Running Head: CASE STUDY 1 Student Name Course, Department Date of submission CASE STUDY 2 Problem Statement: The problem statement in this case can be identified as understanding the most effective method to ensure that GDS promotes their products through increment in sales by adoption of strategic marketing. Analysis, Objective and Long-term goal: Elsie Maya has worked for the company since 2011 but sales and the company’s profits had deteriorated and now, she was faced with a brown envelope that she did not know the content nor understand why her boss Daniel Scudero had requested her to attend the meeting. She wanted to understand the market structure as far as chocolate firms were concerned so that she be in a position to increase her company’s sales. Solution 1: As the vice-president of marketing, it is imperative that she understand the market structure. This will ensure that she has a better position as far as understanding why the company’s sales have drastically reduced. This strategy ensures that the marketing plan that she adopts will be aligned in ensuring that the company has increased sales thus increased profit margins. Solution 2: The second solution is understanding the strategic marketing solution that have been adopted by her rival companies. This is an important strategy as it ensures that the company understand its ‘playing field’ hence having an upper hand in the market thus improved market sales. Recommendation: Elsie needs to first understand the content of the envelope that was given considering that it came from her top rival company. It is a positive content information; she has an upper hand in ensuring that she understand the dynamics of the market. Conclusion: In any kind of market structure, having a better understanding of the overall market which will involve even understanding the competition will ensure that a company has an upper hand in their business progressive as well as pushing their sales translating to more profit. CASE STUDY 3 References Fremeth, A. (2013). Grupo Dulces Suenos (A). Richard Ivey School of Business Foundation, 1-5. 9B21A006 Lillie (Yue Ting) Sun wrote this case under the supervision of Eric Janssen solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) firstname.lastname@example.org; www.iveycases.com. Our goal is to publish materials of the highest quality; submit any errata to email@example.com. i1v2e5y5pubs Copyright © 2021, Ivey Business School Foundation Version: 2021-05-31 On September 20, 2018, Stephanie Solty, a recently promoted marketing manager at Drop Technologies Inc. (Drop), cut herself a piece of cake and sat back in her chair. Drop, a loyalty start-up based in Toronto, Ontario, Canada, had just hit two million downloads of the mobile application (app) and the team was eager to celebrate. Amid the celebratory cheers sounding throughout the office, Solty couldn’t help but feel nervous. With technology giants such as Uber Technologies Inc. (Uber) and Snap Inc. struggling to become profitable, Solty wondered if Drop would experience the same difficulties: a large user base that failed to lead to profitability. As the laughter and excitement of her colleagues echoed around the office halls, Solty thought long and hard about what she was celebrating. Having two million downloads was an impressive feat, but exactly how many of those downloads translated into profitability for the company, and what could she do to generate a greater number of profitable customers? As she began planning the next quarter’s marketing strategy, she wondered if she should explore a new marketing channel: influencer marketing. THE LOYALTY AND MOBILE REWARDS INDUSTRY The loyalty industry was extremely competitive, with minimal barriers to entry and a large number of competitors. American Airlines had launched its frequent flyer program, often regarded as the first fullscale loyalty program of the modern era, back in 1981.1 Since then, companies such as Starbucks Corporation, Marriott International Inc., and Sephora USA Inc. had built their own loyalty strategies. Three major groups of loyalty players dominated the industry: (1) independent merchants, such as Cineplex Inc. and McDonald’s Corporation, who offered tiers and points that could be reused at the same retailer for perks; (2) aggregated/coalition rewards, which included most credit-card systems and where points earned for shopping at a variety of different vendors were accumulated in one platform; and (3) loyalty management companies, such as LoyaltyOne Co. (which managed Air Miles). 