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SOREN CHEMICAL: WHY GROUP NO-8


17021141021 ASTHA KABRA
IS THE NEW SWIMMING 17021141034 DURELLE ELISHA CAMPOS
17021141074 PORE HEMANT
POOL PRODUCT 17021141101 SUBHAJIT MONDAL
SINKING? 17021141122 LISA GUPTA SHARMA

B2B MARKETING
Executive Summary

Soren Chemicals was founded by Timothy Soren in 1942 to sell industrial strength

cleaning solutions. The initial focus of the company was on business to business sales

with very little emphasis on creating consumer awareness. In 2002 company entered

the consumer markets with its water clarifier- Kalian MW. Kalian MW was intended to be

used in large recreational water park facilities with capacities of one million gallons or

higher. Since it was unsuitable for small scale applications like household swimming

pools, Soren Chemicals launched Coracle in 2006. However, the results have been very

discouraging with sales lagging behind its target by 90% due to a number of strategic

and tactical problems. The main problems identified were the low awareness among

consumers about the benefits of Coracle, no support from distributors because Coracle

reduces the use of other chemicals by 25% thereby affecting their margins, high pricing

of Coracle as compared to competitors and poor communication strategy as only 30%

of retailers and professionals received a response to their enquiries from the company.

Supported by a detailed situational analysis, the report recommends the solutions to all

the problems identified. It proposes a new pricing strategy with revised retailer and

distributor margins, branding strategy to create consumer awareness and push strategy

for distributors to support Coracle.


Question no.1 Differentiate between a large pool market and a small pool market.

Answer: Pools are used for commercial as well as domestic purposes. Below is the

differentiation in both the type of markets:

Large Pool Market Small Pool Market

 These are used commercially in  These are mostly residential pools

water parks, training schools etc. set up in people’s houses.

 Large pool markets are used as  Small pool markets are used for

recreational parks and for indoor swimming. Its average size is

professional purposes. The average 10 x 20 feet.

size of the pool is 10 x 36 feet.

 Large pool markets involve higher  Small pool markets involve lower

usage frequency. usage frequency.

 Large pool markets include higher  Small pool markets include lower

bather loads. bather loads.

Different pool markets require different processes of maintenance and the pool markets

have to be segregated based on size and usage. This will enable suppliers of pool

cleaning agents to target a particular market based on maximum utility of the product.
Question No. 2 Why intermediaries are interested in creating private labels?

Answer: According to the case, there are 3 major competitors in the pool cleaning

agents markets with a 15% to 20% market share. Intermediaries are interested in

creating private labels because:

 It is easier for them to customize the products according to the needs of the

customers

 This ability of customization gives them better sales.

 Till date, the big players in the market focussed predominantly on large pool

markets and hence there was a lower entry barrier for them in the small pool

market.

 Pool service professionals end up being more loyal to the customized brands and

hence recommend these private label brands while servicing a client.

 Private label brands work out to be more cost efficient than branded products.

Hence, the revenues made on them are more desirable and intermediaries

create private labels.

 Private label brands do not need investment in terms of marketing or brand

building. The cost incurred in selling the product is much less than bigger

branded labels.

All these factors make private labels more desirable and many intermediaries are

moving in this direction.


Question No. 3 Do you agree with Soren’s decision to build brand? Why?

Answers: Yes, I agree with Soren’s decision to build the brand. Soren was fighting 3

other competitors for residential pool-use clarifiers. People were aware of Kalian MW

and its usage in the pool maintaining industry, but the awareness with respect to oracle

was very poor. In spite of this situation, Kalian MW was used on a large scale by

formulators to dilute it and sell it as a separate private label. This was lowering the sales

and revenues earned by the company and Soren was facing tremendous drop in sales

in contrast with the estimated and expected sales.

If Soren was to build its brand, the Coracle would be known as the branded pool

cleaning product. The manufacturer price for a two-quart bottle of Coracle was $14.88.

However, wholesale distributors would be expected to maintain a 30% margin in selling

Coracle as a differentiated chemical agent. This was only possible if Soren build the

Brand and positioned it as a product that would reduce pool owners’ annual chemical

cost by 20% to 30%.

