Marketing - Management Zoecon Corporation

Updated on January 19, 2016

Zoecon Corporation Case Study

1. Introduction
Zoecon Corporation was found in 1968 in Palo California by Dr Carl Djerassi to research
endocrinological methods of insects population control Djerassi was a pioneer in the
development of chemical methods for human birth control which subsequently led to the
introduction of the birth control pill. The name Zoecon is a combination of the Greek words Zo
for life and con for control.
2. Mission
Zoecon Corporation was acquired in 1983 by Sandoz. I.T.D. a Swiss based producer of
pharmaceuticals, agrichemicals, and colors and dyes. Zoecon mission was to be marketing arm
of sandoz I.T.D in the animal health and insect control areas.
3. Positioning and segmentation:
Research indicated that there are three segments.
The primary target market for Strike Roach Render was the end problem permanently segment.
The secondary market was the product that lasts segment
The convenience low cost segment as not considered a primary of secondary market.
Strike Roach Render was positioned as a scientific breakthrough with unique qualities desired by
the target segments.
4. Marketing mix:
Product price and packaging
Strike Roach Render was packaged in a 10-Ounce aerosol spray and a 6 Ounce togger.The
retail price for the Aerosol was $4.49 and for the fogger was $3.99.These prices were 50 to 75
percent higher than those of existing reach insecticides. The premium price was justified on the
basis of the products unique compound and long lasting effect.
Products
Zoecon sells:
i. Animal health products to small-animal veterinarians and clinics
ii. Pest control chemicals for farm animals

iii. Insecticides for household pets and pest control to supermarkets, pest stores, veterinarians,
and pest control companies
iv. Products and chemical compounds to firms engaged in marketing pest control products to
consumer market.
Consumer and trade promotion:
i. Television and newspaper advertising was used to build consumer awareness and cent off
coupons were employed to stimulate product trial. The consumer promotion and media strategy
focused on 25 to 54 years old women living in households of three or more. A public relation
effort was also launched, featuring press kit mailings to newspapers. Guest appearances on local
radio and television talk shows and an 800 number consumer hotline to answer consumers
questions.
ii. The trade promotion include discounts for the first time supermarket buyers, a calendar to
assist buyers in coordinating store promotion with consumer adverting freestanding in store
displays, and sales aids.
Place & distribution
i. Supermarkets (70%)
ii. Retail stores like home improvement centers and house garden outlets (21%)
iii. Drug stores (9%)
5. Problem Definition
In January 1986, Zoecon corporation executives met to assess future growth and profit
opportunities for its strike brand insect growth regulator (IGR) called Strike ROACH ENDER the
meeting was prompted by a recent change in the top management and corporate objectives
which was emphasized a focus on high financial return businesses and products; however,
executives believed Zoecon (pronounced Zoy-con) should expand distribution of Strike ROACH
ENDER to 19 cities in April 1986. With the intent of distributing the product nationally in April
1987. other executives felt that Zoecon should concentrate its effort on opportunities in the
professional pest control market till other executives held the view that Zoecon should reconsider
any plans to market the product it self rather these executives said Zoecon should sell its IGR
compound to firms actively engaged in reaching the consumer insecticide market these firms
included D-Con company. S.C Johnson and son (Raid), and Boyle-midway division of American
home products (black flag).
6. Alternatives

One position advanced was the Strike ROACH ENDER distribution should be expanded
to the 19 cities where the Strike FLEA ENDER was being sold.

A second view was that Zoecon view was that Zoecon should direct its resources to
PCOs. These executives noted that GENCOR (hydroprene) has been well received by
PCOs in late 1984 and many PCOs were promoting its benefits to their customers.

