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Senior management were very concerned that the structure of the campaign had not been
sufficiently considered; and that the company should think about transferring some of the
budget to other media types.
Other possible avenues of activity
The company had especial expertise in the production of technical paint products. The
production department had one of the best reputations in the country and this had helped
in the acquisition and maintenance of the own label products. Homecolour was looking for
avenues of activity that would exploit this technical strength, improve profitability and
improve the current sales volumes. The main options were thought to be in the following
sectors.
Standard industrial metal work paints. There were an estimated 6000 consumers of
standard metal working paint products in the United Kingdom, ranging from the smallest
metal bashing firm operating from under a railway arch, to some very large concerns like
GKN. The total market had an estimated value of around £17 million, at the average price
of £3.5 per litre, or a total of 5 million litres. Small firms tended to buy product from the
120 industrial wholesalers in the country that stocked this type of paint. But the larger firms
all bought direct from the manufacturers, who were mainly small regional companies. Price
sensitivity was significantly lower than the consumer market, and margins in consequence
higher. Estimates of the Homecolour production department suggested that 55 per cent
margins could be achieved when the company sold direct to the end users though using
wholesalers would mean that margins would drop towards 40 per cent. The range of
colours that was generally in demand was limited: black accounted for over half the
volume and brilliant white, aluminium and beige made up the remainder. Research had
also shown that the majority of users tended to hold low stocks of the relevant paint and
would generally wish to receive new stocks within 2 days of starting a new production run
of metal production. Homecolour would have to produce a new product formulation to
service this market, and would have to decide on the size of the container, the name of the
product and the type of instructions, guarantees and service support that the company
should provide.
Vehicle paints. Paints especially formulated for vehicles were, on the surface, an attractive
outlet for specialist paints. There were an estimated 7000 outlets that carried out some
vehicle paint work, though this varied from minor repairs to the seven or eight vehicle
manufacturers that used paint in large quantities for original vehicle manufacture. The size
of the market was estimated to be around £45 million, the bulk of which was accounted for
by the vehicle manufacturers (an estimated £35 in paint per vehicle for the 1.2 million
manufactured in the UK). The manufacturers determined which paint manufacturers were
listed to supply both them and the repair market. The gross margins on the product that
was supplied was high - estimated at 65 per cent - with a per litre price of £5. The small
repairers tended to order the product via the spare parts departments of the vehicle
manufacturers which held stock of all the colours currently used by the company. There
was also a small retail market where consumers bought product for 'touching' up small
defects in the paint work of individual vehicles.
Homecolour would face a number of problems in this market sector. First, there was a
demand for a wide range of colours - in the current year a total of 45 would be required to
service 85 per cent of the vehicles currently on the road in the UK. The large vehicle
manufacturers also demanded both exceptionally high technical specifications - resistance
to chipping, scuffing being especially important; and absolute guarantees on quality.
Because of these requirements they preferred to deal with large manufacturers who also
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