Case Study: Greener Pastures: The Launch of StaGreen
Academic Discipline: Marketing
Course Name: Marketing Management
Assignment Subject: Case Study: Greener Pastures: The Launch of StaGreen
Academic Level: Undergraduate-second year
Referencing Style: APA
Word Count: 3,370
Abstract
StaGreen is a new lawn care product that can minimize water usage and fertilizer usage. HydroCan needed the help from Stone Age Marketing Consultants to determine how they should spend their marketing budget of $555,000. After an analysis of the situation, internal environment, external environment, and marketing channels, the consultants have come up with a plan. The golfing industry is growing fast and the company wants to start to build some strong relationships in this industry. Additionally, the growing concerns regarding the contamination of local water sources, because of the water run-off being affected by the continued use of fertilizers. The plan will be to exemplify the benefits of using the StaGreen formula, which uses 50% less water and 33% less fertilizer than other brands. It is the best option for getting StaGreen on the market and building a powerful base of clients.
Table of Contents
Abstract
Greener Pastures: The Launch of StaGreen
Situational Analysis
External Environmental Analysis
Customer
Conditions
Competition
Marketing Channel Analysis
Internal Environmental Analysis
Key Issues in Marketing
Objective’s Statement
Options and Evaluation of Options
“The Greener Option”
“Getting More Option”
“Commercial Option”
Recommendations
Reference
Greener Pastures: The Launch of StaGreen
HydroCan is a start-up company that has just received a patent for their new lawn care product in both the United States and Canada. The new product “StaGreen” is revolutionary, because it will allow the root system to retain water longer for most grass types. This reduces the need for additional watering and lessens the need for fertilizers. HydroCan is looking to take their product to the market, but would like our help to answer some key questions, that include which market segment to target, how to position the product in the market, and what launch strategy to use. This report analyzes the markets, costs, and prices, and develops a comprehensive strategy for launching this innovative product.
Situational Analysis
After the initial meeting with the engineers of HydroCan to learn about the product’s benefits, it was up to the executive marketers from Stone Age Marketing Consultants to analyze the situation to determine what would be the best way to market this new product in the lawn care industry. This situational analysis will include an external and internal analysis.
External Environmental Analysis
The external environmental analysis considers the factors outside of the company that may affect the sale and promotion of the product. It looks at the customer, the market conditions, the competition, and the market channels.
Customer
Research in the market has identified that around 40% of the customers looking for lawn care products are not concerned with the brand of product that they use. The consumer, also, depends heavily on promotions and advertisements to help them make decisions regarding which products they will use. Other reports have said that most consumers couldn’t specifically say which lawn care product they use. Scotts heavily markets Miracle-Gro, so it is one of the product lines that many consumers could recognize. The idea that most consumers do not know the brand name of their lawn care products shows that they do not have a high rate of brand loyalty and will easily be persuaded by a good deal. This is an advantage for StaGreen, because they have a product that can be marketed around the same price as other products on the market, but offer additional savings that the other products cannot offer. They can differentiate themselves in the market with a product that can cut water and fertilizer costs, because of the unique patent.
A solid push strategy is used by manufacturers, because of the way that the consumers behave in the industry. Wholesale providers and specialty store owners provide their customers with input that works to push the sale of various products. When the manufacturers provide discounts to the wholesale and retail markets, they will usually pass the savings on to the consumer. Programs that offer cash rebates to the wholesale and retail sellers give them an additional incentive to push the products. Many golf courses purchase supplies from wholesalers that offer products that are made for the types of grass they have on their courses. Since, the condition of the grass is so important to the success of the course, the purchase of lawn care products is one that is important in this industry. The purchasers for golf courses are looking to get great deals on products, because of the excessive costs associated with tending to the grass on their courses.
Conditions
The lawn care market is seasonal in most of the United States and Canada, because of the weather. 70% of the business sales in the industry occur between the 2nd and 3rd quarter, around April to September. The golf course has recently experienced pressure, because the run off from the fertilizer has polluted some water supplies. This is mostly because of the amount of water that is needed to maintain the condition of the grass and the frequent use of fertilizers. This benefits StaGreen because their product uses less water and the fertilizer needs to be applied less frequently. Commercial properties and golf courses were looking for ways to use less water and less applications of the fertilizer, so it can lead to lesser contaminants affecting local water supplies. Both factors would work to benefit StaGreen and help them differentiate themselves in the market.
Additionally, there were estimates that suggested that there would be an increase in the amount of golf courses to by around 22% by the decade’s end. This was due to an increase in the popularity of golf and would prove to be a potentially lucrative market for the lawn care industry, if they could begin landing some contract deals with major golf courses. The overall savings on water and fertilizer use, would lower the operational expenses and give new courses a better chance of making it through their first few years, which is usually difficult for new companies.