Increased brand building would also guarantee them increased shelf space in retail

stores and a better recall amongst pool service professionals.


Question No. 4 What is the market size of Coracle? Is the first year sales target
reasonable?

Answer: Market Size

Number of swimming pools (taking into

account that just 25% of consumers use

clarifiers regularly- Exhibit 3) 2.25 Million (9*0.25)

Average retail Price*1 44.30$

Retailer gross margin 15%

Retailer gross profit 6.6$

Distributor price 37.7$

Distributor gross margin 30%

Distributor gross profit 11.3$

Soren Chemical price 26.4$

Total Price*2 59.4 million $

First year goal 1.5 million $

First year market share goal 2.5%


*1 Average price including competitors

*2 2.25 Million * 26.4$

The addressable market is 59.4 million $. The first year goal for Coracle is 1.5 million $,

which represents a 2.5% of market share. This is reasonable considering that

competitors have between 10%-20% market share.


Question No.5 Why is Soren Chemical is struggling to sell Coracle?

Answers:

 Insufficient channel structure as of now: No support from the distributors/retailers.

Soren chemical sold pool chemicals like Kalian MW to Water Park and

commercial pools primarily through formulators. While they sold pool chemicals

like Coracle to residential pool owners through a two-step process to wholesale

distributors, which supplied specialty retailers and service professionals. And

may be because of less margin Pool service professionals and specialty retailers

had made enquiries about Coracle but only 30% recalled receiving the Coracle

material. Also 70% of them stated that Coracle had not been offered by their

distributors.

 No Awareness in the consumers: Since Coracle sold mainly through wholesale in

order to reach specialty retailers and service professionals which are an indirect

sales channel, the consumers were possibly aware of the safety and cost saving

benefits for them. Wholesale distributors want to hold a higher gross margin of

30% and retailers hold a gross margin of 15%, resulting in a retail price of 25$

which is higher than its competitive products. In the residential pool market, as a

new product with such high price, consumers are not likely to buy it. Still,

Coracle’s consumers do not realize the value of Coracle relative to other clarifiers

(Only 25% of the consumers understand clarifiers).

 Inefficient Marketing: Rather than other advantages (Prices and all), the product

launch rather emphasized on the performance advantage of trapping dangerous

waterborne pathogens such as E.Coli and cryptosporidium.


Question No. 6 Design the pricing strategies for Coracle. Also explore constraints

and implementation issues.

Answer:

Pricing Strategy
Coracle Margin Structure
Current Structure Modified Structure
Manufacturer
Price $14.88 Manufacturer Price $13.50
Retail Price $25 Retail Price $17.50
Sales Goal ($) 1,500,000 Sales Goal ($) 1,900,000
Sales Goal
(units) 100,000 Sales Goal (units) 140,741
Gross Margin 35% Gross Margin 28%
Cost per unit $9.67 Cost per unit $9.67
Gross Profit
(unit) $5.21 Gross Profit (unit) $3.83
Net Profit $525,000 Net Profit $539,037.04
Mass Retailer Margin Structure
Manufacturer
Price $13.50
Retail Price $17.50
Gross Profit
(unit) $4.00
Gross Margin 23%

Constraints & Implementation Issues:

 Lack of support from distributors: Distributors are focused on selling unbranded

products/diluted Kalian thereby earning better margins. Also, since use of

Coracle will reduce the consumption of other pool chemicals by 20%-30%, its

promotion will result in reduction of their overall revenue.


 Lack of awareness among Pool owners: Customers are happy with Pool looking

clearer and hence get satisfied with compromised products at lower price.

 No exclusive demand of Coracle from Pool Service Professionals and

contractors.
Question No. 7 What action plan do you recommend to Coracle?

Answers: Following is the action plan recommended to Coracle:

 Prioritize the restructuring of product pricing strategy.

 Renegotiate the wholesale distributor about gross margin about 20% which

would lead to decrease in retail price.

At 20%- $22

At 25%- $23

 Promote aggressively to end consumer.

 Creating demand from the consumer side will force wholesalers and distributors

to provide the product.

 Educate consumer about the advantages of the product.

 Re-launch the product in the market in summer (swimming season).

 Soren has to try to bypass the wholesale distributors, selling limited range to

Walmart and Home Depot.