Jones Blair

BACKGROUND OF PAINT INDUSTRY

The paint market can be divided in :

- TRADE SALES : product sold to households, contractors and professional painter;

- INDUSTRIALS SALES : product for original application by manufacturers.

TRADE SALES :

1. 1984 : $ 5.1 billion

2. 1986 : $ 5.8 billion

AVARAGE ANNUAL GROWTH reduced during 1980s:

1. usage of new material;

2. more durable products;

3. better paint quality;

4. "war" cost/price;

5. increasing cost of raw materials;

6. increasing competition.

COMPOSITION OF TRADE SALES :

1. 45%: households;

2. 35%: contractors and professional painters;

3. 20%: others.

BACKGRAOUND OF JBC

- Privately held corporation involved in trade paint sales;

- Sales volume= $ 4.67 million

- The four largest paint producers accounted for about 30% of the total U.S. market.

- About 50% of trade paint sales were private brands.

SALES VOLUME distributed evenly between DFW and rural accounts

- $4.67 million/2=$2.335 million:

RURL AREAS accounts for 60% of sales volume :

70%: households;

30%:professional painters.

URBAN AREAS accounts for 40 % of sales volume:

30% : households;

70%: professional painters.

SALES DISTRIBUTION IN JBC:

Urban areas:

50% of $4.67 million = $ 2.335 million

households:

30% of $ 2.335 million = $ 700.500

professional painters:

70% of Ј 2.335 million = $ 1.634.500

Rural areas:

50% of $4.67 million = $ 2.335 million

households:

70% of $ 2.335 million = $ 1.634.500

professional painters :

30% of $ 2.335 million = $ 700.500

SALES DISTRIBUTION IN PAINT MKT:

Urban areas :

60% of 55 million = $ 33 million

households:

70% of $ 33 million = $ 23.1

professional painters:

30% of $ 33 million = $ 9.9

Rural areas :

40% of $ 55 million = $ 22 million

households:

90% of $ 22 million = $ 19.8

professional painters:

10% of $ 22 million = $ 2.2

RISKS:

-Price war;

-No brand awareness.

Estimated dollar volume of paint on JB ' s service area = $ 55 million JB ' S MARKET

SHARE = $ 4.67 million / $ 55 million = 8.49%

PROPOSAL OF MARKET SEGMENTATION

* Segmentation based on 2 factors:

o Type of customers;

o Geographical areas.

* 4 segments:

o urban households vs. rural households

o urban professional painters vs. rural professional painters vs. rural

professional painters

* Competitive positioning:

o Urban areas:

$ 2.335 million / $33 million = 7.07%

household:

$700.500 million / $ 23.1 million = 3.03%

professional painters:

$ 1.634.500 million / $ 9.9 million = 16.51 %

o Rural areas:

$ 2.335 million / $ 22 million = 10.61%

household:

$ 1.634.500 million / $19.8 million = 8.25 %

professional painters:

$ 700.500 million / $ 2.2 million = 31.84%

HOUSEHOLDS CHARACTERISTIC:

1. price