Question 1)

Kone has targeted Monospace directly at Europe’s largest equipment market

segment: low-rise residential elevators. Put yourself in Hatala’s Shoes and develop
a detailed marketing plan for launching the Monospace in Germany. Set a price
for the monospace(to facilitate comparison with prices of existing products of low-
rise, 4floor elevator) and specify clearly how it is to be positioned relative to the
current product line (PH,PT,PU or PS). Based on the pricing and positioning
decisions propose a marketing and sales effort. Justify your decisions and
investments with anticipated sales and the associated contribution relative to
the amount you plan to spend?

Ans) Current scenario of German Elevator market

No of elevator sold @ segment:- In 1995, total no of elevator sold was 15,500 and
it will shrink by 15% by the year 2000.
Assuming Shrinkage will happen @5% every year, in 1996, no of elevators sold
would be 15,500*0.97 = 15, 035

48% of total elevators sold in Germany are residential (same segment in which
Monospace will operate.)

Price Range :- In residential segment following is the distribution.

Type of Elevator Market Share Price (DM)

Hydraulic PH 92% 60000
Traction type PT 6% 75000
Traction type PU 2% 80000
For monospace price should be between Hydraulic PH and Traction type PT i.e
more than the cheapest elevator but not more than the next alternative. Hence the
price point that we have decided is DM 66,000 ( 60000 + 60000*0.10 ) The
reasons for above price is listed below:-

 Various factors like less-energy consumption, no requirement of machine

room, less installment time can allow KONE to keep the price of monospace
higher than the lowest priced elevator hydraulic PH. (We have assumed
that KONE can leverage above factors of Monospace by pricing it 10%
more than the Hydraulic PH)
 The final decision makers in the process of buying low-rise elevators are
property developers, general contractor and architect. These are very price-
conscious person who care about upfront cost rather than long term benefits.
Hence even though after providing many pros of monospace, we can’t
charge them a price too high than the other alternative i.e. PH

Positioning: - KONE should position Monospace as the new cutting-edge

technological alternative of Hydraulic PH. As the German market is dominated
by residential construction and the decision makers for the process of buying
elevators in German market are price-conscious customers, KONE should present
Monospace as the alternative for lowest priced elevator (PH). It will create a
consumer-perception of Monospace as low priced-better product compared to
Hydraulic PH elevator.

Following factors should be emphasized while positioning the product.

 No usage of oil leading to low maintenance cost

 Energy-efficient
 Quick installation
Marketing & Sales Effort :- In German elevator market, property developers use
bidding-process for choosing their dealers for elevators and there are many
stakeholders here such as property developer, architecture, contractors etc, KONE
should use a holistic approach to market Monospace in German market.

KONE Aufzug’s can create a marketing campaign consisting of videos/audios

describing various features of Monospace and air it on visual mediums such as
television as well as audio channels i.e. radio. Also, they can mail them to large
property developers, architecture and contractor. For smaller contractors who build
residential building, KONE should contact them personally and show them a
presentation of Monospace installation and its features.

Apart from above steps, KONE should also ask local journals to feature
Monospace.

Sales Forecast :-

Total elevator installed in 1995 :- 15500

Elevators in 1996 after shrinkage of 3% :- 15035

Sales Forecast as current market share:

Company Market Share 1995 (units) 1996 (Projected)

Schindler 19.4% 3007 2917
Otis 13.8% 1798 1744
Thyssen 15.4% 2000 1940
KONE 8.5% 1426 1383
Others 46.9% 7270 7051
 Revenue after selling 1383 elevators units
Units Value ( DM ‘000 )
*Monospace ~ 60% 830 54,780
*PH~ 32% 443 26,580
PT-6% 83 6,225
PU-2% 27 2,160
Revenue earned by KONE (1996) 1383 89,745
Last year revenue (1995) 86,852
Growth over last year 2,893
Growth over last year (%age) +3.33%

*Assumption: - Monospace will cannibalize sales of PH as we are positioning it a

cutting edge technological alternative of PH. Monospace will cannibalize 60% of
PH sales from total share of 92% so PH share will remain 32% only.

Marketing Spend:- (DM ‘000)

Marketing Campaign ( Audio & Visuals) 200

Presentation 20
Travelling cost 50
Sales kit 100
Total 370

Question 2)

The launch of Monospace in essential to the company due to the following reasons:
  Product portfolio will improve thus brand value perception will increase
because they will be providing not something that is just low in price but
also high on technology. This will lead in increase of market share for
KONE.
 Increase in revenue, which has been declining in the last couple of years.
This will ensure their presence in the market strongly.

Implication of success or failure:

 If successful, KONE will not only gain significant market share but can also
prove itself as a innovator/ technological superior in the eyes of customers. It
can cannibalize other low price elevators
 If they fail, KONE will have to face huge losses in terms of Capital
investment and can also hurt it’s brand image in the market.

Question 3)

The following are the learnings from the test market launches:

 We will have to get a clarity of target market for Monospace

 If properly leveraged, Monospace can create a brand image of Technological
superior for KONE.
 If not properly overviewed and improvised, it can result in fierce
competition and the large players of the industry taking away huge chunk of
market share, which would leave vulnerable for buyouts from the
competitors.

Question 4)

The competitor’s would not react instantaneously because for the technology to be
copied will take some time. If we pick up speedy process of installation we can
gain high market share rapidly to establish the product in market. Other probable
reaction of the competitors after overviewing other countries could be following:

1. Competitors like Otis can get into price wars and give negative feedback and
negative word of mouth publicity for Monospace among the customers in
the market.
2. Low barrier to entry in the industry can also allow new players to copy and
increase competition in the market.
3. Selling their product on the basis of some differentiating points rather thn
just price can also happen, which can lead to decrease in brand perception of
the company.

Question 6)

The following are the weaknesses in KONE’s current capabilities:

 Sakes force of Germany of KONE is very less compared to its competitor. It

can lead to low sales effort than required for proper marketing of
Monospace.
 KONE is not at par with its competitors in terms of its brand value. So it will
have to focus very finely on marketing activities in order to sell their
product.
 KONE does not have deep pockets to sustain any huge losses if the product
“Monospace” fails.