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JANMAR COATINGS

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by

Ray Cheng

on 14 November 2014

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Transcript of JANMAR COATINGS

JANMAR COATINGS
INDUSTRY BACKGROUND
U.S. paint coatings industry growth projected to approximate inflation
$16 billion dollar industry (1-2% growth)
Three segments:
Architectural coatings
Original equipment manufacturing (OEM) coatings
Special-purpose coatings Architectural coatings
COMPANY BACKGROUND
Architectural paint coatings and sundries
Market to over 50 counties in Dallas, Texas
Two market segments
Dallas-Fort Worth (60% ($48M) of total sales)
Non-DFW
70% of professional contractors in DFW
70% of DIY in non DFW
Janmar's Issue
"Where should Janmar deploy corporate marketing efforts
among the various architectural paint coatings markets served by the company in the southwestern United States?"
SWOT
Strengths
Large number of stores (40%) in the DFW area
Additional markets in TX, OK, NM and LA
Solid distribution network
High quality product
Knowledgeable and friendly sales reps

Opportunities
The paint market is growing at rate of 1-2% per year
Competitors are decreasing at a rate of 2-3% per year
Do-it-yourself market is quickly growing
Weaknesses
Low margins on products
Low brand awareness
Competes with national brands
Restricted to DFW region (only 16% market penetration in non-DFW areas)
Highest-priced paint in service area
High COGS
Low rate opening accounts (5 in 5 years)
Threats
Increased Government and Environmental regulations
Increasing R&D costs to comply with new regulations
Companies that comply have reported historically low margins
Constant competition from national brands
Paint Industry
DFW;
60%
$48M
Non-DFW;
40%
$32M
DIY 70%
$33.6M
(42%)
Professional 30%
$14.4M
(18%)
DIY 90%
$28.8M
(36%)
Professional 10%
$3.2M
(4%)
Our Blog : http://www.pinterest.com/ahowell3271/boards/
Target: Do it Yourselfers
Give $200 to an employee once a week
Employee does their own DIY with our products
Employee creates an instructional video or written report on what was done
This is then posted on our social media site and sent out in an email
Plan of Action

Kate Spade Home was created in 2004
Designer brand will expand target market (18-35 yr.)
Reduce need for additional advertising
Kate Spade collection colors
Dynasty Red
Snap Pea
Off Shore
Include quote stencils
"Live colorfully"
"Be happy, be bright, be you."
Reading is Fundamental Charity (RIF)
Potential Partnership
Funding for Advertising
Marketing Through Employees
Finance
Sales Representative
$350,000 investment
All 11 DFW and 15 non-DFW
Existing sales of $33.6m in DFW and $28.8m in non-DFW
Former emphasis on not increasing noncapital expenditures
Need to break-even or create a profit
If 25% awareness results in 15% sales, then 30% awareness results in 18% sales
A 3% sales boost on $33.6m = $1.008m
Profits of $352.8k
If 3% sales boost in 39 non-DFW counties, then 1.15% boost in 15 non-DFW counties
Sales boost of $331.2k
Profits of $115.92k
Conclusion:
A supplemental increase in advertising results in a profit of $115.92k.
Add additional sales rep
Highest price in sales region
Sales Rep will push sales
$60,000/yr salary + 1% commission on sales
Help push sales outside TFW
First name basis with customers
Our Options
Strategy One: Increase ad budget by $350,000
Pros
Improve brand awareness among competitors
Attract more DIY painters in DFW and NON DFW areas
Consumers think about brands they have seen advertised
Cons
Majority of the audience does not buy paint
Large up front expense
Strategy Two: 20% Price Reduction
Pros
Increase potential sales w/ DIY
Have a competitive price among other brands
Everybody loves cheaper prices
Dealers back off our brand if customers are too $ sensitive
Cons
Already low margins
Our cost are unlikely to decline
Need to gain more gallonage Volume
Demand is not expected to increase
Negatively effect quality image
Strategy Three: Hire New Salesperson
Pros
Attract more retailers (DIY) in non- DFW areas
Attract more professional painters(DFW) and outlet stores
Low initiation costs
Cons
Unlikely to gain market share in contractor market
No guarantee of market penetration
Competitive market
BE Analysis: Reduce Price 20%
2004 contribution margin: $4,200,000;
35%
of sales ($12 million)
Breakeven Point shows minimum 2015 sales necessary to support each price cut
BE Analysis: $350,000 for TV ads
Contribution margin:
35%

$350,000/.35 = $1,000,000

TV ads would require an additional $1M of sales
Only 78% of DIY market is reached
Janmar's Market Share
BE Analysis: Hire Sales Rep
Company has the means to allocate
More money to invest in advertising and strategic partnerships
Greater awareness = competitive advantage
Increase Advertising Budget by $350,000
$60,000/.35 =
$171,428
New sales rep earns $60,000/yr., plus 1% commission
Will focus solely on new accounts
Breakeven Point = $29,714.29 per employee
Ray Cheng
Lauren Torres
Yoshi Issod
Jennifer Rigby
Kyle Murphy
Nathan Tessle
r
Ali Howell
Full transcript