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# Level 25, 242 Exhibition St, Melbourne, VIC Mobile +61 419462640

Case Study Aqualisa Quartz

Important Facts of the case In May 2001, Quartz shower was launched by AQ, significant in terms of technological advancement. However, till Sept 2001, it was not selling as expected in spite of being advanced in water pressure, ease of installation, use and design. UK Shower Market stats: Only 60% of UK homes had showers (significant potential for target market expansion) - Plumbing was gravity fed, a cold water tank sat on the roof, while a separate boiler was needed to store water in a nearby cupboard. - 2 Problems with gravity fed plumbing low pressure and fluctuations in temperature. - Gravity fed plumbing was addressed by Electric Showers, Mixer shower valves and Integral power showers - Electric Showers Took water from cold tank and heated it instantaneously. Eliminated separate boiler. Large white box in the bathroom and did not do anything to address flow of water. AQ sold electric showers under the Gainsborough brand. (Brand confusion and competition within same company) - Mixer shower valves Came in 2 variants which is Manual and Thermostatic. Involved excavating the bathroom wall which was a 2 day job. Additional booster pump needed to boost water rate ($350 to $600). AQ609 was its top selling shower with 60,000 units per year. Plumbers regarded it as high quality. COGS of $155, but sale price of $675 to $750. - Integral Power Showers combination of Mixer and Electric showers with a booster pump as well. Required mounting on the shower and hence a bulky box on the wall. Regarded as less reliable. AQ Thermostatic was its primary product in this category. COGS of $175, but sale price of $670 and at about 20,000 units in a year, it was AQs best in this category. - Showers tend to breakdown after a while due to accumulation of lime scale. The valves become stiff and hard to turn and they start to leak as well. Replacement showers are a big market in the UK contributing to at least half of the shower market (significant potential to acquire market share). Some consumer did not have awareness of the shower market and players in the market. Triton managed to build some brand awareness - Shower buyers in the UK Premium, Standard and Value. Premium segment shopped in showrooms and looked for style, performance and service (AQ can look at opening showrooms). Standard segment looked at price but were determined on performance and service as well. Usually took the advice of the independent plumbers (Targeting and incentivizing Plumbers to use AQ products could be viable). Value segment concerned with Convenience and price and rely on independent plumbers to suggest any pipes in the category. - Sizeable DIY market in the UK. They chose inexpensive models which were easy to install but were large and bulky. Electric showers were the choice in this segment. AQ showermax brand available thru specialist contract outlets was popular among DIYs as it was the right price for good technology. - Innovations in the shower market are cosmetic. Relaunch the product line every 4 to 5 years including AQ, but no real change in market share. Distribution Channels: - Trade Shops Products of all available brands were stocked. Pertain to plumbers the most. AQ was available in 40% of the shops (potential to increase its stock in all trade shops). Staff do not have time to learn the features and benefits of the brand they stock. - Showrooms Preferred to carry High end product lines and brands with shop consultants providing advice to the consumers on selecting and designing a bathroom solution. 2000 showrooms in the UK with AQ in about 25% of the showrooms (Potential to increase visibility in more showrooms and also provide incentives to consultants for promoting the brand) - DIY Mass market and Electric showers were east to fit and install. AQs Gainborough brand available in 70% of the 3000 DIY outlets. Plumbers: - 10,000 master plumbers in the UK. Consumers to wait 6 months before plumber can take up new job. So always busy. - Shower installation was a 2 day job. Plumbers who install 40 to 50 showers a year charge about $40 to $80 per hour plus cost of excavation. - Unfamiliar products and breakdown meant Plumber had to go pay a second visit which is money lost to them. Loyalty to a single brand was common. They distrusted innovation. (See analysis for potential to tap the Plumber market) Advantages of Quartz:

