Main Problem Analysis While no real problem exists with Zoecon, there is a conflict of interests in regard to how Strike ROACH ENDER is marketed. A meeting was set for January 1985, in which Zoecon executives were to analyze and discuss the test market results for the Strike ROACH ENDER, after it was placed in a consumer test market for six months in four cities representative of the 19-city market where 80 percent of roach insecticides were sold. These four cities included: Charleston, South Carolina; Beaumont, Texas; Charlotte, North Carolina; and New Orleans, Louisiana. After these six months, executives were to determine which option would benefit Zoecon, resulting in the greatest return on profit. After analyzing the results, executives came up with three different options in which to market Strike ROACH ENDER. These options included: Option One: was to expand the Strike ROACH ENDER distribution to the 19 cities where Strike FLEA ENDER was being sold.
The research conducted by Zoecon’s private marketing research group showed that the 19 cities accounted for 80 percent of roach insecticide volume. The executives at Zoecon agreed that the primary direct costs associated with distributing Strike ROACH ENDER to these 19 cities would be a price of $1, 016, 000. This cost would cover the advertising and promotions for the purpose of creating brand awareness in these 19 cities. The executives also agreed that the set-up / auditing , marketing research, and miscellaneous costs would not be repeated in order to expand distribution. Option Two: Executives believed that Zoecon should focus on directing their resources to Pest Control Operators, (PCO’s).
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They noted that GENCOR () had been greatly received by PCOs in 1984.
At the end of this year, many PCOs were promoting GENCOR’s benefits to their customers. These Zoecon executives agreed that with an annual investment of $500, 000 every year above the 27 percent of sales would be enough for trade advertising and and sales efforts towards accelerating use. Option Three: Zoecon executives suggested that they pursue opportunities for selling to the makers of d-Con, Black Flag, and Raid for use in their products. While this strategy had worked in the past for PRECOR (), it could pose as a threat or possible end of Zoecon’s presence in the consumer market. After conducting a product cost analysis on the Strike ROACH ENDER, the executives indicated that the cost of goods sold for the 10-ounce aerosol package of the Strike ROACH ENDER, without, and the 6-ounce fog ger package, without, would be $0. 80.
This would leave a remaining 50 percent gross margin on for sale to another insecticide marketer without the added expense of marketing and sales. As you can see, with these three suggestions, Zoecon’s future rests with the majority of interests among the executives. Before the proper decision is made, we must first take a look at the underlying results of the two options we have decided to activate. Option three has been eliminated from the list because it promotes an idea that places too high of a risk on Zoecon’s future. A SWOT analysis has been developed for each of the two options we have chosen in attempt to explain which one we will pursue first, and the reasons for our decision.
SWOT Analysis for Option One: Strengths in the Test Market Estimation: While considering expansion of distribution to the 19 cities, Zoecon had calculated that they contained 1. 17 million households. Zoecon’s two objectives for the test marketing of Strike ROACH ENDER were: 1. To determine consumer’s acceptance of Strike ROACH ENDER 2.
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To accurately qualify the product for trade and consumer marketing program. While research showed there were three segments of insecticide users, the greatest segment was the “end the problem permanently” segment, followed by the “product that lasts” segment. The third segment, which was not considered either primary or secondary, due to much lower numbers, was the “convenience / low cost” segment. Through the development of segment testing, Zoecon can safely confirm that their consumers are willing to pay extra to eliminate the insects, rather than temporarily getting rid of them through cheaper short-term remedies. This is a positive result for Zoecon, considering that their products were priced 50 to 75 percent higher than their competitors.
Strike ROACH ENDER was packaged in two separate ways: through the 10-ounce aerosol spray priced at $4. 49/ each. The second package was a 6-ounce fog ger priced at $3. 99/per bottle. These higher priced products, not only represented Zoecon as better quality product than the other roach insecticides, but it also provided supermarkets with a higher margin than received from their competitors.
Exhibit 1 represents Zoecon’s return on profit. Exhibit 1 Strike ROACH ENDER Package Economics: 10-oz. Aerosol 6-oz. FoggerRetailer’s Price: $3.
14 $2. 79 Cost of Goods Sold: (1. 41) (1. 26) Gross Profit: $1. 73 $1.
53 Zoecon makes a favorable return of $1. 73 for every 10-oz. Aerosol spray sold, which accounts for sixty-six percent of Strike ROACH ENDER sales, and $1. 53 with every 6-oz. Fogger sold, covering 34 percent of sales. In addition to these results, it’s important to record the quantitative results, including the number of cases shipped to each location or supermarket.
For each location, 44, 700 cases of the 10-oz. Aerosol spray and 24, 300 cases of the 6-oz. Fogger spray is shipped to each city. If all products are sold within the time between the months of May through October 1985, Zoecon will make a pre-tax profit of $309, 324 on the sale of 10-oz. Aerosol spray and $148, 716 for the sale of the 6-oz. Fogger spray in each of the four locations.
