Jones Blair Company Essay
GROUP:
BM7702P
1. Company Description
1.1. U.S Paint Industry The US paint industry is divided into three broad segments which are:
a. Architectural coatings consist of general-purpose paints, varnishes, and lacquers used on residential, commercial, and institutional structures, sold through wholesalers and retailers, and purchased by do-it-yourself consumers, painting contractors and professional painters.
b. Original equipment manufacturing (OEM) coatings are formulated to industrial buyer specifications and are applied to original equipment during manufacturing. These coatings are used fro durable goods such ad automobiles, trucks, transportation equipment, appliances, furniture and fixtures, metal containers and building …show more content…
products, and industrial machinery and equipment.
c. Special-purpose coatings are formulated for special applications or environmental conditions. These coatings are used for automotive and machinery refinishing, industrial construction and maintenance, bridges, marine applications, highway and traffic markings, aerosol and metallic paints and roof paints.
Segment
Architectural coatings
Original equipment manufacturing (OEM) coatings
Special-purpose coatings
% of total industry dollar sales
43%
35%
22%
1.2. Jones Blair Company
The Jones Blair Company is a privately held corporation that produces and markets architectural paint under the Jones Blair brand name. The company distributes its products through 200 independent paint stores, lumberyards and hardware outlets. 40% of its outlets are allocated in the 11-country Dallas-Fort worth (DFW) area and the remaining is situated in the other 39 countries in the service area. Retail outlets outside the DFW area with paint and sundry purchases exceeding $50,000 annually carry only the Jones Blair product line but except for 14 outlets in DFW which carry the Jones Blair line exclusively, the retailers only carry two or three lines with line being premium priced. Currently, Jones Blair employs 8 sales representatives which responsible for monitoring inventories in each retail outlet, taking order, assisting in store display and coordinating cooperative advertising programs. They are paid a salary and a 1% commission on sales. The company spends approximately 3% of net sales on advertising and sales promotion efforts.
2. Situation Analysis
The problems of the case studies are where and how does the Jones Blair deploy corporate marketing efforts among the various architectural paint coatings markets in their service area.
a. Should they target professionals or do-it-yourselfer market?
b. Where should they target? Either Dallas-Fort Worth or non- Dallas-Fort Worth area?
c. How they going to accomplish this matter?
3. SWOT Analysis
Strengths
Founded in 1980 whereby Jones Blair is an experience company in the industry
Strong relationships between sales representatives and Jones Blair retail outlets.
High quality of product
Sell to both professionals and do-it-yourselfers
Cooperative advertising programs with retailers
Opportunities
Long-term sales growth projected in the range of 1-2% per year
Distributed in 200 independent paint stores, lumberyards and hardware outlets.
40% of the retailers in rural area
Researches indicate that the average dollar paint purchase per purchase occasion is about $74.00 and average dollar sundry purchase by purchase occasion is about $12.00
Researches indicates that do-it-yourself painters first choose a retail outlet for paint and then choose a paint brand
Weaknesses
3% of net sales for advertising purposes
Advertising only reach 25% of target audiences
Only 8 sales representatives in retail outlets
Narrow market penetration (DFW areas)
Highest priced of product in the market
Threats
600 different competitors in the industry
Competition is spending more on advertising and is less expensive
Do-it-yourselfer purchase paint once every 4 years and get what’s convenient and inexpensive
Contractors want large quantities of paint for the lowest price
Demand effected by substitutes, long lasting products and volatile organic compounds (VOC)regulations
4. Core Competency and Sustainable Competitive Advantage
In terms of core competency, Jones Blair seeks to achieve a unique ability a) to provide distinctive, high-quality of paint which is the best on market and good fit with professional painters and b) provide excellent sales representatives (well liked, helpful, knowledgeable, and can run the store) in retail outlets for them to help customers and they also good fit in rural area.
