COMM 225 Case Study – Fall 2015.pdf
COMM 225, FALL 2015: CASE STUDY
DUE: November 28, 2015, 23:55 HR, SUBMIT ONLINE IN THE DROP BOX
Each group is required to solve both cases provided below (i.e., answer all 4 questions)
TO BE DONE IN GROUPS OF MAXIMUM OF 3 STUDENTS FROM THE SAME SECTION (WITH SAME
CONTENT EXPECTATIONS)
CASE 1: Cold Stone Transforms the Ice Cream Social with Facebook
By Casey Hibbard (Published November 22, 2010)
(Full length article available at
http://www.socialmediaexaminer.com/cold-stone-transforms-the-ice-cream-social-with-faceb
ook/)
Ice cream has always been social. But Cold Stone Creamery has found a way to make it even more
so—with Facebook. Today, Cold Stone continues to innovate outside the kitchen, recently releasing
what may be the first eGift feature on Facebook, and running contests that get thousands engaged
even more deeply with the brand. The payoff goes well beyond greater customer engagement; Cold
Stone’s promotions add to the bottom line by moving people from their computers to physical
stores.
In July 2010, Cold Stone made eGifting more tangible. Now you can send Facebook friends a code for
an actual ice cream creation eGift, ranging from $5 to $7, right from the Cold Stone Facebook fan
page for delivery via Facebook or email. Like a gift certificate, recipients can instantly redeem the
gift at any of the retailer’s American locations by showing a printout or the code on their mobile
phones.
For a viral effect, the eGift shows up in the recipient’s News Feed on Facebook, so all friends can see
it. One of the first brands to enable eGift Social, created by First Data Corporation, Cold Stone links
its social media presence directly with sales. “The strategy, and really our goal, for eGift was more
for that everyday gift,” said Suzanne Schutz, vice president of marketing at Cold Stone Creamery. So
far, the results are impressive, delivering on Cold Stone’s goal of increasing revenue for its many
franchisees. “We’ve sold in just over a month and a half, about 2,000 eGifts and we’ve added roughly
$10,000 in incremental sales to the franchisees,” Schutz said. “Franchisees love it because they don’t
have to do anything. It’s no extra labor. It’s all done in the virtual world, if you will, and then they
just watch the sales come in. So they love it. We love it. Our fans love it. It’s definitely a win-win.”
Coupon Boosts Sales More Than 1%
In a direct response to Facebook fans’ requests, Cold Stone decided to run a 2-for-$5 coupon
campaign. The retailer posted the offer on its Facebook page and notified contacts by email. Just 3
weeks in, fans had printed more than 500,000 coupons, with more than 20,000 of those from
Facebook. Clearly, the campaign went well beyond just pleasing customers. “Since we launched the
campaign, we’ve seen sales increase just about 1 to 1.2%,” Schutz said. “We’ve seen a redemption
rate of over 14%. For me as an advertiser, that’s a great ROI. For traditional advertising we would
have spent upwards of $500,000 and we would have seen less redemption. I think our average
redemption was .02%. So far, it exceeds what traditional advertising and print do.”
Lowering the Cost of Sales
Cold Stone has made social media a major part of its marketing strategy, setting a goal of increasing
traffic to stores by 3% through social media and non-traditional advertising like email, while
reducing advertising spend. The retailer focuses on four or five key promotions throughout the year,
getting the attention of customers through Facebook, email, Twitter and YouTube. On YouTube, the
company posts footage from events like its annual “World’s Largest Ice Cream Social,” which
benefits Make-A-Wish Foundation. So far, every campaign with social media has brought a spike in
store traffic and sales. Combined with lower marketing costs, the team has truly added to profit
margins.
Currently, Cold Stone averages a cost of about 39 cents per coupon redeemed, compared to $3.60
per redemption with print advertising. Now more than half of the company’s advertising budget is
dedicated to non-traditional activities like social media. All that contributes to the company’s goal of
raising sales for its many franchisees.
“We let our fans know about our new product launches or programs like eGift and our new flavors.
And, in turn, we hope that our fans get excited about it, and then that drives them into our store, and
ultimately makes the sale,” Schutz said
Q1: What effects would the use of social media websites as advertising channels have on the
operations department within a company? (200-300 words).
Q2: For the ice-cream industry, discuss the different processes/activities and players (i.e.
supply chain partners) that are involved in delivering the final product to the customers.
Through a simple diagram, present a possible supply chain network configuration for such a
product? (200-300 words)
Q3: Consider the total production and sales of ice cream in Canada (in millions of liters) for the
period 1995 until 2012 as shown in the table below: (based on question 35 on page 113 of our
textbook)
Year
1995
Sales
341
Year
2004
Sales
302
1996
331
2005
335
1997
317
2006
320
1998
315
2007
309
1999
321
2008
346
2000
278
2009
329
2001
298
2010
337
2002
311
2011
351
2003
302
2012
332
Fit a model to ice cream production data using each of the following techniques and forecast the
2013 production in each case:
a) Four year moving Average.
b) Exponential smoothing with smoothing constant = 0.3 (Use the naïve approach to get the
method started).
c) Linear Trend equation.
d) Based on MAD values, which of the above three techniques seems more accurate.
