Jones Blair Company is a paint manufacturer that distributes paint to Texas, Oklahoma, New Mexico, and Louisiana with its manufacturing plant based in Dallas-Fort Worth (DFW). The main product line of the company is architectural paint with some line depth that they manufacture at their own plant; they also offer the sundries for painting towards their end customers. The sundries offered are not produced by the company itself but carries the Jones Blair brand logo.
The management is at a turning point where they need to make a decision about how to get more sales out on the market and if the company is competitive enough in the current market place. They have a strong market share in the DFW area as well as moderate distribution out to the surrounding markets. Jones Blair is also looking into their price points and evaluating if they are currently positioning themselves as a too high-end brand in the market place and if the pricing is set accordingly to the quality that they offer.
The management at the firm has had two unsuccessful meetings in hopes of coming up with a future tactical plan for the company’s marketing goals. During the third meeting, management has decided to develop a conclusion on how to pursue a solid plan in the marketing field for architectural paint coating product lines, given that peak season is quickly approaching. The Jones Blair Company has been put into a situation where the peak season for their primary market, paint, is coming up. During some management meetings, they discussed different courses of action to build an effective plan to get more architectural paint out on the market.
The alternatives come from different departments and the main proposals are as follows; increase the marketing funding by $350,000, lower the selling price 20%, hire a new salesperson for $60,000 or just keep resuming business as usual. Each and every one of these suggestions was mapped out with their corresponding pros and cons, accompanied by a break even analysis. The conclusion that emerged was that the company is profitable and currently growing strong, but the low risk (and chance of a great outcome) of hiring a new sales person looks most appealing for the company.
Jones Blair Company is a producer and manufacturer of paint and offers paint supplies that are bought and sold under their own brand name. They operate both in the market for architectural paint and the original equipment manufacturing (OEM) paint. The architectural paint is distributed throughout fifty counties including Texas, Oklahoma, New Mexico, and Louisiana while the OEM paint has the whole United States and the world as a marketplace. Jones Blair does most of its selling of architectural paint in the Dallas-Fort Worth area.
DFW is home to forty percent of the total outlets where product is offered, as well as half of their total dollar sales. The company is stable within the market with over two-hundred accounts with retailers. However, during the last five years only added five new accounts and have had steady sales growth of four percent per year. The company currently has eight sales representatives that have close relationships with most of their accounts. They are working on keeping that strong customer relationship and also keeping track of inventory orders to ensure the customers always have the product available.
The market place that Jones Blair’s architectural paint is currently operating in was calculated in 1999 to be an 80. 0 million dollar market with both the Dallas-Fort Worth and surrounding areas. The sales are growing in their general market overall but have declined the last couple of years in the Dallas-Fort Worth area. This shows that the surrounding areas and counties are currently a stronger growing market even though the Dallas-Fort Worth is a fairly stable market with a larger drop from 1998 to 1999.
Architectural paint is sold towards different types of customers. There is a market for do-it-yourself-people. This market covers almost half the sales for architectural paint. The other half goes towards professional painters that are divided in to two subcategories with pure professional painters that only do the paint job and the other part consists of contractors, but also exports and government sales. In the paint market there are three different main areas; those are architectural paint, original equipment manufacturing (OEM) paint and special-purpose paint.
Architectural paint is the category that mostly reaches out to end costumers of the non-professional kind. The other two categories are more aimed to find itself end up on a professional market for different purposes. Therefore, architectural paint is often called “shelf goods” because one can find it in general purpose stores. The paint market in America is a 13 billion dollar industry in America over the three main sub categories. There are three sub categories of paint with the biggest being architectural paint with a market share of 43 percent. Right ehind is OEM paint with a 35 percent market share. The smallest market is the special-purpose paint with a 22 percent market share.
The specific market Jones Blair is distributing their products into is estimated to be an 80. 0 million dollar market for architectural paint in 1999. From this, Jones Blair has a 15% market share with sales of 12 million dollars. Jones Blair has 40 percent of its total amount of stores with products available in the Dallas-Fort Worth area. In this area between 1995 and 1998 the average sales for the whole market have been a 50. 73 million dollar market. 999 the sales in this area dropped 5. 37% to 48. 0 million dollars. Jones Blair is in the Dallas-Fort Worth are represented in 11 counties, outside this area the company is represented in 39 counties.
The dollar sales between the two areas mentioned earlier are divided equally. The outside Dallas-Fort Worth area have had a growth over the last couple of years and from the average sales from 1995 to 1998 did the market grow 17. 81 percent with a steady growth compared to the Dallas-Fort Worth are that have had a more stable last couple of years with a dollar value of 7. millions from 1995 to 1998. The dollar sales for Jones Blair have been growing with a steady 4 percent thru the last couple of years, with only growing the sales accounts with 0. 5 percent the last 5 years. Currently Jones Blair is spending 3 percent of its net sales on advertising. The dollar value for that is currently $360,000 dollar. Research has shown that 25 percent of the people in the target market are aware of the Jones Blair brand and the awareness factor has a direct correlation on the choice of what brand is chosen for costumers.
