canty international case study

November 5th, 2009

Instructor: Anne Marie Webb-Hughes

Marketing 1102

SET 1F

MOSAIC MARKETING CORPORATION

Marketing 1102 MOSAIC MARKETING CORPORATION NOVEMBER, 2009

Contents

Introduction.....................................................................................................3

Problem...........................................................................................................3

SWOT ANALYSIS:..............................................................................................4

Competitive Analysis:......................................................................................5

Solution:......................................................................................................10

Course Concepts:...........................................................................................11

REFERENCES:.................................................................................................12


Introduction

The market for wall systems and coverings is an untapped and opportunity

filled market. Hospitals, hotels and other buildings are all in need of covers

for their walls. Some companies have high standards for their wall coverings;

to be eco-friendly, sound proof, fire resistant and even decorative. Others are

looking for coverings that simply cover the walls, for a low cost along with

low quality. Canty International is a member of this market, making wall

coverings for industrial and commercial use. Recently they received a

proposal from one of their clients, Bryant Inns, which operates 150 hotels

across Canada. This request was for a new product of wall covering, which

had to meet certain characteristics such as sound proof, fire resistant,

durable, stain-resistant and safe, as well as decorative with the current look

of the hotels.

In order to develop a new product such as a wall covering, B2B marketing

must be considered and a price must be set…but the decision as to what

price is much more complex than it seems. By aiming to create value for the

product, as well as keeping the price appealing, a problem is created. What

is the proper pricing strategy to satisfy the needs of Bryant Inns, and what

price fits well with the new product we are creating

Problem

What is the most effective and profitable pricing strategy for the firms new

product?


Canty International’s main problem is exactly how they should focus on

pricing the new product, Decoline. It’s a product that is greatly improved

from the previous one, it last 5Xs longer, it fire-resistant, minimizes sound, is

abrasion resistant and soil-proof. Along with all these many features the

product will also take considerable investment in terms of production costs.

Therefore fixed costs and variable costs relating to the product must be

identified, as well as the potential value that customers would place on the

product.

Key Findings / Facts / Assumptions:

Break-even point is when Canty’s sells 500m2 of Decoline at the price

of $22.30

Assume that company does not carry any other eco-friendly wall

coverings.

Assume the company is well established locally and nationally.

Company is an older company, with well established customers.

Price should be set approximately $70 per m2 to make profit.

We are assuming that Canty International will act as a profit

maximizing firm.

On a yearly basis:

Break-even Analysis

MonthlySales and Revenue $44,608.75Break Even Price 22.30438


COGS, Decoline 19.29

Unit

Production output $38,580.00

Decorelinem^2

$19.29 x2000

Techno Fibrem^2

$7.28

Bamboom^2

$3.30

Cementm^2

$8.00

Labourm^2

$0.71

Administration CostSupervision $1,080.00Inspection $165.00Miscellaneous $84.00Floor-space expense $327.00Small tool expense $30.00Amortization, Table $38.75Amortization, Cutter $4.00Selling Administration $4,300.00Total Administration Cost $6,028.75Total Cost $44,608.75

Sales Projection

1st 6 months 2nd 6 months

3rd 6 months

Sales $160,000 $216,000$288,00

Monetary discount $24,000 $21,600 $0.00Sales return & allowance $3,200 $4,320 $5,760

COGS $57,870 $81,018 $115,74

Net Sales $74,930 $109,062$166,50

Other Expense


Advertising Budget $35,000 $30,000 $30,000Survey and Data collection $6,835 $6,835 $6,835Administration Cost $44,605 $49,065 $51,518

Total Expense $86,440 $85,900 $88,353

Net income -$11,510 $23,161.50 $78,146

SWOT ANALYSIS:

STRENGTHS

The first apparent strength of Canty International is the amount of loyalty

Bryant Inns has given to them. Bryant could have applied some research into

the world of eco-friendly wall coverings but they first wanted to offer the

challenge to Canty international because they favor and trust the values the

company. Canty International is well established with the products they

already sell to other consumers/customers. They have established a name

for their company and for brand recognition. The new product, Decoline, has

been tested in their design lab and has been described by their fully qualified

technicians to be “the answer to the manufacturer’s needs.”

WEAKNESSES

Canty International is lacking in experience with eco-friendly material which

is a risky venture for the company to take part in. The new product has a

need for new brand recognition. The consumers may not even see the value

for the new product and not understand the high pricing that comes along


with a new product. Entering an eco-friendly environment means to enter

into a smaller target market which may cause a loss of loyal customers.

