What is Going on at Kodak?

What is Going on at Kodak?

Stock Price is down 8% on the rumor of a price cut
Market share has declined from 76% to 70% over the
past 5 years
Product line Ektar @ $4.27 tiny MS for professionals
Gold Plus @$3.49, 70% MS, $ growth 3%
Great Brand Equity 50% are brand loyal, 40%
samplers who rely on Kodak, 10% price shoppers
Advertising Spending $50 million
2

What is Going on in the Film Market?

What is Going on in the Film Market?

Annual Sales are 670 million 24-exposure equivalent rolls
Unit Growth 2% increase year over year for past 5 years
$ Growth 6% increase
Consumer Reports says all film is equally good!

Competition

Competition
Fuji Increasing reputation and acceptance in the US
Super G @ $2.91, 11% MS, $ growth 15%,
$12.5 million in advertising
Polaroid High Definition @$2.49, 4% MS, $ growth 15%
Numerous Private Labels @ $2.19 to $2.49, 10% MS,
$ growth 10%

Why Kodaks Market Share Decline?

Customer
growing body of price sensitive consumers
film is becoming a commodity
Competition
Fuji growing in awareness and reputation
Polaroid well-known entrant at low price
Private label increasing acceptance
Company
Little current product innovation in film
Hard to maintain 70% gross margin and 70% market
share, as it attracts competition happy with lower
margin

Why Kodaks Market Share Decline?

Can Kodak maintain the status quo?

What are Kodaks Primary Alternatives?

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What are Kodaks Primary Alternatives?

1. Introduce an Economy Brand (Funtime) and
Reposition Ektar as Royal Gold
Usage occasion segmentation
Royal Gold very special occasions with enlargements
Gold Plus regular use
Funtime casual picture taking
2.

Reduce the Price of Gold Plus

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Financial Evaluation of Funtime Option

Comparison of Gold Plus and Funtime Gross Profits
Current
Gold Plus
a

Retail Price

pg 5

Dealer Margin

pg 2, fn3

c=ab

Dealer Gross Profit/roll

d=a-c Kodak's Revenue/roll

3.49
20%

0.70

2.79

Kodak's Gross Margin

pg 2

70%

f=de

Kodak Gross Profit/roll

1.95

g=d-f

Kodak Product Cost/roll

0.84

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Evaluation of Funtime Option

Comparison of Gold Plus and Funtime Gross Profits
Current

Funtime

Gold Plus
a

Retail Price

pg 5

Dealer Margin

pg 2, fn3

c=ab

Dealer Gross Profit/roll

d=a-c Kodak's Revenue/roll

3.49
20%

$ 2.79
20%

0.70

$ 0.56

2.79

$ 2.23

Kodak's Gross Margin

pg 2

70%

f=de

Kodak Gross Profit/roll

1.95

g=d-f

Kodak Product Cost/roll

0.84

$ 0.80

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Evaluation of Funtime Option

Comparison of Gold Plus and Funtime Gross Profits
Current

Funtime

Gold Plus
a

Retail Price

pg 5

Dealer Margin

pg 2, fn3

c=ab

Dealer Gross Profit/roll

d=a-c Kodak's Revenue/roll

3.49
20%

$ 2.79
20%

0.70

$ 0.56

2.79

$ 2.23

Kodak's Gross Margin

pg 2

70%

64%

f=de

Kodak Gross Profit/roll

1.95

$ 1.43

g=d-f

Kodak Product Cost/roll

0.84

$ 0.80

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Evaluation of Funtime Option

Comparison of Gold Plus and Funtime Gross Profits
Current

Funtime

Gold Plus
a

Retail Price

pg 5

Dealer Margin

pg 2, fn3

c=ab

Dealer Gross Profit/roll

d=a-c Kodak's Revenue/roll

3.49
20%

$ 2.79
20%

0.70

$ 0.56

2.79

$ 2.23

Kodak's Gross Margin

pg 2

70%

64%

f=de

Kodak Gross Profit/roll

1.95

$ 1.43

g=d-f

Kodak Product Cost/roll

0.84

$ 0.80

For each roll of Gold Plus lost

Kodak makes $.52 less on Funtime
so would need to sell .
how much more Funtime for Kodaks Gross Profit to be equal?
(1.95) Gold Plus Gross Profit /1.43 FunTime Gross Profit
1.95 / 1.43 =

