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Big Sky Carvers: a rural success story.

CASE DESCRIPTION

The focus of this case is on product development for a small, but successful firm. The firm has an opportunity to expand its product line through a co-branding effort, but the new products represent a significant adjustment in how the products are made and who they are sold to. An important secondary issue deals with the opportunity to develop global sources of production as a means of lowering production costs. The case has a difficulty level of four to six. It should take about two class hours and the students will need to spend about two hours outside of class to prepare for it.

CASE SYNOPSIS

Big Sky Carvers (BSC)is a small, but quite successful firm specializing in home decor and gifts based upon a wide range of wildlife, from trout to grizzlies. While BSC is small, it is still a fairly large player within the focused industry niche for this type of product. A significant success factor for the firm has been the high level of craftsmanship exhibited in its pieces, which leads to generally higher prices. The attention to detail and quality has lead to a strong customer base, among both its retailers and consumers, for its products. The firm now has the opportunity to embark on a co-branded line of products which could develop a new method of production for the firm, leading to lower prices, and a possible expansion of the market for its products.

INTRODUCTION

"When I was a kid, Dad had some old decoys around the house. They weren't rare or valuable; they weren't even very well made. But I noticed, especially when I held one of them, I was transported to another place; the memory of the brisk fall morning with autumn smells of a marsh in the air, and our yellow lab. Nancy, running around disobediently while Dad put out the decoys. Those old decoys of my Dad fueled a deep passion in me."

--Marc Pierce, Co-Founder and CEO

PROLOGUE

Marc Pierce and his family are looking forward to their annual winter trip to Cabo San Lucas, Mexico next week. However, before Marc goes he knows that he has to make a decision on a new product line for his firm. This line would be different in many ways from the products that Big Sky Carvers has sold and Marc has been seeking advice and counsel from all his key employees and retailers. But the final decision on whether to pursue this new line is Marc's responsibility and he knows that he must decide before he goes on vacation.

BIG SKY CARVERS

Eric Pierce and his son Marc founded Big Sky Carvers in 1980. In the past twenty years it has grown from a small producer of decorative duck decoys into a global leader in the decorative design industry.

After learning how to make decoys on a multiple-spindle carving machine, the Pierces moved from the mid-west to Montana in hopes of being able to successfully market their product in and around Yellowstone Park. Success was not easy to come by at first. However, with hard work and the addition of many artists and craftsmen from the Yellowstone area the Pierces' dream of being a highly successful leader in their field has been realized.

BSC now has a number of product lines which include, decoys, fish, game birds, signs, furniture, sports collectables, dogs, big game, and much more. BSC has become much more than just a woodworking shop; its expanded facilities include a foundry as well as furniture assembly and sign making processes.

While the products offer a unique view of nature and its beauty, the true identity of BSC is embodied in the employees. BSC has been very fortunate in assembling a talented group of artists. In addition to being great artists, they truly love the outdoors, wildlife and all the things that BSC products have come to represent.

The mission statement for BSC reflects how the firm embodies both the family nature of the firm and the love of its organization members for the outdoors. Marc Pierce has articulated the mission statement as "Big Sky Carvers is a team of highly motivated individuals dedicated to designing, creating and delivering products reflecting outdoor lifestyles to niche markets. Our strength lies in our ability to create win/win relationships with our customers, vendors and staff, resulting in a 'world class' model of excellence."

Existing Products

BSC is a group of people that share the common goal of providing a top of the line product with as much character as those who produce and purchase the product. The hope of the many master artists, designers, craftsmen and members of the workshop at BSC is to bring a little piece of the outdoors into the customer's home.

The company currently has seven major product lines that it markets. While all of these are sold under the BSC name, each line has its own type of pricing structure and distribution intensity based upon its target market. Many of the lines have begun as a single item or small group of items created by artists in the area. BSC has helped these artists to develop profitable products and market them nationally.

