Calyx & Corolla (C&C) is a fast growing company with great potential. Their mail-order catalog provides customers with the freshest flowers in the market, delivered directly to one’s doorstep for the same price as local florists.
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. Ruth Owades INTRODUCING THE FOUNDERS Ann Hayes Lee o Marketing Head - Involved in selection of inventory and pricing o Strategist - Devised the catalog mailing plan Fran Wilson o Creative Head - Created six catalogs per year o Responsible for Oversees merchandising development, marketing programs and indirect mail initiatives. Calyx & Corolla formula 1.
What are the strengths and weaknesses of the Calyx & Corolla formula? Strengths ●Through working closely with the supplier or grower Calyx & Corolla provides a much fresher product to the customer than their competitors. Through Federal Express Calyx & Corolla have an excellent relationship with the growers. Calyx & Corolla uses 30 quality growers to supply their flowers. The top eight of these growers supply close to 80% of their orders, however no one grower supplies more than 25% of its products to Calyx & Corolla (Wylie and Salmon, 1999). Calyx & Corolla has exclusivity agreements with all growers they do business with. The management of Calyx & Corolla works very closely with the growers on a continual basis to ensure that quality arrangements and packaging are achieved.
Growers are paid wholesale prices and an extra surcharge to provide the extra services of arranging and packaging the flowers. To accomplish these extra services or retail responsibilities, the growers employ additional people. Calyx & Corolla senior managers stay in close contact with representatives from each grower they do business with to collaborate on. Calyx & Corolla 1) What is the gap in market structure for Calyx and Corolla's business model?
The traditional distribution chain for the fresh flower market is: grower, distributor, wholesaler, retailer and finally the consumer. As a result of the number of participants in this structure, a flower may be as much as seven to ten days old before it is available for sale in a retail store. Additionally, the industry participants do not confine themselves to a single role. For example, most growers distribute some flowers directly to local or more distant wholesalers, and many distributors and wholesalers engage in some of their own production. The fragmentation within the channels of distribution results in a rather inefficient distribution system. This gap in the fresh flower market structure was noticed by Ruth Owades who capitalized by creating Calyx & Corolla (C&C), which is a true departure from traditional channels of distribution. The business model of C&C is as follows: orders from customers are received by telephone, fax, or mail at the central office in San Francisco and then sent via fax or computer to the thirty flower growers who supply C&C.
The growers, in turn, pack and ship individual orders and send them directly to consumers by Federal Express. As a result, C&C is able to substantially reduce the time it takes to deliver flowers to the consumer's door, typically only a few days. Calyx & Corolla (C&C) is a fast growing company with great potential. Their mail-order catalog provides customers with the freshest flowers in the market, delivered directly to one’s doorstep for the same price as local florists. Customers have been highly receptive to this model, and the company revenues have grown to over $10 million annually in just three years.
Yet, even with gross profit margins of 76%, they have not turned a profit due to their high sales and marketing costs. While it may not be uncommon for a startup to take a few years to get in the black, the issue at hand is that C&C’s sales and marketing costs are growing just as quickly as their revenues. If their sales and marketing costs as a percentage of sales do not improve, they will struggle to reach profitability. While we know that C&C’s sales and marketing costs are too high when viewed as a percentage of sales, this is not the only cause of their profitability issue. It is the result of the actual root problem: that C&C has failed to segment their market effectively and advertise accordingly. Currently C&C is operating under a push method, sending 12 million catalogs out each year, in which 10% go to prior customers.
The balance of the catalogs go to recipients obtained via rented mailing lists. While this channel has the lowest customer acquisition rate (1-2%), it accounts for a disproportionate amount of their sales and marketing costs, as seen in Exhibit 1.Problem Statement Calyx & Corolla, as a company, has enjoyed considerable success since its humble beginnings in 1988. As we move forward, our goal is to solidify our presence in the flower market by evolving our current business model. By examining our current marketing techniques and market environment, our aim is to develop a new and successful business approach which will ensure long-term financial growth and stability. Our foundation on the creativity of Ruth Owades has set us apart from traditional retailers, and our greatest asset has been our ability to be there for our clients for the simple and meaningful moments in their lives. Our long-term prosperity will entail engaging in a new and different marketing campaign, which will takes us a long way in ensuring that Calyx & Corolla become synonymous with those special moments. Consumer and Demand Analysis Fresh flowers are purchased for a variety of reasons.
