1. What are the trends in the chicken farm market?

Ans:
a) The poultry and eggs production was in the family barnyard. It was not unusual for a family
to have its own chickens even in urban areas. In 1921, the largest commercial egg farm in the
US was in Petaluma, CA.
b) In 1930’s in order to improve the efficiency of production, farmers decided to use henhouses
c) In the 1950’s there was a bigger concentration of the poultry industry with the use of cages
d) In 1974 there were 2.5 Million of birds in US
e) California, North Carolina and Georgia accounted more than a quarter of the total amount of
US chickens.

2. What are the benefits and risks of using the lenses from the farmer's perspective? Note that even
though p. 1 of the case suggests that the product has been tested on a number of farms with
“satisfactory results,” the onus is still on the company to prove the value of the lenses in a “live”
setting. In other words, from the point of view of a potential customer, the product is not yet
proven.
Ans:
Benefits for farmers
a) Reduced chicken mortality from 9% to 4.5%
b) Reduces cannibalization
c) Reduced feed cost (Debeaked bird could eat only if the feed in the trough was at least 3/8”
deep, slightly reduced using ODI lenses, no billing and no drooling over food.
d) Reduced Trauma (No egg or weight loss)
e) Savings on egg production
f) Labor cost on inserting lenses vs that of debeaking (220 vs 225)

Risks for farmers

a) Expensive than debeaking
b) Cannot be reused
c) Lenses end up in the farm animal and pet food since they go together with chicken heads
d) Resistance to adopt to new technology
e) May not be profitable for small or family owned farms with less than 10,000 or fewer
chickens
3. How do farmers find out about something like chicken lenses? How do they decide to buy (or not
buy)?

Ans: The ODI lens product was discovered by an accident. A chicken farmer had a flock of
chickens with severe cataract problem that affected birds to eat less and were much easier to
handle. Then the medical specialist instead of being asked to cure, was asked to spread the
affliction out to the rest of the flock. That lead to the idea of optical distortion lenses which had
its depth perception and visual acuity greatly reduced. ODI contact lens was made to partially
blind the chickens. However, farmers were introduced to ODI lens through advertising and trade
shows done nationwide by Daniel Garrison.

The farmers can decide to buy by referring the cost savings (Exhibit 1 & 9) of using ODI lenses
over debeaking. The minimum cost of lens is considered as $0.08/Pair

Exhibit 1

Cost Savings for Farmers

Debeaking ODI Lens Savings
Mortality Savings $0.23490 $0.11745 $0.117
Labor Cost Savings $0.03409 $0.03333 $0.001
Feed Cost Savings $7.04000 $6.83623 $0.204
Egg Laying Savings $0.10167 $0.00000 $0.102
Total Savings $0.42365

Minimum Cost of Lens $0.08000

Total Savings/Chicken $0.34365

4. Considering the potential market, should ODI launch the lenses? If yes, what price would you set
at launch? What implications does your chosen price have on ODI’s likelihood of success?

Ans: ODI should launch the lenses due to following soft benefits.
 ODI has patent for 3 years
 Exclusive technology
 Reliable supply of soft plastic from NWP
 Minimizing Cannibalism, thus creating savings for farmers
 No competition
 ODI has a big market to capture in medium and large size farms spread across CA, NC &
Georgia
 Below are the price comparison and recommended price with which ODI should launch.
Exhibit 2

Price/Pair $0.08 $0.16 $0.24 $0.32

Fixed Cost/20M Pairs $0.060250 $0.060250 $0.060250 $0.060250
Variable Cost $0.03448 $0.03448 $0.03448 $0.03448
Profit/Pair ($0.01) $0.07 $0.15 $0.23

The recommended launch price for ODI is $ 0.24/pair. Garrison and Olson agreed $0.08 as the
minimum price. With that price the savings for farmers per chicken will be $0.34365. However,
that will generate a negative profit/pair $0.01/chicken for Garrison & Olson. If Garrison & Olson
launches with $0.32/pair it will generate savings of $0.10365/chicken (Exhibit 5) for farmers.
However, this price may not be sustainable as farm owners might be hesitant to implement and
adopt switching to lens with such low savings and limited data with reference to success of ODI
lenses. Hence, an optimal price of $0.24/pair will leave a savings of $0.18365/chicken (Exhibit
4) for farmers and generate a profit of $0.15/pair for ODI. This will give an impression of even
split of economic value with farmers which might encourage adoption rate by farmers as well as
help ODI to invest in future R&D. It’s critical for ODI to protect itself from competition once the
patent expires.

5. Sketch out a marketing plan for ODI (if you decide to launch) covering targeted segments, break-
even analysis and rollout plan.

Ans: Daniel Garrison divided the US chicken farms into the following sized groups.

Small Farms: > 10,000 Birds

Medium Farms: 10,000-50,000 Birds
Large Farms: > 50,000 Birds

Olson should not focus on launching in Small size farms due to following reasons.