1 Tim Winship, “Airline Frequent Flyer Miles, 30 Years Later,” ABC News, May 16, 2011, accessed November 13, 2019, https://abcnews.go.com/Travel/airline-frequent-flyer-miles-30-years/story?id=13616082. Authorized for use only by Zaid Khartabil in BUAD 301-26 at California State University – Fullerton from 1/24/2022 to 5/18/2022. Use outside these parameters is a copyright violation. DROP TECHNOLOGIES INC.: UNDERSTANDING THE INFLUENCER MARKETING CHANNEL 9B21A006 The global loyalty management industry was valued at around US$3.2 billion2 in 2019 and was expected to experience a compound annual growth rate of 23 per cent over the next five years. This heightened growth was influenced by technological advancements, especially within mobile applications. Before the modern era of smartphones and online advertising algorithms, reward programs meant carrying a creditcard-sized punch card. With the introduction of mobile technology, loyalty and rewards systems became more relevant and engaging, and could inspire real-time action. According to research carried out in 2016, 57 per cent of consumers preferred engaging with their loyalty programs via a mobile device.3 Former approaches to loyalty programs that required customers to act after making a purchase, or required them to even remember to carry a physical card, seemed unnecessarily cumbersome in this new environment. DROP TECHNOLOGIES INC. Founded in 2015 by Derrick Fung, Darren Fung, Cameron Dearsley, and Akhil Gupta, Drop was a Torontobased coalition customer rewards program that enabled users to earn points using their linked debit or credit card. To join, consumers linked their spending methods of choice (e.g., debit cards, credit cards, or other payment methods such as PayPal) to their Drop account. Drop then automatically scanned and analyzed all purchases made with those linked payment methods and subsequently rewarded consumers with Drop Points, which could be redeemed at hundreds of partner brands, including Uber, Lululemon, and Apple (see Exhibit 1). The company’s mission was to provide a seamless, “all-for-one” loyalty program that rewarded particular shopping habits for each individual customer. Before developing Drop, Fung had been a trader at CIBC World Markets Inc. and had co-founded a music company, Tunezy, which was acquired in 2013 by SFX Entertainment. Known for his bold moves and successful track record, as well as for building a collaborative culture, Fung encouraged employees at Drop to be creative (“think outside the box”) and bring their own ideas to the table. Target Market Across businesses in the late 2010s, conversations about customer loyalty circled back to millennials; and it made sense. In 2018, there were over 10 million millennials living in Canada, which represented 27.5 per cent of the total population and made them the largest population group.4 Luckily for most merchants, over 80 per cent of millennials already participated in loyalty and rewards programs and tended to participate in programs that were aligned with their lifestyle. In order to acquire these users, Drop focused its customer acquisition efforts on creating trendy and unique experiences, such as a pop-up avocado toast food truck and concert ticket giveaways (see Exhibit 2). Recently, a new demographic had emerged as another attractive target market for Drop. This group was largely made up of women aged 2534 who had children and loved collecting points through everyday purchases such as groceries and gas, and who were eager to save money whenever and wherever they could. Canadian mothers spent an average of CA$63,000 per year on their individual households as the prime decision-maker for most everyday purchases, making them a crucial demographic for loyalty companies to 2 All currency amounts are in U.S. dollars unless otherwise specified. Brand Loyalty, Executive Summary: The 2016 Bond Loyalty Report, January 2016, accessed November 13, 2019, https://info.bondbrandloyalty.com/hubfs/Resources/2016_Bond_Loyalty_Report_Executive_Summary_US_Launch_Edition. pdf?t=1488220126670. 4 The Nielsen Company LLC, Millennials on Millennials: Why We Matter, May 2018, accessed November 13, 2019, www.nielsen.com/wp-content/uploads/sites/3/2019/04/millennials-on-millennials-in-canada-2018.pdf. 3 Authorized for use only by Zaid Khartabil in BUAD 301-26 at California State University – Fullerton from 1/24/2022 to 5/18/2022. Use outside these parameters is a copyright violation. Page 2 Page 3 9B21A006 Marketing and User Acquisition The top priorities for most high-growth direct-to-consumer (D2C) start-ups were securing funding and building a large user base. Unfortunately, one was difficult to achieve without the other. Luckily for Drop, Fung’s previous entrepreneurial success had helped boost investor confidence, and Drop was able to raise enough pre-seed financing to launch operations. This allowed the team to focus exclusively on acquiring users. Most merchants defined a user as someone who purchased the product. However, Drop’s user acquisition process was less simple and consisted of four main steps. First, users visited an app store and installed Drop on their mobile device. Second, they opened the app and registered themselves with a username and password, and then verified their email. Third, after registration was complete, users linked an active payment method, such as a credit card or debit card. Finally, users completed an offer via the app to become “fully integrated users” and start