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John Gilbert, President and CEO of the Vermont Teddy Bear Company, was examining a report created by his marketing team that highlighted Calyx Flowers, a subsidiary with gross margins close to 50%, not meeting its maximum financial performance. The report proposed various action plans to enhance the financial performance of Calyx Flowers.
Established in 1981, the Vermont Teddy Bear Company strived to provide customers with a unique gift-giving experience. By 2008, the company had grown to encompass four divisions: BearGram, PajamaGram, and TastyGram for gift deliveries, as well as Calyx Flowers.
The BearGram service from Vermont Teddy Bear provides personalized teddy bears for various special occasions such as birthdays, anniversaries, weddings, baby showers, Valentine's Day, Christmas, and Mother's Day.
Customers have the option to select from a range of teddy bears in varying sizes and colors and can further personalize their gift by choosing one of 156 outfit options. Orders can be placed either by calling 1-800-829-BEAR or online at vermontteddybear.com.
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The Bear-Gram delivery service is promoted through direct response radio ads, print ads, and catalog mailings to customers.
The majority of BearGram gifts, about 66%, are purchased by men, often as a last-minute buy. Just before Valentine's Day, the company was sending out teddy bears at a rate of almost 4,500 per hour, resulting in approximately $4 million in sales in one day. Launched in April 2002, the PajamaGram service offers customers an easy choice of pajamas, gowns, robes, and spa products to select from. This service is aimed at attracting female customers and expanding the predominantly male customer base of the Vermont Teddy Bear Company.
To order PajamaGram gifts, you can call 1-800-GIVE-PJS or visit pajamagram.com online.
TastyGram, founded in October 2002, offers a variety of regional delicacies such as New York Carnegie Deli Cheesecake and Gino's Chicago Deep Dish Pizza. Customers can place orders online which are then fulfilled by the supplier. Each item is prepared for delivery and comes with a personalized card showcasing the TastyGram branding. To order, customers can either call 1-800-82-TASTY or visit tastygram.com.
Vermont Teddy Bear grew its services in September 2003 by purchasing Calyx and Corolla, a flower catalog company renowned for delivering fresh flowers straight from growers. This purchase was an integral component of Vermont Teddy Bear's expansion plan.
By adding Calyx & Corolla flowers to our product line, The Vermont Teddy Bear Co. is able to offer a wide variety of premium gifts for flower lovers and those looking for non-traditional options. This expansion showcases our commitment to providing distinctive and top-notch gifts, solidifying our position as a premier gift delivery company.
The Floral Distribution Industry
Flowers are commonly purchased for significant events such as birthdays, anniversaries, Valentine’s Day, Mother’s Day, weddings, and funerals. They can also be bought to alleviate guilt or enhance the aesthetics of homes or offices. Factors like longevity, variety, presentation, delivery speed, ordering convenience, freshness, and cost are taken into account when choosing flowers. The floral business sees a surge in demand during holidays because of the perishable nature and seasonal appeal of flowers, highlighting the importance of effective distribution.
Flowers in the floral industry are initially purchased by growers and then passed on to distributors, wholesalers, and finally retailers. Retail competition is diverse, involving retail florists, 1-800-FLOWERS.COM, FTD, and supermarkets. Retail florists are known for their customized bouquets and flower arrangement services for special events. Additionally, some florists provide weekend and holiday delivery options for an additional fee.
1-800-FLOWERS.COM is a popular flower distributor in the United States, using television, print, and billboards to advertise their services. Orders can be made by phone (1-800-FLOWERS) or online (1800FLOWERS.COM and FLOWERS.COM), and are filled by the closest florist. The company has a hybrid fulfillment system with about fifteen hundred florists nationwide as well as distribution and warehouse facilities. A significant amount of their sales revenue goes towards advertising, particularly on TV and in print, focusing on holiday promotions.
FTD, also known as Florists’ Transworld Delivery, is the biggest floral company globally, linking around twenty thousand retail florists in North America and representing around 10% of total floral sales. Customers can place orders with FTD through a toll-free number (1-800-SENDFTD) or online at FTD.com. FTD then directs each order to the nearest florist to the recipient. Nearly half of the revenue generated from handling fees is allocated by FTD to television, radio, and print advertising.
FTD provides member stores with a catalog for customer reference, but there is no guarantee that the delivered flowers will match the catalog, as orders are fulfilled by different florists based on the recipient’s location. Supermarkets sell flowers at lower prices than other distributors because they buy in bulk from growers and distributors. Despite the cost savings, supermarkets typically have less variety and service compared to florists. In addition, flowers in some supermarkets may not be stored at an ideal temperature, impacting their freshness.
Ruth Owades, a Harvard Business School graduate with direct mail experience, established Calyx & Corolla in 1988. The company, now called Calyx Flowers, revolutionized the flower delivery sector by sending flowers directly from grower to recipient. Orders for Calyx Flowers can be placed via phone or through their websites, calyxflowers.com and calyxandcorolla.com. Once an order is received, it is forwarded to the grower for arrangement and packaging along with a customized greeting card before being shipped in colorful gift boxes straight from the grower's warehouse to the recipient.
The majority of packages are shipped via Federal Express, using either overnight or two-day service (see Exhibit 1). This delivery method substantially reduces the elapsed time between when fresh flowers are cut and when they are delivered to the recipient, resulting in longer-lasting Calyx Flowers compared to traditional florist delivery services. Calyx Flowers has arrangements with growers around the world, with certain varieties of fresh cut flowers flown in from farms in Ecuador, Columbia, and Holland to the growers' warehouses in the United States. Preserved items and floral containers are inventoried at Vermont Teddy Bear’s distribution facility in Vermont and shipped directly to the receiver from that location. Calyx catalogs offer a wide variety of fresh flowers, plants, vases, and other floral accessories, with a typical order averaging $80 excluding shipping charges of about $16.95. Continuity programs, such as the popular “Year of Flowers,” involve shipping flowers once a month to customer-designated recipients as part of Calyx’ marketing efforts.
In the past, Calyx Flowers used to promote its products mainly through mailing ten million catalogs annually. These catalogs varied in size from thirty-two to forty pages. Half of the catalogs were sent to previous customers (six catalogs per year), two million were sent to flower recipients (six catalogs per year), and the remaining were sent to rented mailing list names with similar demographics as Calyx Flowers' upscale professional female customer base. The production and mailing cost for each catalog was $.74, in line with industry standards. The response rates varied for different recipient groups: current customers had a response rate of about 4.5%, while flower recipients and rented mailing list names had a response rate of around 1% per mailing.
Vermont Teddy Bear’s marketing team identified three strategies to enhance Calyx Flowers’ financial performance: 1. Increasing the number of catalogs to attract new customers by mailing an additional three million catalogs to potential buyers. 2. Ramping up mass-media advertising with more aggressive ads on traditional platforms like direct-response radio and television, focusing on the freshness and longevity of the flowers. 3. Boosting Internet advertising efforts to capitalize on online sales, which accounted for around 40% of Calyx Flowers’ total revenues.
Mr. Gilbert was aware that the company did not have enough resources to pursue multiple approaches in the upcoming year. In order to guarantee success in the future, he needed to pinpoint the strategy that would have the most significant impact on Calyx Flowers' financial performance.
Maximizing Calyx Flowers' Financial Performance. (2017, Jan 09). Retrieved from https://studymoose.com/teddy-bear-and-calyx-flowers-essay
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