5. Alternatives
Jones Blair senior management team has developed four different suggestions to lighten the companies marketing problem as below:- 5.1. Spend additional $350,000 for television advertising
The advertising department proposes a television campaign targeted at the DFW do-it-yourself market to increase customer’s awareness. A recent survey noted that only 25% of this population is aware of Jones Blair product range and only about 12% of this population would make a purchase. This cost for television advertisement targeted mainly in the Dallas Fort Worth (DFW) area at the do-it-yourself market and also to reach non-DFW customer as well which will significantly increase the awareness of Jones Blair products. Research has proven that brand awareness is a major factor in purchasing decisions.
If Jones Blair does agree to use this method the company will need to make at least $1,000,000 sales to break even and cover the cost of this new promotion ($350,000/.35= $1,000,000). Most of the DFW consumers are do-it-yourselfers, so television advertising will be beneficial in this market.
5.2 Have an overall 20% price cut
Compared to other leading national brands, Jones Blair is priced relatively high.
This is based on the extremely high quality and performance of the products. By cutting price, Jones Blair will be able to stay competitive in price with other the other products on the market.
In 1997 architectural product sales volume was $12,000,000. Jones Blair has a current net profit of $1.14 million, and to stay profitable it must maintain this amount.
$12,000,000*.35= $4,200,000
If Jones Blair reduced its price by 20% the contribution margin will drop to 15%.
New contribution margin = 35 % (current contribution margin) – 20% (price reduction) = 15%
How much sales will John Blair achieve with this new contribution margin?
($ 12,000,000 + X) * 15% = $ 4,200,000
$ 1,800,000 + 0.15X = $ 4,200,000
0.15X = $ 2,400,000
X = 16,000,000 (New Sales Volume)
$16,000,000 – $12,000,000 = 4,000,000 (Sales Increase Amount)
$4,000,000 / $12,000,000 = 0.33 = 33% (Sales Increase)
Referring to the above simulation, 20% price reduction will drive the company to a 33% increase in …show more content…
sales.
5.3 Hire additional sales representatives
Hiring an additional sales rep will allow Jones Blair to focus on new markets. They would develop new retail account leads and call on professional painters to solicit their business through our dealers.
Sales of non-DFW territory are crucial for maintaining competition in the market.
A sales rep would cost the company $60,000 a year. So the company would need about $171,428.58 ($60,000/.35) of additional profits to cover this yearly cost. Current existing 120 retailers are located outside of DFW. From the current achievement, $4,200,000 is the amount needed to be maintained in order for Jones Blair to stay profitable. Profit amount required from each retailers in order to maintain the profit is $35,000 ($4,200,000/120). From the figure, Jones Blair would acquire at least 5 new accounts in order to get breakeven return on new representatives’ investment ($171,428.58/$35,000 =
4.89).
5.4 Continue to guard margins and control costs
Jones Blair has continually making profits year by year; so they should maintain their current marketing objectives and operate their business as usual. Jones Blair has done an excellent job in the past by watching the margins and controlling costs. The company will not need to spend any additional money.
Jones Blair will not change any of their current marketing strategies and practices. By guarding margins and cost controlling, Jones Blair will still continue to make profit.
5.5 President Barrett’s suggestions whereby additional dollars used for print media (newspapers and catalogs) in non-DFW areas instead of television advertising and 40% price cut to attract contractors to buy large quantities of paint from Jones Blair outlets
6. Alternatives Analysis
Alternatives
Strengths
Weaknesses
a) Spend additional $350,000 on corporate advertising
Increased customer awareness
Low added cost (extra 1million in break-even)
Almost doubling current advertising costs ($360,000+$350,000). Has little guarantee of results because about 75% of the viewing audience does not buy paint.
b) Have an overall 20% price cut
The company will sell more because of competitive price
Gain more market share in do-it-yourself market
May not be able to sell enough in volume to cover cost of goods sold.
