Zoecon Case Study

The Problem(s): Should Zoecon commercialize their Strike ROACH ENDER brand by expanding their distributions to the 19 cities in the Southeast United States where 80% of roach control products are sold?

Recommendation(s):

Zoecon should not expand distribution of the Strike ROACH ENDER brand. The recommendation is based on the analysis of the following decision factors:

Profitability – Zoecon did a test market analysis shown in table 1, using it to build table 2. Table 2 shows that the Strike ROACH ENDER had a net loss of $1,204,149.80. If you forecast the same sales across the 19 planned cities, it gives three different alternatives for Net Profit/Loss. The three alternatives are the different approaches to take when estimated the fixed expenses. Table 3 shows the predicted Sales and Profit Analysis of the 19 planned cities. Zoecon will have total revenues equal to $9,368,040.00, and with the unit contribution percentage, Zoecon has $5,182,320.00 contribution dollars. We can use this information to estimate the fixed costs for the 19 planned cities. If you use a per capita approach for the plan, you can get fixed expenses of $20,320,000.00, which results in a net loss. If you use the 'rule of thumb' approach, with $10,000,000.00 for fixed expenses, it will still occur in a net loss. Table 4 shows the differential for each alternative. The break even units is much higher than the projected sales for the 19 planned cities. Even the last alternative for estimating fixed expenses gives a small profit of $1,085,320.00. This makes the venture somewhat marketable, but with a net profit as low as this, the potential losses for Zoecon would exceed the potential rewards. The losses from an effective and needed marketing campaign to compete in the crowded market make it a huge risk. The sales would not be a sufficient to gain a prominent market share over a substantial amount of time. But two methods of estimating show a net loss, while one shows a slight net profit. Regardless, all of them carry great risks with not enough potential rewards.

Price and Market Competition – Zoecon sells their Strike ROACH ENDER for $4.49 and $3.99, for the aerosol and foggers, respectively. This price is much higher than any other competitors on the market at the time, by 50-75%. They put themselves as a premium product, since their product has a unique compound and “permanent” effect. But the research showed that the consumer market is geared towards the easier to use products and the do it yourself containers. If Zoecon doesn't reduce their price, it will make it hard for them to gain any significant market share against the cheaper competition. Raid captured 45% of the consumer market alone, with other competitors such as Boyle-Midway Division at 12% with their Black Flag, and d-con Company at 10%. No other competitor had any share