Register to read the introduction…
Zoëcon could use the results from the test market and testimony from the PCOs to convince other companies, such as S.C. Johnson and d-Con, of the unique and effective qualities of hydroprene. However, other companies have been unwilling to cooperate in the past, and a price for the compound might have to be negotiated if an initial agreement cannot be reached. Also, selling the IGR for another company’s use could permanently eliminate Zoëcon brands from the consumer marketplace.
Recommended Action Strike ROACH ENDER did not perform well in the first 6 months of the test market, therefore I do not recommend that Zoëcon launch in all 19 cities. …show more content…
The risk for loss is too great. However, The consumer segment is a lucrative market with a lot of potential. I do not feel that a 6 month test market adequately represented the consumer attitude toward the product. I suggest that Zoëcon extend the test market for an additional year in the same geographic area. Since the initial introduction has been made, I suggest reducing marketing expenses by about $500,000 for the year. This marketing should emphasize the low toxicity of the product, as well as its long lasting effect. In October of 1986, re-evaluate ROACH ENDER’s position and if the brand is able to breakeven, continue with the launch.
I also suggest that Zoëcon mainly focus on the PCO market. Not only does this segment show great potential for market share, an industry the Zoëcon brand has already well established itself in, a good relationship with PCO’s is a form of marketing all on its own. A professional recommendation goes a long way with consumers. If PCOs are offered incentives to suggest, or even sell, the product, awareness and action will increase in the consumer segment. By selling hydroprene to other companies, Zoëcon would be making itself more vulnerable to competition. The chemical is the company’s differentiation strategy, and a justification for its premium prices. If other companies have it, Zoëcon could permanently be eliminated from the consumer market. In comparison to a 55% profit margin in the consumer segment and a 51% profit margin in the PCO segment, a 50% profit margin from selling to other companies is not only less, but uncertain. Appendix Test Market expense = $1,478,000 1. Breakeven units = $1,478,000/ $1.73* = 854,335.26 units (10 oz aerosol) 1.17 million households (representative of 22 million households in market 57% awareness- 666,900 households 6% tried- 70,200 households x 1.3 average units purchased = 91,260 units initially purchased 30% repurchased- 21,060 households x 3.5 units = 73,710 units after initial purchase | 10 oz Aerosol | 6 oz Fogger | Retail Price | $4.49 | $3.99 | Price to Trade | $3.14 | $2.79 | Cost of Goods Sold | $1.41 | $1.26 | Zoëcon Gross Profit Margin/unit | $1.73 (55%)* | $1.53 (55%) | Retailer Profit Margin | $1.35 (30%) | $1.20 (30%) | % of Sales | 66% | 34% | Units purchased initially | (91,260 x .66)= 60,231.6 x $1.73 = $104,200.66 | (91,260 x .34) = 31,028.4 x $1.53 = $47,473.45 | Repeated purchases | (73,710 x .66)= 48,648.6 x $1.73 = $84,162 | (73,710 x .34) = 25,061.4 x $1.53 = $38,343.9 | Total Profits from test market = $274,180.05 2. Profit after Test Market Expense = $274,180.05 - $1,478,000 = ($1,203,820) Loss Marketing expenses per city: $1,478,000/4= $369,500/ city Marketing expense for 19 cities: $369,500 x 19 = $7,020,500 3. Less 4 initial cities: $7,020,500 - $1,478,000 = $5,542,500 more to launch 4. Identical results as test market in 19 cities: $7,020,500 x (.815) = ($5,718,145) Professional Pest Control Industry = $2.5 billion revenue in 1985 5. 6% of revenue spent on chemicals: $2.5 billion x .06 = $150 million industry 15% market share of Chemicals sold to PCOs: $150 million x .15 = $22.5 million revenue 6. 51% profit margin from 15% market share: $22.5 million x .51 = $11.475 million profit Less 27% of sales and additional $500,000 for marketing to PCOs: $11.475 million x .73= $8.377 - $500,000 = $7.877 million profit after marketing expenses
Recommended Action Strike ROACH ENDER did not perform well in the first 6 months of the test market, therefore I do not recommend that Zoëcon launch in all 19 cities. …show more content…
The risk for loss is too great. However, The consumer segment is a lucrative market with a lot of potential. I do not feel that a 6 month test market adequately represented the consumer attitude toward the product. I suggest that Zoëcon extend the test market for an additional year in the same geographic area. Since the initial introduction has been made, I suggest reducing marketing expenses by about $500,000 for the year. This marketing should emphasize the low toxicity of the product, as well as its long lasting effect. In October of 1986, re-evaluate ROACH ENDER’s position and if the brand is able to breakeven, continue with the launch.
I also suggest that Zoëcon mainly focus on the PCO market. Not only does this segment show great potential for market share, an industry the Zoëcon brand has already well established itself in, a good relationship with PCO’s is a form of marketing all on its own. A professional recommendation goes a long way with consumers. If PCOs are offered incentives to suggest, or even sell, the product, awareness and action will increase in the consumer segment. By selling hydroprene to other companies, Zoëcon would be making itself more vulnerable to competition. The chemical is the company’s differentiation strategy, and a justification for its premium prices. If other companies have it, Zoëcon could permanently be eliminated from the consumer market. In comparison to a 55% profit margin in the consumer segment and a 51% profit margin in the PCO segment, a 50% profit margin from selling to other companies is not only less, but uncertain. Appendix Test Market expense = $1,478,000 1. Breakeven units = $1,478,000/ $1.73* = 854,335.26 units (10 oz aerosol) 1.17 million households (representative of 22 million households in market 57% awareness- 666,900 households 6% tried- 70,200 households x 1.3 average units purchased = 91,260 units initially purchased 30% repurchased- 21,060 households x 3.5 units = 73,710 units after initial purchase | 10 oz Aerosol | 6 oz Fogger | Retail Price | $4.49 | $3.99 | Price to Trade | $3.14 | $2.79 | Cost of Goods Sold | $1.41 | $1.26 | Zoëcon Gross Profit Margin/unit | $1.73 (55%)* | $1.53 (55%) | Retailer Profit Margin | $1.35 (30%) | $1.20 (30%) | % of Sales | 66% | 34% | Units purchased initially | (91,260 x .66)= 60,231.6 x $1.73 = $104,200.66 | (91,260 x .34) = 31,028.4 x $1.53 = $47,473.45 | Repeated purchases | (73,710 x .66)= 48,648.6 x $1.73 = $84,162 | (73,710 x .34) = 25,061.4 x $1.53 = $38,343.9 | Total Profits from test market = $274,180.05 2. Profit after Test Market Expense = $274,180.05 - $1,478,000 = ($1,203,820) Loss Marketing expenses per city: $1,478,000/4= $369,500/ city Marketing expense for 19 cities: $369,500 x 19 = $7,020,500 3. Less 4 initial cities: $7,020,500 - $1,478,000 = $5,542,500 more to launch 4. Identical results as test market in 19 cities: $7,020,500 x (.815) = ($5,718,145) Professional Pest Control Industry = $2.5 billion revenue in 1985 5. 6% of revenue spent on chemicals: $2.5 billion x .06 = $150 million industry 15% market share of Chemicals sold to PCOs: $150 million x .15 = $22.5 million revenue 6. 51% profit margin from 15% market share: $22.5 million x .51 = $11.475 million profit Less 27% of sales and additional $500,000 for marketing to PCOs: $11.475 million x .73= $8.377 - $500,000 = $7.877 million profit after marketing expenses