Lower perception of quality because of cheaper price in the market
c) Hire additional sales representatives
Potential for success
Does not cost the company a significant amount of money to do.
Risky
Sales representatives aren’t that effective
d) Continue to guard margins and control costs
Not risky
Keep doing what company does best
No solution for the problem
e) President Barrett’s suggestions
Attract more contractors to purchase paint from Jones Blair
More focused advertising in rural areas
Increase more cost, expertise of competitive bidding for large jobs
Will continue losses
7. Suggestion for Jones Blair Company to Solve the Problem
i. Actively pursue non-DFW Household and Professional markets
ii. Seek more retail accounts in non-DFW markets.
Jones Blair should concentrate on increasing the number of distributors of its products in rural areas. The Dallas-Fort Worth market may be saturated and place importance on quality and service, but the rural market is still in expansion and in need of a producer to fill the quality-service niche. Any producer that wants to secure this niche needs to be present. Being present which means selling paints in a large percentage number of retail stores. Jones Blair is currently lacking in this area, and should be able to improve its position by hiring a new representative.
iii. Hire one additional sales representative who is in charge of developing new accounts. If budget permits, hire two. Each can be assigned to Professional and Household markets respectively.
iv. Engage in cooperative advertising with current advertising budget.
Four facts have led us to a preference for in-store promotion. First, the audience reached by expensive television campaigns is made up essentially of people who don't by paint. More precisely, 75% of the viewing audience falls into this category. Secondly, the majority of consumers decide which brand they will buy before entering the store. Thirdly, the majority of advertising is based on price competition. Lastly, other forms of publicity, such as mailers and newspaper ads, are often overlooked or find their way directly to the trash. In order to counteract these advertising inconveniences, we feel that in-store promotion should be tested and further developed if resultants are positive. In-store promotion is more economical than an expensive television campaign. And most importantly, it counteracts the brand decision that many customers have supposedly already made before entering the store. Also, in-store advertising can be more easily based on quality and service.
v. Maintain prices
BM7702P
1. Company Description
1.1. U.S Paint Industry The US paint industry is divided into three broad segments which are:
a. Architectural coatings consist of general-purpose paints, varnishes, and lacquers used on residential, commercial, and institutional structures, sold through wholesalers and retailers, and purchased by do-it-yourself consumers, painting contractors and professional painters.
b. Original equipment manufacturing (OEM) coatings are formulated to industrial buyer specifications and are applied to original equipment during manufacturing. These coatings are used fro durable goods such ad automobiles, trucks, transportation equipment, appliances, furniture and fixtures, metal containers and building …show more content…
products, and industrial machinery and equipment.
c. Special-purpose coatings are formulated for special applications or environmental conditions. These coatings are used for automotive and machinery refinishing, industrial construction and maintenance, bridges, marine applications, highway and traffic markings, aerosol and metallic paints and roof paints.
Segment
Architectural coatings
Original equipment manufacturing (OEM) coatings
Special-purpose coatings
% of total industry dollar sales
43%
35%
22%
1.2. Jones Blair Company
The Jones Blair Company is a privately held corporation that produces and markets architectural paint under the Jones Blair brand name. The company distributes its products through 200 independent paint stores, lumberyards and hardware outlets. 40% of its outlets are allocated in the 11-country Dallas-Fort worth (DFW) area and the remaining is situated in the other 39 countries in the service area. Retail outlets outside the DFW area with paint and sundry purchases exceeding $50,000 annually carry only the Jones Blair product line but except for 14 outlets in DFW which carry the Jones Blair line exclusively, the retailers only carry two or three lines with line being premium priced. Currently, Jones Blair employs 8 sales representatives which responsible for monitoring inventories in each retail outlet, taking order, assisting in store display and coordinating cooperative advertising programs. They are paid a salary and a 1% commission on sales. The company spends approximately 3% of net sales on advertising and sales promotion efforts.