# Level 25, 242 Exhibition St, Melbourne, VIC Mobile +61 419462640 Deliver good pressure at stable temperatures. Easy to install as remote processor was installed away from the shower, which meant no excavation and bulky boxes near the shower. Only a single hole was put in the ceiling. - Came in 2 variants Quartz standard shower and Quartz pumped shower. - Installation times were as low as half a day as against 2 days for normal showers. Young apprentices could complete the job. Good feedback initially from plumbers during field trials - Good experience for consumers during field trials. It had the WOW factor as one button provided the required temp and the water flow. Both parents and elderly liked the idea. - Addons to the shower like Body Jet and remote were being in the process of being launched. - Awarded the top prize in the Bathroom expo in London in 2001. Composition of AQ sales force: - 20 person sales force that sold to distributors, trade shops, showrooms and plumbers. - 90% of their time spent on maintaining accounts and servicing existing customers - Only 10% spent on developing new customers - Long standing direct relationship with plumbers Sales Results: - Very poor take up. - Only 81 units sold in the first 4 months - Channel partners have stocked up thousands - Selling only 15 units a day. Need to sell 100 to 200 a day to break into the mainstream Reasons for poor take up - Plumbers wary of innovation did not believe in the product - Once they install one, they are in - However, take up in showrooms are better with better penetration rates in the showrooms - Promoting Quartz at expense of Aquavalve is also a major issue Marketing options - Target customer directly by an aggressive marketing campaign. Amount to be spent would involve $3m to $4m over 2 years and represents approx. 17% to 25% of Companys NI in advertisement for a single product line and hence difficult to be approved - Target DIY. It would replace Gainsborough, but superiority of the product would enable charging a slight premium for the product - Target Developers Large volume channel and would expose plumbers to the product. Downsides are time taken to reach the market and perception of the developers that AQ was premium brand and hence expensive. - Rawlinson was reluctant to reduce the price of Quartz as well.

Q1. What is the Quartz value proposition to a) consumers b) plumbers? Ans. Aqualisa, a U.K. based shower manufacturing Company had launched its premium brand Quartz in May 2001. The Company has been very reputed in the U.K. market for its top quality showers, reliability and great service. The basic purpose behind launching this brand was to address the concerns of the consumers and the plumbers who perhaps were not satisfied with the existing products in the market. Stated below are the issues faced by the consumers and the plumbers and the value proposition offered by Quartz:

a) Consumers: Consumers were typically not happy with the kind of showers that were available in the market as revealed by
the market research conducted by the Research and Development team of Aqualisa. The consumers wanted a shower that looked elegant, delivered water flow at good pressure, had a stable temperature, was easy to use, do not break down easily, have valves that do not become stiff and hard to turn after a period of time and dont require servicing very often. Also, they did not want the big bulky boxes installed for the mechanical control right over their shower wall. In order to address these concerns, Aqualisa launched its new product Quartz for providing a solution to the problems faced by the consumers apart from having certain added features. The Quartz, being elegantly designed was easy to use. It gave an option to consumers to run at two-third speeds so that water flowed under the desired level of pressure. It provided the user to take shower at the optimal water temperature which is comfortably hot as the temperature control is automatic. The easy-to-use push button was an added advantage. The button had a light which flashed red until the desired temperature is reached. Also, no excavation of the shower wall would be required as the mechanism for mixing the hot and cold water can be installed remotely. The fitting could be done in half a day, hence the consumers wont have to wait for a longer time for the plumbers to come and install it. Thus for the consumer, the Quartz shower provided efficient and reliable water pressure and temperature control, had neat fittings and was safe for use.

# Level 25, 242 Exhibition St, Melbourne, VIC Mobile +61 419462640

b) Plumbers (Installers): The plumbers distrusted innovation and were comfortable with the shower they had been installing all
these years. They had a notion that unfamiliar products result into unknown performance problems and would often require a second visit to fix up the problem whose expenses were to be borne by the plumber himself. This made them extremely reluctant to switch brands and they became experts at doing their routine work of fixing one particular brand of shower. Hence, the R & D team of Aqualisa developed the Quartz brand which is not only end user friendly but pleases the plumbers too. They addressed the issues faced by plumbers by making a shower that could be installed simply by drilling a single hole into the ceiling above the shower. The task required only half a day and could be accomplished by even the novice plumbers. It helped to avoid excavating the walls. Also, the Aqualisa sales force took efforts in demonstrating to the plumbers to make their job easy. Thus, the push-fit-connect kind of shower was acceptable to the plumbers. Q2. Why is the Quartz shower not selling? Ans. The Quartz brand launched by Aqualisa was proposed to appeal the consumers as well as the plumbers as it had features that could suit both the groups. However, the euphoria surrounding the products initial launch had quickly faded. In the first four months itself very few units of the product had been sold despite being available in all of Aqualisas normal distribution channels. The reasons as to why the brand could not carve a niche for itself in its initial stages of being launched could be enumerated as follows:

