JANMAR COATINGS INC.

CASE ANALYSIS

1 BACKGROUND
Janmar Coatings Inc., and architectural paint coating firm, is faced with multiple
marketing strategies to evaluate and decide which one to execute. Given the
competitive pricing nature of the paint coatings industry and shrinking number of firms
in existence, marketing will become a key component for the companys long-term
profitability and growth.

2 MAJOR ISSUES/DECISION TO BE MADE

Although JanMar does not have a specific issue at hand, it recognized the crucial
resolution that senior management needed to reach. The issue was how to determine
the most effective corporate marketing campaign in the most receptive target market
that the company currently serves. Long-term survival as a non-nationally distributing
firm with a premium price point is directly correlated to the relationship with customers
that the marketing efforts would foster and promote. Understanding the structure of the
market that Janmar services, and where its customers buy their Janmar paint from is
crucial to determining where growth opportunities are present. Identifying a unified
corporate marketing strategy, particularly in pricing is of significant importance as the
options presented by senior management varied in not only their goals, but also in
execution methods. This issue, although not the major focus of the company, is notable
as divergence of method and goals at a senior management level is likely to duplicate
further down into the companys corporate structure.
The target market is appropriate given the geographic information, and buying
characteristics that accompany the architectural paint industry in the 55 counties that
Janmar services. Segmentation of the target market geographically by DFW and nonDFW regions and then by end user is the most appropriate way to determine where
marketing attention is required as the purchasing habits and needs of the segments
differ greatly. Servicing do-it-yourselfers as well as professional painters creates a vast
target market where varying marketing strategies are required to be employed. The
retail market that sells predominantly to do-it-yourselfers has increased vastly in recent
years with the introduction of Home Depot, Sears, and Kmart, all of whom carry multiple
brands of paint which creates internal competition within individual retailers. The
customers who purchase their paint from these retailers are the most price sensitive,
and the least loyal to a brand of paint, neither of which complement the premium
pricing strategy and implied benefits that distinguish Janmar from the major players that
are also available in the 55 county market. Whereas for professional painters quality
products and relationships with stores becomes more crucial as the reputations of the
painter is on the line and larger quantities of paint is purchased per customer. The
unparalleled service that independent retailers provide professional painters
complements the premium pricing strategy of Janmar, making the target market an
appealing growth opportunity.

The product itself is an issue given that Burns conceded that paint as become a
commodity, driven by price, and that once applied to a wall there is no way to identify
the difference between premium-priced and competitively priced paint (Kerin &
Peterson 122).
Distribution of Janmar products also needs to be assessed as the DFW and non-DFW
regions contain a different amount of outlets that currently carry the Janmar paint line.
In total 200 outlets carry Janmar paint, 80 stores in the DFW area and 120 in the NonDFW area. As DFW is currently supporting 60% of total sales, averaging $90,000 of
Janmar paint sales per location, it can be assumed that current practices are effective;
in contrast, non-DFW outlets average $40,000 in Janmar sales per location (Exhibit A).
Given the competitive nature of the industry and reliance on greater levels of
distribution for the company to hedge the threat of larger competitors in the area, nonDFW is an ideal location to expand sales without cannibalizing current sales in DFW.

3 REASONABLE ALTERNATIVES & ASSUMPTIONS

Given the available proposals from senior management, Burns should practically
explore the long-term growth potential that each plan will provide, as the ultimate goal
of Janmar should be to pursue a strategy that not only provides a realistic one year
breakeven and short term increase in market share, but also long-term survival of the
firm and inherent profitability from lasting effects of the marketing strategy chosen.
Long term survival is to be characterized by annual growth of 3%, on the high end of
the industrys expected growth given its mature stage, however it is necessary to
prevent larger firms from acquiring a faltering firm to gain market share. Continued
growth will be impacted by increased distribution, and distribution should also correlate
to higher sales and net profit so long as variable costs are not dramatically affected. As
Janmar is more a niche firm and therefore is unable to acquire additional firms to
increase market share, distribution is another way this concept can be realistically
achieved.
Cutting prices as suggested by the Vice President of Operations not only diverges
from the corporate pricing strategy and diminishes contribution margins, but also results
in the most expensive option as noted in Exhibit D. Similarly, the traditional advertising
model was relatively expensive as noted in Exhibit C, but also targets the well
performing DFW do-it-yourselfer target market that is already responsible for over $5
million in revenue annually. Raising the brand awareness level among do-it-yourselfers
is difficult to measure in regards to the realistic cost to increase awareness to 30% that
the plan aims to achieve. Also, it fails to acknowledge that increased brand awareness
may not translate into additional sales, as do-it-yourselfers purchase behavior begins
with selecting a location to purchase paint and then a brand, rather than a particular
brand and then the location of a retailer that sells the brand.
I recommend that Janmar engage in the proposal brought forth by the Vice
President of Sales to hire a sales representative in the non-DFW area as sales are low,

but the product can be properly positioned with the premium price to professional
painters and increase the 10% of non-DFW sales that Janmar currently has (Exhibit B). A
greater increase of market share will be derived in the non-DFW market as that
segment is experiencing a gallonage increase, which means that sales are projected to
increase. Per Exhibits E and F, hiring the sales representative generates the lowest
additional cost to the company at $171,428.57. This marketing strategy will increase
penetration of the market that is low, hovering at 16% which indicates that there are
approximately 750 outlets (120 = .16*x) in the non-DFW area which is a significant
growth opportunity for the company, particularly within independent stores that sell to
professional painters.

4 SUPPORTING EXHIBITS
Exhibit A
Industry Market
DFW & Non-DFW

Sales in
Dollars

Sales
Janmar Sales
Janmar

80,000,000
12,000,000

Janmar
Total Sales

Market
Share

15.0%
% of Sales
100%

Sales in $
12,000,000

DFW

60% 7,200,000

Non-DFW

40% 4,800,000

Exhibit B
DFW

% of Sales

Total

Sales in $
7,200,000

DIY

70%

5,040,000

Professionals

30%

2,160,000

Non-DFW
Total

% of
Sales

Sales in $
4,800,000

DIY

90%

Professionals 10%

4,320,000
480,000

Exhibit C
Option 1: Increasing Brand Awareness by +350,000 of traditional
marketing
BE$ = FC/Con't Margin

Con't Margin 35%

350,000 = .35 *X ~ X = $1,000,000

$1,000,000 in additional sales necessary
BE$ = $1,000,000

Exhibit D
Option 2: Cut Prices 20%
CM = (P-VC)/P P = 12,000,000
.35 = (12,000,000-X)/12,000,000
VC

7,800,000

Revenue less 20%

Revenue

12,000,000

9,600,000

X = (9,600,000-7,800,000)/9,600,000
X = (9,600,000-7,800,000)/9,600,000
X = (1,800,000)/9,600,000
X = .1875
CM After: 18.75%
BE$ = FC/Cont Margin
BE$ = (12,000,000-7,800,000-1,400,000)/.1875

BE$ 350,000

BE$ = $2,800,000/.1875
BE$ = $14,933,333.33 12,000,000
BE$ = 2,933,333.33
Exhibit E
Option 3: Hire Sales Rep for 60,000
BE$ = FC/Con't Margin
Con't Margin 35%

FC

60,000

BE$ = 60,000/.35
BE$ = $171,428.57

Exhibit F

Costs to Breakeven in 1 Year

3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
Traditional
Marketing

Cut Prices

Hire Sales Rep