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Optical Distortion Marketing Plan - Online Sample

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  • Optical Distortion, Inc.Marketing Plan

    Dean HowleyChristopher LongshawConnie NgFaryn Stanley

    ADMN 210H WI2009: Introduction to MarketingODI Case Study Marketing Plan

    06/04/2009

  • Optical Distortion, Inc.Marketing Plan

    ContentsExecutive Summary 1

    Background 2

    Product 7

    Place 8

    Promotion 9

    Price 10

    Recommendations 14

    Exhibits 15

  • Optical Distortion, Inc. Marketing Plan 1

    _______________________________________Executive Summary

    Optical Distortion, Inc. is the manufacturer of the worlds first contact lens foragricultural use; the ODI contact lens. The innovative product is designed for use in theegg 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 OpticalDistortion, Inc. and the ODI contact lens through the exploration of numerous factors thatimpact the effectiveness of a company within the market.

    First, the background of the company, of its competitors, and of its customers willbe explored, providing a base for further discussion of the product.

    Second, an identification of the appropriate segmenting, targeting, and positioningstrategies for Optical Distortion, Inc and the ODI contact lens will occur, providing abasic understanding of the market structure to which the company and product will beentering.

    Third, the evaluation of the company and products strengths, weaknesses,opportunities, and threats will be made, identifying the key areas to be valued as anadvantage, and those which require some attention to ensure effectiveness.

    Fourth, an exploration of Optical Distortion, Inc.s product, place, promotion, andprice strategies will occur, rounding out the items that form the strategic direction of thecompany and the initial product launch.

    Finally, using the current strategies as a guide, a recommendation of keyconsiderations for the future will be made, indicating where future strategic decisionsneed to be made, and how this marketing plan can form a starting point for the futuresuccess of Optical Distortion, Inc. as a company, and the ODI contact lens as a product.

  • Optical Distortion, Inc. Marketing Plan 2

    _______________________________________BackgroundThe Three Cs Company, Competition, and Customer

    CompanyOriginally 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 byan 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 ofdebeaking. The process of debeaking is the current and most popular process of trimmingthe chickens beaks in order to prevent cannibalism, which is caused by the closeproximity of the birds to each other within their cages. By debeaking the chickens, theirmethod of attack is eliminated and therefore morality rates are decreased and productivityis improved. However, the process of debeaking carries a host of problems such astrauma, temporary weight loss, and retardation of egg production. Consequently,Garrison and Olson saw a need for an improved process and from that need developedthe ODI contact lens.

    Two of the most important assets for Optical Distortion, Inc. are its United Statesproduct patent on the ODI contact lens and the companys contract with New WorldPlastics. 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 contactlenses for humans, and was controlled by New World Plastics. Unfortunately thehydrophilic polymer could not be injection moulded, and therefore was not appropriatefor production of the ODI contact lens. Alternative production processes were simply tooexpensive, and with New World Plastics polymer being the only material known at thetime to produce soft contact lenses, production was halted. However, in 1973 RobertGarrisons grandson Daniel Garrison contacted New World Plastics to investigate if anynew developments had occurred with the hydrophilic polymer. As it turns out, NewWorld 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 thecompany exclusive use of hydrophilic polymer for nonhuman use.

    The company is still in a growth phase and as Olson explained theres a lot atstake here; more than enough potential for a big company to put fifty people on theproject. It is from this point that the strategic direction of this marketing plan will beginto shape the way Optical Distortion, Inc. grows into an expanding and prosperouscompany.

  • Optical Distortion, Inc. Marketing Plan 3

    CompetitionAlthough 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 aggressiveand cannibalistic behaviour. Until now, with the development of the ODI contact lens, theprocess of debeaking has been the only process to address this need for the past fiftyyears, and is therefore the main competitor of Optical Distortion, Inc. Given thissituation, the entrance of ODI into the nearly monopolistic, but actually oligopolisticmarket structure, has turned that structure from a series of companies competing withonly one process, to a series of companies now competing against each other as well asanother process, creating a truly oligopolistic market structure containing both direct andindirect competition.

    The debeaking process seeks to prevent chickens from using their beak as aweapon. The operation entails using a hot knife and anvil to cut off the upper and lowermandibles of a chickens beak at different lengths. The beak is then pressed upon a hotknife to seal the wound and stop excess bleeding. Although this process is successful atrendering the beak less harmful in chicken attacks, the trauma it inflicts upon thechickens makes the process more detrimental than productive. The severity of the traumais seen through temporary weight loss, retardation of egg production for approximately aweek, and increased social stress for the chickens. Despite the fact that the debeakingprocess lowers chicken morality caused by cannibalism from 25% to 9%, there are heavyand drastic repercussions for the chickens and farmers, in terms of production andchicken morale.

    The costs associated with debeaking are mostly composed of labour. The processusually involves three labourers who earn approximately $2.50 each, per hour, who candebeak approximately 220 birds per hour.

    Given the described current market structure, it will be the purpose of thismarketing plan to enable an effective entrance of Optical Distortion, Inc into the marketas an indirect competitor to the debeaking process, which currently holds a monopoly onthe solution to the need at hand.

    CustomerIn 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 theirspecific needs and wants. As Garrison stated chicken farmers, even the big ones, are anindependent-minded breed of men who might react very unfavourably if they get the ideathat they have been taken and as a result, it is important to show the chicken farmer howthe ODI contact lens meets their needs better than the competition.

