Mark Cuban Essays - Marketing, E-commerce, Direct Marketing

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 resour ces, 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 customers 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 stores 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