What Digital Depot is doing?
Digital Depot is in the business of offering products used for multimedia presentations such as high quality video and digital cameras, color scanners, teleprompters and projection equipment. Its services include specialized video editing services to local firms and graphics consultation service to schools.
What happened with the special promotion?
The primary business model of Digital Depot is business to business (B2B) i.e. it sells most of its goods and services to schools, universities or local firms. The customers who walk into the Digital Depot stores are serious amateurs or some professionals. Digital Depot has positioned itself as a premium store selling high quality goods at a premium price. It had not targeted the lower-priced and lower quality of digital cameras which the amateur photo buffs usually look for. As these types of customers were never the target customers for Digital Depot. However when all of a sudden the store put up a Christmas sale offering cameras at a discounted price, it did not go in accordance with the positioning of the store. So neither was the promotion able to attract its original customers who pay a premium price for good quality nor was it able to attract the amateur photo buffs who had a perception that the cameras in Digital Depot were expensive.
Moreover it had positioned itself as a store offering products used for multimedia presentations and video editing and graphics consultation services. It had not positioned itself as a store selling cameras. So during the Christmas season when people want to get a camera, they usually tend to go to exclusive camera stores.
What should Mark Johannson do to increase sales and profits?
He should position the store correctly by appropriately segmenting and targeting the market. Once positioned, he should advertise and offer sales promotions to his target customers only. This increases the effectiveness of advertisements and sales promotions thus increasing sales. Since Digital Depot is primarily into B2B, offering discounts to its clients will result in more sales. Mark could even raise the $2000 annual limit to $2500 or $3000 for offering 25% discount for the in store customers since most of the regular customers are currently qualifying for the discount. This will encourage the customers to buy more thus increasing the sales. It will also result in increased revenue.