Aqualisa Quartz

Simply A Better Shower

prashant@iimcal.ac.in

Market Analysis
Company Analysis
Highly profitable (GMar 47%) No 3 in the market Capability to Innovate

Consumers
Dissatisfaction with showers is high, but switching is difficult due to:
Its a sight unseen product, as one cant experience before purchase Consumers lacks expertise hence more uncertainty while purchasing Inconvenience in installation Costly purchase and customers understanding of costing is fuzzy Plumbers have more say than the consumers themselves

Competition
Very Complacent Breakthrough innovations are rare; More face lift centric Stable market share, high margins Status quo orientation

Collaborators
Plumbers Trade Shops Show rooms DIY Sheds

Consumer Segments
Premium Likely type of purchase Voluntary Standard Grudge Value/DIY Grudge

Likely motivation for purchase

Renovation (New penetration or 2nd shower)

Stylish design WoW Premium price

Existing shower has broken down (replacement shower)

Good performance, plumber provides installation services Fair price

Existing shower has broken down (replacement shower)

Price / Convenience; No Excavation Cheap price

Shower Criteria

Price point

Tolerance for inconveniences

Preferred channel

High

Low

Zero

Showroom

Independent plumber

Independent plumber or DIY shed

The Quartz
Potentially disruptive innovation Challenge is to achieve critical mass in sales Make-or-Break time for quartz Remaining niche would be a major disappointment for the company It is at the early stage of the classic diffusion curve (S-curve).

The Quartzs Value Proposition

For Consumers
Superior to existing products Consumers fell in love during trials with products outstanding performance, elegant design, and ease of use. Called too good to be true Saving of at least $875 for average consumer The problem is consumers are unaware of the product. Even awareness could create appreciation of higher cost is not sure

Without Quartz

Aquavalve 609 $715 + Aquaforce pump $520 + 2 days work @ 60 / hr $960 which means $2195 TOTAL at least plus excavation costs and other materials and 2 days of inconveniences

With Quartz

Quartz pumped $1080 + 0.5 days work $240 which means $1320 TOTAL at least plus No excavation; 1/2 day of inconveniences; better performance; Ease-of-use; More stylish design

The Quartzs Value Proposition

For Plumbers Since it takes 1/4th of the time to install each can do more business given the shortage of plumbers Plumbers can send their apprentice as the installation is so easy, creating opportunities for incremental business for them.
Lifetime value for plumbers
One plumber 40 -50 showers / year Each shower contributes about $ 310 i.e., $13,950 per year

A plumber tends to stick with the same product for many years Imagine five years: LTV $ 69,750

The Big Picture: Organizational Transformation

Rawlinsons Long Term Vision for the firm
Given eroding points of differentiation and poor perception he adopted more offensive market position. Putting together development team; developing field testing capabilities; putting in place market feedback mechanisms; testing facility; more engineers6 to 20; and nine patents are some of the new competencies acquired in recent times. Long term goal is to overhaul business model of the firm to make way for ongoing new product development and the efficient marketing of a steady stream of innovative products.

Rowlinson is transforming Aqualisa into an innovation-focused firm. The idea is to build a portfolio of well differentiated brands that will appeal to different segments of the market and allow Aqualisa to Milk the maximum value out of each product over the course of its lifecycle.

The Marketing Plan

Out of the three options outlined DIY and developer options are unappealing as targeting these segments would leave too much money on the table. As these are both discount channels (price sensitive). These are not attractive in the long term. Direct to consumer option is unattractive because of efficiency issues. Showrooms seems to be the early adopters channel!!!! Focus on Plumbers.??????

What should Aqualisa do?

The Marketing Plan

Aqualisa Wants.
to stimulate the diffusion process
To convert plumbers

The Showrooms.
Are the early adopter channel
Outsource installation to independent plumbers, who must install whatever product the customer has selected

To extract maximum value for the product To educate the consumer about the product benefits To build a reputation as an innovator

Charge a premium price to priceinsensitive consumers Offer consultative selling, point-ofsales service, and show-and-tell displays to wow the customer Tend to embrace innovation; it is a key point of differentiation for them.

Ingredients of a Strong Marketing Plan

Place
The most obvious channel fit would be showrooms, so the plan must focus on cultivating this channel.

Product
The plan must position the Quartz in the context of Aqualisas overall strategy of maximizing value extraction over the PLC using channel placement, pricing and brand labeling as managing the obsolescence process.

Promotion
The plan must recognize and respond to the fact that building brand equity would not only be economically inefficient for aqualisa, it would also require competencies which they dont have at present.

Price
The plan must recognize that Quartz should be priced such that ROI can be maximized as well as position the company for the future stream of premiumpriced innovations. It should also anticipate cannibalization of existing product lines and consider change in both price and volume to maximize contribution.

Your Takeaways
Dispelling the Marketing Myths
MYTH 1 : It is easy to sell a great product !!!
Not necessarily true, as the case illustrates. Good product can fail, if consumer dont recognize the value. Status Quoists rules, and are well entrenched

Mythe 1a: Its tough to sell a bad product.

In markets characterized by complacency, inertia and consumer dissatisfaction one can still sell a product with high failure rate (as in case of Aqualisa). Despite having high marins, no one is under cuttingreasonthey dont have killer instinct and they SIMPLY LOVE Status quo

MYTH 2 : Brand Equity equals Brand Power !!!

Not necessarily true, specially in markets where loyalty is directed towards products rather than suppliers. Loyalty may not be transferable necessarily.

Your Takeaways
Dispelling the Marketing Myths
MYTH 3 : Innovations tend to diffuse linearly, with early adopters leading the way !!!
Not necessarily true, in all the cases. It may follow a hub and spoke pattern, the challenge is to identify critical nodes in ecology of the market. (as plumbers in this case) These nodes some times are deeply entrenched in their behavior pattern and are highly resistant to change or adopt.

MYTH 4 : The easiest way to go to market is the best way to go to market !!!
Planning is everything, Plans are nothing. Process and details are important and there is no short cut to success (in the case DIY or developers seems obvious choice due to efficiencies, but not the best one as the facts suggests).