To: Executive, Zoecon Corporation From: Date: Thursday, February 17, 2005 Subject: Strike Roach Ender Introduction Projected Industry Consumers Professional Projected Growth Rate of 10% annually Projected growth rate of 8% annually Projected sales of $4. 4 million Projected sales of $2. 7 billion Flea IGR Introduction - Similar Scenario Great success of introduction of flea IGR PRECOR into PCO, veterinary and pet store markets. o In 1980 Zoecon broke into the supermarket segment by selling the PRECOR ingredient to it's competitor dCo no In early 1983 Flea Ender (using PRECOR) was introduced to supermarkets by Zoecon - 11 % of the market was captured by late 1983 o Flea Ender's success attributed to a second 3 rd party competitor S.
C. Johnson By 1985 Strike Flea Ender had captured 18% of the flea pesticide market and continues to achieve it's profit objective Consumer Test Market AnalysisZoecon's introduction of the Strike Roach Ender has captured a substantial portion of the test area household market segment. As seen in Table A the brand was recognized by over half of the households in the market and 6 %, (70, 200 households) of those households purchased the brand, resulting in a profit of $ 247, 180. 40.
Though repeat purchases were also high at 30% (21, 060 households) the profit generated was not enough to sustain a revenue in the trial market. Zoecon ended the market in a net loss of $$1, 230, 819. 40. Figures are further broken down in Table A. Contribution margins were also high for Strike Roach Ender.
Aerosol Strike had a contribution margin of 55. 1% and fog ger had an even higher margin of 57% as seen in Table B. Table C projects the break even analysis in both units and dollars as a basis for further projections. As seen in Table C substantially larger sales are required to break even. Industry Market Analysis Using the techniques from the test market estimates of market share and projected sales for the 19 city (80% of trial insecticide volume) are made for the introduction of Strike Roach Ender into the household market.
I also chose to increase the advertising budget by 20% which increased costs to upwards of $12 million. This further drove the net loss to a final projection of $6, 844, 476 as seen in Table D. Much like the test market Contribution margins were also high for Strike Roach Ender. Aerosol and fog ger Strike had a contribution margin exceeding 50% as seen in Table E. Table F projects the break even analysis in both units and dollars as a basis for further projections. As seen in Table F substantially larger sales are required to break even.
Therefore more profitable alternatives and options must be sought to compliment or replace 19 city introduction. Options & Alternatives Roll-out Strike Roach Ender in projected 19 city market at a premium price Pros: 1. A share of projected annual increase of sales in the continually growing 2. Strike Roach Ender will hold high profit margins Cons: 1. Continual loss of profit Roll-out Strike Roach Ender into the 19 cities Strike Flea Ender is currently in Pros: 1. Consumer familiarity with Strike product 2.
Increase in sales and decrease in promotional costs to introduce new product Cons: 1. Consumer confusion due to similar strike name 2. Continued costs without achieving projected market share Enter into and agreement with a 3 rd party to include GENCOR ingredient Pros: 1. Initial introduction into the market by a competitor will pave the way for Zoecon's won premium product with fewer costs 2. Profits made by selling to a 3 rd party Cons: 1. Unable to capture a profitable market share with Zoecon product after competitor entersSuggestionZoecon has developed a significantly improved product in the roach growth regulator market.
It has shown that by promoting the product to an appropriate target market at a premium price it will hold yield high profit margins and achieve strong market penetration - though still not generating a profit. Therefore, I would recommend a marketing strategy similar to that of Strike Flea Ender (as highlighted in the similar scenario section. ) This proposed plan would involve a mixture of options one and three from the alternatives given above. Specifically, Zoecon would approach a 3 rd party: S. C.
Johnson, d Con or Boyd-Midway about purchasing GENCOR to supplement their roach control products. Zoecon may then have a better chance of penetrating the 19 city roach regulator market with its premium quality product.