    There are three broad categories of chicken farms in California: small, mediumand 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, oregg stores. The birds are often housed in henhouses of about 1000-2000 birds leavingfarmers with the need to purchase starter pullers only once or twice a year. Although it is

  • Optical Distortion, Inc. Marketing Plan 4

    possible for chicken cannibalism to be a problem on small farms, it is more unlikelybecause the chickens are not placed in as close proximity to each other as in larger farmsand as such are less likely to attack one another. Therefore, because these small farms arenot greatly concerned by cannibalism the ODI contact lens does not truly fulfil a need forthem, 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 theimplementation of the ODI contact lens would likely be too expensive. In addition, smallfarms are declining at a rate of approximately 25% per year and are therefore not a veryattractive market for Optical Distortion, Inc. to target.

    Medium size farms range from 10,000 to 50,000 birds and are usually managedprofessionally by the farmer. Due to the size of the farms, chicken cannibalism is often anissue, and as such many of these farmers are familiar with the debeaking process andhave 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 ODIcontact lenses. For those reasons, these medium sized farms will be directly targeted byOptical Distortion, Inc. for the sale of the ODI contact lenses. In this case however, I t isimportant for this group of customers to see the cost benefits specifically associated withODI 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 asmall manufacturing firm than a farm. Administration of this firm is far more complexthan both small and medium size farms, and often several people are involved in thedecision making process. As a result, unlike the other two farms, which are largely run bya farmer who would make the majority of the decisions, Optical Distortion, Inc. mayneed to appeal to and convince multiple individuals to switch from the debeaking processto the ODI contact lens as their new prevention of chicken cannibalism. Although moneyis less likely to be a significant issue for this customer group, as their annual cash flowcan reach and even exceed $12 million, it is absolutely essential that the costeffectiveness and production enhancing ability of the ODI contact lens be made veryclear and prominent in the sales pitch. Regardless of these characteristics however, it iswithin this customer group that the majority of Optical Distortion, Inc.s sales force willbe targeted.

    STP Segmenting, Targeting, and Positioning

    SegmentingOptical Distortion, Inc. operates in the United States within the egg producing

    chicken industry. In order to effectively market agricultural contact lenses, the companymust realize impediments, and take advantage of all opportunities that will project ODIinto 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 toestablish the greatest outlet for ODIs initial penetration into the market.

  • Optical Distortion, Inc. Marketing Plan 5

    Currently, the egg producing chicken market encompasses 400 million chickenswithin the United States, embodying nearly 300,000 farms. The relevant data collectedsuggests the market is comprised of four market segments based upon farm populationdensity. 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 than20,000 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 withless than 20,000 birds hold a near majority of the chicken population within the UnitedStates. However, with further analysis of Exhibit 14 the data show that the averagepopulation of birds within each farm, separated by segment, is: over 200,000 birds perfarm; more than 65,000 birds per farm; less than 30,000 birds per farm; and a meagre 571birds per farm respectively. Therefore, it will be most beneficial to market the ODIcontact lenses to more concentrated farms, placing priority with farms of populationdensities in upwards of 20,000 birds, which relating back to the analysis of the customerbase defines the market segment as the upper half of medium farms and large farms.

    TargetingWith 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 bedirected, it is possible to look more directly at the specific target market. As a startingplace, the geographic location of the product launch must align with the financial abilityof 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 thelocation of the product launch: California and Oregon. The decision can be quite easilymade however for two reasons. One, the area has already been subject to initial testingand is therefore more likely to recognize and accept the product. And two, California hastraditionally been an innovator in the area of chicken farming and is therefore more likelyto accept a movement away from the traditional practice of debeaking.

    In more detail, the California market can be broken down numerically as a meansof further defining the specific market that the initial product launch of ODI contactlenses will target. From Exhibit 1 and Exhibit 2 it is possible to strategically isolate thetarget 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 ofthose chicken farms; and third, the number of chickens that are located in those chickenfarms. When interpreting each of those factors, the first question to answer is what is thesize of farm that should be targeted? The answer to that question, according to inferencesmade by government surveys and our own segmenting analysis, is at least 10,000 chickenfarms, and more realistically, 20,000 chicken farms. The second question then, havingdetermined the size of farm to be 20,000 chickens or more, is how many farms of thatsize are located in California? The answer, according to Exhibit 1, is 521. The finalquestion is then, within those 521 farms of 20,000 or more chickens, how many chickensare there in total. The answer, according to Exhibit 2 and an expected growth rate in thecoming year of 23%, is approximately 50 million chickens. Therefore, the target marketfor the initial product launch of ODI contact lenses will be in California, to 521 chickenfarms, with a total chicken population of approximately 50 million.

  • Optical Distortion, Inc. Marketing Plan 6

    PositioningAs a positioning strategy, it is essential that Optical Distortion, Inc. assesses the

    specific personality characteristics of the targeted customer base. It is evident that thewell known and traditional practices of farmers are difficult to sway as they are likely tobe hesitant to change and weary of technological advancement. It is therefore necessaryto stress easy application and the significant cost savings relative to the traditionalpractice of debeaking. It should also be established that the product offers a morehumane approach to the hardships of chicken farming, and should prove to be a leadingproduct that stresses a two-way relationship between farmers and their chickenpopulations. Positioning should incorporate the superior quality of the ODI contact lenscompared to the bleak and inefficient technique of debeaking and its associated negativeimpact of chickens. It should be stressed that changing practices compares as a coststructure similarly to that of debeaking, but yet provides significantly more cost savingsin the area of productivity.

