Janmar Coating, Inc.

September 24, 2015

Marketing 485: Marketing Management
Team M Breshears
Corrie Breshears, Molly McDevitt, Caitlin Fikac, Marisa Righi, Tyler Sena

Janmar Coatings, Inc. is currently generating very low profit margins.

For this reason, Janmars problem is how to cost effectively target a market

segment correctly and acquire new customers given its quality product and
superior customer service in order to increase sales and widen the profit
margin? We believe the best way to do this is by hiring another sales
representative. After the sales representative is appropriately trained to your
high customer service standards, all marketing efforts will be focused on
increasing brand awareness through the help of brand ambassadors, trade
shows, and customer testimonials.
The first alternative to Janmars dilemma is to uphold the status quo,
as suggested by the Vice President of Finance. Although Janmar is currently
producing a profit as shown in Appendix Item 4, the company will suffer in
the near future if nothing is changed internally. We understand that you
have been forced to lower your profit margins more and more each year due
to external factors and are now at the lowest possible point where your
company can still make a profit. After analyzing Janmars current situation,
we realized how valuable the sales representatives are. They are extremely
knowledgeable and have well established, long-term relationships with all of
their current customers. Even though Janmar excels in customer service, it
only focuses on existing customers and does not try to capture new
customers, especially in the non Dallas-Fort Worth (non-DFW) area. The
demand for paint products in the non-DFW area is rapidly increasing, 30%
over the last four years, and the market has not been captured yet. This
could present a world of opportunity for Janmar to send more sales
representatives into this area. Another current problem is the price of

Janmars paint in relation to the competition in the architectural paint

coatings industry. With a higher price than most competitors, modifications
need to be made to increase brand awareness and assure customers that
Janmars paint is worth the higher price. A successful company needs to
adapt to changing market conditions, as well as customer needs and wants.
If Janmar maintains the status quo, the profit margins will continue to
decrease as well as sales volume resulting in more losses than gains in the
long run.
The second alternative is to focus more directly on advertising. The
Vice President of Advertising of your organization wishes to increase
corporate brand advertising by $350,000. This new advertising plan will
mainly target the (DFW) Do-It-Yourselfers segment. The Vice President of
Advertising believes that Janmar needs to increase its awareness of at least
30% among the Do-It-Yourselfers in order to drastically increase sales.
Although we, as a consulting team, do see positives with this alternative,
ultimately we do not believe this is the best option because the cost greatly
outweighs the benefits. The numbers alone deterred us from this option. If
Janmar were to pursue this option, the company would have to make an
additional $1 million in sales, which would be a 8.3% increase in current
sales, in order to breakeven. This is shown in Appendix Item 5. Secondly, this
alternative does not align well with what Janmar does bestcustomer service
through sales representatives. Even though this tactic would probably
increase awareness and put Janmar in peoples consideration sets, we are

not sure that would make a significant difference. The market Janmar
primarily plans to target, the DFW Do-It-Yourselfers, are not thinking of brand
first when purchasing paint. The consumer buying behavior of this group
consists of choosing a retailer first and then choosing what that retailer
stocks which makes it harder for a company, like yours, to compete against
brands that are in discounted retail outlets. This buying pattern shows us
that the Do-It-Yourselfers are more concerned with price than quality.
The third alternative, proposed by Vice President of operations, is to
cut prices by 20%. This is meant to appeal to the price sensitive customers,
be more competitive in the do-it-yourselfer paint market, and not narrowly
focus on the DFW area. This being said, a price cut will conflict with your
present retailers margins, and could cause upsets along our distribution
channels. Janmar will need an increase in sales of $10.4 million for this
alternative to payoff, as you can see in Appendix 6. This means that you
would have to gain a significant portion of the market share, currently
dominated by your competitors, and that is assuming that they will buy your
product just because its now cheaper. This option doesnt help with gaining
awareness or informing customers about your product. If competitors cut
their prices too, you could end up in a price war and be back in the same
situation you are in now. Currently being a premium priced paint isnt
necessarily a negative thing because price is perceived as a reflection of
quality. Efforts need to be allocated towards justifying your high price by

