Flare Fragrances Company
Case
Problem Flare Fragrances is experiencing declining sales growth. Arlmont Associates suggested two options that Flare Fragrance can do to increase sales growth. The first option is to increase efforts in the drug store channel. The second option is to introduce a new perfume brand. Whatever decision they make it will need to deliver $7.5 million in revenue for 2009 and reverse their declining sales growth trend.
Analysis
The first option to look at is to increase efforts in the drug store channel for the existing Flare Fragrances brands. The total market sales from 2007 in the drug store channel was only about 17% (Exhibit 1). With that being said this channel is not as profitable as department stores some drug store chains are beginning to put aestheticians, beauty experts, which may help this channel grow in respect to market share of the total market. This would be a great opportunity for Flare Fragrances to pursue this channel more and increase their sales.
The next option is to introduce Savvy. One of the strengths that Savvy has is the name itself. It is viewed as stylish, upbeat, and classy. The price of $40 per 1.7 oz. spray bottle could also be seen as a strength for Savvy because it gives the product a prestige image and puts it in the Mid-Tier brands category. This price would be competitive against the introduction of Aromatique’s perfume, Dulcet, which is estimated at a price of $42.
Introducing Savvy independently from Loveliest, as a new brand, could reach the target age group of 18-34 year olds because they have a high willingness to try new scents. If Savvy was not only a new scent but a completely new brand Flare Fragrances would avoid diluting their Loveliest brand name and keep their current customers of that brand happy. Introducing Savvy as a new brand would also give Flare Fragrances a chance to penetrate into the drugstore channel more with the new product and increase their market share of that channel which is only about 4% as shown in Exhibit 2. The introduction of beauty experts, as explained above will hopefully increase sales in this channel and ultimately increase sales of Savvy and other Flare Fragrances products.
The use of a celebrity endorsement would be extremely beneficial to the introduction of Savvy since the target market is influenced by word of mouth and prefer exclusivity. The use of a celebrity would also make it easier to come up with a new theme gear towards the target markets of women age 18-34. As for the three media plans for Savvy introduction we would only want to do Plan 2 or Plan 3 since we need to reach our goal of $7.5 million in 2009. If we use the estimated sales return from money spent on advertising by our competitor Plan 2 would generate just enough revenue to reach that mark and Plan 3 would exceed it (Exhibit 3). If we were to use a celebrity endorsement we would want to go with Plan 3 because it will generate the most sales revenue compared to Plan 2.
Recommendation Flare Fragrances should introduce Savvy as a new brand not under the Loveliest umbrella. This way they can be seen as a completely new scent and attract those younger women age 18-34 who want a prestige brand, exclusivity, and are willing to try a new scent. This will also help the Loveliest brand by not diluting it too much with another fragrance like Natural which is aimed at a younger demographic. In order to create hype they should use a celebrity endorser that young women in this age group are attracted to. In order to create this hype and bring in a celebrity endorser Flare Fragrances will need to implement Plan 3 because it will create the most awareness and, with the estimate in exhibit 3, bring in more than $7.5 million in incremental revenue. 