Mark Cuban I. Situation Analysis 1. Background The Faith Mountain Company has experienced a great deal of success since opening in 1977. What Cheri and Martin Woodard began as a local store that sold herbs, related products, and antiques has slowly evolved into a major mail-order catalog company and retail store that develops, manufactures, and markets high-quality gifts, apparel, and home accessories. In 1991, Faith Mountain was still a relatively small company with less than 50 employees.
However, sales have been steadily increasing for Faith Mountain, as they went from about $1.2 million in sales in 1987 to just over $5 million in 1991. In 1991 The Faith Mountain Company set for itself the overall goal of $25 million in annual sales by 1995, with $10 million coming from sales from the Faith Mountain catalog, $5 million from the retail division, and $10 million from the acquisition and development of another catalog company. Reaching these goals will have implications in all areas of operation, including expansion, human resources, marketing, and finance. 2. Industry Overview The Faith Mountain Company operates in the specialty mail-order industry.
According to a study by Arnold Fishman of Marketing Logistics, the total mail-order sales in the United States in 1990 topped $200 billion, with consumer mail order at $98.2 billion. Of the consumer mail order, $40.7 billion was spent on services; $44.5 billion was spent on specialty merchandisers, and $13 billion on products from general merchandisers. Total mail order sales for 1990 reflected 10.1 percent of general merchandise sales, 3.2 percent of retail sales, 2.1 percent of consumer services, and 1.8 percent of gross national product for the year. On a per capita basis, Americans spent an average of $393 on mail-order purchases in 1990. Specialty mail-order vendors, such as The Faith Mountain Company, have a substantially greater share (77 percent) of consumer mail-order product sales than do general merchandising mail-order vendors such as J.C.
Penney (23 percent). As credit card companies offer new inducements and incentives to customers who shop by mail, it is anticipated that shopping by mail will become more prevalent. However, third-class postage rate increases and the placement of taxes on mail-order goods in some states may have a negative affect on the mail-order industry. 3. Business Unit Analysis The Faith Mountain Company develops, manufactures, and markets high-quality gifts, apparel, and home accessories, distributing through use of two business units, the mail-order unit, which distributes catalogs four times per year and provided the bulk of the 1991 total sales with about $4.7 million in revenue, and the retail-store unit, which had revenues of nearly $300 thousand. Both units operated under the same premise, that they achieve competitive advantage by providing customers with superiority in merchandise, quality, and service.
Faith Mountain gained superiority in merchandise by seeking exclusive marketing rights for products and by moving more towards private labeling. High standards of quality were provided to customers because Faith Mountain manufactured about 20 percent of its merchandise, which means they could customize and personalize products to an individual customer’s needs. Superior service was being achieved in the mail-order division by implementing a system designed to answer 90 percent of all customer service inquiries within the first two minutes, and service operators were authorized to do whatever it took to keep customers happy. However, pricing was also a priority to Faith Mountain, as customer service policies included guaranteed lowest prices. The retail store featured the same product lines as those in the catalog, but not all items from the catalog were sold in the store, and about 20 percent of the store merchandise was not offered in the catalog.
Also, the retail store benefits substantially from the catalog, as the store’s sales revenue and traffic increases after the release of a new catalog. Because the Faith Mountain Company is relatively small, the Woodards were able to successfully supervise nearly all facets of both the retail division and the mail-order division without much difficulty. However, with the Woodards intending to open another retail store and increasing their customer bases with the mail order division, they may have to rely on middle management to overtake some of the duties that they had previously handled. 4. Buyer Analysis The Faith Mountain Company had a specific target market in mind for its products. They targeted women between the ages of 30 and 50, who are homeowners and have family incomes of $40,000 – $50,000. These women have traditional family values and their time spent at home with their families dominated their nonworking hours. These values and demographics suggest a northeastern middle-class or midwestern geographic concentration. The average Faith Mountain Company order is $75, with the peak seasons being from September to late December, especially the Christmas season, and January to February. Possibly because of their current success, there has been little effort by The Faith Mountain Company to explore other markets or reposition its current target market.
