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Yorktown Technologies

Yorktown Technologies markets GloFish, the first genetically modified fluorescent fish sold in the US. In 2004, Yorktown sold 500,000 GloFish for $500,000 but incurred an operating loss due to high licensing fees. Yorktown needs a new marketing strategy to meet investor expectations of $4 million profit over 5 years. The document analyzes Yorktown's business and market, and recommends increasing prices while maintaining margins, expanding product offerings, promoting through aquarium kits and Finding Dory, and targeting new distribution channels to reach profit goals.

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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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 🚦 🗣 🌏 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 💰 🔬 🛡 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 😃 🏛 🖥 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 ⭐ ⭐ ⭐ CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
200 producers 5000 retailers 24 regional wholesalers 7% increase in sales annually Prices are controlled at the retail end of distribution 🐠 🏪📈 🏬 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
• 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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) CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Increase price while maintaining distributor & retailer margins Renegotiate Licensing agreements1 Feasibility Infeasible ✖ Considerations High bargainingpower from NUS & FSG CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Renegotiate Licensing agreements1 Distributor margins2 Feasibility Infeasible ✖ Infeasible ✖ Considerations High bargainingpower from NUS & FSG High bargainingpower from distributors Increase price while maintaining distributor & retailer margins CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Renegotiate Licensing agreements1 Distributor margins2 Retailer margins3 Feasibility Infeasible ✖ Infeasible ✖ Infeasible ✖ Considerations High bargainingpower from NUS & FSG High bargainingpower from distributors Prices arecontrolled by retailers Increase price while maintaining distributor & retailer margins CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Renegotiate Licensing agreements1 Distributor margins2 Retailer margins3 IncreaseMSRP4 Feasibility Infeasible ✖ Infeasible ✖ Infeasible ✖ Feasible ✓ Considerations High bargainingpower from NUS & FSG High bargainingpower from distributors Prices arecontrolled by retailers Differentiationbasedadvantage Increase price while maintaining distributor & retailer margins CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
Independentpet stores Chain stores 🏠 🏘 🎪 🖥Kiosks Online There are 4 distribution alternatives for Yorktown CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 🖥 🏠 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 🎪 🏝 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
• 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
• 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
$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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
• 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
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 Retailer margin = $3.50 -> 70% of MSRP Manufacturer margin = $0.30 -> 6% of MSRP • $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 Retailer margin = $3.50 -> 70% of MSRP Manufacturer margin = $0.55 -> 11% 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) Retailer margin = $3.50 -> 58% of MSRP 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) Retailer margin = $3.50 -> 44% of MSRP Distributor margin = $0.95 -> 12% of MSRP 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) Retailer margin = $3.50 -> 44% of MSRP Distributor margin = $0.95 -> 12% of MSRP 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 • (assuming equal sales across all 4 colours, with a weighted operating margin of $2.18) • Sales volume required for $4M profit = ~ 1,835,000 fish -> 0.01% market share of annual US sales volume • Sales revenue requiredfor $4M profit = $14.66M -> 2.1% of market share of annual US sales of $700M
Pricing option 3: premium pricing for foreign competition • MSRP -> $14.99/fish (all colours) Retailer margin = $3.50 -> 23% of MSRP Distributor margin = $0.95 -> 6.3% of MSRP Royalty = $2.40 -> 16% of MSRP (for yellow, orange, and green fish) Royalty = $3.00 -> 20% of MSRP (for red fish) • Operating margin = $7.54 - $8.14 -> 50% - 54% of MSRP • (assuming equal sales across all 4 colours, with a weighted operating margin of $7.99) • Sales volume required for $4M profit = ~ 501,000 fish -> 0.003% market share of annual US sales volume • Sales revenue requiredfor $4M profit = $7.51M -> 1.1% of market share of annual US sales of $700M
Bundle pricing 1: effect on operating margins • MSRP -> $14.99/fish (all colours) Retailer margin = $3.50 -> 23% of MSRP Distributor margin = $0.95 -> 6.3% of MSRP Royalty = $2.40 -> 16% of MSRP (for yellow, orange, and green fish) Royalty = $3.00 -> 20% of MSRP (for red fish) • Operating margin = $7.54 - $8.14 -> 50% - 54% of MSRP • (assuming equal sales across all 4 colours, with a weighted operating margin of $7.99) • Sales volume required for $4M profit = ~ 501,000 fish -> 0.003% market share of annual US sales volume • Sales revenue requiredfor $4M profit = $7.51M -> 1.1% of market share of annual US sales of $700M
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 Distributor margin = $7.60 -> 13.3% 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 - Yellow, orange, and green fish -> $1.85 - Red fish -> $1.55 • $56.99 bundle 2 pricing operatingmargins - Yellow, orange, and green fish -> $1.53 - 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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Yorktown Technologies

  • 1.