Wildlife Woodcarvings

This collection started in the tradition of the American Folk Art of decoy making and was the beginning of the BSC, but has grown to provide a great deal of options for those who have grown up as avid sportsmen. The items are produced by a workshop of artisans, crafting decorative decoys in the tradition of those before them. However this collection has expanded over the years to include several waterfowl editions, game fish, upland birds, songbirds and mammals.

The Wildlife Woodcarvings collection represents the upper level in quality and price for smaller woodcarvings in the industry. With prices ranging from sixty-nine dollars for very small items to almost five hundred dollars for larger items, there is as much parity in price as in selection.

These products are designed for people with outdoor lifestyles. Representing the very best that the industry has to offer in the wood sculpture market, with unparalleled quality, diversity and design. With the offerings of "limited edition" designs BSC increases the worldwide following of collectables and increases the desirability and value of the purchase as the items sell out.

Placement of this line is very important at BSC, with a target of mid to upscale gift/gallery stores and catalogs with a commitment to stocking inventory and display and visual merchandising. With a low to medium distribution density and medium to high price points, these products are a rarity in most stores.

Big Sky Bears and Friends

These bears, carved by chainsaw and created by the imagination of Jeff Fleming are more animated than the rest of the collections, thus they tend to appeal to a wide range of consumers throughout the market.

Big Sky Bears, as with the Wildlife Woodcarvings collection, tends to lean toward the higher price ranges and low distribution density. This collection also is rare and desirable. The prices fluctuate according to the size of the carving, starting at around fifty dollars for the smallest items to twelve hundred dollars for the Ben Table Bear.

These products are marketed to people who decorate or collect for an outdoor or lodge look in their home. These upscale carved bears and other animals have frequently been described as "cool" and "endearing." Collecting or decorating with Big Sky Bears makes people smile.

The William Herrick Collection

This collection started twenty-five years ago when William Herrick began to carve basswood. Beginning with his world famous Trout Table, then adding more tables as well as many other items over time, this collection has grown into one of the more popular collections at BSC.

With this collection consisting of large items such as tables, mirrors and cabinets, it is the most expensive collection that BSC offers. With high price points and low distribution density this collection falls into the same category as the Wildlife Woodcarvings and Big Sky Bears. Prices range from one hundred dollars for a candleholder to almost five thousand for a Round Troutstream Basswood Table.

Marketed to those with a deep appreciation for the outdoors, these reproductions of William Herrick's original woodcarvings represent BSC premium collection of exclusive designs of furniture and accessories. The presence of these items is considered a great source of pride and conversation among owners.

Meissenburg Designs

These handcrafted signs are of unique quality and design that far exceeds that of the rest of the market. Lloyd Meissenburg, the personal designer of this collection, is the leader in this field, showing a dedication to the old days of wood crafting. The production of both inside and outdoor signs is designed specifically to reflect the buyer personality.

The line of outdoor signs are for people wanting a high quality welcome sign reflecting their lifestyle or personality. These signs are the best three-dimensional personalized signs available. With a relatively expensive price and high distribution density, these signs follow the BSC pricing trend but are easier to find. Price ranges are approximately seventy to one hundred dollars.

The inside signs are marketed to those wanting to decorate their home or office with reminders of their life's passions. This collection offers a fun and decorative sign at a very reasonable price. With a medium to low price point (rare at BSC) these items are a great deal. Prices range from thirty-five dollars for a wisdom board to one hundred sixty dollars for a larger sign.

With a larger number of channels of distribution this collection is much easier to find than most BSC products. With the target placement of these items including, home & garden and general variety/hardware stores included with the usual channels of distribution used by BSC, distribution is much higher with these products.

Montana Bronze

Created by Brad Williams, these sculptures consisting of bronze, resin and pewter, appear almost identical to the much more expensive solid bronze sculptures. These limited edition sculptures all come with a certificate of authenticity for added value and desirability. These extremely lifelike sculptures are a true credit to the ability of their artists.

