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The U.S. paint industry is very large and competition among the coating company is quite intense. Jones Blair Company markets its paint and sundry items in over 50 countries and in order to know which the customers of Jones Blair Company are, we have to break down and build up the potential buyers into groups to structure the market.
The market of Jones Blair can be divided to two groups: Dallas-Fort Worth area and Non Dallas-Fort Worth. Among these two areas, we have got the contractor, professional painter and DIY household but the number of contractor is so minimal so we do not focus on this. From the case, we can get the estimated dollar volume of architectural paint and allied products sold in Jones Blair’s 50 countries service area in 1995 was $80 millions; 40% of its outlets are located in the 11-country DFW area and the remaining are in the other 39 countries. So, the estimated dollar volume for the DFW area is $48 millions and for the non-DFW area is $32 millions. Besides, 70% of its sales through the DFW dealers went to the professional painter, while 70% of sales through the non-DFW outlets went to DIY. It means the percentage of the market segment is as following:
DFW ($48 millions) Non-DFW ($32 millions)
Professional Painters 70% ($33.6 millions) 30% ($9.6 millions)
DIY households 30% ($14.4 millions1) 70% ($22.4 millions)
Professional In Downtown
Professional painters in downtown area usually put the focus on the quality of the product rather than the price when choosing suitable painting products. Those professionals choosing the painting products with better quality are because of the outcome of painting may affect their reputation directly. In order to create a better reputation and maintain the high standard quality of apartments furbishing, high-end painting products using is a must, therefore, they have to adopt the inevitable burden over their shoulders by increasing their expenditures. This segment reveals that price is not the first element the customers to consider, but the quality.
Family In Downtown
Customers in this segment make difficulties to the producers since the families are not quality-oriented customers as the professional painters alike.
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Strategy Jones Blair should adopt to reach the segments sought
After the meeting, the senior management executives of Jones Blair Company had made four valid alternatives. The Pros and cons for each of the alternatives are shown below.
A) Spending additional $350,000 on corporate advertising in the DFW do-it-yourselfer market
Pros: Firstly, as we can see from the DFW consumer advertising awareness indicator in the case study, the do-it-yourselfers are in the majority for the sales. If Jones Blair does advertise to them may enhance the awareness level and this can increase the sales, when emphasis on television, which will reach non-DFW consumers as well. Secondly, although Jones Blair’s awareness is lower than national paint brand’s and mass merchandiser brand’s awareness, advertising can really be a tool to facilitate brand recognition and awareness that can have a subtle influence on the consumers’ purchase decision. The last but not the least, advertising can affect the consumers’ buying process. In those stores carrying multiples brands, brand name is also important to consumers because they do think about paint they have seen advertised when choosing a brand.
Cons: As a large number of do-it-yourselfers choose a store before selecting a brand, so that Jones Blair should focus on cooperative advertising rather than corporate brand advertising. Also, only apply this to the DFW area alone is too narrow. Moreover, the research indicated that about 75 percent of the audience does not buy paint, thus using large budget for this strategy cannot guarantee of the results. Originally, the company spends approximately 3 percent of net sales ($12million) on advertising and sales promotion. If the company spends $350,000 more will nearly double the expense. In addition, paint is less image sensitive than other products for the audience so that television promotion campaign may not be useful.
B) Cutting price by 20 percent
Pros: Cutting price by 20 percent that can make the company more competitive against other dealers, such as mass merchandisers. Moreover, it may help to increase sales to do-it-yourself markets when the customers tend to be more price- sensitive.
Cons: It is hard to maintain high profit by cutting price 20 percent because the gallonage demand for paint in the service area will not increase the coming year, the costs are unlikely to decline as well. Furthermore, lowering prices means that the company will throw away its effort that they have made in order to build quality image that offer extra services for the consumers, so that this strategy may not long lasting. High price is considered as advantage for the company because Jones Blair promise to provide high quality paints and services, this differentiation allows them to position as high- priced paint producer. However, if the company cut the price that will cause the less price sensitive consumers to question the quality and it will lose its high quality image. As a result, it may decrease its sales by using this strategy.
C) Add or hire one additional sales representative
Pros: Hiring one additional sales representative can help to develop new retail accounts so as to increase the sales in the long term. Besides, the sales representative can give professional painter advices or suggestions on the application of the product. This can create additional or added value service for the customers. At the same time, it is also an effective way of promotion, especially through word of mouth. Nevertheless, it could also generate sales if it is applied to the right and targeted region.
Cons: However, hiring one additional sales representative will have a direct cost of $60,000 per year and also the commission expenses. As a result, it might increase the expenditure of the company and the sales are inevitably needed to increase so as to cover the salary expense of the representative. Also, it is time consuming for the adaptation and training of the sales representative resulting in not rapid or significant effect in the short term. Moreover, hiring only one additional sales representative might not be enough and thus it is not an attractive and effective tool to fight with the competitors at the moment.
D) Pursuance of current approach and do nothing
Pros: Since Jones Blair Company is estimated to be continuing profitable at the time being and in short term, so it is also possible for the company to continue pursuing its current approach and do nothing with its business strategies. Besides, with reference of doing nothing can also ensure non additional spending cost of the company in areas like advertising. Thus, this can save up the additional expenditure of the company.
Cons: However, in the contrary, this is considered as a pessimistic and conservative strategy since it is only focus in the short term. Due to the quality and pricing strategy of other companies, it is not wise enough for Jones Blair Company to do nothing as it is not specific and sufficient strategy to fight with the competitors. Also, as mentioned in the article, the price for Jones Blair Company is relatively high, so with the intense competition, the sales might not increase too. Therefore, doing nothing is not effective to keep the position and market share in the long term and might even directly lose the sales to the competitors.