Changes in top management at Zoëcon Corporation brought about a shift in corporate objectives. The new objectives emphasized a focus on high financial-return products and businesses. In January 1986, Zoëcon executives called a meeting to determine the fate of their Strike brand insect growth regular (IGR) called Strike ROACH ENDER. This product had been tested in the consumer market in four cities (Charleston, SC; Beaumont, TX; Charlotte, NC; and New Orleans, LA) from May through October of 1985. Now that the test marketing venture was complete, Zoëcon executives were faced with determining the most profitable future marketing strategy for their IGR products.
Definition of the Problem
One Zoëcon executive stated, "The decision is basically how we can best allocate our technical, financial, and marketing resources for our IGR Compounds." Some suggestions had already been discussed informally among the executives, including, consumer market expansion with the ROACH ENDER product, pest control operator (PCO) market concentration with the ROACH ENDER, or IGR compound sales to existing firms in the consumer insecticide market. Some of these alternatives were mutually exclusive, and others were not. So, it was up to Zoëcon's executives to use the test market data analysis, along with their knowledge and experience in the insecticide industry to decide which of the proposed alternatives will be most profitable and most appropriate according to the newly developed corporate strategy.
Summary of the Major Alternatives
Zoëcon executives are faced with the alternatives of marketing their Strike ROACH ENDER product to the consumer market or concentrating their efforts on the professional pest control market. If Zoëcon cannot make a sufficient profit then marketing their IGR compounds through other firms may be the next opportunity.
Zoëcon has already introduced the Strike FLEA ENDER to the consumer market in 19 states, where the product gained an 18% market share by 1985, but has not yet reached its profit objectives. These insecticides were also successfully sold to pest control operators through distributors, and by 1985 had captured 80% of all flea product sales made through these outlets. In December 1983, Zoëcon reached an agreement with SC Johnson and Son to include PRECOR (the flea control compound in Strike FLEA ENDER) in its Raid Flea Killer Plus. There are significant differences in the consumer and professional pest control markets. The consumer market targets a stronger, more poisonous chemical that quickly kills insects. The professional market uses adulticides that focus more on preventing maturity, which disables reproduction. The consumer market is a quick ending solution and the professional market concentrates on a long term effect. Both markets have a good growth rate each year. The following chart represents characteristics of the premise insecticide market.
EXHIBIT 1: CHARACTERISTICS OF THE PREMISE INSECTICIDE MARKET
The data presented in Exhibit 1 as well as the test market analysis data was used to determine the best alternatives:
Strike ROACH ENDER distribution should be expanded to the 19 cities where Strike FLEA ENDER is sold.
Marketing research indicates that 80% of roach insecticide volume is sold in these 19 cities. 2.
Marketing expenses would consist of promotion & advertising.
Direct resources to pest control operators (PCO's).
GENCOR (hydroprene) was well received in 1984, and many
PCO's were promoting its benefits to their customers.
Yearly investment of $500,000 per year above the typical 27% of sales in advertising and sales efforts could increase usage.
Pursue opportunities for selling hydroprene to other manufacturers for use in their products. All marketing and sales costs would be absorbed by the manufacturer of said product, and Zoëcon could realize a 50% gross margin. This action could also terminate Zoëcon's...
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