Strategic Issues and Problems:
The Jones Blair Company competes in a 50-county area throughout Texas, Oklahoma, New Mexico, and Louisiana. Their major business and financial center is located in eleven county Dallas-Fort Worth metropolitan areas. Jones Blair Company is a privately held corporation that produces and markets paint under the Jones-Blair brand name. A large portion of the maturing paint industry, $10 billion, is established from architectural coatings and the annual growth rate is expected to equal that of general inflation in the coming years. Dollar sales have increased at an average annual rate of 4 percent per year over the past decade. The company has been very successful in maintaining their margins even with increased research and development material and labor costs. A small number of regional paint manufacturers have competed successfully against paint manufacturer that distribute their products national. Major producers of paint for the architectural coatings segments account for 60 percent of sales in the architectural coating segments. The competition is pretty stiff when it comes to private store brands or specialty stores. Even with the growing success of Jones Blair it is not enough and in order to reach their business goals at a time when growth is nonexistent, Jones Blair must take immediate action and surge their sales team and change their sales energies. Mass merchandisers pose a serious threat to the future achieved sales levels of Jones Blair Company. Jones Blair Company is currently looking for solutions for gaining more consumers through marketing their architectural coatings and sundries in the southwestern United States. Market Segmentation
The market of Jones Blair can be divided to two groups: Dallas-Fort Worth area and Non Dallas-Fort Worth. Among these two areas, there are the
contractors, the DIY households and the professional painters. From reading case, I gathered that the estimated dollar volume of architectural paint and allied products sold in Jones Blair’s 50 countries service area in 2004 was $80 million (excluding contractor sales). The DFW are accounted for 60 percent or $48 million, while the remaining 40 percent or $32 million is sold in the other areas outside the DFW area. 70 percent of the DFW sales are accounted for by do-it-yourselfers while the other 30 percent is sold to professional painters. In the other areas outside of the DFW area 90 percent of sales are accounted for by do-it-yourselfers while the other 10 percent is sold to professional papers. (See Exhibit 2). This would means the percentage of the market segment is as following: DFW ($48 millions) Non-DFW ($32 millions)
Professional Painters 70% ($33.6 millions) 30% ($9.6 millions) DIY households 30% ($14.4 millions1) 70% ($22.4 millions)
Plan of Action
The senior management team has examined the paint industry, especially the architectural paint markets, and they have yet to come to a conclusion. The president of Jones Blair, Mr. Alexander Barrett, is planning to have another meeting with his executive team where they will each present their suggestions and he has exclaimed a decision must be made. Recommendations
Jones Blair executives have developed four alternatives to relieve the company’s marketing problem (which are outlined as follows): a) Cut price by 20%
b) Spend additional $350,000 on corporate advertising;
c) Hire one additional sales representative
d) Do Nothing (Status Quo)
a) Cut price by 20%
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. b) Spend an additional
$350,000 on corporate advertising
This money will be used to increase awareness. Most of it will be spent on television ads targeted mainly in the Dallas Fort Worth (DFW) area at the do-it-yourself market. Brand image is important to consumers and television ads are a great way to get their name out. Most of this population is aware of this product and only some of this population would purchase it. c) Hire an additional sales representative
Hiring an additional sales representative will allow Jones Blair to focus on new markets. These markets should be outside of the DFW area and allow for new cities and states to recognize Jones Blair. d) Do Nothing (Status Quo)
Since Jones Blair has continually seen profits each year; they should maintain their current marketing objectives and do nothing. Jones Blair has done an excellent job of this in the past by watching the margins and controlling costs. By doing nothing, the company will not need to spend any additional money. e)
a.) Cut price by 20%
In 2004 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%. ($12,000,000)*.15 = ($1,800,000)
If the company drops the price by 20% the company will see a 33% increase in sales. ($1,800,000 * .33) =$4,200,000 ($594,000)
STRENGTHS: Jones Blair will sell more products, because it will be able to compete with its competitors in price. WEAKNESSES: May not be able to sell enough in volume to cover cost of goods sold. If the price is more competitive with other companies it may not be looked at as superior quality. b.) Spend additional $350,000 on corporate advertising.
The marketing department proposes a television campaign targeted at the DFW do-it-yourself market. This will cost an additional $350,000, but 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 $122,500 to break even and cover the cost of this new promotion ($350,000/.35= $122,500). Most of the DFW consumers are do-it-yourselfers, so a television ad will be beneficial in this market. STRENGTHS: Consumers will become aware of Jones Blair. Do-it-yourselfer’s account for 70% of volume in the DFW area. Advertising is proven to increase awareness, and awareness is a critical factor in consumer purchasing decisions. WEAKNESSES: Almost doubling current advertising costs ($360,000+$350,000). This recommendation requires a large budget and has little guarantee of results because about 75% of the viewing audience does not buy paint. Consumer buying process shows household buyers choose a store first, not a brand; therefore, cooperative ad is required, not brand advertising. c.) Hire an additional sales representative.
Sales outside of our home territory DFW are crucial for maintaining competition in the market. A sales rep would cost the company $60,000 a year. So the company would need ($60,000/.35) about $171,428.58 of additional profits to cover this. 120 retailers are located outside of DFW. If we look at our current dollar amount needed to stay profitable $4,200,000 and divide that by stores $4,200,000/120= $35,000 So $171,428.58/$35,000 = about 5. So the company would require a new sales rep to acquire at least 5 new accounts a year to breakeven. STRENGTHS: New clients may bring more opportunity to the table through word of mouth. Doesn’t cost the company a significant amount of money to do. WEAKNESSES: Does not promise new clients. It’s only concentrating on most profitable market, DFW. d.) Do nothing (Status Quo)
Jones Blair will not change any of their marketing strategies. STRENGTHS: Does not cost the company any extra money to maintain current objectives. Jones Blair is currently making money, why change? WEAKNESSES
Jones Blair will not always be profitable in the future; the cost of research and development will only increase. Needs to stay competitive in the market and not looking into long term vision of the company.
Jones Blair needs to look into the future and envision the company competing with competitors. Its best bet is to focus on the consumers in its main home market, DFW. If they can gain awareness of the home market, sooner or later word will spread throughout all of their markets and business will boom. Making a $1,000,000 minimum income looks like pocket change. Right now Jones Blair can afford this and still have a $400,000 profit. Target Market
The target market for Jones Blair is consumers in its main home market, DFW. Specifically the consumers in their architectural coatings and sundries arena.
Promotion: Jones Blair Company advertising can potentially boost their clientele bringing more awareness to the DIY segment in the southwestern area of the United States. This was essentially the objective of the executive meeting and advertising is proven to increase awareness, and awareness is a critical factor in most consumer purchasing decisions.
Place: The Company distributes its product through 200 independent paint stores, lumber yards and hardware outlets. With the expanded advertisements Jones Blair can expand to their marketing scope connecting with more consumers, especially in the southwestern area of the US. Price: Almost doubling current advertising costs ($360,000+$350,000), advertising would be the best way to reach the masses in the regions that are going unnoticed. Product: Architectural coatings and sundries supplied throughout the southwestern United States.