The importance of Return on Investment - Case Study Example

The North Face Case: Strategic Marketing Plan Name Institution Date The North Face Case: Strategic Marketing Plan Summary The New North Face focuses on wholesalers and retailers. These are in most cases bigger organizations and seldom medium-sized firms. TNF most important clients are steady client in outdoor equipment and clothing. Situational Analysis The North Face provides outdoor equipment and clothing locally and internationally as well. It focuses on providing “the pyramid of influence” market and after establishing dominant position within market, growth is sought through two paths: Finding new geographical or new use markets Introduced new quality products The North Face intends to market their new products, namely, skiwear items and work within related markets and better markets in its established and new markets. The company will also look for additional leverage through taking brokerage positions and representative positions to establish percentage holdings within product outcomes (Westwood, 2009). Marketing Objectives TNF needs to establish itself as an expert. This implies being quoted within key trade press, speaking at industry events, as well as gaining acknowledgement. TNF measurable and specific objective should be to be introduced within major events as established experts within the field of outdoor equipment and clothing market. TNF requires brand-name reference clients. By the end of this year, TNF should have major brand names for all its products including skiwear, brand names that can be cited to its clients. TNF needs to be in a position to reference by name and contact phone number. TNF needs representative clients in all major regions. USA, California, San Francisco and others as well. The company cannot claim to be without being truly multi-continental (Gruttadaro, 2010). Financial Objectives Sale of $300,000 in 2012 and $1,000,000 by 2014 Gross margin higher than 80 percent Net income more than 10 percent sales by the third year Target Markets The North Face should focus on few thousand well-selected potential clients within US, San Francisco, California, Seattle, and other foreign countries. The few outdoor equipment and clothing retailers are the major clients for the company’s products (Jay, 2006). Marketing Mix TNF is a delivery intensive, wholesaling, retailing, repeat-business business. TNF is not marketing as much as making direct sales. Evidently, the company should know that it needs to understand its marketing process. In this area, the company should focus on the components of its marketing mix. Products Offered The product is a chief element to the company’s marketing mix. The quality of the TNF products should be its best advertisement. In this case even more so than with several other comparable businesses, due to TNF’s specialization on channels for product marketing means the company should establish contacts with individuals who can be its recommenders. The North Face ought to fulfill the promise it makes: TNF takes its product across national boundaries into new markets, explore channels, guide its customers through the maze, and develop the relationship the client requires. This is an extremely focused deliverable. In this regard, the company will be able to get its products into channels. The products are the key to the company’s markets. Price The North Face should ensure that its products are sufficiently priced. Its positioning in addition to its finances, demands high pricing. When the products are of high quality, the company should project to price high. Ultimately, TNF’s customers will end up spending less on the company when compared to other key clothing companies (Jay, 2006). Competitive Advantages The North Face Maintains a Strong Balance Sheet As one of the leading firms in the outdoor equipment and clothing industry in San Francisco, TNF is able to maintain a strong balance sheet. The strong balance sheet ensures that the firm has an ever rising working capital as a result of a rise in the value of outdoor equipment and clothing and commodity inventories held by the firm. The firm has enhanced its focus in the two areas to sustain debt and overcome all challenges facing sustainable levels. Through the strong balance sheet the company is able to offer a firm financial basis for expansion and launch of products in new areas. The strong balance sheet will ensure that the marketing budget planned is fully financed to guarantee a successful execution (Bellis 2010). The North Face is the Leading Firm in Outdoor Equipment and Clothing Marketing TNF is not only a manufacturer but also an excellent marketer of outdoor equipment and clothing products. The firm is in fact essentially a marketer. It is the leading firm in outdoor equipment and clothing and convenience marketing in the regions it has launched its business. It has been expanding the marketing business in the recent past. This is enough justification that the move to venture into skiwear items will be effective. The firm has been strengthening the regional supplier to expand further across the value chain. TNF has also established effective supply and venture connections to ensure that it expansion plans are as effective as possible. The fact that TNF is the leading firm in outdoor equipment and clothing makes it easier to penetrate the skiwear items market segment successfully (Schwalbe, 2009). Marketing Research The North Face needs to cover two key component of market research: Manufacturers: TNF needs to know the market of manufacturers within all the target regions, and this includes market trends as well as developments allied to manufacturers of outdoor equipment and clothing. Channel marketing: TNF needs to know the trends within channel competition, emergence of new channels, economic, key competitors, new technologies, in addition to key players within all target regions. At this stage on The North Face development, the company’s research is primarily secondary research obtained through keeping up with the media, and this includes trade press as well as the internet. The company should quickly set up a strong filing system to facilitate the usage of information within secondary sources and organize for valuable usage later on (Westwood, 2009). Sales Forecast Key Dark blue: Skiwear items Red: Tents Light blue: Parkers and other outdoor clothing Green: Sleeping bags Key Dark blue: Skiwear items Red: Tents Light blue: Parkers and other outdoor clothing Green: Sleeping bags The Marketing Budget The marketing budget by The North Face for its products is aimed at making the most reasonable estimates