Zoecon

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). They noted that GENCOR (hydropene) 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 hydropene 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 (methopene), 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 hydropene, and the 6-ounce fogger package, without hydropene, would be $0.80. This would leave a remaining 50 percent gross margin on hydropene 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. 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 fogger 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. Fogger

Retailer'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.

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