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Q1. What is the case about? A1: Marketing Swimming Pool Clarifiers to the Business and Consumer market.

Q2: What is the name of the B2B chemical and to whom is it sold? A1: The B2B Pool Clarifier is names Kailan MW and it is sold to Commercial Pools and Water Parks. Quantitatively, to pools larger than 1 Million Gallons.

Q3: What are the USPs of Kailan MW.

A3:

- Attacks organic contaminants which can escape conventional filters.

- Larger effective period.

- Lower quantity required. One gallon for 500,000 gallons of water.

Q4: What is the size of the market size in which Kailan MW competes, what is the market outlook like and what is the current market share of Kailan MW?

A4:

300,000 commercial pools. 1,000 water parks.

$ 30 Million in revenue.

Market is projected to grow by 7% to $32.1 Million in 2007.

$ 6.1 M / $ 30 M = 20% market share in 2006.

Q5: What drives the demand for commercial pool clarifiers? A5: Demand is driven by:

- Number and size of commercial pools.

- Number and size of water parks.

- Increase of decrease in bathing load (No. of swimmers per unit time)?

o

Population increase / decrease (natural and by immigration)

o

Changes in lifestyle and habits.

o

Climate change.

IMPLICATION: Demand for Commercial Pool Clarifiers is Derived in Nature.

Q6: What are the needs of Commercial Pool Owners and Water Park Owners for buying pool clarifier chemicals?

A6:

- Concern for swimmer safety - Minimization of health issues and water borne skin diseases. - Implications?

- Bad publicity and image leading to loss in revenues.

- Failure to maintain safety certification since periodic audits are done.

- Problems with 3 rd party liability insurance.

- Chances of litigations and lawsuits.

IMPLICATION: Their concern is for the effects that the wrong choice will have on the

IMPLICATION: Their concern is for the effects that the wrong choice will have on the business. The

consequences of taking a wrong purchase decision are high.

effects that the wrong choice will have on the business. The consequences of taking a wrong

Q7. What is the buying behavior of customers for Kailan MW? (FIGURE A) A7: Commercial pool owners and water park owners usually buy from formulators especially on the advice of equipment builders, safety inspectors and maintenance personnel. Formulators make sure that they have the right kind of relationships and influence to get customers to keep their brand at the top of their mind. Buying personnel are mostly professional and understand the use, benefits and importance of clarifiers for their business. It is an involved buy for commercial pool owners and water park owners since the safety of their customers matters a lot to their business. Formulators in some cases do not even sell Kailan MW with the brand mentioned.

IMPLICATION: The buying behavior of the commercial market is professional in nature, they have

IMPLICATION: The buying behavior of the commercial market is professional in nature, they have

people who understand the performance benefits of the product.

the commercial market is professional in nature, they have people who understand the performance benefits of

Q8. What value do commercial pool owners get while buying from formulators? -

A8:

Formulators provide customized SKUs (They break bulk and can sell odd quantities)

- Provide entire suite of products / maintenance services, tailor-made for individual entities according to pool size, bathing load, pool system and regional climatic conditions. They sell solutions not products.

- Work with equipment builders, safety consultants and filter manufacturers to develop optimum, cost-effective programs.

IMPLICATION: Commercial market is buying much more than the product from formulators, they are buying

IMPLICATION: Commercial market is buying much more than the product from formulators, they are buying a complete package composed of products and services both. Nature of buying/selling is

high contact and relational.

buying a complete package composed of products and services both. Nature of buying/selling is high contact

Q9: What is the size of the residential pool market?

A9:

Market Size at Retailer Price:

9 Million Residential Pools x $ 50 (Annual Treatment Cost per Pool) = $ 112.5 Million at Retail. Manufacturer Prices are 60% of Retail Prices, so $ 67.5 Million is the market size for the manufacturer.

IMPLICATION: Much more widespread than the commercial market.

Q10: Why is Soren looking to enter this market? A10: Because of it’s lucrative market size and because of the fact that Soren’s R&D department is working on a line-up of products which can be suitable for residential pools and wants to have a foothold in the market to launch other products.

Also formulators have already started marketing a diluted version of Kailan MW to the residential pool market and Soren wants their share of the market.

IMPLICATION: If a company is established in one market and scope for further growth is

IMPLICATION: If a company is established in one market and scope for further growth is limited, then new markets need to be explored provided that there is potential for entry. Soren is doing the

same.

is limited, then new markets need to be explored provided that there is potential for entry.

Q11: What are the needs of the residential pool owners?

