One Month to Make It Two Entrepreneurs Persuaded Wal-Mart to Give Their Pen

| March 29, 2017

Question
One Month to Make It
Two Entrepreneurs Persuaded
Wal-Mart to Give Their Pen
A Tryout — Now the Hard Part
May 30, 2006; Page B1

When he persuaded a Wal-Mart buyer to give his unusual pen a test run some 18 months ago, Colin
Roche thought the hard part was over. Selling to the world’s largest retailer is, after all, the
entrepreneurial Holy Grail: With 138 million weekly customers, Wal-Mart Stores Inc. dwarfs other
bricks-and-mortar competitors.
But far from game over, the toughest challenge begins this
week, as Mr. Roche’s "PenAgain," as the ergonomically
designed writing instrument is called, rolls out in 500 Wal-Mart
stores nationwide. PenAgain has 30 days to prove itself to WalMart sales officials. Meanwhile, the 34-year-old Mr. Roche is
learning to manage everything from Wal-Mart’s strict shipping
standards to fears that other retail partners will protest his
product’s discounted price tag at the big-box chain.
Five versions of the Penagain, from the 1987 prototype, left, to the one currently in
production, far right.

During the trial, PenAgain will get space in the special
displays, known as "end caps," at the edge of aisles, in the thick of consumer traffic. The prime
positioning will give the product a fighting chance: After 30 days, the stores need to sell close to 85%
of the 48,000 pens Wal-Mart ordered if the product is to be considered for wider distribution
throughout the chain.
"It’s a test, that’s exactly what it is," says Mr. Roche.
He conceived of PenAgain in 1987 while sitting in high-school detention and dreamed up its design to
relieve his writer’s cramp. A prototype built in his Dad’s garage became the catalyst that launched the
business and drove it to nearly $2 million in sales last year. Mr. Roche and a former fraternity brother,
Bobby Ronsse, also 34, launched Pacific Writing Instruments Inc., of San Mateo, Calif., in 2001.
There are about 10,000 suppliers hawking their goods in WalMarts world-wide and an equal number of newcomers trying to
get in each year. Of those applicants, only about 200, or 2%,
make it to the trial-run stage. While roughly 75% of those test
products stay on past the trial period in at least some stores,
they won’t move into new locations unless sales are robust.
Seeing a product through this critical phase requires suppliers
to shift from sales-pitch mode to marketing backup. "A lot of
Bobby Ronsse (left), Colin Roche (right) and their ergonomic pen (bottom), shown
times, what will hurt suppliers more than anything is that they
at actual size.
may not monitor the product very well" during the trial period,
says Excell La Fayette Jr., Wal-Mart’s director of supplier development. "They are busy still trying to
sell the [Wal-Mart] buyer on that item. You’ve sold them. Now, just make sure that the information is
out there, and drive customers to the product."

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Price — low price, that is — is another concern. The PenAgain model going into Wal-Mart will sell for
$3.76, compared with a nearly identical version priced at $6.49 on amazon.com and more than $12
elsewhere. By slashing their price for Wal-Mart — which they must do to sell there — the PenAgain
entrepreneurs risk angering their bread-and-butter retail base of some 5,000 retailers, many of them
small stationery shops.
It’s a fine line that all manufacturers walk when they hit mass retailing’s big leagues. The PenAgain
partners haven’t detected a backlash yet, but says Mr. Roche, "We are bracing ourselves."
It is up to the young entrepreneurs to provide the marketing to support their product’s Wal-Mart debut.
Messrs. Roche and Ronsse say they plan a full frontal assault with all the business contacts and
networks they’ve amassed since launching PenAgain. Too small to afford traditional print or TV
advertising, the company will market virally, reaching out to their national fraternity headquarters and
consumer groups that have already shown interest in the PenAgain. The company has a general email
list of some 10,000 customers who regularly buy their pens — "people who really want to know what
the heck is going on with us," Mr. Roche says. Among them are doctors, patients and medical
organizations, for whom the PenAgain’s ergonomic design has a lot of appeal.
Ergonomics is a hot niche in the $4.8 billion dollar writing-instrument industry, as aging baby boomers
face carpal tunnel syndrome and arthritis. Most traditional pens are stick-shaped, requiring users to
grip them. In contrast, the PenAgain’s wishbone design allows users to write by resting the index
finger, and the weight of the entire hand, between two prongs. Any pen can call itself ergonomic, but
what gives PenAgain credibility is that it has been tested with occupational therapists and physicians,
many of whom sell it in their offices. The pen also is distributed by Sammons Preston Rolyan, a
rehabilitative-products purveyor.
A notable segment of PenAgain’s repeat customers are doctors whose patients, in turn, become
customers, too. It is a strategy that has paid off handsomely in some unexpected ways. Scott Koerner,
senior vice president of merchandising at Office Depot Inc., first saw the PenAgain last year at his eyedoctor’s office and noted on return visits that it had sold out. He pursued it for his stores. Starting next
month, Office Depot will stock the PenAgain in its 1,049 stores nationwide (price: $3.99). "We sell to a
lot of small businesses, and this doctor happened to be a small business and that caught my attention,"
Mr. Koerner says.
The PenAgain entrepreneurs know they must track daily sales at Wal-Mart’s 500 stores closely -something they can do over the Internet, via the chain’s Retail Link software system. The system tracks
sales data, telling vendors where their items are, and aren’t, selling. Should a product do well in say,
Salt Lake City, but not in Indianapolis, Wal-Mart can shift merchandise between stores.
But it is a common mistake of neophyte suppliers to expect Wal-Mart buyers to do the tracking for
them, says Wal-Mart’s Mr. La Fayette. "When you have a buyer with 10 to 20 different categories, they
cannot monitor everyone’s pieces, and they depend on the supplier to inform them of what is going
on," he says.
Knowing this, PenAgain founders produced an extra 100 displays for use in Wal-Mart stores, which
they are keeping in their own warehouse. "If one store sells through like crazy, we could ship out more

