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Soren Chemical

Soren Chemical

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Published by Gaurav Kumar
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Published by: Gaurav Kumar on Feb 27, 2013
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07/19/2015

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What is the addressable market size for Coracle? Is your first year goal reasonable?

* Average Price including competitors * 2,25 Million · 26,4$ Market size Number of swimming pools (taking into account that just 25% of consumers use clarifiers Millions (9 · regularly – Exhibit 3) 2,25 0,25) Average retail Price * Retailer gross margin Retailer gross profit Distributor price Distributor gross margin Distributor gross profit Soren Chemical price
2 1

1

2

44,30$ 15% 6,6$ 37,7$ 30% 11,3$ 26,4$

Total Market * 59,4 Million $ First Year Goal 1,5 Million $ First Year Market Share Goal 2,5 % The addressable market is 59,4M$. The first year goal for Coracle is 1,5M$, which represents a 2,5% of market share. This is reasonable considering that competitors have between 10%-20% market share. 2.- Why is Soren Chemical struggling to sell Coracle? How would you describe the selling process for Kaylan MW vs. Coracle? Retailers might not be interested in selling Coracle as they loss profits due to the benefits that Coracle produces to the end consumer (20%-30% reduction on other chemical costs). Previous profits for retailers: Cost Clarifiers (average) Other Chemicals TOTAL With Coracle: Cost Coracle Other Chemicals*
1

Margin 15% 20%

Profit 6,64 $ 60,00 $ 66,64 $

44,30 $ 300,00 $ 344,30 $

Margin 15% 20%

Profit 5,86 $ 45,00 $

39,06 $ 225,00 $

TOTAL 264,06 $ 50,86 $ 1 * (25% reduction on chemicals). For each client retailers lose revenues of about 16$ a year if they sell Coracle, due to reduced consumption of other products. The channel is discouraged to sell our product. Different situation for the product Kaylan MW. In this case, formulators use the clarifier in large recreational water parks and buy directly to the chemical manufacturer thus savings on products increase their (formulators) profits. 3.) What price should Soren Chemical set for Coracle? The price should be lower than the customer’s willingness to pay, but must be over cost—Soren needs to determine the optimal price (at perceived value) Things to remember about PRICE: -The market sets the price -Does it capture value? -What signal do you want to send to your competitors? -What are the barriers of entry? -What are the incentives for the distribution channels? -Can be used as a tool for positioning OPT 1 Begin @ cost = $9.67 Add in Soren’s margin = $14.88 (35%) NOTE: Competitors enter @ $15.00—ClearBlu & Purity Add in retailer/service professional margin (15%) = $17.11- consider going up to $17.99 (gives retailers 20%-- incentive to stock Coracle over its competitors) - also puts it in closer proximity to competitors on the shelf IS IT POSSIBLE TO BYPASS THE WHOLESALERS? If no, consider reducing Soren’s margin: OPT 2 Begin @ cost = $9.67 Add in Soren’s margin (reduce to 30%) = $12.57 NOTE: Competitors enter @ $15.00—ClearBlu & Purity Add in distributors margin (30%) = $16.34 Add in retailer/service professional margin (15%) = $18.79- consider increasing to $19.99 (again, consider giving retailers the additional incentive for better shelf space) 4.) What action plan do you recommend for Coracle? The main issue is that Coracle’s end-consumers may not see the additional value of purchasing the product. As 80% of pool owners clean their own pools, Coracle should be sold primarily in mass retailers and pool specialty retailers. Perhaps for the rest of the “high sales” season, Soren should consider a promotional booth in some of the largest mass retail stores and “outdoor superstore” trade shows in the country, educating consumers on the product. They could even perform demonstrations. This would at least to create some buzz about Coracle. Ideally, express the benefits of avoiding “shock treatments” to the pool- customers shouldn’t have to wait at least an hour to use their pool after cleaning it. If financially possible, promotions should be offered to pool service professionals and specialty retailers- send them free samples to try out when they provide pool-cleaning services. Build up “lead-use customers”.

