GloFish, LLC.
MBA 2009 Fall Semester
Marketing Management
Professor Charles Trappey
9862502 林淵源
9862506 李佳琤
9862514 曾淑華
9862527 周瑞麟
9862531 范國勝
9862532 王舜盈
9862537 湯美玲
9862538 范玉琴
Date: December, 2009
National Chengchi University, College of Commerce
TABLE of CONTENT
I. Summary 3
II. Analyze 5
III. Making decisions 6
IV. Conclusions 7
Appendixes
1. Table 1 GloFish, LLC company history
2. Table 2 Investors
3. Table 3 SWOT analysis
4. Table 4 Traditional and new type fish prices
5. Table 5 2005forecast Qty and margin
I. Summary
Abstract
Blake, CEO and co-founder of Glofish, LLC, was concerned about what to tell the GolFish Board of Directors the next day. Blake knew that if GolFish were to be successful, the board of directors would need to approve key changes in the firm’s marketing strategy, and soon.
i. ZEBRA DANIO FISH
Fluorescent zebra fish can be produced by injecting natural fluorescent protein genes into recently fertilized zebra fish embryos.
ii. COMPANY HISTORY
GloFish was founded by Alan Blake and Richard Crockett in November 2001. Their business strategy to one of licensing existing technology in hopes of packaging and re-selling it to a large industry players. By January 2002, the company had verbal commitments from Dr. Pruchansky and Cellflash to license their technologies to GloFish. Unfortunately, had completely fallen apart by the summer. Dr. Pruchansky worried that he would be attacked by the environmentalist community; he also concerned that he would also be criticized by his academic colleagues.
Blake contacted the NUS. NUS committed to licensing the technology to GoldFish for a 16 percent royalty fee with an annual minimum royalty of $150,000. A formal agreement was reached in September 2002 that gave GloFish exclusive rights to lines of red, green, yellow, and orange fluorescent zebra fish.(Table 1)
Investors
First outside investment in January 2002 from Dr. John Rosemary. January 5, 2004, launch date, at a value of $5 million. By then there were more than three dozen different investors.(Table 2)
iii. REGULATORY OBSTACLES AND MARKETING ACTIVITIES
California Fish and Game Commission passed a blanket regulation that prohibited the possession of any genetically modified fish.GloFish was notified that it would need to prove that its fish were safe for the environment if it wanted to sell them in California.
Public Relations
Croswell’s recommendation to initiate a modest national public relations campaign only days ahead of the product launch. To educate the public about the fish and help understand that the GloFish Red Zebra Danio was safe; secondary to build market demand for the fish. Blake also decided to advertise in two ornamental fish trade magazine.
Product Launch
In late November 2003, Blake advance the launch date of the public relations campaign. Blake was overwhelmed by all of the media attention. United States Food and Drug Administration(FDA)finds no evidence that these genetically engineered zebra danio fish pose any more threat to the environment. By the beginning of 2004, Anti-biotechnology group filed a lawsuit against the FDA. In April 2004, the California Fish and Game Commission recognized that the public had overwhelmingly accepted the GloFish product and agreed to begin the regulatory process that would ultimately allow the fish to be sold in California.
Product Enhancements
Blake learned that scientists at the NUS had developed a new generation of genetically modified zebra fish that would be significantly more colorful than the original product and would maintain their color as they matured. As more than one retailer noted, ”Fish lovers are finicky. They are always looking for new and different fish for their aquariums. Variety drives purchases”.
iv. MARKETING FRESHWATER ORNAMENTAL FISH
Freshwater ornamental fish are typically raised in outdoor earthen ponds. About 95 percent of all aquaculture facilities in the United States are located in Florida, which has an ideal climate.
There are only a couple of hundred freshwater ornamental fish producers in the U.S. Approximately 200 million freshwater ornamental are produced and sold annually in the U.S. Some two dozen regional wholesalers located throughout the country distribute freshwater ornamental fish to an estimated 5,000 retail establishments for sale to consumers. The majority of the retailers in the U.S who sell freshwater ornamental fish are pet stores. In 2004, the average pet store in the U.S had total sales of about $1.75 million.
The consumer market for freshwater ornamental fish and related products in the U.S exceeds $700 million annually and is growing at a rate of nearly 10 percent per year. Blake estimated that about $4 million was spent on GloFish products by consumers in 2004.
A majority of the freshwater ornamental fish sold on the U.S are purchased from three major retail chains: Wal-Mart, PETsMART, and PETCO. None of the three major chains agreed to carry the GloFish product when it was introduced.
