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IntroductionA significantly innovative product developed by Aqualisa, in terms of both cost and quality, has been facing

challenges in the market since its launch four months ago. The product described by one of the customers (a plumber) is a
'push-fit-connect-you're done' shower and offers the customers 'what they (the plumbers) want'. Despite the above facts,
Quartz has experienced poor sales and has not met the company's expectations.
Hence, the company's managing director, Harry Rawlinswon, a HBS graduate who has the 'itch to think big' is faced with
many key decisions regarding the company's marketing strategy. He is re-evaluating their existing strategy regarding the
overall positioning of the product, distribution channels and effectively pricing and promoting Quartz.
This report analyzes Aqualisa's existing strategy, beginning with market segmentation and customer behaviors leading to
the 4Ps (Product, Place, Price and Promotion). Based on the analysis, recommendations have been provided that will help
Aqualisa in developing an effective marketing strategy.
U.K Shower MarketU.K. Shower market is consists of customers who are quite uninformed about the showers and do
understand the product options. Based on the information in the case, they can be divided into mainly two categories of
customers: individual buyers and property developers. Each of these is further subdivided based on two variables: price and
customer behavior. The table below, lists a few characteristicsFigure 1: Market Segments based on Price v. Customer
BehaviorA detailed description of the above figure is as follows, along with the product that Aqualisa offers to cater to their
need. Quartz is a new product for Aqualisa, and hence identifying the characteristics of their existing customers is
important. Aqualisa needs to develop an effective positioning strategy for Quartz, so that it does not cannibalize their
existing products and also gains substantial entry into the market at the same time.
Broadly speaking the customers in the individual market segment have one common feature i.e. they are faced with
problems of low water pressure. But, within this individual customer category there are sub-segments based on varying
needs. However, the property developers do not face the problems of water pressure and are faced with the different set of
issues.
The three distinct customers in the individual category based on price are:* Value Customers,* Standard Customers and*
Premium CustomersThe property developers who form an entirely different category are quite price-sensitive with the
exception of a few luxury developers.
One interesting group of people in all the categories, who are not the consumers and hence could not be placed in the above
figure are the plumbers - people who actually install the showers so that the customers can actually gain the benefits that
they seek. As mentioned earlier, the consumers' knowledge of showers is very limited. Hence the information search /
evaluation during the buying process is largely influenced by these plumbers.
Following the description of the above customer categories is a discussion of the behavior of plumbers, which is essential to
understand the true nature of the market. Although they are not the end consumer, their role will be significant for Aqualisa
when creating an effective marketing strategy.
Value Customers:Customers in this category are mainly concerned with low price and convenience. Style or looks is not
their primary concern; but, functionality plays an important role. Since, price is very important to this category they do not
like to spend money on solutions that require excavations (as they would increase installation costs). Hence, ease of
installation is very important to them. The consumers' decisions are largely influenced by the plumber - either the plumber
selects the shower or advices them on the type (not the brand). Final installation was usually carried out by the plumbers.
This also includes a category of customers called DIY, consisting mainly of landlords and apartment dwellers - who install
and select their own showers.
Products offered by Aqualisa for this category are: Gainsborough, Aquavalve and Aquastream Manual ranging from 95 to
480.
Standard Customers:Customers in this category are mainly concerned with reliability and performance. Assuming that they
fall in the middle of the two categories, style would be a consideration but not important. They also rely on the individual
plumber to not only recommend or select a product for them but eventually install it.
Products offered by Aqualisa for this category are Gainsborough, Aquavalve 609 and Aquastream Thermostat ranging from
155 to 670, offering better quality and state-of-the-art technology.
Premium Customers:Customers in this category expected performance and service as a base criteria to be on their qualifying
list of products. Style is what dominated their selection. They usually shopped at showrooms which had technical experts to
explain the various product options and help them in evaluating and selecting the right product. Being better informed than
the other two segments, plumbers had very little influence on this category. The showrooms also offered installation service.