Competition
Scotts Co. holds over half of the market share in the industry with their two major brands, Turf Builder and Miracle-Gro. Turf Builder offers a product that utilizes a slow-release technology to lessen the amount of applications. This can save money and creates a situation where less fertilizer is used, which can lessen the pollutants to water supplies. This allows for only one application of the product every two years, but is suggested to be applied once a year by experts. Ortho is one of the other large competitors in the market. Their product adds a pesticide that works to ward off pests and is the only product in the market that includes this type of system. It is an additional advantage of choosing the Ortho brand products. Miracle-Gro is one of the most recognized brands in the residential market and is focused on healthy growth. It is not one of the notable brands in the commercial segment and is not particularly designed for the lawn care industry.
The largest wholesaler in the market for golf courses, which will be the target market for the StaGreen product line, is Sierra Horticulture Products. It is one of Scotts’ subsidiaries. Nu-Gro Corporation is another large wholesaler in the golfing industry that will be a competitor for StaGreen. However, neither of these vendors carry a product that is designed to retain the water in the grass’s roots and therefore, StaGreen has a marketing point that can be used to convert some of the contracts.
Marketing Channel Analysis
The three types of retailers that sell products designed for lawn care are discount, lawncare, and specialty retail stores. The commercial market, includes a large amount of golf courses. Many manufacturers work to build strong relationships with the golf course owners and utilize contracts to deal directly with them. StaGreen will have the most potential for growth in the commercial industry, because of the benefits regarding water savings and frequency of application. Commercial facilities will need to manage larger lawns, and the utility savings and less frequent applications will create huge discounts with the StaGreen product line. This is the industry that will be directly marketed to, because of the larger potential for growth. Additionally, there is less consideration for which brand is chosen in the retail industry. For the retail segment, rebates can be given to retailers who reach high sales of the products. However, most of the marketing efforts will be concentrated on the commercial sector.
Internal Environmental Analysis
HydroCan leases equipment and the facilities for production. They can produce up to 180,000 kgs of the StaGreen product each month. To market the product to the commercial market, they will sell the product in 50 kg bottles that will produce around 3,600 treatments per month. The company’s research shows that the product can reduce the amount of fertilizer needed and the amount of water used. It will also work to eliminate the rate of groundwater pollution and other global concerns with the water supply. The total cost of production includes fixed costs of $813,200. This is around $ 67,700 per month. Costs of distribution will be incurred from April to September and add an extra $201,000 in annual costs. The total cost of production and distribution for StaGreen is around $ 1,038,200 annually. There are four founders who are compensated $200,000 annually, but will forgo their salary in the first year to help the business get underway.
The budget for marketing is $555,000, that doesn’t include the seasonal discounts to the wholesalers and retailers or the incentives for the off-season purchases that are designed to increase brand awareness. Total distribution costs do not include these off-seasons sales either, because there is no way to know if these discounts will translate to sales. They plan to set aside $100,000 that will be used for promotional efforts by the sales team and they estimate the variable costs to be around 40% of the sales.
Key Issues in Marketing
One of the largest issues to consider when marketing the products is the idea that many golf courses do not change vendors frequently. They usually utilize the same company and many lawn care manufacturers provide discounts for contracts. They know that the current products they are using work and they usually cannot risk changing to another brand to find out that it does not work. The condition of their lawns is essential to the overall success of their course and therefore, changing the lawn care products can prove to be risky. It will be important for StaGreen to decide to put their focus on wholesalers and commercial properties, instead of the golf courses. However, with the growing number of golf courses that are expected to be created, they may decide to aim towards catering to new businesses.
One of the main advantages is the cost savings that the company can offer with their new products. This may create a marketing angle that can persuade existing golf courses to switch to the StaGreen product line. By estimating the overall water costs and fertilizer costs in a single year for existing golf courses, and then estimating the costs associated with the savings because of the need for less fertilizer and less water, they may be able to appeal to this market. This would especially work for new companies that need to limit their expenses during their first few years of business.
Promotional items will include off-season discounts, in-store displays for retail stores that emphasize the benefits, advertising in specialty magazines and local newspapers, and wholesaler cash rebates for promoting the products to their customers. Sales personnel will spend time estimating costs and will offer customized savings portfolios to all their clients. The process will involve contacting golf courses, apartment complexes, and other commercial facilities to try and get a copy of their fertilizer expense and water expense estimates. The area size will be considered and an estimated savings will be estimated. For those companies that do not want to participate, estimates will still be created for these businesses. A formula will be used that accounts for the area and the overall potential for savings. This formula will propose that there will be an estimated $800 savings a year in water expenses, and another $300 savings a year in fertilizer expenses, for example. The savings will be calculated per square foot. This formula will then be used to assess the total amount of savings for the entire area that needs to be treated. The advertisements and cold calls will utilize this potential savings amount and offer a free estimate and evaluation report. The salesman will follow up and aim to schedule a no-cost meeting that will give them more information and explain how the product can save them money. Additionally, they will offer to treat a patch of grass for free to showcase how the product works. The client will be asked to water this section according to the directions and notice the savings and the health of the final product.
