Optical Distortion Inc

Optical Distortion Inc.

Management 411, Section 6

Bobby Flanigan

Issue: Ronald Olson, the VP of Marketing for Optical Distortion Inc. (ODI), is asked to develop a marketing plan that enables the firm to become a multiproduct company that can serve the entire nation by 1980, at which time competition is expected to become intense.

Suggestion: We recommend ODI use a price skimming strategy and focus its marketing efforts on farms with over 50,000 birds in geographically diverse regions. ODI will introduce its product on a regional basis year by year, starting with California, the South Atlantic US, and the West South Central US.

Company: ODI sells contact lenses for chickens that decrease cannibalization, which results in large cost savings for farms. The lenses were invented in 1965, patented in 1969, and tested with positive results in the current year, 1974. ODI has an exclusive licensing deal with New World for supply of the hydrophilic polymer lenses and a $200,000 VC investment. With over 350 million US chickens, the market potential is large. It is expected that license and patent protection will only keep the company safe for a few years. Given limited resources and the lofty goal of national distribution within five years, ODI needs to launch and market its product very successfully in order to establish a strong brand that can compete against larger future market entrants.

Competition: ODI is the only company that sells this product. The substitute is debeaking, which is currently the primary process to reduce cannibalism among birds. While debeaking has a lower initial cost, ODI lenses provide substantial total cost benefits over debeaking. Currently, ODI has no market share making the challenge market penetration against the incumbent process of debeaking. Future competition will increase dramatically by 1980 once the patent and license are circumvented. Barriers to entry will be low, product duplication easy, and large competitors will already have relationships and distribution channels in place. In order to survive, ODI will need to deliver impeccable customer service, create substantial brand value, and achieve significant market penetration while they have first mover advantage.

Customer: ODI will sell its lenses to chicken farmers who typically live in rural locations on large acreages of land. Olson characterized customers as being independent-minded people who expect a fair deal. As detailed below our target customer has over 50,000 birds. Farms of this magnitude are professionally operated and require a massive amount of business and agricultural sophistication. These farms run all company operations and negotiate their own contracts. Being professional businesses, these farms understand financial metrics and value cost saving measures.