Table of Contents
Alloray, established in 2011, is a ceramic dealer company based in Toronto Canada. The organization deals in three categories of items such as the rugs, LVT, and floor runs. It currently registers revenues of $500,000 with a gross profit margin of $175,000, which is 35% of the total revenues. The firm has discovered that its poor display skills have been the cause of its low sales. Hence, Alloray intends to invest additional $50,000 to improve its revenues through improved display methods. It has projected that the incremental investment of $50,000 may lead to revenue increase by 25%, which totals to $125,000. Hence, the return on equity of the additional investment will be 150%. Thus, the company should continue with the project since it will be highly beneficial.
The point of sale strategies employed by the company has been the cause of its low sales as compared to its competitors. Alloray does not include prices and benefits of the tiles in their displays. Hence, the customers have always had an uphill task of learning about the qualities of the items sold by Alloray. Further, the company has always put poor pictorial quality in their displays with small sizes that do not guarantee the clients good view of the products. Therefore, when Alloray puts good quality pictures with price tags and benefits, they are likely to improve their sales across all the 200 stores. Finally, the firm should find a way of engaging its clients by displaying most of the items in the vicinity of their customers.
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Alloray is a tile dealer company based in Toronto, Canada. The firm sells three different categories of products that include the area rug, LVT, and runners. Alloray has, however, struggled in the market as it is not able to improve its sales by a considerable margin. Currently, the firm has annual revenue of $500, 000, which earns it a 35% gross profit margin. Hence, Alloray makes a profit margin of $175from its sales. The firm, however, has a capacity of making huge sales if they can adopt a good Point of purchase in their stores (Phillips, 2012). Alloray has discovered that its weak sales have been due to poor display. Currently, the firm presents only a few of its products in the website and local stores. Besides, the company does not include any feature of the tiles in the display making the customers not to learn the qualities and the benefits of purchasing such products. Further, Alloray does not include the prices of the tiles in their displays. Hence, the customers may not get lured to buy the products because of fear of high prices. The firm, therefore, needs to improve the display system for better sales.
Alloray faces stiff competition from well-established ceramic manufacturers that have dominated the Canadian tile industry for decades. ABK is one of the firms that have been in the market since 1992 and therefore have a large customer base (Alegre & Chiva, 2004). Other businesses such as Anatolia, Ariana, and Ascot have been giants in the ceramic industry and, therefore, pose a stiff challenge to Alloray. Alloray, therefore, requires evaluating the Point of sale strategies of these companies to enable it to attain an equivalent market base or even higher in the next coming years. The Alloray marketers have however realized that the primary challenge that the firm has faced in the market is its display system.
Most of the organizations in this industry have developed the proper use of signage (Deaton & Gabriel, 2002). They provide all of their products on the screen so that the customers can have knowledge of such tiles and decide whether they would purchase them. Unlike Alloray, most the companies in the market use colorful pictures of the tiles that they sell so that the clients can have a good view of them. They further accompany the pictures with huge signs to indicate the prices of the tiles as well as their features. The clients would then get attracted by the prices of the items against their quality. It would be difficult for a customer to purchase an item without knowing the costs of such projects. Besides, striking features alone cannot provide the qualities of the products over the others. Hence, stating the prices and the benefits of the products in the store and website displays will boost their sales as more customers will get attracted to them (Chandon et al., 2009).
Another strategy that the sellers of the ceramic have employed to increase their sales is through getting the customers involved at the counter. Any customers may come for specific items based on their prior knowledge and history with such products. However, the customers’ service should be in a position to ask the customers if they would consider purchasing additional items before they check out (Meyer, & Schwager, 2007). For example, since Alloray deals in tiles, rugs and floor carpets, they can convince a customer who bought a tile to buy either a rug or a runner that matches the tile. Since the additional items may considerably require less money as compared to the cost of the item purchased by the customer, the customer would not hesitate to buy the other products. As a result, there would be improved sales in the stores providing the company with better gains.
Further, the Alloray stores should place the sale items in the areas with high traffic. For example, need to have a vision of the best things immediately they enter into the stores. It would be difficult for customers to make moves around the stores to identify the new items. They would instead walk out or just make a purchase of the few items that they had in their minds before. However, a proper positioning of the majority of the firm’s products at the view of the customers will increase their purchase capacity (Kuhfeld, 2005). The same approach needs to get applied in the e-marketing as well. When the client logs into the website of the firm, most of the products of the company should be visible easily on the home page. Clients would only get attracted by the first vision. However, if they do not get drawn to the home page, they are less likely to navigate other sites of the location for the search of more items. Hence, firms would register more sales if they produce excellent displays of their ceramic products in the home page of their websites as well as at the entrance of their stores.
Another method that would help the firms to raise their sales capacity is through research and consulting the vendors (Mani & Masand, 2004). Research would allow the company to establish the best mechanisms that they can employ to sell their products. They would identify the best points in the store at which the customers would have the best vision of the products and purchase them. Therefore, the firm can conduct regular checks of the acquisition made at different points of the stores and analyze the data so that they would establish the best display methods. Further, it would be better if the company assess the display methods that attract the customers most. They can view different items in different pages such as at the home page and determine which products sell most based on their display system in the sites. The method that proves the best will, therefore, serve the firm better regarding sales improvement. Further, the company can seek the advice of the vendors as they have conducted analysis and established the best display techniques.