However, if Faith Mountain hopes to achieve its sales target for 1995, they may consider changing or broadening their target market. 5. Competitor Analysis In 1991, the Woodards estimated approximately 50 catalog companies sold gifts, apparel, or home accessories. However, the Woodards had targeted four significant competitors who shared the same basic niche as The Faith Mountain Company. In 1991, Potpourri controlled the highest market share in the industry with annual sales in the $50 million range, and an average order size of $60. The Woodards believe that Potpourri’s quality of merchandise and customer service is inferior to The Faith Mountain Company.
Charles Keath had sales of $35 million, which is also a significant market share in the industry. Charles Keath is well respected for its excellent merchandising, however, the Woodards believe that The Faith Mountain Company catalog is of higher quality, as is Faith Mountain’s customer service. W.M. Green, only seven years old in 1991, reported revenues of $4.5 million in 1991, with an average order size of about $110. W.M.
Green does not sell apparel, and the Woodards believe that Faith Mountain’s broad product line and experience gives it an advantage over W.M. Green. Sturbridge Yankee has about $8 million in annual sales and the Woodards predict that the retail stores will be the future focus of Sturbridge Yankee. This focus on the retail division, along with a narrow product line should inhibit growth. 6.
Marketing Program The Faith Mountain Company’s overall marketing strategy is to provide superior merchandise, quality, and service to its customers. Pricing is also an important part of the mix, as customer service policies include guaranteed lowest prices. Advertising and promotion of The Faith Mountain Company was done mainly through the distribution of the catalog. As of 1991, Martin Woodard worked with a professional service firm (Forgit & White) contracted to design and produce the catalog, including layout, photography, and printing. Also, Faith Mountain operated an in-house advertising named Telesis. However, little is done to promote Faith Mountain products to potential customers who do not receive the catalog.
The Faith Mountain Company has not pursued a true positioning strategy. They targeted a specific market according to demographics such as age, income, and family values. They have done little to consider what choice criteria or dimensions customers use to evaluate product offerings, and consequently have not examined the weight of these criteria. Also, the mix of product, price, placement, and promotion has not been seriously examined. Incorporating the marketing mix and a positioning strategy would be duties of a marketing manager, a position that The Faith Mountain Company did not have in 1991. However, with the expected growth and revenue that Faith Mountain plans to accumulate, they have considered implementing a marketing manager as part of their personnel. II. Problem Identification and Potential Solutions 1. Problem: Market Research.
Although The Faith Mountain Company has a target market in mind, currently targeting women between the ages of 30 and 50 who have traditional values. There has been little research done to determine why this is their target market, or if this segment is their most profitable customer base for maximizing sales. Potential Solution(s): Find an effective medium to survey both customers and potential customers. These surveys should include the customer’s demographic information, i.e. age, race, gender, family income, etc.
The surveys must also try to assimilate what attributes are valued in the industry. These attributes should include but not be limited to: variety of merchandise selection, quality of merchandise, level of customer service, timeliness of delivery, price, company reputation, etc. Then they should rate each of these attributes on a scale of 1 to 10 in increasing level of utility, weight, or importance. This should give The Faith Mountain Company feedback as to whether or not their current target market should be broadened, or repositioned. 2.
Problem: Personnel. Currently, the company employs less than 50 people. Nearly all of the hiring is done by Cheri Woodard. If the company wishes to expand its customer database, as well as open another retail outlet, it must consider hiring more employees to handle increased sales and customer service demands. Another glaring problem facing Faith Mountain is the absence of a marketing executive/manager. Potential Solution(s): If Faith Mountain wishes to expand Cheri Woodard may have to relinquish some of her hiring responsibilities to the specific departments.
Also, to account for an increase in projected sales, more customer service/sales associates will have to be hired for both the retail and mail order business units. And maybe the most important personnel addition needs to come in the form of a marketing manager. 3. Problem: Product Selection. The company has not utilized potential research tools such as surveys to determine which products their customers want or why customers value those pro …