Yorktown Technologies

YORKTOWN
TECHNOLOGIES
CHUBBY
MATTIAS
Chubby MattiasPresented by:

CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Quick snapshot of Yorktown
+
$
®NUS/Cellflash & FSG
First to market
5M value
2004: 500k Glofish sales
36 investors
Holds exclusive licenses
The only company to
sell to the public

Yorktown’s marketing mix
4 Ps
• Genetically-modified zebrafish
• 4 colours
• Colours last a lifetime and can
be transmitted to offspring
• MSRP $5
• More expensive than
traditional fish at $1
• 2 large distributors 5D & Segrest
• Smaller independent stores
• Large chains such as Walmart &
PETCO
• No national campaign
• Pre-launch PR blitz
• Ads in 2 fish trade magazines
🐠 📍
💰 🗣
PRODUCT
PRICE
PLACE
PROMOTION

SET THE TARGET FIRST!
Devise a marketing strategy that will
enable the sale of GloFish to generate $4M
in profit over 5 years, thus reaching its full
potential and meeting the expectations of
the company’s investors.
Yorktown requires a focused marketing strategy

Which distribution channels would be most
conducive to maximizing sales of GloFish while
showcasing product differentiation?
Which promotional methods would be most
effective in educating both consumers and
retailers about the product?
Should Yorktown Technologies consider
expanding sales of GloFish into foreign markets?
Yorktown has three main issues to address in the changing
market landscape
🚦
🗣
🌏

Resources
Capabilities
Competencies
• 500K in capital
• R&D institution
• Co-exclusive
distribution • Access to R&D
• Access to the
market
• Generationof
earned media
• Exclusivepatents
• Full control over
fluorescent fish
market
Yorktown provides a differentiated product in a niche market
💰
🔬
🛡

S W
TO
Strengths
• Exclusive license agreement
• First to market
• Longer lasting colour
• Lower price (vs. foreign)
Opportunities
• High market growth
• International expansion
• Bundles & kits
• Untapped California market
Weaknesses
• Ineffective marketing strategy
• Inability to convert sales
• Licensing structure
• Not present in PetSmart
Threats
• Ongoing lawsuit
• Low demand
• Direct foreign competitor
• Biotech sales are illegal in most
countries
Yorktown must go beyond their current strategy to reach their
full potential in a niche market

SOCIOCULTURAL REGULATORY TECHNOLOGICAL
• High consumer
acceptance
• California is more
environmentally
conscious
• International
expansion possible
in Asia only
• California has
many procedural
obstacles
• Sterilizationof fish
for IP protection
abroad
• Innovativeappeal
to tropical fish
enthusiasts
There are three main environmental factors to address in their
market landscape
😃 🏛 🖥

Market Size
700m
200m
14m
US sales annually
Fishes sold annually
$1.93
Households own a fresh water aquarium
Avg. cost
Freshwater ornamental fish industry figures in the US
⭐
⭐
⭐

200 producers 5000 retailers
24 regional
wholesalers
7% increase in
sales annually
Prices are controlled at the retail end of distribution
🐠
🏪📈
🏬

• Tropical fish enthusiasts
• People seeking convenience (e.g. expertise
of staff)
• Price-sensitive consumers
• First-time buyers
4 segments of consumers across 2 main distribution channels
🏠 🏘Small stores Chain stores

Assumptions
Cost of producing zebrafishis negligible, so COGS is relatedto licensing and distributor/retailer margins
(~ 6.5 cents/day for a tank full)*
* http://www.alnmag.com/articles/2014/06/are-zebrafish-new-mice
1
Distributionmarginstructureis similar for both traditional zebrafishandGloFish2
The 2004 operatingloss of $120,000 is dependent on the MSP/operating3
Sales for each of the four colours availablein2004 accounted for 25% of the total revenueof $500,0004
The underlying assumptions for the recommendation

19%
70%
11%
Distribution margin structure for GloFish (MSRP $5.00)
Distributor margin
Retailer margin
Manufacturer margin
Most of the profit goes to distributors & retailers

16%
20%
11% $0.55 per 🐠
NUS royalty
Operating margin
$1.00 forFSG royalty
$0.80 for
The operating margin is too low to cover the licensing
expenses ($0.80 - $1.00)

Increase price while maintaining distributor & retailer margins
Renegotiate
Licensing agreements1
Feasibility
Infeasible
✖
Considerations
High bargainingpower from NUS & FSG