1) Being a premium product, the Quartz shower was priced between 850 Euros to 1080 Euros, which was very high compared
to other brands of Aqualisa. Thus it was not affordable to consumers other than those in the premium segment. Also, the developers who thought Aqualisa core products to be expensive were skeptical about buying the new product despite being offered heavy discounts. The developers would have been a better market for the product as they would force the plumbers to install a product of their choice.

2) At the launch of a new product, generally Companies lower their price for better market penetration. However, this aspect
was not liked by the Managing Director of Aqualisa as he was of the opinion that Quartz is a premium product. This could have barred the Company from marketing their product through Do-It-Yourselfers who are their discount channel.

3) The plumbers are usually wary of innovations and perhaps did not favor the idea of installing an electronically devised
shower. Reluctance on their part to install the Quartz shower even on the insistence of a consumer did not help in pushing the sales of the product.

4) The Quartz shower had better features which could be exemplified after being compared to any other existing brand.
However, adopting this strategy would have hurt the sales of the existing products.

5) The sales force of Aqualisa concentrated more on servicing the existing customers rather than developing new ones. As the
product is well designed and does not have much issues after being installed, the sales force could have focused on extending their customer base by explaining the features and benefits of the product to potential customers

6) Also, the product was sold through trade shops which did not have time to learn and explain the advantages of such a
valuable product to the end consumers. This would have hampered the sales as the consumers were probably unaware of the features that Quartz shower has in comparison to other brands

7) The Aqualisa brand was sold only in about 500 showrooms out of the 2,000 showrooms in U.K. This reflects poor market
penetration as showrooms are the place where the premium segment usually shops. Thus a high end product such as Quartz should be made available at locations where there are more chances of it being purchased Q3. Aqualisa spent 3 years and 5.8 million Euros developing the Quartz. Was the product worth the investment? Ans. Innovations are primarily cosmetic and dont lead to real breakthroughs. Any Company may generally relaunch its product every three to five years with certain changes and keep its brand awareness among customers. However, the investments made in incremental technological improvements are worth investment if the product is able to achieve the expected sales during the initial period of the launch as it creates an impact in the minds of the consumers and is able to break even within a short period of time. Going with the current sales of Quartz shower of 15 units a day, the Company could probably recover the amount spent on its research and development with a time period of 3-4 years. If the Company could promote the sales of the product to at

# Level 25, 242 Exhibition St, Melbourne, VIC Mobile +61 419462640 least 50 units a day it will be able to achieve a break even within the next two years. The product developed has features which are still unique in the market. The product could not make it to the expected level of sales due to lack of proper marketing strategies. However, this does not make the product not worth investing. As opined by the Managing Director of the Company, the Company has two years of time within which it has an competitive edge over other brands in the market after which competitors would come with similar products at lower prices. It can promote the product in suitable manner and obtain the desired level of sales. If the products picks up again within a few months, the Company will build up higher reputation in the market and enjoy a better market share. Going by the sound financial position of the Company so far, a little burden on the income in the initial stages of a new product launch does not make the product unyielding Q4. What should the Company do with Aqualisa? Ans. Since the launch of the new product Quartz, the sales have not been up to the desired level. However, an analysis of the situation has revealed that the problem lies in the marketing strategy of the Company and not in the product itself. The Company has a competitive advantage in the market and should use it optimally to create and enhance brand awareness. Following are the ways in which the marketing strategy can be improved.

1. As the product is easy to use and install, the Company should market it to the end consumers directly. The sales people can
make the consumers aware the products unique features and benefits. They can be made to understand that buying such a better product at a little high price can reduce the after sales servicing costs.

