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P a r tI T h ed e c i s i ow h e t h etro i n t e r n a t i o n a l i z e
n
to solve specificproblems.Value shops are organizedaround making and executing
decisionsin the specificserviceinteraction situation with a customer - identi$ring
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organizations.
to most service-oriented
with embeddedservices: competitive
Many product companieswant to succeed as
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clearerunderstandingof the strategicrules of this new game - and will have to inte-
grate the rules into their operations- to realizethe promise of these fast-growing
:lusinesses.
'virtual
At the end of this chapterthe value chain' was introduced as a supplement
to the'physicalvalue chain',thus using information to createfurther business value.
Bear
Teddy
Vermont
Bear:Should
Teddy
Vermont
goabroad?
As Elisabeth B. Robert, CEO of The Vermont delivery serviceusing radio and the Internet. Unlike
Teddy BearCompany(www.vtbear.com), wakesup other Internet companies, we have an established,
on 30 June 2006 (the day where the 2005 financial state-of-the-art, cost-effective fulfilment operation
resultsarepublished)shecan look back on one ofthe with integrated systems to customize, personalize'
most eventfulyearsin the history of the company: pick, pack, and ship, and provide superior customer
On l6 May 2005Vermont Teddy Bearannounced service.And, the people of The Vermont Teddy Bear
that enabledthe Company are not only persistent and smart, they
the signingof a definitiveagreement
have become over the past several years extremely
companyto be taken privateby an investmentgroup
good at what they do. Why shouldn't we aspire to
led by The Mustang Group, a Boston-based private
be one of the premier gift delivery services in the
equity firm. The main motive for taking this step
'As world?'
has been statedby ElisabethB. Robert: a private Source: Vermont Teddy Ilear Annual Report.
company, Vermont Teddy Bear will no longer face
the challenges a small company trying to comply
of The company
with increasinglycomplex and costly public com- Vermont Teddy Bear's principal activity is direct
pany requirements.We will have more time and marketing in the gift delivery industry. Founded in
resources devoteto growing our business'.
to 1981 in Vermont (on the east coast of the United
The key financial figuresfor 2005were: States)Vermont Teddy Bear expandedvery quickly.
2005 ln 1992 Inc. Magazine recognized The Vermont
Net revenue: $39.0million Teddy Bear Company as the 80th fastestgrowing
Net profit: $2.5million private company in the United States.The same
year, Vermont Teddy Bear went on the stock
The number of employees at the end of 2005 was 352. exchange New York to hnancefurther expansion.
in
But Elisabeth has further ambitions for the Building on its success with its bear deliveryservices,
company: Vermont Teddy Bearbegana new business segment
My longer-term vision for the comPany is to lever- in fiscal 2001, with its SendAMERICA subsidiary
age our marketing and operational strengths with a sellinghandicraftsand foodstuffs
made by US arti-
sound brand strategy to grow our compar.rywith sans and growers. Vermont Teddy Bear launched
teddy bears and other products in the gift delivery PajamaGram April 2002.
in
service industry. Unlike other Internet companies, Vermont Teddy Bear (VTB) has six operating
we have proven our ability to profitably market a gift segments:
34
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P a r t I T h e d e c i s i o n h e t h e rt o i n t e r n a t i o n a t i z e
w
For the 2005 Fall/holiday season,the company Co
coupon for a 20 per cent discount on any of the
mailed a 48-page catalogue to approximately Con
Vermont-made bears offered through the Bear-
Gram gift delivery service. 4 million names including both its customer list of it
Another example of a corporate customer is and prospects. The comPany believes that- it has poil
BMW of North America, which regularly uses the significani opportunity to grow the segmentthrough keti
Bear-Gram gift delivery service to congratulate and cataloguemarketing in addition to direct resPonse hon
radio distribution. lon
thank both employees and clients for their dedica-
VTB has also initiated an online ffiIiate-marketing izpr
tion and service.
Among Vermont Teddy Bear's corporate cus- programme for its delivery service' The company coE
with affiliate partners, including opt-in pet
tomers are Johnson & Johnson, Kraft Foods' iras worked
Marriott International and Pepsi Cola' list aggregators' news and entertainment websites' tot
existing radio stations and charities to advertise to eYe
Marketcommunication new prospectsvia e-mail, and paid these partners a oth
of salesgenerated.The company has also enu
VTB's marketing and selling expenses immense' percentagi
are
Of VTB's total salesof $66 million, 37 per cent is L..., ,.r...ttfuI in acquiring certain keywords and anc
used for this PurPose. phrasesused on these Internet searchsites and pays
pu.ttt.rs on a'cost per click basis' Affiliate nu
The company developed the BearGram segment ih.r"
using predominantly direct response radio for mar- websites are pre-qualified based on criteria estab- cal
by the company and signedup and monitored tek
ketirig-and distribution in combination with a toll lished
free telephone number and subsequentlyits website by a third-party serviceprovider. Under this system' an
a percentageof rev- ila
vermontteddybear.com. Most of the radio advertise- the company pays its partners
'live' by local radio personalities in .rr.r", g..r"tuted through links from their websites' to
ments are read . se
major metropolitan areas.In 2005the company used
ordering no
local radio stations acrossthe country to advertiseits Online
BearGram and PajamaGram services' Many of the As thecompany began clarifrits identity a gift
to as AI
service as opposed to a toy manutacturer' Th
stations and personalitiesair advertisementsfor both delivery
segments. customer service increasingly became the focus of mi
to differentiate its brand' Focusing on mi
In the early 1990s the Company produced sev- its efforts 'P
that were aired on a small customer service,including last-minute gift delivery
eraltelevisioncommercials
company expandedits con- D
scale on cable networks. These TV initiatives were and personalization,the
centre, invested in the technology infrastructure
not considered successfulat the time' In 2003 VTB tact pa
online orders and built a new distribution
again tested a smaU-scaletelevision ad campaign to support
with state of the art frrlfillment, personaliz- se
for the BearGram segment at Valentine's Day and facility 'd
and shipping capability. Orders, including per-
for both the BearGram and PajamaGram segments ation
in the form of artwork or embroidery' V
at Mother's Day. Encouraged by the results of sonalization
could be taken as late as 5 p'm' for deliv- EI
these campaigns, the company in 2004 engaged a eventually
next day. On the day prior to certain key holi- itr
Los Angeles ug.tt.y to produce commercials and ery the
the company set up its own remote-fulfillment e)
increasedits spending on cable networks' The com- days,
near the carrier distribution hub to receive vi
pany intends to continue expanding television as a operation
pro."tt orders until midnight for next day a
means of direct responsemarketing and distribution urrd , a
particularly for the BearGram and PajamaGramseg- delivery.
ments in the holidays. Based on the results during The company began taking orders on its web- d
in tvtarch 1997, tecognising that the website
2005, the company intends to continue developing site
TV as a advertising medium for all its segments' provided visual support of the company's radio
VTB has periodically tested direct response print advertising campaign across the country and was P
way for customers to place orders' In il
ailvertisemenrs a variety of magazinesand news- a convenient
in
December 1997online orders represented7 Per cent ir
papers.Theseearly efforts were deemedonly margndly
orders. In April 2000 approx- F
i,ric.ssfrrl. More recently, VIB's brands have gained of total Bear-Gram
35 per cent of the Bear-Gram orders were
greater awarenessin markets nationally and as it imately
L
'art' of multi-channel marketing' the received vii the Company's website, triple the level s
Imbraced the
prior year. In 2005 nearly 60 per cent of the a
company has again begun to test a variety of print of the
were receivedvia the Internet'
adveitising opportunities for all of its gift segments' orders
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