    ODI contact lenses offer a more humane, more efficient, and more cost effectivealternative to the reduction of chicken attacks and cannibalism than any other leadingpractice in the egg producing chicken market. By nearly eliminating cannibalism amongthe flock and drastically reducing the stress associated with traditional practices, the ODIcontact lens provides simple technology that will save the customer money, as reflectedby 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 theright sales task force exemplifying and proving these attributes, the ODI contact lens willsurely 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 externalcircumstances. Those circumstances may be defined as positive or negative based ontheir impact on the organization. The process of determining these circumstances isknown as SWOT, which defines this process as the organizations strengths, weaknesses,opportunities, and threats. The following is the SWOT process for Optical Distortion, Inc.

    Strengths Internal - Positive1. 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 mortalityrates, while increasing chicken morale and productivity.

    2. Product Patent the ability to prevent direct competition for three years.3. Contract an agreement to prevent the manufacture from aiding competition; as they are the sole

    producer of the required plastic.4. New Market the first mover advantage in an untouched market opportunity; competition only

    with outdated and inhumane processes.5. Human Capital internal knowledge of, and relation to, the agriculture industry and business and

    commercial strategy.

  • Optical Distortion, Inc. Marketing Plan 7

    Weaknesses Internal - Negative1. Cash Flow an instance of limited monetary and current investment resources.2. Human Capital with a limited employee base, the sales impact may be limited.3. Limited Market the product is only beneficial for 20,000+ chicken farms.4. 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 - Positive1. Competition no direct competitors exist in the market for agricultural contact lenses.2. 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 - Negative1. Competition the traditional practice of debeaking is considered the accepted norm and will prove

    a challenge in convincing customers to change practices.2. Competition the release of a patent gives competitors an ability to reverse engineer the product

    using its specification, creating future competition.3. Competition as the first market mover, it is expected that direct competition will emerge as the

    product becomes more widely known and accepted.4. Consumers the target consumer, the farmer, is often opposed to change, and is often wary of

    scams regarding new agricultural products and practices.5. Contracts pre-existing contracts between farmers and debeaking companies or food distributors

    may reduce the size of the target market.6. Product Patent the patented product was released before production was possible, wasting

    protected time.7. Environment the industry itself is expensive by nature.

    _______________________________________Product

    As the company name might suggest, the ODI contact lens is designed to distortthe vision of an egg laying chicken and as a result improve egg laying productivity. Thecontact lens, much like that used by human beings, is a soft plastic semi-sphericalcovering that fits directly over the eyeball of a chicken. Unlike the human versionhowever, the ODI contact lens is slightly larger than the chickens eye opening andtherefore uses the outer eyelid as a retainer to ensure the lens remains in place after itsinitial fitting. Furthermore, the contact lens is tinted a shade of red which, after the testingof a variety of colours, was found to produce the best result in terms of improvingchicken temperament and productivity.

    The inspiration for the product is derived from the relatively ineffective practiceof debeaking. The debeaking process was originally introduced as a method of reducingchicken mortality that was the result of cannibalism brought on by the close proximity ofthe chickens within each individual cage. By debeaking the chickens, their method of

  • Optical Distortion, Inc. Marketing Plan 8

    attack was eliminated, therefore reducing mortality rates and improving productivity.However, the debeaking process itself brought on other additional issues that inthemselves decreased productivity, and as such left room for improvement in industrypractice. Enter the ODI contact lens.

    Through a series of product tests, conducted via Ronald Olsons chicken farm aswell as by external parties, the ODI contact lens was proven to maintain severaladvantages over the traditional debeaking process. First of all, the fitting of the contactlenses can be completed in a similar time frame to the debeaking process; however theresulting trauma to the chicken is drastically reduced, as is recovery time, meaning thechickens are able to resume production much more quickly. Once fitted, tests have shownthat the ODI contact lens is able to reduce the mortality rate in chicken flocks to anaverage of 4.5%, down from an average of 9% using the debeaking process. Furtherstudies indicate that the use of ODI contact lenses as a replacement of the debeakingprocess can significantly reduce the amount of wasted feed lost to fussy eating habits,escaping saliva from the beak, and billing the throwing of feed from a trough caused bythe blunt end of a debeaked chickens beak.

    _______________________________________Place

    The decision as to where and how Optical Distortion, Inc. should distribute theODI contact lens is a relatively simple one. That simplicity can be attributed to twofactors; one, the proposed operational structure utilizes the use of a mobile sales taskforce, which eliminates the need for a traditional brick and mortar retail location.Secondly, because of the nature of the product, which is the need to be professionallyinstalled by trained individuals, there is again no need to provide a retail location. Withthat said, there are several key aspects of the operational structure that relate to theeffectiveness of the distribution channel for ODI contact lenses. The first is that theremust be an effective communications infrastructure in place, including both telephoneand first class mail systems being effectively implemented within the headquarters,regional office, and warehouse to ensure efficient sales call requests and orderprocessing. The second is that the sales task force and associated technicalrepresentatives are effectively dispatched and appropriately exemplifying the benefits ofthe products, while also ensuring customer satisfaction through follow-up service calls.And finally, the installation professionals must also be dispatched effectively andensuring high quality installation, while showing efficiency and cost effectiveness to thecustomer.

