Alex

Ferro MKTG 1050 November 18, 2010

First in Show Pet Foods Case Study

Situational Analysis
The situation facing First in Show Pet Foods currently is one of expansion. First in Show wants to break into the world of retail branded pet food. First in Show is currently the number one producer of dog food for show dog kennels. Their promotional budget is approximately 500 to 800 thousand dollars with most of it allocated to this project.

Background
The first event that has a bearing on the company is the creation of the product. This product is what shapes the company. The second event that plays a part in the company is its marketing towards kennels. A kennel has a different outlook to products that a consumer. The product is currently marketed towards show dogs that need to look their best against all else. A kennel is also interested in a bulk size package and is less interested in a flashy package, rather than a large one. All of the companys marketing glossies are also geared to kennel owners.

Central Core of Difficulty

The primary internal difficulty that will be affecting First in Show is the gear change from a marketing plan that appeals to kennels, to a marketing plan the appeals to consumers. To appeal to the consumer, costs may need to be cut. However, the company does not want to move away from the business that provides 100% of its revenue. With all of the consumer transitions, they should not move away from their current core excessively.

Company Goal
The goal of First in Show is to market a retail dog food product simultaneously with their existing profitable kennel dog food product. As part of that goal, the company does not want to become perceived as abandoning its kennel market nor does it want it be perceived as reducing it quality to meat a price point. Of course the driving goal behind all of this is to make money.

Objectives

The objective that underscores all of First in Shows plans is that of even getting to product in stores. A target to meet is to be in 50% of major store by the next fiscal year. The second objective to meet is that of sales. The minimum sales target by next fiscal year is the breakeven sales point referenced in figures 4b, 5b, and 6b. The final objective is to not cut the quality of their products.

Primary Audience

The primary audience First in Show plans to target is in the Boston area, targeting both singles and couples in between the ages of 21 and 54 that have disposable income available for their pets. This age group has a rate of pet ownership around 79% and more importantly, because they have or want to have kids, consider dogs to be a part of the family. These criteria leave 178,343 households that can buy pet food in the Boston area. For more info see Figure 1. These figures do not account for houses with multiple dogs.

Boston Population Targeted Age Group % Population in Group Households Pet ownership rate Pet owners Figure 1

645,000 50% 322500 225750 79% 178343

Problem Definition
There are three problems that compound First in Shows product introduction. The first problem is the same problem as faces every other new brand, product recognition. The second problem that makes the brand introduction worse is that this dog food must be frozen. Frozen dog food needs to be in the frozen foods section, near people food rather than dog food, thus not being visible to a consumer idly browsing the dog food section. The last obstacle is that of pricing, if the price is too high, sales will be bad, but if the Cost per Case prices are too low, the company will not profit. Profit Margin Wholesale Price Commission Causes and Effects Supermarket Margin A lowering of production costs will allow First in Show to Sale Price either have higher margins at the same price point, or to Per can profit reduce the price while still keeping the same margins. If the Average Food Usage company sends more to place a larger number of Number cases per buyer advertisements, more consumers will purchase the product. If the company reduces the quality of their product, they will Profit per Buyer have lower production costs, and thus be able to sell at a Figure 2 Price per oz. better price, but also run the risk of losing current customers. Figure 2 contains a pricing justification for the projected sale Alpo oz. Mighty oz. price of $14.38 per case. Figure 3 shows a Price per Ounce comparison between our brand, leading canned food, an organic dog food, and a Cesar oz. similar product in a different market. Organic oz. Bil Jac oz. Figure 3

$ 7.87 40% $ 11.02 7% 22% $ 14.38 $ 3.15 75 6.667 $ 20.99 $ 0.080 $ 0.057 $ 0.125 $ 0.254 $ 0.196 $ 0.066

