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Acqualisa

1. Is this a good product?

Simply a Better Shower

Segments
a)
b)
c)
c)
d)

Market over view


Quartz
Analysis
Approach
Learning

Shower Market overview

Product Variants
a)

Electric: No need for hot water supply. Bulky box. Low flat
rate.

Gainsborough-- ( 95 pounds to 230 pounds)

b)

Mixer Shower: Require hot and cold water supply. Additional


pump for pressure. Excavation required for installation.

Acqua valve-- ( 390 pounds to 715 pounds)

c)

Power shower: Require hot and cold water supply. Additional


pump for pressure. Less reliable than mixer shower

Acqua stream --( 480 to 670 pounds)

Channels
a)

Trade Shops: Carried all brands Sold to plumbers who worked for
developer, showroom, contractors and end customers. Acqualisa
was stocked in 40% of outlets. Focus on selling brand/product asked
for by the customer
b) Showrooms: Distributors supplied to showroom. Stocked and sold
high-end thru a consultative process to end customers selling
solutions. Installation offered to customers thru plumbers. 2000
showrooms in UK 25% stocked Acqualisa
c) DIY sheds: Discount, mass market , DIY products Electric showers
preferred choice cheaper and easier to retrofit. Acqua lisa not
available thru this channel but Gainsborough was available in 70%
of outlets
d) Plumbers: 10000 master plumbers after several years of master
training and apprenticeship. Shortage of plumbers in UK.

Standard shower requiring excavation took 2 days to install.

Plumbers charged 40 pounds to 80 pounds per hour and did 40


to 50 installs in a year

Plumber sold material plus service at a small mark up. Break up


not known to customers

Acqualisa
Differentiated products for different customer
segments
o Acqua- Premium
o Showermax Customised product for developer
o Gainsborough Price proposition for DIY buyers
Makes it easy for customer to identify relevant brand
and select.
Competitive pitching
Price to product value proposition clearly understood

Customer Segments for showers


a)

Premium Shopped in showrooms.

High performance and service is a hygiene requirement.

Key consideration -- Style


b) Standard Performance and service key. Independent
plumber to recommend or select product
c) Value Segment Convenience and Price. Minimum
developmental work. Independent plumber to select product
d)

e)

Do it Yourself (DIY)segment: Shopped from large retail


outlets. Easy to install , inexpensive models ( products were
bulky and unattractive. Electric showers -preferred choice for
the segment
Property developer market: Price sensitive except for the
premium/luxury builders. Independent plumbers installed
selected product. Shower-max -- which was a stripped down
version ( did not need high pressure elements) sold thru
specialised contract outlets was the preferred product

Birth of Quartz

Birth of Quartz
a)

Historically premium brand number 2 in mixing valves and


number 3 overall
b) Acqualisa Slipping; Competitors catching up; perception it is
overpriced and service was dropping.10% of product defects
c) Priority to build R&D.
d) Market research indicated that

Customers were looking for Good looks/good pressure/ease to


use and reliable

Plumber- Easy to install, No break-down product; no servicing


e) Product developed with electronics innovation

Need for mechanism that will mix water remotely--- eliminate


excavation and facilitated good looks.

Flexi-pressure

Flexi- temperature

Radically different
f)
The research effort thru a state of art facility had 9 patents,
Several products in pipeline and more ideas in early development stage

Birth of Quartz
g)
h)
I)
II)

Quartz came in 2 variants standard ( where pump was already


available and Quartz Pumped shower.
Processor located away from unit. Minimum excavation.
Installation in half of day as against 2 days. Plumbers Raved about
the ease of installation and time saved Push-fit-connect- done
Consumer: Efficient and reliable water pressure and temperature.
One touch control. Easy to use. Set to desired temperature and
light to guide . No need to keep fiddling with controls. Customer
experience Wow

Product that solved all the problems for a BETTER shower experience

Initial result

Acqualisa had 20 sales executives who sold to distributors,


trade shops, showrooms, developers and plumbers
Had direct relationship with a group of plumbers loyal to
Acqua
First 4 months only 81 units sold and channel was sitting
on huge inventory
Need to be selling 100 to 200 per day to break thru
mainstream
Main problem Plumber was wary of innovation ( past
issues with innovation).
Didnt want to take a chance and risk failures
Is quartz a niche or mainstream product?
Deficiencies in existing products is the rationale for Quartz??

Acqualisa
1. How important a product is Quartz to Acqualisa? Importance to
Harry?
2. Is this product worth the investment of 5.8 million pounds

Acqualisa
1. How important a product is Quartz to Acqualisa? Importance to
Harry?
2. Is this product worth the investment of 5.8 million pounds
. Product innovation that promised to change the market
FOREVER
. Technologically miles ahead
Water pressure ( without gravity)
Easy to install
Easy to use
Outstanding design
Great value
. The R&D effort has created a good pipeline of
great products. The break thru product justifies
the investment on its own steam but it has also
paved the way for more exciting products to come

Acqualisa
Is quartz a niche product or a mainstream product?

Acqualisa
On the face of it appears niche Milk quartz for
margin
Sometimes the urge to protect existing brands/range
can blind us to the opportunity
Quartz has the potential to cut across segments by
offering VALUE with its break-thru product.
Making it niche will limit what the product can do the
brand and company
It can create a HUGE lead over competition if
positioned as mainstream.
Pitch at a higher price?
Create Value perception even if priced higher?