The only product offered by Aqualisa for this category was Aquastyle at 230.
Developers:Customers in this segment are quite price-sensitive and require showers that are reliable, stylish and flexible i.e.
those that could work in multiple settings. They do not require showers that have premium valves because the new homes
are built with high-pressure systems. Also, they do not rely on the individual plumbers while making purchase decisions.
However, they do have relationships with the plumbers who will install the showers that the developers select.
Aqualisa offered the ShowerMax brand to this category at a significantly lower price than their other products and fewer
features.
The Plumbers:Although the plumbers are not Aqualisa's prime customers, they have huge influence on the individual
market segment, especially the value and standard customers. Their major concern is reliability, performance and ease-of-
installation because they would have to bear the costs of any unforeseen problems. Hence, they would familiarize
themselves with a product brand. They are quite loyal to the brand that they have chosen and are apprehensive of any
product innovations.
Aqualisa's Marketing Strategy (4Ps) and QuartzUntil now, Aqualisa has had a successful marketing strategy, enjoying 25%
net return on sales and a growth of 5% to 10% in a mature market. They have effectively segmented their markets and have
products that cater to each segment's needs. Their channel relationships are strong and positioning has helped them achieve
a good brand name in the market. Following is a brief discussion of Aqualisa's 4Ps with an emphasis on their new product
Quartz. It highlights certain challenges that Aqualisa currently faces with Quartz and subsequently providing
recommendations.
Product:Aqualisa offers a wide range of products to cater to the needs of each of its market segments, as has been described
above.
The recent introduction of Quartz showers has been a great leap for Aqualisa in terms of both product quality and cost. The
company spent almost 3 years and 3.8 million in developing the product. It was developed after undertaking a thorough
market analysis and identifying the problems in existing products - resulting in a product that 'customers actually want'The
product is offered in two models - the Quartz standard (not requiring a pump to boost water pressure) and Quartz Premium
(including the pump). The use of electronics has enabled the product to offer unique advantages, both in terms of features
(the use of indicator light to signal that required temperature has been achieved) and in terms of installation. Quartz
provides high flexibility of installation - the use of remote processor to control the thermostatic mixer valve has overcome
the need to excavate (since it can be conveniently placed anywhere close to the shower where there is access to water pipes)
and has tremendously reduced installation times and costs. As such, the ease of installation makes it attractive for the most
novice customer. In addition, no bulky boxes translate into better look and style.
Lastly, as described by Rawlinson, Quatrz will open up doors for development of new products. So, what are the issues that
Rawlinson faces?The use of electronics (which was a failure in the 80's) has caused plumbers to be sceptical about the
Quartz. But, that was 20 years ago and we have seen a great deal of technological advancement. Field test that were
conducted before the launch of the product to ensure that it met the needs of its customers resulted in the 'wow' factor.
Secondly, Rawlinson feels that Aqualisa's existing products face the threat of cannibalization, especially their cash cow - the
Aquavalve.
So what should Rawlinson do? Following is Ansoff's matrix that suggests corporate growthstrategis: Source: Jobber
2000Clearly, Aqualisa falls in the Product development box. As suggested by Ansoff, this is riskier than the market
development strategy. While a firm pursues new markets with existing products in market development, Aqualisa's
strengths lie not only in relationship with its existing markets (being No. 3 in the market) but also with the product itself (the
excellent engineering and R&D team involved in development).
The suggestion is that Aqualisa should not change the product. It is definitely a riskier approach, but is a calculated risk i.e.
Aqualisa has developed a product that its customers want, who are just not aware of its benefits. Secondly, Aqualisa can
look at market penetration for its Aquavalve brand and develop market in other regions or geographical locations.
The 'itch to think big' leading to adoption of such calculated riskier alternatives will lead Aqualisa to success.
Place (Distribution Channels):Aqualisa offers its products through a wide range of distribution outlets - from trade shops,
showrooms, DIY Sheds, plumbers and contract outlets.
