BatesManor Furniture, Inc.

BatesManor Furniture, Inc.
Case Analysis
Khyatiben Patel
Davenport University

MKTG610
Dr. Loughran
January 28, 2011

Case Recap In early 1900s, Charlton Bates’ great-grandfather opened BatesManor Furniture Inc.; the company manufactures medium-to-high-priced wood bedroom, living room and dining room furniture. BatesManor sells its furniture to independent furniture stores and high quality department stores nationwide; it’s very selective in choosing retail outlets. BatesManor had 10 full-time salespeople and 2 sales managers for fiscal year 20071. And sales personnel receive his salary and commission on the base of the sales. Bates believes that the company has been successful because they have employees who are committed to the company and they are not only taking the order but motivate the retail sales people and suggesting them about displaying the furniture in the store. The total promotional expenditures allocated by BatesManor for the operating year 2007 were $3,675,000, which did not include the salary of the vice president of sales. For the same year the company had net sales of $75 million.
Problem Identification For year 2008, Mike Hervey, from BatesManor’s ad agency, proposed that they would increase the advertising expenditures by $225,000. This would increase new product exposure, brand awareness, and enhance the quality image of the manufacturer. However, the $225,000 increase in advertising is slightly out of line with the manufacturer’s policy of budgeting 5 percent of expected sales for total promotion expenditures1. Although Hervey recommended an additional $225,000 only for the advertising budget, John Bott, the vice president of sales, noted sales expenses and administration costs were expected to increase a total of $135,000 in 2008. Therefore, how can Charlton Bates allocate the advertising