    By using this zero level distribution channel, that is selling directly to thecustomer and providing installation, Optical Distortion, Inc. will be able to eliminate bothwholesale and retail distribution levels which could easily prove to be less cost effectiveand diminishing of the high quality sales and service that will be essential for thecompanys success. By ensuring that high level of quality and a truly cost effective

  • Optical Distortion, Inc. Marketing Plan 9

    process through this distribution approach, ODI contact lenses will surely become theindustry benchmark.

    _______________________________________Promotion

    For Optical Distortion, Inc. there are essentially six main mediums in which thepromotion of the ODI contact lens can take place. Those are trade publications,newspapers, trade shows, fairs and community events, radio, television. There is,however, a certain degree of restraint that must be placed on the availability of thesemedia to the company, based purely from resource availability. Realistically, themaximum feasible amount that can be spent on advertising and promotion is $40,000.00,which is then split between trade shows and fairs and community events, and the othermedia. In that way, the use of television, at least at the moment, may be entirely out ofreach, with the possible exception of small local television stations throughout California;which should be researched and approached if the opportunity for their use is presented.Radio however, is mush more feasible given the allotted resources and should be utilized,but in a directed fashion. Because the target market is comprised of individuals withspecific characteristics, it will be essential that market research be conducted to identifythe most appropriate radio stations to air commercials for the ODI contact lens forexample on country and western or local news stations. Similarly, the use of local newspapers for advertising must also be directed in a similar fashion as to ensure the readersare comprised of the same target market to which the ODI contact lens will be directed.There are as many as eight trade publications, aimed specifically at the target market forODI contact lenses that must also be utilized for the promotion of the product. Again, itmust be determined where these trade publications are distributed, namely regions andspecific locations, and therefore decided which of these publications the advertising forthe ODI contact lens be placed in. Obviously, advertising the product in a publication thatis not distributed in California or nearby locales is a waste of resources, at least for theinitial product launch.

    In the case of trade shows and fairs and community events, those instances wherethey take place within the target market for ODI contact lenses, that is in California, andare of a large enough scope to encompass medium and large sized farmers interest,should be utilized for the personal selling and promotion of Optical Distortion, Inc. andthe ODI contact lens.

    The most important aspect of the promotion of ODI contact lenses, in addition tochoosing the appropriate media and locations, is the continuity of each of theadvertisements and their alignment with not only the Optical Distortion, Inc brand, butalso the positioning strategy that has now been set forth within this marketing plan. It isessential that Optical Distortion, Inc. and the ODI contact lens is portrayed as a simple,humane, effective, cost saving, and profitable technological advancement within the eggproducing chicken industry.

  • Optical Distortion, Inc. Marketing Plan 10

    _______________________________________PriceObjectives

    Our role as marketing consultants is very simple and contains three basic topics.First, we must use a set of scenarios to determine the levels of production and pricepoints that will allow Optical Distortion, Inc. to become minimally sustainable; that is abreakeven analysis. Second, we must determine, through an analysis of the three basicpricing structures, the prices at which the ODI contact lenses could be effectivelyproduced, marketed, and sold while allowing the company to remain minimallysustainable. And third, we must determine, conclusively, the appropriate organizationalstructure and accompany that by a recommendation for the most appropriate final pricingstrategy.

    Issues

    There are several significant issues impacting our analysis and associatedrecommendations. First, the current financial position of Optical Distortion, Inc. limitsthe size of a feasible organizational structure and therefore limits the target market thatcan be approached during the initial product launch. Second, as a new technologyentering the market the ODI contact lens can be priced, hypothetically, at any level giventhere are no direct competitors to reference that price level to. However, the issue arisesin that the currently accepted practice of debeaking must be referenced as a price level,meaning the ODI contact lens must be seen as both competitively priced and future costsaving while also ensuring the feasibility of production and that the company remainssustainable. And third, the issue of market penetration may be significant as thetraditional practice of debeaking is engrained in the operations of current chicken farmsand to convince the farmers of a change, given they are often opposed to change, willtake a very attractive and statistically proven pricing plan.

    Alternative Scenarios

    By using a set of alternative scenarios, for this analysis a set of four, it is possibleto examine and reflect upon the differing levels of penetration into a market. In doing sowe are able to determine the exact cost structures associated with targeting a certainpercentage of the farms in the California market. To do so we have chosen the scenariosto reflect the instance of Optical Distortion, Inc. approaching 100%, 75%, 50%, and 25%of the farms in California. By using these percentage based figures we will be able todetermine the level of fixed and variable costs associated with approaching that numberof farms, as well as the sales requirement and associated market share necessary for thecompany to remain minimally sustainable, that is to breakeven.

    For each scenario there will be a set of annual non-adjustable fixed costs,adjustable fixed costs, and variable costs based on the level of production. The non-adjustable fixed costs include a contractual payment to the contact lens manufacturer,

  • Optical Distortion, Inc. Marketing Plan 11

    New World, and the regional office and warehouse expenses for California. Theadjustable fixed costs include sales representative salaries, technical representativesalaries, publication advertising expense, tradeshow advertising expense, andheadquarters expense. The variable cost is a single figure that encompasses within it thecost of manufacturing, cost of injection moulds, and cost of product packaging andshipping, and can be examined in Exhibit 3.