The study employed the research technique to determine the best display methods used by other firms in the same industry. Since many companies deal in ceramics in Canada and other parts of the world, learning how they present their products will assist Alloray in developing the best marketing techniques for their items.
The firm further used the ROI formula to determine the impact of the improved sales on their profit margins. The firm thought of investing an additional $50,000 in their 200 stores s as to improve their revenues. The return on investment formula would, therefore, assist in calculating the profitability of such investment. Apart from the ROI, the study used the payback analysis as well. It further employed the use of NPV analysis which assisted in establishing the average revenue per sale. Finally, the survey employed the use of breakeven analysis to help with more analysis.
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Alloray sought to raise its sales by 25 percent from the current sales of $500,000. The current sales of $500,000 provided a gross profit of 35 percent. Hence, the firm initially made a gross profit margin of $175,000. It, therefore, sought to establish the profit margin it would earn on an additional investment worth $50,000.
Since the firm intended to improve the revenues by 25% from the current sales of $500,000, the additional sales would be as follows;
Incremental sales = $500,000*25/100 = $125,000
Hence the total sales after the investment of $50,000 would be;
$500,000 + $125,000 = $625,000
Since the cost of the production of the additional revenue would be $50,000, the profit margin would $75,000
Return = Gross margin – marketing investment
= $125,000 – $50,000 = $75,000
Hence the return on investment would be 150%
Return on investment = (return / investment) * 100
= 75,000/50,000 * 100
Since the firm has 200 stores, each branch will spend $250 in the signage.
Cost per branch = $50,000/200 = $250
The stores will further make additional sales of $675 each and profit margin of $375 each.
Unit revenue = 125,000/2,000 = $625
Unit profit margin = $625 – $250 = $375
Discussion of the Results
Alloray has recorded flat sales over the past period due to the poor display system. If they invest additional $5,000 in the improving its display system, the firm can register additional revenue of $125,000. The additional investment will produce high returns of 150 percent due to a good show. Hence, Alloray needs to better their display mechanisms as it would be more profitable to them.
Lack of proper marketing strategies results in the weak sales since the customers fail to have a view of the items. No client would spend extra time in the stores while trying to look for things. Hence, it is always upon the company to place the elements at the points that are attractive to their clients. When the customers can have a clear vision of the products, they are likely to purchase such items. However, the display pictures should as well be qualified to allow the customers develop an attraction to them. A poor quality display such as in the websites is likely to scare away the customers and prevents them from the purchase of the items. Hence the display should be attractive enough with all the information the customer may need from the products. Therefore, when Alloray invests additional $50,000 in improving its points of sales, it will significantly record a rise in the ROI.
Alloray requires advancing their display techniques to raise their revenues from the ceramic business and eventually improve their return on investment. One of the best methods that the company can use is to employ the signage in their displays. The current display made by the firm in both their stores and the websites indicate a lack of signage. The quality of the photos in the websites have got reduced and their lack additional information such as the price of the items and their benefits to the buyer. Hence, when the company includes the amount in their displays, customers will compare them with the quality and purchase the products. It would be difficult for the clients to seek from the company the price of every product in their display. The clients would, therefore, go to other stores where they can easily access the information of the tiles that they intend to purchase. Further, the pictures would not display the quality of the products to the customers however much attractive they can be. However, when the company includes the benefits of each tile or rug in the display, customers will quickly make a comparison against their prices and decide to purchase them. The signage will cost each store an additional $250. However, it will result in a further profit margin of $375 per store as they would be an improved revenue by $625 in each of the 200 stores.
Another strategy that will help Alloray to achieve their projected sales is to involve their clients at the counters. Many customers may come with the mentality of purchasing one or few products. However, when the salesmen of the company include them well at the counters, such clients are likely to buy more items. Since Alloray sells a variety of elements, it can successfully convince customers of either tile to purchase the rugs or carpets that match their choice of the tiles. The customers always intend to buy the best products and would not turn down the suggestions about the additional sales. Hence, the best method for Alloray to raise their revenue is to display several categories of products together. Many clients would, therefore, consider the purchase of the items as recommended by the stores. The firm does not need any additional cost to implement this display method as it just needs to instruct its salespersons in each store.
Further, the company needs to place their items in high traffic areas. Alloray, just like other ceramic dealers, has employed the use of the website to market its products. However, many clients have failed to have a clear view of the products sold by Alloray since the company provides unnecessary procedures in finding the items. There is need to display most of the elements of the home page visited by the customers. Most of the customers would not like to encounter multiple procedures to view the products. The same process would improve sales well applied in the stores. Displaying the best selling items such as tiles at the point easily visible to customers is ideal for better revenues. Some of the best viewing points may be at the entrance or the counter. When the clients easily access the items, they are likely to buy them. However, the customers would walk away from the stores if they cannot find the best items on the front display. They would as well log out from the sites if they fail to find the things they require in the front pages. The firm would instruct the marketing agency to employ the practice in both its stores and the website. Hence, Alloray can implement it at no extra cost.
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