Patrick Davis
Star Chemical Case Study
Background:
Star Chemical is a chemical supply company who has recently struggled due to the fact
that it could not compete on price with its competitors and their clientele was moving elsewhere.
In addition, Star Chemical was not creating its own line of consumer products like many of their
competitors were because of their lack of knowledge in marketing and not having a specific
product which they could sell. However, Star Chemical recently created a pool cleaning
chemical which could launch them into the consumer market. The company is unsure about how
they should go about the process. Their ideas for handling this were either to let the current sales
force attempt to sell the chemical, use either a distributor, or start a whole new sales force. A few
of the issues that were presented either way were: which channels should they use and markets
should they penetrate, whether to sell in bulk or not, and whether to use a push or pull marketing
strategy. Proposals for either sales strategy would be judged against a scale evaluating:
effectiveness in reaching customers, profit potential, experience the company will gain, total
investment required, and ability for company to cut short term losses.
Pros and Cons of Using Current Sales Force:
Pros:

Have a better knowledge of the company it’s culture and values

Costs should be limited to advertising and training the current employees, as no new
employees will be needed

Have a much better knowledge of the chemical field which could be applied to selling the
new product

Offers Star Chemical more power over the channels of distribution and which markets to
penetrate than using a distributor would

Gain experience in consumer goods market, creating more room for future growth and
profits
Cons:

No experience with selling in consumer markets

Company is already struggling, taking these employees away from the current sales could
be disastrous if the pool chemical fails

Don’t know the most effective and efficient channels as well as a distributor or consumer
goods sales person would

Would be guessing as to which markets will be the most fruitful to penetrate

Most likely have to use a pull strategy and incur a great amount of cost through
advertising which they have no experience doing
Pros and Cons of a New Sales Force
Pros

Experience selling consumer goods, comes in handy particularly when you will need to
be able to compare your product with your competition’s

Knowledge and experience with the most effective and efficient channels of distribution

Better idea of which markets would be the easiest to penetrate whether it be the
residential pools or business operated pools, better market coverage

Most likely will already have some strong business relationships which they could bring
with them to Star Chemical

Ultimately Star Chemical is still in complete control and gains experience in consumer
goods with a chance to grow
Cons

Fixed cost for Star Chemical will be much higher, will need to hire a whole new team and
on top of will have some sort of training program to assimilate them to the company

Will not be as knowledgeable about the technical aspects of the product as the current
salesman are

Possible internal company disputes if the other sales people feel slighted by the
company which the sales manager believes could happen

Cost of having to pull the product thru the channel with heavy advertising will be very
expensive
Pros and Cons of a Distributor
Pros

Will already have a market penetration strategy in place as they deal with products that
are very similar

Already have set channels of distribution they will be able to go thru with minimal level
of effort as there is already trust built

Risk of chemical sales people being unhappy is lower than creating a new sales force

Would be easier to push product through the distribution channels because of their
knowledge of their buyers and experience with it, saving a lot of money on advertising
Cons

High cost for using a distributor

Star Chemical will have less control over the channels that will be used and the markets
which the distributor will enter

Will limit the amount of experience that Star Chemical gains in selling consumer goods,
therefore limiting any possible immediate growth opportunities
Recommendation
I would recommend to Star Chemical after weighing the pros and cons of each of the
decision alternatives that they choose to hire a distributor. The biggest advantage to hiring a
distributor is the knowledge and experience they have in the consumer goods market. While
investing in a distributor will probably be the more expensive option initially, it is the safest bet.
Star Chemical has no previous experience in selling or marketing consumer goods, and thus
creating a sales force would be a huge risk to take on. Star Chemical would in all likelihood have
to use an expensive pull strategy investing heavily into advertising, which as stated before they
have had no practice doing. With the distributor, the pool cleaning chemical could be pushed
through the distribution channels at a much lower cost because of the relationships the distributor
has and with a much smaller investment in advertising.
In addition, using a distributor will provide a much wider market reach for the pool
cleaning product. If Star Chemical were to choice one of the other options, it could take months
of market research and at a much higher cost, to figure out whether the product would be
received best at residential or commercially operated pools or a combination of the two. A
distributor will allow Star Chemical to learn how to effectively penetrate markets and which
channels are the most efficient, without experiencing as heavy of a learning curve if they were to
create their own sales force.
A huge factor in making this decision is the size of investment required by Star Chemical.
Going in any direction besides using a distributor could have catastrophic effects. Transferring
sales people to sell the new pool cleaner, presents a huge risk in that Star Chemical is then
neglecting what got them to this point, and what they know they can succeed in, and that is
chemical sales. The investment into a new sales force is a huge unknown for Star Chemical and
the cost of advertising, salaries, training and any other aspects will add up. With a distributor and
money spent is a sunk cost, so if the product does not pan out in your favor, you can simply stop
and cut your losses. It would be hard to say that if you created a new sales force that you could
easily cut your losses, as there would be jobs on the line and a heavy investment into advertising.
However, if the use of a distributor does work to your favor, Star Chemical can slowly
learn and understand what the most effective channels to use are when selling consumer goods.
Star Chemical, could one day launch their own sales line, but for now the risk is too great with
the uncertainty of how the pool cleaner will play out in the consumer market. So take a smaller
profit margin for now and if the product is successful, then in the future consider creating your
own sales force with more growth potential.