Quartz has been made available through all of Aqualisa's distribution outlets, but in varying degrees. In addition, the
Aqualisa's sales team has also targeted its 'loyal' group of plumbers by introducing them to the new product. However, sales
have not picked up since the four months of its launch.
Aqualisa's sales team targeted 'their group' of plumbers by introducing them to the product. However, the plumbers are
sceptical of Quartz (electronic and innovative products) for the reasons mentioned earlier. Hence, the trade shops (plumber's
merchants) have seen very poor sales. They have only been able to sell 15 units a day - compared to an estimated
requirement of 100-200 units a day to break through to the mainstream. However, one incident in the case suggests that
once a plumber installs Quartz he is immediately a 'convert'.
On the other hand, showrooms have shown better results. They are able to offer customers (the actual users) with a display -
which is a key to Quartz success. Once the customer has 'seen' the benefits, the product is sold and the 'love it'. Quartz has
become the leading product of the showrooms, where it has gone on display.
The case does not give enough evidence of Quartz being made available in the DIY stores. However, it can be assumed that
Rawlinson has not fully exploited this channel, because he mentions that they are careful of introducing any product in DIY
stores. Once a product goes into DIY, it is almost impossible to back out. However, Quartz flexibility of installation makes
it a DIY product.
Also, it does not give enough evidence on the product being made available to property developers. This group forms 15%,
a substantial portion of the market. In addition, their decisions are not influenced by the plumbers but the product. The
plumbers in turn are influenced by the property developers. Quartz seems to offer exactly what the developers want - a
value product with much desired flexibility.
Hence, it is suggested that Aqualisa concentrates more on exploiting these three channels for the next six months i.e DIY
stores, the property developers and the showrooms. These in turn will have a trickle down effect on the plumbers (a major
channel partner for Quartz), since they are forced to install what the customers want in the above cases. Once the plumbers
have been influenced and there are many 'converts', Aqualisa should make Quartz available in the trade shops (since they
tend to carry the products that are in demand). As for now, Aqualisa should not focus its resources on the trade shops and
plumbers.
Promotion:Aqualisa enjoys a good reputation and brand name in the market. Its existing products, being of high quality and
performance have helped it attain number 3 position having close to 18% market share (325,500 units of 1.8 million).
Quartz is an improvement over Aqualisa's existing product range. However, it is safe to say that Quartz is an entirely new
product because of the advanced capabilities offered by it in terms of features, performance and flexibility. In order to
promote Quartz, Aqualisa has adopted several approaches - exhibitions, face-to-face contact with plumbers, and
advertisement in The Mail on Sunday. The Quartz was awarded the top prize at the Bathroom Expo and received great
reviews from all reporters, who were enthusiastic about the 'cleverness' of the product and 'elegant design'.
Rawlinson points out that targeting the customers directly with an ad campaign will cost about 3million to 4 million over
two years and is very difficult for a company with net profit of about 17 million.
So what should Aqualisa do?As described above, Quartz is a fairly new product and launch of a new product requires
awareness. The customers need to be educated about the product and its features. As pointed out in the case, customers are
generally unaware of product features and have limited knowledge. Only one company has been able to create some product
awareness i.e. Trinton.
Hence, Aqualisa should use its existing brand image and awareness in the market to launch the ad campaign for Quartz and
build product awareness. It is agreed that the costs will be high and is a risky proposition. But, this should be viewed as an
investment and not as a cost; since Quartz is going to lead Aqualisa's market for other electronic product innovations and
success of Quartz will give Aqualisa the first mover advantage in the market.
Price:A few important facts can be seen from the table as below:* Retailer margins across all product categories is fairly the
same, ranging about 47%.
* Aqualisa's cash cow - Aquavalve has a manufacturer's margin of about 60% - comnparable to both the Quartz models.
* The cost of manufacturing Quartz is higher than that of Aquavalve - hence the higher retail price.
As will be described below, Quartz offers good value for the end customers not only in terms of product features but also
price, even though it is their highest priced product.
