What is the financial impact with regards to profit and loss?

Case Study 2.4 Marketing - Simply Shoes

Founded in 2003, Simply Shoes had grown to six similar sized outlets by 2014, and was headquartered in Winnipeg Manitoba. For the past year, management had been debating the value of the money being spent on advertising and promotions.

Mathew Micheli, the controller emphatically stated, "I am of the opinion that we should simply stop advertising altogether." Mathew stated, "We are facing tough times and all that money would simply go to our bottom line and Bob has not shown us that it really pays for itself."

"Well I don't know how I can convince you, Mathew," stated Bob Merlin, the marketing manager, "but I can't imagine maintaining our market share without advertising. All our major competitors spend about the same percentage of their sales on marketing as we do, as best as we can figure. How would our customers find out about our special sales? No we should not cut our advertising budget - we should increase it by 30 per cent.

"That's a lot more money, about $285,000 if I'm not mistaken," stated Jasmine Kilby, manager of stores. "Why not put more emphasis on direct mail campaigns or even do better job on our in store signage and displays". We've got about 53,000 names in our customer data base, and they are almost evenly distributed between our six outlets. It would cost about $1.00 to mail each customer a letter, which would be a lot cheaper than our advertising, and would probably be much more effective as well. Not to mention, our in-store merchandizing can be done for around $28,000 per event, and about $10,000 in production and $2,000 per store to implement.

"I'm tired of these disagreements," stated Janet Jones, president. "It's time we resolved this issue. We've got our big Father's Day event coming up in six weeks and there are several items that we were going to promote heavily. Then there is the Canada Day sale shortly after that. Let's try some testing of these ideas around these two week-long events to find out whichway is the best to spend our advertising, direct mail, and merchandizing dollars. Now, I know that none of our store managers or buyers will want nothing short of a full ad and promotional effort in their areas.I think we can convince then otherwise if we have a good test design to offer them. We had originally set aside $40,000 for advertising and $28,000 for merchandizing for these two events. Bob, would you please design a couple of effective tests and get back to me by the end of the week."