Jones Blair

It is considered to be a maturing industry  Industry sales in 2004 were estimated to be slightly over $16  billion  Divided into 3 segments: 

Architectural coatings 22% 43%

35%

Original Equipment Manufacturing (OEM) Coatings Special-purpose Coatings

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Architectural Coatings   

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OEM Coatings   

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General purpose paints ,varnishes and lacquer used on residential, commercial and institutional structures. Sold through wholesalers and retailers Purchased by do-it-yourself consumers, painting contractors, and professional painters. Formulated to industrial buyer specifications To be applied to original equipment during manufacturing Used for durable goods such as automobiles, transportation equipment, appliances, furniture and fixtures, metal containers / building products and industrial machinery

Special-Purpose Coatings  

Formulated for special applications / environmental conditions such as extreme temperatures, exposure to chemicals or corrosive conditions. Used for special applications such as bridges, marine applications, and highway and traffic markings

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Headquarters: Dallas, Texas Service Area: Texas, Oklahoma, New Mexico, and Louisiana. 2. Dallas-Fort worth (DFW) area 1.

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Competition: ›

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600 paint companies in the US

2004: ›

$12 million net sales of  Jones Blair architectural paint and allied products

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Distribution: ›

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200 independent paint stores, lumberyards, and hardware outlets. 40% of outlets are in DFW area

Promotion: ›

8 sales representatives  

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Salary: $60,000 annually 1% sales commission

3% of net sales 

Advertising & Sales promotion effort

To prioritize which market segments to pursue & to increase advertising dollars by $350,000 2. Have an overall 20% price cut 3. Add one more sales representative 4. Continue to guard margins and control costs 1.

INTERNAL STRENGTHS  Experience – Founded in 1928  Strong relationships between sales representatives and retail stores  High quality  Sell to both professionals and DIYers  Cooperative advertising with retailers  Motivated, determined and passionate  A lot of research available  Low Break Even

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Only 3% of sales goes to advertising

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Ads only reach and influence 25% of target

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COGS is 60% of sales

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Only 8 sales representatives

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Narrow market penetration with sales reps

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No exclusive rights with retailers

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Highest price in market

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Market Growth: 1-2% per year Distributed to 200 of the 1,000 retail outlets in the area 40% of these retailers are in rural areas DIY painters first choose a retail outlet for paint and sundries then choose a paint brand. Pro-painters are frequent buyers and look for paint that is high quality, durable and easy to clean up

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600 different competitors Competition is spending more on advertising Competition is less expensive Major in-house retailers have little knowledge DIYers purchase paint once every four years and get what’s convenient and inexpensive Contractors want paint for the lowest price. Demand effected by substitutes, long lasting products and VOC regulations

JBC’s Market Market Segment Shares Do-it-yourself

DFW

Non-DFW

Professional

$ 1.8M / 33.6 M = 5.4 %

$ 4.2 M / 14.4 M = 29.2 %

$ 6M / 48 M = 12.5 %

$ 4.2 M / 28.8 M = 14.6 %

$ 1.8 M / 3.2 M = 56.3 %

$ 6M / 32 M = 18.8 %

$ 6M / 62.4 M = 9.6 %

$ 6M / 17.6 M = 34%

$ 12M / 80 M = 15 %

DFW – PRO = 29.2 %  DFW – DIY = 5.4%  NON –DFW PRO = 56.3 %  NON – DFW DIY = 14.6% 

JBC’s Market Points to Note 

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Market shares vary greatly among four markets  JBC is strong in professional market with a 34% market share Weak (5.4%) in DFW, most probably due to mass merchandisers. JB only represent 12.5 % in the DFW area

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Relatively weak competition in rural markets. Wal-Mart probably not a major threat

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Dominates rural professional market with 56.3% share

13 of

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Direct sales to DFW – DIY 350 k in corporate brand advertising

Action: Avoid this alternative. Reasons: 1) DFW –DIY market share is a “dog” 2) 350k advertising is nonsense BE = $350K /0.35 cont margin = 1 M 1 M represents almost 8.3 % increase over current sales. #JBC need to increase its market share by 1.6% of DIY DFW market to recover additional spending.

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Price cut 20 % Have to be competitive in DIY market.

Action: Avoid this alternative. Reasons: 1)Currently, JBC Contribution margin is 35% - Price cut 20% will reduce Cont. margin to 15% or 0.15 2) DIY market represents area of “ dogs” & “ question marks” - Have not achieved dominant market position - Do not generate much cash

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Hire sales representatives at $ 60 000/ annum each Work on Non- DFW area

Action: Hire sales representatives to work Reasons: 1) The reps have to earn at least $ 171, 428 each just to  break even ( $6 0 k / 0.35 ) - How much they worth? DFW PAINTER= $ 4.2 m / 400 painters = $ 10 500 NON DFW PAINTER = $ 1.8 m / 200 outlets = $ 9 500 DFW OUTLET = $ 1.8m / 80 outlets = $ 22 500 NON DFW OUTLET = $ 4.2 m/ 120 outlets = $ 35 000

- Hire sales reps to work on Non DFW areas - Get 6 per year to break even.

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Keep everything the same Continue to guard margins & control costs

Reasons: 1) JBC is a “ cash cows” and “stars” in both DFW & Non DFW areas for Professional users - Since this market already established themselves, any surplus funds generated from these areas should be channel to “ question marks” and “dogs” SBU.

Recommendations 

Actively pursue non-DFW Do-it-Y and Professional markets

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Secondary emphasis on DFW-Professional market

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Seek more retail accounts in non-DFW markets

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Hire one additional sales rep who is in charge of  developing new accounts. If budget permits, hire two. Each can be assigned to Professional and Doit-Y markets respectively Engage in cooperative advertising with current advertising budget Maintain prices