Comparing Aquavalve Value to Quartz Standard:A typical installation of Aquavalve will take from 1-2 days. Assuming that
plumbers charge on an average 70/hour (including labour and materials for excavation) and it takes 12 hours to install,
customers would pay 840, over and above the retail price of 390 - the total being 1230.
Assuming similar labour charges (even though excavation is not required), and 6 hours installation time for Quartz - a
customer pays approximately 420 for installation - the total cost being 420 + 850 = 1270.
Hence, the total cost for the customer is fairly the same in both cases. In addition, they receive a product that is much
advanced and better in all respects.
Thus, it is suggested that Aqualisa maintains its current price for Quartz and use the above value proposition in targeting
customers to show then benefits gained.
ConclusionAqualisa has truly developed a product that is going to lead the market - however has faced challenges in terms
of effectively positioning it and delivering it to the end customer. Slow sales have worried Rawlinson who was taught 'think
big'.
Introducing a new product in the market can be challenging for a company, especially when the customers have had a
'previous bad' experience with similar products. But, we have to account for the fact that Quartz is a genius in itself and a lot
of effort and resources has been put into its development, creating a product that customers 'want'. Technological
advancement in the last 20 years has been tremendous and although customers are wary of innovations, it is not impossible
to sell a technologically adept product to them. As pointed out in the case, once plumbers use the new Quartz, they are
immediately a convert i.e the post evaluation of purchase during the buying purchase is in favor of Aqualisa. This offers
huge potential for Aqualisa in terms of repeat business, because majority of the UK shower market is made of replacement
showers and plumbers tend to remain loyal to their selected brand.
The challenge for Aqualisa is in effectively communicating to its customers and making them aware of the fact that they
have developed such a product, before their competitors catch up.
ReferencesJobber, D. (2004). Principles and Practices of Marketing. McGraw Hill.
Youngme. M. (2003). Aqualisa Quartz: Simply a Better Shower. HBSCase-2Problem StatementAqualisa launched the most
significant shower innovation in recent British history: the Quartz shower. The shower provides significant improvements in
terms of quality, cost, and ease of installation. In product testing, the Quartz shower received rave reviews from both
consumers and plumbers alike. However, early sales of the Quartz have been disappointing. Now, the company is faced
with some key issues about whether to change the channel strategy, promotional strategy, and the overall positioning of the
product (niche or mainstream product) in the context of his existing product line.
Situation AnalysisCompany: Aqualisa, 3rd in the shower market with 18% coverage has had a successful marketing
strategy, which allowed it to enjoy 25% net return on sales and a growth of 5% to 10% in a mature market. They have
effectively segmented their markets and have products that cater to each segment's needs (product range of 9 models
covering the three types of showers used in the UK, ranging between 230 and 670). Their channel relationships are strong
and positioning has helped them achieve a good brand name in the market. The company used the shower max (specialized
product similar to Aqualvalve at lower priced than the before mentioned) to penetrate the developer's market.
Company's Strengths* Strong reputation in the shower market* Highly profitable company* High quality products*
Excellent service* Strategic use of Gainsborough brand to penetrate low cost marketCompany's Weaknesses* Only
available in 40% of trade shops, 25% of the total showrooms, and 70% of total outlets* 10% defected products*
Competition is catching up in product quality* Considered as an expensive brandCostumers: Broadly speaking the
customers in the individual market segment have one common feature; they could identify problems in current showers
which were poor pressure, varying temperature and breaking down. Within this individual customer category there are sub-
segments based on varying needs.
Following the description of the customer categories is a discussion of the behavior of plumbers, which is essential to
understand the true nature of the market. Although they are not the end consumer, their role will be significant for Aqualisa
when creating an effective marketing strategy.
