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Soren Chemicals Case Solution PDF
Soren Chemicals Case Solution PDF
A1: Marketing Swimming Pool Clarifiers to the Business and Consumer market.
Q2: What is the name of the B2B chemical and to whom is it sold?
A1: The B2B Pool Clarifier is names Kailan MW and it is sold to Commercial Pools and Water Parks.
Quantitatively, to pools larger than 1 Million Gallons.
Q4: What is the size of the market size in which Kailan MW competes, what is the market outlook
like and what is the current market share of Kailan MW?
A4: 300,000 commercial pools.
1,000 water parks.
$ 30 Million in revenue.
Market is projected to grow by 7% to $32.1 Million in 2007.
$ 6.1 M / $ 30 M = 20% market share in 2006.
Q6: What are the needs of Commercial Pool Owners and Water Park Owners for buying pool
clarifier chemicals?
A6: - Concern for swimmer safety
- Minimization of health issues and water borne skin diseases.
- Implications?
- Bad publicity and image leading to loss in revenues.
- Failure to maintain safety certification since periodic audits are done.
- Problems with 3rd party liability insurance.
- Chances of litigations and lawsuits.
IMPLICATION: Their concern is for the effects that the wrong choice will have on the business. The
consequences of taking a wrong purchase decision are high.
Q7. What is the buying behavior of customers for Kailan MW? (FIGURE A)
A7: Commercial pool owners and water park owners usually buy from formulators especially on the advice
of equipment builders, safety inspectors and maintenance personnel. Formulators make sure that they have
the right kind of relationships and influence to get customers to keep their brand at the top of their mind.
Buying personnel are mostly professional and understand the use, benefits and importance of clarifiers for
their business. It is an involved buy for commercial pool owners and water park owners since the safety of
their customers matters a lot to their business. Formulators in some cases do not even sell Kailan MW with
the brand mentioned.
IMPLICATION: The buying behavior of the commercial market is professional in nature, they have
people who understand the performance benefits of the product.
Q8. What value do commercial pool owners get while buying from formulators?
A8: - Formulators provide customized SKUs (They break bulk and can sell odd quantities)
- Provide entire suite of products / maintenance services, tailor-made for individual entities
according to pool size, bathing load, pool system and regional climatic conditions. They sell
solutions not products.
- Work with equipment builders, safety consultants and filter manufacturers to develop
optimum, cost-effective programs.
IMPLICATION: Commercial market is buying much more than the product from formulators, they
are buying a complete package composed of products and services both. Nature of buying/selling is
high contact and relational.
Also formulators have already started marketing a diluted version of Kailan MW to the residential pool
market and Soren wants their share of the market.
IMPLICATION: If a company is established in one market and scope for further growth is limited,
then new markets need to be explored provided that there is potential for entry. Soren is doing the
same.
IMPLICATION: The buyers are worried about their own usage of pools and do not care about
anything else. They are not technically sound (neither do they need to be), to them water which
appears clear after using a clarifier is pretty ok. What they do not realize is that even clear water
may contain a lot of dangerous contaminants invisible to the naked eye. This is the reason why
formulators are able to sell the diluted version of Kailan which is actually designed for much larger
volumes of water.
Q12: What is the buying behavior in the residential pool owner market?
A12: Residential pool owners buy in following ways:
- From mass retailers like Walmart etc.
- From Specialty Pool Retailers.
- Get maintenance services through Pool Service Professionals.
- Are not technically aware about the intricacies of pool chemicals.
- Rely on advice from Pool Service Professionals, retailers and promotions at retailers.
- It is a low involvement buy for residential pool owners and is treated at a similar level as
compared to household cleansers.
IMPLICATION: Distribution chain for the consumer segment is long and contains more channel
members. For the commercial market the only intermediary was the formulator.
Q13: How does Soren plan to enter the market? And what is the USP of their proposition?
A13: Soren has developed a pool clarifier named Coracle which is suitable for smaller size pools. This
clarifier takes care of organic / biological contaminants also which are invisible to the naked eye. It also has
the advantage of reducing the need for other cleansing chemicals by 20% to 30%. The c
Q15: What is the proposed price of Coracle and how did Soren arrive at this price? (TABLE A &
EXHIBIT 2)
A15: The retail price for Soren per container of 0.5 Gallons has been settled as $25. This is based on a
manufacturer price of $14.88 which Soren has ascertained for a 35% gross margin.
Analysis:
Selling Price = Cost Price + %margin x Selling Price.
Selling Price (1 - %margin) = Cost Price.
Selling Price = Cost Price / (1 - %margin)
Q16: What measures were taken by Soren to launch Coracle and how was the initial response to
marketing efforts?
