Calyx & Corolla Case
Executive Summary
Calyx & Corolla (Calyx) needs to determine whether it should change its current strategy
and positioning as a mail order operation to compete more directly against more traditional
outlets, such as florists, and wire services, such as FTD. How could Calyx attract the largest
group of potential buyers who patronized florists or other retailers and were not
accustomed to buying by mail order? Calyx needs to determine what actions it should take
to make a profit and grow its business.
I. Goal and goal defense:
Calyx and Corolla should target raising revenue by 50 %, increase net profit, decrease
marketing and sales costs by 45%. The net profit figures of Calyx and Corolla are not very
high (Exhibit-1). The retail plant and flower industry in the U.S. is a $9 billion per year
industry. The industry has grown at a rate of 7.7% since 1985. The market landscape is
broken into three areas. Twenty five thousand retail florists have 59% of the market ($5.31
billion) and supermarkets have about 18% of the market ($1.6 billion). Nurseries, mail
order companies (seed companies) and other retailers accounted for the remaining
23%. Calyx’s cost structure, especially its sales and marketing (S&M) expense as a
percentage of sales, suggests that its cost per order is extremely high. In 1991, Calyx’s S&M
expenses were 68% of sales. (Exhibit. 1) In comparison, FTD‘s S&M expenses were 3.5% of
its total sales or 50% of its gross revenue. While 70% of Calyx’s sales are through its
catalogs, the current approach is highly expensive. Sales and Marketing includes catalog
production and mailing, list rental and freight out that comes to $9 per catalog. In
comparison, FTD annual advertising budget was .21 per U.S. household. FTD spent $24
million on TV, radio, newspaper and other forms of advertising. Based upon FTD’s 21 million
orders and $24 million in advertising cost, FTD spent $1.14 in advertising to obtain an
order.
II. Impediment and Impediment Defense
focusing on lean season when FTD stays low.