Purdys Chocolatiers is a company that is rich in history dating back to 1907.  Founder, Richard Camon Purdy opened its first store on Robson Street in Downtown Vancouver. Now, it has 79 shops across British Columbia, Alberta, Saskatchewan, Manitoba, and Ontario.  Karen Flavelle bought the company from his father in 1997 and is the sole owner and current CEO of the company.  Opening more shops is a strategy to grow sales.  However, this strategy is slow, cumbersome, and requires much capital.  Karen looks towards eCommerce to boost sales and to have it become a substantial revenue driver.  Purdys.com came online with eCommerce enablement in the year 2000 and has since seen multiple revamps to its site.  The most current one was completed in June 2016.  Kriston Dean, the current Vice President of Marketing & Merchandising has been tasked with expanding and capitalizing on the eCommerce site.  It is estimated that each of the 79 shops generates $2 million in annual revenues and Purdys.com generates approximately $5 million in sales yearly.

 The Request for Proposal

Specifically, she is replacing her current marketing agency (creative and media-buy) and is seeking an all-inclusive agency that will handle brand direction, creative design, digital marketing, and media-buy.   Purdys.com oddly does not have a digital marketing agency. All current digital initiatives are handled by the current traditional agency that does their creative and media-buy (including very limited digital). Her primary objective is to grow eCommerce sales by 30% within 1 year of implementing a digital marketing plan. She believes that she must focus on using digital marketing to achieve this 30% sales growth online, though there might be a little tie-in to traditional marketing methods. 

However, the Purdys Chocolates brand is extremely important, so any marketing plans, digital or traditional, will have to take the brand into consideration.  If the marketing plan would grow sales tremendously but does not fit into Purdys' overall brand message, Kriston would rather not implement such a plan.  On the other hand, being a marketing professional, she is open to new brand ideas if they do not stray too far from the current one and if it fits into the eCommerce objective. 

Kriston is seeking a roster of 6 different marketing agencies in the Vancouver area and asking them to submit an RFP (request for proposal) or a consulting report.  Out of the 6 agencies, she will choose one to represent Purdys Chocolates as the sole creative, digital marketing, and media-buy agency for the eCommerce site. The retail side will be handled by the current agency and is entirely separate and not related to the eCommerce push.

The Product

It's all about fantastic chocolates, fantastic service, and fantastic people. Purdy's sources their cocoa 100% from sustainable sources.  They pay a premium price to farmers to improve the livelihoods of their suppliers.  It is a win-win synergistic relationship.  Purdys would get high-quality cocoa from farmers and the farmers would be paid a premium over the market price for their cocoa.  It is no surprise that Purdy's chocolates are sold at a premium over similar chocolate products sold in specialty stores and well above chocolates sold through supermarkets.

 

Purdys Chocolates has the following estimated revenue segmentation for its retail stores and eCommerce site (hereafter referred to as Purdys.com):

50% Boxed

25% Seasonal

20% Molded Bars

5% other

Boxed chocolates make for perfect gifts because they are packaged very well and are very presentable and consumers buy it throughout the year. Seasonals are chocolates tailored towards specific seasons.  For example, for Valentine's Day, there might be a heart theme or flavor for specific products.  Molded bars are lower cost, smaller sized, and plastic-wrapped chocolates.  These are mainly used for personal consumption or as small gifts.  Please note that between boxed and molded bars, the boxed chocolates dominate gift giving and molded bars dominate personal consumption.  Other chocolate types include Purdys ice cream, holiday cards, and related gift-wrapping services. Of course, ice cream is not sold on Purdys.com.  However, gift-wrapping and holiday cards might be something to explore more of. Perhaps, exploring the website, Purdys.com, might be an effective way to learn more about it.

On Purdys.com, 266 different products are sold.  For gross margins, please refer to "Price".

 Sales Channels and Competition in Canada:

In the chocolate industry, the sales channels are supermarkets, specialty stores, and online.  These main channels can further be segmented by:
 

• Supermarket: Impulse cashier shelves (the same assortment of chocolates as the candy aisle, but   priced higher due to the impulse nature of the purchase)
• Candy aisle (lower-priced)
•  Specialty snacks aisle (higher priced)

Specialty Stores: Well-priced chocolates (medium range)

                                    Premium chocolates (high range)

                                    Luxury chocolates (higher range)

                                    Ultra-luxury chocolates (highest range)

 

Online: A mix of every type of chocolate from low priced to ultra-luxury.

