IB BM SL 4.5.10 Appropriate Marketing Mix

[Maximum number: 10]

Justin Price Clothing Ltd. (JP) is a private limited company that manufactures clothing. Its unique selling point/proposition (USP) is its innovative process. Customers sends images of themselves and some measurements to JP via the internet, which JP uses to determine the customer’s exact measurements. Then, a style consultant contacts the customer via video conference to discuss the customer’s fashion preferences. After this, the style consultant designs clothing for that customer. Using job/customized production, JP manufactures and ships the clothing to the customer. Most materials (stock) are ordered when a customer agrees to the designs. A total of 84 % of JP’s customers have purchased items from JP more than five times.

Justin Price Clothing Ltd. (JP) is a private limited company that manufactures clothing.

Justin Price, JP’s owner, asked his management team to consider two options and decide which would best increase profitability:

Justin Price Clothing Ltd. (JP)

Justin Price Clothing Ltd. (JP) is a private limited company that manufactures clothing. Its unique selling point/proposition (USP) is its innovative process. Customers send images of themselves and some measurements to JP via the internet, which JP uses to determine the customer's exact measurements. Then, a style consultant contacts the customer via video conference to discuss the customer's fashion preferences. After this, the style consultant designs clothing for that customer. Using job/customized production, JP manufactures and ships the clothing to the customer. Most materials (stock) are ordered when a customer agrees to the designs. A total of 84 % of JP's customers have purchased items from JP more than five times.

Table 3: Selected financial information for the year or at year's end 2020, 2021 and 2022

Justin Price, JP's owner, asked his management team to consider two options and decide which would best increase profitability:
- Option 1: Change JP's design and production model. Consultants, when working with customers online, would recommend from a series of pre-made options. The company would shift to batch production and have the stock (inventory) available. Style consultants would still be central to the process, but the clothing would no longer be custom made.
- Option 2: Increase JP's customer base. JP's customers have high brand loyalty. However, the brand is not very well known. JP would open several strategically located retail stores in a few major cities to increase brand awareness. In the store, customers could get their measurements taken and receive in-person fashion advice from a fashion consultant, after which they could purchase unique clothing. JP would continue its online services.

Discuss the two options that Justin has suggested.

Option 1, switching to batch production, would mean that one important feature of JP's business model would weaken: clothing would no longer be unique to each customer ("consultants would recommend from a series of pre-made options";
"clothing will no longer be custom-made"). A second disadvantage would be that the company would have to increase its investment in stock. Right now, clothing is made one at a time, with stock delivered after the customer has approved the designs. With this option, JP would have large amounts of stock, both before production, during work-in-progress, and finished goods. This would require an increase in working capital. Will the price be the same?
The advantages of switching to batch production are: that costs will be lowered, as batch production is generally cheaper than job production. Further, JP should be able to deliver items to the customer faster (since design options will come from ready-made items). A further advantage is that if JP's sales grow, and all indications are that is what JP wants, the business can scale up operations more easily.
However, it seems unclear how this change will improve JP's brand awareness, one of its aims.
Option 2, building retail stores, would probably increase JP's brand awareness and, therefore, its customer base. Brick-and-mortar stores, if properly located, would increase visibility. Curious potential customers could walk into the stores, where they would probably see mannequins attired in J P clothing. Further, the process of being measured in a store by JP's own trained salespeople and/or tailors will lead to more accuracy in measurements, which should strengthen brand loyalty further. Finally, the service would be even more personalized than before. Salespeople will be able to see customers in person and have a sharper sense of their fashion desires and requirements.
The disadvantages of this approach are that J P will have to make an investment in the brick-and-mortar stores. Already the business has loan capital and not strong liquidity. Increasing debt and increasing debt service might well strain JP's liquidity even further. While the business is profitable, its profitability declined for two years in a row, and increased expenses of the new stores and the interest expense may weaken profitability further.

Accept other relevant judgments, if justified.
Marks should be allocated according to the markbands on page 3 with further guidance below.
N.B. The marks listed are maximum awards.
Maximum mark award
Option 1
Option 2
Judgments/conclusion
3
One option unbalanced
N/A
4
One option balanced (one argument for and one argument against;
or Both options in an unbalanced fashion
N/A
5
One balanced and one unbalanced
N/A
6
Both balanced
No judgments/conclusions
7-8
Balanced Largely effective use of business language and the stimulus
Judgments/conclusions based upon analysis and explanation in the body of the response
9-10
Balanced Rich use of business language, business theory, and the stimulus
Judgments/conclusions based upon analysis and explanation in the body of the response

IB Business Management SL 4.5.10 Appropriate Marketing Mixes Questions

Exam points

IB Business Management SL 4.5.10 Appropriate Marketing Mixes Questions question 1