Martha had just returned from the National Hardware show in Chicago. Standing in the trade show display booth for long hours and answering the same questions hundreds of time had been tiring. Yet, all the hard work had paid off. Each year, National Hardware Show officials held a contest to select the best new product introduce at that years show. The Trap-Ease had won the contest this year, beating out over 300 new products. Despite all of this attention, however, the expected demand for the trap had not been materialized. Martha hoped that this award might stimulate increased interest and sales. Background A group of investors had formed Trap-Ease America in January after it had obtained worldwide rights to market the innovative mousetrap. In return for marketing rights, the group agreed to pay the inventor and patent holder, a retired rancher, a royalty fee for each trap sold. The group then hired Martha to serve as president and to develop and manage the Trap-Ease America organization. Trap-Ease contracted with a plastic manufacturing firm to produce the traps. The trap consisted of a square, plastic tube measuring about 6 inches long and 1and half inches in diameter the tube bent in the middle at a 30 degree angle, so that when the front part of the tube rested on a flat surface, the other end was elevated. The elevated end held a removable cap into which the user placed bait. The front end of the tube had a hinged door. When the trap was open, this door rested on two narrow stills attached to the two bottom corners of the door. The simple trap worked very efficiently. A mouse, smelling the bait, entered the tube through the open end. As it walked up the angled bottom toward the bait, its weight made the elevated end of the trap drop downward. This action elevated the open end, allowing the hinged door to swing closed, trapping the mouse. Small teeth on the ends of the stilts caught in a groove on the bottom of the trap, locking the door closed. The user could then dispose of the mouse while it was still alive, or the user could leave it alone for a few hours to suffocate in the trap. Martha believed the trap had many advantages for the consumer when compared with traditional spring loaded traps. Consumer could use it safely and easily with no risk of catching their fingers while loading it. It posed no injury threat to children or pets. Furthermore, with Trap-Ease created no clean up problem. Finally, the user could reuse the trap or simply through it away. Marthas early research suggested that women were the best target market for the Trap-Ease. Men, it seemed, were more willing to buy and use the traditional, spring loaded trap. The targeted women, however, did not like the traditional trap. These women often stayed at home and took care of their children. Thus, they wanted a means of dealing with the mouse problem that avoided the unpleasantness and risks that the standard trap created in the home. To reach this target market, Martha decided to distribute Trap-Ease through national grocery, hardware, and drug chains. She told the trap directly to these large retailers, avoiding any wholesalers or other middle men. The traps sold in packages of two, with a suggested retail price of $2.49. Although this price made the Trap-Ease about five to ten times more expensive then smaller, standard traps, consumers appeared to offer little initial price resistance. The manufacturing cost of the Trap-Ease, including freight and packaging cost, was about 31 cents per unit. The company paid an additional 8.2 cents per unit in royalty fees. Martha priced the traps to retailers at 99 cents per unit and estimated that, after sales and volume discounts, Trap-Ease would produce net revenue from retailers of 75 cents per unit. To promote the product, Martha had budgeted approximately $60,000 for the first year. She planned to use $50,000 of this amount for travel cost to visit trade shows and make sales calls on retailers. She planned to use the remaining $10,000 for advertising. So far, however, because the mousetrap had generated so much publicity, she had not felt that she needed to do much advertising. Still, she had placed advertising in good housekeeping and in other home home and shelter magazines. Martha was the companys only salesperson, but she intended to hire more sales person soon. Martha had initially forecasted Trap-Eases first year sales at five million units. Through April, however, the company had only sold several hundred thousand units. Martha wondered if most new products got off to such a slow start, or if she was doing something wrong. She had detected some problems, although none seemed overly serious. For one, there had not been enough repeat buying. For another, she had noted that many of the retailers upon whom she called kept their sample mouse tarpon their desk as conversation pieces- she wanted the traps to be used and demonstrated. Martha wondered if consumers were also buying the traps as novelties rather than as solution to their mouse problem. Martha knew that the investor group believed that Trap-Ease had an once-in-a-lifetime chance with its innovative mousetrap, and she sensed the groups impatience with the companys progress so far. She had budgeted approximately $250,000 in administrative and fixed cost for the first year. To keep the investor happy, the company needed to sell enough traps to cover those costs and make a reasonable profit. In these firs few months, Martha had learned that marketing a new product was not an easy task. Some customers were very demanding. For example, one national retailer had placed a large order with instruction that Trap-Ease was to deliver the order to the loading dock at one of the retailers warehouses between 1 and 3 pm on a specified day. When the truck delivering the order arrived after 3 pm., the retailer had refused to accept this shipment. The retailer had told Martha it would be a year before she got another chance. As Martha sat down at her desk, she realized she needed to rethink her marketing strategy. Perhaps she had missed something or made some mistake that was causing sales to be so slow.

Questions:

Has Martha identified the best target market for Trap-Ease? What other market segments might the firm target?

Explain Cost-plus pricing and Break-Even Analysis and Target Profit Pricing with examples.