 Purdy's main distribution point is through specialty stores that it owns.  The secondary sales channel is Purdys.com.  Therefore, its main competitors are other specialty-chocolate stores such as Rogers Chocolates which operates 10 stores, is sold through other chocolate stores and supermarkets throughout Canada, and sold through rogerschocolates.com.  Another big competitor is Rocky Mountain Chocolate Factory which has 341 franchises across Canada and the U.S. and sell through rockychoc.com in Canada.[3]  The largest competitor within Canada is Laura Secord with over 120 stores across Canada with a good online presence.

 Location Targeting

Kriston wants to target mainly Canadians with some USA targeting. Chocolate products can ideally be sold everywhere within Canada and exported to the USA. The quality of Purdys chocolates and the shipping technologies used can counteract the slow-melting process of chocolate in hot weather.  The key takeaway is that Purdys chocolates can be shipped anywhere at anytime of the year. 

 The Customer 

Customer Segments

Purdys has three main customer segments: consumers, businesses, and fundraisers.  Consumers account for the majority of sales: 75%.  Consumers buy them for a variety of reasons including personal consumption (40%) and gift giving (35%).  Fundraisers make up 20% of sales and these include businesses and individuals who create special events to raise fund for different causes.  Purdys Chocolates would offer substantial discounts to these groups, so that the groups can resell them to raise funds for fund raising causes.  Lastly, 5% of all sales are from businesses who buy them for corporate reasons (prizes, gifts to employees, etc.). 

Customers of all demographics eat chocolates.  However, Purdys is firmly in the luxury chocolates product segment (refer to Sales Channels and Competition in Canada).  Therefore, the household income of the ideal customer is in the above median-income range in Canada.

 Seasonality

Much of chocolate sales happen during 2 distinct dates: the weeks leading up to Valentine's Day and the 2 months leading up to Christmas. Chocolates, especially chocolates in the luxury market (Purdys), are good gifts for Valentine's Day and for Christmas Day.[5]

The Brand

Clearly, the purple colour is instantly recognizable by Canadians. The current website has splashes of the purple spread throughout the site. Kriston strictly enforces the Purdys brand across all channels: retail and eCommerce.  Therefore, any marketing campaigns, big or small, have to utilize the branding of Purdys meticulously.

These include:

1. The Purdys logo
2. Brand color
3. Brand story (since 1907)
4. Proudly Canadian spin on the brand
5. Brand positioning
6.  Social Mission
7. Branding and pricing (see "Price")

Price

For different price ranges, please refer to the sales channels and competition section.  Purdys is firmly in the luxury chocolates market with a higher range price point. A Purdys 100g molded bar might cost $10 but another 100g molded bar (Cadbury) might cost only $3 at the supermarket.  The price premium for Purdy's chocolate can be justified through:

1. Branding
2. Premium ingredients
3. Social Mission
4. High overhead costs for operating specialty-stores

The gross margin for boxed chocolates is 40% for Purdys' online store (Purdys.com).  This is derived through comparable statistics.[6] [7]  This calculation is derived after subtracting COGs, shipping costs (generalized), and applicable eCommerce costs such as credit card fees, software fees, hosting fees, external providers fees, etc.  The gross margin for molded chocolates is 25% and it is 40% for seasonal chocolates.  The gross margin for the "other" revenue type would be 90% (gift wrapping and holiday cards).  Fixed costs for Purdys.com annually would generally look like the following chart.

Fig. 6 - Estimated Fixed Costs

Fixed Expense Type	Annual Costs for Purdys.com
Purdys.com Employees x 10	$400,000
Warehouse lease for eCommerce sales	$60,000
Electricity cost for warehouse	$12,000
Hydro and Gas for the warehouse	$12,000
Depreciation (1 year) for computer and telecommunications equipment	$20,000
Depreciation (1 year) for 2 trucks	$14,400
Miscellaneous (Stationery, food, etc.)	$6,000

 

For simplicity's sake in the calculation of gross margin and digital marketing tactics, Kriston mentioned that it would be entirely agreeable to separate all 266 products into 4 different product groups: boxed chocolates, molded bars, seasonals, and others.

Current Traditional Marketing Strategies

Purdys uses many traditional marketing media such as OOH (ex. transit ads), magazine ads, radio ads, and TV ads.  Kriston does not need the winning agency to handle the traditional marketing side of things.  Instead, she recommends that any digital marketing strategies should tie in, to a small extent, with traditional marketing strategies.

