For this case study, I want you to create a mini, 1.52-page marketing plan for The Gril-Kleen Corporation. It should follow the same guidelines outlined for the marketing plan section of your business plans
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.CASE 8 THE GRIL-KLEEN CORPORATION Well, where do I begin? Warren Ryan wondered as he surveyed the chaos before him. Boxes and bottles were piled all over the place, invoices and order forms cluttered the desktop and filled the drawers, and he couldnt seem to locate anything resembling an orderly set of books. It was spring of 2010, and just a few days earlier Ryan had quit his job with a large management consulting firm to assume the presidency of Gril-Kleen Corporation and help get the young company off the ground. The companys efforts to market its innovative product, a liquid restaurant grill cleaner, had been extremely successful. Ryan felt that with a professional marketing approach, the product could capture a sizable share of a national market. The product, a chemical solution that could be applied directly to a working grill to clean off burnt-on food and accumulated grease in a matter of minutes, represented a significant departure from the existing methods of cleaning restaurant grills. It appeared to have several major advantages over competing products, and initially it had generated such enthusiastic response from users that the product had practically sold itself.
PRODUCT EVOLUTION Gril-Kleen had been developed for their own use by two brothers who owned a small, busy restaurant in Eastern Massachusetts. The restaurants grill needed cleaning Page 494 several times a day, especially during busy periods, and the brothers were disturbed by the amount of time and effort it took to clean the grill. They were also bothered by the orders they lost while the grill was being cleaned. Most grill-cleaning products then available could not be used on a hot grill, and the time required to cool, clean, and then reheat the grill varied from about 20 minutes to almost an hour, depending on the method being used and the condition of the grill. Two of the most popular methods of cleaning grills used a carborundum stone or a wire mesh screen to scrub the grill clean. Though inexpensive, they required a great deal of physical labor and both products tended to wear, with some danger of stone chips or metal particles ending up in food cooked on the grill. Spray foam oven-cleaner type products, similar to those sold for home use, were easier to use but considerably more expensive. Most had critical effective temperatures of around 160200 Fahrenheit, compared to normal grill operating temperatures of around 3508, and often had objectionable odors, which restricted their use in small or poorly ventilated restaurants. Dissatisfied with the products then on the market, the two brothers decided to develop their own grill cleaner. They sought the advice of one of their customers in the chemical business, and from him they learned about some chemicals and began to experiment with different combinations in various proportions. The cleaner they sought would clean grills quickly, easily, and at normal operating temperature. It had to be economical, easy to mix, and have no discernible odor or taste, and it would have to pass safety requirements (i.e., be both nontoxic for use on food preparation surfaces and noncaustic to the users skin). In addition, it had to leave the grill seasoned so that food wouldnt stick to the grill after it had been cleaned. After experimenting and modifying the solution for a couple of years, the brothers finally arrived at a mixture having all the desired properties. It would work on both hot and cold grills, and the grill operator could clean a grill in less than five minutes by simply pouring the solution on, allowing it to dry, and then rinsing the grill with water. After a light seasoning with cooking oil, the grill was ready for use again. Soon, friends in the restaurant business heard about the product and began asking for samples, then coming back for more. As demand increased, the brothers started to sell the product by the gallon, charging whatever they felt the market would bear.
THE GRIL-KLEEN CORPORATION The product appeared to be so successful that the brothers began to think about marketing it on a larger scale. One of the restaurants customers, a line foreman for a Boston electric Company, was impressed by the demand for the product, and urged the brothers to consider manufacturing and selling it on a regular basis. In early 2007, the three of them formed the Gril-Kleen Corporation. Working out of the basement of the restaurant, the three new partners bottled and sold Gril-Kleen in their spare time and on their days off. The chemicals were mixed in a large plastic tub with a spigot, then transferred to gallon-size plastic bottles labeled Gril-Kleen. On Tuesdays, when the restaurant was closed, the two brothers made sales calls to other restaurants, leaving behind samples of the product. Even with this minimal sales effort, orders began to increase to the point where larger facilities were needed to bottle and store the product. Less than a year after its incorporation, the Gril-Kleen Corporation moved to a new and larger headquarters in a nearby industrial park. The new plant was a 1,500-square-foot cinderblock building, and the equipment consisted of a large stainless steel tub, formerly used for pasteurizing milk and capable of producing 450 gallons of Gril-Kleen per day. The company hired one part-time employee to mix the chemicals and fill the bottles. After one unfortunate experience with a traveling salesman who offered to sell the product and instead, sold several phony exclusive distributorships for Gril-Kleen throughout New England before he disappeared, the company established relationships with half a dozen bona fide distributors of restaurant and cleaning supplies in New England. As sales volume grew, the need for a full-time manager became increasingly apparent. Orders and invoices were piling up, billing was haphazard, records were disorganized and incomplete. With no regular system of record-keeping, orders often went unfilled, or customers were never billed for orders that had been shipped. Recognizing that the company had grown too large to continue operating on a one-day-per-week basis, the owners hired a local politically ambitious individual to run the company, and offered him a 25 percent interest in the business. The new partner was well known locally, had a number of important connections, and the company owners felt that his name would lend some prestige to the operation. Page 495 As it turned out, he devoted little of his time and attention to running the business and most of it to campaigning for re-election, even charging some of his campaign expenses to the company. After more than a year, with company sales declining, the other three partners bought him out, paid his bills, and returned to running the business on their days off.
