AFTON INDUSTRIES / MARKETING QUESTIONS

1. The asphalt shingle market in the upper Midwest is in the mature phase of the product lifecycle. There are no innovations driving demand in the market, and asphalt shingles are a well-known and accepted commodity in the market. Afton Industries has a strong reputation in the market in terms of quality and delivery, but its shingles are not perceived as being significantly better in quality than the competition, at least not to the point where it can differentiate itself through a premium pricing strategy.

The marketing channel in this market is to intermediate buyers and agents. For example, when a developer constructs a new housing development, he subcontracts the roofing activities to local companies. These subcontractors are generally given the leeway to deal with whichever roofing company such as Afton they choose so long as the warranty is acceptable. There is thus incentive for these subcontractors to use the lowest priced supplier so that they will realize the greatest profit between their cost and what the developers is paying them. In the reroofing market, where the homeowner is generally paying for the materials, the roofing contractor may be responsible for procuring the materials and marketing up the product to the homeowner. Again, there is strong incentive to deal with the lowest-priced supplier in order for the contractor to receive the best profit margin on each project.

2. Afton is dealing with a highly kn

ofing contractors that future Afton price increases might not be permanent. This might cause them to put off purchases in the future following a price increase to see if the company will lower its prices again. However, the company cannot afford to continue to lose market share. At this point, the company should maintain its current price point, but begin a marketing program designed to separate Afton organic asphalt shingles from the competition. To this end, the company can target both home manufacturers and homeowners with advertising that focuses on the benefits that organic asphalt shingles have over fiberglass shingles in the region, and on the company's reputation for quality. Using the tagline "Afton Shingles ask for them" can help drive demand. At the same time, the company can set up incentive programs with key roofing contractors to encourage roofers to use Afton products. Such incentive programs might include price breaks as roofers reach predetermined quantity levels on a cumulative basis so that the roofers would still realize greater profits when they bought in large quantities from Afton, but Afton would not be forced to drive down their costs for smaller contractors. This would help the company maintain ma

Category: Business - A