Since Canty International is placing a high majority of effort to Bryant Inns,

they have concentrated a segment strategy upon the product. Relying on

potential unqualified employee/manufactures that produce or export the eco-

friendly material, without the proper knowledge of the product and what its

needs are to be kept safe.

OPPORTUNITIES

Canty International already has Bryant Inn as a customer. They are a huge

player in the hotel industry and if Canty is successful in delivering a quality

product and service, they will have a massive opportunity to promote their

brand. Once they get more local brand recognition, they will have the

opportunity to expand internationally. By improving the quality of their

product and service, they will have the opportunity to boost revenues. As

long as they can deliver perceived value, customers will pay more for

superior quality. Canty also has the opportunity to engage in Business-to-

Business marketing. Once they have experience with their new materials

they could sell their products through home decorating companies such as

Rona or Revy.

THREATS

Canty are taking a big risk by venturing into a new area of wall coverings.

Because the materials are new to them, they may not have much research


or testing for the long term. Other companies could develop a similar

product. There is the threat of competitive retaliation here if the competitors

decide to create a similar product for a cheaper price. Because they are

using new materials for the wall coverings, conflicts with building codes and

government regulations may be possible in the future.

Competitive Analysis:

There are extensive local wall covering companies that cater to the physical

appearance of walls rather than the functionality of the product itself. For

example, the Home Depot, being the main competitor is known for providing

customers with a larger selection of colors and designs at low prices. A huge

advantage that Canty has over its competitors is the environmental aspect

as well as its longevity. While competitors offer a lifespan of 2 to 4 years,

Canty offers up to 10 years on their Decoline which offers them great

potential over their competitor.

Target Market Identification

The Decoline product that Canty International is creating has a distinct

market set up for them. Since the company has been given a series of

requirements and characteristics, the product is targeted towards Bryant

Inns as a way of business-to-business marketing. This means targeting the

CEO, buyers, initiators, deciders and even interior designers who work for

Bryant Inns. These people’s demographics are professional men and woman


who are meticulous with their careers. They analyze details of the product

they are about to purchase; therefore the value must be noticeable when it

comes to creating the product because they will know if the value is present.

The Geographic market consists of all buyers who live in the regions of

Bryant Inn’s 150 hotels. Demographic variables of this market are not

specific, because the information regarding who the people in charge of the

jobs above are not clear. We can assume that the psychographic variables

would be the following:

-Individuals who perceive value from characteristics featured in a product.

-Purchasing habits associated with high quality

-Desires the best for their company (Bryant Inns)

-Have a decorative eye

-Concerned with the environmental issues (our product is eco-friendly)

We recognize that this market is very limited by saying that Bryant Inns is

the only customer we have. This is true in the short run and is aware that our

product will suffer once Bryant Inns has utilized the product in all its hotel

chains. We would not want our product to only have a lifecycle measuring

the amount of years Bryant Inns uses it. Therefore, our secondary target

market would be other hotel chains who are aiming to build up their hotels

with high quality decorations in their buildings. These companies would have

high profits and may be in tune with environmental issues. They are


companies who are keen on keeping up the image of their hotel rather than

just cutting the costs to keep it running. All these are examples of benefit

segmentation. On the perceptual map for wall coverings, our ideal

point would be closest to quality rather than cost sensitive. They are located

in Canada, just like Bryant Inns. We assume that they would be relatively

experienced companies in the market, whose current wall coverings have

expired and gotten old. We could also avoid issues of being able to afford our

wall coverings, since they are companies who are in the maturity stage of

their lifecycle and have money to spend on increasing credibility of their

hotels.

Alternatives and Recommendation

Alternative #1:

To gain a government contract to produce our new product of Decoline. A

government contract would enable us to set a higher price of $65.00 m2

(premium pricing). This is possible because of the government’s economic

stimulus plan. If the government supports us with a contract, they are

supporting and stimulating trades. If we position the decoline product into

our customers mind as a premium alternative to their current wall covering,

they will be more inclined to pay a higher price because it is justified through

our features. For the premium decoline they are getting more value for a

premium price, but in the long run because they do not need to maintain or

change the covering as much, they are saving money because they pay less


for shutting down their business for renovations and maintenance. Also they

are getting a more valuable product in the end so they will be satisfied with

their purchase and accept our price.

Advantages:

1. Such a huge contract would generate a lot of business and a lot of

profit

o Example: Coquitlam Public Library has a floor space of 14,834

m2, yes not all of that would be wall space to be covered, but

there would still be a large area of wall

o Example: Evergreen Cultural centre in Coquitlam, a floor space of

4,224 m2, again, not all wall, but still would be a significant job

o Government includes schools, public buildings, etc.