With prices ranging from fifty to three hundred dollars, there is a wide selection of items to fit almost any consumer. With medium to high price ranges and low to medium distribution these products are true collectors items.

This product line is designed for art collectors with outdoor lifestyles who are not necessarily buyers of real bronze sculptures. Montana Bronzes are near bronze sculptures with outstanding quality and design at reasonable prices. Collectors of Montana Bronzes get a piece of art for their home or office, which not only reflects their lifestyle and is a great value, but as editions sell out can increase in value.

Ducks Unlimited

Ducks Unlimited is a national organization that was begun by a group of waterfowl hunters in 1937 and whose goal is to save or restore the nations wetlands. Ninety percent of its current members are hunters whose participation in waterfowl hunting fuels their drive to give something back to the resources that make their outdoor experiences so enjoyable. Through the support of this sportsman constituency, DU has been able to conserve more than 10 million acres of habitat across North America-in the areas that are most important to ducks and geese.

The partnership between BCS and Ducks Unlimited (DU) was formed to raise money for DU and its cause. Selected to develop some designs that reflect the lifestyle of the DU supporter, BSC jumped at the chance to help a cause directly associated with their own lifestyle as outdoorsmen. This co-branded venture has been extremely successful for both BSC and DU, and continues to raise money to support wildlife habitats.

With medium price points and high distribution the hope is to raise as much as possible for DU, while pushing the BSC name. Prices range from one hundred to three hundred twenty dollars, determined primarily by the size of the item.

Produced and marketed especially for DU members and other people with outdoor lifestyles, the DU collection is a group of accessories reflecting the DU lifestyle. Owning DU accessories provides the buyer with a connection to that DU lifestyle through their decor, and supports DU's important conservation efforts.

Big Sky Home Accents

This collection consists of items that the owners and employees of BSC feel would appeal to their customers, but are not made by BSC. These products could come from a tiny village in Mexico, a workshop in Asia, or a small community in the low country of South Carolina. Low to medium price points and high to medium distribution, make this collection the most affordable of the BSC collections. Prices range from twenty-five to one hundred twenty-five dollars with a few products that may go as high as four hundred fifty dollars.

This product line, consisting of many items from different backgrounds, is directed to anyone who enjoys BSC products and an outdoor lifestyle. These are things that BSC employees enjoy and feel that their customers will as well.

The Distribution Channels

BSC uses a variety of different channels to sell their products; this variety has proved to be very successful throughout the life of the firm. By using so many different channels of distribution BSC has given itself a great deal of freedom and ability to reach many different markets within its industry.

Retail Stores

BSC owns and operates two retail stores which carry items from all the product lines and can order any item for a customer. One store is at the Mall of America and the other at their headquarters in Manhattan, Montana. These stores account for a very small percent of the yearly sales and also perform the duties of a showroom for soliciting larger clients such as catalogs and other forms of distribution.

Licensed Gallery Dealers

The licensed gallery dealers are a larger part of the sales picture. Currently there are over three hundred of these dealers that are licensed to sell BSC products (see table below). These dealers operate independently from BSC, and perform as separate entities within the same markets as BSC. Operating in the same way as any other store they purchase the products from BSC and then resell them for their own profit.

Catalog Distribution

All the various catalogs in which BSC products are featured constitutes the largest channel of distribution for its products. The ability to reach as many people as a catalog can is a great asset. With low costs and high circulation, the catalog market has allowed BSC to grow into an industry leader. Although BSC does not put out its own catalog, its products are featured in over forty major and regional specialty books that reach over forty million people every circulation cycle. With that type of opportunity for sales it is easy to see why it can be so successful.

Internet

The Internet has become an important tool in helping to support the sales of BSC products, but BSC does not sell on-line direct to consumers. Instead, the web site (www.bigskycarvers.com) provides information about its products to prospective customers and then will help direct them to the nearest licensed gallery dealer. With detailed explanations and descriptions of products and dealer information the Internet is a good "end consumer" driven support of the licensed gallery dealers distributing BSC products. In addition, retailers that would like to carry BSC products can provide contact information so that BSC can contact them and in the future BSC would like to use their web site as way for its retailers to place their orders electronically.