earning points (see Exhibit 3). There were many instances of users falling out of the process before completing all four steps; some were apprehensive about linking their credit card and others simply downloaded the app and stopped interacting with it. This had led Solty and the marketing team at Drop to approach users with a different tactic. The team targeted users at each phase and encouraged them to complete the entire user acquisition funnel. This was an important task, especially because investors were carefully looking at revenue and profitability metrics. A revenue-generating6 user at Drop was defined as someone who completed all four steps in the onboarding process. Once a user completed a purchase through the app, Drop received a percentage cut from the merchant. Paid Social Advertising Drop’s initial user growth had come from press coverage, including articles on TechCrunch and BetaKit, and within a year and a half, over 70,000 Canadians were using the app. In order to scale up, the marketing team allocated 6070 per cent of its budget toward paid social advertising on Facebook and Google. One of the main benefits of this approach was the quick and efficient speed of this channel. Within only a couple of weeks, Drop had funnelled countless advertisements to individuals based on Facebook’s algorithms and was targeting millennials and women with children all over the country. Solty preferred this channel because of its efficiency. Within minutes she was able to monitor the number of downloads, gather statistics on who was downloading the app, and update her bids for the upcoming week’s advertising. However, she was not confident that all users from this channel were actually completing the whole onboarding process. The graphics on Facebook showed Drop as a platform where users could earn free rewards for their favourite retailers (see Exhibit 4). Often, this was enough to warrant a download, but users were not sure what to do next. These advertisements did not mention having to link 5 “Survey of Household Spending, 2017,” Statistics Canada, December 12, 2012, accessed November 13, 2019, www150.statcan.gc.ca/n1/daily-quotidien/181212/dq181212a-eng.htm. 6 Drop defined profitable users as those for which the cost of acquisition was less than the revenue Drop earned from their spending. For example, if it cost Drop $11 to acquire the user and the user brought in $15 for the company, the user was considered profitable. Authorized for use only by Zaid Khartabil in BUAD 301-26 at California State University – Fullerton from 1/24/2022 to 5/18/2022. Use outside these parameters is a copyright violation. target.5 This demographic also displayed a strong sense of community. Through everything from in-person playgroups to online forums, these women constantly interacted with others in their social circles. Decisions were carefully thought-out and verified by others as they shared their own brand experiences, making wordof-mouth strategies much more impactful than direct marketing. Page 4 9B21A006 a credit card, and many individuals stopped the onboarding process due to security concerns. In addition, this channel was quickly becoming oversaturated by a number of different brands. Every page on the Internet contained advertisements vying for attention and none of them seemed personalized. In an effort to establish a more personal relationship with users, Drop tested referral marketing. Referral marketing encouraged passionate customers to recommend that their network try a business’s product or service. In return, the customers were offered a reward or an incentive, usually in the form of points or cash. Drop allocated 1020 per cent of its marketing budget to this channel. Each user on the app had a referral code and was given a $5 gift card if the user referred someone else. The benefit of this channel for Drop was that both users (the one who did the referring and the one who was referred) received the $5 gift card only after their payment cards were linked and they had completed an offer. This ensured that consumers completed the onboarding process before being rewarded. A common example of referral marketing was word-of-mouth between family members, such as siblings or spouses. One family member would encourage the other to sign up and would walk them through the entire process, answering any questions that arose organically. This led to a very high conversion rate. Unfortunately, this channel did not provide for as much scalability as paid social advertising did. Each user on average referred two to three users in total. Solty wondered if there was a middle ground—a way to reach an audience at scale but still maintain the level of personal connection that came with word-of-mouth marketing. Her research pointed her to a new channel that held a great deal of potential: influencer marketing. THE NEW WORLD OF INFLUENCER MARKETING At a fundamental level, influencer marketing was a type of social media marketing that used product mentions from influencers—individuals who had a dedicated social following and were viewed as experts within their niche.7 Influencers fell into many different categories, some of the popular ones being gaming, fashion, technology, and fitness. Influencer marketing was successful because of the high amount of trust influencers established with their followers. Recommendations from influencers served as a form of social proof for the brand’s potential customers. 