Topic: Zoecon Case
Zoëcon Corporation: Insect Growth Regulators
- How do insect growth regulators “fit” each user segment identified in the case?
CG Table 1. IGR Fit with Alternative User Groups
Product Factor Consumer Segment PCO Segment
Relative Advantage
Short-term
Long-term
Compatibility
Simplicity (of use)
Immediacy of Benefit
Felt Need
What does this analysis tell you about the “fit” of IGRs with the needs of the consumer segment? The PCO segment?
- What was learned from Zoëcon’s flea IGR introduction?
What accounted for the seemingly successful introduction of PRECOR (flea IGR) to PCOs, vet clinics, and pet stores, and Strike FLEA ENDER in supermarkets? Was the introduction truly successful? The introduction was profitable, but did PREOCR achieve the company’s objectives for its introduction?
- What was learned from the Strike ROACH ENDER test market?
Overall, the test market strategy represents a “typical” introductory program for a consumer packaged good.
Address the following questions:
What was the geographic scope of the test?
What was the timing and duration of the test?
What were the test market objectives?
What was the target consumer segment?
How was the product positioned?
What pricing strategy was used?
What was the advertising/trade promotion strategy?
What was the distribution strategy?
Use CG Table 2 below to summarize the test market data in terms of initial and repeat purchases.
CG Table 2. Sales Data From The Test Market
GC Table 2. Sales Data From Test Market (Expanded)
Data Description
1 Number of HH in 19-city Southern Tier market area
2 Percent HH in 4-city test area
3 Percent insecticides sold in 19-city market area
4 Total cost of test market
5 % of the households in the test market aware of the product
6 % of households tried the product
7 % of trial households repurchased during the test period
8 Average trial households purchased ____ units
9 Average repeat households purchased ____ units
10 % of purchases were aerosol sprays
11 % of purchases were foggers.
12 cases (12/case) of aerosol sprays shipped
13 cases (12/case) of foggers shipped
14 Units per case
Based on these data, what conclusions can you draw about the test market in terms of:
- Advertising effectiveness for creating awareness and stimulating trial.
- Was the amount of repeat purchase behavior acceptable?
- Using trial/repeat purchase data above, estimate profitability of the test market using the tables provided in CG Tables 3, 4, and 5 below.
CG Table 3. Work Sheet for Test Market Unit Contributions
Package Sales Mix (%) Unit Price Unit COGS Unit Contribution
Aerosol _______ _______ _______ _______
Fogger _______ _______ _______ _______
Weighted Avg. Unit Price:_______
Weighted Avg. Unit COGS (Avg. Variable Cost):_______
Weighted Avg. Unit Contribution:_______
CG Table 4. Work Sheet for Test Market Sales and Profit Analysis (Chain Ratio Method)
Trial: ____million HH x ____trial rate x____ units x ___ price/unit = $________
Repeat: ____ trial HH x____ repeat rate x____ units x ___ price/unit = $________
Total Sales = $________
Contribution Margin (%) = $________
Contribution ($) = $________
Less Case Exhibit 6 Expenditures $ ________
Profit/Loss = $ ________
- Using the above information and other information in the case, estimate the market share Zoëcon earned from the test market and the required break-even in dollars and market share.
Focus on the “relevant” market. CG Table 5 below will help guide your analysis.
CG Table 5. Market Share Earned In Test Market & Breakeven Market Share
- Given in case:
Total market size was $______ million at manufacturers’ prices in 1985.
____% annual market growth rate; therefore
1986 total estimated market size is $______ million.
____% of sales for ant and roach products
____% of total roach sales in 19-city (southern tier) market
____% of households in 19-city market exposed to test market effort
____% of insecticides sold through supermarkets
____% of insecticides sold during the May-October period
____% of insecticides sold in aerosol and fogger form
- Estimated market size (market potential) in test cities (based on information in “I” above): ______
III. Estimated earned market share of ant and roach products:______
- Break-even in dollars and market share: $_________ Market Share ______%.
- What are profit implications of expanding distribution to 19 city consumer market? Use the format in CG Table 6 below to project profits for a 19 city launch.
CG Table 6. Forecasting Sales And Profit Of A 19-City Introduction
- Assuming that all test market data would remain the same for expanded distribution, then forecasted sales in the 19 city market composed of 22 million households would
be:
Dollar Sales for Initial Trial: $__________
Dollar Sales for Repeat Purchases: $__________
Total Sales: $__________
- Contribution dollars would be:
$ Total Sales (from I) x ____ (contribution %) = $_______________
III. Expenditure levels (Fixed Costs) can be estimated in several ways.
- Assuming expenditures are based on a per capita approach and the test market cities contained 5.3% of the household population, then advertising and promotion expenditures for the 19 city market would be, say 20 x $1,016,000 = $20,320,000. More precisely, since $1,016,000 was spent on 5.3 percent of consumers comprising the total 19-city market, the “spend” required for the entire market would be 20 times what was spent in the test market. Algebraically, the expression .053x = $1,016,000 expresses the relationship. The formula is then solved for “x;” x=$1,016,000/.053= $19,169,811. $20,000,000 is a good rough estimate.
- Assuming expenditures are based on a per city approach and spending in 4 of 19 cities (test market cities) or about 1/5 of cities for advertising and promotion was $1,016,000, the total spending would be, say 5 x $1,016,000 = $5,080,000. More precisely, the spend would be $1,016,000/4×19 = $4,826,000. $5,000,000 is a good rough estimate.
- Assuming Zoëcon adopts the industry “rule of thumb” that $10 million are necessary to launch a new product when consumers were familiar with the brand name (which might be the case since Strike FLEA ENDER was distributed in 19 city market), then spending for advertising and promotion would be $10 million.
- Now estimate profits under each expenditure level.
Expenditure level A profits = $ ____________
Expenditure level B profits = $ ____________
Expenditure level C profits = $ ____________