Renegotiate
Distributor margins2
Feasibility
Infeasible
✖
Infeasible
✖
Considerations
High bargainingpower from distributors

Renegotiate
Retailer margins3
Feasibility
Infeasible
✖
Infeasible
✖
Infeasible
✖
Considerations
Prices arecontrolled by retailers

Renegotiate
Retailer margins3
IncreaseMSRP4
Feasibility
Infeasible
✖
Infeasible
✖
Infeasible
✖
Feasible
✓
Considerations
Prices arecontrolled by retailers
Differentiationbasedadvantage

Independentpet stores Chain stores
🏠 🏘
🎪 🖥Kiosks Online
There are 4 distribution alternatives for Yorktown

Positioning statement!
As the first biotech animal for sale in the U.S., GloFish has
positioned itself as an industry pioneer. With innovation at the
core of the brand’s ethos, GloFish is dedicated to offering its
customers a wide and exclusive selection of fish that are unique
and safe for the environment. From amateurs to collectors,
GloFish’s differentiated product assortment is great for anyone
looking for something truly eye-catching!
Yorktown requires a focused marketing strategy

First-time buyers of aquariumkitsTropical fish enthusiasts
Use variety & innovation to attract the target segments
1 2
a. Less pricesensitive
b. Shop mostlyat small stores
c. Values variety& innovation
a. More likely to purchase fishin
bundles
b. Shop mostlyat larger chains
c. Values variety& innovation
Use variety & innovation Use variety & innovation

Increase the variety of GloFish offerings
🔬
💚
Invest more in R&D
with NUS
Launch branded
aquarium kits & supplies
Tanks & lights
Decorations & food
More colours
More speciesof fish

1
2
3 $7.99 per 🐠
Match price of online
distributors
Premium pricing to
convey differentiation
$14.99 per 🐠
Premium pricing to
compete with foreign
competitors
$5.99 for
$7.99 for
All pricing options maintain the existing distributor & retailer
margins

8 for $56.994 for $29.991 2
• Targets first-time buyers filling their aquarium
• Leverages the fact that zebrafish do best in groups
• “Build Your Bundle”to maximizecustomizability
• Yorktown will absorb cost of bundle discounts
Bundle pricing increases basket size for first-time buyers

Sustained in-store sales require an investment
Internet
In-store
• Maintain distribution in both smaller
stores and larger chains
• Invest in providing GloFish branded
display aquariums to the largest chains
• Launch online sales on GloFish
website
• Offer free US overnight delivery on
orders over $40.00
🖥
🏠

Kiosks enable a diversification of targeting
California
Kiosks
• Leverages high growth
• Seasonal targeting of youth
• November and December only
• High visibility will increase brand
awareness
• Population greatly values innovation
• Contains 12% of total US population
• Invest in a report for commercialization
🎪
🏝

Targeted approach for tropical fish
enthusiasts
Mass approach for first-time buyers
Finding Dory sponsorship
Invest in optimal store displays
Communicate bundling pricing as a KPI
booster
Offer competitive margins on GloFish
aquarium kits + supplies
Use both push & pull to attract the target segment

• Social media campaign + contest: #FindingGloFish
• Playing #FindingGloFish game -> chance of winning GloFish + kits
• Posting a picture with your GloFish -> chance to win tickets to Finding Dory
premiere
• Sponsorship embeds positive associations into GloFish brand
Sponsorship to target youth and increase brand awareness

• R&D + kit
production
• Store
displays
• Promotional
pull
JANUARY
-
MARCH
• Internet
logistics
• California
expansion
• Promotional
pull
APRIL
-
MAY
• Finding
Dory
sponsorship
• Promotional
pull
JUNE
-
JULY
• Promotional
pull
AUGUST
-
OCTOBER
• Kiosks
• Promotional
pull
NOVEMBER
-
DECEMBER
Implementing the recommendation in one year

$60,000
$30,000
$15,000
$10,000
$10,000
$75,000
$50,000
$250,000 breakdown of the first year marketingstrategy
Kiosks
Store displays
R&D
Internet logistics
California expansion
Promotion pull
Finding Dory sponsorship
The biggest portion is spent on the pull strategy

0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
Year 1 Year 2 Year 3 Year 4 Year 5
5-year sales forecast
Units
Revenue
Expenses
Profit
4m in profit after 5 years

