Case Study - Should JonesBlair Company, a privately held corporation that produces and markets architectural paint increase marketing efforts in the South West of the United States?
To: Steven Clinton
Date: June 24, 2013
Re: Jones-Blair Company
Recommendation: Jones-Blair Company should continue doing what they are doing, and keep the cost structure the same.
Problem Statement: Should Jones-Blair Company, a privately held corporation that produces and markets architectural paint; increase marketing efforts in the South West of the United States by spending an extra $350,000 in corporate brand advertising, cutting prices by 20%, hiring one additional sales representative, or doing nothing?
- U.S. Paint Industry
- The architectural coatings have a projected growth rate of 1-2% each year, and are considered a mature market.
- Estimated sales of paint in 2004 were $16 billion.
- Architectural paint coatings and sundries were $12 billion plus in 2004.
- Market Segments
- Two major segments in the paint industry are do-it-yourselfers (DIY), and professional painters.
- Roughly 50% of architectural coatings are from DIY painters.
- Buyers view paint as paint and search for the lowest price.
- Professional painters
- 25% of architectural coatings came from professional painters
- Seek quality products.
- Seek retailers who will put in the extra effort for them.
- Expect to work with knowledgeable employees when dealing with their paint.
- 25% of sales as a result of government, export, and contractor sales
- Contractors look for the lowest price.
- The industry has seen a 40% reduction in the number of paint companies since 1980. This leaves roughly 600 companies still in business, but with a declining rate of 2-3% per year. This is due to larger companies acquiring smaller ones in order to boost their specific market, or geographic presence.
- More than 60% of sales in the architectural coating segment came from large national producers such as Sherwin-Williams, Benjamin Moore, the Glidden unite of Imperial Chemicals, PPG Industries, Valspar Corporation, Grow Group, and Pratt & Lambert.
This is a preview of the whole essay
- Private Brands
- Roughly half of the architectural coatings are sold under private brands. These brands include Wal-Mart, Home Depot, Sears, and Lowes.
- Jones-Blair Company distributes its products through 200 independent paint stores, lumber-yards, and hardware outlets.
- 40% are located within the 11-county Dallas Fort Worth area.
- 60% are located in the other 39 counties it services.
- Other Products
- The company sells brushes, rollers, and thinners. However, these are not manufactured by the company.
- Original Equipment Manufacturing (OEM)
- The company also operates a large OEM coatings division.
- OEM is applied during manufacturing.
- Used for cars, appliances, furniture, and industrial machinery.
- Sold throughout the U.S. and worldwide
(1) The estimates for the future market growth will remain steady.
(2) All research done into the market is accurate.
(3) The Jones-Blair company does not want to do nothing.
Possible alternatives for Jones-Blair Company include:
- Vice President of Advertising suggests the Jones-Blair Company should spend an extra $350,000 on corporate brand advertising.
- Vice President of Operations suggests the Jones-Blair Company should cut product prices by 20 percent.
- Vice President of Sales suggests the Jones-Blair Company should hire an additional sales representative.
- Vice President of Finance suggests the Jones-Blair Company should do nothing.
- Option one (Spending an extra $350,00 on advertising)
- Will increase brand awareness
- Reach new customers
- Can focus on non DFW areas
- Large cost
- 75% of the targeted audience isn’t buying paint
- Hard to track results
- Option two (Cutting prices by 20%)
- We can begin to compete more aggressively with other brands
- DIY Customers who are buying based on prices will be more likely to pick this product.
- Weakens brand image
- No guarantee consumers will disregard current brand loyalty for other products
- Will be difficult to retain new customers if they increase prices in the future
- Need to increase sales volumes in order to maintain a profit margin
- Still won’t attract contractions (need a 40% price cut for them)
- Option three (Hiring an additional sales representative)
- Help expand into new markets and areas
- Can focus on non-DFW areas (market penetration is only 16%)
- $60,000 increase in payroll, as well as commission rates
- What would they be focusing on
- Option four (do nothing)
- No increase in cost
- No added risk
- Hope to maintain contribution margin of 35%
- No guarantee on customer retention
- May allow competitors to gain an edge on the company
`Customer Environmental Analysis
- Who are our current and potential customers?
- Do-it-yourself painters
- Professional Painters
- What do our customers do with our products? What needs do we satisfy?
- Painting, residential, commercial, institutional structures
- Complimentary products include paint thinners, rollers and brushes. These are also sold by Jones-Blair Company.
- Where do our customers purchase our products?
- In over 50 counties in:
- New Mexico
- 200 independent paint stores, lumber-yards, and retailers
- 40% are located in the DFW area
- 60% are located outside the DFW area
- When do our customers purchase our products?
- Seasonal sales have not been measures for each product line.
- Why and how do our customers select our products?
- Quality of product
- Brand image
- Brand reputation
- Customers select our product through the many retailers, based on quality and convenience of service.
- Price is important
- Contractors and DIY prefer low prices. While professional painters prefer quality products and employee expertise when purchasing products.
- Why do potential customers NOT purchase our products?
- Higher pricing
- Brand loyalty to another brand
- Simply a lack of need for the product at this time
ATTACHMENT 2 – SWOT ANALYSIS
ATTACHMENT 3 – COMPETITIVE ANALYSIS
- The Jones-Blair Company has many competitors and different levels.
- They are competing with, Sherwin-Williams, Benjamin Moore, the Glidden unite of Imperial Chemicals, PPG Industries, Valspar Corporation, Grow Group, and Pratt & Lambert, at a national level. They account for 60% of sale in the architectural coating segment.
- Stores who marketing their own brand including Sears, Lowes, Home Depot, and Wal-Mart. These stores hold about 50% of the architectural coating sales.
- Total paint companies are decreasing at a rate of 2-3% annually.
- If the Jones-Blair Company changes their marketing strategy, we can expect the competition to do nothing. Since Jones-Blair is a smaller, local company their strategy will not likely influence the larger national brands.