solution

Jake’s Trophy Shop

Jake Brown was about to begin an exciting new phase in his business. His original retail outlet, Jake’s Trophy Shop, located in the east-central part of Kansas City, Missouri, had reached its peak. It was time to expand to a second location, which would be on the south side of town close to the Kansas border, where great deal of population growth had taken place. Along with new residential neighborhoods in that part of the city, many larger companies had opened offices in that area.

The marketplace for trophies includes several types of customers. One large group includes the many children’s sports programs in the community, from little league baseball, to soccer, basketball, football, tennis, gymnastics, swimming, and others. The buyers for trophies for this age group include sports leagues such as those provided by the YMCA, individual team sponsors, and occasionally parents and/or team coaches.

A second market contains trophies for adults participating in various activities, such as bowling leagues and other recreational sports. Once again, league officials, team sponsors, and individual venues including bowling alleys and tennis court providers purchased trophies for winners of various events.

Business-to-business opportunities also created sales. Jake’s target marketing includes individual companies seeking to buy “thank you” plaques for those retiring or commemorating long-standing years of service, along with trophies for some events, such as sales contests winners. This market includes plaques for local citizens and business awards provided by city government leaders, Chambers of Commerce, The United Way, and others. The Kansas City Royals also presented plaques to various individuals for their accomplishments, support of the city, and support of the team itself through activities as diverse as singing the National Anthem at games and throwing out the first pitch before a game start.

Recently, Jake had launched another product line – essentially, “gag” trophies for parties and other occasions. For example, plaques for people turning 40 or 50 years old, individually-designed items with punch lines aimed at various personal foibles as well as accomplishments, and some items poking fun at people for individual characteristics were added to his store. Jake had been disappointed by the advertising campaign efforts that were part of the launch of this line of products, and sales were slow as a result.

Jake had several important decisions to make. He would need to choose target markets to reach along with product lines to emphasize. He wanted to encourage not only the first visit but also return business. There was sufficient competition in the area to make a choice between competitors based on price or quality. He believed his edge was offering fast service, high quality, and reasonable prices. The new location had been chosen and would open in two months. It was time to get started promoting this new store.

Question:

1) What are the advantages of In-House versus Outside Agency? Should Jake utilize a local advertising agency or do as much of the work as he could by himself? Defend your response.

2) Would threshold effects, diminishing returns, and wear-out effects apply to Jake’s upcoming advertising program? Define the three terms and then explain why or why not.