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 as given at the bottom of case page 724, price a
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.

A. The German Market Scenario:

i. Product:

The elevator Market of 15500 units was to shrink by 15% from 1996-2000
48% of 1995 sales were residential & out of this:
92% were PH (Least expensive)
6% were PT (Mid-Priced)
2% were PU (Lesser than most expensive)

ii. Price deciding factors:

Legal approval needed in each state for the installation of Monospace

Brand building and differentiation efforts by the company
No subsidy from the government for the elevator industry
Headquarters’ suggestion to keep prices high due to lesser market share of corn

iii. Consumer:

Price sensitive consumer

Quality conscious
Focused on service
Favours the energy efficient products

B. Pricing:

Pricing of the MONOSPACE

Type of PH - MONOSPACE PT- PU- PS-Traction
Elevator Hydraulic Gearless Traction
Price 60000 65000 75000 80000 120000
(DM)

i. Reasons for this pricing from the Customer’s point of view (Why they should pay higher)

The energy consumption is much lesser. The customer can save the energy cost as much
as 1/6th of the cost of the MONOSPACE every year, which shows that he recovers the 17%
cost of MONOSPACE in 1st year only.
No machine room is required in the installation of MONOSPACE which means
customers can save that much of the space and can utilize it for some other productive use.
Private and Confidential
 ii. Reason for pricing from Company point of view (Why moderate pricing is important)

The market pricing has been reduced by 8% for PH, MONOSPACE current pricing is 8%
higher than PH and if we count the reduced price, then it would be 16%, which shows a fair
revenue gain from a market which is due growing by 8%.
Installation time is 60 Hrs less than other elevators hence save on cost.
No oil is used in MONOSPACE which shows a lesser maintenance (after sale service
cost) which company can recover from the customer in the service contract.

C. Positioning:
Energy efficient machine
No oil requirement
Fire and other environmental hazards are eliminated
Quick installation
Service with quality product

D. Marketing & Sales Strategy:

A working MONOSPACE has to be created in Germany similar to Netherlands to build

the trust of the customers.
The productivity of the sales call without increasing in Number of person or hours has to
be reviewed and sales people to be trained accordingly.
Meeting with all the five stake holder which are required for decision making which
includes 01) Owner 02) Construction Company Manager 03) Architect 04) Construction
Company purchasing agent 05) Service Manager.
Involve the stakeholders for similar requirement at the common platform for dinner and
demonstrate them with the working MONOSPACE.
Articles in local and national architectural Journals and local newspaper which focuses
on saving energy and giving more space in the House.
Lucrative Incentive structure to the sales person on each conversion.

E. Marketing tools to be used:

Monospace Brochure
Working model of Monospace for demonstration
Separate PowerPoint presentation for all 4 decision maker’s group
Direct mail
Events and road shows
CAD rendering of Monospace

F. Anticipated Sales and Investment

Total Elevators installed in 1995 15500

Elevators in 1996 (Shrink of 3% per year) 15035

Anticipated Sales as per Current Market Share

Company Market 1995 Projected
Share 1996
Schindler 19.4% 3007 2917
Otis 11.6% 1798 1744
Thyssen 12.9% 2000 1940
KONE 9.2% 1426 1383
Others 46.9% 7270 7051
 Value Value
Total Elevators installed 15500 88033.00
in 1995 (Sale through V1)
Elevators in 1996 (Shrink 15035 85392.01
of 3% per year)
Revenue by selling 1383 Units (DM '000)
92% MONOSPACE 1272 82703.40
6% PT (GEARLESS 83 6223.50
TRACTION)
2% PU (TRACTION) 28 2212.80
Revenue earned by 1383 91139.70
KONE in 1996 (DM '000)
Last year (1995) Revenue 1426 88033.00
from V1 Sales (DM '000)
Growth over last year -43 3106.70
(DM '000)
% Growth over last year 97% 104%

MARKETING SPENDS FOR THE LAUNCH (DM '000)

Article in the Journal 50
Gather the potential buyers for 250
Dinner
Travelling cost in meeting with 100
the Decision Makers
Sales Incentive Scheme 100
Sales Kit for all sales employees 75
Total 575

2. How do you expect competitors to react to your launch plan? How do you plan to respond to
competitor's reactions?

The competition reaction would not be instant as for them this technology will be new and if
we pick up a faster pace of installation, the competition would be left behind and by the time they
react to the situation and come with the similar technology- we would have gained at least another
5 % of the market share.
Other probable reaction from the competition:-

Giving negative feedback to the customers on weak areas of Monospace

Competitors like OTIS and Schindler may get into price wars
As OTIS has tried such product in the past, they may re-launch with better technology

3. What key weaknesses in KONE’s current capabilities need to be managed to ensure the
success of the product launch?

Following are the weaknesses Kone has to manage through their sales force strategy and
communication mix:
a. The MONOSPACE could not be used in the building with PENTHOUSE as public access was
necessary.
b. It was not suitable to use outdoor because its temperature has to be maintained between 5-40
Degree
c. Compare to other players Kone has smaller sales force
d. No proactive sales approach