Acqualisa
1. How does it create value
For customer
o Looks and design
o Pressure and temperature
o Low TOTAL cost
o Low Maintenance cost
For Plumber?
o Quick installation
o Trouble free

Acqualisa
Why is it not selling?
Existing showers plagued with problems ( Pressure and
temperature)
Quartz Vastly Superior and yet not selling
Resistance from plumbers suspicious of innovation
Trade inertia
Upfront higher price value not understood

Acqualisa
1. How do the channels differ?
Which Channel is most likely to embrace Quartz
Which consumer shops from which channel?
Which customer segment is most likely to accept/prefer
quartz

Acqualisa
1. Who are the critical players in the shower market?

Acqualisa
1. Plumber influences about 75% of all sales and are involved in
54% of installs of mixer shower.
2. Loyal to product may be not to company
3. Does not want to experiment or take chances
Brand

Gainsboroug
h

Channel
DIY sheds
( 70%
presence)

Customer
Segment

DIY/value
buyerr

Premium
buyer

Acquaisa

Distributor
25%
presence

Trade shops

Showroom
20% mixer
installs

Master
plumber

Standard or
value buyer

Shower max
wo pump

Developer

20% of mixer
installs

New home
buyer

Acqualisa
1. Economic Value of Quartz

Acqualisa
1. Economic Value of Quartz
Without Quartz

Figs in Euros
Acqua valve 609
715
Acquaforce pump
520
Two days labour
charge
960
Total cost
2195

With Quartz

Figs in Euros
Quartz Pumped
1080
.5 days work
240
Total cost
1320

Acqualisa
1. Is it worth converting a plumber---- given his resistance to
innovation
2. What is the lifetime value of converting a plumber

Acqualisa
1. What is the life time value of converting a consumer

Life time value of plumber


Number of installs per uear
Contribution from each shower
( pounds)
Total value per year

310
15500

Value from a plumber over 5 years

77500

50

Acqualisa
What should Rawlinson do to generate sales
momentum for Quartz?
o Should he change his marketing strategy and
target customers directly or target the
developers or the DIY retail outlets?
o Should he lower the price?
o Or something different altogether?

Where to start
Option 1
)
Target customer. Spend another 3 to 4 million pounds and generate
customer pull
Option 2
)
Target DIY market pitching the easy to install proposition
Option 3
)
To target DevelopersHigh volume channel
Option 4
)
Position in the niche premium segment

Where to start
Option 1- Target customerSpend another 3 to 4 million pounds
)
Economically risky and inefficient .
Option 2- DIY market
)
pitching the easy to install proposition
)
But should a premium product be positioned for discount channel
)
Or can one sustain a higher price even in this segment with the
value offered?
Option 3- Target Developers
)
High volume channel and break-thru with a view developers can
provide volume break thru
)
Downside: Time lag in customers experiencing the product and this
will allow competition to catch up. Also sell premium product at
steep discount didnt seem right
Option 4
)
Sell niche as premium??
)
But niche implies LOW leveraging of product that transforms the
user experience !!

Where to start

None of the 3 options actually seem to be attractive..

So what to do?

Where to start
)
)
)

)
)

Plumbers move across the channel and are primary gatekeepers.


As they play a key installation role , they are best placed to advise
customers and accelerate adoption
Launch a service support program to reassure plumbers that Acqua
will directly service any issue that may come up
o
Thru Own service team or outsourced ( retained) plumbers Or
even have a program where the plumber is mapped to accounts
installed by him and any service is directed to him for a FEE
paid by Acqua
Launch an recommend and install incentive for plumber.
Launch plumber education program

Where to start
a)
)

The only channel with the ability to showcase the end product to
customers and also exert pressure on plumbers is the SHOWROOM
channel
Showroom will help
o
Educate customers
o
WEAN/WIN early adopters
o
Convert plumbers
o
Extract maximum value for the product
o
Support the brand stand as an innovator

Learning from the case

It is easy to sell a great product

Learning from the case

Myth 1 Its easy to sell a great product


Not Always
o Value is in Customers mind
o Sometimes Customer does not realize the value
immediately
o Perception and Behaviour is entrenched
o Value is not always a rational cost-benefit analysis
o Sunk cost.
o Changeover time
o Eco-system not being developed can ALSO be a key
factor complementary/adjunct/associated products
not being available or being expensive

Learning from the case


Corollary
Its tough to sell a bad product. Not necessarily
Expectation with competition--- Quality improves, price
drops, customer decides and opts for the best
However need to take into account the following at-least in
the short-term
o Inertia/Complacency/ imperfect information
o Lack of killer instinct amongst competitors

Learning from the case

Myth 2:Brand equity equals brand power


o Is brand equity fungible ( trade can be traded)
o Does it translate to or does it spell power

Learning from the case

Acqua is unable to cash in on its equity


Tata has not been able to transfer its brand power to
Telecom
Customers do not EVEN upgrade within the scale
/continuum of their preferred brand.
Brand Loyalty sometimes is on a very narrow plank.
o Maruti Alto to i-10

Learning from the case

Myth 3: Innovations tend to spread-out linearly.


o Early adopters followed by mainstream laggards

Sometimes innovation can spread in a HUB and spoke


fashion with each spoke then becoming a center and
sending out its own ripple

In Acqualisa case this role is played by the plumber who is


touching /migrating across the various channel members.
They are not opinion leaders or early adopters . If anything
they are rigid
They are the most invested in the system with the least
incentive to change.
Sometime people cling on to inferior technologies
paralyzed by the fear of change or lacking in vision of
what the new can offer

Learning from the case

Myth 4: The easiest way to go is the best way to go

Long term connect

DIY plan and Developer plan offer marketing efficiencies


But it does not connect with the larger strategic challenge
faced by the company--- which is to evolve as an
innovation driven enterprise
What does it take to transform an organization
What is sustainable in the long term
Stronger foundation for a skyscraper--- sometimes need
to invest in building organizational competencies

Acqualisa
1. Is this a good product?

Thank You

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