Case Discussion Analysis: The Challenges of Marketing Budget Preparation in Uncertain Times

Question 1

Fitzie

Answer 1

• Archana Roy, head of marketing
• Eastern Europe, Middle East, South Asia, and Africa (EMESSA region)
• Manufactures and marketed sports and lifestyle footwear and apparel products globally

Question 2

Effects of COVID-19 on Fitzie (see slide 20 for more)

Answer 2

• Sale forecasts in 2020 showed a steep decline of 33%
• Marketing budget had been cut for the year (if this budget was not recovered and if management did not approve her proposal for the EMESSA region, budgets would be slashed

Question 3

EMESAA Region

Answer 3

• Over the past two years had delivered above 10% year-on-year growth in sales and profitability
• Marketing budget for this region has been cut by 1/3
• In 2019, revenue in this are grew by 11% making it Fitzie’s fastest growing region
• Accounted for 15% of Fitzie’s global revenues in 2019
• Share expecting to increase 17% in 2020
• In 2019, Sports category was 75% of revenue, 25% from Lifestyle

Question 4

Three options to still meet the desired sales objectives

Answer 4

1) Reallocate the budget in proportion to the revised revenue forecast of the countries
2) Allocate funds based on the recovery potential of each market
3) Change the advertising focus from brand building to commercial product sales

Question 5

Global Sports and Fitness Industry

Answer 5

• Had been growing for the past 3 years
• Was projected to increase at a compound annual growth rate of 5% at the beginning of 2020
• Competition was intense and dominated by entrenched global players such as Alohomora and Natter
• Alohomora global revenue grew 6% in 2019
• Natter’s global revenue grew 7%

Question 6

Fitzie - Global

Answer 6

• Established in 1950’s, HQ in USA
• Manufactured and marketed apparel and footwear

-Catered to Sports and Lifestyle

Sports:
-Comprised of products for strength training and running

Lifestyle:
-Comprised everyday wear and fashion products

Revenue Hot Spots:
-North America first, Europe second, Asia Pacific, South American, and EMESAA equally third

Question 7

Fitzie Global Leadership Prioritized 3 Things

Answer 7

1) Growing shareholder value by driving revenue growth (most important by far)
2) Increasing profitability
3) Driving Consumer excellence through product creation and rich storytelling for long-term sustainability

Question 8

Fitzie Premium Product Line

Answer 8

Advertised as either Sports Icon or Lifestyle Icons

Technology associated with the Icon product lines were patented and trademarked

Average Sports Icon Price 130 Euros = $188 CAD

Question 9

Fitzie Mainstream Product Lines

Answer 9

• Not supported with significant advertising like the premium products
• Majority of sales derived from low margin, non-iconic products that were barley advertised
• Little product differentiation between items compared to competitors
• Sold to Men, Women, and Children (Children line was 2% of total business share)

Pricing was between 70-80 Euros $101-$115

Question 10

Retail Channels for Fitzie

Answer 10

In 2019, retail store drove 99% of sales revenue in EMESAA, 1% from e-commerce

-Most stores in premium shopping malls in tier 1 cities

Question 11

Ftizie Brand Marketing Framework Three Key Performance Indicators (KIPs)

Answer 11

1) Upper-funnel awareness, wherein a campaign was expected to reach 70% of the target audience with a frequency of four exposures
2) Mid-funnel click-through rate (CTR)
3) A sell-through rate (i.e., the Percentage of products sold) for lower-funnel conversion

Question 12

Target Consumer

Answer 12

• Aged 18-34 year olds involved in Fitness and Health
• Subdivided this demographic into game-changer consumers (early adopters) and sporty consumers

Game-changer consumers:
- wanted to better themselves, with fitness as a key enabler, and paid considerable attention to product technologies

Sporty consumers:

• Fitness orientated but did not care much about cutting-edge product technology
• Wanted to take after the athletes and designers they followed online

Question 13

2019 Demographic

Answer 13

40% EMESAA business from 18-34 year old

45% EMESAA business from 35-55 year olds

Average transaction of 90 Euros = $130

Purchase frequency of 2.3 times per year

Question 14

18-34 year old Demographics

Answer 14

-These consumers were highly digital, social, and mobile-technology savvy

Question 15

Consumer perceptions of Fitzie

Answer 15

Scored low on being fun, cool, and fashionable

Score High on being high-quality, credible, authentic, and favourable for sports

Question 16

November 2019, EMESAA Marketing Team Meeting with 3 key Priorities

Answer 16

1) Win with Icons. Promote icons as Blockbusters, with high reach and awareness among the core audience of 18-34 year olds. Set the target reach at 70% amonth the audience, with frequency of exposure at 4 or mroe times for the top two campaigns (one sport product and one life product)
2) Deliver consideration and conversion through digital and e-commerce media, leveraging product storytelling and content to entice consumer to buy. 12 consideration-driving campaigns and 20 conversion-driving campaigns were recommended
3) Win with women and children’s. The women’s segment was still emerging, with no clear brand that had penetrated and scored a large share of the market in EMESAA. The women’s and Children’s segments could prove to swing the market in favour of Fitzie

Question 17

Following the Key Priorities outlined in the slide above, what was the marketing allocation?

