Recently commissioned market research has concluded that SmartWear appears to have no clear understanding of the profile of its customer mix, and as a result operates quite unsophisticated and ineffective marketing campaigns.

Recent financial results indicate that SmartWear is finding it hard to both retain and get repeat business from existing customers, and the company is clearly losing market share to both established competition and newer e-retailers.

The sales and marketing director has been considering the development and implementation of a sophisticated customer database management system (CDMS), incorporating a customer loyalty scheme, to replace the existing very basic customer database.

The marketing department has undertaken a financial appraisal of this proposal to supplement the market research findings, and this indicates that it is financially viable in net present value (NPV) terms.

You have advised the sales and marketing Director that for the board to agree to the proposal, a clearly stated business case and more reliable evaluation of the financial viability of the project will be needed. She agreed and asked you to help her in this regard.

Required:
Write a report on behalf of the sales and marketing director, for presentation to the board which achieves both of the following:

(b) Evaluates the marketing department’s NPV analysis that supports the CDMS investment, questioning any underlying assumptions made. (10 marks)

Professional skills marks are available for displaying scepticism about the cash flow forecast used to support the proposal. (2 marks)