1.363281

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Evaluation of Price Cut on Gold Plus

Comparison of Gold Plus at Current Price and with 15% Price Reduction

Retail Price

pg 5

Dealer Margin

pg 2,
fn3

c=ab

Dealer Gross Profit/roll

d=a-c Kodak's Revenue/roll

Current

15% price

Gold Plus

reduction

3.49 $
20%

2.97
.2

0.70 $

0.59

2.79 $

2.37

Kodak's Gross Margin

pg 2

70%

f=de

Kodak Gross Profit/roll

1.95 $

1.53

g=d-f

Kodak Product Cost/roll

0.84 $

0.84

If Kodak maintained all of its MS at $2.97 retail price , Gross Profit would be $717,570,000
A reduction of ((916,613,600 - 717,570,000)/916,613,600) = 21.7% in gross profit

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Comparison of Price Cut with Funtime Option

How many sales of $3.49 Gold Plus could Kodak lose to Funtime
Film and still be better off than if they lower the price on Gold Plus
to $2.97?

17

Comparison of Price Cut with Funtime Option

How many sales of $3.49 Gold Plus could Kodak lose to Funtime
Film and still be better off than if they lower the price on Gold Plus
to $2.97?
Gross Profit for Royal Gold at $2.97 for 469 million rolls (current sales) is $717,570,000.
(469,000,000 X)* $1.95 + (X * $1.43) =$717,570,000.
X= 378,807,692 or 80.8 % of Gold Pluss current sales

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Comparison of Price Cut with Funtime Option

How many sales of $3.49 Gold Plus could Kodak lose to Funtime
Film and still be better off than if they lower the price on Gold Plus
to $2.97?
Gross Profit for Royal Gold at $2.97 for 469 million rolls (current sales) is $717,570,000.
(469,000,000 X)* $1.95 + (X * $1.43) =$717,570,000.
X= 378,807,692 or 80.8 % of Gold Pluss current sales
Even if only half of the lost sales of Gold Plus went to Funtime,
(469,000,000 X)* $1.95 + (.5X * $1.43) =$717,570,000.
X= 159,497,976 or 35% of current Gold Plus sales,
Kodak would still be better off adding Funtime than by lowering the price of Gold
Plus.

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Evaluation of Funtime Option

Pros

Cons

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Evaluation of Funtime Option

Pros
Provides price conscious customers a lower priced
Kodak option that should stabilize market share
Takes shelf space from a competitor
Allows retailer to do one stop shopping get all the
price points covered from one manufacturer
Cons
Cannibalizes Gold Plus with a nearly 30% decline in
Contribution
Legitimizes brands that sell for less than $3
Customer Confusion
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Product Line Pricing

22

Marketing Plan for Funtime Film

Target Market:
Name:
Package Color:
Seasonal Availability:
Advertising:

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Marketing Plan for Funtime Film

Target Market: Somewhat price conscious consumers
Name: Funtime Film by Kodak
Package Color: Lighter Yellow
Seasonal Availability: Year Round
Advertising: None

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Kodak: Funtime Film

Diagnosed reasons for Kodaks market share decline and
assessed the situation if Kodak maintains the status quo
Kodaks Objectives examined the trade-offs among
profitability, market share and brand equity
Evaluated of the Funtime Film proposal
Evaluated the price cut to Gold Plus option
Compared these two alternatives
Concluded Funtime should be introduced
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Conclusion

Product line pricing allows Kodak to protect Gold Plus

longer maintaining its high margin, while generating some
contribution from price sensitive customer and
an increased margin from Royal Gold
To be successful Funtime will need a better marketing
plan!

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