Clique Pens Pricing: The Writing Implements Division of U.S. Home

1. Clique pens case analysis

2. Introduction
• Clique was founded in 1922
• Originally produced fountain pens
• Switched to ballpoint pens in 1960s
• By 1980 Clique was valued at $17
million
• Pen industry = No brand loyalty
• Gross margins drop from 42% in 2010
to just over 36% in 2012

3. Company objectives
The Clique Pens Writing Division of US Home have experienced a
6% decline in the gross profit margin within 2 years, which made it
critical for the president of the company to implement a new plan
that could increase gross profits, work with retailers and motivate
consumers. The company is confused whether to satisfy the
needs of the retailers or the customers.

4. Clique Dilemma
• Debate between VP Marketing (Chen) and VP Sales
(McMillan) for use of the MDF
• They need to compromise and come to a final decision
to grow Clique's brand equity
Marketing:
• Consumer oriented MDF
• Consumer driven discounts
• Price increase
• Minimise deals with retailers
Sales:
• Discounts to retailers
• MDF used to increase shelf
space
• Retailers will no take a price
increase

5. Customers and market demand
• Currently 20 billion pens and pencils sold world wide
• Good news: digital age did not kill sales
• Sales would expected to grow 2% per year
Consumers:
1. Customers are not
price sensitive
2. Consumers de not
differentiate between
products
3. Clique should target
retailers
Retailer needs:
1. Quality of Clique
products
2. Reliability of service/
Inventory
3. Offer incentives
Competitor analysis:
1. Threat of substitute
products
2. Buying power

6. Channels and competitors
• Pens and pencils were sold in many types of retail outlets such
as supermarkets, mass retailers,drug stores, warehouse clubs,
department stores, and specialty stores.
• Current have 50 major competitors in the market
• On average, Clique allocated 15% of its total promotional
budget to advertising, 30% to consumer promotions, and 55% to
trade promotions. Clique's competitors used similar allocations.
• Our competitors will continue to work on thin margins, and we'll
lose to them. They aren't spending as much on advertising
either, so they have a real advantage on us now, and you're
proposing that we give them further advantage.

7. Industry Rivalry:
Industry rivalry is at its peak
because there are a number
of manufacturers who are
competing on prices and
trade discounts.
Substitute:
Since their are very small
differences between different
brand's products, all these
pens or pencils could viewed
as a substitute in the industry.
Bargaining power of
Buyers:
In this industry the
bargaining power of the
buyer is moderate to high
because to sell out their
products, a manufacturer
needs to offer high trade
discounts to retailers to
get a shelf space.
Both the retailers and
consumers have no
switching costs to other
products which also
increase their power.
Bargaining Power of
Suppliers:
The bargaining power of
suppliers is low, because
every manufacturer has
a unique formula to
produce and design the
final product. Suppliers
are only responsible for
providing the raw
material, which also has
a fixed price in the
industry.
Threat of new entrants:
It is a mature market, and
already have a lot of
competitors in the industry, so
the threat of new entrants
could be ignored.

8. Retailer model one: Staple
The buyer at Staples gets a bonus heavily weighted to his realized
gross margin, so discounts off our wholesale are extremely important
to him.
Current discounts:
• volume allowance 5.5%
• warehouse allowance 3%
• stocking fee 1.5%
• wholesale price $0.94
• cost $0.46
1. Coorperate with Staple to expand market, increase sales volumes.
2. Give Staple some discount to keep competitive among competitors.

9. Retailer model two: Wal-mart
The buyer at Wal-Mart pretty much lives with a set margin, around
35%, but is rewarded for obtaining things that affect cost, like
warehouse allowances, roll-back promotions, and center-aisle
programs.
If I went to the Wal-Mart buyer
with MDF funds, she'd just laugh
and tell me to discount our price
more.
Wal-mart already have a
great brand image.
All Wal-mart need is profit, profit, profit.
So, we should provide discount, discount, discount!

10. Retailer model three: Walgreens
The buyer at Walgreens has a bonus with a component that rewards
dating and payment discounts.
Just last week our Midwestern
regional manager had the chance
to buy out a competitor at
Walgreens if he had had funds
available to do so
1. They really care about the discount.
So, sales MDF is necessary.
2. Just-in-time.
3. Marketing MDF may help, but they
may don't like it.

11. The price waterfall in 2012