Sale!
Zoëcon Corporation: Insect Growth Regulators

[ORDER] ZOËCON CORPORATION: INSECT GROWTH REGULATORS

Original price was: $ 67.00.Current price is: $ 63.00.

Zoëcon Corporation: Insect Growth Regulators

Order Now
Category:
Order This Paper

Zoëcon Corporation: Insect Growth Regulators

Instructor’s Guide To Your Analysis Of The Case

Case Overview

In January 1986, Zoëcon Corporation executives were assessing future directions for Strike ROACH ENDER (SRE), a new roach-control product formulated with both an adulticide and an insect growth regulator (IGR). The product had undergone a six-month test market in four cities located in the Southeast US. Based on the test market results, executives must decide the next steps. One alternative under consideration was expanding SRE distribution to a 19-city area in the Southeast US, in which 80% of insect-control products are sold. Your research problem in this case is:

“Should Zoëcon commercialize the Strike Roach Ender brand by expanding distribution to the 19-city market area in the Southeast United States?” 

Your task is to employ the test market results and other information presented in the case to make a recommendation. Note that you do not need to recommend an alternative distribution method should you choose not to pursue SRE’s commercialization. You are to make a go-no-go recommendation based on the test market results, projections based on the test market, and other DFs brought out in the case.

Objectives For This Case
  1. Identify the distinction between market potential and sales potential for a specific target market (also called the relevant market).
  2. Evaluate test market results to determine profitability, market share earned, and break-even market share.
  3. Apply test market data to determine the potential sales revenue, costs, and profits for a new product’s potential commercialization.
  4. Apply the chain ratio method of forecasting to use test market data for projecting new product sales.
  5. Construct and interpret pro forma income statements for the projected commercialization of a new product.
  6. Compute and interpret break-even in unit sales, dollar sales, and market share.
  7. Demonstrate the ability to identify critical non-financial decision factors (DFs) important for supporting your recommendation.
  8. Demonstrate the ability to professionally communicate case analysis results in writing via the assigned case report.
  9. Demonstrate the ability to develop and present professional-grade tables and figures to include in the case report.

Considerations to Guide Your Analysis

 

1. How do insect growth regulators “fit” each user segment identified in the case?

Consider the unique qualities of IGRs compared to conventional insect adulticides. The acceptance of IGRs will depend on several product-related factors. The major factors are listed below. Try to rate IGRs vis-à-vis traditional adulticides for the consumer and PCO markets by assigning pluses or minuses to the product factors listed in the table below (+ = better than adulticide; – = worse than adulticide; 0 = no difference).

 

CG Table 1. IGR Fit with Alternative User Groups

 

Product Factor Consumer Segment PCO Segment
Relative advantage–short-term benefits ? ?
Relative advantage–long-term benefits ? ?
Compatibility with application experience ? ?
Simplicity (of use) ? ?
Immediacy of results ? ?
Felt need (insect elimination) ? ?

What does this analysis tell you about the “fit” of IGRs with the needs of the consumer segment? The PCO segment?

  • In terms of relative advantage, do IGRs have any short-term advantages over adulticides in either the consumer or PCO segments?
  • Does the use of IGRs seem more compatible with how consumers or PCOs would use them?
  • How do consumers and PCOs view IGRs’ simplicity of use relative to adulticides?
  • How do consumers and PCOs view IGRs ability to provide immediate results vs. adulticides?
  • Do consumers or PCOs view IGRs to be better or worse than adulticides at eliminating insect infestations?
2. 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 profit objectives for its introduction?

3. What was learned from the Strike ROACH ENDER test market?

The test market strategy represents a “typical” introductory program for a consumer packaged good.

Address the following questions:

  1. What was the geographic scope of the test?
  2. What was the timing and duration of the test?
  3. What were the test market objectives?
  4. What was the target consumer segment?
  5. How was the product positioned?
  6. What pricing strategy was used?
  7. What was the advertising/trade promotion strategy?
  8. 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

Item 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 [Amnt] units
9 ? Average repeat households purchased [Amnt] 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:

  1. Advertising effectiveness for creating awareness and stimulating trial.
  2. Was the amount of repeat purchase behavior acceptable?
4. Using trial/repeat purchase data above, estimate the profitability of the test market using the tables provided in CG Tables 3 and 4 below.