Blake through that it might be possible to sell his firm’s fish through kiosks, which would provide the added benefit of being able to offer Glofish-branded tanks and supplies, fish food, and water conditioner.
Blake was also considering the possibility of marketing through the Internet directly, the price of these fish were competitive, delivery costs typically were several times higher than the price of fish.
Blake and Crockett thought that international markets also represented a huge opportunity for GloFish, particularly if the company could sterilize its fish to prevent illegal breeding in areas where it could not otherwise control its intellectual property.
v. BLAKEE’S RECOMMENDATION
Blake knew that distribution was the key to market success. He realized that his recommendation would have to be consistent with the resources that GloFish presently had available as well as fit other elements of the company’s marketing strategy.
II. Analyze
i. FIVE DISTRIBUTION OPTIONS
Blake listed four plus one distribution options as below:
‧Independent pet stores
‧Chain Stores
‧Kiosks
‧Internet
‧International
ii. SWOT
Blake wrote down the internal and external advantage and disadvantage for theses five distributions . The independent pet stores and Kiosks are face to face sale and they are easier to convince people to buy the new generation modified zebra fish. But the independent pet stores have no good display conditions and Kiosks have a high cost for leased space. The Chain Stores are the majority of the freshwater ornamental fish sold in U.S.A., but the three main chains refused to carry the Glofish products. Internet and International channels are higher at delivery cost , especially in Asia area the piracy products everywhere, in European Union it’s still prohibitions for the genetically modified fish etc. (Table 3).
iii. Risk and How much earn/cost
GloFish 2004forcasted sales USD$4M of all USA market USD$700M is 0.5% market share. There are 200 freshwater freshwater ornamental fish producers , and produced millions of each year with 25% shipped to domestic markets. Total quantity to sell in USA are 200,000,000. The freshwater ornamental fish and related products is growing at a rate of nearly 10%. So that, we assumed the 2005 forecasted Qty will be (200,000,000 * 0.5% *25%)*( 1+10%)=275,000pcs. Regarding to the selling cost for each GM fish, we assumed the margin rate is same as traditional zebra fish then the selling cost will be $0.3 for each . (Table 4) If sell to Independent Pet stores in $1.5 (by pass wholesales chains) deduct the selling cost and Royalty fee, the margin for each is $0.65. If sell to Chains stores in $1.3 (through wholesales chains) deduct the selling cost and Royalty fee, the margin for each is $0.45. If sell to the Kiosks in $5~$12(direct sale) deduct the selling cost and Royalty fee, the margin for each is $3.9~$9.78 . If sell to Internet and International , the selling price is hard to estimated. (Table 5)
III. Making decision
i. THE CHANNEL-SELECTION DECISION
Making the channel-selection decision is not so much a single act as it a process of making various component decisions. Before making the channel-selection decision, we must conduct a thorough market analysis in order to identify the target markets that will be served by prospective marketing channels. The target markets sought and their buying requirements form the basis for all channel decisions. In other words, we need the answers to fundamental questions such as these: Who are potential customers? Where do they buy? When do they buy? How do they buy? What do they buy? Then we should focus on the type and location of intermediaries in the marketing channels:
‧Target Market Coverage
Achieving the best coverage of the target market requires attention to the density and type of retails. Which degree of distribution density shall we select? Intensive distribution, exclusive distribution or selective distribution?
‧Satisfying Buyer Requirements
The identification of channels and intermediaries that satisfy at least some of interests buyers want fulfilled when purchasing a firm’s products or services. These interests fall into four broad categories: (1)information (2)convenience (3)variety, and (4)attendant services.
‧Profitability
Channel profitability is determined by the margins earned (revenues minus cost) for each channel number. Channel cost is the critical dimension of profitability. The channels with high-cost will always not be selected at last.
ii. MULTI-CHANNEL MARKETING
Multi-channel marketing involves the blending of an electronic marketing channel (electronic storefront or Web site) and a traditional channel in ways that are mutually reinforcing in attracting, retaining and building relationships with customers.
The viability of multi-channel marketing depends on a viability of considerations. A major consideration is the extent to which an electronic marketing channel generates incremental revenues or simply cannibalizes sales from traditional channel intermediaries.
iii. CHANNEL-MODIFICATION DECISIONS
An organization’s marketing channels are subject to modification but less so than product, price, and promotion. Shifts in the geographical concentration of buyers, the inability of existing intermediaries to meet the needs of buyers, and the costs of distribution represent common reasons for modifying existing marketing channels.
