Jones Blair Company is a paint manufacturer based in Dallas-Fort Worth (DFW) and serves Texas, Oklahoma, New Mexico, and Louisiana. Their manufacturing plant produces architectural paint as their primary product line. Along with paint, they also provide painting sundries to customers, branded with the Jones Blair logo even though they are not manufactured by the company.
The management is faced with a critical decision regarding sales and competitive positioning in the current market. Jones Blair holds a significant market share in the DFW area and has moderate distribution in neighboring markets. Additionally, the company is examining its price points to determine if it is positioning itself as a high-end brand in the market and if the pricing aligns with the quality of its products.
The management at the firm has had two unsuccessful meetings to develop a tactical plan for the company’s marketing goals. During the third meeting, management decided to create a conclusion on how to pursue a solid plan in the marketing field for architectural paint coating product lines, as peak season is approaching. The Jones Blair Company is facing the impending peak season for their primary market, paint. In various management meetings, they discussed different actions to build an effective plan to increase the presence of architectural paint in the market.
The various alternatives from different departments are: increasing marketing funding by $350,000, reducing the selling price by 20%, hiring a new salesperson for $60,000, or continuing with business as usual. Each suggestion was thoroughly analyzed, including their pros and cons and a break-even analysis. Based on this evaluation, it was concluded that the company is currently profitable and experiencing strong growth. However, the option with the lowest risk and potential for great results is hiring a new salesperson.
Jones Blair Company is a manufacturer and producer of paint. They offer their own brand of paint supplies, which are sold in both the architectural paint and original equipment manufacturing (OEM) paint markets. The architectural paint is distributed in Texas, Oklahoma, New Mexico, and Louisiana — spanning fifty counties. On the other hand, the OEM paint is sold globally, covering the entire United States and the world. Jones Blair primarily focuses on selling architectural paint in the Dallas-Fort Worth area.
DFW is the location of 40% of all outlets where product is sold and accounts for 50% of total sales. The company has established a stable presence in the market with over 200 retailer accounts. Over the past five years, they have added a mere five new accounts, but have experienced steady sales growth of 4% per annum. The company currently employs eight sales representatives who maintain strong relationships with the majority of their accounts. These representatives are focused on preserving these customer connections while also monitoring inventory orders to guarantee product availability.
In 1999, the market value for Jones Blair’s architectural paint in the Dallas-Fort Worth and surrounding areas was estimated to be $80.0 million. Despite a decrease specifically in the Dallas-Fort Worth area lately, sales have been rising in the overall market. However, neighboring areas and counties are currently experiencing stronger growth. It is important to note that although there was a bigger decline from 1998 to 1999, the Dallas-Fort Worth market remains relatively stable.
Architectural paint is available to various customer groups, including DIY enthusiasts and professional painters. The DIY market accounts for approximately 50% of architectural paint sales, while the remaining portion is divided among professional painters, contractors, exports, and government sales. In the paint market, there are three primary categories: architectural paint, OEM paint, and special-purpose paint.
Architectural paint primarily targets non-professional customers and is often referred to as “shelf goods” due to its availability in general purpose stores. The American paint market is valued at 13 billion dollars and consists of three main sub categories, with architectural paint holding the largest market share at 43 percent. Following closely behind is OEM paint with a market share of 35 percent, while special-purpose paint holds the smallest market share at 22 percent.
According to estimates, Jones Blair is distributing their products in an 80.0 million dollar market for architectural paint in 1999. Within this market, Jones Blair holds a 15% market share, equating to sales of 12 million dollars. In terms of store distribution, Jones Blair operates in 40% of its total stores within the Dallas-Fort Worth area. From 1995 to 1998, the average sales for the whole market in this area amounted to 50.73 million dollars. However, in 1999, sales in this area experienced a 5.37% decrease, totaling 48.0 million dollars. Jones Blair has a presence in the Dallas-Fort Worth area, specifically in 11 counties, and is also represented in 39 counties outside of this area.
The two mentioned areas, the outside Dallas-Fort Worth area and the Dallas-Fort Worth area, have an equal share of dollar sales. From 1995 to 1998, the outside Dallas-Fort Worth area experienced growth with average sales increasing by 17.81 percent. On the other hand, the Dallas-Fort Worth area remained more stable during this period, with a dollar value of 7 million.
Jones Blair’s dollar sales have been steadily growing at a rate of 4 percent recently. However, over the past five years, this growth in sales only accounts for 0.5 percent. Currently, Jones Blair allocates 3 percent ($360,000) of its net sales to advertising. Research indicates that 25 percent of the target market is familiar with the Jones Blair brand and this brand awareness directly influences customers’ brand choices.