CG Table 3. Worksheet for Test  Market  Unit Contributions

  Package Sales Mix (%) Unit Price Unit COGS Unit Contribution
  Aerosol [Amnt]% $[Amnt] $[Amnt] $[Amnt]
  Fogger [Amnt]% $[Amnt] $[Amnt] $[Amnt]

Weighted Avg. Unit Price: $[Amnt]

Weighted Avg. Unit COGS (Avg. Variable Cost): $[Amnt]

Weighted Avg. Unit Contribution: $[Amnt]

CG Table 4. Worksheet for Test Market Sales and Profit Analysis (Chain Ratio Method)

             
Trial: ? million HH x   ? trial rate x   ? units x   ? price/unit = $[Amnt]
Repeat: ? trial HH x   ? repeat rate x   ? units x   ? price/unit = $[Amnt]
        Total Sales = $[Amnt]
        Contribution Margin (%) = [Amnt]%
        Contribution ($) = $[Amnt]
      Less Case Exhibit 6 Expenditures   $[Amnt]
        Profit/Loss = $[Amnt]

5. 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 Size Estimates, Share Earned In Test Market, & Break-even Market Share

  1. Given in case:
  2. Total market size was $[Amnt] million at manufacturers’ prices in 1985.
  3. [Amnt]% annual market growth rate; therefore
  4. 1986 total estimated market size is $[Amnt]
  5. [Amnt]% of sales for ant and roach products
  6. [Amnt]% of total roach sales in 19-city (southern tier) market
  7. [Amnt]% of households in 19-city market exposed to test market effort
  8. [Amnt]% of insecticides sold through supermarkets
  9. [Amnt]% of insecticides sold during the May-October period
  10. [Amnt]% of insecticides sold in aerosol and fogger form

 

  1. Estimated market size (market potential) in test cities (based on information in “I” above): [Amnt]

III. Estimated earned market share of ant and roach products: [Amnt]

 

  1. Break-even in dollars and market share: $[Amnt]. Market Share [Amnt]%.
6. What are the profit implications of expanding distribution to the 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

  1. 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:                                       $[Amnt]

Dollar Sales for Repeat Purchases:       $[Amnt]

Total Sales:                                                      $[Amnt]

 

  1. Contribution dollars would be:

 

$ Total Sales (from I)  x  [Amnt] (contribution %)  =  $[Amnt]

 

III.    Expenditure levels (Fixed Costs) can be estimated in several ways.

 

  1. Based on a per capita approach and assuming the test market cities contained 5.32% of the household population, advertising and promotion expenditures for the 19-city market would be about $20,000,000. Since $1,016,000 was spent on 5.32% of households reside in the 19-city market, the “spend” required for the entire market would be given by .053x = $1,016,000.  Solving for “x;”  x=$1,016,000/.053= $19,169,811. $20,000,000 is a good rough estimate.

 

  1. If expenditures are based on a per-city approach, the spend would be $1,016,000/4×19 = $4,826,000. The spend per test market city is $1,016,000/4 = $254,000.  The spend for all 19 cities, therefore, is $4,826,000. A reasonable rough estimate is $5,000,000.

 

  1. Based on the industry “rule of thumb” that $10 million is necessary to launch a new product would be $10 million. This assumes consumers are familiar with the brand name.  Is this assumption reasonable, given the Strike Flea Ender was distributed in the same market area?  If not, then the rule of thumb estimate may be too low.

 

  1. Now, estimate profits under each expenditure level.

 

Expenditure level A profits = $ [Amnt]

Expenditure level B profits = $ [Amnt]        Expenditure level C profits = $ [Amnt]

Case Report Template for
ZOËCON CORPORATION:
INSECT GROWTH REGULATORS

Enter Your Student Name Here

Enter Your euid Here

 

MKTG 5150

Marketing Management

[Enter Semester and Year]

 

The Problem

Should Zoëcon commercialize the Strike Roach Ender brand by expanding distribution to the 19-city market area in the Southeast United States?

Recommendation

Zoëcon should…………….

 

Decision Factors

The following analysis provides the rationale for this recommendation.

Economic Analysis

The following paragraphs examine the results

Note: Full answer to this question is available after purchase.
from Zoëcon’s Strike Roach-Ender test market and extrapolate those results to the 19-city area targeted for commercialization.

            Test market results.  The test market was conducted in four cities that were “representative of the 19-city market area…..[Provide an introduction to your discussion of the test market data.  You should summarize the key test market statistics in this introduction].

 

            Test market sales results.  Table 1 presents the sales mix, weighted average price, and unit contribution..[Discuss the specific numbers.  Do not simply refer the reader to your table.]  ……..Table 2 contains estimates of unit and dollar sales from initial product trial and repeat purchases…[Discuss how the chain ratio method was used to estimate total unit and dollar sales from the TM.  Specifically, cite the end results of your computations; do not simply refer the reader to the table.]

 

            Test market income statement.  The test market income statement, as shown in Table 3, shows that …..[Review the key numbers, specifically stating the bottom-line profit(loss) from the TM.  Speculate on the adequacy of the TM data related to awareness, initial trial, and repeat purchases.]