The majority of purchases have traditionally been for special days such as Valentine's Day, Mother's Day and birthdays. Whatever the reason for buying fresh flowers, the consumer considers a number of variables before making a choice.
The most important of these variables are price, the freshness and quality of the flowers, and in the case of Calyx & Corolla, the delivery period. Achieving the best balance of these variables is key to being successful in our business.As of 1995, we believe that Calyx & Corolla should adopt a high premium pricing strategy and have also identified tactics it should implement in order to improve on its product, price, place, and promotional activities. We arrived at our conclusion by analyzing Calyx’s marketing strategy, perceived value or willingness to pay, competitors’ prices, and the company’s costs.
First of all Calyx & Corolla is in the floral industry, a multi-billion dollar business comprised of growers, wholesalers, and retailers. It started when founder Ruth Owades created a mail order business selling garden implements and accessories. After selling the business to Williams-Sonoma, a direct mail and retail seller of cookware and other kitchen merchandise, Owades continued working there for 4.5 years, gaining a substantial understanding of business operation models. After resigning from Williams-Sonoma, Owades started Calyx & Corolla.
She recruited the VP of Operations, Fran Wilson, from her old employer to design the operations system and to be in charge of operating issues. Also, she hired a marketing specialist with 20+ years of experience, a former creative director at Roger Horchow, to oversee all the marketing activities. Fast forward to the present, Calyx’s currently operates by buying flowers from growers in Florida, California, and Hawaii, and then delivering the flowers directly to customers via. Calyx & Corolla’s long-term growth depends on increasing its core customers, who are: (1) high income-individuals (predominately women ages 30 – 55) who demand product quality and longevity and (2) corporations. Although this represents only a fraction of flower purchasers, deviating from Calyx & Corolla’s core consumers would force competition with existing companies like FTD. Converting customers of companies like FTD to Calyx & Corolla would require Calyx & Corolla to compete on price rather than quality.
Calyx & Corolla is well positioned to pursue a strategy that increases its share of wallet of existing customers and attracts new customers who value quality over price. Our recommendation is three-pronged: (1) continue distributing product catalogues to existing customers, (2) increase advertising in magazines and publications targeted to Calyx & Corolla’s core customers (i.e., wealthy women: Southern Living, Home & Garden, Domino; corporate clients: Wall Street Journal) and (3) offer promotions to new and existing customers. To capture a greater share of existing customers’ wallet, Calyx & Corolla should continue to circulate all its catalogs to existing customers and cut back circulations to rented mailing lists, given their low response rates (1%-2%). Additionally, for $0.09 (a $0.01 premium to the. Calyx and Corolla: Case Study Write-up Prepared by: Group 3 Brendon Jordan Krystal Juren Matt Leslie Andreas Rudin University of Florida Gainesville Executive Summary Tivo’s new consumer electronics product has the potential to revolutionalize media consumption habits and the structure of the television industry.
The key challenges include: (i) how to improve the value of the product in terms of the benefit to cost ratio and (ii) how to increase awareness of the brand as well as the many different product attributes. We recommend that (i) TiVo improve the value of the product by unbundling it in terms of the various benefits provided and then bundling the individual components with other complementary products. (ii) So as to increase the awareness of the different TiVo products and the brand, we propose to segment the market in terms of the specific customer profile whose needs are aligned to the particular benefit provided by the product. Accordingly, we arrive at a communication plan for the different TiVo products that target different customer segments through a mix of advertising, promotion, distribution and branding strategies. In the following section, we analyze the situation that Tivo is faced with and follow it up with the logical sequence that helped us arrive at the above recommendations. Company Analysis Calyx and Corolla is a new company in the fresh flowers market.