Value Customers: Customers in this category are mainly concerned with low price and convenience. While style or looks is
not their primary concerns, functionality plays an important role. Price is very important to this category as they do not like
to spend money on solutions that require excavations (as they would increase installation costs). Hence, ease of installation
is very important to them. The consumers' decisions are largely influenced by the plumber - either the plumber selects the
shower or advices them on the type (not the brand). Final installation was usually carried out by the plumbers. This also
includes a category of customers called DIY, consisting mainly of landlords and apartment dwellers - who install and select
their own showers.
Standard Customers: Customers in this category are mainly concerned with reliability and performance. Assuming that they
fall in the middle of the two categories, style would be a consideration but not important. They also rely on the individual
plumber to not only recommend or select a product for them but eventually install it. Products offered by Aqualisa for this
category are Gainsborough, Aquavalve 609 and Aquastream Thermostat ranging from 155 to 670, offering better quality
and state-of-the-art technology.
Premium Customers: Customers in this category expected performance and service as a base criteria to be on their
qualifying list of products. Style is what dominated their selection. They usually shopped at showrooms which had technical
experts to explain the various product options and help them in evaluating and selecting the right product. Being better
informed than the other two segments, plumbers had very little influence on this category. The showrooms also offered
installation service. The only product offered by Aqualisa for this category was Aquastyle at 230.
Developers: Customers in this segment are quite price-sensitive and require showers that are reliable, stylish and flexible i.e.
those that could work in multiple settings. They do not require showers that have premium valves because the new homes
are built with high-pressure systems. Also, they do not rely on the individual plumbers while making purchase decisions.
However, they do have relationships with the plumbers who will install the showers that the developers select. Aqualisa
offered the ShowerMax brand to this category at a significantly lower price than their other products and fewer features.
The Plumbers: Although the plumbers are not Aqualisa's prime customers, they have huge influence on the individual
market segment, especially the value and standard customers. Their major concern is reliability, performance and ease-of-
installation because they would have to bear the costs of any unforeseen problems. Hence, they would familiarize
themselves with a product brand. They are quite loyal to the brand that they have chosen and are apprehensive of any
product innovations.
Collaborators: Aqualisa has a 20-person sales team who sold to distributors, trade shops, showrooms, developers and
plumbers. (DIY sheds represent 36% of the shower market sales trade shops 47%, and trade shops and showrooms 17%)
Currently, they spend 90% of their time on maintaining exiting customers, only 10% on developing new customers. Team
has a long-standing relationship with a group of loyal plumbers- "our plumbers".
Context: Aqualisa Quartz was developed in reaction to customer dissatisfaction with the poor quality of showers on the
market, in addition to the company's need to innovate in order to differentiate itself from the competition and maintain
competitive advantage.
Alternatives and RecommendationAqualisa's marketing team discussed three options for the marketing strategy for Quartz.
The three options they came up with were; targeting consumers directly, target Do-it-Yourselfers, and target developers.
The three alternatives have advantages and disadvantages as shown in Exhibit 1.
From the analysis of this case we determine that Quartz is a niche product. We recommend that Quartz should target the
specialized bathroom retail stores, captivate the plumbers' attention, and raise product awareness amongst consumers. While
plumbers tend only to recommend products they know well, retailers will be happy to take on products that stand out in
showrooms, particularly if they are highly functional and easy to use as well as attractive. As we believe that Quartz is a
niche product, the specialized retails stores will be the place where the demand will be created for this product. These stores
are more likely to recommend a new, innovative or high-end product than a large merchant. In order to ensure a strong
increasing market penetration, plumber's attention should be grasped. Costumers in the shower market know little or
nothing about the products they buy, so they are strongly influenced by their plumber's advice. It is important to note that
plumbers install 54% (972,000 installations) of the showers in the UK and Aqualisa's management has the goal of selling
46,800 (2.6% of shower market) showers in a year to break through the mainstream. By convincing just 20% of the 10,000
plumbers, to recommend Quartz to their costumers, the end result would be 58,320 (972,000 showers x 20% of plumbers x
30% installation of Quartz) Quartz showers installed. Once the plumbers realize this product satisfies their needs, the word
of "Quartz being a great product" will spread amongst the small plumbers' population quickly.
