Batesmanor Furniture, Inc.

BatesManor Furniture, Inc.

Case Analysis

Katie Tierney

10/31/2011

Problem Identification

On January 9th, BatesManor executives held a budgeting meeting to discuss the appropriate way to allocate funds for promotional expenditures in 2008. Also in attendance were executives from BatesManor's advertising agency, Hervey and Bernham. BatesManor's policy has been to budget 5% of expected sales toward total promotion expenditures. Mike Hervey proposed an increase in expenditures for consumer advertising by $225,000. Cooperative and trade advertising would remain at the 2007 levels. Hervey recommended that shelter magazines account for the bulk of the incremental increase in consumer advertising. John Bott, the BatesManor vice president of sales, disagrees with Hervey's suggested budget allocation. Bott believes the funds should be used to cover expected increases in sales expenses and administration costs, as well as to hire an additional sales representative. Charlton Bates, president of BatesManor, is now faced with the challenge of figuring out how to allocate the advertising funds and how the funds should be allocated within the budget. (Kerin, Peterson)

Industry, Market, and Buyer Analysis

Total industry sales in 2007 were estimated to be $31 billion. The industry is divided into three categories of furniture. The first category is upholstered furniture which makes up 50% of the total sales. The second category is wood furniture which has 40% of the market sales. In 2007, this category grew 2.5% and is forecasted to grow another 4% in 2008. Wood furniture consists of tables and dining room and bedroom furniture (in which account for the majority of the wood sales). The third category is other, which consists of ready-to-assemble furniture and casual furniture and makes up about 10% of the sales.

There were several surveys that were distributed to consumers to find out the important factors to buying furniture. Selected findings from surveys conducted and reported by Better Homes and Gardens indicate what factors indicate customer's buying behavior. The first question addresses the subject of factors influencing at which store a consumer would make a purchase. The following are the top five that were listed from highest to lowest score: carries the style of furniture you like, is a highly dependable store, sells merchandise that is good value for the money, has well informed sales people, and has a relaxed no-pressure atmosphere. From the survey's results, we can presume the customers want to be knowledgeable about the product before they make their decision. They want well-informed sales people. We can expect consumers to ask questions, seek information, and they would need active and engaged sales personnel. Overall, the most important factors are style, design, comfort, quality, durability, and construction. (Kerin, Peterson)

BatesManor's target market is individuals who are between 40 and 59 years old homeowners with an annual household income of over $100,000. The followers of them would be the 25-39 year old individuals. The item price wasn't a very vital factor, but given that BatesManor has a specific market they target, this would not be a deal breaker on the buyer's decision. Within this market, the purchase decision is very complex and needs assistance provided to the consumer within the store to determine the purchase.

Organization Analysis

BatesManor Furniture, Inc. was formed in the early 1900s by Charlton Bates' great-grandfather. BatesManor Furniture is a manufacturer of high quality wood furniture, specializing in medium to high priced bedroom, living room and dining room pieces. Their furniture is sold through 1,000 high-quality department stores and independent furniture stores nationwide, but not all stores carry the company's entire line of furniture. BatesManor is very selective in choosing retail outlets and will not sell to furniture chains and discount outlets. Their sales force consists of ten full-time employees and two regional sales managers.

BatesManor categorizes their promotional expenditures into four