Bussiness Proposal

Describe how the certain food market conditions give strike the planning or operating decisions involving the proceeds. Market Structure The market social structure in this instance could dismount into one of two types, oligopoly or monopoly (McConnell, Bruce, & Flynn, 2009). The precept behind oligopoly is that several large retailers currently provide this service and arrest the availability, ingestion, and other aspects of the programs (McConnell, Bruce, & Flynn, 2009). The rationale behind monopoly is that the program is limited to each face (McConnell, Bruce, & Flynn, 2009).For example the program employ at my organization is call the stock Your Way Rewards program, it is hardly available at bracing and Sears, it cannot be used at other retailers and is exclusively controlled by Sears Holding Inc. Ultimately The market structure is a combination of a monopoly and oligopoly. Price Elasticity of take aim Price elasticity of bring has little effect on this product as the product is a unfreeze program provided by the organization. notwithstanding this fact equipment casualty elasticity does pass on an effect on the use of the program in that the customers can earn points on gets and in romp spend those points on other researched.In this instance, as prices rise or fall within the store the use of the product accessions or decreases as a result. If for instance a products price rises at the store level, the number of points bring in during purchases using the product increases as well. Likewise as the prices increase it requires customers to have more points available to make purchases. Though the rewards cod is a free program an increase in product prices would translate to an increase in demand for the rewards card.In looking at the determinants of price elasticity of demand, substitutability is first off. The only way to substitute this product would be to shop at a competitor using the rewards program there such as a Kroger P lus card. Another substitute would be to use coupons instead of the card however enhance them. The next determinant is proportion of income, again this would soak up into the selling price of products and how the rewards program would off desex any increases in price therefore increasing the amount of funds available to purchase products.Next is the sumptuousness versus necessity determinant, the rewards card applies to both and is neutral in this argona as it can be used for either luxuries or necessities. The last determinant is time, as more consumers become familiar with this product the demand leave increase as the benefits are realized. Profit-Maximizing Quantity This program essentially gives the customer a percentage of his or her purchase price natural coering in the form of points that can be redeem during a traffic Just like cash.The program excessively generates coupons based on purchase levels and membership levels for additional dollars or percentages off purc hases. Through data analysis, the ac gild has determined that customers enrolled in the program average trio additional obtain trips per onto than non-members, the data besides reveals that members purchase on average $13 more per transaction than non-members. Points are earned one point at a time based 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 relative frequency of customers return trips along with the average dollar amount of those purchases the bon ton is essentially paying for the program by enrolling new members. As membership increases so do sales and in turn profits. Price and Non-price Strategies Because the program is free, no price is readyd upon the product. A non-price strategy is currently underway in which the benefits of membership are expressed by tick operators during the cus tomer checkout experience.The company has also set enrollment and usage goals for each hole within the company as well. Through the increase in communicatory communication with every customer the company will realize the goals set and will be able to increase the goals as they are met. ware Costs The production be associated with this product are the production of tractile 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 advance customers to use their mobile phone number to access the account.The company also has an internally produced website specific to the program that allows customers to update information and review purchases and current point amounts. 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 reducing costs on receipts as grammatical constituent of the prog ram is to allow customers to receive electronic receipts via e-mail instead of printed paper receipts. The costs of the program also include the points issued to customers. These costs are offset by the increases in purchases.The future(a) is a hypothetical cost break started the program by survey producing credit card-sized plastic rewards cards along with multicolumn, trip-fold brochures. The companys initial investment 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 recurring costs of $100,000 per month to report production and distribution of materials. This initiative was to take away the plastic card and eliminate the need for informational brochures.This was accomplished through the use of customer phone meter and email addresses as identifiers instead of physical cards. The next reduction was do through the implementation of a website whe re 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 spent by customers is variable and changes month to month, the amount has been steadily increasing since the programs inception and will 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 will prevent customers from obstetrical delivery up a large number of points and eroding profit margin. sure Global Economic Conditions and the local anaesthetic Macro Economy The current globular economic conditions eave led to increases production costs of products sold by Smart and Sears as a result these increased costs have been passed on to consumers in the form of price increases on the products.The rewards program will entreat c onsumers 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. fresh economic trends in the United States include new growth in the housing market, as consumers arches rest homes 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 sampleing a 75% penetration rate across all avenues of the business, including brick and mortar stores and online outlets. Local Economies Current Stage in the Business Cycle The local deliverance is currently in an expansion period as businesses are lento starting to rebound from the recession. This is evident by the increase in home sales and the result ing increase in mortgage rates, along with the decrease in unemployment. As a result the demand for the product will increase as people begin to have more disposable 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 obscure from the competition in fighting for this increase in disposable income by allowing customers to access a virtually limitless amount of products through lucre shopping sites and affiliate marketplaces set up on those sites. The current market conditions for Smart and Sears are still in a period of clamber as individuals are still recovering from the recession. As individuals recover the company must fight to regain market share from new competitors such as Dollar General, Family Dollar, and Dollar Tree.These three companies capitalized on the recession by offering low price products that undercut many big stroke retailers such as Smart, Target, and Wall-Mart. As the economy recovers it will be burning(prenominal) for Smart and Sears to pursue 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 roughly three to four times the amount of profit needed to cover the topic of the points to each customer. Management should have a solid understanding of how in effect(p) and beneficial this program is and how the continued mastery of the program 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.