OPTICAL DISTORTION

Write Up Questions.

Group # 1

Marketing Theories and Practice

ASSIGNMENT

QUESTION
#1

WHAT

CHARACTERISTICS OF

ODI LENSES

ARE GOING TO MAKE

THEM APPEALING OR UNAPPEALING FOR DIFFERENT TYPES OF

CHICKEN FARMERS?

Debeaking of hens causes considerable trauma to chickens resulting in

weight loss and retardation of egg-production. There is a greater social stress
due to a longer maturity process.
Therefore, one of the main positive characteristics of the ODIs contact
lenses is the reduction in mortality due to cannibalism among chickens. This
is the first product to confront the cannibalism. By reducing chickens depth
perception to about 12 and having a red tint, lenses alter the behavior of
birds. The interference in the formation of pecking order/hierarchy (during
8th-10th week of age) eliminates violence and aggressiveness, hence
reducing mortality to 4,5% when the lenses are used, in comparison to the
9% when debeaked.
Another attribute of the lenses that is going to be appealing to farmers is
decrease in egg-production loss, existing due to considerable trauma to the
birds when/after debeaking is done. Since debeaking causes at least a week
in retardation of egg-production (productivity slightly decreases), not only
farmers especially those of medium and large farms experience loss in
their annual revenue, but also it creates a greater social stress to the birds
due to the establishment of pecking order and hierarchy. Moreover, the
quality of birds lives is better: they are not that affected and traumatized.
The third positive characteristic is monetary savings for the farmers. Small
to large farms can save on feed expenses. Especially medium and large
farmers could benefit from using the lenses, because the ability to reduce the
depth of the troughs from 2 to 1 would calculate to 156 pounds of feed per
day saved (for every 20,000 birds). While a debeaked chicken could eat only
from a deeper trough. Smaller amount of feed needed could represent
considerable savings annually, especially for larger farms/large flocks. A hen
also doesnt bill much, therefore doesnt throw feed out of the trough, she
doesnt drool into the feed (like she does after debeaking) neither. Savings
would come also from replace less dead chicken, and higher productivity of
hens. These advantages of the product can be taken especially by medium
and large farms and made into big savings, and greater revenues afterall.

Medium to large farmers should be appealed by a fast process of installing

the lenses: its even faster than debeaking (225 contact lenses per hour,
comparable to 220 debeaked birds per hour). It is also a product that can be
tried on a small fraction of the flock/population of chickens therefore making
sure the lenses work well. This might be especially appealing for a farmer of
large farms less risk in the beginning without trying it on a smaller sample.

Unappealing attributes of ODI contact lenses

First, unappealing characteristic might be a higher price that ODI is going
to charge, in the beginning. Before getting to know the positive attributes and
huge opportunity to save money, the higher pricing might get a bad first
impression for a farmer who is most likely not that prone for changes. Also, an
unappealing characteristic might be a history of problems that arose while
developing the lenses. Even though retention and irritation problems were
solved, farmers need to know and see the positive effects and efficiency of it
now. Direct sales and a good word of mouth will be needed to spread correct
and newest information to the farmers. ODI salespeople will have to inform
and convince them to try out the new product developed. The concept and
positive effects of lenses to chickens life and farmers revenue might be
difficult to grasp for a farmer who is less educated and more used to his good
old way to do farming. However, medium and large farmers, who usually have
high business and agricultural skills, should not hesitate to try a new
technology (the product developed) as soon as they learn all the
qualities/positive effects of it.
Medium and large farms probably already were paying a service company
to get the debeaking done, therefore for them it should not be too big of a
change to pay for technical representatives. The process is even faster and
less brutal most likely. However, to a smaller farmer, this might be too
difficult, if he/she is used to get debeaking done by him/her personally.

QUESTION
#2

IN

WHAT GEOGRAPHIC AREAS SHOULD

ODI

FOCUS ITS EFFORTS?

WHY?

In The first place where we can concentrate our effort are the California
and Oregon market. This way of conducting our business relies on the fact

that we need to create a wider support in a restricted area where we are able
to concentrate our sources. In addition, if we focus only on these markets
during the first year, we can use only a 5% of the total budget if we use a
low strategy and a 30% with a fast strategy for advertising. These lands are
also the place where such a product was tested successfully and where our
main offices and headquarters are located.
After the first year, however, we have also to invest in other markets,
because we have patents only for a limited amount of years, therefore we
need to be present in those regions before competitors are able to be there.
We can enter after the first year in Washington and West North/Sud Central.
The additional market size in those regions is composed by 40752930
chickens that is substantially the same amount of California and Oregon
(41421605)
Our market target are medium and large farms, in small farm its difficult
to convince farmers how are addicted to traditional techniques. Moreover,
small farms are a decreasing business. The number of such farms has been
declining in recent years, at a rate of ~25% per year.