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to keep things going" during the test, Mr. Roche says. They also are considering hiring a merchant
service organization, a third-party group that sends reps into stores to check out display placement and
consumer traffic and then report back electronically to the supplier.
Messrs. Roche and Ronsse also have had to navigate Wal-Mart’s packaging and shipping requirements,
which are highly regimented, down to the thickness of the cardboard used on display cartons. Shipping
boxes must have a reddish stripe around the outside that says "stationery," to help Wal-Mart staffers
route the boxes at stores.
Timing is tricky, too. There are no guarantees for suppliers until Wal-Mart issues an official purchase
order. When it comes down, the window for getting products into stores isn’t open long. PenAgain
manufactures all its pens and packaging in China, and so even before they got the April 12 purchase
order they were ramping up pen production — they needed the 48,000 for Wal-Mart, plus 5,000 more as
backup — and printing packaging.
Shipping labels must specify a litany of data, including purchase-order numbers and distribution-center
details. Because the pens for Wal-Mart were hurried out of China, PenAgain didn’t have time to have
their own packaging manufacturers print all the necessary data on the boxes. It had to be added when
the boxes hit shore in Long Beach, Calif., on May 2. "We didn’t sleep during that three weeks," says
Mr. Roche.
The work paid off. The pens were ready to move to Wal-Mart’s distribution centers on time, starting
May 17. Currently, pens are arriving in Wal-Mart stores from Fishkill, N.Y., to Tucson, Ariz. Helped in
part by the exposure the pens are getting at Wal-Mart, PenAgain’s founders expect sales to double this
year to between $4 million and $5 million.
The partners haven’t forgotten their smaller retail partners. The company is creating exclusive offerings
for small stores: It plans to offer an ergonomic sample set, including a basic pen, a black marker, two
highlighters and refills, for $15 to $20, and a brushed-metal pen for $20 to $30. "That’s our goal: to try
and prove that we will live in both worlds," Mr. Roche says.
Some small players say they’d welcome such efforts: Fred Ebert, an owner of Edwards Luggage Inc.,
San Francisco, has been selling the same PenAgain model going into Wal-Mart, but for $9.95. He says
Wal-Mart’s $3.76 price "worries" him and at some point he’ll probably stop ordering from PenAgain
until it comes out with a higher-end model. "I don’t want to be way out of line on pricing anything
because it sends a bad message," Mr. Ebert says.
And so, as the PenAgain partners prepare for what may be the most crucial 30 days of their business
careers, they are realistic about the challenges ahead. "There are things that could go tremendously
well, and things that could sink," Mr. Roche says. "We have a lot on the line, and honestly, we are
nervous as hell."
Write to Wendy Bounds at wendy.bounds@wsj.com

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Questions to think:
PenAgain Case 2: Product Life Cycle and Marketing Mix
This is the 2nd case of PenAgain. It shows more detailed information about PenAgain’s marketing mix
decision as it expands its distribution from specialty store (e.g., hospital, specialty stationary stores) to
general discounters (e.g., Wal-Mart) to Category killers (e.g., office depot).
1. How did PenAgain change its marketing strategy as its products move through product life
cycle? Discuss how its 4 p’s have changed over time.
a. Products
b. Price
c. Promotion
d. Place
2. Compare PenAgain’s marketing mix changes with those of typical companies throughout the
product life cycle.
3. Do you like its strategy to become Wal-Mart’s supplier (in the short term and long-term
perspective)? Why or why not? To aid your answer, perform a break-even analysis (see your
book) on their operation when they target at niche market vs. mass market? How did the breakeven point change? If there are not enough information you can get from the two PenAgain
cases, you are welcome to make reasonable assumptions.
This case will serve as class participation portion of your grade. You are asked to analyze the case and
submit a written case analysis addressed to the founders of PenAgain. Case analysis should follow the
format explained in the class.

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