Optical Distortion Case Analysis

Introduction
In an effort to solve the cannibalization problem of chickens and to find a more efficient
alternative for the practice of debeaking, Robert D Garison, owner of a large farm in
Oregon, and Ronald Olsen, a businessman, formed the Optical Distortion Lens Inc. in
1965. They invented a revolutionary product, a lens for chickens that would stop the
cannibalization between chickens and received a patent on it. In 1973, Optical Distortion
got into an agreement with New World Plastics (manufacturer of hydrophilic polymer,
which eliminates the irritation problem) which spun-off the products into the markets.

This paper will first take a closer look at the ODI lens, will then discuss into what
geographical regions ODI should expand and what pricing strategy to implement.
Furthermore, the paper will gives suggestions on marketing activities and concludes
with recommendations for ODI.

Closer look at ODI lenses
The revolutionary technique of using contact lenses may be appealing to a large
number of medium and big scale farmers. Foremost, because it actually confronts the
cause of chicken cannibalization instead of just minimizing its effects, as debeaking
does. By altering the chickens vision the chicken cannot establish a peck order which is
the main reason for cannibalization, thus reducing the mortality rate significantly from
9% to 4,5%. In contrast to debeaking, it does not traumatize the chickens and thus there
is no loss of productivity due to fewer eggs laid or mortality of traumatized chickens.
Furthermore the lenses have the potential to reduce the farmers feed costs by,
especially important for farmers with large flocks.

The question whether these new lenses are more ethical to use remains controversial,
yet we believe as this technique at least does not traumatize the chickens and hence
may be quite appealing to many farmers. Same holds for the difficult topic of introducing
this new technology to the traditionally conservative chicken farmers, especially smaller
family owned farms might be reluctant. Since there are no high concerns of
cannibalization at small farms (where less birds are confined in cages) these farmers
may find the new technology unnecessary and unappealing. Furthermore, most farmers
will find unappealing that the new lenses can hardly be removed once in use and are
not reusable. Nevertheless, the process may still be very appealing to them since the
process takes just as long as the debeaking and significantly reduces costs such as
feed, labor or losses in productivity.


Geographic Expansion
Recognizing the geographic areas to focus on and the market segments to introduce
the lenses in is really important to ODI. In order to know where ODI should focus its
efforts, we have to examine its profitability by regions within US. As we know,
profitability is the business's ability to generate earnings as compared to its costs. As for
ODI, there are 4 regions of US with the highest profitability: the pacific region, the south
Atlantic region, the west south central and the east north central (further details on
profitability regions in US are given in Appendix I). Of these 4 regions, we will take in
consideration the two most profitable ones: the Pacific Region (including California with
the highest amount of farms) and the South Atlantic Region (including Georgia and
South Carolina with the highest amount of farms).

It is important to examine the market size of these regions. Sizing the market is a
necessary task for business and marketing planning. To evaluate the potential market
size of the highest profitable regions, we will consider an estimated penetration rate of
50%. For Pacific Region the market value size is $22,758,010 and for South Atlantic
Region is $23,186,046. As we can see, the market value size is high; therefore it will be
convenient to invest in such high potential markets (details and calculations of the
markets values are given in Appendix II).

Due to this, ODI should put its short-term efforts in focusing on medium and big farms of
the Pacific Region and South Atlantic Region. Both regions account for more than the
50% of biggest farms in the US. In the long run, they should focus on medium and big
farms in the West North Central and West South Central- third and fourth most
profitable regions- as shown in Appendix I. Therefore it will be necessary to open
regional offices in these areas as well, so that all resources will be available and
negotiations can be made.