8 In its infancy, influencer marketing had referred to the select group of celebrities and supermodels who chose to endorse exclusive brands. But the definition of influencer was changing. Currently, young men and women across the globe were self-proclaimed full-time “fashion bloggers” or “social media influencers” with large online audiences and high levels of engagement through social channels such as Facebook, Instagram, and TikTok. 7 Gerardo A. Dada, “What Is Influencer Marketing and How Can Marketers Use It Effectively?” Forbes, November 14, 2017, accessed November 13, 2019, www.forbes.com/sites/forbescommunicationscouncil/2017/11/14/what-is-influencermarketing-and-how-can-marketers-use-it-effectively/#34dd6b2123d1. 8 Ibid. Authorized for use only by Zaid Khartabil in BUAD 301-26 at California State University – Fullerton from 1/24/2022 to 5/18/2022. Use outside these parameters is a copyright violation. Referrals 9B21A006 This industry was set to reach $10 billion in 2020 with influencers leveraging networks like Snapchat, YouTube, and TikTok, each with their own audience demographics.9 Not only was this a growing industry, but the industry had also been wildly successful for brands. Brands typically earned $2 for every dollar spent on Google Ads compared to the $11.69 in earned media value10 per dollar spent on influencer marketing.11 One of influencer marketing’s main benefits was that it enabled brands to target both broad and niche audiences. By working with individuals who specialized in a specific category of content, brands could make more meaningful decisions regarding who they wanted to target, and subsequently allow them to gain access an already trusting base of consumers.12 For example, Whitney Simmons (@whitneysimmons) was a certified fitness coach who regularly posted workouts and healthy recipes on her Instagram account, which had three million followers. As a social media influencer, she had worked with Gymshark, a fitness clothing and accessories brand, in the past to share different workout outfits on her Instagram account that featured the brand’s clothing and accessories. She tagged Gymshark in her posts so that her followers could learn more about the brand, check out its website, and shop for specific products they had seen on her page. Because Simmons was a fitness influencer, a majority of her audience was made up of consumers interested in health and fitness and who were likely to purchase Gymshark products. When Gymshark launched a clothing line in collaboration with Simmons, every product was sold out within three days. Drop’s Use of Influencer Marketing Drop began testing this channel in early 2018 by allocating 10 per cent of its total marketing budget, while the rest was spent on paid social advertisements and referral marketing. Lacking much clarity on how to navigate this new type of marketing, the team at Drop tried various strategies, using influencers ranging from previous contestants on the television show The Bachelor to fashion bloggers. Also unclear was whether this channel was actually translating into profitable users for the company. The process of influencer marketing was more extensive than other marketing methods. As Drop’s marketing manager, Solty spent time working with an outside agency that helped manage influencer relationships. At the start of a campaign, the agency would match influencers with Drop based on audience, timing, and reach. Once influencers expressed their interest, both sides worked on negotiating payment terms. Typically, influencers were paid two cents per view on a post or video. They then received the creative brief detailed by Drop’s marketing team, which contained key talking points, the call-to-action, and any images or logos to include. Influencers submitted their post or video for approval by the agency before it went live on their respective channels. Solty monitored target metrics throughout the campaign and evaluated the final performance to determine whether this was someone Drop should partner with on a longer-term basis. Currently, Solty focused on two main groups of influencers: popular personalities and lifestyle bloggers. Popular personalities included YouTube stars such as Morgan Adams (see Exhibit 5) and lifestyle bloggers such as Sophia Chang and Jessica Skube (JesssFam). Solty wondered what other influencers would make sense to approach for Drop’s platform. 9 Giordano Contestabile, “Influencer Marketing in 2018: Becoming an Efficient Marketplace,” AdWeek, January 15, 2018, accessed Novemb
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