An Assignment on Business 2 Business Marketing Case Study on: KUNST 1600

(In partial fulfillment towards the ePGP course, IIM-K)

Submitted by:
Prashanti Sharma ePGP-03-143 Prem Wig ePGP-03-144 Prakash Bharti ePGP-03-140

Major Issues in the case

SEGMENTATION: Identification and selection of the potential new market segments for the product Kunst 1600 to be launched options: AC Repair segment, Refrigerator repair segment, home and light commercial refrigerator repair segment POSITIONING: Positioning of the product in the chosen segments based on different value proposition for different segments i.e. Projected lifetime, light weight, the product features like the pump did not require oil or cost saving. PRICING: The product is priced highly as compared to the competitive products @ $500 for 1.6 CFM vis--vis the competitive price of $150-200 for 1.5 CFM, $250 for 3 CFM and $320 for 6 CFM

Major Quantifiable Value & Price Elements associated with Kuntz 1600:
From a quantitative perspective, the superior value and price of the Kunst 1600 can be attributed to these three elements.
Value Elements: Cost savings due to the elimination of oil change expenses and messiness -Most owners and technicians trivialize oil change related costs. Incremental revenue and profits Incremental revenue and profits refers to new income that can be attributed to greater product efficiency. In this case study, this occurs in only one segment light commercial refrigerator repairs. In all other segments, repair firm revenues remain the same regardless of which pumps are used. Price Element: Increased pump durability -- The Kunst 1600 lasts 2 to 3 times longer than the incumbents in most segments. This means that repair firms will have to buy more conventional pumps than Kunst 1600s. This impact the price a repair firm has to pay for conventional pumps (i.e., 2 to 3 times greater) and not the number of jobs it can complete! In the economic sense, there is no incremental profit merely greater

Additional Values Placeholders not Quantifiable in Value Model:

Value Placeholders For the most part, there are few differences among conventional pumps and the Kunst 1600. Here are a few placeholders.
Weight differential The Kunst 1600 is lighter than pumps currently used in residential AC repairs and heavier than those used in home refrigerator and light commercial refrigerator repairs. These weight differences may impact technician preferences. Durability of parts As the Kunst 1600 is constructed of molded aluminum, its parts may be subject to less corrosion and thus last longer. Moreover longevity can also be achieved as oil replacement is not required so there is less chance of damage to the m/c due to contaminated acid laden oil. Brand equity Currently, Kunst and Atler have little brand equity in the potential market segments in USA. This may put them at a competitive disadvantage with long-established rivals. Expected value of oil dumping fines You can either treat this as a placeholder or include the expected probability of fines into your cost savings category for the Kunst 1600 in the value model. You would calculate the expected value as the sum of company and individual fines times probability of being caught times the amount of oil dumped per year. There is limited case information that enables you to do such calculations.

Customer Value Model in Different segments:

Cost savings per oil change = Oil price + Labor cost + Clean-up supplies + Oil disposal cost Labor cost = Hourly rate of individual changing oil x Hours of time required per change Clean-up supplies = monetary amount of scouring soap used + price of cloth towel Oil disposal cost = recycling charge per gallon of oil x number of gallons
Element Residential AC Repair Segment
$318.00

Home Refrigerator Repair Segment

$153.30

Light Commercial Repair Segment

$207.30

Oil Change Savings

Incremental Profit

$0

$0

$720.00

Total Value

$318.00

$153.30

$927.30

Differential (per year)

Price

$16.67

($33.33)

$16.67

TARGET & SEGMENT SELECTION:

Given Kunsts status as a new acquisition, Evan and Will should target a single segment at this time. Given that this is a small firm, they should focus their limited resources on the segment that offers the most feasible chances of success. They can use this segment as a foothold to penetrate other segments later on perhaps with other Atler products. Of the four segments, the one offering the greatest potential is a light commercial refrigerator repair. This is the only segment where all three value/price elements (incremental profit, cost savings from oil changes, and durability) come into play for the Kunst 1600. The fact that the Kunst 1600 enables firms to do more jobs per week is the pivotal factor in that owners and technicians trivialize changing the oil and overestimate the lifetimes of conventional pumps. The value-in-use per year (i.e., $943.97) and value created per year ($927.30) are significant and far greater than that created in the other three segments. The incentive to buy the Kunst 1600 in this segment is significant (i.e., around $844 per year). The Kunst 1600 reduces repair job time by 10 minutes and increases the number of job possible by 2 per week during the summer months. The Kunst 1600 eliminates the hassle of oil changes for these largely independent operators. There is no likelihood of fines due to illegal dumping of oil. The competition will probably not be as strong in this segment as it will in other segments, namely residential AC repairs. Although it is highly attractive in terms of size, the residential AC repair segment is not feasible because of perceptual barriers and the fact that the Kunst 1600 may be underspecified (1.6 CFM pump in a 3-6 CFM application). Target another Atler product at this segment! The home refrigerator repair market may be viable long-term however, the Kunst 1600 may be over specified for the application (1.6 CFM pump in a 1 CFM application). The Kunst 1600 does not create incremental jobs here and pumping only takes 15 minutes.

VALUE PROPOSITION FOR KUNTZ1600 FOR TARGET MARKET

Stress that value propositions do not

have to cover all points-of-difference, and instead should focus only on the most significant ones.

The faster draw-down performance of the Kunst 1600 enables your firm to complete more jobs in the busy season and earn more, while eliminating the oil change mess and hassle.

THANK YOU!