correlating it with your high quality, rather than price cutting based on the
needed increase in sales to validate this plan of action.
We recommend that Janmar follow the Vice President of Sales
proposition of employing a new sales representative. Hiring the new sales
representative will cost the company $60,000, plus 1% of sales for their
commission, per year. Janmar would need to increase sales by $176,470.59,
Appendix 7, for this proposition to be successful. With an additional sales
representative, there is a large potential to generate high sales figures when
assigned to the correct territory. This individual will be assigned the territory
of the non-DFW area to target retailers selling primarily to professional
painters and also to Do-It-Yourselfers. Janmar should be concentrating its
efforts on increasing the number of retailer outlets in the non-DFW areas
because the DFW area has been saturated with big players such as Sears,
Home Depot, Lowes, etc. The non-DFW is located in a rural area which is
currently in an expansion phase. Also, this area is currently uncaptured by
competitors who are quality-service specific. If Janmar wants to capitalize on
this opportunity, they need to be able to penetrate a large portion of retailers
to dominate the market.
Hiring this additional sales representative is just the beginning of how
we want to resolve Janmars dilemma. The first thing we would recommend is
implementing a training program, in which current, successful sales
representatives would hold workshops and teach new hires the skills they
need to capture these new customers in the non DFW area. These workshops

will be two weeks long, then be followed by a shadowing period for two
weeks, and the final step in the training program would be having the newly
hired sales representative followed by a current sales representative for a
week as they go on various sales visits. That brings the total training period
to five weeks. This would cost $50-100 for a half day workshop run by a
professional sales organization.
Once this new sales representative is trained and working for a while,
the next step for Janmar would be to attend various trade shows in the Texas
region area. This would include one professional trade show and one home
improvement trade show. We chose these specific areas because they
encompass your two target markets. The cost for one trade show space is
$25,000, so this would cost you $50,000.
The next part of the plan we propose is to find and utilize brand
ambassadors. We believe these are crucial to spreading Janmars product
awareness in both the DFW and non-DFW areas. The people that would be
chosen as brand ambassadors would be the professional painters, employees
in the small mom and pop stores, and employees in the targeted retailers.
They should be outgoing, personable, and respectful. Customers should feel
comfortable going to them and asking advice/opinions about various
products, especially paint preferences. Customer testimonials from current
customers will help to convince new potential customers to promote the
Janmar brand. The testimonials will also help the new sales representative

look more reliable and legitimate to the retailers in the non-DFW area they
will be trying to capture.
The breakeven point for the Vice President of Sales alternative was
$176, 470.59, which was significantly less than the other alternatives. This
leaves room for worthwhile expenditures, such as the trade shows and the
cost of hiring a new sales representative. In the long term, we would
recommend hiring additional sales representatives to continue penetrating
the non-DFW area. The costs of implementing our plan surrounding the new
sales representative are completely worthwhile. The expenditures are
justified by the fact that they will all conglomerate to bring more awareness
to the Janmar brand and product, therefore increasing sales volume. After
thorough analysis and examination of all options, we believe these marketing
actions will help to increase your overall profits and allow you to ultimately
bring your profit margins back up.

Appendix Items
1. SWOT Analysis
Strengths

Weaknesses

Janmar serves the 50-county service area in

Texas
Strong, personable sales reps
Full control over corporation (private
corporation)
Partnerships with retailers in the non-DFW
area that exclusively sell Janmar products
High quality products
Wide assortment of paints

Opportunities
Sell original equipment manufacturing and
special-purpose coatings
Increase brand awareness
Specifically target the do-it-yourselfers and
professional painters
Allocate more money towards advertising and
hiring an additional sales rep

Sales reps have not branched

customers
Private corporation (little cap
Premium price
Weak margins (increasing pro
while not being able to increa
Not well known-low awarenes
No internet marketing (little m
allocated)
Do not manufacture their own
Low advertising budget
Not specifically targeting peo

Threats
EPA regulations
Competitors account for 60%
architectural coatings
A dip in the economy, housin
car industry
New formulas for paints being
Competitors selling high qual
lower prices
Competitors have their produ
merchandisers (e.g. Walmart,
Company mergers