2. Could cause them to expand

o Expansion means they could produce more product, the more

product they get out there/the more buildings they have put

their wall coverings in, the more people know about their

company and this could increase sales.

3. They could spend less on advertising because they would be gaining

quite a bit of work from the government, as well with their work in so

many places; it is a form of advertising.

Disadvantages:


1. Would this company be able to keep up with the amount of demand

from the government?

o Demand from the government could be too great and cause

them to go under due to the cost of buying machines to try and

produce enough Decoline.

o Not being able to produce enough Decoline could cause them to

lose the contract and customers.

o If the work could not be completed it could ruin their reputation.

2. Could be costly, if they decide to expand in order to keep up with the

demand

o Would entail higher costs for rent or purchasing a warehouse

o Costs for more of the base equipment (cutters and tables) in

order to produce more product

o Costs for hiring more employees in order to produce more

product

3. Could cost them other retail jobs because there could be such a huge

concentration on government work.

Alternative #2:

The second alternative for Canty International is to use competitive pricing

for their wall coverings. First of all, Canty must measure their company

against their competition, which means that Canty must set their prices

similar to their major competitors. Other competitors will use value for their


wall coverings, so Canty through this pricing strategy must copy that exact

strategy that provides value to accommodate the competitive pricing

strategy.

Canty international is categorized as in an oligopolistic competition. This

means that only a few firms dominate in one market. The competitive pricing

strategy is ideal for Canty International because there is an exact amount of

competitors in the market of wall coverings and to be able to survive you

must change your prices in reaction to the competition. By Canty

International setting their prices competitively, this will gain market share

when, the consumers compare prices of wall coverings. Another option is to

use premium pricing, which captures consumers who shop for the best and

price is not an issue.

Advantages

1. By setting the price close to competitors this allows consumers to

perceive Canty International’s wall coverings to be similar to other

brands of wall coverings. This benefits Canty because the price allows

consumer to believe that their product is of quality and value even

before they have tried the product.

2. By using premium pricing, this will target consumers who specifically

shop for products that are of better quality, and they also believe a

product of greater quality is always priced higher than other products

3. Competitive pricing allows to keep a close watch on competitors in the


Disadvantages

1. Since Canty International is the first company to come up with this

revolutionized wall covering, there is room for competitors to use

reverse engineering.

2. After lowering the price from using the pricing strategy of premium

pricing, some costumers may lose their loyalty from being dissatisfied

with the high they initially paid.

3. In the future, if Canty International were to lower their price this could

damage the perception of value the consumer has about the product

Alternative #3

One of the alternative pricing strategies we came up with will be cost based.

Cost base is one of the more primitive forms of pricing a product. There are

three major considerations to place a price. First, the variable cost of the

product and the fix cost of the sales and administration. Second, the

economy of scale, the more we produce the lower the price, the more

competitive we are. Third, the fluctuation of the raw materials must be

factored in to place the floor price.

We have calculated and came up with the actual cost of the decoline per

meter square. The cost would be $12.832 / m2. And the floor price will be

20% mark up of its cost which will be $15.394. And on we will mark up the


price base on $15.394 for sale prices.

Advantages

1. Canty can expand its market share very rapidly. The price is

reasonable and reflects its cost.

2. Profit and sales are steady. Since the value of decoline is equivalent

to its price, Canty can saturate the market with its decoline product.

Since Canty needs to provide for the entire market, it sells as much

as it produces. It will more likely to expand its production force

hence improving the economy of scale, making its product more

competitive (like wal-mart.)

3. Canty can also capture some of the value based segments. It can

produce high-end decoline from order, and fitting a reasonable price

on it, or produce low-end decoline with desirable price.

Disadvantages

1. There can be risks of shortages of key raw material needed to

manufacture decoline, hence driving the cost of the product high. If the

cost is higher than its projected floor price, the company may be losing

money.

2. Using this pricing strategy, the company will not be able to promote

enough value or recognition of its product or brand name.


3. Since the sale margin is not significant, and the B2B market is quite

limited, the potential for profit is very limited.

