1. MARK4210, 2014 Spring, L1/L2
MARK4210: Strategic Marketing
2014 Spring, Section L1/L2
[Class #12]
Distribution Strategies:
Calyx & Corolla

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MARK4210, 2014 Spring, L1/L2
Case Learning Objectives
 Examine intricacies of distribution systems, and
opportunities for restructuring inefficient systems
 Identifying new segments that leverage current
capabilities/competencies
 Financial and marketing implications of reaching
new markets

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MARK4210, 2014 Spring, L1/L2
Key Questions for Discussion
1. What’s the traditional channel of distribution for flowers
(conventional florists, FTD, 1800-Flowers)? And what’s the
distribution channel for Calyx & Corolla? Please draw the value
chain for each showing the distribution of flowers from growers to
consumers. Include all the various members of the distribution
channel and any information about margins and prices available
in the case.
2. What are the strengths and weakness of Calyx & Corolla’s
business model? What advantages and disadvantages does
Calyx & Corolla’s distribution model offer the consumers?
3. Customer lifetime value (CLTV) is an important analysis for
companies to figure out the dollar value associated with the long-
term relationship with their customers. Let’s try to calculate the
CLTV of a Calyx and Corolla customer.

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MARK4210, 2014 Spring, L1/L2
Customer Lifetime Value (CLTV)
 To calculate CLTV, use the following approach and ignore taxes; if a number you need is given as a
range in the case, use the midpoint for simplicity.
 First, think about the net acquisition cost of a new customer. To calculate this, you need:
• (1) how does C&C acquire customers and how much does it cost to acquire a customer (not the cost to
reach a prospect); and
• (2) the average contribution of one order
Next, think about the discounted net value each customer can bring in their lifetime. Assume that
each customer acquired stays with Calyx & Corolla for 5 years. To calculate this, you need to:
• (1) calculate the cost of retaining each customer every year (think about how C&C retains customers )
• (2) calculate the contribution from the orders each customer place in a year.
• (3) calculate the net value of each customer in a year (that is, Contribution – Cost),
• (4) do the same calculation for year 1 through year 5; and
• (5) calculate the discounted net value of one customer over the 5 years =
(Year1 net value) / (1 + i) + (Year2 net value) / (1 + i)2 + …… + (Year5 net value) / (1 + i)5.
Use a discount rate of 10% (i = 10%) to make this calculation.
The following table might help you:
 Finally, the CLTV of a Calyx and Corolla customer is: Discounted net value of one customer
over the 5 years – net acquisition cost.
Year 1 Year 2 Year 3 Year 4 Year 5
Cost
Contribution
Net Value
Discounted Net Value

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MARK4210, 2014 Spring, L1/L2
1.a. Traditional flower distribution?
Channel Structure
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
1.a. Traditional flower distribution?
Costs & Prices
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
1.a. Traditional flower distribution?
Delivery Time
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
1.b. C&C flower distribution? Channel
Structure
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
1.b. C&C flower distribution? Costs &
Prices
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
1.b. C&C flower distribution? Delivery
Time
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
2. Strengths & Weaknesses of C&C
business model?
Strengths Weaknesses
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
3. CLTV: Part I – Net Acquisition
Cost of New Customer (1)
 Net Acquisition Cost per New Customer
= Total Acquisition Cost per Customer – Average
Contribution per Customer
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
3. CLTV: Part I – Net Acquisition Cost
of New Customer (2)
 Total Acquisition Cost per Customer (i.e., cost of getting
paying customer) =
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
3. CLTV: Part I – Net Acquisition Cost
of New Customer (3)
 Average contribution per Customer (i.e., the unit contribution
on average for actual paying customer) =
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
3. CLTV: Part II – Discounted Net Value
of Customers in lifetime (1)
 Note: Assume each acquired customers stays with
Calyx & Corolla for 5 years
 First, figure out Cost of Retaining each Customer
(i.e., costs associated with getting each consumer to
continue to be active)
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
3. CLTV: Part II – Discounted Net Value
of Customers in lifetime (2)
 Second, figure out Contribution from the successive
orders each customer places per year (i.e., unit
contribution based on actual potential orders, on
average)
 Contribution from each successive Customer order per
year =
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
3. CLTV: Part II – Discounted Net Value
of Customers in lifetime (3)
 Then, figure out the Net Value (i.e., net or resulting
value between Contribution & Cost)
 Net Value =
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
3. CLTV: Part II – Discounted Net Value
of Customers in their lifetime
 Finally, calculate Discounted Net Value per Customer over
5 years: (Year1 net value) / (1 + i) + (Year2 net value ) / (1
+ i)2 + …… + (Year5 net value) / (1 + i)5.
(Note: Assume discount rate i = 10%)
Year 1 Year 2 Year 3 Year 4 Year 5
Cost
Contribution
Net Value
Discounted
Net Value
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.

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MARK4210, 2014 Spring, L1/L2
3. CLTV: Final Part III – CLTV of Calyx &
Corolla Customer
 CLTV of a Calyx & Corolla customer =
IN CLASS USE ONLY, NOT FOR RELEASE/CIRCULATION. TAKE NOTES AS NECESSARY.