 

            Test market break-even analysis.  Table 4 presents break-even estimates for the test market in units, dollars, and market share.…[Review the key numbers, specifically stating the bottom-line estimates of break-even in units, dollar sales, and market share.  Speculate on the probable meaning of break-even market share. Discuss the actual market share earned from the TM.  Compare the estimate to the estimate of break-even market share.]

 

            Projections for commercialization.  The process of making the projections for commercialization takes the factors used in the chain ratio method of the 4-City test market to predict sales, expenses, and break-even for the more significant 19-City estimates, as shown in Tables 5 and 6. [Discuss the logic of the chain ratio method for projecting sales anticipated for commercialization using the TM results. Can be discussed here or in the next section on sales projections.]

 

            Sales projections.  Table 5 presents the results of applying test market sales data to the 19-city market area. [If not already done above, review the logic of the chain ratio method for estimating sales from commercialization. Specifically cite the end result of your computations, do not simply refer the reader to the table.] …..

 

            Pro forma income statement.  The income statement for the 19-city projection, Table 6, together with the break-even analysis, gives the best picture for analyzing profitability and whether to move forward…[You must present and thoroughly discuss your proforma income statement comparing all three proposed cost scenarios. You must specifically discuss why one or more cost scenarios may not be realistic and must provide detailed support for the choice of the most reasonable cost scenario. The template uses a single table that compares all three scenarios side-by-side.] ….

 

            Break-even analysis.  The lower portion of Table 6 presents the break-even analysis for commercialization. Break-even estimates are in units sold, dollar sales, and market share.  Figure 1 is a graphic representation of the break-even market share estimates for all three fixed cost scenarios…[A break-even analysis must be tabled and thoroughly discussed. Break-even must be computed and presented in unit sales, dollar sales, and market share. Implications of break-even market share must be specifically discussed. Break-even market share estimates should be compared with shares held by competitors, with speculation on the implications]…[Note: The figure is optional.  If not included, delete the example and reference to that sample.]

Consumers’ Acceptance of IGR-based Insecticides

[You must specifically examine the consumer behavior issues surrounding the use of pesticides and SRE in particular. How receptive are consumers to the concepts of an IGR? You must also relate relevant behavioral issues to the test market results and commercialization projections.]

Additional DF [Use an appropriately descriptive title]

Table 1 4-City Sales Mix and Margin Analysis
Item Aerosol Fogger
Unit Price x.xx x.xx
Unit Cost x.xx x.xx
Unit Contribution x.xx x.xx
Sales Mix 66% 34%
Weighted Avg. Price 1  $   x.xx N/A
Weighted Avg. Unit Contribution 2  $   x.xx N/A
Contribution Margin 3 xx.xx% N/A

1 Weighted Avg. Unit Price = (aerosol unit price * sales mix) + (fogger unit price * sales mix).  Price and unit cost data are taken from Case Exhibit 4.

2 Weighted Avg. Unit Contribution = (aerosol unit contribution * sales mix) + (fogger unit contribution * sales mix). Price and unit cost data are taken from Case Exhibit 4.

3 Contribution Margin = weighted avg. unit contribution / weighted avg. unit price.

Table 2 4-City Trial Sales Analysis (Non-Annualized)

Estimation of Dollars and Units Sold

Item Initial Trial Repeat Total
Households 1,170,000 xxx,xxx1 N/A
Purchase Rate 6% 30% N/A
Units Purchased per Household 1.3 3.5 N/A
Manufacturer’s Weighted Average Price $x.xx $x.xx N/A
Unit Sales 2 xx,xxx xx,xxx xx,xxx
Dollar Sales 3 $xxx,xxx $xxx,xxx $xxx,xxx

 

1 Repeat households are 30% of the number of households making an initial purchase.

2 First-time unit sales are 6% of the total households x an average of 1.3 purchases per household. Repeat unit sales refer to the number of households engaged in repeat purchasing (30%) multiplied by an average of 3.5 purchases per household.

3 Dollar sales are the number of units sold multiplied by the weighted average manufacturer’s price.

Table 3
Zoëcon Corporation
Income Statement

For the 6-Month Period Ending October 31, 1985

(Representing the 4-city test market)

Sales 1                                                                                                                        Amount     Totals

Aerosol                                                                     $xx,xxx

Fogger                                                                    $xxx,xxx $xxx,xxx

Cost of goods sold 2

Aerosol                                                                   $xxx,xxx

Fogger                                                                    $xxx,xxx $xxx,xxx

Gross margin                                                                                            $xxx,xxx

Marketing expenses 3

Promotion & Advertising                                   $x,xxx,xxx

Setup/Auditing                                                       $xxx,xxx

Marketing Research                                                 $xx,xxx

Miscellaneous                                                            xx,xxx $x,xxx,xxx

Net income before tax                                                                                 $x,xxx,xxx

 

 