A16: - In order to reach pool service professionals and specialty retailers, company decided to sell
through wholesale distributors who had reach in the market.
- Press release in trade journals targeted at pool service professionals and specialty retailers.
- A new website for the product was made.
- The packaging of Coracle clearly highlights the USP.
- The company decided not to let wholesale distributors re-sell Coracle as a private label brand.
- Based on the efforts, Soren received 2,000 enquiries from pool service professionals and
specialty retailers in the first three months of 2007 and responded by sending brochures,
technical notes and MSDS about the product.
- Contact information for customers who had sent inquiries were passed on to the wholesale
distributors for soliciting sales.
IMPLICATION: Soren did not go for a widespread product awareness campaign for the residential
pool owners, most probably because it was too costly and the company is only conversant with B2B
marketing techniques which engage fewer customers in a more direct manner.
Q17: What is the issue with Coracle which is worrying the company?
A17: Extremely low sales of Coracle.
Quantification and measure of problem extremity?
Coracle was launched in September 2006.
Pool season is over till May every year.
9 months of sales available to Coracle.
Targeted sales = 50,000 for the first year
Targeted sales per month = 5,555 gallons
Sales till February 2007 = 3,725 gallons
Targeted sales till February 2007 = 33,330 gallons
Sales Achieved = 3,725 / 33,330 = 11%
Problem: Behind targets by almost 90%
Q18: What measures were taken to diagnose the situation and what was discovered?
A18: The company conducted a survey of Pool Service Professionals and Specialty Retailers and found out
that only 30% of them recalled having sent an enquiry or receiving any product literature. Further, 70% of
the respondents claimed that they were never contacted by the wholesale distributors regarding Coracle,
whereas the company shared contact information with them.
How much profit would they be losing and is it lesser than the margins that Coracle is offering?
Retailer Distributor
Annual Chemical Sales (Excluding Clarifiers) $300 $255.00
Reduction in Sales due to Coracle 25% 25%
Reduction in Chemical Sales Revenue $75 $64
Industry Standard Margins 15% 20%
Reduction in Margin / Earnings $11.25 $12.75
Number of treatments per annum 10 10
Reduction in Margin / Earnings per treatment $1.13 $1.28
Margins offered by Coracle per treatment $0.59 $1.00
Issue A:
The USP of Coracle may be of great attraction to them especially since quite a few service
professionals would be charging customers a lump sum amount for the periodic maintenance visits
rather than presenting bills for chemicals and labor separately. These professionals would be
saving money and increasing their profits by adapting Coracle. This message needs to be clearly
communicated through marketing campaigns.
Issue B:
Customers must be made aware that clean looking pools are not always clean. Company should
launch pool cleanliness rating competitions and give prizes for cleanest pools. Company should
offer free of cost pool water testing services to ensure that the residential pool water is biologically
safe. In this way, the value of the product can be increased viz a viz the USP.
Customers must also be made aware about the economic benefits of Coracle with respect to its
USP that it will reduce the need for other chemicals by 25% and give customers a direct reduction
in pool maintenance expenditure of $75 ($300 x 25%) per annum.
The above solutions can create product pull but will not fare well with the distributors and
retailers, therefore their issue needs to be solved too.
Issue C:
To create the kind of pull that will force the distributors to support Coracle shall require massive
expenditures in brand building and may not be justified by Soren earnings and will require a very
different experience since Soren is primarily a B2B company. Therefore margins will have to be
re-aligned in order to get channel member support.
Per-treatment analysis:
Distributor Cost Price: $2.32 (Soren’s Ex-factory Price)
Distributor Profit Loss: $1.28
Distributor Selling Price: $3.6
At this price of $4.73 per treatment, the distributor and retailer margins are exactly equal to the
margins that are losing out on other chemical sales. At this price, the distributors and retailers
should be indifferent to Coracle since it is not adding or deleting to their profitability. This shall
imply that Soren needs to increase the distributor margins and the price of Coracle should be even
higher.
Since customers spend $50 annually in clarifiers and $300 annually on other chemicals making a
total of $350. If they spend $47.3 in Coracle and spend $225 (300 x 75%) on other chemicals, they
will spend $272.3 which is significantly less than $350. This means that Soren has a room of $ 7.7
per-treatment ($350 – $273.2 = $77.7, divided by 10 treatments = $7.77) to increase price.
However, further price increase must be significantly less than $7.77 so that the customer gets a
good benefit in terms of annual cost savings. Also, to communicate the value savings to the
customers, a lot of funds need to be available for ATL marketing. The high price will generate a
lot of funds for the company which can be used for this marketing. Even at a high price, Coracle
will still be a winning product because customers can save annual costs by using it. Soren just has
to communicate the message properly to customers.