Reliance Baking Soda is a long-established product of Stewart Corporation and has been the "cash cow" of the company. In 2008, the company's newly-employed Domestic Brand Director needs to come up with a marketing budget that seeks a 10% sales increase from the 2007 profit level. In coming up with the budget, she must review previous consumer and trade promotions. This case study allows students to prepare a budget and defend the items of appropriation in such budget proposition.
John A. Quelch and Heather Beckham
Harvard Business Review (4127-PDF-ENG)
May 22, 2009
Case questions answered:
- What are the strengths and weaknesses of the Reliance Baking Soda (RBS) brand?
- Analyze the effectiveness of past RBS consumer and trade promotional events. How have the promotional strategies impacted sales volume? What kind of return on investment is the company getting from consumer and trade promotions?
- Compare the relative merit of a push vs pull strategy for marketing low-involvement (low-price) grocery items in a mature marketing setting.
- What is your recommendation on how Regnante can achieve her 2008 profit target? What changes should be made to trade and consumer promotions to make them more effective?
- Develop a pro forma income statement (see the template in case exhibit 10) and outline the long-term strategic implications of your decisions
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Reliance Baking Soda: Optimizing Promotional Spending (Brief Case) Case Answers
This case solution includes an Excel file with calculations.
1. What are the strengths and weaknesses of the Reliance Baking Soda (RBS) brand?
The strengths of the Reliance Baking Soda (RBS) brand include a robust customer relationship. At the same time, the company has a clear monopoly in the baking soda market (with a share of 70%), RBS’s equity, and brand loyalty.
With the pros of having a high marketing budget, RBS’ s distribution mechanism was strong which covered over 6000 independent retailers. RBS has a strong management team and they shared the sales and marketing experience.
Selling into the household sector, they covered a big segment of the division and were responsible for $400 million of the gross sales in 2006.
One of the weaknesses of the Reliance Baking Soda brand is that there was high brand awareness and loyalty. From the 2006 survey, it was found that low advertisement recalls were noted.
In addition, the brand was not perceived as innovative or cutting-edge. Rather, it was viewed as a commodity in the baking soda category. It was also perceived as old-fashioned.
Another weakness we can see is that RBS only used 50% of its products as multi-use products. Its competitors were trying to push the multiple uses of products. The high concentration of sodium in the product and the intended users used it for cooking and baking instead of it being used only for baking.
2. Analyze the effectiveness of past RBS consumer and trade promotional events. How have the promotional strategies impacted sales volume? What kind of return on investment is the company getting from consumer and trade promotions?
As per the past consumer promotion schedules, Reliance Baking Soda provided certain incentives for its consumers. A refund promotion offers twin packs, coupon redemption, premium offers, discount offers, etc.
In the years 2005, 2006, and 2007, the overall costs of Trade Promotion are $4240, $5,938, and $5,505, respectively. Looking at this data, we can say that there has been an overall increase in the budget.
In the year 2003, RBS offered a 20% coupon on the 1lb box. In 2004, there were no such events. But from the year 2005, there were aggressive promotion strategies like the use of a container pack (glass vase), etc.
As per the case, baking soda’s usage had become more out-of-the-box, as new introductions of other products, such as self-rising flour and instant mixes, came into play. Reliance Baking Soda conducted a…
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