Classic Knitwear Collaboration with Guardian – Case Study Example
Evaluate the product-company fit. Initially, ic Knitwear, Inc. ic) was producing unbranded knitwear which, were not much recognized especially by the retail customers, consequently limiting the company chance of differentiating its products. However, in September 2006, Classic Knitwear Inc. led by its Chief Marketing Officer Brandon Miller decided to brand the company’s products in order to improve gross margin. Introduction of branded insect repellent clothing was the only way out to improving the gross margin of the company. Although they had tried to engage competitively with the leading branded products manufacturers, prevailing competition could not allow them meet the increasing market demand. Classic collaboration with Guardian in branding their shirts could not taint their images since it was essentially known to provide variety of products thus customers will not change perception towards the company.
2. Evaluate the product-market fit.
Classic shirts could easily gain high sales considering some favourable market factors in their target market. Firstly, the cost of launching the new products could only cost over $ 3 million. Incurring low capital would enable heighten on such things like advertising in order to improve expected sale. Presence of many wholesale markets would also enable classic get to the market niche as there were only few firms offering similar products. Availability of ready market especially retailers and wholesalers could help raise the profit margin easily as Miller had intended. The fact that repellent shirts are only commonly in niche market precisely for hunters and anglers, it could be very easy for Classic to convince customers who associate guardian products with quality to buy their shirts.
3. Will consumers and the trade respond to the Guardian marketing program?
Yes, because, customers were becoming more aware about insect-borne diseases and they would like to prevent themselves. Classic developed the idea after witnessing a number of attempts to create awareness of insect-borne diseases using measures that were not satisfactory to most Americans. They therefore found it as an opportunity to provide shirts made of fibre since they proved convenient as insect repellents. Considering that insect repellent clothing were already in use especially in niche market, precisely among hunters and fishermen, it could be easy for Classic repellent shirts to attract customers because they were slowly becoming common in mass -markets. Customers that do not like carrying traditional liquid repellents thus gaining strong market position could also facilitate sales.
4. What other problems do you see in the proposed Guardian marketing program?
The agreement implies that Guardian be consulted for approval before any writing is done on the shirt. This may imply slow decision making that can consequently slow delivery of products to customers. According to the agreement, sales are projected to increase steadily over the four years with the first three years contributing subsequently towards achieving forth year sales target, which may be affected by economic instability thus not hitting the target. Finally, there is fear of dissolution especially if the Guardians feel that the new product have adverse effect on their liquid repellents products implying that $100,000 would be refunded to the other party.
5. What are the advantages and disadvantages of the licensing agreement?
Potential partnership between Classic and Guardian could help them increases customer base by convincing enthusiastic customers who do not like carrying traditional liquid repellents. This will ensure customer satisfaction regardless of their diverse taste and preferences. Additionally, considering positive customer association with Guardian’s products, it could be easy to start partnership investment with small capital of just over $ 3 million. However, some doubts developed concerning success of the partnership. Firstly, according to Chong the new partnership could risk the success of Classic in innovating new products later. Additionally, Ortiz believed that partnership could downgrade Classic since the products will be using Guardians name and instead suggested research on improving new products.
6. What sales volume is required to break even on Classic’s 2 year marketing investment?
Cost per unit= [manufacturers selling price per unit-(less cost per unit+ promotion cost allowances)] = [17.87-(10.82+0.89+036)]
= $ 5.80
1st year cost per unit $ 5.80
Less royal payments $ 0.83
2nd year cost per unit = $ 4.96
2nd year breakeven= estimated sales/ cost per unit= $ 135,500/4.96
= $ 276,000 shirts
7. If Classic implements all of Miller’s marketing recommendations, what is the estimated demand for the new product line over the 2-year launch period?
Estimated demand for two years
Targeted customers 100,000,000
Add: awareness (12.5*100,000,000) 12,500,000
Interested with the product:
Assume 60% of definitely will buy (38%)
(0.38*0.6)2,312,500 527, 250
50% will buy coming year
(0.5*263, 625) 131,813
Expected demand after Miller recommendation 659,063