Jones Blair Company Case Study Essay
The market of Jones Blair can be divided to two groups: Dallas-Fort Worth area and Non Dallas-Fort Worth JBC’s potential segment(s) and strategy In order to reach these business goals at a time when growth is nonexistent, Jones-Blair must take immediate action and increase their sales team and refocus their sales energies. Jones Blair is a regional paint manufacturer that has to compete in a mature market (sales growth are expected to be the general rate of inflation) and also very concentrated, since the seven major producers account for upwards of 60 percent of sales.
Therefore, in this market context, Jones Blair will need to increase its sales in volume, but keep its profit margin. The strategies to be considered in this case can be based on: consumer segmentation, targeting and managing marketing mix. Key Issues Recent research indicated that do-it-yourself painters do not care much about the brand and, consequently, about the quality of the paint (brand reputation was the 4th key criteria mentioned by the buyers to choose a covering) and it has become a commodity for this kind of consumers.
Also, the company has been facing strong environmental pressure due to new regulations about the emissions of volatile organic compounds (VOCs). It is necessary for the company to invest in R&D and it is also likely that the company will not see its costs of production decrease due to the activities of R&D. -SWOT Analysis: Strengths ? High quality products ? High quality service with ? Knowledgeable sales representatives that know customers personally ? Mature market 1-2% sales growth long-term ? Shelf goods 43% of total industry dollar sales ? Specialty paint stores & lumberyards most frequently patronized ?
Distributes through 200 independent paint stores ? Maintaining margins while increasing R&D, material, & labor costs ? Market to major business/financial center (DFW) ? Total sales/year increasing dollars sales rate 4% each year Weakness ? Slow sales growth ? Reduce emissions of volatile compounds ? Compliance w/ EPA = low profit margins ? Presence in DFW do it yourself market, in-home centers ? Non-DFW market ? New accounts, only added 5 in last 5 years ? High costs for product ? DFW Sales decreased ? Paint gallon-age hasn’t changed in years ? Highest priced paint in service area, especially in DFW ? Awareness of the company Opportunities
Need to increase customer awareness by 30% ? Increase demand for paint sundries due to trend towards do it yourself painting ? Interior more popular than exterior ? Expand beyond paint ? Primarily in DFW area, so advertising outside of DFW ? Increase advertising over all mediums, catalogs etc ? Develop new retail accounts leads and penetrations ? Professional painters could solicit business to them ? Discount coupon offers on every purchase after first to build loyalty ? Increase contractor sales ? Number of paint companies are declining at a rate of 2 to 3% a year ? US Paint industry is maturing, over $13 billion in 1997Threats ?
Research & design= low profit margins ? Customers choose store first, then brand ? Companies like Wal-Mart becoming bigger ? Competition from cheaper paint brands ? More options besides painting ? Competition in DFW market ? Competition in non-DFW market ? Sherwin Williams, Benjamin Moore, Sears, Kmart, Home Depot etc. , strong brand… There are a few options to consider when determining how Jones-Blair Company will achieve their business goals of exponentially increasing company sales. One would be to make an additional expenditure in advertising in the DFW area to increase the awareness of the company brand to do-it-yourself painters.
Another would be to cut the price in both the DFW and non-DFW areas of all paint products by 20% in order to achieve parity with national paint brands. As well, the company could consider increasing their present sales reps, eight, by an additional representative. Those within the company afraid to step forward and attempt to grow are content maintaining the present business plan and guard margins and control costs. The present plan has increased dollar sales by 4% annually without increasing the amount of gallons sold.
In such an instance, increases in sales come with increases in variable costs related to the product. So with a contribution margin of 35% the final dollar amount to hit the bottom line would be minimal and not add significant value to the company. Given that the sales representatives’ forecast for the next year does not include increased demand for Jones-Blair paint this is additionally a risky business option. (See exhibit 1). After analyzing the previous options, it is apparently clear that in order to exponentially increase sales the Jones-Blair Company should hire an additional sales representative. …] -? However, as good as this market positioning is, the achieved total grossed sales amounts will not allow them to maintain current levels of research and development and adhere to the growing demands of environmental standards. – and professional painters, these mass merchandisers have priced their products to capture a higher percentage of the home construction market and the business from paint contractors. So with a contribution margin of 35% the final dollar amount to hit the bottom line would be minimal and not add significant value to the company.
The cost of such an addition would be minimal with a base salary of $60,000, plus a 1% commission on sales. With 120 of the company”tms 200 independent retail stores in the non-DFW area, the sales increases will be exponential and allow the company to reach established business goals. However, as the sales reps have focused on current customers over the last five years the sales team has added only five new professional accounts. As well, in the areas outside DFW, 70% of sales are derived from do-it-yourself painters. As well, the company could consider increasing their present sales reps, eight, by an additional representative.
At present, 70% of sales within DFW are derived from professional painters. However, the benefit of cutting the prices would not increase company sales to a point where they could maintain current contribution margin numbers. Given that the mass merchandisers are presently not pursuing this market source, the Jones-Blair Company would do well to draw upon their superior salesmen and initiate sales from this resource. Thus resulting only in approximately a 3% increase in customer purchases, from 15% to 18%. A posed increase of approximately 3% in the DFW area would increase the company”tms brand awareness by 5%, from approximately 25% to 30%.
The company”tms sales representatives have a superior reputation with their dealers. In such an instance, increases in sales come with increases in variable costs related to the product. -Alternative Courses of Action The market for do-it-yourself consumers is forecasted to reach US$ 5. 74 billion by the year 2003 (see appendix 2) and it seems to be the best segment for Jones Blair to focus its resources on, since it represents 90 percent of non-contractor-related volume outside DFW area and 70 percent in DFW.
The company’s most important market is Dallas-Fort Worth, which reaches 60-67 percent of total sales in USD within the years 1992-1996 (Appendix 1). Nevertheless, this percentage has been declining throughout the years, on a decreasing average basis of 1. 43 percent per year (Appendix 1). The market in DFW is getting more competitive and in Jones Blair’s outlets there has been a decline in gallonage volume. Nevertheless, non-DFW outlets historically have grown in gallonage volume sales, which means that consumers in DFW area seem to be more price sensitive than outside this area. Recommendations
Jones Blair will need to play up strength on distribution. This also means that they could expand their business into other areas. It is likely to be more profitable and successful to the company to sell to consumers located outside DFW area in this case. As the Vice President of Sales figured, it will cost $60,000 per year plus commission to the additional sales representative. The company will also need to segment their market and focus more on its most important segment of do-it-yourself consumers and work or its premium positioning through promotion efforts regarding Jones Blair’