A11:

Hygiene of the pool. Clarity of the water in the pool for better aesthetics. They are not worried about safety inspections, license cancellations or lawsuits.

IMPLICATION: The buyers are worried about their own usage of pools and do not care about anything else. They are not technically sound (neither do they need to be), to them water which appears clear after using a clarifier is pretty ok. What they do not realize is that even clear water may contain a lot of dangerous contaminants invisible to the naked eye. This is the reason why formulators are able to sell the diluted version of Kailan which is actually designed for much larger volumes of water.

Q12: What is the buying behavior in the residential pool owner market? A12: Residential pool owners buy in following ways:

- From mass retailers like Walmart etc.

- From Specialty Pool Retailers.

- Get maintenance services through Pool Service Professionals.

- Are not technically aware about the intricacies of pool chemicals.

- Rely on advice from Pool Service Professionals, retailers and promotions at retailers.

- It is a low involvement buy for residential pool owners and is treated at a similar level as compared to household cleansers.

IMPLICATION: Distribution chain for the consumer segment is long and contains more channel

IMPLICATION: Distribution chain for the consumer segment is long and contains more channel

members. For the commercial market the only intermediary was the formulator.

segment is long and contains more channel members. For the commercial market the only intermediary was

Q13: How does Soren plan to enter the market? And what is the USP of their proposition? A13: Soren has developed a pool clarifier named Coracle which is suitable for smaller size pools. This clarifier takes care of organic / biological contaminants also which are invisible to the naked eye. It also has the advantage of reducing the need for other cleansing chemicals by 20% to 30%. The c

Q14: What market share is Soren targeting? And is it reasonable? A14: Soren’s target is $1.5 Million in the launch year i.e. $1.5/$67.5 Million = 2.2%, which is a very reasonable and achievable market share for the first year.

Q15: What is the proposed price of Coracle and how did Soren arrive at this price? (TABLE A & EXHIBIT 2) A15: The retail price for Soren per container of 0.5 Gallons has been settled as $25. This is based on a manufacturer price of $14.88 which Soren has ascertained for a 35% gross margin. Analysis:

Selling Price = Cost Price + %margin x Selling Price. Selling Price (1 - %margin) = Cost Price. Selling Price = Cost Price / (1 - %margin)

Distributor Cost Price = $14.88 Distributor Margin = 30% Distributor Selling Price = 14.88 /(1-0.3) = $21.25 Distributor Margin = $6.375

Retailer Cost Price = $21.25 Retailer Margin = 15% Retailer Selling Price = 21.25 /(1-0.15) = $25.00 Retailer Margin = $ 3.75

Q16: What measures were taken by Soren to launch Coracle and how was the initial response to marketing efforts?

- In order to reach pool service professionals and specialty retailers, company decided to sell

through wholesale distributors who had reach in the market.

- Press release in trade journals targeted at pool service professionals and specialty retailers.

- A new website for the product was made.

- The packaging of Coracle clearly highlights the USP.

- The company decided not to let wholesale distributors re-sell Coracle as a private label brand.

- Based on the efforts, Soren received 2,000 enquiries from pool service professionals and specialty retailers in the first three months of 2007 and responded by sending brochures, technical notes and MSDS about the product.

- Contact information for customers who had sent inquiries were passed on to the wholesale distributors for soliciting sales.

A16:

IMPLICATION: Soren did not go for a widespread product awareness campaign for the residential pool

IMPLICATION: Soren did not go for a widespread product awareness campaign for the residential pool owners, most probably because it was too costly and the company is only conversant with B2B

marketing techniques which engage fewer customers in a more direct manner.

and the company is only conversant with B2B marketing techniques which engage fewer customers in a

Q17: What is the issue with Coracle which is worrying the company?

A17:

Extremely low sales of Coracle. Quantification and measure of problem extremity? Coracle was launched in September 2006. Pool season is over till May every year. 9 months of sales available to Coracle. Targeted sales = 50,000 for the first year Targeted sales per month = 5,555 gallons Sales till February 2007 = 3,725 gallons Targeted sales till February 2007 = 33,330 gallons

Sales Achieved = 3,725 / 33,330 = 11% Problem: Behind targets by almost 90%

Q18: What measures were taken to diagnose the situation and what was discovered? A18: The company conducted a survey of Pool Service Professionals and Specialty Retailers and found out that only 30% of them recalled having sent an enquiry or receiving any product literature. Further, 70% of the respondents claimed that they were never contacted by the wholesale distributors regarding Coracle, whereas the company shared contact information with them.