    Scenario OneScenario one represents Optical Distortion, Inc. approaching 100% of the chicken

    farms in California. At 100% of the market, the company will approach 521 farms, withan associated population of 50 million chickens. As seen in Exhibit 4, the total fixed costwhile approaching 100% of the market is $1,121,000.00. At that fixed cost, there are arange of price options and associated breakeven or profit generating sales outputs that arefound in Exhibit 5. Those options will be analyzed further within the analysis section.

    Scenario TwoScenario two represents Optical Distortion, Inc. approaching 75% of the chicken

    farms in California. At 75% of the market, the company will approach 391 farms, with anassociated population of 37.5 million chickens. As seen in Exhibit 6, the total fixed costwhile approaching 75% of the market is $871,000.00. At that fixed cost, there are a rangeof price options and associated breakeven or profit generating sales outputs that are foundin Exhibit 7. Those options will be analyzed further within the analysis section.

    Scenario ThreeScenario three represents Optical Distortion, Inc. approaching 50% of the chicken

    farms in California. At 50% of the market, the company will approach 261 farms, with anassociated population of 25 million chickens. As seen in Exhibit 8, the total fixed costwhile approaching 50% of the market is $696,000.00. At that fixed cost, there are a rangeof price options and associated breakeven or profit generating sales outputs that are foundin Exhibit 9. Those options will be analyzed further within the analysis section.

    Scenario FourScenario three represents Optical Distortion, Inc. approaching 25% of the chicken

    farms in California. At 25% of the market, the company will approach 131 farms, with anassociated population of 12.5 million chickens. As seen in Exhibit 10, the total fixed costwhile approaching 25% of the market is $481,000.00. At that fixed cost, there are a rangeof price options and associated breakeven or profit generating sales outputs that are foundin Exhibit 11. Those options will be analyzed further within the analysis section.

    Cost and Profit Pricing

    As a starting point for the analysis of pricing, the cost and profit pricing systemswork internally as company specific strategies that are applied to the products which arebeing produced and sold. In the case of Optical Distortion, Inc. the instance of definingthe price for ODI contact lenses is relatively unlikely as the market to which the product

  • Optical Distortion, Inc. Marketing Plan 12

    is being proposed, that is to chicken farmers, is highly unlikely to accept the productsimply based on an arbitrarily set number that is based only on a cost-plus or profitpricing basis. That said, it will be important to consider the availability of profit whenpricing the ODI contact lenses, but that consideration must accompany both thecompetitive and value based pricing strategies as well.

    Competitive Pricing

    The competitive pricing strategy in the context of the initial product launch forODI contact lenses is an interesting one for two reasons. One, the product must be pricedcompetitively with the existing practice of debeaking as a means of luring the targetmarket away from that tradition. And two, the product must also be priced in such a wayas to be representative of the value that is being brought forth over the existing practiceby way of introducing an entirely new and innovative product and process. In that way,much the same as with cost and profit pricing, the strategy of competitive pricing mustnot be considered on its own, but instead in conjunction with cost and profit pricing aswell as value based pricing.

    Value Based Pricing

    In the case of Optical Distortion, Inc. the implementation of a value based pricingstrategy is, in our opinion, the most important of the three different pricing options. Thisis simply based on, as was stated earlier, the target market in which the ODI contact lensis being launched. Although the product is new and innovative, the market itself isrelatively adverse to the entrance of new technology, and more generally to change.Therefore, when pricing the ODI contact lens the first consideration must be the value tothe customer that will be obtained by switching from the traditional practice of debeakingto the use of the ODI contact lens. That value is a very important factor in the ability ofthe company to market and sell the product, and can be numerically represented by costsavings to the customer as seen in Exhibit 12. With a close inspection of the cost savingsfrom switching to the use of the ODI contact lens, there seems to be a clear financialbenefit to the customer, in this case approximately $0.27per chicken. With that customervalue as a base, with additional input using cost and profit pricing and competitivepricing strategies, we are able to break down the four scenarios, in Exhibit 3 throughExhibit 11, and determine, concretely, an appropriate operational structure and pricingstrategy.

    Operational Structure

    Using the calculations developed within each of the four scenarios, in Exhibit 3through Exhibit 11, we are able to determine the appropriate operational structure for theinitial product launch of the ODI contact lens. That structure is based upon the currentfinancial position of the company, the desired market penetration within the first year ofentry, and the sales outputs necessary to ensure the company remains minimallysustainable, that is they are able to breakeven. Based on these parameters, the mostappropriate scenario and associated operational structure is scenario two, seen in

  • Optical Distortion, Inc. Marketing Plan 13

    Exhibit 6, for several key reasons. First of all, the approach of 75% of the total market sizeis within the financial ability of the company. This is based on an effective use of fivesales representatives and one technical representative which leaves no excess capacity bythe technical representative; a feasible headquarters expense that will provide effectivecompany contribution without being overextended; and an advertising budget that bothreflects an effective proportion of the publications and geographic areas while alsoremaining feasible with reference to the budget. In each of the other three scenarios, one,three, and four, there are ineffective uses of resources, namely in the lower populationapproach scenarios, as well as inflated expenses, namely in the high population approachscenario, that make those operational structures unfeasible and inappropriate for thecurrent position of the company. Therefore, for the initial product launch of ODI contactlenses we recommend the approach of 75% of the market, as seen in scenario two, Exhibit6, as an operational structure.

