Tyler Pet Food Inc. is a major distributor of dog food for show-dog kennels in the United States. After some researches and discussions, Tyler Pet Foods (TPF) decided to enter into the household dog food market in the Boston, Massachusetts metropolitan area. TPF hired a consulting firm to help it promote and distribute its product. The programs included situational and competitive analysis, the problems and opportunities of the company, and creative strategies to promote its product.
The sales of dog food will total almost $5.6 billion this year, with $3.1 billion in sales coming from supermarket chains. The Boston area has 1.5% of the U.S. population, and 1.5% of the dog population. The dog food industry has been growing rapidly because of owners desire for companionship or need for protection. Dog owners are generally price sensitive, yet they spend more than $10 billion annually for veterinary fees and medications for dogs. Supermarkets make approximately 55% of all dog food sales. Typically, all pet foods are located in one area of the store, separate from human foods. The following graph shows the detailed market potential of Show Circuit dog food.
Category Share of Dog Food Total Sales of Dog Food Boston Market Potential Supermarket % Show Circuit Market Potential
Canned 23.7% $5.6 billion 1.5% 55% $10,949,400
Dry 58.6% $5.6 billion 1.5% 55% $27,073,200
Semimoist 2.2% $5.6 billion 1.5% 55% $1,016,400
Treats 15.5% $5.6 billion 1.5% 55% $7,161,000
There are about 50 dog food manufacturers and 350 dog food brands in the United States. Ralston Purina, Kal-Kan, Heinz, Nestl? USA, and Nabisco, together capture 83% of all supermarket sales. Traditionally, dog food comes in four forms: canned, dry, semimoist, and snack-type. Either the introduction of Show Circuit would add a new segment for frozen dog food or TPF would segment it between the dry and moist segments already established. The prices of these forms of food can range between $.55 for a 5.5 oz. can up to $9.99 for a 13.5 lb. bag. Because dog food is heavily advertised, TPF must follow suit to remain competitive in the industry.
IV. PROBLEMS TO BE ADDRESSED
After meeting with representatives from Marketing Ventures Unlimited, these questions were left to be answered:
1. Was the market itself adequately defined?
2. What position would Show Circuit seek in the market? Should the program be targeted toward all dog food buyers or toward specific segments?
3. Could the food brokers get distribution in supermarkets given the sales program?
4. What should be TPF’s recommended selling list price to the consumer for Show Circuit?
5. Could TPF at least break even in the introductory year and achieve a 15 percent return on sales in subsequent years?
V. PROBLEMS ADDRESSED
On the question about the market itself being adequately defined, I believe that it was narrowed down adequately to the single and married couples between the ages of 21 and 50 years of age with an income greater than $25,000. This represents a focused target market but it is questionable whether the market is large enough to be profitable.
On the question about the market positioning, Show Circuit will be marketed as a high-quality food that has for years, been exclusively sold to owners of show dogs. The product is also differentiable from other forms of pet food, since it is a frozen pet food, and one of the first organic dog foods. Consumers would find this dog food in the frozen food section of a supermarket along side the food that you would serve to other family members.
The problem of the food brokers getting distribution in supermarkets represents the greatest challenge for TPF. However, the pioneering work has already been done by a frozen dog treat called Frosty Paws. Frosty Paws has already gained freezer space next to ice cream in Boston area supermarkets. It is difficult to convince supermarkets to give up a proven product’s space, for an unproven, untested product. It may be necessary to offer higher profit margins to the frozen food buyers, to encourage them to free up space to sell Show Circuit.
The following graph demonstrates the selling price and the contribution margins.
CANNED CASE CANNEDTUB SEMIMOIST CASE SEMIMOIST TUB
Price to Consumer $18 $1.50 $11.16 $0.93
Price to Retailer $13.50 $1.13 $8.37 $0.70
Broker Commission -$0.95 -$0.08 -$0.59 -$0.05
Other Variable Costs -$6.37 -$0.53 -$6.37 -$.53
Contribution Margin $6.19 $0.52 $1.41 $.12
In order for TPF to break even in the introductory year, they would have to garner 12.6% of the market with the premium priced canned dog food with the $600,000 budget and $30,000 slotting fee. If TPF chose the $400,000 budget, with the $30,000 slotting fee, they would have to get 8.36% of the market of canned dog food. For the semimoist dog food, they would have to get more than 100% of the market.
To attain this level of market share would be great, but I do not think that it is likely in the first year. I do not feel that TPF will break even in the first year, and it may be a year or two before TPF achieves a 15% return on sales.
The General Media Strategy has several advertising objectives. They are:
1. Create awareness of new brand
2. Obtain distribution through grocery outlets
3. Motivate trial through coupon redemption
4. Motivate trial through emotional impact of television
In order to achieve objective 1, TPF will have to sell the brokers on the product and make sure that the brokers are fully educated on the product before the brokers try to sell the product to the supermarkets. One way to get them fired up about the product is to give them incentives to sell the product.
As for objective 2, the brokers will have the sales packets mentioned in the case. As I mentioned earlier, Frosty Paws did the pioneering work with their frozen dog treats. This objective will be the critical stage of the campaign. If TPF cannot get the supermarkets to give up the space for the dog food, TPF will have to identify other alternatives. Some of these alternatives include marketing Show Circuit to pet stores, like Petland for example, or marketing it to veterinarians.
For objective 3, TPF plans to issue coupons in several local Boston newspapers and several well-known magazines – Better Homes and Gardens and Dog Fancy. One strategy that TPF may want to look at is to issue the coupons before the product is even available in the supermarkets. This may cause a pull strategy rather than the push strategy that some products have.
Finally, for objective 4, TPF plans to spend a sizable bulk of their money on television advertising. They plan on advertising during “The Late Show with David Letterman.” Fixed space will be purchased within the first half-hour of the program. Although television is a good medium for advertising a new product, TPF may want to rethink the show that they have chosen to air their spots. TPF’s target markets are already in bed when this show is on the air. It might be better suited for TPF if they air the commercials either during the 6:00 or 10:00 news, or even during syndicated shows that feature dogs, such as “Frasier” or “Mad About You”. These syndicated shows have dogs that are treated like members of the family, which is exactly the message that TPF is trying to get across.
In the last section, I discussed several alternatives that TPF has in addition to selling their product to supermarkets. I also discussed several alternatives that TPF has with their marketing campaign. After looking at all the alternatives, I believe that TPF should continue with trying to market to supermarkets. The ground has already been broken with another product, so there should be less resistance than if TPF were pioneers. However, I believe that TPF should rethink some of their promotional techniques. They should not have commercials during late night television shows and should focus more earlier time slots for the commercials.
I believe that TPF should choose the $400,000 budget, with the $30,000 slotting fee, and try to get 8.36% of the market of canned dog food. I think that this is reasonable and more attainable than 12.6% of the market with the premium priced canned dog food with the $600,000 budget and $30,000 slotting fee.