Jones Blair Case Study Essay

Jones †¢ Blair is a company that produces and sells architectural paint it also sell paint sundries which include paintbrushes and rollers. It caters to over 50 countries which are divided into two sectors the DFW area and the non-DFW area. Of the two the DFW area has been proven to be the most successful area for the company. In 1999 the company made 80 million in sales and 60% of this was contributed by the DFW area. There are two segments within the company’s main sales attributes and these are between the do it yourself market and the professional market. With regards to the professional market in the DFW area this accounted for 70% of sales In the non-DFW area 70% of sales were made through the do-it-yourself market. During a meeting the company discussed the problem of where and how to carry out marketing efforts. They were left with four options: 1) Cut the price by 20%. 2) Hire one additional sales rep. 3) Spend additional $350,000 on advertising. 4) Stay the same. A detailed look into each option. 1) Cut the price by 20%. The shopper research programme indicated that dealers will back off the brand when the customer appears price sensitive. By cutting the price by 20% this will allow the company to be on par with national brands. The current contribution margin for the company is 35% if the price was to be cut by 20% then the new contribution margin would be reduced to: 35% – 20% = 15% with the current sale volume being $12 million and a price cut of 20% the sales would have to increase significantly for the price cut to be effective. According to Barrett â€Å"we are now the highest price paint in our service area† the fact that the company still has increasing sales despite being the highest cost brand of all the competitors this shows that the company is being perceived as giving high quality goods where people don’t mind about paying extra for their brand. If the company was to cut the price by 20% this may leave doubts in peoples minds about whether or not the brand is actually as high quality as they had thought. The fact that they can get away with charging a higher price for their brand they should stick with it. 2) Hire one additional sales rep. Currently the company has 8 sales reps which are responsible for the following tasks: Monitoring inventories. Taking orders. Assisting in store display. Coordinating cooperative advertising programmes. A survey indicated that the sales reps were very well liked, helpful, professional and knowledgeable with regards to paint. These reps are paid a salary and also a 1% commission. The cost of hiring an additional sales rep would be $60,000 a year, this is excluding commission. The vice president feels that the current sales reps aren’t aggressive enough and the fact that only 5 new accounts were made in the last 5 years something needs to be done. Only 16% of the accounts come from the non-DFW area so maybe a focus needs to be placed onto this area. If this was to be done, an additional sales rep be assigned to the non-DFW area this could lead to a significant increase in sales. 3) Spend additional $350,000 on advertising. The vice president of advertising believes that there is a need for an awareness level of 30% among do-it-yourselfers to affect their sales. An emphasis on television coverage will reach non-DFW consumers in 15 countries. Research shows that ads affect the buying process Since most consumers consider the store before the actual brand maybe the advertising should be focused more-so on corporate ads rather than brand ads. The company spends 3% of its net sales on advertising therefore the current cost of advertising is: 3% of 12 million = 360000 with an additional spend of $350000 on advertising the total cost of advertising would be: 360000+ 350000= $710,000. This would almost double the cost of advertising and since there’s an emphasis on television this could prove to be a risky option, especially since brand awareness isn’t the main attribution to buyer behaviour. Another factor to consider is the fact that 75% of the audience of the advert aren’t buying paint. 4) Stay the same. The final option for the company would be to keep everything the same which is advised by the vice president of finance. Since the company is continuing to make profit he feels that if you were to take the other options that there would have to be a significant increase in the sales volume which may not be a result. Although most of the options offer different benefits and of course different drawbacks we don’t think there is an outright option to choose. With regards to the cut in price of 20% we don’t believe this option should be chosen. The fact that the company is allowed to charge the higher price and is perceived as being a high quality brand why should they risk losing all of this by accepting the price cut. The next option with regards to hiring an additional sales rep we feel that the fact that they have 8 sales reps already would the addition of another really make a significant impact on sales. Rather than focusing on hiring a new one we believe that if they focused more-so and possibly retraining their current sales reps this could prove to be more effective. The fact that the sales reps are already considered highly by the customers is a bonus. If more effort was put into them and how they could improve efficiency then this could be worthwhile to the company. The company could divide up the sales reps into the necessary markets and possibly by offering them incentives this could increase their performance. By hiring an additional sales rep doesn’t necessarily promise a change in sales. With regards to an increase of advertising spending of $350,000 we wouldn’t recommend this option. As the company wants to put an emphasis on television and the fact that 75% of the audience don’t buy paint, the 25% of the audience that do doesn’t seem like a big enough market coverage to invest such a lot of money into. Instead we feel they should look into other marketing options. The fact that with regards to buyer behaviour that customers choose the store first before the brand maybe the company should look into advertising within the actual stores. They could look into what stores are proven to be more popular and focus advertising attention on these. With the last option as staying the same although the company is continuing to make profits we feel like this could be the easy option. Rather than just being content with what is currently happening with the business they should focus on improving the business. The fact is that more and more competitors may enter the market or even people may change their buying behaviour but ultimately the company should try and always be a brand considered.