According to this case study, which of these product lines (s)( clothes, toys, or books)  need sales promotions?  Why does this product line or lines need sales promotion? 

 

 DMC Case Study

DMC is a direct mail company that started as a catalog-sales company selling children's toys, books, and clothes but has transitioned to almost fully online sales. Since its inception, the company has introduced and nurtured company-owned brand names for its toys and clothes categories. It collaborated with small and regional book publishers to acquire book inventories to sell on its website. While its toys and clothes may have unique brands, they are not necessarily unique because similar products (with different brand names) can be purchased elsewhere (either offline or online). Despite their lack of uniqueness, these products generate margins (average undiscounted gross margins are 60% for clothes, 40% for toys, and 25% for books) that meet the company's profit objectives.

In its early days, DMC periodically acquired customer mailing lists and sent catalogs to customers in those lists. The catalogs have 1800 numbers that consumers contact and orders are typically taken via telephone. In order to cut down on its costs, and due to its investments in e-commerce, DMC has shifted most of its sale transactions to its website. While its customer service hotline can still process orders, DMC encourages its customers to purchase online and maintains a reduced customer service staff for issues other than purchasing.

 

Loyalty program

DMC has a bare-bones loyalty program. To sign-up, individuals need to provide a phone number, mailing address, and email address, and answer some basic demographic questions (see accompanying Excel Worksheet and Table 1 below for demographic data of a representative sample of its loyalty program members). At this time, while utilizing third-party customer mailing lists for customer acquisition, DMC is exploring the potential benefits provided by its loyalty program (see Table 2 for a description of its sales promotions in the past three years).

 

Sales promotion for its loyalty program members

Using customer demographic information, DMC sends targeted customers direct (postal) mail and/or emails with coupon codes to be used when purchasing from the website. Direct mail is expensive (see Table 3 below for cost breakdown) but is a great complement to email offers. With close to zero cost (no printing and distribution costs), email offers are often ignored and result in lower redemption rates. Recently, with the revamp of its social media page, DMC has started deploying sales promotion offers through social media. As cheap as email to produce, social media offers allow even untargeted customers to use coupons. However, social media proved to be effective in reaching targeted customers who ignore direct or email offers. Finally, the company is slowly reaching consumers with targeted coupons via text messages. While this vehicle appears promising, it is not foreseen to replace paper, email, or social media coupons.

 

Problem

The company is seeking recommendations for (1) determining which customers need to be targeted and; (2) with what type of sales promotions. It is open to any type of sales promotion; its only requirement is that the sales promotion generates profits (net of sales promotion expenses).