GALE COMPANY
Ryan Keane was a brand manager in the employ of Gale Company, a producer of fast
moving consumer goods with annual revenues of approximately €150 million and gross
profits of around €30 million. Keane had been given responsibility for managing Gale’s
imminent entry into the shoe polish business. This had been a very stable market with
limited competitive activity for the last 15 years or so. It was anticipated that Gale’s
emergence would ‘shake things up’ appreciably.
Shoe polish technologies were of two types, namely liquid and wax. Total sales in the
market were around 60 million units annually, with both liquids and waxes retailing at €2
for a 75 ml container (or the equivalent). Liquid polish accounted for 40 million units and
wax accounted for 20 million units each year. Over 90 per cent of all polishes were
purchased in supermarkets and hypermarkets by householders during their regular
shopping trips.
The market leader of the liquid segment was ShuShyne, which controlled some 80 per
cent of sales. ShuShyne was a product owned by Lind Company. Like other liquid
brands, ShuShyne was packaged in a plastic bottle container with a sponge applicator
attached at the top to facilitate application. All users had to do was to spread the liquid
onto the shoes with the sponge and leave them to dry by themselves in a matter of
minutes. Hence, customers bought liquid polishes because they were convenient to use,
providing a quick, easy, no-mess cleaning operation. This resulted in an adequate,
although not outstandingly good, shine. Customers also benefited from the fact that the
liquids covered shallow, although not deep, scuff marks or scratches on the shoes,
thereby restoring them to their original colour.
Wax polish, however, was far less convenient to use. These products were supplied in
narrow round metal cans. Users had to transfer wax from the can using a cloth or a
brush to spread it over the shoes. Then users had to rub energetically with another cloth
or brush to complete the cleaning process. It was a tedious, tiring, dirty job, which could
result in stains that were difficult to remove from the user’s skin or even from nearby wall
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coverings or furniture if they became affected, as they sometimes did.
However,
customers in this segment bought wax polish because it could guard against penetration
inside the shoes by rain, snow and other liquids. It could also guard against some
causes of scuff marking or scratching. Further, it could repair even quite deep scratches
by filling the grooves with wax and restoring the footwear to its original colour. Wax
polishes also provided a superb shine of the quality that was appreciated by police and
military personnel, for example. The wax segment leader was WaxOne, which held
around 80 per cent market share. WaxOne was produced by Ward Company.
The average costs of production and distribution of both ShuShyne and WaxOne were
€1.20 per unit and they were both sold to retailers at €1.50 per unit. Hence, both brands
gained margins of €0.30, or 25 per cent, on average costs, while the retailers gained
about €0.50 margins, or 33 per cent on their buying price. The total sales volume,
revenue and profit on ShuShyne was respectively 32 million units, €48 million and €9.6
million. The equivalent figures for WaxOne were 16 million units, €24 million and €4.8
million. Lind had total company revenue and profits across all its brands of €600 million
and €120 million respectively. Ward’s equivalent data were, respectively, €300 million
and €60 million.
At the age of 32, Ryan Keane was proud to have the responsibility for managing
GlosGard, which was what Gale had named its new product. Gale Incorporated, Gale
Company’s parent organization, held very high hopes for GlosGard and had planned to
launch it globally once the initial launch had succeeded. Gale Incorporated enjoyed
global annual total revenues of €3000 million and profits of €700 million. It had provided
generous funds for the development and effective marketing launch of GlosGard by
Gale Company.
GlosGard was a technological substitute since it was a synthetic liquid wax polish.
Consequently, it provided all the benefits of both liquid and wax polishes without the
limitations of either. It protected against deep scratches and liquid penetration of shoes.
It repaired scratches and restored the original colour of shoes. It provided a superb
shine and was quick, easy and clean to apply. The product was sprayed on evenly from
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Principles and Practice of Marketing 6e David Jobber
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an aerosol container and the shoes were then left to dry quickly by themselves.
Ryan Keane was not unduly concerned about the threats posed by ShuShyne or
WaxOne as neither brand had been marketed aggressively for many years. Both were
limited to the same four colours of black, brown, navy blue and neutral. Neither brand
had been improved in any way for nearly two decades. Neither was supported by mass
advertising or given much trade marketing support, even though the retailers had been
asking for both.
Ryan knew that if Gale could achieve an annual output level of 9 million units the
company’s advanced production technology would enable it to match the average costs
of the two rivals. Further, he knew that each successive increase in output of 9 million
units would result in a 10 per cent reduction in average costs due to economies of scale
and experience.
Ryan was delighted with the abundant funding he had been allocated to support the
launch of GlosGard. However, the objectives he had been given by senior management
had been to gain at least a 50 per cent share of the total market and to be profitable in
five years. Ryan had not regarded these objectives as being impossible to achieve.
Nevertheless, as it had been his first major assignment with sole responsibility, he had
invited you and your colleagues to help him. Specifically he had requested that you
develop a five-year marketing plan for GlosGard.
Question
Propose a long-term marketing plan for GlosGard, paying particular attention to
market segmentation and target marketing.
This case study was written by David Shipley, Emeritus Professor of Marketing, Trinity
College Dublin, and Graham Hooley, Professor of Marketing, Aston University.
All names, company data and market data have been disguised for reasons of
anonymity and simplicity
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Principles and Practice of Marketing 6e David Jobber
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