CORPORATE MARKETING STRATEGY

Transcription

1 CORPORATE MARKETING STRATEGY Strategic Marketing Planning: Case Study A. Stamatellos, D. Jain, L. Pierre, S. Hartley October 18,2010

2 JONES-BLAIR BACKGROUND Jones-Blair is a regional paint company that focuses primarily on architectural coatings and professional OEM products. The firm sells its architectural coatings to independent retailers primarily in Dallas-Fort Worth along with an increasing percentage of sales going to neighboring regional markets. They consider their main customers as do-it-yourselfers and professional service providers. 2

3 JONES-BLAIR DILEMMA Executives at Jones-Blair have been pressured to increase sales and profit margins in a maturing market that is incurring increased expenses due to production costs and EPA guidelines. Goal: Effectively allocate corporate marketing efforts among Jones-Blair s existing consumer markets to increase sales while maintaining profit margin. 3

4 PROPOSED MARKETING ALTERNATIVES Invest $350,000 into brand advertising to increase brand awareness among DIY consumers Cut prices by 20% to better compete in both DIY and professional markets in and outside of DFW Add sales representative to focus on markets outside of DFW Continue current strategy maintain advertising, pricing, sales force, and target market focus 4

5 Pros 1. INCREASE ADVERTISING SPEND TV ads will help convey quality and value differentiation. Being top-of mind will increase purchases where Jones Blair is located next to competitors. DIY customers are 50% of sales in architectural paint market increasing DIY purchase % may move needle more quickly than focusing on professional painters. Creative TV ads may be better than cooperative spends as consumers will connect directly with the Jones Blair brand as opposed to retail marketplace. Cons There is no proof that the brand awareness boost will actually increase sales. 72% of TV market does not care about paint. Jones Blair will spend only $360,000 in advertising in 2004, so this option is doubling ad budget. Television ads are expensive is it worth hiring a production team to create a TV spot that will only reach local markets? Spending $350,000 in ad sales will need to in turn create a $350K increase in sales. To cover costs, Jones Blair will have to see at least a 7% increase in sales in

6 2. 20% PRODUCT PRICE CUT Pros Price cut will better attract DIY consumers in all markets and increase sales volume Better compete with national-brand competitors (i.e. Sherwin Williams, Benjamin Moore, Glidden ) who account for more than 60% of architectural paint sales DIY audience outside DFW is a growing market with little competition Cons Hardware store clients compete on service, not price. Regional economies of scale level will make competition difficult Expense restructuring may not be able to maintain margin with 20% price cut Non-DFW accounts, though growing, do not generate as high sales volume as in DFW 6

7 3. ADD SALES FORCE OUTSIDE DFW Pros Non-DFW market experienced 5% average yearly growth in past 5 years Current account penetration in non-dfw area is currently only 16%, leaving plenty of room for potential entrance Adding a sales representative will allow sales efforts to be focused on a broader area with a higher concentration of independent stores. Cons 70% of sales from non-dfw outlets came from DIY customers, but population is buying lower-priced paints. These customers are more likely to defect to competitors Increasing sales force will incur expenses and commission payouts, and adding another employee may not guarantee a similar # of spend increase, particularly if the representative is working to break new markets. 7

8 4. MAINTAIN CURRENT STRATEGY Pros Jones-Blair will be able to predict profit margin as past data will indicate future sales. Buyers (both DIY and professional) constitute 75% of architectural coating sales. Jones Blair reaches both markets in and around DFW Saving money on new advertising and sales force efforts will allow Jones-Blair to focus on quality and customer service value propositions Jones Blair has been able to increase sales at a higher rate than the architectural coatings industry average (4% vs. 1-2%) Cons Increase in alternative materials availability will continue to erode the market, and EPA regulations will decrease profit margin Independent retailers, Jones-Blair s main market channel, have been decreasing 2-3% per year. 8

9 BREAK-EVEN ANALYSIS 9

10 BEST OPTION: INCREASE SALES FORCE Why: Lowest increase to break-even point each rep adds only $171K not including commissions (See Slide 9 for break-even analysis for all options) Market penetration outside of DFW is only 16%--lots of opportunity for reps to make up difference Sweet spot are non-dfw DIY Outlets they net $35,000 per account! Only need 5 new accounts to cover break even increase 10

11 NEXT STEPS-OUR IDEAS Market segmentation: focus on DIY in DFW and non-dfw areas with an emphasis on interior paints Focus marketing spend on in-store displays and design consultants and reduce cooperative advertising Restructure sales team account distribution and compensation schedule 11

12 1. FOCUS MORE ON DIY MARKET Why this works: Jones-Blair must carve out position in mature market (1-2% growth) in order to maintain/increase its 4% year-over-year sales growth. Interior paint sales represent 60% of annual architectural coating sales. Non- DFW markets have been a growth area for Jones-Blair. They should leverage this further by increasing penetration across non-dfw market and extending reach to other states with similar DIY demographics (AZ, NV, AK, MS). Supporting Evidence: 12

13 2. FOCUS MARKETING WHERE DIY SHOP Why this works: As a regional player, Jones-Blair can t compete with nationals (both pricing and ad spend) Focus on customer service: interior paint purchases and sundries have high purchase frequencies ($74.00 and $12.00 respectively) get customers to love Jones Blair and come back repeatedly. Install in-store digital interactive demonstrations/displays SHOW customer that Jones Blair is worth the money and bring the brand to center stage. Hire design consultants who evangelize Jones Blair products and help DIY customers. Supporting Evidence: Creating a point of interaction with consumers will help build brand equity over time Some DIY consumers desire service such information about color palettes, paint application, and surface preparation. Jones Blair can use the interactive displays to output information on paint and sundries needed for a project in order to increase purchase intent 13

14 3. HELP REPS BREAK DIY MARKET Why this works: Current salary structure does not incentivize sales representatives to break new markets. Restructure salary schedule.: $40K Base with 2% commission. With current sales team and sales volume, cost to Jones Blair is the nearly the same (see below) Reallocate accounts so that each sales rep has a new market to break along with a stream of current customers so they don t feel set up to fail. Supporting Evidence: 14

15 CORPORATE MARKETING STRATEGY Strategic Marketing Planning: Case Study A. Stamatellos, D. Jain, L. Pierre, S. Hartley October 18,2010