Part a no 1

Define the Problem

One Zoecon executive stated that 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 Zoecon 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.

Enumerate the decision factor

Alternative 1
One position advanced was the Strike ROACH ENDER distribution should be expanded to
the 19 cities where the Strike FLEA ENDER was being sold.

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

cities.
Marketing expenses would consist of promotion & advertising.

Alternative 2
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.

GENCOR (hydroprene) was well received in 1984, and many PCOs were promoting

its benefits to their customers.

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

Alternative 3

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

Consider relevant information

Zoecon 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 Zoecon cannot make a sufficient profit then marketing their IGR compounds
through other firms may be the next opportunity.
Zoecon 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, Zoecon 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.

Identify the best alternatives:

After careful analysis and examination of the alternatives, our recommendation for Zoecon is
alternative B. The test market results show more than $1M in losses during the test period,
and, based on the 19-city profit estimates, alternative A would most likely continue to result

in losses. This is further supported by the fact that after 2 years in the 19-city consumer
market, Strike FLEA ENDER still has not reached its profit objective.
With alternative B, marketing & advertising costs are sharply reduced, and PCOs are already
promoting the IGRs benefits (since GENCORs introduction in 1984). Also, by 1985,
PRECOR successfully captured an estimated 80 percent of all flea product sales made
through PCOs, veterinary clinics, and pet stores. It is reasonable to expect similar results
from GENCOR.
Although alternative C would essentially eliminate marketing and sales costs, it could also
potentially terminate Zoecons presence in the consumer market, thus limiting future growth
and profit potential. For that reason, we do not recommend this course of action.

Develop a plan for implementing the chosen alternative

There are a few market considerations in choosing to implement alternative B. One, Zoecon
should budget an expected $500,000/year above the 27% of sales amount for marketing to
PCOs. The good news is that this is far less than any marketing estimates in the consumer
market, and Zoecon has already established strong relationships in the professional pest
control market. Also, Zoecon should reasonably be able to maintain the average gross profit
of 51% on the GENCOR product. The product has already been received well by
professionals in the industry, and continued support is expected.
This option satisfies the goals of the organization by making the most effective use of
resources to gain the highest return. Alternative B also preserves Zoecons ability to compete
in the consumer market in the future.

Evaluate the decision and the decision process

With alternative B, marketing & advertising costs are sharply reduced, and PCOs are already
promoting the IGRs benefits (since GENCORs introduction in 1984). Also, by 1985,
PRECOR successfully captured an estimated 80 percent of all flea product sales made
through PCOs, veterinary clinics, and pet stores. It is reasonable to expect similar results
from GENCOR.
The projections are based on sales and advertising costs of 27% of sales plus an additional
$500K to accelerate GENCORs use among PCOs. In this market, because of the reduced
costs, Zoecon can remain profitable with as little as 5% market penetration. Given the 80%

market penetration of the PRECOR product within 5 years, Zoecon can expect significant
profits from GENCOR in the PCO market as well.