WARREN RYAN At this point, Warren Ryan, a management consultant working on an assignment nearby, began patronizing the restaurant and became friendly with the owners. When he learned of the situation at Gril-Kleen, he suggested that the company hire his consulting firm to do a market study and map out an operating and marketing plan for the company. He also recommended that they utilize his firms Executive Search service to find a new president for Gril-Kleen. Reluctant to deal with a large consulting firm or to hire anyone they didnt know to run the company, the brothers asked Ryan if he would take over the job himself. Ryan, an MBA with extensive experience in marketing, advertising, and industrial management, was intrigued by the idea. He had grown up in a household with a small, family-owned business, and had long been interested in applying his management and marketing skills to running a company. He agreed to consider the offer, and then began to research the product and its market. From library sources, he estimated the national restaurant cleaning market at about $80 million a year, and learned that no single company held a dominant share of the market. From experience with the product and interviews with current users of Gril-Kleen, he became convinced of Gril-Kleens performance superiority over competing products. Moreover, he was impressed by the apparent success of the company despite the lack of good planning, and concluded that the product could be developed successfully. After serious consideration and considerable research, he decided to accept the offer, and in April 2010 became the new president of the Gril-Kleen Corporation.
THE SITUATION IN EARLY 2010 When Ryan took over, he found the product being manufactured in the small, one-story cinderblock plant in Hingham. The companys one part-time employee could mix and bottle up to 200 gallons a day to meet orders, and plant capacity could easily be increased by buying a larger mixing tank and hiring more labor. It was also possible to rent additional floor space if necessary. The product was packaged in cases of four (4) one-gallon-size plastic containers. It was sold for $28 a case retail, $18 a case wholesale, F.O.B. the wholesalers warehouse. Included with each case was a 16-ounce squeeze-type plastic applicator bottle. Sales volume at the time was approximately $35,000 a year. The average usage rate was approximately one case per month. The companys primary customers were six wholesale distributors in Massachusetts: two of these were suppliers of cleaning and chemical products to restaurants, one was a paper products distributor, another one sold restaurant equipment, one sold janitorial supples to hotels and motels, and the last one sold food products and supplies to theaters. Ryan found few records, little financial data, and no regular flow of paperwork within the company. Prices were based on those charged for a competitive product, with no regard for or knowledge of actual costs or profit margins. To apply for a working capital loan, Ryan had to develop a marketing plan for the next 12 months and projected cash flow statements for the next 3 years and then present his marketing plan and cash requirements to a bank.
ADDITIONAL PRODUCT USES Before he could develop a marketing plan, Ryan had to decide which markets to approach and determine realistic market-share goals for Gril-Kleen. There was considerable evidence that the product could do much more than just clean restaurant grills. Preliminary tests had indicated that the product was effective in cleaning stainless steel, ceramic tile, formica, vinyl, plastic, chrome, machine tools, clothing, and fiberglass. The last use suggested a possible application in cleaning boat hulls, a market which strongly appealed to the owners of Gril-Kleen. (See Exhibit 3.) The product also appeared to be effective as a rust remover and preventative, suggesting a wide variety of possible industrial uses. Ryan had to determine which markets to develop, which product lines to offer, and what degree of market penetration could be achieved in each market segment before he could set profit targets and schedules. The restaurant, marine, and industrial markets required different selling methods and different channels of distribution and posed different pricing, packaging, promotion, and selling requirements. Before deciding which markets to pursue, Ryan needed additional information on the requirements of each market segment and the dollar and volume potential for each. Page 496 Within each market, he had to decide whether to segment the market by uses, type of customer, or geographical territory. Ryan wondered whether market testing would be useful in analyzing market need, product potential, and the habit patterns of users in the various markets, and if so, whether market testing should be accomplished by field product testing, field interviews, or mail or telephone surveys. It was felt by Warren Ryan that Gril-Kleen could significantly increase its share in this market. Current sales of $35,000 a year represented a little less than half of 1 percent of the potential market for restaurant cleaning products in the New England area alone. However, the product appeared to fill a particular need in this market, while there was considerable competition from similar products in the other markets under consideration (marine, industrial, consumer).