Conservation Groups

Alliances with conservation groups has been another successful channel of distribution for BSC. This method of product distribution not only helps the cause of the group but it increases circulation of the BSC name and products. This channel allows BSC to contribute to the conservation of the environment that it represents so well within its product. Currently over twenty major conservation groups and their member chapters use BSC products for fundraising. An example of how successful this channel can be is the partnership of BSC and Ducks Unlimited to help raise money to save, restore and manage wildlife habitats.

Profitability

BSC has been a profitable firm since shortly after Marc and his father founded it in 1980. The firm grew slowly during its early years, but growth in the last ten years has been much faster, largely due to the expanding product lines the firm produces and markets. While the firm is privately held and closely guards its financial information, it is widely recognized as a leader within its niche area within the home decor/gift industry.

Retail prices for merchandise in this industry commonly provide a fifty percent margin for the retailer. For example, if the retail price on a product is one hundred dollars, the retailer paid fifty dollars to the supplier for it. Thus, if a BSC product retails for one hundred dollars, BSC received fifty dollars for it and from that price must pay for all production costs, promotion, and overhead costs. It is not uncommon for the production costs to consume over fifty percent of the price of the product, so that of that fifty dollars BSC generally has less than twenty-five dollars to cover all promotion and overhead costs, and leave some type of profit. For many publicly traded firms in the home decor/gift industry the net profit margin ranges from eight to fourteen percent. It is also common for the lower priced retail products in this industry to produce a lower net profit margin and firms that market these products hope to make higher net profits through volume sales. While BSC is distributed nationwide, it is not carried in any of the larger discount or volume retailers for these products, and the firm emphasizes margin over volume in the sales of its products.

Promotion

The promotional efforts of BSC have largely been directed to two areas: point-of-purchase (POP) displays and personal selling. BSC recognizes that its products appeal to a small target market that is spread widely over the U.S. In fact, many of its products sell better in smaller, more rural markets where there is a larger percentage of the population that still hunt and fish. This wide and shallow distribution of the target market has always made the purchase of any type of mass media rather costly on a per exposure basis. In addition, Marc Pierce believes that advertising does not have the ability to truly represent the quality of the products that BSC markets. As a result, BSC has put a great deal of time and money into developing effective POP display items for its products. For example, a handmade, hand-painted decoy from BSC would have a display easel given to the licensed gallery dealer to put next to the product to hold a card (or number of cards) that talk about the particular species of waterfowl the decoy represents, the areas of the country where the bird can often be found, any interesting facts about the bird (such as geese mating for life), what type of wood was used in producing the product, and so on. BSC also has a number of special display units that it sells to its dealers to display the products at less than the manufacturing cost of the unit.

The second method of promotion that BSC employs is really in developing and maintaining reseller relations rather than sales from the end consumer. To help build these relationships BSC employs twelve major sales representative groups and over thirty-five sales people. In order to support these sales people BSC owns three permanent showrooms as well as six regional/representative showrooms and attends specialty and temporary shows throughout the year. BSC spends tens of thousands of dollars each year for these shows where the dealers come to see new products, make purchases, and find new vendor sources. The cost for attending these shows is expensive, but BSC feels that it is worth every penny it costs to make sure its dealers have a chance to view and purchase new products. It is also an important source for BSC in finding new dealers to represent its products, especially as the type of product lines increases and more market segments may be attracted to its products.

New Product Development

In the year 2002 BSC plans to expand their collections to include a number of new products and ideas. Not only will the existing collections be expanded, but new collections will make their way into the BSC family.

The addition of new collections of stoneware, lamps and metal ware as well as the Hearthside Santa collection will bring new variety to BSC. These new products are created in the same image and with the same character as all previous collections produced by BSC.

