Optical Distortion, Inc Marketing Plan full case solved PDF

Preview

Summary

Optical Distortion, Inc. is the manufacturer of the worlds first contact lens for
agricultural use; the ODI contact lens. The innovative product is designed for use in the
egg producing chicken industry and provides a simple, humane, effective, cost saving,
and profitable technolog...

Description

Optical Distortion, Inc. Marketing Plan

Dean Howley Christopher Longshaw Connie Ng Faryn Stanley

ADMN 210H – WI2009: Introduction to Marketing ODI Case Study – Marketing Plan 06/04/2009

Optical Distortion, Inc. Marketing Plan

Contents Executive Summary 1 Background 2 Product 7 Place 8 Promotion 9 Price 10 Recommendations 14 Exhibits 15

_______________________________________

Executive Summary Optical Distortion, Inc. is the manufacturer of the worlds first contact lens for agricultural use; the ODI contact lens. The innovative product is designed for use in the egg producing chicken industry and provides a simple, humane, effective, cost saving, and profitable technological advancement to farmers within the industry. This document will develop a strategic direction for the marketing of Optical Distortion, Inc. and the ODI contact lens through the exploration of numerous factors that impact the effectiveness of a company within the market. First, the background of the company, of its competitors, and of its customers will be explored, providing a base for further discussion of the product. Second, an identification of the appropriate segmenting, targeting, and positioning strategies for Optical Distortion, Inc and the ODI contact lens will occur, providing a basic understanding of the market structure to which the company and product will be entering. Third, the evaluation of the company and product’s strengths, weaknesses, opportunities, and threats will be made, identifying the key areas to be valued as an advantage, and those which require some attention to ensure effectiveness. Fourth, an exploration of Optical Distortion, Inc.’s product, place, promotion, and price strategies will occur, rounding out the items that form the strategic direction of the company and the initial product launch. Finally, using the current strategies as a guide, a recommendation of key considerations for the future will be made, indicating where future strategic decisions need to be made, and how this marketing plan can form a starting point for the future success of Optical Distortion, Inc. as a company, and the ODI contact lens as a product.

Optical Distortion, Inc. Marketing Plan

1

_______________________________________

Background The Three C’s – Company, Competition, and Customer

Company Originally invented in 1965 to mimic the effect of cataracts on chickens, the contact lens for use on chickens was a result of collaboration between Robert D. Garrison, an inventor, and Ronald Olson, an owner of a large chicken farm in Oregon. After product conceptualization, development, and testing, the two men, accompanied by an investor, saw the project as feasible and by late 1966 they had formed a corporation; Optical Distortion, Inc. (ODI). The company was formed in response to the relatively ineffective practice of debeaking. The process of debeaking is the current and most popular process of trimming the chicken’s beaks in order to prevent cannibalism, which is caused by the close proximity of the birds to each other within their cages. By debeaking the chickens, their method of attack is eliminated and therefore morality rates are decreased and productivity is improved. However, the process of debeaking carries a host of problems such as trauma, temporary weight loss, and retardation of egg production. Consequently, Garrison and Olson saw a need for an improved process and from that need developed the ODI contact lens. Two of the most important assets for Optical Distortion, Inc. are its United States product patent on the ODI contact lens and the company’s contract with New World Plastics. In 1969 Optical Distortion, Inc. was granted a patent for the use of a polymer. This polymer was the same matter used by Bausch and Lomb to produce soft contact lenses for humans, and was controlled by New World Plastics. Unfortunately the hydrophilic polymer could not be injection moulded, and therefore was not appropriate for production of the ODI contact lens. Alternative production processes were simply too expensive, and with New World Plastics’ polymer being the only material known at the time to produce soft contact lenses, production was halted. However, in 1973 Robert Garrison’s grandson Daniel Garrison contacted New World Plastics to investigate if any new developments had occurred with the hydrophilic polymer. As it turns out, New World had discovered a method that allowed polymer to be injection moulded and thus, Optical Distortion, Inc. entered into a contract with New World Plastics that gave the company exclusive use of hydrophilic polymer for nonhuman use. The company is still in a growth phase and as Olson explained “there’s a lot at stake here; more than enough potential for a big company to put fifty people on the project.” It is from this point that the strategic direction of this marketing plan will begin to shape the way Optical Distortion, Inc. grows into an expanding and prosperous company.

