1) What has been happening in this market? How has Sealed Air (SA) been doing? To what do you attribute SA’s success? Sealed Air had achieved 25% annual growth in net sales and net earnings from 1971 to 1980. The company has been keeping a technical leadership position in the market. During 10 years, the company built on its development of the first-cell, lightweight cushioning material, introduced the first foam-in-place packaging system, and engineered the first complete solar heating system for swimming pools. Regarding the protective packaging market, the Sealed Air’s product AirCap has the feature that differentiated called “barrier-coating”.
Barrier-coatng and its customer benefits had been the major driving force of Sealed Air’s AirCap cushioning sales for 10 years. Thus, Sealed Air created value to its customers by building high technical product quality in its coated bubbles and by informing the customers about the benefits of coated bubbles through the efforts of its salespeople. Sealed Air’s salespeople also did “consultative selling approach” to increase its market share and profits. Moreover, the company created value for its distributors by the strength of its brand equity and the strong demand for its products. The company also used selective distribution policy with less competition among distributors and thus this policy makes the distributors’ profit margins maximized.
2) Should SA introduce an uncoated bubble in the U.S market to compete with GAFCEL? Why or why not? – SA should introduce an uncoated bubble for the following reasons Introducing uncoated bubbles can allow Sealed Air to retain these customers whose needs are met with uncoated bubbles. It seems that GAFCEL’s ability to get sales at the rate of $1 Million/year with only 1.5 salespeople from only the New York market is a strong indication that the uncoated bubble is going to be a strong competitor for Sealed Air’s coated bubble business. Introducing uncoated bubbles would require no additional capital or R&D investment on this case. This cost saving could be a competitive advantage over GAFCEL.
Distributors need to stock uncoated bubbles for their sales. If Sealed Air does not have uncoated bubbles, distributors can end up selling other companies’ (such as GAFCEL) uncoated bubbles. This would hurt Sealed Air’s relationship with these distributors.
– SA should NOT introduce an uncoated bubble for the following reasons Distributors sometimes complained about the level of AirCap selling effort. Since distributor’s margins on AirCap cushioning were generally higher than the 10% to 12% for Instapak, distributors were not happy. Also, their margins for uncoated products make them not happy compared to AirCap product. Sealed Air in the market is a technology leader. It has had a history of innovations. Introducing uncoated bubbles would mean introducing a me-too product. This could hurt the company’s reputation and brand equity in the market place. For years, Sealed Air has told the customers that coated bubbles are better than uncoated bubbles.
It is impossible for the company to tell the market that the uncoated bubble is as good as coated bubbles. The company would definitely lose its credibility as the technology expert in the marketplace. This is not about confusion, but about the trustworthiness of the company in the customers’ perspectives. A similar situation can happen with respect to the salespeople. If the company now tells the salespeople that uncoated bubbles equally good for some applications, the company would lose its credibility among the sales people. There can a problem on getting the salespeople motivated for the new product. If the salespeople have to sell the lower priced bubbles, then their commission income will get reduced.
3) Assuming an uncoated bubble is introduced, propose a marketing plan for the product, including: positioning & targeting, pricing, branding, direct sales strategy and channel policy
I would propose a marketing plan for differentiation between a coated and an uncoated bubble. First of all, Sealed Air should keep the current brand equity status not affected by an uncoated bubble launched especially in the U.S market. It is important to develop intensive salespeople directed at distributors focusing on their high profit margin because the distributors don’t want well-trained salespeople to be allocated to an uncoated product which leads to lower margin. Regarding consumer perspectives, the company should keep its brand status of the coated as it participates in exhibition shows. Regarding customers, the company should provide additional services to the coated customers and different packaging for the different grades product to offset the effects of lower prices of competing uncoated bubbles. Different product usage can be applied. For the important and fragile products such as laptops to be protected, a coated bubble should be used. For the comparatively less fragile products, a coated bubble can be used. This differentiation will be able to make different market value positioning for consumers under uncoated bubble launched.
In the European market where packaging supplies are viewed as “expendable commodities”, Sealed Air should cut prices of the products affected by the uncoated bubble. Additionally, the company should focus on uncoated because the European consumes are so price sensitive. Instead of focusing on salespeople, the company should be aligned with some hyper and mass merchants for volume sales on an uncoated bubble. Also, the company expands channel pipeline to use direct mail and trade shows to target smaller businesses.
4) Assuming an uncoated bubble is introduced, what changes would you make to the marketing plan for the existing, coated bubble? Given how successful the product line has been, would you just leave it to be? Although, marketing cost rises up, I would recommend use different brand name. If the company stays with the current name, there would be some confusion about Sealed Air’s products and some dilution of the brand equity of the current name because the new product is totally different from the current products. Some of this problem can be mitigated if the company launches the uncoated bubbles under a different name. Also, product differentiation such as color or shape change can be one of the solutions. The differentiation can make consumers and distributors not confused about high valued coated products. In others words, the uncoated bubble product cannot hurt brand equity of the current product.