Along with new products BSC is also changing its logo enough to differentiate the different product lines within the firm. The goal of BSC is to develop logos and brand marks to better communicate separation of the different collections.

With all these changes at BSC it is a very exciting time within the firm. However overshadowing all of these changes and improvements that are being made throughout BSC is a project with the National Audubon Society.

THE AUDUBON SONGBIRD COLLECTION

The National Audubon Society and BSC have worked on the development of a new BSC product line which would be used to raise money for the conservation of wildlife throughout North America. The product line would be called The Audubon Collection consisting of songbirds from different areas of North America.

This project provides some new opportunities for BSC, the expansion of global business and marketing to a different customer than that of the past. If BSC goes ahead with this product line it will be the first time that BSC outsources the production of a product. The less expensive version of the collection will be made out of resin and produced in China. This new production method will allow BSC not only to experiment with outsourcing, but also with global business as BSC begins to expand to other markets around the world.

This product differs from the BSC products of the past. The items are less expensive than most BSC items. By offering a product consisting of resin BSC can sell these items for $79, far less than what is usually charged. However BSC is also offering the same birds, carved out of wood, in the traditional BSC fashion for those who have come to expect the best from BSC. This differentiation of products allows BSC to reach customers that usually would not buy BSC products due to the high price.

The Customer Profile

The customer that is targeted by this new partnership is one who sympathizes with what The Audubon Society is trying to do, protecting birds and other wildlife and the habitat that supports them. These products are designed for an outdoors person who doesn't want to see any further destruction of the environment. Many "birders" will take trips exotic or remote locations simply to see and hear special birds. However, the product is one that can appeal to people who venture no further than their backyard or the city park to enjoy the many songbirds that can be found in urban settings. It is very important to those who work with and for BSC to preserve the environment that they have grown so fond of over the years. The customer targeted is one who can recognize that goal and feel good about purchasing a product that helps the environment.

There will be two market segments that this product may appeal to. The resin birds costing $79 will allow those who don't want to spend much money on a wood carving to be able to purchase one of these items without guilt. The wood carved bird on the other hand, costing $200, allows those who have become collectors of BSC products over the years to purchase a product of the same quality as those purchased before.

Another important difference for this product is the increased focus on women as the target market for the product. The songbirds represent a more delicate, softer view of nature that may appeal to more women. Many of the BSC products are of larger animals such as deer or bear and most of the birds in the current collections represent game birds like ducks or pheasants. The songbirds are a way that BSC hopes to reach out to the wife of the sportsman. While women have purchased a number of BSC products in the past, the firm believes that these have frequently been gifts for the men in their lives. The songbirds are a way for BSC to extend their reach by having women buying BSC products for themselves.

The Product

The materials used to make the resin version of the songbirds in this collection are different than what is usually used by BSC. By using resin rather than wood it is hoped that the costs will be less and those savings in turn can be passed on to the customer. One thing that BSC is not sure of is how good the resin product will look in coming out of the factory. Up to this point all of the examples of the product that the BSC have been samples that have essentially been hand made. Once a contract with the factory is signed, a wooden model will been sent over. The factory will use the wood model to create a mold for the resin version. Only then will BSC be able to see actual production versions of the songbirds.

The production of this product is going to be outsourced to a factory in China. This method of production is necessary to keep the costs low enough to be able to sell them profitably for the projected price of $79. If the resin songbird were to be made in Montana, the labor cost of the BSC employees would significantly higher than from the factory in China. An additional benefit from outsourcing the production is that it will allow more time for the production of other collections in the BSC workshop.

