Clique Pens

For the exclusive use of K. Larsen, 2016.

9-914-525

DECEMBER 16, 2013

FRANK V. CESPEDES

JAMES KINDLEY

Clique Pens:

The Writing Implements Division of U.S. Home

A fierce thunderstorm had just brought brief relief to the sweltering mid-August temperatures in

Tampa, Florida, as Elise Ferguson, president of the writing implements division of U.S. Home, Clique

Pens, stared at the notepad in front of her. She had jotted some thoughts about just whose needs were

more important for Clique to satisfy—its retailers or its consumers?

Fortunately, the 2013 back-to-school sales of her core writing implements product lines appeared

to be on goal for a 3% increase over 2012. These sales were not without a cost, however, as various

discounts, allowances, and other off-invoice deals had pushed gross profit margin down from 42% in

2010 to just over 36% in 2012. (See Exhibit 1.) Another one of Ferguson’s primary goals for Clique

was to stop this decline in gross profit margin percentage and grow its overall gross profit by 4%. She

hoped to accomplish this by growing revenues and increasing the gross profit margin. At this point,

she felt it was unlikely that the latter would happen this year (2013).

Ferguson wondered, were all these “giveaways” to retailers necessary? If so, couldn’t the monies

be shifted to a form referred to generally as Market Development Funds (MDF), which would in

theory allow Clique to have more control over their use in driving sales of its products, rather than

just increasing retailer margins? Clique had spent considerable effort on wringing costs out of its

supply chain, and Ferguson was fairly certain that the deterioration in margins was being driven

solely by these trade discounts.

Ferguson had held several recent meetings with Logan Chen, division VP of marketing, and his

product managers, for their views on this issue. She had also had similar meetings with Ross

McMillan, division VP of sales, and several of his key...