for the advertisement and promotional plans for the product as well other marketing strategies that are necessary for the product. The costs for each marketing plan for every month are indicated in the budget. Marketing Forecast and Budget Jan Feb March April May June Total Advertising $40, 000 $30, 000 $30, 000 $30, 000 $30, 000 $20, 000 $180,000 Promotions $30, 000 $25, 000 $20, 000 $15, 000 $15, 000 $15, 000 $120,000 PR $15, 000 $15, 000 $10, 000 $10, 000 $10, 000 $10, 000 $70,000 Service $30, 000 $20, 000 $15, 000 $15, 000 $15, 000 $10, 000 $105,000 Shows $30, 000 $20, 000 $15, 000 $15, 000 $10, 000 $10, 000 $100,000 Training $20, 000 $15, 000 $15, 000 $10, 000 $10, 000 $10, 000 $80,000 Catalogs $15, 000 $10, 000 $10, 000 $10, 000 $10, 000 $10, 000 $65,000 Others $40, 000 $30, 000 $25, 000 $15, 000 $15, 000 $15, 000 $140,000 Marketing expenses $220,000 $165,000 $130,000 $205,000 $115,000 $100,000 $935,000 Total Sales $180,000 $205,000 $210,000 $220,000 $200,000 $200,000 $1,215,000 Revenue The revenue generated from the market in the first six months will be $1,215,000 while the total marketing expenses will be $935, 000. The net return within the first six months will thus be $280,000. Breakeven Point Analysis Break even point is the point at which the difference between costs or expenses and revenue are equal. This implies that there is neither a net loss nor a net gain. The break even point of the marketing budget will be at the second month; February 2011. At this point the total sales of the company’s products in the market will cover the costs of the marketing budget (Gruttadaro 2010). Return on Investment-ROI Return on Investment is a performance measure applied in the assessment of the viability of an investment or to compare of several investments. The ROI is computed by dividing the gain from an investment by the cost of the investment. The result is thus indicated as a percentage or ratio. The ROI formula is expressed as; In the marketing budget drawn the ROI for the six months is; ROI=1,215,000-935,000/1,215,000 ROI=0.23 The ROI is positive implying that the venture is viable (Gruttadaro 2010). Marketing Strategy Strategy is focus. TNF strategy entails focusing on designing, manufacturing and marketing area in which it is strong as any firm anywhere within the world. TNF is a true expert within the production and supply of outdoor equipment and clothing, particularly through channels of distribution. The North Face will focus on the major geographical markets; US, San Francisco, California and Seattle as well as other new entrances and in limited product segments; sleeping bags, tents, skiwear items and parkers and other outdoor clothing. The target clients are the established retailers and wholesalers within these areas (Levine, &Michele, 2008). The North Face’s Marketing Strategy is based on a Strong Supply Chain TNF has a marketing position based on a strong supply chain in San Francisco. The supply chain is composed of several retail stores and factory outlets in major markets. The retail stores and factory outlets ensure that the firm fully satisfies its share of the market. In addition to sleeping bags, tents, parkers and other outdoor clothing, NTF supplies a wide range of other clothing products. It has effective factory outlets, sales representatives and retail outlets that help satisfy customer needs. The comprehensive supply chain will ensure that The North Face succeeds in the penetration of skiwear items market segment and invest effectively in the potential marketing area (Jon 2010). The North Face as a Marketing Leader The North Face is generally a market leader and has a strong brand name. The strong brand name will not only ease the firm’s marketing plans but will also assist in the penetration of the market. The firm has a substantial market share in San Francisco in addition to other regions such as US and California which makes the marketing of skiwear items a simple strategy. It is the most convenience retailer of clothing products in San Francisco and other regions as well (Jon 2010). Recommendation and Conclusion In spite of the challenges, skiwear move is appropriate for The North Face. This is justified by both Break Even Point analysis as well as the Return on Investment analysis of the marketing budget and forecast. The break even point was reached at the second month of the product launch which indicates that the investment was viable. At the second month the investment will neither benefit the company nor lead to losses. The investment makes significant profits after the break even point which further justifies the launch. The Return on Investment computation of the marketing budget yielded a positive figure of 0.23. This shows that the net returns of the six months analyzed were positive. The firm should proceed and increase skiwear expansion because it will not be a loss to the company. It will be a viable investment that will lead to establishment of new markets as well as increase in the proportion of the market share held by the company. The marketing forecast and budget is supported by other factors such as strong balance sheet of The North Face, strong brand name and the high quality outdoor equipment and clothing designed, manufactured and sold by the company. The company is a market leader and has strong supply chains which will ensure that it does not fail in the supply of the products. The firm enjoys two marketing channels- Retail and Commercial and is the leading firm in outdoor equipment and clothing industry. All these factors will justify the viability of the skiwear move. References Britton, N.J. "Boots Treads Carefully," Marketing, May 26, p. 22. Bellis, M., 2010, Marketing Plan for the Independent Inventor, Retrieved January 10, 2012 from http://inventors.about.com/od/licensingmarketing/a/in_marketing_2.html. Gruttadaro, D. (2010). The importance of Return on Investment, Retrieved January 10, 2012 from http://www.ehow.com/about_6397819_importance-return-investment.html. Jay, L. (2006). Knowledge management handbook. New York: CRC Press. Jon, G. (2010). Marketing: essential principles, new realities. Toronto: Kogan Page Publishers. Levine, D, &Michele B. (2008). Against intellectual monopoly. Cambridge: Cambridge University Press. Palo Alto software. (2006). Acme consulting Sample Plan. Palo Alto software. Schwalbe, K. (2009). Information Technology Project Management. Sydney: Cengage Learning. William, L. (2009). The marketing plan: how to prepare and implement it. Sydney: AMACOM Div American Mgmt Assn. Westwood, J. (2009). The marketing plan: a step-by-step guide. New Jersey: Kogan Page Publishers. Read More