2. As far as the plumbers are concerned, there should be more free trials and demonstrations to help them understand the easy
method of installation required for the quartz shower. The plumbers once positive about the product would always prefer it. Approximately 73% of the consumers are influenced by the plumbers for installation of a shower. Thus, promotion with the plumbers would help in better market penetration.

3. The developers who are of the opinion that the Aqualisa brands are usually high end products should also be made to realize
the performance and flexibility of the product. If they can be influenced, more number of plumbers will have to install the Quartz shower.

4. Since the product is priced at a relatively higher end and is targeted mostly to premium segment, it should be displayed on
the shelves of more number of showrooms. Because of the working displays in showrooms, people generally become aware of the products usefulness and instantaneously make a decision to buy the product.

5. Thus, the Company should promote the new product in an effective manner and at the same time also concentrate on its
existing products so that their sales do not get hampered Important Points to talk about in class Customers Shower buyers fall in three pricing segments: premium, standard and value. First, premium segment is conducted of people who mainly shop in showrooms. Their focus is on great service and high performance. Second segment is called standard. Customers in this segment rely on plumber recommendation and emphasize performance and service. Value segment conducts mainly customers who are primarily concerned with convenience and price. Thus, they like to avoid excavation and also tend to rely on independent plumber in selecting a product. Value segment falls in with DIY market, where people tend to buy in large retail shops, interested mainly in inexpensive models that are easy to install and they are also strongly price sensitive. Channel Main three channels of distribution are Trade shops, Showrooms and DIY Sheds. It is evident that Do-it-Yourself Sheds are dominant in sales for Electric Showers (550.000 units), which are cheap and easy to install and designed for mass-market. Followed by Mixer Showers (80.000 units) and Power Showers (20.000 units). This represents buyers of lower pricing segment.

# Level 25, 242 Exhibition St, Melbourne, VIC Mobile +61 419462640

Showrooms tend to be for more high end products and customers with higher income. Here the bestselling products are
Mixer Showers (70.000 units), followed by Electric Showers (55.000 units) and Power Showers (20.000 units).

Trade Shops are places most applicable for plumbers, where reliable product availability is more important than technical
advice. Mixer Showers are the bestselling product (440.000 units), followed by Electric Showers (330.000 units) and Power Showers (110.000 units). Competition UK Market share Data shows us that UK has five players which sell more than 100.000 units per year (data for year 2000) on the showers market. These are: Triton (545.500 units), Mira (390.000 units), Ganiesborough (203.500 units), Aqualisa (122.000 units) and Masco (120.000 units). If we focus on Electric Showers, Gainesborough (Aqualisa brand) is with 180.000 units sold on the 2nd place, behind Triton (479.000 units). In Mixer Showers category, Aqualisa is also second with 94.000 units (behind brand Mira with 200.000 units sold in year 2000). Company & market environment UK shower market has a big potential, since only 60 percent havent had a shower. Many homes still had archaic, gravity based plumbing and cold water tank or cistern on the roof. Separate boiler and cylinder were needed to store hot water in a nearby airing cupboard. Sound like a good opportunity. Aqualisas reputation was always strong in UK. It was perceived as a top quality shower, a premium brand with product quality. Quartz shower value (relative to consumers) Comparing Quartz shower with pump and Aqualisa 609 mixer shower with pump gives us a few points. Aqualisa 609 mixer shower with pump: - Standard segment - Retail price = 715 EUR (+ pump 475 EUR) = 1390 EUR Pros, Cons: + High quality, reliable, state of the art technology - excavating the bathroom wall (two day job), high price Quartz shower with pump - Premium segment - Retail price = 1080 EUR Pros, Cons: + Low price in comparison with Aqualisa 609, easy to install, small remote processor applicable anywhere, Excavation not necessary, efficient and reliable water pressure and temperature, one touch control button, automatic temperature control. - None (?) Quartz shower value (relative to plumbers) Plumber is better off if installing Quartz shower. First thing we have to mention is that Quartz has a significant lower price and also installing is much easier, quicker and consequently cheaper. In this way plumbers can make the same work for cheaper price, which makes them more competitive. Plumbers are known to be distrustful to innovation and consequently they are dedicated to one single brand. Persuading plumbers to use Quartz would mean that when these converted plumbers would see the simplicity of the product and started using Quartz. In this way Aqualisa would get dedicated customers. For explaining and showing to the plumbers, the simplicity and economic value of the product, Aqualisa should strongly target them in Trade Shops presentations (In Trade Shops primary customers are plumbers), potential Newsletters, plumbers society, organizing seminars etc. Introduce a plumber incentive scheme, which aims at providing a commission to the plumbers based on the sales of Aqualisa. This will appear as sales promotion expenses in the P&L a/c and it can even be up to 10% of its revenues. Who should Aqualisa target