 Current Status of Digital Marketing for Purdys.com

Purdys.com is doing quite well on social media, but there is always room to improve. However, its YouTube channel is faring poorly. This is quite normal because many brands in all industries find it hard to capitalize on the social media marketing aspect of YouTube. Perhaps, this is an area for improvement to focus on.

https://www.instagram.com/purdyschocolatier/?hl=en

https://www.facebook.com/PurdysChocolatier/

https://www.youtube.com/channel/UCMtX5q6Kr79HggTmi4SVLkw

Purdys is strong currently in mobile advertising (300 x 250 and 300 x 50) with image based search ads.

https://www.adbeat.com/free/advertiser/Purdys.com/purdys.com

Relative to the large retail footprint of Purdys, the eCommerce store is actually not receiving as much traffic and sales as it should be.  Also, the current marketing agency is doing very little to advance digital marketing strategies for Purdys.com.  There is very little SEM, SEO, or other digital media types used for Purdys.com. It is also no surprise that the ups and downs of monthly traffic is correlated to the chocolate buying seasons (Christmas, Valentine's Day, etc.). There were 340,000 unique visitors for November, 2018 but only 40,000 unique visitors for July, 2018.

Perhaps, finding out more about Purdys.com website metrics might help in showing Kriston how agencies can improve Purdys.com and its eCommerce digital marketing push.  In fact, it might be good to know how Purdys.com gets its website traffic.  Is it from organic search?  paid search?  social media sites?  referrals? display ads?  Then, after finding out, a better plan can be created to improve on Purdys.com's current digital marketing initiatives. 

Other forms of digital marketing would also pique Kriston's interest. Perhaps, showing her how you can improve the organic search rankings for Purdys.com might help. Or, proposing an e-mail marketing strategy might also help.

The Ask

Sales Growth

Kriston wants to grow eCommerce sales by 30% within 1 year of implementing the marketing plan.  She believes that she must focus on using digital marketing to achieve this 30 % sale. Understanding the gross margins of the different types of chocolates is essential to the success of the marketing plan (hence choosing the winning agency).  She is entirely okay with breaking even on the eCommerce sales channel because she wants to generate lifetime, not short-term, revenues.  She believes Purdys' products would retain the vast majority of customers who try its chocolates for the first time.  However, with that said, she feels better if she can eke out a slight gross profit from all and any type of eCommerce sales (even if it is to first-time customers). 

Timeline

Kriston wants the agencies to focus on the 1st year of sales growth, so any digital media spend focusing on growing sales will have to take this into account.  On the other hand, for Kriston, branding strategies can have a 10-year timeline. Branding strategies be allotted a maximum media-buy budget of $100,000 per year.

Financials and Metrics

Any digital media spend will need to be supported by numbers and how it affects revenues, gross margins, and net profits.  Kriston insists on knowing exactly how much the winning marketing plan will cost Purdys to execute.

Brand Alignment

For brand alignment and themes, please refer to "Request for Proposal" and "The Brand'.  Oddly, there does not seem to be a giant brand theme for Purdys.  It does showcase many aspects that are unique to itself, but there is no theme that wraps everything together.

Creatives

A large part of the RFP and "Ask" is the creation of creatives for the proposed digital media types. The creatives do not have to be professionally completed. They only have to be mock-ups or draft versions of the final product because, at this time, she does not know which agency and digital marketing plan to choose.  Kriston is also open to improving the look of Purdys.com if the improvements help in sales growth and branding.

Digital Media Types

The plan should also have detailed information on the proposed digital media types and how they help in achieving Kriston's objectives. 

Traditional Marketing Tie-in

A very large part of Purdys Chocolates is its retail operations and traditional marketing endeavors. She hopes that the agencies will somehow tie in the digital marketing portion with its traditional marketing portion. There is no need, however, to spend too much time on traditional aspects

1. How would your agency's marketing plan increase Purdys.com sales by 30% within a year while adhering to Kriston's requirements?

2. Which marketing agency will win the marketing business of Purdys Chocolates?

Answer rating: 100% (QA)

Answer 1 Based on the information provided our agencys marketing plan would focus on the following three main objectives 1 Increasing traffic to the Purdyscom website 2 Improving conversion rates on t... View the full answer