Management of Plastics Industries, Inc., was faced with the problem of promoting a new product to the market. The company had been organized in Beaumont, Texas, to manufacture pipe. It was founded by a group of wealthy individuals from the community, and total capitalization had been set with the expectation of four years of operation at a loss. By the second half of the third year of operation, the company had made a profit, and the room for future growth looked very promising. Nevertheless, management believed that sales were not increasing as rapidly as might be expected in light of the clear strengths of the product.
Plastics Industries manufactured plastic pipe by the extrusion process. Its manufacturing plant was located on the outskirts of Beaumont. The major capital investment consisted of an extruder, designed and specially built for the company in Germany at a cost of $250,000. The extruder was almost completely automated, so that only minimal training was needed to operate it. A staff of two engineers was maintained to service the machine. Polypropylene, available from major chemical companies, was used as the raw material, and it was available in a pellet form ready for manufacture. The finished pipe was called Plylene pipe.
The number of manufacturers of plastic pipe in the United States was small but growing. Several major companies, such as Dupont, Shell, and Hercules, were manufacturing or had manufactured plastic pipe. Dupont, a major supplier of the raw materials, had produced a plastic pipe under the Delrin brand name but recently had ceased manufacture of pipe and was buying Plylene pipe from Plastics Industries. The use of plastic pipe as a replacement for other types of pipe was a relatively new development. A first major product was polyethylene pipe, which was first introduced on the market as a nonpressure pipe suitable for mine-drainage operations. The chemical resistance of polyethylene made it a natural for this application; lack of resistance to acid mine waters had caused major corrosion problems with the steel pipe formerly used. Since that successful first, the polyethylene and, subsequently, polypropylene pipe industry had grown at a rapid rate. Some of the major oil companies began manufacturing plastic pipe for use in their fields. However, Plastics Industries quickly became a major supplier in this industry and soon was supplying twelve major oil companies.
Galloway, president of Plastics Industries, Inc., believed that the greatest single problem for the company, as well as for other makers of plastic pipe, was the setting of standards of quality. A number of laboratories were available for product performance testing. Galloway had made use of the services of the Battelle Memorial Institute in Columbus, Ohio, a leading researcher in the field of thermal polymers, to test samples of its product. But, until specific performance standards were established, no industry enforcement of quality levels was possible. Certain grades of Plastics Industries’ pipe had been tested and accepted by the Food and Drug Administration and the Department of Commerce.
Plastics Industries maintained a sales force of three sales engineers, plus one factory representative to sell to major industrial users. These personnel were located in Odessa, Texas; Houston, Texas; and Tulsa, Oklahoma—all major oil-producing centers; they had concentrated their efforts almost exclusively on the oil industry. All orders were shipped directly from the factory, but the very high shipping costs indicated the need for distribution and warehousing points in the near future.
In the opinion of Galloway; the really big market for plastic pipe was in the home construction industry. He believed that this market was potentially at least five times as large as the present market, but so far neither the users nor middlemen were interested in the product. The image of plastic pipe was of a product that would easily break and, therefore, would not last as long as conventional pipe. The lack of quality standards in the industry had done nothing to improve the image. In addition, the building codes in most cities would have to be completely rewritten to permit the use of plastic pipe as a substitute for metal or other materials. Furthermore, middlemen and users required instruction in installation of plastic pipe. It was not a difficult process—sections were welded together with heat but the methods of cutting and welding needed to be explained to prospective users and distributors.
Galloway felt that a possible solution to the problem of selling the home construction market lay in advertising to the general public and to builders. He realized that Plastics Industries was too small to advertise in many major media, but to some extent they could benefit from the advertising of their major suppliers of raw material in trade magazines. He planned to reach the general public and builders through cooperative advertising on a shared-cost basis by suppliers. He was unsure as to the role of the sales force in pursuing this new market.
- What should be the role of personal selling for a product such as this?
- What kind or kinds of promotions would probably have been most productive for Plastics Industries?
- Should the company go after the home construction market?
- Would the job of the salesperson be changed if entry is made into the home construction market?
Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.