Solution:

Our goal is to enable Canty International to establish an affirmative

reputation by their high valued wall coverings. This would also allow for their

brand to be well recognized locally, throughout their province, and has the

potential to be acknowledged nationally. This pricing strategy will induce the

particular target market to frequently purchase Canty International’s specific

wall-coverings product in immense quantities. Customers will realize that this

is a brand they can greatly trust and rely on. We decided that the value

based pricing alternative would be our best option going forward. The appeal

of Decoline as a premium product will generate more sales for Canty. The

value based pricing of our innovative product will also attract more

customers because we will be setting the next precedent in wall coverings

because this new product will be far greater than the previous types and this

will be a new “norm” for wall coverings. This plan is designed to go get us

over the projected sales of 500 square meters and get us to sell closer to

what we are capable of. The new product is much improved from what we

were selling before so if properly marketed, we can turn in a bigger profit for

the company through higher prices and the high demand we anticipate to

induce.


Implementation Plan

Canty International’s new product, Decoline is a great substitute for any

regular wall coverings. This high class product offers a new and improved

degree of fire resistant and soundproof walls, and is resilient enough to

endure daily traffic. Most significantly, Decoline will have a ten year life span,

benefiting customers, as they would not have to go through having to

renovated wall coverings every couple of years.

Due to the extended lifespan of Decoline, it will permit us to charge a

higher price. We have decided that the selling price for Decoline be, $70.00

per square meter, allowing monetary discounts to customers to choose to

purchase in large quantities. This strategy will induce many consumers to

buy in bulk, which will also enhance Canty International’s profit goals. We will

also be advertising other appealing product incentives, which we would

thoroughly promote to the regular, loyal customers we have already built

strong relationships with. This will also allow Canty International to attract a

newer, broader clientele, which could be receiving many advantages from

the Decoline product.

We would also look to market this product at a variety of

manufacturing conventions. This would permit for Canty International to

grasp the attention of many large industrial and manufacturing

professionals. Therefore, while considering reconstruction of not only hotels,


these industrial leaders could however look to renovate their company

headquarters, industrialized buildings, or warehouses. Promotional strategies

would continue through construction companies, flyers of neighborhoods

home stores, such as Home Hardware and by internet marketing.

Also, as a way to receive feedback, we would ask all customers to

participate in a survey, expressing their point of view on what changes

should be made in order for our product to become the most finest. Decoline

is a product that has been strictly developed for specific use, therefore the

opinions of our clientele is of immense significance. Lastly, if no other

company produces a similar product, we would decide to raise our prices a

reasonable amount, in order for Canty International to receive their

maximum profit possible.

Course Concepts:

- B2B marketing

- Geographic

- Demographic

- Buyers

- Market Position

- Need Recognition

- Concentrated Segmentation Strategy

- Competitive Retaliation

- Initiators


- Deciders

- Psychographic

- Lifecycle

- Benefit Segmentation

- Perceptual Map

- Ideal Point

- Maturity Stage

REFERENCES:

1) Grewel, D., Levy, M., Persaud, A., & Lichti, S. (2009). Marketing Canadian

Edition, USA: McGraw Hill Ryerson Limited.

2) Metro Vancouver. (2009). Coquitlam Town Centre. Retrieved October 27,

2009, from

http://www.metrovancouver.org/planning/development/livablecentres/

Pages/coqutilam.aspx

3) Renovation and Building Costs. (2000-2009). Ontario Contractors.

Retrieved October 26, 2009, from

http://www.ontariocontractors.com/costs.htm?printable=1

SWOT Analysis Graph


ENVIRONMENT

POSITIVE NEGATIVE

INTERNAL STRENGTH:

-Loyal customer basis (strong market position within hospitality and tourism industry).

- Their products are well-established because they have already been in the business.

-Their new idea has been tested and is described as “the answer to the manufacturers needs”.

WEAKNESS:

-Lack of experience in this type of concept/ this change may be risky.

-creating need recognition for their new image may be risky. For example, what if customers don’t see the value of the product?

-reliance on fewer customers for eco-friendly demographic (concentrated segmentation strategy).

- Possible unqualified workers to produce eco-friendly material and export eco-friendly materials.

EXTERNAL OPPORTUNITIES:

-Expand into other countries/ company development

-Boost revenues by expanding into a more affluent target market

-The customer that they have, Bryant Inn, is a huge player in the hotel industry. They have the opportunity to promote their brand, get more brand recognition

-engage in Business-to-Business

THREATS:

-Other companies carrying similar product, competitive retaliation

*they would have more competitive prices

*big companies like Rona Revy who already have a loyal customer base

- They are venturing into new material knowledge. For example, they may not know the long term research about the bamboo and technofibre. What tests do we know of? Could cost of production go up?

-Possible government regulations, building codes. We just don’t know the long term effects.

canty international case study

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