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Weaknesses with Test Market Expenditures: Of course, there is always a downside to consumer marketing. The first of Zoecon’s disadvantages comes from consumer’s awareness. While executives agreed that Zoecon would not have to pay additional costs for setup / auditing , marketing research, and other miscellaneous costs, they will have to pay for advertising and promotions in order to prompt the acceleration of sales. This cost, which we have already mentioned, would be $1, 016, 000. While this extraordinary price has already been subtracted from Zoecon’s budget, it also serves as an opportunity for brand awareness in each of the four locations. Opportunities with Consumer and Trade Promotion: By the end of testing in November 1985, results showed that 57 percent of households within the test cities were aware of the Strike ROACH ENDER, and revealed that six percent of the households within these cities had tried the product.
The test results also showed that thirty percent of the households that tried the product had also repurchased during the testing period. In addition, 3. 5 units of this product were repurchased by those households. These numbers are a result of the varieties of television and newspaper advertising used to build consumer awareness. Zoecon’s promotion and media strategy, which were designed to target 25- to 54-year old women living in a household of three or more people, consisted of cents off coupons to stimulate a first time trial, along with a “blitz” strategy. With heaviest promotion targeted within the first three months of the test, guest appearances were scheduled on local radio channels and television talk shows, press kit mailings to newspapers were actively dispersed, and an 800- number consumer hotline was addressed on television to answer consumer’s questions or concerns.
Threats: While many executives might agree with the estimation of $400 million for all consumer-disbursed insecticides, they should first consider their competition, S. C. Johnson and Son, holds 45 percent of this market with its Raid brand. If Zoecon’s executives expect a return as large as $400 million, their advertising and promotion investment will have to measure up. After all, past history of product introduction s showed that a “minimum ” of $10 million must be spent on promotions in order to successfully launch a new product when consumers were familiar with the brand name. As a result, Zoecon’s threats of immediately expanding resources into the consumer market, is far too risky to attempt right now.
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Without completely eliminating option one, we should first activate the second option first, in order to cover the expenditures and threats of option one. By evaluating the SWOT analysis of option two, we can prove that Zoecon has the greatest opportunity for success with option two, directing their resources towards PCOs. SWOT Analysis for Option Two: Strengths of the Professional Pest Control Market: The professional pest control market is very much responsible for Zoecon’s original success in the insecticide market. In 1985, this market produced revenues of $2. 5 billion.
This market was also expected to increase at an annual growth rate of 8 percent and 6 percent of this growth was accounted for by chemical compound cost. Let’s not forget to mention that more than half (52 percent) of pest control revenues resulted from general insect control. The remain in revenues came from the 21 percent contribution from termite control and 27 percent earnings from specialty pest control applications. Ork in and Termini x stood by Zoecon’s products from the very beginning of their existence. Around the mid-1970 s, Zoecon’s extensive research of insect growth regulators led by more than 25 percent of the company’s employees, had created more than 1, 250 I GRs, and 175 patents were issued for these inventions.
Methoprene, used for mosquito control was introduced in 1974, followed by PRECOR, a flea control compound, obtained EPA (Environmental Protection Agency) approval. With already established trade relations with PCOs, veterinary clinics, and pet stores, Zoecon was able to sell the compounds to these particular outlets. By continuing to direct their resources to PCOs, Zoecon executives noticed that PCOs would promote the benefits of GENCOR () to their customers, spreading a positive “word-of-mouth” revue of their products. Because GENCOR had been well received by PCOs in late 1984, promotions of this product is already under way. With only a small investment of $500, 000 per year from Zoecon’s sales, they will obtain brand awareness, their products will be properly used by professionals, thus creating the results that their customers expect to see. Opportunities: Another strength comes from this option.
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As we ” ve mentioned before, in analyzing the best way to market a product, one must apply qualitative and quantitative reasoning to their approach. As you already know, our target market is women, ranging from the ages of 25- to 54, who live in households of three or more. By conducting outside research through specific questionnaires, and data research, we can properly assume that majority of our target market, fears these insects and rodents, and prefer to hiring qualified pest control operators to ensure safe evacuation of rodents and insects. In directing Zoecon’s resources towards PCOs, the Strike ROACH ENDER and GENCOR will soar above their competition.
Weaknesses: While there isn’t a great deal of weaknesses to this option, executives might still agree that our competition will take advantage of our opportunity for growth in the consumer market. While this may be true, the results could be much worse if Zoecon jumps into the consumer market before gaining the reputation and earnings they would have produced from starting with the PCO’s support behind their product. Zoecon has a specially designed product that is backed by strong, scientific research. Even though Zoecon’s competitors will have a few years to breathe freely, after developing widespread attention from professionals, and gaining competitive edge, Zoecon is bound to quickly surprise the consumer market in the future.
Threats: The only potential threats to this option is new innovations, or a lack of timing. Zoecon’s patents will eventually time out, which will give competition access to the controlled compounds that Zoecon formulated. Although this threat could potentially destroy Zoecon’s existence, the chances of this happening are very slim to nearly impossible unless every one of their plans fail in the PCO market.
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