Tone and Tops Case Study

Introduction:

Our overall strategic decision is to maintain TONE’s strong presence in the market and to increase TOPS’ brand awareness by focusing more on advertising. Looking at the company and industry dashboard, TONE has already established strong presence in the market compared to TOPS. From the company’s perspective, TONE and TOPS have large gaps in terms of brand revenue and brand contribution. Within the industry, TONE was ranked as number one selling brand in terms of retail sales while TOPS was ranked fifth. More specifically, TONE has $60 Million retail sales and TOPS has only $22 Million. In order to make both TONE and TOPS market leading brands, we have decided to allocate our budget in the most effective way by considering both industry trends and consumer market trends. In this round, we had to make decisions for marketing mix, commercial team and market research studies.

Our overall strategic decision for round 2 is to keep TONE’s strong presence in the market and to run the R&D for TOPS. After reviewing the results from the periods 1, we ranked #2 in share price index, #1 in volume market share, and #2 in net contribution. Our overall performance is good. However, we did lose some market share from the period 1.  In order to improve our performance, we made decisions for R&D (TOPS), marketing mix, commercial team and marketing research studies.

 In this round, we made decisions on

Commercial Team & Marketing Research

As for the number of people allocated to each channels for Round 2, our team decided to maintain the current distribution size of commercial team for product TONE, which is the same size of commercial team we had for Round 1. Hence, we have 15 people for Special Stores, 9 for Mass merchandise, and 6 for online store. Our target market for Tone is still High-earners. By looking at the shopping habits data, 50% of high earners choose Specialty stores, 33% for Mass Merch, and 18% for online stores. As a result, our team though it is good to keep the same size of commercial team for TONE. However, our team made changes for the product TOPS based on the feedback we got from period 1.  More specifically, we increased the number of people in the Mass Merch channel by 11 and decreased the number of people in Specialty store channel by 10. As a result, we have 10 people in Specialty stores, 15 people in Mass Merch, and 5 in Online store. The reason we did this is because we tried to switch our target market, Explorers to Savers for Tops. According to the Market Forecast research, Savers will be the most attractive segments (37%) in the market in terms of future growth.

 In addition, we bought all the market researches for the Sonite market, like we did for the Round 1.  In order to have a sense of the Vodites market and to prepare for our future strategy, our team also purchased additional researches in Vodites Market.

•  Marketing Mix - TOPS

• Remain production in 84000 (we lost potential sales because of inadequate productions, but we are lowering advertising)
• Decrease price point to $200 (competitor LOCK has a price of $200)
• Lower advertising to $1000 in media and $100 in Research  (Because the reason why TOP isn’t doing well is because our target segments do not like the features of the current TOP; that’s why we are launching a new R&D for TOPS)

For tops, we decided to decrease our budgets spending on advertising in order to support our new R&D projects, PONEWTOPS and PEMPONEW. The advertising budget in previous term was $3450k, and now is $1100K, which is 68% of decrease. It is a big drop in the budgeting. We made the decision for two reasons. First, we spent half of our budgets on the R&D projects ($5030k in total), which limits our spending on the advertising. Second, the current TOP is not well perceived by Savers because the product’s characteristics do not fit Savers’ expectations. As a result, we thought aggressive advertising is not effective for increasing the sales of TOP. However, we did launch the new R&D for TOPS in period 2, and it will be completed on the next period. We believe the new TOPS could incur more sales and increase our brand awareness. Then in order to compete with our close competitor-LOCK which has a price of $200, we also decreased TOPS’s selling prices to $200.  In terms of production, we decided to remain the same level 84000 unites as we did for last period  Based on the result from last time, we lost potential sales for TOPS because of inadequate productions, but we are lowering our advertising in this round. Therefore, we did not increase our production level.

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