Pricing Strategy
In analysis of the debeaking process versus the ODI lens we will first take a look at the
financial gains for the farmers. As you can see in appendix III the farmers will save a
total of 0.4222$ per bird per year, minus the minimum cost of 0.08$ the saving will start
from 0.342$.
Since we are dealing with a new product for this market and as mentioned in the case,
the patent and license protection will be in place for the duration of at least three years,
we believe that ODI should adopt the skimming strategy at first. This is a product
pricing strategy where the firm charges the highest price that customers will pay
at the beginning but as the demand of the first customers is satisfied, the firm
lowers the price to attract other, more price-sensitive customers. Due to the
patents competitors will not be able to enter the market. Also lowering the price
will only have a small effect on the sales volume and moreover, high revenues in
the first year ensure investment possibilities in the future. Furthermore, the ODI
lens will save money for the farmers hence, the farmers will be able to pay a
proportionally higher price for this kind of product.
Following the skimming strategy we will suggest ODI to price the product at 0.24$. The
price range of one pair of lens is between 0.08$, as mention in the case, and up to
0.4222$, which is the saving amount. The selected price of 0.24$ will give the highest
price with the highest saving amount per bird.

Promotional Activities/Marketing Plan
During the introductory period of the product ODI should consider a heavy advertising
strategy. There are various measures ODI can take to push their product. First, they
should participate in all farming trade-shows. They should be present at these shows
with a booth, which informs all visitors about their product. The booth should be as eye-
catching as possible, could show video installations (showing the process of putting the
lenses on the hens) and should definitely have brochures to give to potential customers,
as well as business cards to hand out. At these trade-shows they should also actively
search and speak to potential customers. Name and address of potential customers
should be recorded to make follow-up calls, appointments, or send information
packages to these customers. Second, OPI should invest in advertising in the most
popular farming magazines either nationwide or in the largest potential markets.
Furthermore, they should also invest in advertising on the most popular farming
webpages, to maximize the people reached. Third, ODI should invest into public
relations, which can be seen as free marketing. Interviews with farming magazines,
nation or local newspaper focusing on this innovative product would help reach their
wanted customer base. Fourth, when selling the product to potential customers they
should use personal selling to ensure that the customers get all the information needed
and can be convinced to buy the lenses. Follow-up visits and phone calls are also an
important part, so that the customers feel taken-care off, especially when they might be
unsure of the product in the beginning. Fifth, ODI could engage in CRM by creating a
platform on their webpage to keep customers updated on their product and to create a
platform for exchange of experiences for the customers.

RECOMMENDATIONS AND CONCLUSION
Taking all the previously discussed issues into consideration we recommend ODI to
make a large-scale entry into the poultry market. They have a revolutionary product that
resolves the problem of cannibalization of chicken. A number of characteristics make
these lenses very appealing and desirable when compared to the traditional debeaking.
Especially the cost savings from a reduced mortality and lower feed costs are attractive.
Therefore, we recommend ODI to put its efforts to introducing the lenses to the largest
markets in the short run, namely the west pacific and south Atlantic regions. After
having established the lenses in these regions they should expand to the next most
profitable regions. In terms of pricing strategy we clearly see the skimming strategy
most suitable for ODI. In accordance they should price the lenses in the first three years
at $0,24 per pair and as soon as patents run out and competition becomes fierce switch
to penetration pricing. This will generate the necessary profits to further expand and
diversify the company and to establish it as a dominant player in the business. To push
the new product into the market and to enhance sales in the introductory phase IDO
should make use of a large set of promotional activities that create a buzz around the
product. Aside from being present at all major trade shows, they should heavily invest in
advertising and public relations. By use of personal selling and engaging in CRM the
clients will have a very satisfying long-term relationship with IDO, beneficial for both
sides.




























Appendix I

Profitability = Sales - Costs
Sales = # Chickens * Price per pair lenses
Costs= 5*Cost for one regional office



For the calculations of profits, costs are calculated estimating that there are going to
be 4 or 5 regional offices.


Profit in US regions


Four most profitable regions

Appendix II


Calculations for MArket value Size in the pacific region & South Atlantic region


Appendix III





Appendix IV