ODI Contact Lens’ Marketing Strategy

ODI contact lens is a revolutionary new product, which is aimed at replacing the traditional de-beaking technique used by farmers to minimize cannibalism among chickens. Being unique, there is no competition to the product in the market and hence ODI has the first mover advantage. There is very little awareness about the advantages of ODI among potential customers (chicken farmers). This product is in the introduction phase of the Product Life Cycle and the ODI team is faced with the task of developing a marketing and pricing program for the ODI lens.

ODI?s strengths include an exclusive patent on its technology and an exclusive contract with New World Plastics to manufacture lenses. However the company has limited cash ($200,025) and a very small sales force. Since this is a unique product, there is no competition to the ODI lens and, given the exclusive access to the market, there is unlikely to be any major competitors in the next three years. There are three main consumer segments; Small Farms (10,000 or fewer birds), Medium Farms (10,000-50,000 birds) and Large Farms (over 50,000 birds). Due to lack of awareness among consumers about the benefits of the product, the perceived value of ODI lenses is almost zero. Chicken farming is a very low margin industry and the number of innovators will be limited to those farms that have enough cash to try new products.

ODI lens benefits include 1) decreased cannibalization rate (4.5% vs. 9% for debeaking), 2) trauma elimination from debeaking leading to loss of 1 egg per week and 3) reduced food and labor costs comparable to debeaking. The Accord Framework reveals the following: Advantage- Farmers have an advantage of potential economic savings of 23.9¢ per chicken (see Appendix 1); Complexity- Due to lack of experience with the product, farmers may perceive installation of the lenses as overly complicated. ODI must demonstrate that the process of lens insertion is easy; Compatibility (With present processes) – The product is completely new and is not compatible with current practice (debeaking). The costs and productivity of workers will be compatible once the training is performed; Observability (of Benefits) – The benefits are not easily observable by others.

The successful use by early adopters is key; Risk (of Adoption)- As with any new product there is an inherent risk of product failure. In a low margin industry such as chicken farming, the investment in risky technology is much lower. The free trial is key to reducing the risk of future investment; Divisibility (Limited Trial) – It is possible, and in fact, desirable to try this product on a limited basis. The Pacific region is the logical choice, since ODI already has an office there and has conducted tests in the region.

Three pricing strategies may be employed; 1) Penetration with no Free Trial, 2) Skimming with no Free Trial and 3) Skimming with Free Trial. For Penetration with no Free Trial strategy ? In order to break even at a low price of 8¢ cents per pair, the company must achieve quarterly sales of 3,092,000 units, sold to at least 157 farms (see Appendix 1). This represents a penetration of 23% within one year. This is an add-on cost to a farmer (in addition to labor cost). With perceived value being virtually zero, the penetration of 23% of the market is highly unlikely.

For Skimming with no Free Trial the skimming price can be set to capture the economic value entirely. This price (less shipping and handling costs) is around 20¢. The quarterly sales in this case must be 759,750 units to at least 39 farms (see Appendix 1). This amount corresponds to a 6% penetration of the total market within 1 year. With low perceived value, this is extremely hard to achieve in a low margin industry.

For Skimming with Free Trial option ODI must introduce a batch of lenses to farms in each segment (distributed proportionally to the farm?s size). The lenses must be given on a three month free trial with the option to purchase at a higher price (16¢ ? 20¢) or keep the lenses. This strategy must be accompanied by extensive educational and informational campaign with salesperson being present at the farm at least several times a month. As the number of followers grows, ODI will be able to discontinue trial and lower the price of lenses. Using the initial investment of $200,000, ODI can distribute 5,442,671 units for free trial. In order to recover its cost within a year, the number of adaptors at the price of 20¢ must be around 79% (annually).

This percentage can be spread through the year. This corresponds to 8% of the market. Combined with on site support and an informational campaign, this penetration is attainable. This only pertains to the percentage of lenses bought from the initial distribution. It does not include the additional lenses purchased neither it takes into consideration the imitator effect of other farmers. Using Bass Diffusion Model analysis shows that with the average coefficient of innovation of 0.001 and average coefficient of imitation 0.038 and with only 10% of initial adapters (based on number of units purchased from initial distribution), the profits are expected to come in the second year (see Appendix 1).

Since the product is in the introduction phase of the Product Life Cycle, an extensive promotion to raise product awareness with emphasis on economical benefits and product ease of use is required. This promotion must focus on information and education of the farmers. The company must concentrate its efforts on a limited distribution in Pacific region. ODI should adopt a free trial approach followed by skimming pricing. The number of adaptors after a trial is critical to the ODI?s success. The initial investment of $200,000 should be used to acquire 5,442,671 pairs of lenses which should be distributed proportionally (see Appendix 1) to the farmers. The free trial should last for 3 month. There must be a considerable personal involvement of a salesperson concerning the progress of the farmer?s trials. This is necessary to convey all the potential value of the product to the farmer. The awareness advertisement must be made in the industry publications, supplicated with the results of the trials. At the end of a trial, the farmer will be given an option to buy the units for 20¢ a pair.

As the number of units sold goes up, the price will eventually come down and the free trial will be discontinued. The initial distribution of the product will be limited due to the ODI budget constraint and inadequate sales force. The initial distribution should focus on Pacific region since the company has done tests there and has a physical presence. Therefore, one regional office should be considered.