Objective’s Statement
The main objective in the first year is to break even. This year will concentrate mostly on the building of trust and the acquiring of contracts. They expect a 10% increase in sales from the second year to the fifth year and then a 20% increase in sales from the sixth year to the tenth year. For the first year, the company would need to reach sales of around $2.3 million to break even. They have estimated that they will need to sell around 15,333 50kg-bags at regular price to accomplish this. However, this amount does not account for the free patchwork that will be used to acquire new customers.
Options and Evaluation of Options
Stone has come up with three marketing alternatives that can be used for this project. Since there is only a limited budget for marketing, only one option can be utilized now.
“The Greener Option”
The Greener Option focuses on the capitalization of recent ecological issues that have come up in the industry, relating to water contamination. It is the eco-friendly approach that pushes the product for its eco-friendly benefits of water preservation and less use of fertilizer, which can mean less contaminants in the run-off waters that lead to major water sources. Estimates show that water consumption can be cut in half and the use of fertilizers would be cut down by one-third with the StaGreen product. This is an enormous difference. By pushing these eco-friendly options, the company can gain a buzz in the communities and get the consumer involved. The companies will be able to promote their greener efforts and save money on the amount of fertilizer they use and the amount of water they need. This going green attitude will look great for the company.
Studies show that consumers believe that the status for the use of environmentally friendly product use passes on to them when they deal with eco-friendly companies. They believe that by doing business with a company that focuses on being eco-friendly, they are in turn being eco-friendly, so this is essentially a solid plan. However, StaGreen will have to conduct studies that show that their pellet system does not create adverse effects on the environment. They would have to prove that the groundwater is less polluted with their fertilizer, instead of solely relying on the fact that using less fertilizer is better for the environment. This research will essentially build a better understanding and brand awareness and it will raise awareness regarding the detriment that other fertilizers are having on the water supply.
“Getting More Option”
The Getting More Option will aim at placing the products at a lower cost than other offerings in the market. This would add a double level of savings, because the fertilizer is less expensive, because less is needed and less water is needed. The company would emphasize how the companies will spend less money on the fertilizer and therefore save money. This will work well for the golf courses, because they are operating with lower profit margins. Maintaining the facility is a major cost in this industry and is part of their main product offering. By allowing them to spend less money each year on fertilizers, there overall costs are less. This will increase their profits and increase their profit margins, making them more competitive.
One of the major concerns with this option is that it won’t be enough of a savings to push the companies to switch. Since, the consumers are less likely to switch, they may not find this benefit of a large enough value to make them want to switch. Another concern with this approach is that the consumer may attribute the savings in costs with the quality of the product. They may relate the lower costs with lower quality. That is why the company must be very cautious of how they present the savings. They need to ensure that the consumer understands that the product is the same cost as the alternatives, but that they need less of it, so the overall costs are less per year. Since, the product must be applied less, they will be paying the same amount less often.
“Commercial Option”
The Commercial Option is designed to have the company focus mostly on businesses and apartment complexes. The idea is that they will have more luck in this segment, because the value put on the lawn care is not as high as with the golf courses. After they have a larger client base, they will be able to gain some more golf courses with their proven success. They may be able to even set up agreements with the businesses to allow them to use them as examples for a discounted rate on future years. They will be able to build brand awareness and concentrate their budget on putting large displays in retail stores, offer more promotions to wholesalers, and larger rebates for the promotion of their product. By focusing on this smaller market, they can put more focus on the quality of their brand and the benefits that it offers its clients.
This option is the less risky option of the three. They are putting their concentration on a market that has consumers that are not loyal to their lawn care brand. The golf courses are less apt to switch to the new brand, but businesses and consumers will usually choose the deals. With the offering of less water use and less fertilizer use per year, they will understand the overall benefits of making the switch. When the larger businesses already have a proven success rate with the golf courses, there is a lesser chance that they will switch, even with the potential savings. Since, the product is completely new, there is no trust built for its success. When this idea is paired with the eco-friendly attributes of less water use and less need for repeat application, it will be a solid promotional tool.
Recommendations
The best option is to choose the Green Option. With the growing concern for the environment and the continued regulations surrounding the need to stop the rate of groundwater contamination, the company has a solid product that can’t be beat in the industry. It is the perfect time to capitalize on the fact that the company’s product uses half as much water and a third as much fertilizer than the competition. This will be a way of promoting the product to the consumers and the industry leaders. Additionally, the cost savings on fertilizer and water alone add another benefit that the company can capitalize on. The golf industry is growing fast and the longer HydroCan waits to get into the golfing industry, the harder it will be. They can work to gain support in existing golf courses and work to gain contracts with new golf courses. They need to capitalize on the first year, because the expenses will be less with the executives not taking a paycheck. The monetary benefits of utilizing this plan are beneficial and will offer a powerful base for success in the future.
Reference:
Hale, Anne T. (1996). Greener Pastures. Contemporary Marketing Cases. First Ed.