In an industry where gaining a competitive advantage through product innovation was deemed impossible, Aqualisa developed a breakthrough product, launching the Quartz in the U.K. shower market in May 2001 with great optimism. Four months after the initial launch of Quartz, Aqualisa has only managed to sell the product at a rate of 15 units a day. Managing Director Harry Rawlinson set a goal of selling 100 to 200 units of Quartz showers a day to break through to the mainstream. This translates into an annual minimum goal of approximately 36,500 units. To generate this sales momentum, Aqualisa must rethink its marketing strategy for the Quartz.
MARKET POTENTIAL OF AQUALISA QUARTZ U.K. shower unit consumers’ main complaints- poor pressure, varying temperatures, and frequent breakdowns – are traditionally addressed through the use of electrical showers, mixer shower valves, or integral power showers (Moon, 2).
The quantity and pricing information for the three shower categories are provided in Figure 1.
The main channels for showers in the U.K. are showrooms which typically sell to customers in the premium price segment, trade shops which primarily sell to plumbers, and do-it-yourself sheds (DIYs).
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With retail prices for the Quartz of €850 for the standard model and €1,080 for the pumped model it can compete with and be feasibly marketed towards the 145,000 shower units sold annually in showrooms (Exhibit 2).
This segment assumes high quality and service with products differentiated through style. According to Rawlinson, once the Quartz goes on working display in a showroom, it rapidly becomes the leading product (Moon, 10).
Due to price differences between available value and standard brands of electric shower units and the Quartz, it is not clear if the Quartz could compete with the 330,000 electric shower units sold through trade shops. The 400,000 mixer showers and 110,000 power showers sold annually through trade shops have smaller price differences, giving the Quartz the potential to compete in this market segment. Although consumers in the value segment are highly concerned with price, they are also concerned with convenience and avoiding excavation. The reduced time of installation- a half day versus up to two days- should be considered in evaluating the buyers needs and behavior due to the €40 to €80 charged per hour by U.K. plumbers as well as the opportunity cost for the buyer of that day and a half and the opportunity cost of not excavating. The value and standard consumers are unaware of the cost breakdown of installation and will be less price sensitive to the retail shower price if they are saving €320 to €960 on installation.
The Quartz does not have clear market potential with the 550,000 electric shower units sold annually through DIY sheds. Not only is the price significantly greater for the Quartz than for a value brand electric shower unit, there are also no plumber cost savings. Further, the electric showers are especially popular with landlords meaning that the consumer is not the shower user and, as long as minimum quality requirements are fulfilled, cost has particular importance. The Quartz may have market potential in the 80,000 mixer shower units and 20,000 power shower units sold annually from DIY sheds. Although there is no plumber costs savings and the Quartz is more expensive than the value brands of these shower types, the Quartz is superior to the other brands and has the ease of installation that DIY consumers demand. The downfall to targeting DIY sheds is that Aqualisa’s premium brand would gain momentum within the discount channel, possibly harming its market image.
... installation is straightforward that plumbers could even send their young apprentices to complete entire job. For the consumers, the Quartz shower ... Aqualisa: -Strength: good reputation, top-quality shower, premium brand, great service, market share: number 2 in mixing valves and ... solution of high pressure shower with Aquavavle technology. Gainsborough is branded for DIY market and it is available ...
An additional possible marketing target for the Quartz is the property developer market. Developers’ main selection criterion includes product reliability and aesthetics. Developers make up 20% of the mixer shower market and hooking a few developers could result in large, sustainable sales. However, the price sensitivity of this channel is a huge barrier to entry. Even with a 50% discount, €225 down from €450 giving Aqualisa a margin of only €50, Aqualisa has been unsuccessful in selling the Quartz Standard to developers.
TARGETING TRADE SHOPS
The analysis of possible market segments for the Quartz reveals trade shops as the channel with the largest potential customer base. The possible customer base ranges from a minimum of 53,000 to a maximum of 840,000 units sold annually (see Exhibit 2).
Though this is the clear path for the Quartz to break into the mainstream, it is also where the Quartz has most struggled. The primary customer of trade shops are plumbers. Despite the Quartz providing plumbers exactly what they want- a guarantee to not brake down and ease of installation- plumbers are extremely brand loyal and are very reluctant to switch brands. Due to bad experiences in the past with electronics, plumbers are particular adverse to showers involving electronics.
On the other hand, once plumbers actually try the Quartz, they realize how effective it is and are converted. With each plumber installing 40-50 showers a year, a single instance of a plumber using the Quartz translates into 40-50 annual installations if not more due to fractional installation time and the potential of apprentices rather than just master plumbers doing independent installations. The challenge is finding an incentive for plumbers to try the Quartz.
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TARGETING CONSUMERS Targeting consumers through an ad campaign may be the solution. Although this is a high-risk and expensive strategy, costing €3 to €4 million over two years out of a €17 million net income, Rawlinson is confident of the superiority of the product. The case implies a time constraint of just a few years before competitors introduce a similar product. Aqualisa must gain brand equity while its competitive advantage is superior product and then use that brand equity as its competitive advantage once similar products are offered by competitors.
Many factors reduce the risk of this strategy. Twenty-seven percent of mixer shower consumers “select type and brand of shower alone (without advice from plumber)” and for 20% of consumers, “plumber influences type of shower, not brand” (Moon, 14).
This comes to 108,000 mixer shower consumers who select the shower without advice from their plumber and 80,000 consumers of mixer shower units who choose the brand. The case does not specify what percentage of electric shower and power shower consumers choose shower type independently. Within this large number of potential consumers, the goal of the ad campaign would require that only a small percentage of them get their plumbers to install the Quartz. Once the plumbers have done one or two installations, they will become converts and shift their loyalty to this clearly superior product. This means that the campaign only needs to get a few thousand customers to convince their plumbers and then plumber loyalty will cause sales of the Quartz to reach the 36,000 minimum sales per year goal through the market potential displayed in Exhibit 2.
Risk is diminished even further because the consumers who make their own decisions are part of the same general public as other shower unit consumers. This means that the advertising campaign will gain brand equity for the Quartz within the DIY and premium shopper market segments even if the ad campaign only targets consumers who make their own decisions. The association of Quartz, a premium label, with value brand DIY may be avoided by creating a value product line for Quartz. DIY shoppers place little emphasis on aesthetics so this could be easy point of differentiating the premium and value brands. The DIY market potential of up to 100,000 units sold annually (Exhibit 1) could be utilized through a deal with B&Q to promote the Quartz in return for a larger sales commission. Depending on price, this value product line may also attract developers. While waiting for the advertisement campaign to kick in, the Quartz can find a quick niche within the potential market of 127,000 to 145,000 units sold annually.
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