Answer 17

For 2020, marketing allocation preference was given to markets with more focus on digital and e-commerce channels

Question 18

EMESAA projected net sales was how many Euros lower than expected

Answer 18

8.6 million

= 12, 467, 721 CAD (12.4 Million)

Question 19

Budget breakdowns

Answer 19

On average, markets spent 60% of their budgets on digital advertising

40% on was split evenly between TV and Print advertising, promotional events, and online influence marketing

Question 20

Impact of COVID-19 Pandemic

Answer 20

• Entire Sports and Fitness industry in the EMESAA region was negatively affected in 2020
• The lockdowns across all countries led to a decline in consumer demand, retail store closures, and lower consumer confidence dur to the cancellation or postponement of al major spots events
• Alohmora’s revenue dropped by 26% in the first half of 2020

Natter’s quarterly revenue declined by on 1%, which was due to a strong digital presence offsetting the steep decline in retail stores (but this was secretly due to major discounting of 50-60% to liquidate inventory)

Question 21

2020 Revamp Plan

Answer 21

Consumer preferences shifted in a multiple of ways:
-Consumers between 18-34 were most concerned about the impact of the pandemic, but only 40% said they shopped less frequently and actually reduced their spending

• 72% of respondents said they would be more likely to purchase from companies tat they felt were doing good for society and the environment
• Consumers over 35 saw the most impact on their employment, with 78% shopping less frequently and 90% seeing a reduction in their spending on clothing and footwear category
• Almost overnight consumers had become mobile and digital savvy
• The media habits of 35-55 were showing the highest increase in average time spent on social and digital media

-Consumers shower lower likelihood to experiment with Flashy or Edgy brands but cared more for “value for money”
_________________________________
Fitzie global leadership team announced to all Fitzie employees the importance of conserving cash (keeping costs low) to stay competitive

Question 22

Considerations for the 2021 Planning Decision

Answer 22

Roy had 2 weeks to:

1) Put together her marketing allocation proposal
2) Align country sales and marketing stakeholders
3) Present her proposal to the global team for sign-off

Minimum marketing budget to meet reach was 19m Euros

Question 23

Research conducted by McKinsey and Company

Answer 23

• Consumer sentiment was at an all-time low
• Consumers were pessimistic about economic recovery, more mindful of their spending, and trading down
• Restricted purchasing largely to groceries and household supplies
• Less than 30% of consumers were comfortable leaving their home

Question 24

Roy had ___ options to consider based on the reports about changes in consumer behaviour, as well as discussions with sales channel teams

Answer 24

3

Three

Question 25

Option 1:

Answer 25

• Proportionally allocate the marketing budget to each country based on the countries’ sales target for 2021
• The idea was to allocate the available budget in a way that was proportionate to the revise revenue forecast of each of the markets
• The media mix would b changed to provide more emphasis on social and digital initiatives as opposed to outdoor events
• When presenting the idea, the sales teams were ready to commit to sales of only 224 million euros

Question 26

Option 2:

Answer 26

Proportionally allocate the marketing budget to each country based on the countries’ sales target for 2021 HOWEVER, the marketing strategy would be revamped by focusing on commercial products (non-iconic products)

• In all markets, investments in upper-funnel awareness would be pulled back and reallocated to driving consideration and purchase
• The marketing budget would be pulled out of the upper funnel and reallocated to mid and lower funnel initiatives to increase consideration and purchase among the existing user base with the help of discounts
• Continuous stream of marketing stories would be delivered through retail, digital, social, and e-commerce platforms to communicate product benefits, with emphasis on promotions and discount-related selling
• The sales channel teams felt that this equipped them to deliver target sales of 265 million euros

Question 27

Option 3:

Answer 27

The third option was to allocate funds as per the marketing KPI’s and sales recovery potential of 2021 (project incremental to sales over 2020)

• Essentially include changes such as driving sports icon products with withdrawing completely from lifestyle icons
• Media spends for digital formats across the entire marketing funnel (upper, middle, lower) would be increase for markets with high allocation
• For markets with low allocation, awareness marketing would be withdrawn and spent only on consideration and purchase (middle and lower funnel) to drive sports icons
• For this option, the sales team’s sales commitment added up to 240 million euros

Question 28

Simulating the Options

Answer 28

Option 1:

-Most conductive to keeping brand equity intact, but least conductive to delivering business targets for the sales team

Question 29

Roy’s choice had to factor:

Answer 29

1) The possibility of closing the negotiation with the country teams
2) Ease of implementation on the ground
3) Motivation of the team
4) Short and long term business results