Optical Distortion, Inc. Marketing Plan

2

Competition Although there is no direct competition in the chicken contact lens market, the real ‘need’ being addressed is the taming of chickens through the reduction of aggressive and cannibalistic behaviour. Until now, with the development of the ODI contact lens, the process of debeaking has been the only process to address this need for the past fifty years, and is therefore the main competitor of Optical Distortion, Inc. Given this situation, the entrance of ODI into the nearly monopolistic, but actually oligopolistic market structure, has turned that structure from a series of companies competing with only one process, to a series of companies now competing against each other as well as another process, creating a truly oligopolistic market structure containing both direct and indirect competition. The debeaking process seeks to prevent chickens from using their beak as a weapon. The operation entails using a hot knife and anvil to cut off the upper and lower mandibles of a chicken’s beak at different lengths. The beak is then pressed upon a hot knife to seal the wound and stop excess bleeding. Although this process is successful at rendering the beak less harmful in chicken attacks, the trauma it inflicts upon the chickens makes the process more detrimental than productive. The severity of the trauma is seen through temporary weight loss, retardation of egg production for approximately a week, and increased social stress for the chickens. Despite the fact that the debeaking process lowers chicken morality caused by cannibalism from 25% to 9%, there are heavy and drastic repercussions for the chickens and farmers, in terms of production and chicken morale. The costs associated with debeaking are mostly composed of labour. The process usually involves three labourers who earn approximately $2.50 each, per hour, who can debeak approximately 220 birds per hour. Given the described current market structure, it will be the purpose of this marketing plan to enable an effective entrance of Optical Distortion, Inc into the market as an indirect competitor to the debeaking process, which currently holds a monopoly on the solution to the need at hand.

Customer In order for Optical Distortion, Inc. to successfully sell the ODI contact lens to chicken farmers, it is essential for the company to understand the customer and their specific needs and wants. As Garrison stated “chicken farmers, even the big ones, are an independent-minded breed of men who might react very unfavourably if they get the idea that they have been taken” and as a result, it is important to show the chicken farmer how the ODI contact lens meets their needs better than the competition. There are three broad categories of chicken farms in California: small, medium and large. Small farms constitute 10,000 birds or fewer and are usually family operated. These farms most often sell their eggs directly to consumers or to local grocery, milk, or egg stores. The birds are often housed in henhouses of about 1000-2000 birds leaving farmers with the need to purchase starter pullers only once or twice a year. Although it is Optical Distortion, Inc. Marketing Plan

3

possible for chicken cannibalism to be a problem on small farms, it is more unlikely because the chickens are not placed in as close proximity to each other as in larger farms and as such are less likely to attack one another. Therefore, because these small farms are not greatly concerned by cannibalism the ODI contact lens does not truly fulfil a need for them, and for that reason this customer group will not be targeted directly. Furthermore, because these farms consist of a maximum of 10,000 birds, the costs associated with the implementation of the ODI contact lens would likely be too expensive. In addition, small farms are declining at a rate of approximately 25% per year and are therefore not a very attractive market for Optical Distortion, Inc. to target. Medium size farms range from 10,000 to 50,000 birds and are usually managed professionally by the farmer. Due to the size of the farms, chicken cannibalism is often an issue, and as such many of these farmers are familiar with the debeaking process and have utilized it in the past. Moreover, farms of this size often have yearly cash flows of $375,000, and therefore would be able to afford the purchase and insertion of the ODI contact lenses. For those reasons, these medium sized farms will be directly targeted by Optical Distortion, Inc. for the sale of the ODI contact lenses. In this case however, I t is important for this group of customers to see the cost benefits specifically associated with ODI contact lenses, as money is likely to be a significant factor in their decision making. Large size farms contain upwards of 50,000 birds and are closer to resembling a small manufacturing firm than a farm. Administration of this firm is far more complex than both small and medium size farms, and often several people are involved in the decision making process. As a result, unlike the other two farms, which are largely run by a farmer who would make the majority of the decisions, Optical Distortion, Inc. may need to appeal to and convince multiple individuals to switch from the debeaking process to the ODI contact lens as their new prevention of chicken cannibalism. Although money is less likely to be a significant issue for this customer group, as their annual cash flow can reach and even exceed $12 million, it is absolutely essential that the cost effectiveness and production enhancing ability of the ODI contact lens be made very clear and prominent in the sales pitch. Regardless of these characteristics however, it is within this customer group that the majority of Optical Distortion, Inc.’s sales force will be targeted. STP – Segmenting, Targeting, and Positioning

