Business strategy case study Background You are being asked
Business strategy case study Background You are being asked
Business strategy case study Background You are being asked to refine the pricing strategy for Zappos todrive 10% year-over-year growth for the upcoming summer seasonwhile maintaining current profit margins. Assume we are sellingabout 500 different brands across 10 different product categories(shoes, clothing, bags, accessories etc.) on Zappos. For mostbrands and categories sales follow a seasonal pattern, meaningdemand for spring/summer will ramp up in March, culminating inApril and May, and then trailing off over the summer holidays.Various holidays present an opportunity for marketing, as theytypically see increased demand. The season ends around Labor Dayand back-to-school sales, which is also when fall/winter productstarts to sell. Zappos’ customers roughly fall into these segments: · Premium: o Avg. Income over200k o Ages 45-65 o Average household of 4people o Don’t like crowdedplaces o Most profitable o Most loyal visitors;premium customers visit Zappos 1 out of every 5 times they signonto the internet o Costly to acquire o Average order value:$181 o Average order size: 3items o Favorite brands:Patagonia, Breville, Marc Jacobs, Stuart Weitzman, Theory, Dansko,Mephisto, Salvatore Ferragamo · Young Professionals: o Avg. income between $55kand $75K o Ages 26-34 o Average household of 2people o Mostly located in urbanareas o Have a tough timebalancing work/life o Come to the site theleast o Not costly to acquire,but hard to keep their loyalty o Average order value:$74 o Average order size: 1item o Favorite brands: CalvinKlein, AK Anne Klein, Levi’s, Cole Haan, Rockport, Samsonite, Nike,Dooney and Bourke · Off Price: o Avg. Income between $55kand $60K o Ages 18 – 40 o Average household of 3people o Very savvy with onlineshopping; willing to price compare to brick and mortar o spend the most time onthe site o “coin operated” – if youget word of good offer out to them they will at least check out thesite o Average order value:$48 o Average order size of 5items o Favorite brands: TheNorth Face, Nike, Oakley, Rockport, Ugg, DKNY · Families: o Avg. income between $75kand $125k o Ages 35 – 55 o Average household of 5people o Very busy with familylife – spend the least amount of time on the site o Average order value:$45 o Average order size: 2items o Least profitable due tohigh return rate o Favorite brands: adidaskids, DC, Hurley, Babyjogger, Cuisinart, Omega, Oxo Questions What would be your plan to maximize sales given certainprofitability margins for each segment and across all segments?Your levers are prices/discounts, a loyalty program, coupons andother incentives, promoting specific products on the site, directmarketing and online product ads. Assume that besides having accessto customers’ order data, you can also obtain information on howcustomers shop the site (web logs) as well as how customers get tothe site. You also have access to competitive data and have an ideawhich of your products are also carried by other retailers (thoughnot the other way around) and at which prices. That data is notcomplete or current to the minute, but can be used for directionaldecisions. If you think you are missing certain assumptions orfacts, feel free to make your own assumptions and state them inyour answers. 1) Whatwould be your pricing strategy for each segment? Considering theinterplay with the other marketing levers you have available andmake assumptions about or state how you would use them.Additionally, consider the change in demand over the course of theseason. 2) Assuming no budget or resource constraints, what data would youwant to obtain about Zappos’ customers to craft an even betterpricing strategy? Explain how you would use the data to informpricing decisions. 3) Outline for one of the segments an optimization model thatconsiders all marketing mix factors. Be as specific as possible.What additional information would you need? Make reasonableassumptions for the missing pieces of information and provide thesource of your information, as you incorporate the assumptions inyour model. 4) Howdoes your pricing strategy impact the financial metrics a retailerwill be concerned about? What aspects of your pricing strategy maylead to trade-offs between the short term and long term financialhealth of the business? Additionalinformation Additional information on thecompetitors and competitive data, as well as shopping patterns ofcustomers, can be accessed through search engines and Web logs. COMPANY OVERVIEW Zappos.com, a subsidiary ofAmazon.com, is an online retailer of apparel, footwear, handbags,watches, sunglasses and accessories. The company product categoriesalso include eyewear, housewares, jewelry, sporting goods, watchesand gifts. The company primarily operates in the US, where it isheadquartered in Las Vegas, Nevada. As a subsidiary of Amazon.com,Zappos.com is not obliged to release its financials. MAJOR PRODUCTS &SERVICES Zappos.com, a subsidiary ofAmazon.com, is an online retailer of apparel, footwear, handbags,watches, sunglasses and accessories. The company’s key productsinclude the following: Accessories, Baby shop, Bags andhandbags, Beauty products, Clothing, Eyewear, Gifts Housewares,Jewelry, Shoes, Sporting goods, Watches. TOP COMPETITORS The following companies are the majorcompetitors of Zappos.com, Inc. Boot Barn Holdings Inc. ; Foot Locker,Inc.; J. C. Penney Company, Inc. Customer experiences https://www.forbes.com/sites/advisor/2013/05/13/what-zappos-taught-us-about-creating-the-ultimate-client-experience/#4b1c98e220fb https://www.owler.com/iaApp/124589/zappos-competitors?onBoardingComplete=true . . .
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