2. Situation Analysis
The problems of the case studies are where and how does the Jones Blair deploy corporate marketing efforts among the various architectural paint coatings markets in their service area.
a. Should they target professionals or do-it-yourselfer market?
b. Where should they target? Either Dallas-Fort Worth or non- Dallas-Fort Worth area?
c. How they going to accomplish this matter?
3. SWOT Analysis
Strengths
Founded in 1980 whereby Jones Blair is an experience company in the industry
Strong relationships between sales representatives and Jones Blair retail outlets.
High quality of product
Sell to both professionals and do-it-yourselfers
Cooperative advertising programs with retailers
Opportunities
Long-term sales growth projected in the range of 1-2% per year
Distributed in 200 independent paint stores, lumberyards and hardware outlets.
40% of the retailers in rural area
Researches indicate that the average dollar paint purchase per purchase occasion is about $74.00 and average dollar sundry purchase by purchase occasion is about $12.00
Researches indicates that do-it-yourself painters first choose a retail outlet for paint and then choose a paint brand
Weaknesses
3% of net sales for advertising purposes
Advertising only reach 25% of target audiences
Only 8 sales representatives in retail outlets
Narrow market penetration (DFW areas)
Highest priced of product in the market
Threats
600 different competitors in the industry
Competition is spending more on advertising and is less expensive
Do-it-yourselfer purchase paint once every 4 years and get what’s convenient and inexpensive
Contractors want large quantities of paint for the lowest price
Demand effected by substitutes, long lasting products and volatile organic compounds (VOC)regulations
4. Core Competency and Sustainable Competitive Advantage
In terms of core competency, Jones Blair seeks to achieve a unique ability a) to provide distinctive, high-quality of paint which is the best on market and good fit with professional painters and b) provide excellent sales representatives (well liked, helpful, knowledgeable, and can run the store) in retail outlets for them to help customers and they also good fit in rural area.
5. Alternatives
Jones Blair senior management team has developed four different suggestions to lighten the companies marketing problem as below:- 5.1. Spend additional $350,000 for television advertising
The advertising department proposes a television campaign targeted at the DFW do-it-yourself market to increase customer’s awareness. A recent survey noted that only 25% of this population is aware of Jones Blair product range and only about 12% of this population would make a purchase. This cost for television advertisement targeted mainly in the Dallas Fort Worth (DFW) area at the do-it-yourself market and also to reach non-DFW customer as well which will significantly increase the awareness of Jones Blair products. Research has proven that brand awareness is a major factor in purchasing decisions.
If Jones Blair does agree to use this method the company will need to make at least $1,000,000 sales to break even and cover the cost of this new promotion ($350,000/.35= $1,000,000). Most of the DFW consumers are do-it-yourselfers, so television advertising will be beneficial in this market.
5.2 Have an overall 20% price cut
Compared to other leading national brands, Jones Blair is priced relatively high.
This is based on the extremely high quality and performance of the products. By cutting price, Jones Blair will be able to stay competitive in price with other the other products on the market.
In 1997 architectural product sales volume was $12,000,000. Jones Blair has a current net profit of $1.14 million, and to stay profitable it must maintain this amount.
$12,000,000*.35= $4,200,000
If Jones Blair reduced its price by 20% the contribution margin will drop to 15%.
New contribution margin = 35 % (current contribution margin) – 20% (price reduction) = 15%
How much sales will John Blair achieve with this new contribution margin?
($ 12,000,000 + X) * 15% = $ 4,200,000
$ 1,800,000 + 0.15X = $ 4,200,000
0.15X = $ 2,400,000
X = 16,000,000 (New Sales Volume)
$16,000,000 – $12,000,000 = 4,000,000 (Sales Increase Amount)
$4,000,000 / $12,000,000 = 0.33 = 33% (Sales Increase)
Referring to the above simulation, 20% price reduction will drive the company to a 33% increase in …show more content…
sales.