The purchasing process for a product involves four stages: recognizing the need, researching information, selecting a store, and ultimately deciding on a specific product. In-store, customers make their final decision on which product to purchase. Currently, Jones Blair products are known for being high-quality paints with premium prices. Luckily, there are practical solutions available to address the challenges faced by the Jones Blair Company.
During the meeting, the Vice President of Advertising suggested improving advertising to increase net sales. The Vice President emphasized the importance of targeting the DFW do-it-yourselfer market, as there appears to be a correlation between brand awareness and customer preferences. Sufficient data supports this assertion. Currently, the Jones Blair Company’s brand awareness rate stands at 25%. However, raising it to 30% is believed by the Vice President to be the solution for this issue.
The Vice President of Advertising recommends a $350,000 increase in advertising to tackle the issue. Currently, advertising expenses amount to 3% of net sales. In 1999, the Jones Blair Company had $12,000,000 in net sales, resulting in an advertising expense of $360,000. To achieve the necessary 30% awareness level for problem resolution, the Vice President suggests that $710,000 will be needed. Moreover, the extra $350,000 will allow television coverage in approximately 15 counties outside of DFW.
This proposal appears suitable, however concerns will arise about the risk involved in allocating $350,000 for advertising. The Vice President of Operations presented a second option to reduce the price of all paint products by 20% in order to align with national paint brands. He argued that focusing solely on advertising in the DFW areas is too narrow and proposed a strategy to enhance competitiveness in the do-it-yourself market. There are potential benefits to adopting his approach, as it could enable the Jones-Blair company to potentially expand into specialty stores.
The Vice President of Sales suggests a practical and affordable course of action to capture the market of price-sensitive customers. By decreasing the price, it can influence their decision to purchase Jones-Blair paint, resulting in larger sales. Although this may increase the break-even point due to the price drop, it is still a beneficial strategy. To implement this, hiring a new sales person is recommended, who will focus on developing new retail account leads and presentations, as well as calling on professional painters to solicit their business through our dealers.
Currently there are eight sales representatives employed, however, in the past five years, we have only added five new accounts. While our current sales representatives are helpful, professional, and knowledgeable, they could be more aggressive in obtaining new retail account leads. Our account penetration in the non-DFW area is only at 16%. The cost of hiring a new sales representative will be $60,000, excluding commission. By adding a new representative to our workforce to focus on these tasks, Jones Blair will be able to acquire new retail accounts and collaborate with untapped professional painting firms in the area. If we assume that our revenues will be the same as in 1999, a 10% increase in sales in the DFW area will bring a total benefit of $3,048,000 after subtracting the salary and commissions expense. This move will help expand Jones Blair distribution in the non-DFW area and increase the company’s value. Maintaining the current approach is a viable option for Jones Blair Company.
This would entail keeping the current business model intact for corporate marketing efforts. Jones Blair Company is fortunate in that they can choose to maintain the existing approach. In 1999, their sales volume amounted to twelve million, resulting in a net profit before taxes of $1,140,000. Furthermore, Jones Blair Company has experienced a 4 percent annual average increase in dollar sales over the past ten years. Despite higher research and development expenses, as well as material and labor costs, Jones Blair Company has managed to successfully maintain its profit margins.
The current business model is viable and profitable, so there is no urgency for Jones Blair Company to take immediate action. However, implementing the three alternative approaches for corporate marketing would require significant increases in spending. According to the Vice President of Finance, the company policy is to recover noncapital expenditures within one year. Therefore, adopting additional marketing efforts would strain the company as they need to recoup the money spent within a year.
Each proposal carries its own risk as there is no guarantee that sales volume will increase at a rate equal to or above the noncapital expenditures. By maintaining the current approach, Jones Blair Company can maintain the successes it has achieved in the architectural paint market. This option allows the company to avoid additional spending on marketing efforts and consequently, avoid new risks. By taking a conservative approach, the company can continue with its current market strategy and navigate the challenges of the industry without taking on any new risks.
Despite having a respectable market presence and satisfactory profitability margins, Jones Blair Company sees no real need for any changes. When deciding the appropriate course of action, the focus should be on the investment risk. While all members of the executive team have valid proposals, the most beneficial choice for Jones Blair would be to hire an additional sales person. This individual would solely concentrate on developing new retail account leads and presentations, as well as collaborating with professional painting firms. This option has the least financial risk and the potential to yield limitless outcomes.
As peak painting season approaches, professional painting firms and retail stores will require additional materials and merchandise compared to recent months. To address this, a new representative will be hired to handle these new accounts, allowing our current sales associates to concentrate on their expertise and maintain strong customer relationships, which are highly important to Jones Blair. The primary goal of the new sales associate will be to focus on the non-DFW areas. Achieving a 10% market share increase in these areas this year would result in a revenue of 3.2 million dollars for Jones Blair.