A third opinion was that Zoecon should pursue opportunities for selling hydroprene to the
makers of D-Con. Black Flag. And Raid for use in their products. This strategy had worked
in the past for PRECOR (methoprene). A product cost analysis performed on strike ROACH
ENDER indicated that the cost of goods sold for the 10-ounce aerosol package without
hydroprene would be $0.80.For the 6ounce fogger package without Hydroprene,the cost of
goods sold would also be $0.8

7. Issues:

Alternative one: Strike ROACH ENDER distribution should be expanded to the 19 cities where
the Strike FLEA ENDER was being sold.
i. Advantages
1. increase sales
2. strengthen the brand image and build brand equity
3. Marketing research indicated that these 19 cities accounted for 80% of roach insecticide
volume hence a good opportunity for expansion.
ii. Disadvantages
1. It needs high advertising and promotional expenses.
2. It will be necessary to acquire new outlets which will require high capital expenditure.
3. It will be necessary to enhance the distribution channels and build up a larger fleet to cover the
targeted cities.
Alternative Two: Zoecon view was that Zoecon should direct its resources to PCOs. These
executives noted that GENCOR (hydroprene) has been well received by PCOs in late 1984 and
many PCOs were promoting its benefits to their customers.
i. Advantages
1. the company will be able to increase its sales in large quantities
2. Producers marketing expenses were small in comparison to the costs of selling to the
consumer market.
ii. Disadvantages
1. The company will lose control on the amount sold every month because the distributors and
PCOs are controlling the market.
2. The gross margins will be lower because the large distributors are buying insecticides in large
quantities from producers and sell it in small quantities to distributors and retail outlets ($55%
compared to 51 %).

 Alternative Three: Zoecon should pursue opportunities for selling hydroprene to the makers of
D-Con. Black Flag. And Raid for use in their products. This strategy had worked in the past for
PRECOR (methoprene). A product cost analysis performed on strike ROACH ENDER indicated
that the cost of goods sold for the 10-ounce aerosol package without hydroprene would be
$0.80.For the 6ounce fogger package without Hydroprene,the cost of goods sold would also be
$0.8 .
i. Advantages
1. Zoecon experienced a successful experience in the past in adopting this strategy with Raid
and others in their way to promote for PRECOR.
2. It is not required to invest in marketing and advertising which will be 1.5 million Dollars.
3. It will help to enhance the profit margin for this product because no additional marketing and
advertising expenses will exist.
ii. Disadvantages
1. D-Con, Black Flag, and Raid are direct competitors for Zoecon which will be a dangerous
decision to take especially that the company is going to give them their technology and their
secret formula of this product.
2. This action will spell the end for Zoecon presence in the consumer market.
8. Conclusion
PRECORs success prompted to Zoecon to again approach the makers of Black Flag and Raid
in 1982.No agreement could be reached. However this setback resulted in the decision by
Zoecon to develop its own brand for sales through supermarkets in early 1983.Zoecon
introduced strike Flea Ender which includes PRECOR and an adulticide, in 19 cities that
accounted for the majority of Flea product sales by late 1983.Strike Flea Ender has captured
11% of FLEA product sales in these cities. This success lead to an agreement with S.G .Johnson
& Son, in December 1983 to include PRECOR in its Raid Flea Killer plus. This agreement
allowed Zoecon to continue marketing PRECOR under the Strike brand name. Strike Flea Ender
has an 18% market share in 1985; however, the product has not yet achieved the profit objective.
After comparing the advantages and disadvantage for the there options available, it seems that
the first alternative is the best solution in the long run while the other two options are better in the
short run because the result will be fast and more powerful. In my opinion taking into
consideration the whole aspects related to the decision that must be done it will be the best
solution for the company is to focus on enhancing its distribution channels which will leas to high
capital expenditures in the short run but it will give the company a core competence in the future
among its rivals especially that its products are innovations and successful so it is none sense to
rely on others to distribute its products or sell through others.
The first alternative from a strategic point f view is the best one especially that the other two
options will limit the bargaining power of Zoecon to apply the suitable and desired selling prices

needed to cover its production cost especially the gross margin difference in the three options is
only 4%.