Aqualisa Case Essay - Part 2
Aqualisa had launched the Quartz shower, significant product innovation in the UK shower market in terms of water pressure, ease of installation, use, and design - Aqualisa Case Essay introduction. But this new product is not selling well enough. I will make some analysis in order to understand the situation and make some recommendation for Harry Rawlinson on marketing strategy and ways to generate sales for the Quartz products. 1. What is the Aqualisa Quartz value proposition to plumbers, to consumers? Quartz offers a technological change to enhanced value to consumers and plumbers.
Aqualisa has been customer-focused, making efforts to understand what consumers want and upgrade its product accordingly. Aqualisa Quartz value proposition to plumbers is following: easy to install, more profitable, faster to install. It takes ? day to install Quatrz so plumbers have an opportunity to install more showers and make more money. Aqualisa Quartz value proposition to consumers is following: efficient, reliable water pressure and temperature, easy to use (one touch control with red light indicator), easy to install for do-it-yourself segment.
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Thus, Quartz offers a breakthrough product that delivers superior value to plumbers and consumers. But Aqualisa has failed to have high sales volume since its launch. 2. Why is the Quartz shower not selling? I believe there are two main reasons which are impeding Aqualisa’s ability to realize the expected sales volume from its Quartz shower. The first reason is the blockage in the channels. There were total sales of 1,800,000 (1,000,000 units of electronic showers+550,000 units of mixer shower+150,000 units of power showers) showers in the UK in 2000.
Distribution through the trade shops is 840,000 showers (330,000+400,000+110,000) or 46,6 % of the total market (840,000/1,800,000). Distribution through showrooms is 145,000 showers (55,000+70,000+20,000) or 8 % of the total market (145,000/1,800,000). Distribution through Do-It-Yourself sheds is 650,000 showers (550,000+80,000+20,000) or 36,1 % of the total market (650,000/1,800,000). Distribution through the other channels is 9,3 % of the total market (100%-46,6%-8%-36,1%).
As we can see from the above calculations, the distribution through the showrooms is too low but according to the case the demonstration in showrooms is impressive and results in good sales due to the allowing customers to see the benefits of the products by displaying it. So, the Aqualisha need to exploit showrooms in order to use these rooms to display the benefits of the shower. Besides, the very influential role of independent plumbers in distribution process, their stickiness with the brand they know, and their reluctance to switch to the Quartz play important role in Aqualisa’s new product success.
The plumbers are the gatekeepers of the market; they influence 73 % (20%+28%+25% from Exhibit 4) of purchase decision. It is hard for Aqualisa to convince plumbers to switch to the unfamiliar product, especially to the innovative product due to the historic failure and unreliability of electronic control products. Aqualisa failed to convince plumbers to switch to the Quartz knowing their critical role in distribution and decision-making process. Another reason of insignificant sales I believe is the lack of sales and marketing focus.
Aqualisa management was confused about the place that Quartz should occupy amongst its products and concern about cannibalization of its existing products. Besides, Aqualisa failed to generate brand and reputation value by emphasizing functional benefits to consumers and advantages to plumbers. I believe they were preoccupied with electronic, technical side of its products rather than focusing on its functional benefits to consumers. Aqualisa failed to emphasize Quartz’s real selling point to customers which is the offering a revolutionary shower.
Also the sales staffs spend 90 % of their time on maintaining relationship with existing clients but I believe they had to develop new customers as well. I would recommend to start install Quartz showers in hotels, spas, and gyms in order to increase exposure of the new product through these channels. Also Aqualisa didn’t have an extensive advertising campaign and seems to believe that its new product will sell itself. They had a one-tine-only print advertising campaign in The Mail on Sunday magazine and spent only about 19 % of its budget expenses on marketing (2,724,000/14,469,000).
I believe they can increase marketing expenses for new product to at least 25%-30 % and spend 4,000,000 euro. This will affect its profit a little but will help to build product awareness and customers’ education which is important on the product introduction stage. Thus, Aqualisha developed product with package of benefits that customers’ want but failed properly introduce its new shower to the customers by providing presale education and post sale customer ervice. As we learn from the marketing management course, introduction is the challenging stage, especially for this case because plumbers have had a previous bad experience with innovative products. So it is critical to effectively communicate value to the plumbers as well as provide plumbers with warranty that allows them to claim reimbursement from the company if the product fails. This will help to build trust and support.
Best way to communicate value to the customers is to advertise the product in the trade press, lifestyle magazines by emphasizing the benefits of new shower such as easy and quick installation, no need of excavation, link customers to the website of Aqualisa, and let plumbers to experience the installation process by giving them opportunity to see the mechanism of installation in the trade shops and showrooms. 3. Aqualisa currently has three brands: Aqualisa, Gainsborough and ShowerMax. What is the rationale behind this multiple-brand strategy? Does it make sense? The UK market for showers has three segments: value, mid-range, and premium.
Customers in the value segment tend to be highly price sensitive, want basic shower and little concern with aesthetics and high quality. This segment is mostly served by do-it-yourself channel and tends to rely on an independent plumber to select a product. The value segment prefers electric showers and stick with Gainsborough brand which prices ranging from 95 -155 euro and is considering to be low. This segment provides high volume of sales (180,000 units per year for electric showers). The mid-range and premium segments tend to place value on both quality and aesthetics.
