Design the marketing plan that Gonzalo and Pilar Goyes should implement in 1995. Be explicit regarding the specific actions they should carry out, their costs, and the sales and economic results you expect SpainSko to attain by December 1995.

Question

What will be an ideal response?

Answer 1

If instructors have exerted a lot of control on the class discussion so that a clear diagnosis of SpainSko in December 1994 is reached before any attempt to design a marketing plan for 1995, answering this last question is likely to be relatively easy for the class.
If instructors choose not to exert a lot control, it is likely that some students may rush ahead and try to present their 1995 marketing plans based on a different diagnosis of SpainSko, or even based on no diagnosis at all. In that case, instructors may expect contributions from students ranging from “SpainSko is a hopeless case, it is not a viable new business venture, and therefore the Goyes should fold it up and quit,” to “It is fairly normal that a new business venture will show a loss in its first year. The Goyes should have the patience to continue doing substantially the same marketing actions, in the hope of turning SpainSko around in the future.” Instructors should be aware of the fact that statements like this last one may be based on pure blind faith! Students may not be aware that, if they continue as they are, SpainSko may run out of funds, and may even go bankrupt in a fairly short time!
In my opinion, as stated above, neither of these is the right option. SpainSko should go on, but they clearly cannot go on like this.
The 1995 marketing plan should include at least five kinds of actions:
a. First of all, any 1995 marketing plan should include the necessary mailings to generate repeat purchases from the 187 customers captured in 1994. Many of the numerical calculations made in this teaching note hinge on the short- and long-term repeat purchase rates actually derived from these customers. An actual repeat purchase significantly below 16 percent per year might be disastrous, while a repeat purchase of 16 percent or above would confirm that customers captured in 1994 are really happy and satisfied with the shoes they bought. This might greatly facilitate the economic consolidation and future development of SpainSko.
b. Secondly, Pilar and Gonzalo Goyes should choose which kinds of marketing actions to repeat in 1995, out of all the marketing actions actually implemented in 1994.
In other words, they should select the most efficient and effective actions done in 1994 and repeat them in 1995. In so doing, they would prove that they have learned something from their trial and error attempts in 1994.
c. If students do not mention it, instructors may consider raising the point of what should be done with the selling prices of Dansko shoes in Spain in 1995. According to the case, the initial rate of exchange was 80 pesetas per one Deutsche Mark, which is the currency in which the Danish manufacturer of the shoes invoices the Spanish importer. But this rate of exchange reached 88 pesetas per DM in December 1994. This is a 10 percent devaluation of the Spanish peseta in front of the German currency. If the average cost of an imported pair of shoes was around 6,000 pesetas at the beginning of SpainSko’s operations, it is likely to be around 6,600 pesetas at the end of 1994.
If potential customers are not price sensitive (as mentioned in the case), maybe the average retail selling price of SpainSko should be increased from 18,000 pesetas to at least 18,600 to compensate for the cost increase due to adverse currency fluctuation. The Goyes might even consider increasing their selling prices a little bit above this figure to improve SpainSko’s contribution margins. By the way, some improvement may already happen in 1995 if, contrary to what happened in 1994 (see footnote in case Exhibit 4), the Goyes do not grant as many discounts to their friends.
d. Obviously, the enterprising couple may wish to reconsider the kind and amounts of SpainSko’s overhead expenses. If these could be significantly reduced, break even would be nearer. Contrary to that, at some point in time in the future, Pilar may rightfully claim some kind of salary or economic compensation for her efforts. If SpainSko sales grow, and she needs further help, overhead expenses may actually go up, fueled by salaries, and other miscellaneous expenses such as telephone, et al.
e. Finally, the 1995 marketing plan might include some testing of a few new and different marketing actions, as described in the last paragraphs of the case.
Regarding the latter, instructors, if time allows, may determine pros and some cons of some of them.
1. Establishing an exclusive Dansko retail store
Pros
• Stores would allow potential customers to try the shoes on, and to touch and feel the material before buying.
• Customers might buy at the retail store for the first time, and then repeat purchase by telephone or by placing a mail order.