The Costumer buying decision process is four steps starting to decide that they need the product, thereafter there is an information collection process which follows by deciding where to buy the product. It is first in the store in step four that the costumer decides what product to choose. Jones Blair products in the marketplace currently are one of the most premium priced paints and seen as a quality product. There appears to be many practical solutions that sufficiently address the problem that is at hand in the Jones Blair Company.
One of the options that were raised in the current meeting was to increase advertising in order to increase net sales. This advertising option was brought up by the current Vice President of Advertising. The Vice President of Advertising believes that the company must direct their efforts toward the DFW do-it-yourselfer market. He believes there is a direct relationship between the awareness level and brands brought. There is adequate data to support this fact. The Jones Blair Company is currently at 25% brand awareness, and the Vice President of Advertising believes that a 30% awareness level will solve the problem.
The main course of action that the Vice President of Advertising is proposing is to increase advertising by $350,000. The expense of advertising is currently at 3% of net sales. The net sales in 1999 for the Jones Blair Company were $12,000,000. This data shows that their current expense on advertising is $360,000. The Vice President of Advertising suggests that $710,000 will be necessary to achieve the 30% awareness level needed to solve the problem. The increase of $350,000 will also allow for television coverage in some 15 counties outside of DFW.
This proposal seems to be appropriate, but questions will be asked in regards to the risk level of allocating $350,000 towards advertising. Second option was raised by Vice President of Operations to decrease a price by 20% on all paint products in order to achieve parity with all national paint brands. He claimed that advertising in just DFW areas is too narrow a focus. He also suggested becoming more competitive in do-it-yourself market. There are some advantages to his approach. Jones-Blair company could possible expand in a specialty stores market.
Also, price decrease will most likely capture the market of the customers that were price-sensitive. Price decrease can influence their decision to buy Jones-Blair paint. That does mean their break-even point will need to increase with the drop in prices but netting larger sales. The Vice President of Sales proposes a course of action that is both practical and affordable. These are the reasons why our efforts should be focused on hiring a new sales person 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.
There are eight currently employed sales representatives; we have only added five new accounts in the last five years. Our current sales representatives are helpful, professional, and knowledgeable; however they could be more aggressive with obtaining new retail account leads. Account penetration in the non-DFW area is currently only 16%. Hiring a new sales representative will cost the company $60,000 excluding commission. By adding a new representative to our workforce to execute the tasks mentioned above, Jones Blair will be able to btain new retail accounts, and work with the untapped professional painting firms in the area. Assuming that we will accrue the same revenues as in 1999 this year, a 10% increase in sales in the DFW area will benefit the company a total of $3,048,000 less the salary and commissions expense. This is a move in the right direction toward expanding Jones Blair distribution in the non-DFW area as well as increasing the value of the company. A viable option for Jones Blair Company is to maintain the current approach.
This would mean making no changes to the current business model as it stands in regard to corporate marketing efforts. Jones Blair Company is fortunate in that they have the option to maintain the current approach. Their sales volume for the year of 1999 was twelve million with a net profit before taxes of $1,140,000. In addition, dollar sales for Jones Blair Company have increased over the past decade at an average annual rate of 4 percent per year. Jones Blair Company has been able to successfully preserve its margins even with spending increases in research and development, material and labor costs.
The current business model is indeed both viable and profitable, and because of this there are no factors forcing Jones Blair Company to take immediate action. The three alternative approaches which aim to deploy corporate marketing efforts will each require the company to make substantial increases in spending. As stated by the Vice President of Finance, the company policy is to recoup such noncapital expenditures within a time-frame of one-year. Taking on new spending for additional marketing efforts would inevitably put some amount of strain on the company as Jones Blair Company will need to recoup the money spent within one year.
Each proposal has its own inherent risk as there is no guarantee that through such efforts sales volume will increase at a rate at or above the noncapital expenditures. Maintaining the current approach would allow Jones Blair Company to continue to enjoy the successes it has gained in the architectural paint market. This is an option which allows the company to take on no new increases in spending on marketing efforts and therefore no new risks. By “playing it safe” the company can carry on with its current market strategy and avoid any new risks in a challenging industry.
Jones Blair Company has a respectable market presence and more than adequate profitability margins. For this reason there is no real need to make any changes. When it comes down to choose the correct course of action one has to look at the risk of the investment. Although all members of the executive team have valid proposals, there is one course of action that will be most beneficial to Jones Blair. Hiring an additional sales person to focus solely on developing new retail account leads and presentations as well as working with professional painting firms has the least monetary risk involved and the ability to produce unlimited results.
With peak painting season quickly approaching, professional painting firms and retail stores will need more materials and merchandise than in recent previous months. Hiring a new representative to deal with these new accounts leaves our current sales associates free to focus on their areas of expertise and maintain those strong customer relationships that Jones Blair values. Focusing on our non-DFW areas will be the new sales associate’s main focus. A 10% increase in market share this year in the non-DFW will make Jones Blair 3. 2 million dollars.