To:          Executive, Zoecon Corporation
From:           
Date:          Thursday, February 17, 2005
Subject:     Strike Roach Ender Introduction


Projected Industry
Consumers                              Professional
Projected Growth Rate of 10% annually          Projected growth rate of 8% annually
Projected sales of $4.4 million                Projected sales of $2.7 billion

Flea IGR Introduction – Similar Scenario
•     Great success of introduction of flea IGR PRECOR into PCO, veterinary and pet store markets.
•     In 1980 Zoecon broke into the supermarket segment by selling the PRECOR ingredient to it’s competitor dCon
•     In early 1983 Flea Ender (using PRECOR) was introduced to supermarkets by Zoecon – 11 % of the market was captured by late 1983
•     Flea Ender’s success attributed to a second 3rd party competitor S.C. Johnson
•     By 1985 Strike Flea Ender had captured 18% of the flea pesticide market and continues to achieve it’s profit objective

Consumer Test Market Analysis
Zoecon’s introduction of the Strike Roach Ender has captured a substantial portion of the test area household market segment. As seen in Table A the brand was recognized by over half of the households in the market and 6 %,( 70,200 households) of those households purchased the brand, resulting in a profit of $ 247,180.40. Though repeat purchases were also high at 30% (21,060 households) the profit generated was not enough to sustain a revenue in the trial market. Zoecon ended the market in a net loss of $$1,230,819.40. Figures are further broken down in Table A.

Contribution margins were also high for Strike Roach Ender. Aerosol Strike had a contribution margin of 55.1% and fogger had an even higher margin of 57% as seen in Table B.

Table C projects the break even analysis in both units and dollars as a basis for further projections. As seen in Table C substantially larger sales are required to break even.

Industry Market Analysis
Using the techniques from the test market estimates of market share and projected sales for the 19 city (80% of trial insecticide volume) are made for the introduction of Strike Roach Ender into the household market. I also chose to increase the advertising budget by 20% which increased costs to upwards of $12 million. This further drove the net loss to a final projection of $6,844,476 as seen in Table D.
Much like the test market Contribution margins were also high for Strike Roach Ender. Aerosol and fogger Strike had a contribution margin exceeding 50% as seen in Table E.
Table F projects the break even analysis in both units and dollars as a basis for further projections. As seen in Table F substantially larger sales are required to break even. Therefore more profitable alternatives and options must be sought to compliment or replace 19 city introduction.

Options & Alternatives
Roll-out Strike Roach Ender in projected 19 city market at a premium price
Pros: 1. A share of projected annual increase of sales in the continually growing 2.      Strike Roach Ender will hold high profit margins
Cons:      1. Continual loss of profit


Roll-out Strike Roach Ender into the 19 cities Strike Flea Ender is currently in
Pros:     1. Consumer familiarity with Strike product
2.     Increase in sales and decrease in promotional costs to introduce new product
Cons: 1. Consumer confusion due to similar strike name
2.     Continued costs without achieving projected market share

Enter into and agreement with a 3rd party to include GENCOR ingredient
Pros:     1. Initial introduction into the market by a competitor will pave the way for Zoecon’s won premium product with fewer costs
2.     Profits made by selling to a 3rd party
Cons:     1. Unable to capture a profitable market share with Zoecon product after competitor enters
Suggestion
Zoecon has developed a significantly improved product in the roach growth regulator market. It has shown that by promoting the product to an appropriate target market at a premium price it will hold yield high profit margins and achieve strong market penetration – though still not generating a profit. Therefore, I would recommend a marketing strategy similar to that of Strike Flea Ender (as highlighted in the similar scenario section.) This proposed plan would involve a mixture of options one and three from the alternatives given above. Specifically, Zoecon would approach a 3rd party: S.C. Johnson, dCon or Boyd-Midway about purchasing GENCOR to supplement their roach control products. Zoecon may then have a better chance of penetrating the 19 city roach regulator market with its premium quality product.