The Rationale

Introducing a new product is an exciting and intellectually challenging moment for marketers. Many considerations go into the positioning decision, and companies with modest resources often have only one chance to get it right.

The Situation

In 2005, Springs Industries, one of the home textiles industrys larger suppliers, was contemplating the launch of its new Wamsutta Bed Sets line. The Wamsutta brand was one of the companys two main brands, and was sold primarily in department stores, including Macys, May Company, and Belk, and also large specialty store retailers including Linens N Things (LNT) and Bed Bath & Beyond (BBB). Wamsutta was known for quality and timeless design, and had a significant consumer acceptance, particularly in cotton sheets at higher thread counts250, 300, and 400. Thread count was a standard metric in the home furnishings industry. Typically, the higher the thread count the more luxurious the fabric and the better the quality. Wamsutta Bed Sets was a new product in Springss bed-in-a-bag (BIAB) category. BIABs had been on the market for many years. A BIAB consisted of a comforter (the bed cover), bedskirt (the item between the mattress and box spring that hangs down to the floor to hide the bed frame), pillow shams, outer coverings for pillows that coordinated with the comforter, and a set of sheets and pillowcases. A normally made bed would have four pillows, two for sleeping (one on each side of a full, queen, or king bed) and two that would be covered with decorative pillow shams. The twin-size bed has two pillowsone for the pillow sham and the other for sleeping. BIABs had been very popular in the market as they enabled the consumer to purchase a single package and get everything needed to make up a bed. Prior to the introduction of BIABs, consumers would walk through the store and pick out the individual pieces necessary to complete the bed. One of the challenges for both retailers and suppliers was the necessity of maintaining inventory of all the various components. Accordingly, the opportunity was created to put all the necessary items into one package. No longer would suppliers and retailers have to deal with being out of stock on, for example, the bedskirt, which then prevented the consumer from being able to purchase a complete bed set. Until the time of the Wamsutta Bed Sets introduction, the various components in a BIAB were manufactured from what is referred to as printed sheeting fabric. In other words, the comforter, bed skirt, and pillow shams were printed on the same fabric used for sheets, usually at a 180 thread count in a 5050 blend of polyester and cotton. The look that is created is similar to a silk-screened T-shirt or a mens necktie. BIABs using this process typically retailed for $99.00 at all sizes (twin, full, queen, and king). The larger sizes cost more to manufacture than the smaller sizes as more fabric and larger quantities of ink were necessary than the smaller sizes. However, by creating an easy to understand retail pricing structure ($99.00 for all sizes) retailers were willing to make less money on the larger sizes in order to attract potential consumers to this value proposition. A $99.00 all-size BIAB was packaged in a clear vinyl zipper bag and had a single cardboard insert with a picture of the product as it might appear in a typical bedroom setting. Consumers were able to see the comforter in the package and the rest of the individual pieces were tucked and folded inside the comforter. The decorative bedding market, which had about $1 billion in annual sales, consisted of several suppliers. At the lower end of the marketapproximately 70 percent of the businessthere were 4 key suppliers, and Springs had about a 35 percent share as the market leader of that part of the market. Springs used its moderately positioned brandSpringmaidon its $99.00 all-size BIABs. Springmaid BIABs were sold primarily to the discount (Walmart, Kmart, Target) and mid-tier (Sears, Kohls, JC Penney) channelsand were the dominant selling SKUs (stock keeping units) due to their convenience and sharp retail price point. As the competition was fierce at this price range, contribution margins for the supplier were typically very lowno more than 10 percent. If suppliers wanted to compete, they did so knowing the way to make a reasonable profit was to streamline their manufacturing operations while continually developing winning styles consumers would find attractive. Springs met both these challenges as they invested heavily in manufacturing equipment and design resources. At the high end of the marketthe department stores and the two large specialty retailers, LNT and BBBSprings also competed but had less than a 5 percent share in decorative bedding at the higher price points. One reason Springs had a small share was that department and specialty stores did not carry the Springmaid brand. Retailers in this channel did not want to compete with the discounters and so they chose brands that were positioned exclusively for them. There were two main suppliers and several smaller niche suppliers in the department and specialty store channel. Here, decorative bedding was sold as component partsseparate comforters, bedskirts, and pillow shams. Consumers would buy a comforter, a coordinating bedskirt, and pillow shams separately. Additionally, consumers could also purchase these same products in a configuration known in the industry as a comforter set. A comforter set consisted of a bedskirt, pillow shams, and a comforter all in one package. Unlike BIABs, sheets werent included in a comforter set. There were several important differences between comforters in BIABs and those sold at the high end. One important distinction was the target market. Typically, consumers bought $99.00 BIABs for every bedroom in the house except the master bedroom. Accordingly, BIABs were primarily used for the childrens rooms, a guest bedroom, or bedrooms in a guest house, which might have two twin beds. However, consumers were willing to spend more for their master bedroom. It was not uncommon for a consumer to spend over $150.00 for the comforter itself, as they desired a more luxurious product. The reasons for the upcharge included the type of fabric used, the amount of fill inside the comforter, and sewing details. The fabric used at the high end was often jacquard fabric, which was elaborately woven on special looms. Jacquard fabrics had more colors and textures and richer detailing than the sheeting fabrics used in $99.00 BIABs. The bedskirts and pillow shams were also made from jacquard fabrics, and as a result of the more elaborate materials, a comforter set would often retail for $199.00, $249.00, $299.00, or $349.00, twin through king. Unlike BIABs, a comforter set did not include sheets, nor was it sold at the same price regardless of size. Consumers who bought comforter sets usually bought better quality sheetsoften with a thread count of 250 or more. Springs was contemplating using its strengths in BIAB and wanted to expand their offerings beyond the Springmaid brand. They were considering two options. The first was to change the various components into better quality products. The comforter, bedskirt, and pillow shams would be manufactured using jacquard fabrics and the sheets would become all cotton at a thread count of 250. The pricing structure would be different than that for a traditional BIAB. The new product would retail for $99.00, $129.00, $149.00, or $179.00, twin through king. Packaging would be upgraded with stronger vinyl than a $99.00 BIAB to improve the overall shelf appeal to consumers. This offering would be positioned as Wamsutta Platinum Bed in a Bag. The term Platinum was being widely used in the industry to differentiate upper-tier products from those sold at moderate price points. The product Springs was introducing would be a first-to-market entry of better quality at higher retail price points. The second alternative had the same components (comforter, bedskirt, pillow shams, sheets) but with different packaging. Instead of a clear vinyl zipper bag, the product manager proposed something different. The idea was to create individual pockets that would be sewn into the package so the consumer could see the bedskirt, pillow shams, and sheets in addition to the comforter. The top and bottom of the package would be made of canvas while the sides and pockets would be clear vinyl. Figure 12.1 is a rendering of the packaging. Its dimensions were 3 in. wider than the vinyl zipper bag in option 1 because of the packing requirements of the sheet set, bedskirt, and pillow shams. This would mean the retailer might have to carry less inventory due to the bulk of the product compared with option 1. This drawing was part of a patent application Springs initiated for the packaging concept. Although it took about 18 months for a new patent application to work its way through the process, it wasnt uncommon for Springs to apply for patents on anything they could be first to market on. Springs did not know if they would receive a patent for this packaging design. At the time of the application, Springs had 12 applications awaiting patent approval. Historically, about half of Springs patent requests were granted as the patent approval process was arduous. If the patent was not granted, Springs would still be able to use this packaging design, but it wouldnt be protected from competitors copying it. Lastly, the product manager proposed a different name for the productWamsutta Bedroom Solutionsinstead of Wamsutta Platinum Bed in a Bag. Because the packaging was more elaborate, it would cost more to produce it, and there was an added labor expense to pack the various elements into the pockets on the package. As a result, Springs would need to raise its selling prices to retailers, and with that came an increase in suggested retail prices in order for retailers to make their necessary profit margin. After tinkering with various formulas, the product manager proposed retail prices of $99.00, $149.00, $199.00, and $249.00, twin through king. See tables 12.1 and 12.2 for the costs and selling prices under both proposals along with the assumed sales ratio by size.

