Web Co is an online retailer of fashion goods and uses a range of performance indicators to measure the performance of the business. The company’s management have been increasingly concerned about the lack of sales growth over the last year and, in an attempt to resolve this, made the following changes right at the start of quarter 2:
Advertising: Web Co placed an advert on the webpage of a well-known online fashion magazine at a cost of $200,000. This had a direct link from the magazine’s website to Web Co’s online store.
Search engine: Web Co also engaged the services of a website consultant to ensure that, when certain key words are input by potential customers onto key search engines, such as Google and Yahoo, Web Co’s website is listed on the first page of results. This makes it more likely that a customer will visit a company’s website. The consultant’s fee was $20,000.
Website availability: During quarter 1, there were a few problems with Web Co’s website, meaning that it was not available to customers some of the time. Web Co was concerned that this was losing them sales and the IT department therefore made some changes to the website in an attempt to correct the problem.
The following incentives were also offered to customers:
Incentive 1: A free ‘Fast Track’ delivery service, guaranteeing delivery within two working days, for all continuing customers who subscribe to Web Co’s online subscription newsletter. Subscribers are thought by Web Co to become customers who place further orders.
Incentive 2: A $10 discount to all customers spending $100 or more at any one time.
The results for the last two quarters are shown below, quarter 2 being the most recent one. The results for quarter 1 reflect the period before the changes and incentives detailed above took place and are similar to the results of other quarters in the preceding year.
Required:
Assess the performance of the business in Quarter 2 in relation to the changes and incentives that the company introduced at the beginning of this quarter. State clearly where any further information might be necessary, concluding as to whether the changes and incentives have been effective.