if the consumers decide not to use the pool until next May.06*2. they may not maintain the pools because in the beginning of next May. Consumer market of residential pools emphasized more on aesthetics and perceived cleanliness. 4. Coracle has three leading competitors for residential pool-use clarifiers: Keystone Chemical. Furthermore. pool specialty retailers sides.250. 3. mass retailers need to take time to know the new Coracle brand and the value they can get from Coracle if they buy it. Also as introduced by the Table A in the page 5. Soren Chemical did not position the good product Coracle in the most appropriate position to its customers. According to the Exhibit 3 shown in the case.5 million sales reasonable? (10 points) Why is Soren struggling to sell Coracle? (10 points) What is the highest price Soren can set for Coracle? (7 points) What action plan do you recommend for Coracle? (13 points) Q1.373 by 5 (it means Soren Chemical generates their sales revenue mainly in 5 months from May to September for Coracle). There is unclear gap between Kailan MW and Coracle even though Kailan MW targets at the segment of commercial pool and water parks. pool service professionals sides. the frequency of usage of residential pools and residential pool chemicals will be largely increased from May.57 million and higher than the target. we suggest that 15% should be market share of residential pools market for which Coracle needs to struggle and address. the remained reasonable and addressable market share for Coracle is 40% to 55% maximumly if we do not consider the competition and market share of other smaller competitors. 2. and Jacson Laboratories. 30% of the respondents recalled receiving the Coracle materials that Soren Chemical had sent in response to their inquiries.88/25) if we calculate based on the manufacturer price of Coracle.309. 70% of the respondents stated that Coracle had not been offered by their distributors. although it seems that the first year goal of $1.000*25%*14. All these suggest that Coracle’s sales team did not do sufficient work before they bring the Coracle clarifier to the market and this also weakened their sales revenue. 5.846. and each of the competitors has a 15% to 20% share of the residential pool clarifier market. Therefore the addressable market size for Coracle should be $7. pool specialty retailers. So.152 (=39. Soren Chemical launched Coracle only in September 2006 which is the last busy and most suitable month for swimming.373 based on the 15% of market share. Kymera. especially in the last busy maintenance month of a year.5 million sales is quite reasonable if we decide the addressable market size $7. Thus the maximum reasonable marketing revenue for residential pools is $52. Especially till the end of September. Based on the above analysis.000. The sales team for Coracle did not consider following effects which will impact the sales revenue extremely for the first year: 1. Currently. pool service professionals. while Coracle targets at the segment of residential pools.Soren Chemicals What is the addressable market size for Coracle? Is the first year goal of $1. but it is not the case. including the regional formulators that sold Kailan MW. and it is not reasonable if the marketing team study it carefully. and mass retailers sides will also impact the sales of Coracle. there is only 25% of consumers who understand and use clarifiers regularly.846.000 (=9. and the competition from leading competitors and small competitors. so there are around 2. the average months of pool usage are 5 months.250. This is a risk for Soren Chemical to bring Coracle to the market without a suitable emphasis focusing on what the consumers concern more. Coracle is one of the clarifiers developed and produced by Soren Chemicals targeting residential pools which have of the case in page 7. which is around $1. As indicated in the case. The $1. Considering the facts like distributors typically carried tens of the thousands of products from many suppliers. Consumers. and less people will swim in cold whether from October to April. wholesale distributors. . There are still at least two formulators who dilute Kailan MW with a private label and sell to distributors for consumer market and this will compete with Coracle clarifier. at least two of the formulators sold Kailan MW with a diluted version as a private label clarifier. which makes great sense because normally people will swim in summer time from May to September. they need to clean again for the pools for swimming after a long time of non-use. The stocks in the consumers sides.000*25%) residential pools which use clarifiers regularly every year.5 million sales goal is too aggressive for the first year for Coracle..

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