    Pricing Strategy

    Using scenario two, seen in Exhibit 6, as a basis for the recommendation of apricing strategy, we are able to conclude upon an appropriate price per pair of ODIcontact lenses. As was stated within the analysis section, the basis for the pricing strategymust be the value created for the customer because of the characteristics of the targetmarket. That basis then, according to Exhibit 12, depicts that our customer value isapproximately $0.27 per chicken, and therefore per pair of ODI contact lenses. From thiswe are able to determine that the appropriate price must be less than $0.27. However, toremain sustainable the minimum price per pair, according to internal research must not beless than $0.08 per pair of ODI contact lenses. Furthermore, based on a conservativeestimate of approximately 50% market penetration within five years, and thereforeapproximately 10% penetration per year, we are looking for our price to reflect anintroductory market share for the first year of at least 10%. Using these parameters, andthe associated calculations found in scenario two, in Exhibit 6, we have determined that asustainable, competitive, and value based price for the ODI contact lens is $0.15 per pair.At this pricing level the company is able to breakeven at a sales output level of 7,539,820pairs, at 15% market share, which is more than feasible; the company is able to becomeprofitable at a sales output level of 9,271,122 pairs, at 19% market share, which is alsofeasible; the company can remain internally sustainable based on its current and projectedfinancial position; and the company will be able to market to the customer a gross costsavings of $0.27 per chicken, with a net cost savings of $0.12 per chicken. Therefore, it isour recommendation that Optical Distortion, Inc. produce and distribute its ODI contactlenses at a price of $0.15 per pair.

    We strongly believe based on internal research, external research, scenarioanalysis, and our personal expertise and judgement that our recommended target market,operational structure, and pricing strategy will produce excellent results and a thrivingcompany for Optical Distortion, Inc.

  • Optical Distortion, Inc. Marketing Plan 14

    _______________________________________Recommendations

    There are several key recommendations to consider for the future of OpticalDistortion, Inc. which are encompassed by the categories of resource availability, targetmarket, and promotion.

    First of all, each and every recommendation made within this marketing plan wasimpacted in some way by the current financial position of Optical Distortion, Inc. With alimited cash flow currently hindering certain strategic moves, it will be important in thefuture to reassess certain decisions based on increased operational ability that will comefrom an increase in resources based on the income of revenue.

    Secondly, and related to the first point, the current target market for the ODIcontact lens is relatively limited, although currently in perfect strategic line with theability and direction of Optical Distortion, Inc. However, in future years an expansion toa wider target market, specifically the addition of regions outside of California, willcertainly be an important strategic move that will provide the company with a muchgreater opportunity for market capitalization and overall profitability.

    Finally and again related, the current promotional strategy is based on a verylimited resource allocation as well as a very limited scope regarding the target market. Inthe future, when resources are less scarce and the target market has widened, it will beabsolutely necessary for Optical Distortion, Inc. to increase promotional expenditures andexpand the scope of these advertisements as it will enable them to connect to thecustomer on a larger scale, ultimately resulting in greater product interest, market share,and profitability. Additionally, as technological advancements are made in the areas oftelephone, facsimile, and computer technologies, it will be imperative that OpticalDistortion, Inc. maintain an up to date and efficient communications infrastructure toensure that their operational structure is efficient and effective, providing the highestquality experience for customers.

  • Optical Distortion, Inc. Marketing Plan 15

    _______________________________________ExhibitsExhibit 1 Chicken Farms in California, 1969 and 1955

    Year: 1969 1969 1969 1975 1975 1975Farm size /

    market segment# of farmsin segment

    # of farmsin market

    segmentshare

    of market

    # of farmsin segment

    # of farmsin market

    segmentshare

    of market

    100 000 87 3,023 2.9% 87 3,023 2.9%

    Total Market : 3,023 3,023 100.0% 3,023 3,023 100.0%20 000 521 3,023 17.2% 521 3,023 17.2%

    Exhibit 2 Chicken Populations in California Farms, 1969 and 1955

    Year: 1969 1969 1969 1975 1975 1975Farm size /

    market segment# of

    chickens insegment

    # ofchickensin market

    segmentshare

    of market

    # ofchickens

    in segment

    # ofchickensin market

    segmentshare

    of market

    100 000 22,952,283 46,203,988 49.7% 28,893,206 58,135,223 49.7%

    Total Market : 46,203,988 46,203,988 100.0% 58,135,223 58,135,223 100.0%20 000 39,929,680 46,203,989 86.4% 50,286,968 58,135,225 86.5%

  • Optical Distortion, Inc. Marketing Plan 16

    Exhibit 3 Optical Distortion, Inc. Variable Cost

    Variable CostOptical Distortion, Inc.

    Variable Costs

    Manufacturing $ 0.03200

    Injection Moulds 0.00080($12,000/15,000,000 pair)

    Plastic Boxes 0.00040

    Filling Boxes 0.00056

    Shipping 0.00072

    Total Variable Cost $ 0.03448

  • Optical Distortion, Inc. Marketing Plan 17

    Exhibit 4 Optical Distortion, Inc. Scenario One Fixed Costs

    Scenario OneOptical Distortion, Inc.

