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IIM - Kozhikode EEPM – 04 - 028
CELLCAST INTERACTIVE INDIA PVT. LTD.
Value Elements: • • Cost savings due to the elimination of oil change expenses and messiness -. This means that repair firms will have to buy more conventional pumps than Kunst 1600s. In all other segments.Most owners and technicians trivialize oil change related costs. its parts may be subject to less corrosion and thus last longer.COMMERCIALIZING THE KUNST 1600 DRY PISTON VACUUM PUMP© Major Issues: • • • • • • • To penetrate into Vacuum pump market segment with Kunst 1600 To identify new market segments for and then commercializing Kunst 1600 To develop a value proposition for the Kunst 1600 for each segment targeted To compete with existing alternative within the same segments Brand name was not created in the top of them mind as expected Most of the technicians who use these vacuum pumps were not trained To make technicians and contractors aware of Kunst 1600 I. the superior value and price of the Kunst 1600 can be attributed to these three elements. This impacts the price a repair firm has to pay for conventional pumps (i. this occurs in only one segment – light commercial refrigerator repairs. II. Value Placeholders For the most part. Kunst and Atler have little brand equity in the potential market segments. there are few differences among conventional pumps and the Kunst 1600. Brand equity – Currently. You would calculate the expected value as “the sum of company and individual fines times probability of being caught times the amount of oil dumped per year. repair firm revenues remain the same regardless of which pumps are used.e. From a quantitative perspective. there is no incremental profit merely greater price. Here are a few placeholders. Price Element: • Increased pump durability -..The Kunst 1600 lasts 2 to 3 times longer than the incumbents in most segments. • • • • Weight differential – The Kunst 1600 is lighter than pumps currently used in residential AC repairs and heavier than those used in home refrigerator and light commercial refrigerator repairs. 2 to 3 times greater) and not the number of jobs it can complete! In the economic sense. Durability of parts – As the Kunst 1600 is constructed of molded aluminum. In this case study. Incremental revenue and profits –Incremental revenue and profits refers to new income that can be attributed to greater product efficiency. These weight differences may impact technician preferences. This may put them at a competitive disadvantage with long-established rivals. Expected value of oil dumping fines – You can either treat this as a placeholder or include the expected probability of fines into your cost savings category for the Kunst 1600 in the value model.” There is .
15) + ($5 x .50 + .275 Cost savings per year for oil change = Cost savings per oil change x Number of oil changes per year = $17.275 x 12 = $207.50 + . but this will be difficult to pin down in that any calculation will involve assumptions about how often the contractor illegally dumps the oil.5) + (. Word Equations for Kunst 1600 Value Elements Cost savings per oil change = Oil price + Labor cost + Clean-up supplies + Oil disposal cost Labor cost = Hourly rate of individual changing oil x Hours of time required per change Clean-up supplies = monetary amount of scouring soap used + price of cloth towel Oil disposal cost = recycling charge per gallon of oil x number of gallons recycled For Residential AC Repair segment (using maintenance worker): Cost savings per oil change = $8 + ($12 x .90 x 20 = $318 For Home Refrigerator Repair segment: Cost savings per oil change = $4 + ($15 x .5) + (.775 x 12 = $153.30 Incremental profit per year = (Number of additional jobs per week x Average profit per job) x Weeks per busy season .25) = $15.775 Cost savings per year for oil change = Cost savings per oil change x Number of oil changes per year = $12.30 For Light Commercial Refrigerator: Cost savings per oil change = $4 + ($24 x .limited case information that enables you to do such calculations.5) + (.50) + ($5 x .90 Cost savings per year for oil changes = Cost savings per oil change x Number of oil changes per year = $15.15) +($5 x .15 + .125) = $12.125) = $17.
this must be taken into account.33 = $16.$83.33 = $16. Incremental profit per year = (2 x $30) x 12 = $60 x 12 = $720 To move from the total value of the Kunst 1600..5) – ($500/6) = $100 . we must also include the price of the alternative pumps. When the expected lives of the offering differ. Value-in-use is an economic term that equals the theoretical maximum price that a customer would be willing to pay.33 For Light Commercial Refrigerator: Differential price per year = ($200/2) – ($500/6) = $100 . to the value-in-use of the Kunst 1600.$33.33 = .$83. careless handling. given by the preceding two word equations.67 . For Residential AC: Differential price per year = ($250/2.The Kunst 1600 would not enable the contractors to perform any additional jobs in either the residential AC repair or home refrigerator repair segments. Only for the light commercial refrigerator repair segment was it found that using the Kunst 1600 would enable the contractor to perform additional jobs.67 For Home Refrigerator: Differential price per year = ($150/3) – ($500/6) = $50 . throwing the pump into the back of the truck).$83. Differential price per year = (Incumbent pump price/Expected number of years) – (Kunst 1600 price/Expected number of years) An assumption to question here is the given expected life of 6 years for the Kunst 1600. A point to make is that this estimate was likely obtained from accelerated use lab tests.g. and can be expressed as the differential price per year. Estimates obtained in this way can be problematic when one or more assumptions made in the accelerated use lab tests do not hold in the actual use of the Kunst 1600 in the given applications (e.
the Kunst 1600 may be overspecified for the application (1. they should focus their limited resources on the segment that offers the most feasible chances of success.30) are significant and far greater than that created in the other three segments.6 CFM pump in a 3-6 CFM application).33 Light Commercial Repair Segment $207. . The Kunst 1600 eliminates the hassle of oil changes for these largely independent operators.30 $0 $153. • Of the four segments. There is no likelihood of fines due to illegal dumping of oil. $943.30 $720. Given that this is a small firm.00 $927.00 $0 $318. namely residential AC repairs. the residential AC repair segment is not feasible because of perceptual barriers and the fact that the Kunst 1600 may be underspecified (1. Target another Atler product at this segment! • The home refrigerator repair market may be viable long-term however..67 Element Oil Change Savings Incremental Profit Total Value Differential Price (per year) Justification of choice of target segment(s) for the Kunst 1600.67 Home Refrigerator Repair Segment $153. Evan and Will should target a single segment at this time. They can use this segment as a “foothold” to penetrate other segments later on perhaps with other Atler products.6 CFM pump in a 1 CFM application). The incentive to buy the Kunst 1600 in this segment is significant (i.30 $ 16. • Given Kunst’s status as a new acquisition. around $844 per year). The Kunst 1600 reduces repair job time by 10 minutes and increases the number of job possible by 2 per week during the summer months. The value-in-use per year (i. The competition will probably not be as strong in this segment as it will in other segments.30 .e. • Although it is highly attractive in terms of size. cost savings from oil changes.$ 33.97) and value created per year ($927.. and durability) come into play for the Kunst 1600.e. the one offering the greatest potential is a light commercial refrigerator repair. The fact that the Kunst 1600 enables firms to do more jobs per week is the pivotal factor in that owners and technicians trivialize changing the oil and overestimate the lifetimes of conventional pumps. This is the only segment where all three value/price elements (incremental profit.Customer Value Models Kunst 1600 Value (per year) Residential AC Repair Segment $318.00 $ 16.
Value Proposition Stress that value propositions do not have to cover all points-of-difference.” . while eliminating the oil change mess and hassle.The Kunst 1600 does not create incremental jobs here and pumping only takes 15 minutes. “The faster draw-down performance of the Kunst 1600 enables your firm to complete more jobs in the busy season and earn more. and instead should focus only on the most significant ones.
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