It is also important that Aqualisa does not lower Quartz proposed price for two reasons: to avoid cannibalism towards
Aquavalve (bestseller for Aqualiza) and create lower installation costs for consumer Quartz offers good value for the end
customers not only in terms of product features but also price, even though it is their highest priced product. Comparing
Aquavalve value to Quartz Standard: a typical installation of Aquavalve will take from 1-2 days. Assuming that plumbers
charge on an average 70/hour (including labor and materials for excavation) and it takes 12 hours to install, customers
would pay 840, over and above the retail price of 390 - the total being 1230. Assuming similar labor charges (even though
excavation is not required), and 6 hours installation time for Quartz - a customer pays approximately 420 for installation -
the total cost being 420 + 850 = 1270. Hence, the total cost for the customer is fairly the same in both cases. In addition,
they receive a product that is much advanced and better in all respects. Thus, it is suggested that Aqualisa maintains its
current price for Quartz and use the above value proposition in targeting customers to show then benefits gained.
Implementation PlanQuartz will be positioned as the easy to install, most aesthetic, advanced and unproblematic shower.
Quartz is an improvement over Aqualisa's existing product range. However, it is safe to say that Quartz is an entirely new
product because of the advanced capabilities offered by it in terms of features, performance and flexibility. The launch of a
new product requires awareness. The customers need to be educated about the product and its features. As pointed out in the
case, customers are generally unaware of product features and have limited knowledge. Hence, Aqualisa should use its
existing brand image and awareness in the market to launch the ad campaign for Quartz and build product awareness. It is
agreed that the costs will be high and is a risky proposition. But, still by the end of the current year Quartz will make profits,
which can be used to finance the ad campaign (see Exhibit 2). This should be viewed as an investment and not as a cost;
since Quartz is going to lead Aqualisa's market for other electronic product innovations and success of Quartz will give
Aqualisa the first mover advantage in the market. Along with this ad campaign Aqualisa should distribute 3000 free Quartz
packages (shower samples with brochures, information on installation and benefits of Quartz) to the plumbers. This will
encourage plumbers to at least recommend and install one Quartz shower to their costumers. Once this is done as mentioned
before "spread of word" will work within the plumber population. Finally Aqualisa, as a niche product, should place the
products in the specialized bathroom retail stores. Quartz allows high margins (88% on Quartz standard and 87% on Quartz
pumped) for retailer and is a very attractive product to carry. The company should use half of its sales force to convince
these retailers to take Quartz in their shelves. Finally, as mentioned in the recommendation section, Quartz's price should
remain at what is proposed.
Exhibit 1Consumers Directly Do-It-Yourself Developers & PlumbersAdvantages- Getting directly to treat with
the final customer- Lower dependence from plumbers- Smaller bargaining power from customers- Raise company's image-
Product awareness - Easy to install (no need for plumbers)- Depend on the final consumer- High quality product, with
great design- Avoid problems reaching the plumbers - Develop trust and loyalty of the customers that try the product-
Gain influence in the decision makers of the market- Securing a number of sales through the year- Low advertisement cost-
Develop a large volume distribution channelDisadvantages- High advertisement costs- Need of informed and good
salesmen force at reasonable cost- More difficult to convince plumbers to buy the product- Make a large consumer
campaign (very expensive)- Place a premium product in an inferior segment- Could damage Quartz's image- Harder to sell
the product- Possible discount on price- Need of informed and good salesmen force. Reasonable costExhibit 2Current Year
Selling 15 Selling 30-401st 6 months 2nd 6 months TotalsSales $ 1,345,500 $ 3,139,500
$4,485,000Costs $ 538,200 $ 1,255,800 $1,794,000Marketing costs @ 6% of sales $ 80,730 $
188,370 $ 269,100Costumer services costs $ 40,365 $ 94,185 $ 134,550EBIT for 1st year $
686,205 $ 1,601,145 $2,287,350

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