  • 2.
    CONTEXT ANALYSIS MARKETINGPROGRAMS 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
  • 3.
    Yorktown’s marketing mix 4Ps • 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 4.
    SET THE TARGETFIRST! 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
  • 5.
    Which distribution channelswould 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 🚦 🗣 🌏 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 6.
    Resources Capabilities Competencies • 500K incapital • 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 💰 🔬 🛡 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 7.
    S W TO Strengths • Exclusivelicense 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 8.
    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 😃 🏛 🖥 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 9.
    Market Size 700m 200m 14m US salesannually Fishes sold annually $1.93 Households own a fresh water aquarium Avg. cost Freshwater ornamental fish industry figures in the US ⭐ ⭐ ⭐ CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 10.
    200 producers 5000retailers 24 regional wholesalers 7% increase in sales annually Prices are controlled at the retail end of distribution 🐠 🏪📈 🏬 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 11.
    • Tropical fishenthusiasts • 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 12.
    Assumptions Cost of producingzebrafishis 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 13.
    19% 70% 11% Distribution margin structurefor GloFish (MSRP $5.00) Distributor margin Retailer margin Manufacturer margin Most of the profit goes to distributors & retailers CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 14.
    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) CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 15.
    Increase price whilemaintaining distributor & retailer margins Renegotiate Licensing agreements1 Feasibility Infeasible ✖ Considerations High bargainingpower from NUS & FSG CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 16.
    Renegotiate Licensing agreements1 Distributor margins2 Feasibility Infeasible ✖ Infeasible ✖ Considerations Highbargainingpower from NUS & FSG High bargainingpower from distributors Increase price while maintaining distributor & retailer margins CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 17.
    Renegotiate Licensing agreements1 Distributor margins2 Retailermargins3 Feasibility Infeasible ✖ Infeasible ✖ Infeasible ✖ Considerations High bargainingpower from NUS & FSG High bargainingpower from distributors Prices arecontrolled by retailers Increase price while maintaining distributor & retailer margins CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 18.
    Renegotiate Licensing agreements1 Distributor margins2 Retailermargins3 IncreaseMSRP4 Feasibility Infeasible ✖ Infeasible ✖ Infeasible ✖ Feasible ✓ Considerations High bargainingpower from NUS & FSG High bargainingpower from distributors Prices arecontrolled by retailers Differentiationbasedadvantage Increase price while maintaining distributor & retailer margins CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 19.
    Independentpet stores Chainstores 🏠 🏘 🎪 🖥Kiosks Online There are 4 distribution alternatives for Yorktown CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 20.
    Positioning statement! As thefirst 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
  • 21.
    First-time buyers ofaquariumkitsTropical 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 22.
    Increase the varietyof GloFish offerings 🔬 💚 Invest more in R&D with NUS Launch branded aquarium kits & supplies Tanks & lights Decorations & food More colours More speciesof fish CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 23.
    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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 24.
    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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 25.
    8 for $56.994for $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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 26.
    Sustained in-store salesrequire 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 🖥 🏠 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 27.