Q19: What is your diagnosis of the Situation?

A19:

A- Pool service professionals and contractors not properly aware about Coracle. Why? Apparently a marketing campaign targeted at customers requires much more expenditures than what Soren is currently spending since there are 40,000 to 50,000 pool service professionals and contractors. Spreading awareness and creating pull would require much more efforts.

B- Customers not aware about the value of Coracle. Why? Residential pool owners (80% maintain the pools themselves) are not technical and do not really know about the benefits of the product. Also, since no post clarifier use testing occurs, distributors can get away by selling inferior products which just make the water look clear visually and not remove organic contaminants. Therefore customers are satisfied by inferior products also. Another point is that the customers are not properly aware of the economic benefits of using Coracle since the marketing message has not reached them. They would perceive it to be a high priced product and thus take it out of their consideration set.

C- Distributors not supporting the product. Why? They can sell dilute version of Kailan or similar products at lower prices. Since using Coracle can reduce the use of other pool chemicals by 20% to 30%, say 25%, it would lead to a revenue loss of the distributors and retailers because they sell other chemicals also. And the packaging of Coracle clearly highlights this fact. In fact, the USP of Coracle is in conflict with distributor and retailer objectives. Need to see whether the margins offered by Coracle are enough to offset earnings.

How much profit would they be losing and is it lesser than the margins that Coracle is offering?

 

Retailer

Distributor

Annual Chemical Sales (Excluding Clarifiers)

$300

$255.00

Reduction in Sales due to Coracle

25%

25%

Reduction in Chemical Sales Revenue

$75

$64

Industry Standard Margins

15%

20%

Reduction in Margin / Earnings

$11.25

$12.75

Number of treatments per annum

10

10

Reduction in Margin / Earnings per treatment

$1.13

$1.28

Margins offered by Coracle per treatment

$0.59

$1.00

Q20: What could be possible solutions to each issue:

Issue A:

The USP of Coracle may be of great attraction to them especially since quite a few service professionals would be charging customers a lump sum amount for the periodic maintenance visits rather than presenting bills for chemicals and labor separately. These professionals would be

saving money and increasing their profits by adapting Coracle. This message needs to be clearly communicated through marketing campaigns.

Issue B:

Customers must be made aware that clean looking pools are not always clean. Company should launch pool cleanliness rating competitions and give prizes for cleanest pools. Company should offer free of cost pool water testing services to ensure that the residential pool water is biologically safe. In this way, the value of the product can be increased viz a viz the USP.

Customers must also be made aware about the economic benefits of Coracle with respect to its USP that it will reduce the need for other chemicals by 25% and give customers a direct reduction in pool maintenance expenditure of $75 ($300 x 25%) per annum.

The above solutions can create product pull but will not fare well with the distributors and retailers, therefore their issue needs to be solved too.

Issue C:

To create the kind of pull that will force the distributors to support Coracle shall require massive expenditures in brand building and may not be justified by Soren earnings and will require a very different experience since Soren is primarily a B2B company. Therefore margins will have to be re-aligned in order to get channel member support.

Per-treatment analysis:

Distributor Cost Price:

$2.32

(Soren’s Ex-factory Price)

Distributor Profit Loss:

$1.28

Distributor Selling Price:

$3.6

Retailer Cost Price:

$3.6

Retailer Profit Loss:

$1.13

Retailer Selling Price:

$ 4.73

Annual Cost of Clarifiers to customers: $47.3. Lesser than competition and average annual clarifier spend of $50.

At this price of $4.73 per treatment, the distributor and retailer margins are exactly equal to the margins that are losing out on other chemical sales. At this price, the distributors and retailers should be indifferent to Coracle since it is not adding or deleting to their profitability. This shall imply that Soren needs to increase the distributor margins and the price of Coracle should be even higher.

Since customers spend $50 annually in clarifiers and $300 annually on other chemicals making a total of $350. If they spend $47.3 in Coracle and spend $225 (300 x 75%) on other chemicals, they will spend $272.3 which is significantly less than $350. This means that Soren has a room of $ 7.7 per-treatment ($350 – $273.2 = $77.7, divided by 10 treatments = $7.77) to increase price. However, further price increase must be significantly less than $7.77 so that the customer gets a good benefit in terms of annual cost savings. Also, to communicate the value savings to the customers, a lot of funds need to be available for ATL marketing. The high price will generate a lot of funds for the company which can be used for this marketing. Even at a high price, Coracle will still be a winning product because customers can save annual costs by using it. Soren just has to communicate the message properly to customers.