CASE 2: Most Annoying Airline Delays Might Just Be in the Boarding
By JAD MOUAWAD, Published: October 31, 2011 (New York Times)
It’s the common tale of woe for many travelers waiting to board a plane. First the airline has to go
through a long list of passengers who have priority: First- and business-class passengers, frequent
fliers, elite card holders, uniformed members of the military, families with children, those who hold
credit cards affiliated with the airlines, passengers who paid for priority seats. By the time coach
travelers are called, the overhead bins seem to be already full.
Airlines have been boarding passengers since the first commercial flight, but as they have added
new classes of seating to their cabins and new fees for priority boarding — all in the name of more
revenue — they have slowed down the whole process.
Checked-baggage fees have only added to the problem, because travelers now take more roll-ons
onboard, blocking the aisles as they try to cram their belongings into any available space. That is
why some airlines have gone back to the drawing board to rein in a lengthening process. As it is,
boarding time has doubled over the last decades, according to research by Boeing. It now takes 30
to 40 minutes to board about 140 passengers on a domestic flight, up from around 15 minutes in the
1970s.
“They should have a different line for people with carry-ons like they do at baseball games with
bags,” said Brian Proffit, who was flying to Houston from New York with Delta Air Lines. “The
boarding process has become worse than the security lanes.”
One airline did figure out a way to sharply cut boarding time. Spirit Airlines found that passengers
got to their seats much more rapidly once it started charging $20 to $40 per carry-on bag. Since it’s
$2 cheaper to check a bag, more passengers do, and Spirit claims its “stress-free boarding” saves six
minutes on average. Others are reluctant to take such a drastic step for fear of alienating customers.
It should be no surprise that boarding has become one more frustrating step in airline travel. Or, as
Mark E. DuPont, the vice president for airport services planning at American Airlines, put it:
“Boarding can be like driving behind a slow-moving truck that you can’t overtake.”
Airlines have tried all kinds of elaborate tricks over the years to leave the gate on time. Some board
passengers in the back rows first, while others give priority to those with window seats, and some
come up with elaborate combinations, including one no longer used, known as the “reverse
pyramid.” But passengers can be unpredictable.
“The real world has wrecked their optimization plans,” said Matthew Daimler, the founder of
SeatGuru, a Web site that helps passengers find the best seats on a particular plane.
American Airlines changed the way it boarded its planes in May. It still gives priority to business
passengers and frequent fliers but then boards passengers who paid an extra $9 to $19 to get on
early, guaranteeing they will find space to stow their bags.
The rest of the passengers are then brought in as three groups, sorted in an attempt to spread them
out more evenly through the cabin and allow more people to find their seats faster. The approach
also helps passengers stow their luggage more efficiently, nearer to their seats, allowing more
people to find overhead space and cutting the number of bags that need to be checked at the last
minute — a common cause of delayed flights. The new method has cut boarding by four to five
minutes, Mr. DuPont said.
All the extra fees have been a major benefit to the airlines’ bottom lines. According to estimates by
Amadeus, a global distribution service, they will add up to $12.5 billion in 2011 for major United
States airlines, up 87 percent from previous year.
The challenge of boarding is thornier for narrow-body planes with single aisles that are used on
domestic flights than on the larger planes on international flights where passengers have two
possible pathways. A scientist once said the problem of boarding a single-aisle plane was a real-life
application of Einstein’s theory of relativity, where passengers are constrained in their movements
through space and time.
A few years ago, Jason H. Steffen, an astrophysicist at Fermilab in Chicago, figured there had to be a
better way to board after he was held up on the jetway while waiting for a flight to Washington. “If
the process was efficient, there would be no line,” he said.
He set out to solve the problem using a “Markov chain Monte Carlo optimization algorithm” — a
mathematical program well suited to the kind of haphazard events that occur in an airplane cabin.
Much to his surprise, he found that the common back-to-front method was among the slowest:
passengers must wait for those ahead of them to stow their bags and sit down. It is far better, it
turns out, to let passengers board randomly. Mr. Steffen claims he found the fastest way, which
involves boarding passengers from the back who are seated two rows apart.
“The lesson I learned comes down to this: you want to spread passengers out and not concentrate
them while boarding,” he said. But the method is unlikely to be picked up because the airlines say it
is too complicated.
Others have also searched for the holy grail of boarding. In 2002, America West Airlines, which later
merged with US Airways, hired industrial engineers from Arizona State University to speed up the
boarding process. The group came up with an approach that they called the “reverse pyramid.” It
begins with passengers assigned to window seats in the back, and gradually makes its way to the
front of the plane in a staggered pattern.
That saved time, but US Airways dropped it in 2007 because some passengers without elite status
sitting in the front could not find space for their bags.
“Overhead space has really become a premium product,” said Kerry Hester, the senior vice
president for operations planning at US Airways.
Another approach is used by Southwest, which says it can board its planes in around 15 minutes. It
says the root of the delays is the practice of assigning seat numbers. Southwest’s passengers are
instead assigned to one of three boarding groups, and then given a number based on the time they
checked in. Passengers who buy a premium “Business Select” ticket are guaranteed to board ahead
of everyone, followed by Southwest frequent fliers and passengers who bought a $10 one-way
“early-bird check-in” pass.
The airlines, meanwhile, keep looking for what Scott O’Leary, managing director of customer
experience at United, described as “the sweet spot between speed and a sense of order.”
Q4: Discuss the impact of long boarding times on (i) the revenue of airlines and (ii) passenger’s
travel? Recommend another way (not reported above) for the airlines to improve the boarding
process [300-400 words].