    Kiosks enable adiversification 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 🎪 🏝 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 28.
    Targeted approach fortropical 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 29.
    • Social mediacampaign + 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 30.
    • 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 31.
    $60,000 $30,000 $15,000 $10,000 $10,000 $75,000 $50,000 $250,000 breakdown ofthe 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 32.
    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 Year2 Year 3 Year 4 Year 5 5-year sales forecast Units Revenue Expenses Profit 4m in profit after 5 years CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 33.
    • Expansion intoSingapore 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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 34.
    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 CONTEXT ANALYSIS MARKETING PROGRAMS RECOMMENDATIONS IMPLEMENTATION
  • 35.
    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
  • 36.
    • (assuming onlyVC 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
  • 37.
    Distribution margin structurefor 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
  • 38.
    Distribution margin structurefor 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)
  • 39.
    Distribution margin structurefor GloFish cont. • Distributor margin = $1.20 -> 24% of MSRP of $5.00 Retailer margin = $3.50 -> 70% of MSRP Manufacturer margin = $0.30 -> 6% of MSRP • $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
  • 40.
    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
  • 41.
    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 Retailer margin = $3.50 -> 70% of MSRP Manufacturer margin = $0.55 -> 11% 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)
  • 42.
    Pricing option 1:match internet distribution price • MSRP -> $5.99/fish (yellow, orange, green) Retailer margin = $3.50 -> 58% of MSRP 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) Retailer margin = $3.50 -> 44% of MSRP Distributor margin = $0.95 -> 12% of MSRP 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
  • 43.
    Pricing option 2:premium pricing for differentiation • MSRP -> $7.99/fish (all colours) Retailer margin = $3.50 -> 44% of MSRP Distributor margin = $0.95 -> 12% of MSRP 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 • (assuming equal sales across all 4 colours, with a weighted operating margin of $2.18) • Sales volume required for $4M profit = ~ 1,835,000 fish -> 0.01% market share of annual US sales volume • Sales revenue requiredfor $4M profit = $14.66M -> 2.1% of market share of annual US sales of $700M
  • 44.
    Pricing option 3:premium pricing for foreign competition • MSRP -> $14.99/fish (all colours) Retailer margin = $3.50 -> 23% of MSRP Distributor margin = $0.95 -> 6.3% of MSRP Royalty = $2.40 -> 16% of MSRP (for yellow, orange, and green fish) Royalty = $3.00 -> 20% of MSRP (for red fish) • Operating margin = $7.54 - $8.14 -> 50% - 54% of MSRP • (assuming equal sales across all 4 colours, with a weighted operating margin of $7.99) • Sales volume required for $4M profit = ~ 501,000 fish -> 0.003% market share of annual US sales volume • Sales revenue requiredfor $4M profit = $7.51M -> 1.1% of market share of annual US sales of $700M
  • 45.
    Bundle pricing 1:effect on operating margins • MSRP -> $14.99/fish (all colours) Retailer margin = $3.50 -> 23% of MSRP Distributor margin = $0.95 -> 6.3% of MSRP Royalty = $2.40 -> 16% of MSRP (for yellow, orange, and green fish) Royalty = $3.00 -> 20% of MSRP (for red fish) • Operating margin = $7.54 - $8.14 -> 50% - 54% of MSRP • (assuming equal sales across all 4 colours, with a weighted operating margin of $7.99) • Sales volume required for $4M profit = ~ 501,000 fish -> 0.003% market share of annual US sales volume • Sales revenue requiredfor $4M profit = $7.51M -> 1.1% of market share of annual US sales of $700M
  • 46.
    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 Distributor margin = $7.60 -> 13.3% 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
  • 47.
    Bundle pricing’s effecton 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 - Yellow, orange, and green fish -> $1.85 - Red fish -> $1.55 • $56.99 bundle 2 pricing operatingmargins - Yellow, orange, and green fish -> $1.53 - Red fish -> $1.24
  • 48.
    Breakeven analysis formall 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)