CASE ANALYSIS-AQUALISA QUARTZ: SIMPLY A BETTER SHOWER

1. Background, Issues & Analysis

Aqualisa, founded in 1977 in UK, is a manufacturer of technology-driven showers.

Starting with a bimetallic thermostatic valve in 1977, Aqualisa moved on to roll out the
first digital shower-the Aqualisa Quartz-in 2001. Until the rollout of Quartz the only
options available to consumers were Electric Showers, Mixer Shower Valves and Integral
Power Showers.

Product Market Share-Aqualisa* Market Share-Leader Aqualisa Rank

Electric Showers 16.91% 43.54% 3

Mixer Showers 20.82% 36.36% 2

Power Showers 16.67% 23.33% 3

Total 18.1% 30.3% 3

Table 1: Market Share of Aqualisa Products (Year 2000) (*Based on combination of Aqualisa & Gainsborough)

Table 1 shows the market share of Aqualisa for each of its products. Aqualisa ranked 3 rd
in the market with 18.1% market share as against the overall market leader who
commanded 30.3% market share. Although Aqualisa ranked within the top 3 showering
solutions provider, the gap between Aqualisas market share and that of the market leader
was quite wide.

1.1 Channels of Distribution & Market Share

The traditional channels of distribution in the UK were trade shops, showrooms and DIY
sheds. Table 2 shows the share of various channels of distribution.

Distribution Channel Total Share in Distribution

Do it Yourself (DIY) 6,50,000 36.11%

Showrooms 1,45,000 8.055%

Trade Shops 8,40,000 46.67%

Other 1,65,000 9.17%

Table 2: Distribution Channels

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Although the existing showers tried to address the most common problems of low
pressure and temperature fluctuations they were unable to do it fully. Also the concerns
about safety and increased space consumption gave rise to the need for a single product
which addressed all these issues. And so was Quartz born.

Quartz brought in considerable improvisation in important issues of water pressure and

temperature. It has also improved on the external appearance, convenience in usage, ease
in installation and quality of the product. Despite the much felt need for such a product
the shower manufacturer is finding it difficult to promote its newly developed Quartz
shower product.

1.2 Issues

Limited brand awareness

Current sales strategies not yielding desired results

Need to scale up quickly before patent expires and competition catches up

In the first four months, only 81 units sold

In case sales do not pick up, channel partners will no longer be interested in
distribution

Resistance from plumbers to recommend or install Quartz

Promoting Quartz as part of mainstream products rather than a niche category

Plumbers hesitate to install it because it is electronic and may require free post-installation
support. The limited brand awareness makes prospective consumers ignorant about the
existence of such a product in the market. Aqualisa is in a catch-22 situation: They have a
perfectly wonderful product, which is simply not selling.

2. Decision Questions

Aqualisa needs to make some strategic decisions regarding product positioning,

distribution and promotion.

1. What is the benefit to plumbers? Why should they promote Quartz?

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2. Should the price of Quartz be reduced?

3. Should Quartz be promoted as a niche product or a mainstream product?

4. Which is the best distribution channel to supply Quartz?

5. Will any initial promotional/discount campaigns help?

3. Recommendations

DIY and Trade Shops are currently the major channels of distribution. These channels
have proved to be profitable for other products. Hence it will be safe to assume that a
major chunk of products are reaching the target audience through these established
channels. Pushing Quartz through these channels as well is advisable.

Being the first mover in this category the best time to maximize revenues is in the initial
launch phase. There is a lag time before competitors catch up with the innovation due to
time needed for imitation and patent restrictions. The product needs to be positioned as a
mainstream product to build on volumes in sales. This will ensure better market
penetration which in-turn will have a cascading effect on promotion through the
existing/acquired client base.

Plumbers may initially be offered the product at a marked-down price thus giving the
plumbers a sizeable commission for promoting Quartz.

Particulars Cost

Materials & Excavation 50 euros (approx)

Cost of Unit Nil

Total Cost 50 euros

Table 3: Cost to Plumber

Table 3 shows the approximate cost incurred by a plumber in case the Quartz is
initially given out free to them. They are required to bear only the cost of other
materials and the cost of any necessary excavation. The plumber may require around
four hours only to install Quartz. Since the rates charged by the plumbers vary from
40 to 80 euros per hour, we take an average of 60 euros per hour. This amounts to 240
euros for four hours. Also the standard unit can be charged around 850 euros. The

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plumber makes a neat profit of 1090-50=1040 euros. Moreover, the plumber saves
considerable time which he can utilize in installing more units elsewhere.

Particulars Amount

Labor Charges (@60 euros per hour for 4 hours) 240 euros

Cost of Unit 850 euros

Total Cost to Customer 1090 euros

Table 4: Price Charged to Customer

Periodic brand creation campaigns may be launched so that there is an immediate

brand recall when a plumber recommends Quartz to a prospective customer. This way
the lag between implementation of strategies and results in terms of increased sales
revenues will lessen.

As more and more people move on to knowledge based jobs there will be lesser
number of people entering plumbing and allied occupations. This implies longer
waiting periods for the plumber and more expensive plumbing services. It is more
sensible and economical then to install the showering equipments oneself. The DIY
channel is expected to grow by leaps and bounds in near future.

With e-commerce one can compare specifications, pricing and other features of
multiple products at the click of a button. Having an online purchase option on
Aqualisas site as well as other online shopping sites can greatly help. Many efficient
and cost-effective search optimization techniques can further help in throwing up
Quartz in every search result. This in turn also improves brand recall.

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