Calyx Flowers Case Summary

Lina Kim, Pranav Reddy, Brett Mabie, Alex Zoeckler, and Claudia Fang

Professor Dzyabura

Introduction to Marketing

October 11th, 2015

Calyx Flowers Case Memo

Calyx Flowers’ report indicated that Calyx did not reach its full potential despite gross margins of almost 50%. For Calyx to increase revenues and reduce marketing costs, Calyx should focus more on Internet advertising. By increasing Internet advertising and targeting a different segment of customers, Calyx can improve its yield rate and total revenues. An additional recommendation is to merge the two current websites for further convenience. The added emphasis on Internet ordering can reduce Calyx’s advertising costs such as maintaining the hotline.

Calyx Flowers is a flower delivery

service that sends flowers from the growers to customers. Calyx positions itself as a creative business that provides fresh, high-quality flowers to its customers. A typical order of flowers cost $80 (excluding shipping charges). Currently, Calyx’s main customers are upscale professional women. Calyx’s four main competitors are retail florists, 1-800-FLOWERS.COM, FTD, and supermarkets. Despite the large amount of competition, Calyx’s main comparative advantages stem from its high quality flowers that stay fresh for a longer period. Retail florists have similar prices to Calyx, but with lower-quality flowers. 1-800-FLOWERS.COM and FTD may be cheaper, but the flower orders may not be delivered according to the customer’s specifications. Supermarket flowers are cheaper but have the worst psychological value for customers due to quality. Overall, Calyx has its own advantages in the flower distribution industry and can cater toward certain customers.
One solution is to increase the number of catalogs. Catalogs demonstrate a shotgun targeting method, as catalogs can be distributed to a variety of customers. However, the shotgun targeting method is inefficient, as catalogs are historically shown to lead to a low response rate. Calyx sends its catalogs to different groups: current customers mailings and rented mailing lists. The current customer mailings and rented mailing lists yielded around a 4.5% and 1% response rate respectively. Calyx can determine the total costs of producing the catalogs. For the current customer mailings and the rented mailing lists, each group costs $3,700,000 . Around 7.2 million dollars were used to produce unsuccessful catalogs. The number of successful catalogs for the current customer mailings is 225,000 . The number of successful catalogs for the rented mailing list is 50,000 . The average cost for the rented list advertising per each successful catalog is $74 , which is 92% of cost of goods sold, resulting in loss per successful catalog. The average cost for the current customer mailings per each successful catalog is $16.44 , which is 21% of cost of goods sold. Thus, rented mailing lists are unprofitable, and catalogs should not gear only toward Calyx’s current customers of upscale women. Calyx can improve catalogue effectiveness with demographic profile-based segmentation. Specifically, catalogs geared toward older, more traditional customers who values physical catalogs. Calyx can reduce their output and decrease advertising costs by only sending catalogs to less tech-savvy demographics.
An alternative strategy is to increase mass-media advertising. Calyx’s current target customers are upscale professional women, which demonstrates over-segmentation. Mass-media advertising avoids over-segmentation targeting as many current and potential customers watch television or listen to the radio. Using mass-media advertising can also provide value-based segmentation, as customer needs involve psychological factors such as image and social status. Mass-media advertising can build the brand image of the company and awareness of its services. However, Calyx’s current positioning as an innovative company that provides high-quality flowers may be compromised using mass-media advertising. Calyx is able to distinguish itself from its competitors by providing a special service, but using mass media advertising puts Calyx directly against its competitors.
The recommended solution is increased Internet advertising.

Online sales currently represent about 40% of Calyx revenues. Since Calyx’s main customers are upscale, professional women, it is understandable that professionals are more likely to use the Internet as a resource to buy flowers. The advantage of Internet for professionals is that the Internet requires the least amount of effort and time to purchase flowers. Calyx can use Internet advertising to target specific demographics. Calyx can position themselves towards the younger generation of customers who are more likely to use the Internet to buy goods. Calyx can also use the Internet to attract professional men, instead of its normal customer base of upscale women. Calyx should also target more heavily to companies, as it already offers flowers for corporate giving. Corporate customers and businesses are more likely to provide a higher lifetime value than a customer who only buys flowers for special holidays. In addition, Calyx could merge their two websites (calyxflowers.com and calyxandcorolla.com) together for easier navigability and increased customer convenience. By reaching out to the younger generation, corporations, and men, Calyx can increase their current yield rate. Focusing on these three groups can increase Calyx’s revenue by aligning themselves closer to the desired sniper

segmentation.