Michael Machuca

Mim0030

Individual Case Summary for

Zoecon Corporation

MKTG 5150
Marketing Management
Summer 2014
The Problem. Zoecon needs to decide whether or not to distribute Strike ROACH ENDER to all 19
cities that represent 80% of insecticide sales.

Recommendation. Zoecon should not pursue expanding distribution of Strike ROACH ENDER to all
19 cities. The test market analysis and the market forecast data project that Zoecon would sustain losses.
The company should make a decision to pursue other alternatives before April.

Test Market Analysis. The test market sustained losses of $ 1,204,149.80. Further research into the
data reflect that the cause of the losses stem from the initial low adoption rate of the product. Though
57% of the market was aware of the product only 6% had actually purchased Strike ROACH ENDER.
Repeat use of the product was 30% which can be seen as a positive in for the product. When customers
repurchased the product they would on average buy 3.5 units. Repurchases may have different causes,
first the application direct to use every 120 days (4 months) and the trial period was for 6 months.
Second, customers who bought the product a second time would have been pleased with the initial use,
or there was a lack of product for their specific roach killing need. This is a solid source of revenue but
was not enough to cover the cost of expenses for the test market. The conclusion for the test market is
that there was not enough adoption to at least break-even on the cost.

Profit/Loss Potential. The test market analysis allowed for a projection of the entire market. Initial result
from the test were not positive to the full market forecast. After computing a growth rate of 8% on a $400
million market, additional criteria calculation revealed that a the 19 city market cap for roach insecticide
was $31,787,380.80. An aggregation of all the cost projected that expense would be ($30,320,000.00).
These initial numbers indicate that Zoecon would have to control over 95% of the market just to break-
even on the cost. If Zoecon were to pursue expand distribution to all 19 cities they would sustain a loss of
$(20,951,960.00).
Table 1. Test Market Analysis

Break-Even Analysis

Unit
Model Mix x Contribution = Total Contribution

Aerosol 64.80% x $1.73 $1.12

Fogger 35.20% x $1.53 $0.54

$1.66
Fixed Cost $ 1,478,000.00

1
Unit Break even Volume 890,577

Contribution Margin
Aerosol Fogger
Unit Price $ 3.14 $ 2.79
COGS 1.41 1.26
Unit Contribution $ 1.73 $ 1.53

Sales Mix
Aerosol 66%
Fogger 34%

Weighted
Average
2
Unit Price $3.02
3
Unit Contribution 1.66

1 𝑡𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡

= 𝑈𝑛𝑖𝑡 𝐵𝑟𝑒𝑎𝑘 𝐸𝑣𝑒𝑛
𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛

2
𝑈𝑛𝑖𝑡 𝑃𝑟𝑖𝑐𝑒 ∗ 𝑆𝑎𝑙𝑒𝑠 𝑀𝑖𝑥 %

3
𝑈𝑛𝑖𝑡 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 ∗ 𝑆𝑎𝑙𝑒𝑠 𝑀𝑖𝑥 %
 Sales Analysis
Initial Purchase Repeat Purchase
House Holds 1,170,000 House Holds 70,200
Purchase % 0.06 Purchase % 0.3
Unit Purchase Avg 1.3 Unit Purchase Avg 3.5
Avg Unit Price $ 3.02 Avg Unit Price $ 3.02
$ 275,605.20 $222,604.20

Profit Analysis

Contribution $ 273,850.20
Cost ($1,478,000)
Profit $ (1,204,149.80)

Table 2. Market Forecast Analysis

Dollar Sales for Initial Trial

House Holds 22,000,000

Purchase % 0.06
Unit Purchase Avg 1.3
Avg Unit Price $ 3.02
$ 1,182,320.00

Dollar Sales for Repeat Purchases

House Holds 1,320,000

Purchase % 0.3
Unit Purchase Avg 3.5
Avg Unit Price $ 3.02
$ 4,185,720.00

Esimated Market Size $ 31,787,380.80

Sales Forecast $ 9,368,040.00

Per Capita adv ($20,320,000.00)
Rule of Thumb ($10,000,000.00)
Profit/Loss $(20,951,960.00).