    Annual Fixed Costs (100% of 50,000,000)

    Contractual Payment $ 25,000.00

    Regional Office and Warehouse Expense 196,000.00

    Headquarters Expense 500,000.00(50,000,000 x $0.01)

    Sales Representatives 280,000.00(7 @ $40,000)

    Technical Representatives 70,000.00(2 @ $35,000)

    Publication Advertising 25,000.00(100,000 x 25%)

    Tradeshow Advertising 25,000.00(100,000 x 25%)

    Total Annual Fixed Costs $ 1,121,000.00

  • Optical Distortion, Inc. Marketing Plan 18

    Exhibit 5 Optical Distortion, Inc. Scenario One Price and Breakeven Analysis

    Scenario OneOptical Distortion, Inc.

    Price and Breakeven Analysis

    Market Population 50,000,000Total Variable Cost $ 0.03448Total Fixed Cost $ 1,121,000.00Breakeven Profit Level $ -Desired Profit Level $ 200,000.00

    Lens PriceBreakeven

    Sales Market ShareProfitable

    Sales Market Share

    ($ per pair) (# of pair) (% at b/e sales #) (# of pair)(% at profit sales

    #)

    0.08 24,626,538 49 29,020,211 58

    0.10 17,109,280 34 20,161,783 40

    0.12 13,108,045 26 15,446,679 31

    0.15 9,703,947 19 11,435,249 23

    0.18 7,703,408 15 9,077,790 18

    0.20 6,772,595 14 7,980,909 16

    0.22 6,042,475 10 7,120,526 14

    0.25 5,201,373 10 6,129,362 12

    Price and Breakeven Analysis Formulas

    Breakeven Sales Output = Total Fixed CostsUnit Price - Unit Variable Cost

    Profitable Sales Output = Total Fixed Costs + Desired ProfitUnit Price - Unit Variable Cost

    Market Share = Sales OutputMarket Population

  • Optical Distortion, Inc. Marketing Plan 19

    Exhibit 6 Optical Distortion, Inc. Scenario Two Fixed Costs

    Scenario TwoOptical Distortion, Inc.

    Annual Fixed Costs (75% of 50,000,000)

    Contractual Payment $ 25,000.00

    Regional Office and Warehouse Expense 196,000.00

    Headquarters Expense 375,000.00(37,500,000 x $0.01)

    Sales Representatives 200,000.00(5 @ $40,000)

    Technical Representatives 35,000.00(1 @ $35,000)

    Publication Advertising 20,000.00(100,000 x 20%)

    Tradeshow Advertising 20,000.00(100,000 x 20%)

    Total Annual Fixed Costs $ 871,000.00

  • Optical Distortion, Inc. Marketing Plan 20

    Exhibit 7 Optical Distortion, Inc. Scenario Two Price and Breakeven Analysis

    Scenario TwoOptical Distortion, Inc.

    Price and Breakeven Analysis

    Market Population 50,000,000Total Variable Cost $ 0.03448Total Fixed Cost $ 871,000.00Breakeven Profit Level $ -Desired Profit Level $ 200,000.00

    Lens PriceBreakeven

    Sales Market ShareProfitable

    Sales Market Share($ per pair) (# of pair) (% at b/e sales #) (# of pair) (% at profit sales #)

    0.08 19,134,446 38 23,528,120 47

    0.10 13,293,651 27 16,346,154 33

    0.12 10,184,752 20 12,523,386 25

    0.15 7,539,820 15 9,271,122 19

    0.18 5,985,432 12 7,359,813 15

    0.20 5,262,204 11 6,470,517 13

    0.22 4,694,912 8 5,772,962 12

    0.25 4,041,388 8 4,969,376 10

    Price and Breakeven Analysis Formulas

    Breakeven Sales Output = Total Fixed CostsUnit Price - Unit Variable Cost

    Profitable Sales Output =Total Fixed Costs + Desired

    ProfitUnit Price - Unit Variable Cost

    Market Share = Sales OutputMarket Population

  • Optical Distortion, Inc. Marketing Plan 21

    Exhibit 8 Optical Distortion, Inc. Scenario Three Fixed Costs

    Scenario ThreeOptical Distortion, Inc.

    Annual Fixed Costs (50% of 50,000,000)

    Contractual Payment $ 25,000.00

    Regional Office and Warehouse Expense 196,000.00

    Headquarters Expense 250,000.00(25,000,000 x $0.01)

    Sales Representatives 160,000.00(4 @ $40,000)

    Technical Representatives 35,000.00(1 @ $35,000)

    Publication Advertising 15,000.00(100,000 x 15%)

    Tradeshow Advertising 15,000.00(100,000 x 15%)

    Total Annual Fixed Costs $ 696,000.00

  • Optical Distortion, Inc. Marketing Plan 22

    Exhibit 9 Optical Distortion, Inc. Scenario Three Price and Breakeven Analysis

    Scenario ThreeOptical Distortion, Inc.