• Expansion into Singapore 5 years from now
• Global market is small (US accounts for 35% of global sales)
• Success of Taikong in Taiwan means there is consumer interest in East Asia
• Leverage relationship with NUS as a marketing element
Possibility for long term international expansion into
Singapore

IMC
TROPICAL FISH ENTHUSIASTS
• Print & onlineads in relevant media
• Sponsored content about GloFish’s innovation
• Targeted SEO marketing on specific keywords
• Emphasize first-to-market, R&D, variety
FIRST-TIME BUYERS
• Earned media on increased variety and California
• Online targeting of first-time aquarium buyers
• NationalTV ads (withholiday blitz)
• Owned media about environmental friendliness
• Emphasize FDA approval, aquarium kits, and bundle
pricing
Bronfman Chair Model: overall focus is on variety & innovation
FIRM

Appendix
1. Variable costs
2. Distribution margin structure for traditional zebrafish
3. Distribution margin structure for GloFish
4. Distribution margin structure for GloFish cont.
5. Operating income statement(2004)
6. Operating income statementcorrected for loss (2004)
7. Pricing option 1: match internet distribution price
8. Pricing option 2: premium pricing for differentiation
9. Pricing option 3: premium pricing for foreign competition
10.Bundle pricing 1
11.Bundle pricing 2
12.Bundle pricing’s effect on operating margins
13.Breakevenanalysis for mall kiosks

• (assuming only VC in 2004 are licensing expenses)
• NUS royalty rate of 16% of revenue = (0.16)($5.00) = $0.80/fish -> for yellow, orange, and green fish
(or $150,000 annual minimum royalty)
• FSG royalty rate of 20% of revenue = (0.20)($5.00) = $1.00/fish -> for red fish
Variable costs (2004 operating income
statement)
• $500,000 in sales revenue -> 100,000 sales volume for $5.00/fish
• (assuming each of the 4 colours accounted for 25% of sales volume)
• Licensing expenses
NUS royalty:
$0.80(25k yellow fish) + $0.80(25k orange fish) + $0.80(25k green fish) = $60,000
* However, licensing agreement stipulates an annual minimum royalty of $150,000
• FSG royalty:
$1.00(25k red fish) = $25,000
• Total licensing expenses = $150,000 + $25,000 = $175,000

Distribution margin structure for traditional
zebrafish
• Manufacturer’s selling price (MSP) = $0.05
Wholesaler’s selling price (WSP) = $0.25
Manufacturer’s suggested retail price (MSRP) = $0.75-$1.00
• Wholesaler margin = (WSP-MSP)/WSP = (0.25 - 0.05)/0.25 = 80% -> $0.20 profit
• Retailer margin = (MSRP -WSP)/MSRP = (0.75-0.25)/0.75 = 66.7% -> $0.50 profit
= (1.00-0.25)/1.00 = 75% -> $0.75 profit
• Manufacturer operating margin = $0.05 -> 5.0% - 6.7% of MSRP
(assuming cost of producing zebrafish is sonegligible that it’s ~ $0.00)
(source: http://www.alnmag.com/articles/2014/06/are-zebrafish-new-mice)
• Wholesaler margin = $0.20 -> 20% of MSRP of $1.00
Retailer margin = $0.75 -> 75% of MSRP
Manufacturer margin = $0.05 -> 5% of MSRP

Distribution margin structure for GloFish
• Manufacturer’s selling price (MSP) = ???
Distributor’s selling price (DSP) = $1.50
Manufacturer’s suggested retail price (MSRP) = $5.00
• Retailer margin = (MSRP -DSP)/MSRP = (5.00-1.50)/5.00 = 70% -> $3.50 profit
• (assuming Distributor margin is consistent with traditional zebrafish, thus is 80% with $1.20 profit)
MSP = DSP - (Distributor margin)(WSP) = $1.50 - (0.80)(1.50) = $0.30
• Manufacturer operating margin = $0.30 -> 6.0% of MSRP
(assuming cost of producing zebrafish is sonegligible that it’s ~ $0.00)
(source: http://www.alnmag.com/articles/2014/06/are-zebrafish-new-mice)

Distribution margin structure for GloFish cont.
• Distributor margin = $1.20 -> 24% of MSRP of $5.00
• $500,000 in sales revenue
Distributor margin = 24% of $500k = $120,000
Retailer margin = 70% of $500k = $350,000
Manufacturer margin = 6% of MSRP = $30,000
• Total distributor + retailer margin = $120k + $350k = $470,000