2. PEST Analysis

Political
Economical
EPA regulations (reducing emissions of Volatile
Mature industry for architectu
Decrease in housing and car i
Organic Compounds)
Company mergers
Internal issues (private corporation)
Social
Technological
Increase in DIY trends
Research and Development re

Eco-friendly trends

3. Evaluation of market potential and market segments

The overall paint industry is 80 million
The DFW area accounts for 60% of
sales
70% of these sales are from
DIYers
30 % of these sales are
professionals
The Non DFW area account for
40%
90% of these sales are from
DIYers
10% of these sales are
professionals
$
80
DFW 60%
Non DFW 40%
$48
$32
DIY
Professional
DIY
Professional
70%
30%
90%
10%
$33.6
$14.4
$28.8
$3.2

DFW DIY
42%
(70%*60
%)

DFW
Prof
18%
(30%*60
%)

Non DFW
DIY
36%
(90%*40%
)

Non DFW
Prof
4%
(10%*40%
)

Total DIY
market
78%

Total
Professional
Market
58%

Janmar sales in 2005 were

EPA
New climate/regional formula

$12 million
Sales split 50/50 between
areas
Professionals account for 70% of DFW sales
DIYers account for 70% of Non DFW sales
70% x 6 mil =
$4.2
30% x 6 mil =
$1.8
$12 million

Profession
als
DIYers

$6
DFW

$6
Non DFW

$4.2/$14.4 = 29.2%

$1.8/$3.2 = 56.3%

$1.8/$33.6 = 5.4%

$4.2/$28.8 = 14.6%

6/(14.4 + 33.6) =
12.5%

6/(3.2 + 28.8) =
18.8%

4. Alternative Proposal 1: Uphold status quo

6/(14.4 + 3.2) =
34%
6/(33.6 + 28.8)
= 9.6%

Current

COGS

$12,000,00
0.00
$7,200,000
.00

Gross
Margin

$4,800,000
.00

Sales

Advertising
other
expenses

$360,000.0
0

Total Cost

$3,300,000
.00

Net Profit b4
taxes

$1,140,000
.00

Breakeven

3,300,000/.
35
$9,428,571
.43

Projected sales
current
sales
potential growth

$
12,000,000
4%

new
sales
new
COGS

$
12,480,000
$
7,488,000

GM

$
4,992,000

(12,000 x
4%) =

0.6

(3,300,000 x
4%) =
New
Cost

$
3,432,000

$
480,000

$
132,000

(3,300,000 + 132,000)

increase
in sales

Net
Profit

$
1,560,000

5. Alternative Proposal 2: $350,000 more toward advertising

350,0
1,000,
00
=
1 mil / 12 mil 000
= 8.3%
35%
6. Alternative Proposal 3: 20% price cut
$1 $.65 = 35%
$1
$.80 $.65 = 18.75%
$0.80

Current contribution
margin

New contribution margin with

price cut

To keep consistent with current gross margin

$12 x .
35 = 4.2 million
(.8-.65=.
15)
.15
(x)
=
$4.2
x =
4.2/.15
x =
$28
million
$16,000, more that Janmar has to make for this option
28 - 12 =
000 to pay off

7. Alternative Proposal 4: Hire an additional sales rep

$60,000
$176,470
salary
=
.59
34%
(35% CM 1% commission)
DFW
Non-DFW

70% of
Sales =
# of Prof.
=

30% of
Sales =
# of
Stores =

$4,200,00
0.00
400
$10,500.0
0
$1,800,00
0.00
80
$22,500.0
0

30% of
Sales =
# of Prof.
=

70% of
Sales =
# of
Stores =

$
1,800,000
.00
200
$
9,000.00
$
4,200,000
.00
120
$
35,000.00

Sources Cited
Keefer, A. (n.d.). The Average Cost to Train Sales Employees. Retrieved
September 21, 2015. http://www.ehow.com/info_8694634_average-costtrain-sales-employees.html
Kerin,r., & Peterson, R. (2013). Strategic Marketing Problems: Cases and
Comments.

Boston: Allyn and Bacon.

http://cob.jmu.edu/clarkeix

Trade Show Booths & Conventions FAQ. (n.d.). Retrieved September 21,
2015.
FAQ

http://www.exhibitsusa.com/trade-show-booths-and-conventions-