 Small farms are reducing by 25% every year

 They are family operated and cannibalism is much more controlled
 Transactions in small farms are smaller due to local selling
 They are reluctant to new technologies

Based on the data given, ODI should invest in medium and large farms based out of South
Atlantic and Pacific regions. To begin, the first launch in California which accounts for about
16% of the total chicken in US, it may be great option as the HQ and employees are currently
based out California. This will have less impact on fixed cost. With total of 521 medium/large
farms and having approximately 40 million (Exhibit 6 & 7) chickens in California, can easily
meet the target of 20 million pairs of lenses/year forecasted by Garrison. With a sales person
covering 80 farms irrespective of the size of the farm launching in medium and large farms with
more than 50,000 chicken is high profitable. After their first launch in California, ODI should
target to enter Georgia and North Carolina which accounts for 25% of total chickens in US
The breakeven at $.24/pair (Exhibit 3) is going to be 5,863,176 pairs of lenses. This quantity is
achievable in California based on the number for farms, chickens, 50% market penetration
strategy and forecast of 20 million pairs of lenses.

Exhibit 3

Recommended Price Break Even Quantity

$0.08 26,471,880
$0.16 9,600,064
$0.24 5,863,176
$0.32 4,220,370

Break Even Quantity Calculation: (Exhibit 3, 6 & 8)

Break Even Quantity = Fixed Cost/ (Price-Variable Cost) = 1,205,000/(0.24-0.34480)

= 5,863,176

ODI should do a nationwide advertising and participate in trade shows where participation from
chicken farmers are high. Give a demo of the advantages of lenses, savings and ease of use. The
sales team should reach to medium and large farms in California, educating the owners about the
lenses. In subsequent years, ODI should plan to advertise in the product in leading poultry
industry publications. The chicken farm owners should be given an option to buy lenses in bulk
orders for multiple years and reducing the price of lens/pair to $.16/pair. ODI to generate the
interest should Free Samples to farmers and run free workshop for farmers to learn about the lens
technology and train the employees in farm to insert lenses.
 Exhibits

Exhibit 4

Cost Savings for Farmers

Debeaking ODI Lens Savings
Mortality Savings $0.23490 $0.11745 $0.117
Labor Cost Savings $0.03409 $0.03333 $0.001
Feed Cost Savings $7.04000 $6.83623 $0.204
Egg Laying Savings $0.10167 $0.00000 $0.102
Total Savings $0.42365

Minimum Cost of Lens $0.24000

Total Savings/Chicken $0.18365

Exhibit 5

Cost Savings for Farmers

Debeaking ODI Lens Savings
Mortality Savings $0.23490 $0.11745 $0.117
Labor Cost Savings $0.03409 $0.03333 $0.001
Feed Cost Savings $7.04000 $6.83623 $0.204
Egg Laying Savings $0.10167 $0.00000 $0.102
Total Savings $0.42365

Minimum Cost of Lens $0.32000

Total Savings/Chicken $0.10365

Exhibit 6

Fixed Costs (CA Segment)

Payment to NWP $25,000
Office & Warehouse $196,000
Salesman $280,000
Technical
Representatives $70,000
Head Quarters Expense $184,000
Advertising &
Promotions $100,000
Trade Shows $100,000
R&D Cost $250,000
Total $1,205,000
 Exhibit 7
Target Segment California (Data as per Exhibit 3 in Case Study)
Flock Size # Farms # Chickens
20000-49000 320 9,517,453
50000-99000 114 7,459,994
100000 & Over 87 22,952,283
Total 521 39,929,730
1 Salesman Farms Coverage 80
Salesman Required 7
Technical Representative/5 Salesman 1
Technical Representatives Required/7 Salesman 2
Salesman Salary/Year $40,000
Technical Representative Salary/Year $35,000

Exhibit 8

Variable Cost/Pair of Lens

Manufacturing Cost $0.0320
Molds Injection $0.0008
Box Cost(250 Lens Pairs) $0.4200
Plastic Box $0.1000
Filling Cost $0.1400
Order Processing $0.1800
Lens Pair Cost/Box $0.00168
Total $0.03448
Exhibit 9: Reference Data

$$$ Data Other Data

Laying Stock $2.610000 Debeaking Mortality 9.00%
Debeaking Labor
Cost/Hr $0.034091 ODI Mortality 4.50%
ODI Labor Cost/Hr $0.033333 Debeaking Crew 3
Debeaked Feed Cost $7.040000 Debeaking Birds/Hour 220
ODI Birds/Hour 225
ODI Food Consumption Reduction/Chicken 0.0078
ODI Food Consumption
Reduction/Chicken/Year(LBS) 2.847
1 LBS 0.453 KG
ODI Food Consumption
Reduction/Chicken/Year(KG) 1.289691
ODI Food Annual Savings/KG(Large Flocks) $0.1580
ODI Savings/Chicken/Year $0.2038
Debeaking Egg Loss/5 month 1
Debeaking Total Egg Loss/Year/Chicken 2.44
Total Cost/Dozen $0.50
Cost/Egg $0.0417
Total Loss/Chicken/Year $0.1017