    Price and Breakeven Analysis

    Market Population 50,000,000Total Variable Cost $ 0.03448Total Fixed Cost $ 696,000.00Breakeven Profit Level $ -Desired Profit Level $ 200,000.00

    Lens PriceBreakeven

    Sales Market ShareProfitable

    Sales Market Share($ per pair) (# of pair) (% at b/e sales #) (# of pair) (% at profit sales #)

    0.08 15,289,982 31 19,683,656 39

    0.10 10,622,711 21 13,675,214 27

    0.12 8,138,447 16 10,477,081 21

    0.15 6,024,931 12 7,756,233 16

    0.18 4,782,848 10 6,157,229 12

    0.20 4,204,930 8 5,413,243 11

    0.22 3,751,617 6 4,829,668 10

    0.25 3,229,399 6 4,157,387 8

    Price and Breakeven Analysis Formulas

    Breakeven Sales Output = Total Fixed CostsUnit Price - Unit Variable Cost

    Profitable Sales Output =Total Fixed Costs + Desired

    ProfitUnit Price - Unit Variable Cost

    Market Share = Sales OutputMarket Population

  • Optical Distortion, Inc. Marketing Plan 23

    Exhibit 10 Optical Distortion, Inc. Scenario Four Fixed Costs

    Scenario FourOptical Distortion, Inc.

    Annual Fixed Costs (25% of 50,000,000)

    Contractual Payment $ 25,000.00

    Regional Office and Warehouse Expense 196,000.00

    Headquarters Expense 125,000.00(12,500,000 x $0.01)

    Sales Representatives 80,000.00(2 @ $40,000)

    Technical Representatives 35,000.00(1 @ $35,000)

    Publication Advertising 10,000.00(100,000 x 10%)

    Tradeshow Advertising 10,000.00(100,000 x 10%)

    Total Annual Fixed Costs $ 481,000.00

  • Optical Distortion, Inc. Marketing Plan 24

    Exhibit 11 Optical Distortion, Inc. Scenario Four Price and Breakeven Analysis

    Scenario FourOptical Distortion, Inc.

    Price and Breakeven Analysis

    Market Population 50,000,000Total Variable Cost $ 0.03448Total Fixed Cost $ 481,000.00Breakeven Profit Level $ -Desired Profit Level $ 200,000.00

    Lens PriceBreakeven

    Sales Market ShareProfitable

    Sales Market Share($ per pair) (# of pair) (% at b/e sales #) (# of pair) (% at profit sales #)

    0.08 10,566,784 21 14,960,457 30

    0.10 7,341,270 15 10,393,773 21

    0.12 5,624,415 11 7,963,050 16

    0.15 4,163,781 8 5,895,083 12

    0.18 3,305,388 7 4,679,769 9

    0.20 2,905,993 6 4,114,306 8

    0.22 2,592,712 4 3,670,763 7

    0.25 2,231,811 4 3,159,800 6

    Price and Breakeven Analysis Formulas

    Breakeven Sales Output = Total Fixed CostsUnit Price - Unit Variable Cost

    Profitable Sales Output =Total Fixed Costs + Desired

    ProfitUnit Price - Unit Variable Cost

    Market Share = Sales OutputMarket Population

  • Optical Distortion, Inc. Marketing Plan 25

    Exhibit 12 Optical Distortion, Inc. Scenario Four Price and Breakeven Analysis

    Cost Savings and Customer ValueOptical Distortion, Inc.

    Cost Savings and Customer Value(Achieved by switching from Debeaking to the ODI Contact Lens)

    Bird Mortality $ 0.11745(9% to 4.5% - $2.61 per chicken)

    Bird Trauma 0.04417(1 egg loss reduced to 0 egg loss)

    Chicken Feed 0.11246(78 lbs per day less - $158.00 per ton)

    Total VariableCost $ 0.27407

    Cost Savings and Customer Value Formulas

    Bird Mortality = Percentage Savings x Cost of Chicken

    Bird Trauma = One Egg x Income per Egg CartonTotal Eggs in a Carton

    Chicken Feed = (Feed Cost) x (Chickens) x Savings per Day x Days per Year(Lbs in Ton) (Flock Size)

    Cost Savings and Customer Value Statistics

    Bird MortalityPercentage Savings - 4.5% according to internal and external researchCost of Chicken - $2.61 per chicken according to external research

    Bird TraumaReduced Egg Loss - 1 egg savings according to internal researchIncome per Egg Carton - $0.53 per carton according to external research

    Chicken FeedFeed Cost - $158.00 per ton/$0.079 per pound according to internal researchFlock Size - Savings based on a minimum flock size of 20,000 according to internal

    researchSavings per Day - $78.00 per day, using a 2 inch trough, according to internal research

  • Optical Distortion, Inc. Marketing Plan 26

    Exhibit 13 United States Chicken Market, 1969

    100000 Total

    # of farms 289,494 2870 631 345 293,340# of chickens 165,238,279 81,547,775 41,566,445 74,856,267 363,208,766share of totalchickens

    45.5% 22.5% 11.4% 20.6% 100%

    average chickenpopulation per farm

    571 28,414 65,874 216,975 1238

    Exhibit 14 100,000+ Flock Size Farms in the United States, 1969

    SouthAtlantic

    California Total U.S.

    # of farms 70 87 345share of farms >100000 20.3% 25.2% 100.0%# of chickens 12,065,486 22,952,283 74,856,267share of birds within farms >100000 16.1% 30.7% 100.0%average chicken population per farm 172,364 263,819 216,975


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