ARGUMENT #10

ARGUMENT #10 The following appeared in a memo from the marketing director of Bargain Brand Cereals.

“One year ago we introduced our first product, ‘Bargain Brand’ breakfast cereal. Our very low prices quickly drew many customers away from the top-selling cereal companies. Although the companies producing the top brands have since tried to compete with us by lowering their prices, and although several plan to introduce their own budget brands, not once have we needed to raise our prices to continue making a profit. Given our success selling cereal, Bargain Brand should now expand its business and begin marketing other low-priced food products as quickly as possible.”

Amidst today’s fierce competition within marketing and sales, it is not only impressive, but speaks to the business plan of Bargain Brand, that they are able to make a profit from their cereals during their first year of production. Making a profit this early in a production time-line merits a serious look at further expansion. But while the marketing director applies valid reasoning for expanding the Bargain Brand product line, there are a few points Bargain Brand should consider before quickly marketing other low-priced food products.

First is the director’s mention of the top-selling cereal companies impending introduction of their own budget brand. That customers were quickly drawn from those cereal companies by lower prices, Bargain Brand should consider the customer’s reaction to those same companies producing a product to directly compete with Bargain Brand. Before the introduction of Bargain Brand, the top-selling cereal companies had earned the trust and business of consumers. If Bargain Brand hasn’t earned the trust needed to maintain business, and indeed they may have, many may readily return to the top-selling companies.

Furthermore, the marketing director mentions the companies continuation of profits, but doesn’t divulge the details of how much. While Bargain Brand is still making a profit, the top-selling companies move to lower prices, as well as the introduction of competing brands, may be resulting in a shrinking margin. If this is the case, and Bargain Brand’s profit margin is shrinking, quickly expanding business may be a risky, if not detrimental move, than if the company had a stable margin of profit. 

Conclusively, the marketing director is right that Bargain Brand’s success at selling cereal should lead to the expansion of the company to other low-priced food products. His reasons, however valid, are one-sided, and not considerate of crucial factors the company must take into account before expansion. A calculated plan and a quick-as-possible plan are not likely to catapult a company in the same direction.