IV. Conclusions
Regarding to the SWOT and making decisions analysis, we made the conclusions.
‧ Independent pet stores
a. The total sales is growing.
b. The margin is reasonable.
‧ Kiosks
a. Kiosks are everywhere, can attrack more shopping people to pay attention GloFish products and increase GloFish brand exposure.
b. The margin is profitable. If the leased cost can be breakeven .
‧ Internet
a. Always open store and no extra cost of physical store.
c. The main cost of delivery cost can be charged to the customers.
Appendixes
Table 1: GloFish , LLC Company History
2001.11 / Company founded2002.01 / Acceptance by Dr.Pruchansky to sell his fish (20% Royalty fee)
2002.summer / Dr.Pruchansky pulls out
2002.09 / NUS signed instead to supply the fish (16% Royalty fee)
2003.09 / California Fish and Game commission pas regulation forcing GloFish to prove it’s fish are safe for the environment
2003.11 / California Fish and Game commission Hearing for GloFish
2003.12 / FDA states GloFish “fish” safe
2004.01 / GloFish “original” product Launch date
2004.04 / California Fish and Game commission Accept GloFish products
2004 / GloFish “released” however due to controversy, few retailers wished to stock it
2004 / Poor Sales for 2004
2005 / Improved “Fish” Release date
Table 2: GloFish , LLC Investors
2002 / USD$ 100,0002003 / USD$ 600,000
2004 / USD$ 5,000,000
Table 3: SWOT Analysis
Independent Pet Stores / Chains Stores / Kiosks / Internet / InternationalStrengths / It is easier to convince people to buy the new generation modified zebra fish. / Chain stores have more ability to display the fish under optimal lighting and aquarium conditions. / Can offer glofish-branded product in kiosks, which can bring more revenue / Web site :www.glofish.com. Working 24 hours , convenient to purchase, communication and service with customer directly / particular products (new red fish)
It serves both true freshwater ornamental fish lover and people who find it convenient to purchase freshwater ornamental fish. / Sell whole aquarium kits to whom is purchasing freshwater ornamental fish first time. / customers can easily find kiosk in the shopping mall. / No need more money to support a advertising campaign to announce the availability of its new genetically modified fish, let customers aware the product and GoldFish / good technology
Be marketed on eBay , it also can be one of possible international strategy
Using internet to educate the GloFish Red Zebra Danio was safe
Bypass wholesalers and sell directly to retailers or consumers, then gain more profit
Controll prices by GoldFish itself
Weaknesses / It is hard to educate them to display the fish under optimal lighting and aquarium conditions. / It is difficult to convince the major chains agree to carry the Glofish product. / may increase logistic expense / Couldn't face fluorescent zebra fish directly and sell from showcase, attractive lower than display in aquarium / Delivery cost typically were several times higher than the price of fish
revenue occurs mostly in the end of the year, 40% in Nov.& Dec. (annual sales) / Delivery cost is higher than the price of fish / patent problems
Opportunities / The total sales of pet store are increasing. / It is a good distribution channel to reach a broader customer. A majority of the freshwater ornamental fish are purchased from retail chains. / kiosks may attract people who shops for other things in the shopping mall / Have chance to get customer from the major retail who none carry the GoldFish or retailers refused to display / high acceptance in emerging markets
It could attract more fish aficionados than in chain stores. / It will provide a good chance to defend the product against false accusations. / Market exist for biotech, freshwater ornamental fish / The worldwide market is approaching $2 billion per year
The most lucrative foreign market appeared to be in Asia
Threats / The number of pet stores is declining at an annual rate of 2 percent. / The customers of chains store are price-sensitive and not tropical fish enthusiasts. / the cost of leased space is high, ranged from $12000~36000 for each / There numerous dot-com firms that marketed tropical fish to consumers over the Internet / prohibitions of foreign regulations、the opposition of anti-biotechnology groups
The new generation modified zebra fish that contingent on successful completion of federal and state regulatory reviews. / Fish lovers are finicky. They are always looking for new and different fish for their aquariums. / there is already having competitor sold colorful beta fighting fish in the market / The prices of these fish were competitive / The competitors from China, Indonesia, Singapore, Taiwan, and Thailand are found at all distribution channel levels
The old generation was not as attractive as the market wanted. / losing the control of intellectual property (piracy products)
They sell pet-related product in addition to fish. / The European Union was essentially closed
Table 4: Traditional and New type Fish prices