Bussiness Proposal

Describe how the current merchandise conditions bequeath affect the planning or operating decisions involving the intersection superlative. Market Structure The commercialize organize in this instance could crepuscle into one of two types, oligopoly or monopoly (McConnell, Bruce, & Flynn, 2009). The precept behind oligopoly is that several big retailers currently provide this service and control the availability, procedure, and early(a) aspects of the schedulememes (McConnell, Bruce, & Flynn, 2009). The rationale behind monopoly is that the computer course is expressage to from each one organization (McConnell, Bruce, & Flynn, 2009).For example the course of instruction utilize at my organization is come up to the Shop Your Way Rewards political class, it is lone(prenominal) acquirable at Smart and Sears, it cannot be characterd at other retailers and is exclusively controlled by Sears Holding Inc. Ultimately The securities industry structure is a combinati on of a monopoly and oligopoly. scathe Elasticity of Demand Price walk over of imply has little effect on this ingathering as the product is a free program provided by the organization. condescension this fact wrong elasticity does ready an effect on the use of the program in that the customers can earn points on acquires and in turn spend those points on other researched.In this instance, as wrongs rise or fall within the s disunite the use of the product outgrowths or decreases as a resultant role. If for instance a products price rises at the store level, the form of points earned during purchases utilise the product adjoins as head. Likewise as the prices increase it requires customers to feel more points visible(prenominal) to make purchases. Though the rewards humour is a free program an increase in product prices would translate to an increase in demand for the rewards card.In looking at the determining(prenominal)s of price elasticity of demand, substitutab ility is foremost. The only panache to sculptural relief this product would be to bring out at a competitor use the rewards program there such as a Kroger Plus card. Another substitute would be to use coupons quite of the card however enhance them. The next determinant is proportion of income, again this would tie into the interchange price of products and how the rewards program would low some(prenominal) increases in price therefore change magnitude the get of funds available to purchase products.Next is the sumptuosity versus necessity determinant, the rewards card applies to both(prenominal) and is neutral in this atomic number 18a as it can be used for each luxuries or necessities. The last determinant is time, as more consumers become familiar with this product the demand leave increase as the benefits atomic number 18 realized. Profit-Maximizing Quantity This program essentially gives the customer a constituent of his or her purchase price cover in the fo rm of points that can be redeemed during a dealing effective like cash.The program in some(prenominal) case generates coupons establish on purchase levels and social rank levels for redundant dollars or percentages off purchases. Through info analysis, the fellowship has determined that customers enrolled in the program average three additional shop trips per onto than non-members, the data similarly reveals that members purchase on average $13 more per transaction than non-members. Points are earned one point at a time establish on one percent of every $1 . An example of this would be a purchase of $100 would translate to gaining 10 points.Every 10 points equal one penny, 1,000 points equals $1, 10,000 points equals $10, and so forth. By increasing the frequency of customers soften trips along with the average dollar keep down of those purchases the company is essentially paying for the program by enrolling sunrise(prenominal) members. As rank and file increases so do gross sales and in turn profits. Price and Non-price Strategies Because the program is free, no price is rear endd upon the product. A non-price schema is currently under counsel in which the benefits of membership are expressed by checkout time operators during the customer checkout experience.The company has also range enrollment and usage goals for each location within the company as well. Through the increase in verbal communication with every customer the company exit realize the goals set and entrust be able to increase the goals as they are met. Production Costs The achievement cost associated with this product are the business concern of charge plate cards for consumers to carry for purposes of using the program and redeeming points. This has been reduced over the last year and a half of the programs existence by encouraging customers to use their mobile band number to inlet the account.The company also has an internally produced website item to the program th at accepts customers to up insure cultivation and check over purchases and current point measurements. This required only a small outlay in web design as the hardware and software was already in place to support the aerogram. The company also is trim down costs on receipts as pop of the program is to allow customers to amaze electronic receipts via e-mail sooner of printed paper receipts. The costs of the program also imply the points issued to customers. These costs are offset by the increases in purchases.The following is a hypothetical cost break started the program by mass producing credit card-sized moldable rewards cards along with multicolumn, trip-fold brochures. The companys initial enthronement was $1 million for the printing, distribution, and advertisement of this program. The initial program an for 12 months prior to the first cost reduction initiative. The program had repeat costs of $100,000 per month to continue production and distribution of materials. This initiative was to eliminate the plastic card and eliminate the need for informational brochures.This was constituted by dint of the use of customer phone numbers and email addresses as identifiers instead of physical cards. The next reduction was do through the implementation of a website where the information regarding the product could be accessed by customers. This resulted in a net reduction of costs by $75,000 per month. The costs associated with points accumulated and washed-out by customers is variable and changes month to month, the meter has been steadily increasing since the programs inception and pull up stakes continue to do so.To curb expenses associated with this part of the program the suggestion is to limit the number of points that can be redeemed in any transaction as well as place an expiration date on accumulated points. This depart hamper customers from saving up a large number of points and eroding profit margin. received Global Economic Conditio ns and the Local macro Economy The current global scotch conditions eave led to increases production costs of products change by Smart and Sears as a result these increase costs have been passed on to consumers in the form of price increases on the products.The rewards program will suffer consumers a way to offset these increased costs by earning rewards points that will allow them to reduce the total amount of their purchase. The program will also issue member-only coupons to these consumers which will further reduce his or her costs. By doing this the company will see an increase in brand loyalty and revenues. young economic trends in the United States include new growth in the house market, as consumers arches spots and contractors build new homes the demand for products offered by both Smart and Sears will increase and as a result the demand for the rewards program will increase as well.The company is seeking a 75% penetration rate crossways all avenues of the business, i ncluding brick and mortar stores and online outlets. Local Economies afoot(predicate) Stage in the Business hertz The local economy is currently in an expansion period as businesses are slowly starting to rebound from the recession. This is unadorned by the increase in home sales and the resulting increase in owe rates, along with the decrease in unemployment. As a result the demand for the product will increase as sight begin to have more fluid income and seek out purchases for both luxury items, such as televisions and necessity items such as food.The product uniquely will set Smart and Sears apart from the ambition in passage of armsing for this increase in disposable income by allowing customers to access a virtually limitless amount of products through Internet shopping sites and affiliate marketplaces set up on those sites. The current market conditions for Smart and Sears are still in a period of struggle as individuals are still recovering from the recession. As indi viduals recover the company must fight to regain market share from new competitors such as sawhorse General, Family Dollar, and Dollar Tree.These three companies capitalized on the recession by offering low price products that undercut many big box retailers such as Smart, Target, and Wall-Mart. As the economy recovers it will be important for Smart and Sears to attend actively the consumers lost to these competitors and a way to do that is with the rewards program. Conclusion The program provides a unique experience for customers as the points are redeemable on virtually any product carried either in tore or online.The program also generates sales and profit with a low amount of investment from the company. Customers will have generated more or less three to four times the amount of profit needed to cover the return of the points to each customer. Management should have a solid understanding of how effective and near this program is and how the continued success of the progra m directly translates to the success of each business unit. Reference McConnell, C. R. , Bruce, S. L. , & Flynn, S. M. (2009). Economics. Unknown, NY McGraw-Hill Company.