QUESTION
#3

WHAT

PRICING POLICY SHOULD

ODI

ADOPT?

We think that ODI should adopt a slow-skimming strategy due to the

characteristics of the customer (medium to high farmers sensible to cost
savings) and of the product (introduction phase, debeaking in mature/decline
phase), with this strategy the company aims to build market share quickly
among big producers. We estimate savings of 35 cent per hen (see
spreadsheet) so we recommend a price of 20 cent per pair, which will transfer
a lot of value to the customer and allow the producer to capture a good
margin (12 cent higher than the minimum). The largest concern should be the
awareness of farmers of the cost savings allowed by the lens, this is the key
to convince farmers to swith to ODI. Sales people efforts should be made on
hen suppliers and directly on medium/large farmers. The breakeven point
with this price is 3803828 which accounts to 9,5% of the chicken population
in California (see spreadsheet in attachment).
This margin will allow the company to be profitable and generate the cash
that it needs.

Saving per hen

Birth mortality

4.5%

0,102

Food laying trauma per bird

0,0078

0,204037641

Egg laying trauma

1 more
chicken

egg

per
0,044166667

Total savings

QUESTION
#4

0,350204308

WHAT

IS A REALISITC GOAL FOR

1978?

First, we would like to examine the buying behavior of ODI Lenses. It will
provide the birds eye view of how poultry industry regulated.

BUYING BEHAVIOR OF ODI LENSES

Who is the buyer? The owners of chicken farms.
What is the buyers requirement? ODI contact lens for chickens.
When will the buyer need the product? When chickens are about 8 to 10
weeks of age. It is at this time that a complete pecking order is
established.
Why will the customer buy? To reduce the chickens vision and hence
cannibalism and feed cost.
Where will the customer buy? The buyer will get them through ODI's
salesperson with technical representatives to make sure that lenses are
being used in such a way to maximize benefits to the farmer.
UNDERLYING ASSUMPTIONS

Following are few basic assumptions which help to formulate effective

marketing strategy to achieve the desired result;
The target population of chickens per quarter is about 10 million
growing at 1% a year.
The unit price is set to 35 cents with 1 regional office and a total of 582
target farms (20.000 chickens or more each).
At the end of the second year we have a cash balance of $2.174.854.
We use this cash flow to finance our expansion in North Carolina and
Georgia before going national.
PROPOSED MARKETING EFFORTS
Marketing zones (Regional - National).
During the inception stages ODI should start their marketing from the
California region and later expand to North Carolina and Georgia and
then all U.S.
Targeted Farms (Medium & Large), as medium farms are a better arena
to launch the product in the initial stages so that its easy to penetrate
the market rather than target larger farms due to their adoption scales.
SALES FORCE ALLOCATION
This utmost important tool for ODI to reach to its target audience, we
decide to cover only California farms with 20.000 or more chickens each (582
farms) we need 8 salespeople (582/80 rounded up) that cover about 73 farms
each and 2 technical representatives (1 for 5 salespeople). For this we need
only a regional office and warehouse without headquarters before reaching
20 million pairs in sales. The sales force effort should be directed towards the
most efficient medium farms at first and then the large farms because large
farms prefer professional and experienced suppliers with efficient supply
capacity. We need to do field trials on medium firms and construct a strong
database as a proof to farmers. We should count on direct marketing without
advertising, at first, since the product has to be well explained to farmers and
tested by them.

PLAN OF ACTION SPREAD TO FIRST 5 YEARS

First Two Years

From the beginning of the second year we increase our investment in

advertising and trade shows to $40.000 a year from $15.000 a year invested
before. For the first 2 years the salespeople were advised not to cover more
than 60 farms each, which would increase the adoption probability in the
transition matrix of visited farms.
3rd Year
The company after becoming the market leader in the 3 major states
expands to other parts of U.S. It will then also set up a R&D lab with a high
investment. It would be necessary to do this so to keep the market share
through a new and innovative product. The price of the lenses would be
reduced in this year to 18 cents to capture the small size and unprofessionally
managed farms.

4th Year
Reinvent the product following changing trends and rising competition. Try
to come up with more products for the poultry industry. The investment in
R&D department should start paying by now. The company would start
making a shift towards a multiproduct company rather than a single product
company. The company would start looking at new avenues in the poultry
industry, like poultry management services.

5th Year
This year ODI should come out with new products in this year. Concentrate
on launching and marketing the new products for the next two years. By this
time the R&D department should be booming with new innovative ideas.
From this year the target of the company would be to come out with new
products every 1.5 years. The lenses should be re-invented following the
technological advances. Become the number one company in the poultry
products and services industry in the U.S.