The Price

The new Audubon resin songbirds will be priced lower than most other products from BSC. It is hoped that the lower price will play a significant role in helping to make this product line a success. By pricing this collection lower than most, BSC will be able to sell this collection in more channels than what is traditionally used. However, since this product will be sold as a means of generating funds for the Audubon Society, a portion of the retail price will go directly to the Society. While the exact amount has not yet been determined, there have been discussions regarding whether it should be a set amount or a percentage of the retail price. BSC would like it to be a percentage of the retail price (in the range of five to ten percent) and have the retailer send the money directly to the Society. The retailers would expect a lower wholesale price based upon the lowered revenue generated from each item. The Audubon Society, and most of the retailers that BSC has talked to about this project, feel that it would be better to have a set amount per item shipped and let BSC send it directly to the Society. This amount could then be put on the display information as "X amount of dollars from the sale of this product goes directly to support The Audubon Society." The amount for each item has been suggested by The Audubon Society and the retailers to be in the range of five to eight dollars in order to stimulate purchasing.

The Distribution

Another issue for BSC is the distribution of the product. The wooden version of the songbirds will undoubtedly get sales through the channels of distribution that BSC has developed over the years. This part of the product line will be viewed by these retailers as a routine product extension for them and they will simply have to decide if they have room to merchandise this new product.

The resin songbird will not necessarily be going through the same distributors. While there is no doubt that some of the current dealers will be happy to have a lower price point product to sell, many of the dealers pride themselves on dealing in only high quality and collectible products. The resin songbird will not fit in their product mix. But there may be a number of new dealers that might be attracted to this product as it would be the first product from BSC that would really fit within the price category that their customers have come to expect. The difficulty for BSC will really be in finding those new dealers and trying to convince them to carry more than just a very small portion of the total BSC product assortment.

A final issue associated with distribution would be the sales of the product through The Audubon Society. The Society would like to put the product line on its website and its literature that it sends out to its members. The Society would then order the products necessary to fill these orders from BSC. This method of distribution is similar to what occurs with the Ducks Unlimited products, but BSC has found that it is rather expensive to ship out a number of small orders and would rather have both groups direct their members to purchase through a licensed BSC dealer. This type of arrangement may be difficult for a new product like the resin songbirds where only a few or select dealers are carrying the resin songbird.

THE DECISION

Marc Pierce has to make the decision about whether or not to include The Audubon Society Collection for the next year's product assortment before he goes on vacation. He feels that while it is not a decision that will either make or break the company, it is one which represents some significant risks and opportunities:

It would give BSC a chance to gain experience with a new product material and new production facilities that are off-shore, however, it might also upset the current workforce who could view the new product line and production method as a threat to their jobs;

It would give BSC a new product line which might open doors to new dealers and new target markets, but it also might alienate some current dealers who could view the new product offering as a lowering of quality of the BSC products;

The pricing on the product leaves little room for error and if it does not generate enough volume it will probably not generate sufficient profit.

R. Sitki Karahan, Montana State University--Bozeman

Tim Christiansen, Montana State University--Bozeman
Big Sky Carvers

Licensed Gallery Dealers by Region

Western United States

State Dealers

Alaska 10
Arizona 2
California 28
Idaho 7
Nevada 3
Oregon 16
Utah 12
Washington 10

Central United States

State Dealers

Colorado 24
Montana 18
North Dakota 1
Nebraska 5
New Mexico 1
Oklahoma 1
South Dakota 2
Texas 3
Wyoming 6

Eastern United States

State Dealers

Alabama 3
Arkansas 7
Florida 2
Iowa 3
Illinois 8
Indiana 4
Louisiana 1
Massachusetts 3
Maryland 1
Maine 4
Michigan 19
Minnesota 11
Missouri 9
North Carolina 11
New Hampshire 1
New Jersey 1
New York 3
Ohio 5
Pennsylvania 3
Tennessee 5
Virginia 3
Vermont 1
Wisconsin 16
West Virginia 1

Canada

State Dealers

Alberta 5
British Columbia 4
Ontario 6
COPYRIGHT 2004 The DreamCatchers Group, LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2004 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Karahan, R. Sitki; Christiansen, Tim
Publication:Journal of the International Academy for Case Studies
Article Type:Case study
Geographic Code:1USA
Date:Jan 1, 2004
Words:5280
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