2004 operating income
• Revenues -> $500,000
Licensing expenses -> ($175,000)
Distributor + retailer margin -> ($470,000)
• Operating income (loss) -> ($145,000)
* However, the case statesthere wasan operatingloss of $120,000, thus there is $25,000 in over-accountedloss
• Therefore, the manufacturer margin must be higher, and that must be taken from the distributor margin (because the
MSRP and DSP are clearly stated in the case, but not the MSP for GloFish)
• For the operating loss to be $120,000, the distributor margin has tobe $95,000

2004 operating income (corrected for loss)
• If the distributor margin is $95,000 on $500,000 in sales revenue and 100,000 in sales volume
- Unitary distributor margin = $95,000/100,000 fish = $0.95/fish -> 63.3%
- MSP = DSP - (Distributor margin)(WSP) = $1.50 - (0.633)(1.50) = $0.55
• Manufacturer operating margin = $0.55 -> 11.0% of MSRP
• Distributor margin = $0.95 -> 19% of MSRP
• $500,000 in sales revenue
Distributor margin = 19% of $500k = $95,000
Retailer margin = 70% of $500k = $350,000
Manufacturer margin = 11% of $500k = $55,000
• Revenues -> $500,000
Licensing expenses -> ($175,000)
Distributor + retailer margin -> ($445,000)
Operating income (loss) -> ($120,000)

Pricing option 1: match internet distribution
price
• MSRP -> $5.99/fish (yellow, orange, green)
Distributor margin = $0.95 -> 16% of MSRP
Royalty = $0.96 -> 16% of MSRP
Operating margin = $0.58 -> 9.6% of MSRP
• MSRP -> $7.99/fish (red)
Royalty = $1.60 -> 20% of MSRP
Operating margin = $1.94 -> 24% of MSRP
• (assuming equal sales across all 4 colours, with a weighted operating margin of $0.92)
• Sales volume required for $4M profit = ~ 4,358,000 fish -> 2.2% market share of annual US sales volume
• Sales revenue requiredfor $4M profit = $28.22M -> 4.0% of market share of annual US sales of $700M

Pricing option 2: premium pricing for
differentiation
• MSRP -> $7.99/fish (all colours)
Royalty = $1.28 -> 16% of MSRP (for yellow, orange, and green fish)
Royalty = $1.60 -> 20% of MSRP (for red fish)
• Operating margin = $1.94 - $2.26 -> 24% - 28% of MSRP
• Sales volume required for $4M profit = ~ 1,835,000 fish -> 0.01% market share of annual US sales volume

Pricing option 3: premium pricing for foreign
competition
Distributor margin = $0.95 -> 6.3% of MSRP
• Sales volume required for $4M profit = ~ 501,000 fish -> 0.003% market share of annual US sales volume

Bundle pricing 1: effect on operating margins
• Sales volume required for $4M profit = ~ 501,000 fish -> 0.003% market share of annual US sales volume

Bundle pricing 2: effect on operating margins
• Bundle 2 - 8 fish for $56.99
• MSRP -> $56.99
Individual price -> $7.12/fish
Bundle discount -> $6.93
Individual bundle discount -> $0.87/fish
Retailer margin = $28.00 -> 49.1% of MSRP
(assuming twofish of each colour)
Royalty = $6.84 -> 16% of the price of 6 individual fish (for yellow, orange, and green fish)
Royalty = $2.85 -> 20% of the price of 2 individual fish (for red fish)
• Bundle operating margin = $11.70 -> 20.5% of MSRP
Individual operating margin = $1.46/fish

Bundle pricing’s effect on operating margins
• $7.99 individual pricing operating margins
- Yellow, orange, and green fish -> $2.26
- Red fish -> $1.94
• $29.99 bundle 1 pricing operatingmargins
- Red fish -> $1.55
• $56.99 bundle 2 pricing operatingmargins
- Red fish -> $1.24

Breakeven analysis for mall kiosks
• Annual cost = $12,000 - $36,000/year
Assumed monthly cost = $1,000 - $3,000/month
Assumed monthly cost for November-December = $2,000 - $6,000/month
• B/E for a monthly kiosk leasing cost of $6,000/month
# of fish = Monthly cost / Operating margin = 3,093 fish
(using smallest operating margin for red fish of $1.94)

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