There are three solutions First in Show can implement for an advertising strategy. The first strategy is to run a $500k ad campaign with $50k total bribes for stores to carry the product. For a breakdown of costs of Slotting $ 50,000 this strategy, see Figure 4a. The yearly Ads $ 500,000 break even point for this strategy is TV $ 359,000 174,714 sales yearly, which gives us a Print $ 100,500 market share in the Boston area of 14.695%. To make $200k after profit, Collateral $ 9,750 we would need to have 20% market Misc. $ 5,250 share and in the middle ground at Agency $ 25,500 17% the company would receive Total Promo Costs $ 550,000 $86,278.48 in profit. See Figure 6b for Figure 4a more info. The second strategy is to run a $700k ad campaign with $50k total bribes for stores to carry the product. For a breakdown of costs of this strategy, see Figure 5a. The yearly break even point for this Slotting $ 50,000 strategy is 238,247 sales yearly, which Ads $ 700,000 gives us a market share in the Boston TV $ 529,000 area of 20.038%. To make $200k after Print $ 130,500 profit, we would need to have 25.38% Collateral $ 9,750 market share and in the middle Misc. $ 5,250 ground at 22% the company would Agency $ 25,500 receive $73,419.21 in profit. See Figure 6b for more info. Total Promo Costs $ 750,000 Figure 5a The third and cheapest campaign is to not run an ad campaign, and spend $100k total on bribes for stores to carry the product in better locations in hopes that consumers will notice the product. For Slotting $ 100,000 a breakdown of costs of this strategy, Ads $ 0 see Figure 6a. The yearly break even TV $ 0 point for this strategy is 31,766 sales Print $ 0 yearly, which gives us a market share Collateral $ 0 in the Boston area of 2.672%. To make Misc. $ 0 $200k after profit, we would need to have 8.02% market share and in the Agency $ 0 middle ground at 4% the company Total Promo Costs $ 100,000 would receive $49,712.58 in profit. Figure 6a See Figure 6b for more info.

Alternate Solutions

Break Even Point 174714 Min Market Share 14.695% MS for 200k Profit 20.04% Market Share 17% Buyers 30318 Sales 202121.5 Sales-Breakeven 27407 Profit $ 636,278.48 Profit-Expenses $ 86,278.48 Figure 4b

Break Even Point 238247 Min Market Share 20.038% MS for 200k Profit 25.38% Market Share 22% Buyers 39235 Sales 261569 Sales-Breakeven 23322 Profit $ 823,419.21 Profit-Expenses $ 73,419.21 Figure 5b

Break Even Point 31766 Min Market Share 2.672% MS for 200k Profit 8.02% Market Share 4% Buyers 7134 Sales 47558 Sales-Breakeven 15792 Profit $ 149,712.58 Profit-Expenses $ 49,712.58 Figure 6b

Compare, Choose, Implement

The cheap solution of no advertising, while attractive for cost reasons, relies on people noticing the brand far too much. For that reason alone, this plan is a non- starter. See Figures 6a&b on the previous page for more info. The next most attractive plan in terms of monetary expenditure is where First in Show spends $500k on advertising. This plan has the lower immediate expenditures of the two credible plans. This plan requires reaching 174,714 sales in the first year to break even for production and promotion costs. For the company to make $200k profit after production and promotion expenses, 238,266 sales must be made. See Figures 4a&b on the previous page for more info. The most expensive plan in terms of monetary expenditure is where First in Show spends $700k on advertising. This plan has the greater immediate expenditures of the two credible plans. This plan requires reaching 238,247 sales in the first year to break even for production and promotion costs. For the company to make $200k profit after production and promotion expenses, 301,756 sales must be made. These numbers work out to 5% more of the market than the previous plan. See Figures 5a&b on the previous page for more info. The important point to consider with the two credible plans is Is an extra $200k of advertising going to result in an extra 5% of the market? If the answer to that is yes, then it makes sense to spend the extra money, otherwise it does not. Regardless of which plan is implemented place TV ads with networks and shows favored by dog owners, place print ads in magazines read by dog owners like Dog Fancy, provide coupons for 10-20% off, and dont forget to pay the ad agency!