Segmenting Optical Distortion, Inc. operates in the United States within the egg producing chicken industry. In order to effectively market agricultural contact lenses, the company must realize impediments, and take advantage of all opportunities that will project ODI into a favourable position as a market leader, and stave off competition. In order to do so, data has been collected to represent the entire industry within the United States to establish the greatest outlet for ODI’s initial penetration into the market.

Optical Distortion, Inc. Marketing Plan

4

Currently, the egg producing chicken market encompasses 400 million chickens within the United States, embodying nearly 300,000 farms. The relevant data collected suggests the market is comprised of four market segments based upon farm population density. The four segments are farms with bird populations of: upward of 100,000 birds; between 50,000 and 100,000 birds; between 20,000 and 50,000 birds; and less than 20,000 birds. At first glance the data show that each segment contains: 20.6%; 11.4%; 22.5%; and 45.5% respectively, as seen in Exhibit 14. These figures show that farms with less than 20,000 birds hold a near majority of the chicken population within the United States. However, with further analysis of Exhibit 14 the data show that the average population of birds within each farm, separated by segment, is: over 200,000 birds per farm; more than 65,000 birds per farm; less than 30,000 birds per farm; and a meagre 571 birds per farm respectively. Therefore, it will be most beneficial to market the ODI contact lenses to more concentrated farms, placing priority with farms of population densities in upwards of 20,000 birds, which relating back to the analysis of the customer base defines the market segment as the upper half of medium farms and large farms.

Targeting With a realistic understanding of the market segment, as defined by the size of chicken farm and associated number of birds, to which the ODI contact lens will be directed, it is possible to look more directly at the specific target market. As a starting place, the geographic location of the product launch must align with the financial ability of Optical Distortion, Inc. as well as be easily accessible for salespeople and technicians. On that basis, and based on the previous test locations, there are two options for the location of the product launch: California and Oregon. The decision can be quite easily made however for two reasons. One, the area has already been subject to initial testing and is therefore more likely to recognize and accept the product. And two, California has traditionally been an innovator in the area of chicken farming and is therefore more likely to accept a movement away from the traditional practice of debeaking. In more detail, the California market can be broken down numerically as a means of further defining the specific market that the initial product launch of ODI contact lenses will target. From Exhibit 1 and Exhibit 2 it is possible to strategically isolate the target market in which the product launch will occur by considering three factors. First, the total number of chicken farms located in California; second, the respective size of those chicken farms; and third, the number of chickens that are located in those chicken farms. When interpreting each of those factors, the first question to answer is what is the size of farm that should be targeted? The answer to that question, according to inferences made by government surveys and our own segmenting analysis, is at least 10,000 chicken farms, and more realistically, 20,000 chicken farms. The second question then, having determined the size of farm to be 20,000 chickens or more, is how many farms of that size are located in California? The answer, according to Exhibit 1, is 521. The final question is then, within those 521 farms of 20,000 or more chickens, how many chickens are there in total. The answer, according to Exhibit 2 and an expected growth rate in the coming year of 23%, is approximately 50 million chickens. Therefore, the target market for the initial product launch of ODI contact lenses will be in California, to 521 chicken farms, with a total chicken population of approximately 50 million.

