Zoecon Case Analysis

Changes in top management at Zoлcon Corporation brought about a shift in corporate objectives. The new objectives emphasized a focus on high financial-return products and businesses. In January 1986, Zoлcon executives called a meeting to determine the fate of their Strike brand insect growth regular (IGR) called Strike ROACH ENDER. This product had been tested in the consumer market in four cities (Charleston, SC; Beaumont, TX; Charlotte, NC; and New Orleans, LA) from May through October of 1985. Now that the test marketing venture was complete, Zoлcon executives were faced with determining the most profitable future marketing strategy for their IGR products.

Definition of the Problem

One Zoлcon executive stated, "The decision is basically how we can best allocate our technical, financial, and marketing resources for our IGR Compounds." Some suggestions had already been discussed informally among the executives, including, consumer market expansion with the ROACH ENDER product, pest control operator (PCO) market concentration with the ROACH ENDER, or IGR compound sales to existing firms in the consumer insecticide market. Some of these alternatives were mutually exclusive, and others were not. So, it was up to Zoлcon's executives to use the test market data analysis, along with their knowledge and experience in the insecticide industry to decide which of the proposed alternatives will be most profitable and most appropriate according to the newly developed corporate strategy.

Summary of the Major Alternatives

Zoлcon executives are faced with the alternatives of marketing their Strike ROACH ENDER product to the consumer market or concentrating their efforts on the professional pest control market. If Zoлcon cannot make a sufficient profit then marketing their IGR compounds through other firms may be the next opportunity.

Zoлcon has already introduced the Strike FLEA ENDER to the consumer market in 19 states, where the product gained an 18% market share by 1985, but has not yet reached its profit objectives. These insecticides were also successfully sold to pest control operators through distributors, and by 1985 had captured 80% of all flea product sales made through these outlets. In December 1983, Zoлcon reached an agreement with SC Johnson and Son to include PRECOR (the flea control compound in Strike FLEA ENDER) in its Raid Flea Killer Plus.

There are significant differences in the consumer and professional pest control markets. The consumer market targets a stronger, more poisonous chemical that quickly kills insects. The professional market uses adulticides that focus more on preventing maturity, which disables reproduction. The consumer market is a quick ending solution and the professional market concentrates on a long term effect. Both markets have a good growth rate each year. The following chart represents characteristics of the premise insecticide market.

EXHIBIT 1: CHARACTERISTICS OF THE PREMISE INSECTICIDE MARKET

The data presented in Exhibit 1 as well as the test market analysis data was used to determine the best alternatives:

(A) Strike ROACH ENDER distribution should be expanded to the 19 cities where Strike FLEA ENDER is sold.

1. Marketing research indicates that 80% of roach insecticide volume is sold in these 19 cities.

2. Marketing expenses would consist of promotion & advertising.

(B) Direct resources to pest control operators (PCO's).

1. GENCOR (hydroprene) was well received in 1984, and many

PCO's were promoting its benefits to their customers.

2. Yearly investment of $500,000 per year above the typical 27% of sales in advertising and sales efforts could increase usage.

(C) Pursue opportunities for selling hydroprene to other manufacturers for use in their products. All marketing and sales costs would be absorbed by the manufacturer of said product, and Zoлcon could realize a 50% gross margin. This action could also terminate Zoлcon's presence in the consumer market.

Relevant Decision Factors

In order to make the correct decision on which markets to penetrate, Zoлcon must carefully weigh many factors within both potential customer groups - PCO's and general customers. The relevant factors in this decision involve looking at the potential advantages of an IGR (insect growth regulator) over the traditional adulticide products currently in the market. With toxicity and safety concerns of these types of products being top of mind for many consumers, the newer IGR products should bring welcome benefits to end consumers using the product on a regular basis.

Product Factor Customer Segment PCO Segment

1. Relative Advantage

Short term + -

Long term + +

2. Compatibility + -

3. Simplicity (of use) - -

4. Immediacy of Benefit - -

5. Felt Need + -

Zoлcon must consider the immediate, "observable", benefits that can be highlighted when bringing the IGR to market. Products of this nature will not show an immediate effect, similar to an adulticide-type spray or aerosol, i.e., they will not immediately kill the intended target. Typically, a time period of 120 days is needed in order to realize the full effects of the product. It would be for this reason, that the lower toxicity risks with the IGR should be heavily promoted if Zoлcon chooses to focus the marketing of Roach Ender on the general consumers. Additionally, IGR compounds have demonstrated to be non-compatible with adulticide products. The long term benefits of using IGR's will not be realized if they are combined with adulticides.

It is also important to measure the potential market for this type of product and balance the perceived need within the consumer and PCO segments. Select information from Exhibit