Mary paid $250 for a pair of Italian-made high-heels and within a month badly scraped the tip of her left shoe while running up a flight of stairs. Overtime, the tip had discoloured, worn down to the raw leather. Irreparable, the shoes ended up in the bin.

Joan, wearing a pair of $70 high-heels, had one of her heels badly nicked by a supermarket trolley carelessly pushed by a playful child in the local shopping centre. That ruined an otherwise perfect pair of high-heels. Beyond repair, the unsightly shoes ended up in her shoe rack never to be worn again.

Jane wears high-heels to work and after 10 hours in them, she would frequently develop blisters from her poorly lined shoes. She could ill-afford the $200 pair that comes with soft-leather lining.

These common incidents – tip & heel damage, and foot blisters – are experienced by women all over the country. Despite these problems, every adult woman would own an average of 5 pairs of high-heels. These classic high-heels will never go out of fashion. They are staples – equipped with 8+ cm heels. They come in a variety of colours with the most popular being black, tan, burgundy, beige and white. Gold, silver, copper and other in-fashion colours complete the list.

Marketing

Classic leather high-heels retail from $40 to more than $500 a pair, with the median 50% selling for between $80 and $120.

Footwear retailers in the Perth metro area include major chains such as Betts (23 stores), Spend-Less (21 stores), Williams (12 stores), and Paul Carroll (6 stores). In addition, there are hundreds of smaller chains and independent specialty stores. Myers and David Jones are department stores that also sell an extensive range of ladies shoes.

It’s widely held that independent specialty shoe stores are more receptive to innovative products – to set them apart from the major chain stores and give them a headstart, i.e., before the innovation becomes mainstream and prices fall.

Most stores in Perth trade 7 days a week. The retail margin (mark-up on cost) for these shoe stores range from a low of 25% to a high of 100% -but the average selling ladies shoes would be marked-up 40%.

The Company

Jefferson is a wholly-owned Australian company headquartered in Sydney. Founded in 1950, it started as a small firm contracted to manufacture a range of sport shoes for a multinational company. In 1970, it gained “independence” and began using its accumulated experience to manufacture and sell a narrow range of specialty walking shoes under the Jefferson’s Walkers brand name. The shoes have a patented hard-wearing rubber sole as well as a patented shock-absorbing insole. The brand soon gained a reputation for its comfort, styling, durability, and shock-absorbency features. The shoes, priced at the high-end from $150 to $180, are specially designed for “power” walking, an activity that is considered safer and more beneficial for 35 year olds and above. The Jefferson’s Walkers are the number one choice among serious or regular “power” walkers.

In Perth, a team of two sales representatives works from a small sales office. Marketing responsibility is in the hands of James Jones, State Marketing Manager. He is assisted by an administrative officer.

The sales force has the task of selling the entire range of Jefferson’s Walkers to mainly sport stores and some specialty shoe stores in Perth. Currently they are available from about 50 outlets. Because the Jefferson’s Walkers are considered a specialty brand, the company has little direct consumer advertising. The standard trade promotion is the norm in this low volume, high margin business. The brand comes highly recommended by the retailers and has enjoyed consistent word-of-mouth promotion. Sales figures over the past 5 years suggest that currently there may be as many as 6,000 owners of a pair of Jefferson’s Walkers in Perth, of which 60% are men.

The Breakthrough

The designers at Jefferson Shoes are in the process of developing a range of high quality classic high-heels with the following features – only some of which are patented:

Moulded thin polycarbonate (special plastic) toe caps that are discreetly and aesthetically fitted to the tip of the shoes. The toe caps extend 2 cm from the tip and give the shoes a distinct look.

Moulded thin polycarbonate heel protectors that are discreetly and aesthetically stuck to the back of the heels.

Both toe caps and heel protectors give the shoes extreme protection from scrapes, nicks and other common damages. These can be replaced in 5 minutes by anyone with basic tools. These are innovations but not patented.

Hard-wearing rubber sole for extreme durability. Durable soles are not new but the material used is patented by Jefferson.

Shock-absorbing insole for extreme comfort. Such insoles are not new but the material used is patented by Jefferson.

Soft leather lining and insole for extreme comfort. Though not an innovation, this feature is only found in expensive brands, especially Italian imports.

This new range of high-heels incorporating the above features comes in 5 standard colours (black, tan, burgundy, beige and white) and other colours can be added to the range seasonally.

It is expected that each pair of shoes sold will include one spare set of toe caps and heel protectors (4 pieces) that can easily be replaced by the wearer.

The shoes can be made in their Sydney factory using its excess capacity at a cost of $50 a pair (inclusive of delivery to Perth shoe outlets). The minimum production run is 2000 pairs of the new shoes per year.

Alternatively, the shoes can be made under contract to their exact standard and specifications by a reputable factory in China at a cost of $30 a pair ((inclusive of delivery to Perth shoe outlets). Minimum order at that price is 3000 pairs a year.

Sales Representative & Travel Expenses $60,000.00 each

Sales office overheads (apportioned) $30,000.00

Target sales volume (total) 3,000 to 8,000 pairs a year

Required:

The Sydney office has requested from James Jones, a marketing plan for the next 12 months incorporating the new range of classic high-heels. If approved, the product will be marketed in Perth on a limited scale (trial marketing). Assume the role of James Jones.

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Posted on May 11, 2016Author TutorCategories Question, Questions