Reference no: EM131142732

Hot Rod Marketing

Terry Walsh knew the time was right to move from being a small, “garage-based” company to a much larger enterprise. After spending years as a research chemist, Terry had launched out on his own. His goal was to develop a top-of-the-line fuel injector cleaner for both domestic and foreign automobiles. For 2 years, he worked with various formulas until the right one emerged. The product was named Hot Fire Fuel Injector Cleaner, and the company’s name was Hot Fire. Terry was positive Hot Fire would perform well against any competitive product.

The market for fuel-injector cleaners is diverse. Numerous backyard mechanics sell limited amounts of their concoctions to local merchants and over the internet. Several formulas are even available on eBay. There is no guarantee of quality for these products, some of which may actually harm engine performance. At the other extreme, major companies such as STP, Gumout, and Dupont offer various grades of cleaners, from low-end products selling for around $3 per unit up to high-end versions priced as high as $30. The primary price determinant is the degree to which the product reduces congestion in a fuel injector. The higher-priced entries are more powerful and remove more “gunk.”

Terry’s Hot Fire Fuel Injector Cleaner was at the high end. The price would be $17 wholesale, per can. He hoped that dealers would charge no more than $25 as a retail price. Hot Fire sold in single containers as well as in multipacks of 6 and 12 cans. Each can held two treatments or applications.

Several potential markets are available for fuel-injector cleaners. The first is auto repair shops, including simple “lube and oil” change stores and more traditional repair shops. Many times, the proprietors of these stores welcome the idea of a small display of an auto repair or maintenance product, as long as the owner believes the product actually works.

The second type of outlet consists of all of the retailers that sell replacement parts and auto supplies, such as Napa Auto Parts, Dallas Auto Parts, and O’Reilly Auto Parts. Most of these retailers only sell nationally based products from major manufacturers. Getting them to stock Hot Fire would be a major victory.

A third potential customer base is convenience stores. Again, the primary challenge would be convincing a chain, such as 7-Eleven or Circle K, to carry Hot Fire along with other, cheaper products such as STP’s and Gumout’s low-end products.

Terry knew that buyers in all of these outlets are extremely price sensitive. At the same time, the buyers want to be sure the product works and will not harm other engine parts. Once these objectives have been reached, the goal is to convince them to order larger quantities and continually stock the product. To encourage sales, seasonal discounts, such as for the summer driving season, may move more product to the shelves.

Hot Fire currently employs 20 workers in the production department and has a sales force of 5 people to cover the entire country. The company’s website is designed to attract people who are willing to buy auto products online and to provide information to business customers.

Terry had a large enough budget to do some advertising. He mostly bought ads in magazines that featured high-performance cars and trade journals for auto body shop managers. One major advantage that had emerged was that Hot Fire sold well locally and was emerging as a product known by local and regional race-car drivers. Hot Fire decals were placed on cars at races across the region.

With some additional funding, it was now time to try to move Hot Fire to national prominence. Winning over each type of retailer was the key to success.

(1) What should be the main trade promotions objectives for Hot Fire Fuel Injector Cleaner? What challenges or obstacles might keep the company from reaching those objectives?

(2) Design a trade promotions program for Hot Fire Fuel Injector Cleaner.

(3) Create a trade magazine advertisement and tag line for Hot Fire that ties in with the trade promotions program.