Questions

a.) Given the concepts we talked about this semester, what are the important considerations in this decision?

b.) What is your recommendation to Springs management, and why? Your analysis should include the various calculations necessary to make a well-informed decision.

42 I Principles of Marketing Case Studies for Undergraduate Students Figure 12.1: Proposed Wamsutta Bedroom Solutions Packaging Table 12.1 and 12.2: Variable Costs and Selling Prices to Retailer Scenario #1: Wamsutta Platinum Bed in a Bag Size Sales Ratio* Variable Cost Price to Retailer Twin Full 5% 10% 50% 30% $42.00 $60.00 $68.00 $74.00 $45.00 $65.00 $80.00 $90.00 Queen King Scenario #2: Wamsutta Bedroom Solutions Sales Ratio* Variable Cost Size Price to Retailer Twin Full Queen King 5% 10% 50% 30% $45.00 $65.00 $78.00 $85.00 $50.00 $75.00 $100.00 $125.00 *These are the assumptions the product manager made as to how the products would sell by size. MacBook Pro Q Search Qsearch 42 I Principles of Marketing Case Studies for Undergraduate Students Figure 12.1: Proposed Wamsutta Bedroom Solutions Packaging Table 12.1 and 12.2: Variable Costs and Selling Prices to Retailer Scenario #1: Wamsutta Platinum Bed in a Bag Size Sales Ratio* Variable Cost Price to Retailer Twin Full 5% 10% 50% 30% $42.00 $60.00 $68.00 $74.00 $45.00 $65.00 $80.00 $90.00 Queen King Scenario #2: Wamsutta Bedroom Solutions Sales Ratio* Variable Cost Size Price to Retailer Twin Full Queen King 5% 10% 50% 30% $45.00 $65.00 $78.00 $85.00 $50.00 $75.00 $100.00 $125.00 *These are the assumptions the product manager made as to how the products would sell by size. MacBook Pro Q Search Qsearch