They tend to use mixer and power shower and willing to pay higher prices (up to 700 euro). Also customers in these segments usually prefer their shower to be installed by a professional plumber. Consumers in the premium segment usually shop in showrooms, look for high performance, service, and style. They tend to use Aqualisa brand products. ShowerMax brand was available through specialists contact outlets and tend to be used by developers. ShowerMax product line was optimizing for developer’s special need and delivers a high-pressure shower at a significant lower cost.
Thus, multi-brand strategy allowed Aqualisa to penetrate different market segments and to better serve these segments concurrently. 4. What is Rawlinson do to generate sales momentum for the Quartz product? Should he change his marketing strategy to target consumers directly, target the DIY market, or target developers? Should he lower the price of Quartz? Should he change his strategy altogether? Harry Rawlinson is trying to decide whether to target consumer directly, target Do-It-Yourself, target developers or shift its marketing strategy.
I would recommend not target the consumers. According to the Exhibit 3, 15 % of the showers is used for new build homes, 6 % is for commercial build, so 79 % (100%-15%-6%) of sales is for the consumer market. 36,1 % is for the do-it-yourself, so the 63,9 % (100%-36,1%) is installed through the plumbers, where the consumer influence 27 % of the installations (Exhibit 4). As we can see from Exhibit 4, the plumbers influence 73 % of the decisions (20%+25%+28%) and only 27 % of the time the consumer makes decision about the type of shower to use.
This means that a pull-strategy appealing to the end customers will not have significant impact on the sales. I don’t believe Aqualisa should focus on DIY-market either because DIY customers are price-sensitive that can affect brand image by increasing risk of associating Quartz premium brand with discount channel. Besides, DIY customers are interested in inexpensive products and less likely are willing to buy more expensive product. Also DIY market has high volume of sales of basic showers so I believe it doesn’t make sense to distract this segment from buying basic showers.
I wouldn’t recommend Aqualisa to target developers as well because they are reluctant to spend money on conventional products and perceived those products as a premium which is hard to change. The main factor is the price-sensitivity of the developers but Quartz is a breakthrough innovation so Rawlison should be reluctant to discount the price. Instead I would recommend focusing on plumbers and showrooms. According to the case, the showrooms are helping to gain reaction from customers because it allows to demonstrate shower, its benefits and installation process.
Besides, showrooms offer installation services and the only channel which allows to use push strategy and influence customers’ decision process. Also the Aqualisa need to keep focusing on plumbers since they influence 73 % of the customers’ decisions. Aqualisa should convince plumbers to use Quartz by emphasizing the easy to install, guarantee not breakdown, free repair service or warranty, ability to make more money by installing more showers per day or even sending someone with little experience to install shower due to the easy installation process.
The plumbers tend to mistrust unfamiliar products so it is very important to get them familiar with new product, let them try this product for free in order to build trust and experience. It is very important to demonstrate the Quartz value preposition to plumbers and customers so that they can’t resist Aqualisa’s innovative products. Quartz has to convince plumbers to stick with its product by demonstrating the cost of installation, the number of showers they can install per day, and the total revenue plumbers can get.
Aqualisa need to show plumbers that they will do less work on each installation, will be able charge higher hourly rate, will be able to serve more customers; and the work is so simple that that they can use less experience workers to do the installation. The calculation below will demonstrate how plumber will benefit from Quartz showers even charging only $ 10 more per hour for installation compare to traditional shower. | Quartz shower| Traditional (mixer/power) shower| Hours per installation| 4| 16|
Charge per hour (about 40-60 euro/hour per traditional)| 50| 40| Total cost of plumber| 200| 640| Number of jobs in 48 hours| 4 (1/2 day per shower to install)| 1 (a standard installation is a two-day job)| Total revenue for plumber| 800| 640| Quartz Standard will also cost 305 euro less and Quartz Pumped will cost 75 euro less to consumer compare to traditional most expensive brand Aquavalve 609. | Quartz Standard| Quartz Pumped| Aquavalve 609| Cost of shower (retail price)| 850| 1080| 715|
Cost of plumber| 200| 200| 640| Total cost to consumer| 1050| 1280| 1355| As we can see, both plumber and customer will benefit, thus there is no need to reduce price for Quartz. Also Aqualisa will benefit as well because new showers will provide the highest margin compare to other Aqualisa products. For Quartz Standard margin per unit for Aqualisa is 275 euro, for Quartz Pumped is 345 euro per unit so the average margin per unit for Aqualisa is 310 euro ((275+345)/2).
Thus, company need to sell about 19,000 units to recover its expenses on development Quartz shower (5,8 million/310). According to the Exhibit 2, Aqualisa brand sold 122,000 units in 2000 so it doesn’t seem to be a big problem to sell 19,000 units. Furthermore, the company has two years before competitors catch up so I believe the plumber might be expected to stick with Quartz product for about two years and Aqualisa should use this gap by charge premium prices for a high value product.
Thus, I believe Quartz offers good opportunity for Aqualisa to grow and to positioning itself for the future. So Aqualisa should invest in communicating product’s value to those who have influence on customer’s demand and to customers directly. In this case Aqualisa should communicate Quartz’s value to plumbers in economic terms (the revenue they will get) and to consumers in aesthetic, functional and money saving terms.