PRICING To help determine standard costs, break-even volumes over a range of possible product prices, and profit margins, Ryan collected the cost data in Exhibit 1.(attached)
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Ryan needed to determine a pricing strategy, set profit targets, determine the volume necessary to meet those targets, and establish a policy on trade discounts, allowances, and credit terms. He also needed further information on price elasticity (one dealer had tripled his sales from 4 to 13 cases a month by lowering the retail price from $28 a case to $24).
Checking the reorder rates, Ryan calculated the rate of usage of the product to be approximately one case every month in a small, one-grill restaurant. Approximately 97 percent of end-users who had tried Gril-Kleen continued to order it.
DISTRIBUTION
Among the distribution decisions to be made were whether to (1) hire a sales force (and if so, how large), (2) use manufacturers representatives (and if so, how many and with what commissions), (3) sell exclusively to wholesalers, (4) sell directly to restaurants and large chain operations, and (5) grant exclusive privileges to any dealers, distributors, or representatives (and if so, what demands to make upon the holders of such exclusive rights).
Other decisions related to distribution included questions on consignment sales, volume discounts, and shipping costs. Ryan also had to decide whether to expand his distribution network geographically or to concentrate on getting a larger share of the New England market.
PROMOTION
To successfully promote the product, Ryan had to determine which media to employ, how much to spend on advertising, and how to push or pull the product through to the ultimate user. In addition, he had to design some catalog sheets and fact sheets for Gril-Kleen similar to those in Exhibits 2 and 3. In designing these, he had to decide which product features to stress: price, convenience, effectiveness, safety, and so on.
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.PATENT AND TRADEMARK Ryan also wondered whether he should try to patent the product. He didnt know if it was patentable, if it infringed upon any existing patents, or if he could obtain a trademark on the name Gril-Kleen and/or on the product logo he planned to design. He wasnt sure that a patent would be valuable to the company, or even necessary, or whether it was worth all the trouble and expense required for a patent application. Legal costs alone, whether the patent were granted or not, could amount to about $4,000 or more and would afford doubtful protection from imitators. The company would have the right to sue if it discovered anyone else using its formula, but patent litigation would be too time-consuming and expensive for a company of Gril-Kleens size.
COMPETITION The most common grill cleaning products then in use, especially in smaller restaurants, were the stone and the screen. The stone is a block of carborundum (hard soapstone) about the size of a brick, which was used to scrub the grill and remove grease and food residue. The screen was a wire mesh screen placed in a device similar to a sandpaper holder which was used to scour the grill much like home scouring pads. Both were inexpensive but required a great deal of effort to use, took about an hour to clean a fairly dirty grill, and could not be used on a hot grill. In addition, the stone especially tended to wear and chip, with some danger that stone chips might end up in food cooked on the grill. Page 497 There were also several chemical liquid and spray foam oven-cleaner-type products on the market that could be used to clean grills. Most of these were fairly expensive and had critical effective temperatures of around 1608 to 2008F. These competitive products were generally marketed by fairly large companies, with large advertising budgets, and wide distribution networks. Among these were Swell, DuBois, Easy-Off, and Jifoam. Colgate-Palmolive and Lever Brothers also had plans to introduce new chemical oven cleaner products. Page 498 DuBois liquid oven cleaner (see Exhibit 2) was sold in four-gallon cases for $28.00 a case retail and employed its own sales force to sell directly to retailers. Swell was marketed via wholesale distributors for $7.00 a gallon or $26.50 a case retail and used its own sales force to sell to wholesalers.
DEVELOPING A MARKETING PLAN To develop a sound marketing plan, it was necessary to determine the size of the potential market in units and dollars, estimate the market share that Gril-Kleen could expect to attain, and then develop sales projections over a 12-month period. Page 499 They needed to find out who and where the distributors of restaurant cleaning products in New England were and determine the best means of selling to them. They also had to calculate potential sales volumes at various prices and price the product to maximize profits (or volume). They would need to construct volume discount schedules and determine the effects of any increase or decrease in price on demand and on profits. They should consider whether any market or product testing is necessary, and if so, what type and how much. These decisions would form the basis for Gril-Kleens marketing plan, from which Warren Ryan could develop projected cash flow statements and Page 500 estimate his working capital needs over the next 12 months.
