Reference no: EM133950006

Question

Running Case : TSL | Place Strategy for Growth A Growing Concern

The TSL team was conducting a review of their marketing strategy and had just concluded the assessment of their product strategy. In all, the team was relatively satisfied with the product decisions they had made to this point, but now they would spend the next two weeks reviewing the place strategy for TSL. It was not something most of the team was looking forward to, because there were two different viewpoints expressed every time the team met to discuss place strategy. Everyone agreed TSL wanted and needed to grow, but there was no consensus about how to grow.

The team was divided into two camps. One camp believed that TSL's place strategy should be to try to get as many bars in as many reasonable retail outlets as possible, and the bigger the better. The more places TSL was sold, the higher the probability that more potential customers would see the brand and then have a chance to purchase it. This group wanted to pursue an intensive place strategy. The other camp argued that TSL should target its retail outlets selectively. By being more selective, TSL could make sure it was associated only with retailers that had a similar, premium, high-end brand image. Customers shopping in such stores were also more representative of the core TSL buyer. In addition, because this strategy would mean fewer overall retailers, TSL could better focus its marketing resources on just these retailers. The two camps each made their points, but they also saw merit in the other side's perspective, so it would take all of the two weeks to decide what to do.

Part of the reason for the team's split on place strategy was inherent to a start-up company. In its early days, TSL secured shelf space for its bars with Bristol Farms, an upscale grocery chain that operated 12 stores in the Los Angeles area. Bristol Farms fit well with TSL's mission to provide high-quality, fresh food while being responsible and committed to the community and the environment. TSL felt the match was perfect, and Ryan had a photo made holding up a TSL bar in front of a Bristol Farms store to show TSL had finally made it into retail. The team felt that Bristol Farms would be a springboard for adding other retailers to its distribution network. However, it didn't work out that way. Just six months after TSL bars first appeared on shelves at Bristol Farms, Bristol Farms dropped TSL because the bars weren't selling.

The team was hugely disappointed when they heard the bad news from Bristol Farms. They knew that the bars tasted good, and once people tried them, they bought them. How was it possible that the bars wouldn't sell in an upscale retailer like Bristol Farms? The customers matched the TSL target market profile, the placement on the shelves was good, and the retailer seemed excited about the bars. Yet, the sales didn't come. On reflection, the team realized that bars don't sell themselves no matter how good they taste, and no matter how noble the cause they support. TSL needed to support the retailer. Subsequent agreements with retailers included a plan for supporting the retailer through product demonstrations, in-store signage, on-shelf displays, and other marketing initiatives. The team knew it was particularly effective to go to stores, talk to the staff about the mission, have them try the bars, and then follow up with customers as they shopped so they could try the bars and learn about TSL and its mission. The clear downside to this support was that it was time-consuming and expensive. To fully support a retailer, TSL needed to provide signage and display materials at a minimum, but anything on site at the retailer also required either hiring a company to promote and give out samples, or someone from the team to be there. The on-site promotions were extremely effective but stretched thin both TSL's financial and personnel resources.

Growth Options

The trade-offs between the more effective on-site support and the somewhat less effective signage and display materials were at the root of the debate about place strategy. Everyone knew that it was more feasible to support a smaller chain fully. In fact, this was becoming more and more of a concern as TSL added more retailers, especially when adding more retail outlets from bigger retailers. Whole Foods, Starbucks, and Target were all huge retailers TSL considered critical to its long-term success, since these were three of the largest bar retailers. However, TSL supplied bars to only a relatively small percentage of the total number of stores for any of these larger retailers. With every new retail chain, TSL found it more difficult to go to the locations to really have the impact it wanted when it was on site in support of a store.

The group debated three primary possibilities. They could continue to grow by adding new retailers that had a reasonable fit with their brand image and mission, but most would receive only minimal on-site support or none at all, if TSL did not think the potential sales justified the expense. As another option, TSL could limit growth by not pursuing additional retailers, but instead increasing the number of stores TSL sold through, especially among the larger retailers like Target and Starbucks. This option meant TSL would offer some on-site support to a select few new stores once they started carrying TSL bars, but most new stores, and all existing stores that carried TSL already, would get only signage and display support. The final possibility was more radical. TSL could reduce the number of retailers to those with the most potential and best fit, dropping the others, to focus more on on-site support for the stores in the remaining chains. This would also allow TSL to reinforce its presence with existing stores in the chain periodically. Admittedly, dropping existing retailers seemed difficult to do, especially since TSL had worked as hard as it had to get these retailers to offer its bars in the first place. Target was the most hotly debated retailer in this option because it had huge potential but also probably fit the brand the least well. Although Target is not a discount store, Target shoppers clearly considered price to be more critical to bar purchases than those at Starbucks, Whole Foods, or Timothy's World Coffee. This was reflected in the assortment at Target as well as the pricing.

The options all had advantages and disadvantages. Which made more sense? Was the on-site support really necessary, and how critical was it to long-term sales? If TSL kept its current retailers but offered on-site support to only a select few of the new outlets as the retailer added TSL to its stores, would this be enough? Would it increase the risk of retailers dropping out, as Bristol Farms had done, if they felt they were not getting adequate support but other retailers were? If TSL decided to be more selective, which retailers should it stay with and which should it drop?

The team felt like they were at somewhat of a crossroads. Should they try to focus more effort on one specific place outlet, and if so, which one should get more attention? Should they continue to expand to any retailer that would sell their bars, or should they be more selective? What were the potential long-term consequences of these decisions? The group knew their decision not only would have an impact on the immediate emphasis within their place decisions, but would also potentially have longer-term effects that they could not foresee. It was going to be an important next few weeks.

1. Given the pros and cons of each channel option, should TSL consider pursuing additional channel options or not? Explain.

2. Should TSL try to secure additional smaller boutique coffee chains like Timothy's World Coffee, or should it focus on further penetration in Starbucks? Explain.