5.3 Hire additional sales representatives
Hiring an additional sales rep will allow Jones Blair to focus on new markets. They would develop new retail account leads and call on professional painters to solicit their business through our dealers.
Sales of non-DFW territory are crucial for maintaining competition in the market.
A sales rep would cost the company $60,000 a year. So the company would need about $171,428.58 ($60,000/.35) of additional profits to cover this yearly cost. Current existing 120 retailers are located outside of DFW. From the current achievement, $4,200,000 is the amount needed to be maintained in order for Jones Blair to stay profitable. Profit amount required from each retailers in order to maintain the profit is $35,000 ($4,200,000/120). From the figure, Jones Blair would acquire at least 5 new accounts in order to get breakeven return on new representatives’ investment ($171,428.58/$35,000 =
4.89).
5.4 Continue to guard margins and control costs
Jones Blair has continually making profits year by year; so they should maintain their current marketing objectives and operate their business as usual. Jones Blair has done an excellent job in the past by watching the margins and controlling costs. The company will not need to spend any additional money.
Jones Blair will not change any of their current marketing strategies and practices. By guarding margins and cost controlling, Jones Blair will still continue to make profit.
5.5 President Barrett’s suggestions whereby additional dollars used for print media (newspapers and catalogs) in non-DFW areas instead of television advertising and 40% price cut to attract contractors to buy large quantities of paint from Jones Blair outlets
6. Alternatives Analysis
Alternatives
Strengths
Weaknesses
a) Spend additional $350,000 on corporate advertising
Increased customer awareness
Low added cost (extra 1million in break-even)
Almost doubling current advertising costs ($360,000+$350,000). Has little guarantee of results because about 75% of the viewing audience does not buy paint.
b) Have an overall 20% price cut
The company will sell more because of competitive price
Gain more market share in do-it-yourself market
May not be able to sell enough in volume to cover cost of goods sold.
Lower perception of quality because of cheaper price in the market
c) Hire additional sales representatives
Potential for success
Does not cost the company a significant amount of money to do.
Risky
Sales representatives aren’t that effective
d) Continue to guard margins and control costs
Not risky
Keep doing what company does best
No solution for the problem
e) President Barrett’s suggestions
Attract more contractors to purchase paint from Jones Blair
More focused advertising in rural areas
Increase more cost, expertise of competitive bidding for large jobs
Will continue losses
7. Suggestion for Jones Blair Company to Solve the Problem
i. Actively pursue non-DFW Household and Professional markets
ii. Seek more retail accounts in non-DFW markets.
Jones Blair should concentrate on increasing the number of distributors of its products in rural areas. The Dallas-Fort Worth market may be saturated and place importance on quality and service, but the rural market is still in expansion and in need of a producer to fill the quality-service niche. Any producer that wants to secure this niche needs to be present. Being present which means selling paints in a large percentage number of retail stores. Jones Blair is currently lacking in this area, and should be able to improve its position by hiring a new representative.
iii. Hire one additional sales representative who is in charge of developing new accounts. If budget permits, hire two. Each can be assigned to Professional and Household markets respectively.
iv. Engage in cooperative advertising with current advertising budget.
Four facts have led us to a preference for in-store promotion. First, the audience reached by expensive television campaigns is made up essentially of people who don't by paint. More precisely, 75% of the viewing audience falls into this category. Secondly, the majority of consumers decide which brand they will buy before entering the store. Thirdly, the majority of advertising is based on price competition. Lastly, other forms of publicity, such as mailers and newspaper ads, are often overlooked or find their way directly to the trash. In order to counteract these advertising inconveniences, we feel that in-store promotion should be tested and further developed if resultants are positive. In-store promotion is more economical than an expensive television campaign. And most importantly, it counteracts the brand decision that many customers have supposedly already made before entering the store. Also, in-store advertising can be more easily based on quality and service.
v. Maintain prices