Optical Distortion, Inc. Marketing Plan

5

Positioning As a positioning strategy, it is essential that Optical Distortion, Inc. assesses the specific personality characteristics of the targeted customer base. It is evident that the well known and traditional practices of farmers are difficult to sway as they are likely to be hesitant to change and weary of technological advancement. It is therefore necessary to stress easy application and the significant cost savings relative to the traditional practice of debeaking. It should also be established that the product offers a more humane approach to the hardships of chicken farming, and should prove to be a leading product that stresses a two-way relationship between farmers and their chicken populations. Positioning should incorporate the superior quality of the ODI contact lens compared to the bleak and inefficient technique of debeaking and its associated negative impact of chickens. It should be stressed that changing practices compares as a cost structure similarly to that of debeaking, but yet provides significantly more cost savings in the area of productivity. ODI contact lenses offer a more humane, more efficient, and more cost effective alternative to the reduction of chicken attacks and cannibalism than any other leading practice in the egg producing chicken market. By nearly eliminating cannibalism among the flock and drastically reducing the stress associated with traditional practices, the ODI contact lens provides simple technology that will save the customer money, as reflected by increased productivity and increased profit. It is this image of a simple, humane, effective, cost saving, and profitable technological advancement that Optical Distortion, Inc will use as a positioning strategy within the target market. With this approach, and the right sales task force exemplifying and proving these attributes, the ODI contact lens will surely become a market leader in the near future. SWOT – Strengths, Weaknesses, Opportunities, and Threats All organizations are subject to the instance of both internal and external circumstances. Those circumstances may be defined as positive or negative based on their impact on the organization. The process of determining these circumstances is known as SWOT, which defines this process as the organization’s strengths, weaknesses, opportunities, and threats. The following is the SWOT process for Optical Distortion, Inc.

Strengths Internal - Positive 1.

2. 3. 4. 5.

The Product – the use of contact lenses, as opposed to traditional practices, can reduce overall costs by decreasing feed loss due to billing and drooling, procedural recovery time, and mortality rates, while increasing chicken morale and productivity. Product Patent – the ability to prevent direct competition for three years. Contract – an agreement to prevent the manufacture from aiding competition; as they are the sole producer of the required plastic. New Market – the first mover advantage in an untouched market opportunity; competition only with outdated and inhumane processes. Human Capital – internal knowledge of, and relation to, the agriculture industry and business and commercial strategy.

Optical Distortion, Inc. Marketing Plan

6

Weaknesses Internal - Negative 1. 2. 3. 4.

Cash Flow – an instance of limited monetary and current investment resources. Human Capital – with a limited employee base, the sales impact may be limited. Limited Market – the product is only beneficial for 20,000+ chicken farms. Profit Margin – penetrating the market requires a low-cost introduction strategy, but with high expenses and limited cash flow sales must be significant.

Opportunities External - Positive 1. 2.

Competition – no direct competitors exist in the market for agricultural contact lenses. Industry Growth – the number of chicken farms, notably 20,000+ chicken farms, is increasing steadily, creating a larger, concentrated market and increased share. 3. Advertising – the industry contains a variety of publications and trade shows aimed specifically at the target market, creating significant opportunity for product advertising. 4. Customer Need – the instance of cannibalism, reduced production, and other associated issues with current practices, creates a need for a better alternative.

Threats External - Negative 1. 2. 3. 4. 5. 6. 7.

Competition – the traditional practice of debeaking is considered the accepted norm and will prove a challenge in convincing customers to change practices. Competition – the release of a patent gives competitors an ability to reverse engineer the product using its specification, creating future competition. Competition – as the first market mover, it is expected that direct competition will emerge as the product becomes more widely known and accepted. Consumers – the target consumer, the fa...