectiveness of past promotional strategies in order to select a promotional strategy which will
contribute towards a 10% increase in profits for 2008 before SGA, overhead, and taxes, specifically
through marketing expenditures in advertising, consumer promotion, and trade promotion. Further
Regnante must develop a 2008 budget P&L that will show the resulting 10% increase in profits from the
marketing expenses.
Situation Analysis
Context
Economic
 Mature industry
 Increasing raw material cost
 Recent price increases
 Low-involvement purchase
 Prior to 2005, consumer promotions were not really a significant part of RBS marketing
Technological
 Baking soda first produced in 1846
Social/Cultural
 Alternative uses for baking soda
 Different types of users of baking soda
 Staple product in most homes
 Female heads of households generally are the purchasers
 Reliance has high brand recognition (95% mentioned Reliance when asked for a baking
soda brand)
Competitors
The main competitors for Reliance baking soda are private label brands who compromise 30% of the
market and are priced 30% below RBS price. RBS had lost 5% of its market share to private label brands
in the past decade. Baking soda does not have any viable substitutes or alternatives as it is a unique
product and staple product, but private label brands posing price pressures on Reliance are a big threat.
Company
Stewart Corporation, founded in 1915 is compromised of four divisions: Household, Beauty, Foods, and
International. RBS has a high distribution penetration, with 90% of grocery stores and mass
merchandisers, 85% of warehouse clubs, and 80% of drug stores stocking at least one size, 8 oz., 1 lb.
and 5lb. The household division of Stewart was responsible for $400m of the $1.8b in gross sales in
2006. Also, the household division has a 150-person sales force to manage the retail and wholesale
accounts.
Stewart
Corporation
Household
Baking Soda
Laundry
Detergents
Window
Cleaners
Drain Cleaners
Foods
International
Toilet
Cleaners
Beauty
Disinfectant
Wipes
Reliance
Baking Soda
8 oz.
1 lb.
5 lb.
Collaborators
Grocery stores, mass merchandisers, warehouse clubs, and drug stores are all collaborators because
they must work with Stewart and Reliance on stocking and how the product appears in the retail
environment, establishing lasting, working relationships. Also suppliers of raw materials are
collaborators because once again Stewart must work with them on establishing lasting relationships to
lean the supply chain.
Customers
End-users of the product are people in most households because of the many applications that baking
soda has in the house. Baking soda is considered a staple product in many households, and some users
of the product have a different use for it in each different room of their homes. Female heads of
households are the primary purchasers of RBS. The direct customers for RBS are grocery stores, mass
merchandisers, warehouse clubs, and drug stores.
Alternative
New Consumer and Trade Promotions
Regnante could create new consumer and trade promotions for 2008 in order to capture the 10%
increase in profits. This would mean revising current advertising, trade promotion and consumer
promotion expenditures to reflect the profit jump. This option is risky because Regnante is new to the
position and it is unlikely that new promotions would be more successful than previous ones. Though it
is possible for new promotions to generate better incremental returns, there is insufficient data and
knowledge to create such promotions with prior knowledge of their effectiveness.
Recommendation
Select Previously Successful Consumer and Trade Promotions
Regnante could use previously used trade and consumer promotions that were specifically successful in
order to achieve the profit increase. Since there is already information about the incremental
contribution or loss, promotions can be selected from after 2006 because that is when they started
being a significant part of RBS marketing efforts. This option is not very risky because it utilizing
information which shows the effects on profits from the past to select which promotions to use for
2008. For example, the January-March consumer promotion of 2006 generated a net incremental
increase by $619,562; thusly, it should be used in 2008 as that is the most significant net incremental
contribution figure. The projected 2008 shipments and pricing figures allot for slight increases,
especially for the 5 lb. factory shipments, which means promotions should be aimed at increasing sales
of the 5 lb. size to reach these numbers, especially considering the much larger contribution margin on
that size from the other sizes, $29 per unit on 5 lb., $6.50 per unit on 1 lb. and $3.50 per unit on 8 oz.
Manufacturer’s Price Per Case
Factory Shipments (in 000’s of cases)
Variable Manufacturing Cost per Case
P&L Budget
8 oz.
1 lb.
5 lb.
8 oz.
1 lb.
5 lb.
8 oz.
1 lb.
5 lb.
2008
$7.50
$12.50
$55.00
750
1300
750
$4.00
$6.00
$26.00
$63,125
$30,300
$32,825
TV
Print
Internet
Total Advertising
$4,000
$750
$250
$5,000
$200
$600
$5,200
$11,000
$21,825
Gross Sales
Variable Manufacturing Costs
Gross Margin
Advertising
PR/Media Production Costs
Consumer Promotion
Trade Promotion
Total Marketing Expenses
Profit before SG&A, overhead, and taxes
(10% increase over 2007 estimates=$20,587)
Implementation
Select Previously Successful Consumer and Trade Promotions
Jan.-Mar.: Refund consumer promotion5% ad allowance for feature ad
April: Coupon consumer promotion10% off + 5% ad for 8 oz. and 5 lb. sizes
May: Twin Pack/Refund consumer promotion
- 2 w/10 twin pack + 5% ad for 8 oz. size
June: Coupon consumer promotion- 10% off + 5% ad for 8 oz. size
Aug.-Sept.: Sweepstakes and Refund consumer promotion- 1 w/11 +
5% ad on all sizes
Oct.-Dec.: Coupon consumer promotion-15% off for 5 lb. size