Michael Machuca

Mim0030


Individual Case Summary for
Zoecon Corporation


MKTG 5150
Marketing Management
Summer 2014





The Problem. Zoecon needs to decide whether or not to distribute Strike ROACH ENDER to all 19
cities that represent 80% of insecticide sales.

Recommendation. Zoecon should not pursue expanding distribution of Strike ROACH ENDER to all
19 cities. The test market analysis and the market forecast data project that Zoecon would sustain losses.
The company should make a decision to pursue other alternatives before April.

Test Market Analysis. The test market sustained losses of $ 1,204,149.80. Further research into the
data reflect that the cause of the losses stem from the initial low adoption rate of the product. Though
57% of the market was aware of the product only 6% had actually purchased Strike ROACH ENDER.
Repeat use of the product was 30% which can be seen as a positive in for the product. When customers
repurchased the product they would on average buy 3.5 units. Repurchases may have different causes,
first the application direct to use every 120 days (4 months) and the trial period was for 6 months.
Second, customers who bought the product a second time would have been pleased with the initial use,
or there was a lack of product for their specific roach killing need. This is a solid source of revenue but
was not enough to cover the cost of expenses for the test market. The conclusion for the test market is
that there was not enough adoption to at least break-even on the cost.

Profit/Loss Potential. The test market analysis allowed for a projection of the entire market. Initial result
from the test were not positive to the full market forecast. After computing a growth rate of 8% on a $400
million market, additional criteria calculation revealed that a the 19 city market cap for roach insecticide
was $31,787,380.80. An aggregation of all the cost projected that expense would be ($30,320,000.00).
These initial numbers indicate that Zoecon would have to control over 95% of the market just to break-
even on the cost. If Zoecon were to pursue expand distribution to all 19 cities they would sustain a loss of
$(20,951,960.00).










Table 1. Test Market Analysis



Break-Even Analysis



Model

Mix x
Unit
Contribution = Total Contribution


Aerosol

64.80% x $1.73

$1.12


Fogger

35.20% x $1.53

$0.54


$1.66

Fixed Cost


$ 1,478,000.00



1
Unit Break even Volume


890,577



Contribution Margin



Aerosol

Fogger

Unit Price $ 3.14

$ 2.79

COGS

1.41

1.26

Unit Contribution $ 1.73

$ 1.53


Sales Mix


Aerosol

66%


Fogger

34%



Weighted
Average


2
Unit Price $3.02


3
Unit Contribution 1.66




1





2


3



Sales Analysis


Initial Purchase


Repeat Purchase
House Holds 1,170,000

House Holds 70,200
Purchase % 0.06

Purchase % 0.3
Unit Purchase Avg 1.3

Unit Purchase Avg 3.5
Avg Unit Price $ 3.02

Avg Unit Price $ 3.02


$ 275,605.20


$222,604.20


Profit Analysis





Contribution $ 273,850.20


Cost

($1,478,000)


Profit

$ (1,204,149.80)



Table 2. Market Forecast Analysis

Dollar Sales for Initial Trial


House Holds 22,000,000
Purchase % 0.06
Unit Purchase Avg 1.3
Avg Unit Price $ 3.02


$ 1,182,320.00


Dollar Sales for Repeat Purchases


House Holds 1,320,000
Purchase % 0.3
Unit Purchase Avg 3.5
Avg Unit Price $ 3.02


$ 4,185,720.00


Esimated Market Size $ 31,787,380.80


Sales Forecast $ 9,368,040.00
Per Capita adv ($20,320,000.00)
Rule of Thumb ($10,000,000.00)
Profit/Loss $(20,951,960.00).