# Level 25, 242 Exhibition St, Melbourne, VIC Mobile +61 419462640

In my opinion plumbers have the biggest potential for further sale of Quartz. They are for sure the one who influence the
biggest group of people. Since plumbers are distrustful to innovation and are reluctant to switch brands, Aqualisa should put more effort in persuading plumbers to use Quartz shower. Once we achieve that, plumbers will stay with our product. This could be done in various ways. For sure, primary focus should be on Trade Shops, where plumbers are the most frequent guest. In Trade Shops they should offer various presentations emphasized on simplicity of installation, economic value and on time saving. Another option would be finding addresses of all plumbers and sending them leaflet where shortly explaining the great benefits of Quartz shower and especially stress the time saving factor (and ability to do more and consequently to earn more). Leaflet would also include number for any question asked and also date of presentation in nearby (maybe only Trade Shops?) of their homes (this is questionable, because I imagine these plumbers dont have a lot of time: but this could be also a reason to get their attention and attract them to come). The Solution: I believe that the best solution for Aqualisa is to focus on plumbers because they are the primary customers of trade shops which has the most sales volume in the U.K. shower market. In addition to this, plumbers also work for developers, showrooms, contractors or directly for consumers. As we can see, plumbers play a big mediator role in the distribution channel and reaching the end consumers. First of all, trade shops focus on demand and they do not have time to explain the benefits of the new product. If Aqualisa get plumbers to demand Quartz, trade shops have to stock up this product because their primary customer is the plumbers. Secondly, showrooms also offer installation services by subcontracting with contractors or independent plumbers. Once plumbers are convinced and informed about the benefits of the new product like ease of installation, they will become a source of word of mouth to push showrooms to call attention to Quartz by emphasizing the low cost of installation. Similarly, plumbers will help convince developers by suggesting the new product. Lastly, consumers in the standard price range trusted an independent plumber to advise or choose a product for them. Sales will automatically be increasing by getting plumbers to select Quartz for this consumer segment. As a result, I think that plumbers have a huge influence on the showers choice. For this reason, Aqualisa has to find ways to reach plumbers and to make them loyal to the brand. The Implementation: Aqualisa can reach and convince plumbers to use Quartz by implementing the followings: Arranging a conference for plumbers and developers: Aqualisa should invite plumbers and developers from all over the country for a weekend conference to present the benefits of the new product and demonstrate the ease of installation. The number of plumbers and developers should be identified as 5 plumbers and 5 developers from each city which will be total 500given 50 cities in the U.K. The cost of this conference will be approximately 350,000including the staying, traveling and sample product cost. There also must be an incentive for these people to devote their time. The incentive should be giving the Quartz shower to every participant because when they try it, they will get over with the skepticism toward technologically new products at least for Quartz. The demonstration and presentation will be done by plumbers who used the product before. Giving away a free product to try: Even though plumbers suggest Quartz, some price conscious consumers might not want to buy it because it is relatively expensive compared to other brands in the product category. For this reason, Aqualisa will give a free product to those of consumers. Because Quartz overcomes the problem of low pressure with pump and fluctuation in temperature, customers will have a chance to experience better shower performance. This will also help build brand awareness, so the company can also target those types of consumers which will eventually lead more and more word of mouth. Providing an unconditional guarantee to plumbers and customers: Aqualisa should accept products that are returned within 6 months if there is any problem with installation or product without any conditions.