Jones Blair Company - Market and Industry Analysis

BACKGROUND AND PROBLEM DEFINITION

Alexander Barrett, president of Jones Blair Company wants to decide where and how to deploy their corporate marketing efforts among the various architectural paint coatings markets they serve. Jones Blair is a U.S paint industry that manufactures architectural paint coatings and original paint equipment coatings.

MARKET AND INDUSTRY ANALYSIS

The U.S paint industry is categorized into three broad segments (1) architectural coatings, (2) original equipment manufacturing (OEM) coatings, and (3) special-purpose coatings which accounts for 43%, 35%, and 22% of total industry dollar sales respectively.  The architectural paint coatings and sundries estimated U.S sales are $12 billion in 2004. It’s considered to be a mature market with long-term sales growth estimated around 1-2 % per year. Jones Blair Company has segmented their market in two categories, first being Dallas-Fort Worth (DFW) and the second being Non Dallas-Fort Worth or non-DFW area. Jones Blair distributes paints sundries through 200 independent paint stores, lumberyards, and hardware outlets. 40% of the outlets are located in 11 County DFW areas and the rest are located in 39 county non-DFW areas. They spend around 3% of net sales ($12,000,000) i.e. $360,000 on advertising and sales promotion efforts. Of which 55% i.e. $198,000 is allocated to cooperative advertising programs with retail accounts. They have employed 8 sales representatives who are paid salary and 1% commission on sales.

EVALUATION OF ALTERNATIVE COURSES OF ACTION

• VP Advertising: Spend additional 350,000 on corporate brand advertising. On doing so the cost of advertising will increase by almost 100%. As 75% of the viewing audience does not buy paint this strategy might not be that effective.
• VP Operations: Cut the prices down by 20% on all paint products, as customer seems price sensitive. As the company is known for higher price range products and higher quality products consumer may assume the quality has degraded. Furthermore, there might be resentment from distributors as it may lower their margin. Also, the contribution margin will reduce to 15% and to maintain profits required sales is too high.
• VP Sales: Hire an additional sales representative who will focus on new markets outside southwestern America. This may lead to more new retail accounts for Jones Blair Company. Professional painters and people would really appreciate additional service. The investment is low i.e. $60,000 annually and 1% commission on sales compared to other alternatives.
• VP Finance: Do nothing and continue with the same strategy. This approach can be optimal for short period but in long run can backfire them. To keep up with the competition and stay in the market this alternative is feasible.

CONCLUSIONS AND RECOMMENDATIONS

• According to me Jones Blair Company should invest in first alternative i.e. advertisement for DFW areas, as awareness is less for Jones Blair Company as per the exhibit 5 mentioned in the case. It shows higher the awareness of product higher is the percentage of last product purchased by consumer. These advertisements will also reach non-DFW consumers of 15 counties.
• For rural area Jones Blair Company should go with third alternative. Hiring a salesman for rural area is a good option as sales is increasing in rural area and stores are decreasing. So sales person concentrating on that particular area may increase their store reach and consumer base.