1 Sales in dollars and units are taken from Table 2.

2 Cost of goods sold equals unit sales from Table 2 multiplied by unit costs taken from Table 1.

3 Marketing expenses are taken from Case Exhibit 6.

Table 4 4-City Break-Even Analysis                                                               

Break-Even Item                             Estimates

Expenses1                                       $1,478,000

Break-Even Dollars 2                        $xxx,xxx

Break-Even Units 3                              xxx,xxx

Break-Even Market Share 4                 xx.xx%

4-City Market Size5                       $x,xxx,xxx

Market Share Earned6                                      xx.xx%

 

1 Fixed costs from the test market are taken from Case Exhibit 6, totaling $1,478,000.

2 Break-Even Dollars = total fixed costs/weighted average contribution margin of 55% from Table 1.

3 Break-Even Units = total fixed costs / (weighted avg. unit price minus weighted avg. unit cost) from Table 1.

4 Break-Even Market Share = break-even dollars divided by total market dollar size based on the roach-only segment

5 The 4-City market size is determined from CG Table 5 for the roach-only segment.

6 Earned market share = total dollar sales divided by market size for the roach-only segment.

Table 5 19-City Projections Financial Analysis

Estimation of Dollars and Units Sold for 19-City Commercialization 1

Item Initial Trial Repeat Households Totals
Purchase Rate2 6% 30% N/A
Number Households xxxxx xxxxxx N/A
Units per Household x.x x.x N/A
Manufacturer’s Price $x.xx $x.xx N/A
Dollars $x,xxx,xxx $x,xxx,xxx $x,xxx,xxx
Units x,xxx,xxx x,xxx,xxx x,xxx,xxx

 

1 Percent purchase rate for initial trial and repeat purchases, based on test market results, units purchased per household, and prices are taken from Table 2.

2 Repeat households are 30% of the 6% of the 22,000,000 households engaging in the initial trial.

Table 6

Zoëcon Corporation

Pro Forma Income Statement

For the 12-Month Period Ending December 31, 1986

(Representing the 19-city projections)

Sales 1

Aerosol                            $ x,xxx,xxx

Fogger                                 x,xxx,xxx                $ x,xxx,xxx

Cost of goods sold 2

Aerosol                            $ x,xxx,xxx

Fogger                                 x,xxx,xxx                $ x,xxx,xxx

Gross margin                                                               $ x,xxx,xxx

Marketing expenses 3

A-Promotion & Advertising (per capita)           $ x,xxx,xxx

B-Promotion & Advertising (per city)                                              $ x,xxx,xxx

C-Promotion & Advertising (ROT)                                                                                                                          $ x,xxx,xxx

Net income before tax                                                                 $ x,xxx,xxx                                                                         $xxx,xxx             $ x,xxx,xxx

1 Sales projections are annualized estimates from Table 5. Annualized adjustments are obtained by dividing estimates from Table 5 by .75 since 75% of pesticide sales occur during the 6-month period of the test market.

2 Cost of goods sold = units from Table 5 * unit cost.

3 Marketing Expense A (per capita). 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.    

4Marketing Expense B (per city). Assuming expenditures are based on a per-city approach and spending on advertising and promotion in 4 of 19 cities (test market cities) was $1,016,000, the total spend would be $1,016,000/4×19 = $4,826,000; rounded to $5,000,000.

Break-Even Analysis

Fixed Cost Alternatives

Break-Even Metric                                                       Per Capita               Per City                                                                  Rule of Thumb

Fixed Cost Estimate                                                                     $20,000,000         $5,000,000 $10,000,000

Break-Even Dollars                                                    $ x,xxx,xxx             $ x,xxx,xxx                                                                     $ x,xxx,xxx

Break-Even Market Share (Ant & Roach) 1                      xx.xx%         xx.xx %                                                                    xx.xx %

Break-Even Market Share (Roach) 2                                xx.xx %         xx.xx %                                                                    xx.xx %

1Break-even is given by dividing fixed cost estimates by the weighted average contribution margin of 55%.

2The total market size is  $72,934,400. Estimate is derived via the chain ratio method: Total Market = $xx Mil (1985 Total) * 1.1(mkt growth rate %) * 40% (ant & roach %) * 80% (19 cities) * 70% (supermarket %) * 74% (aerosol & fogger %).

3The total market size for roaches only is assumed to be 50% of the combined ant and roach segment.

RELATED: Scenario: Your boss at RAS Direct has been impressed with your statistics skills so far. They request that you continue analyzing the data on their clientele by providing confidence intervals and estimating the sample sizes needed to collect data about the company’s clientele.

Order This Paper

Reviews

There are no reviews yet.

Be the first to review “[ORDER] ZOËCON CORPORATION: INSECT GROWTH REGULATORS”

Your email address will not be published. Required fields are marked *

Related products

error: Content is protected !!