Our report aims at developing a marketing plan for Aqualisa Quartz shower. The product was launched and in spite of being much better than the existing showers in the U.K market in terms of water pressure, ease of installation, use and design, it didn’t have very impressive sales figures in the first four months. This report delves into the details as to why the launch was not successful and what can be done now to improve the situation of the product and the company. It is very important to reflect on the ways through which a company can increase sales together with its brand quality because usually, there is a strong competition in the industry and the companies have to choose among the ways through which they might win the market and this requires a lot of research. Companies should be aware of one key concept which is “you can’t be everything to everybody.” Our report elaborates on the industry, the company, the customers and the product itself to give an overview of the whole situation and finally, it suggests the recommendations and the implementation plan.
Quartz entered the market when only about 60% of U.K homes had showers and archaic plumbing some of which dated back to the Victorian period was still common in many houses. There were two major problems regarding the shower system in the U.K: low pressure and high fluctuations in temperature, which were addressed through the use of either electric showers or special U.K shower valves. The three main types of shower that existed in the market were Electric showers, mixer showers and power showers each having their own positive and negative features. Electric showers had one advantage over the other two types and that was “not requiring hot water supply.” The disadvantage of such a shower was that the electrical components were usually mounted in a cumbersome white box which could be seen in the shower stall. Another weak point in these showers was that they had not solved the problem of low flow rate. Aqualisa sold electric showers under the separate brand name of “Gainsborough.”Electric showers covered 61% of the units sold in the market. (See EXHIBIT 1)
The mixer shower which covered 30% of the units sold in the market (see EXHIBIT 1) came in two types; manual and thermostatic. The thermostatic type created comfortable temperature but manual ones were very inconvenient. The mixer shower required both hot and cold water, additional pump to address pressure problems, and the installation typically required excavation of the bathroom. No wonder it was selling half the volume electric showers were selling. Aqualisa had Aquavalve and Aquavalve 609, the latter being the core product of the company. The third type was integral power showers which covered only 9% of the units sold in the market. These showers required both hot and cold water as well. The bulky box on the wall was another problem with these ones and more importantly, they were regarded as less reliable compared to mixer showers. Aqualisa’s primary product in this category was Aquastream thermostatic.
What was noteworthy in the shower industry was the fact that there was hardly any innovative movement in the industry in terms of functionality ,that is to say, possible innovations mostly happened in the cosmetic part of the product and major manufactures recycled their product line every four or five years. Aqualisa could take advantage of this weak point in the industry and be the winner. The question that remained to be answered was how?
Most customers disliked two major problems of the existing showers- poor pressure and varying temperature. Consumers complained about other problems as well. They were not happy with hard-to-turn valves, leaky seals and worn-out showers. On the other hand, brand awareness was very low among the customers and only one brand (Triton) had been able to build brand awareness at the customer level (see EXHIBIT 1).
Shower buyers in the U.K fell into one of these three pricing segments: premium, standard and value. Customers in the premium segment cared about the style of the shower and the performance or service of the product was not of importance to them. They normally shopped in showrooms. On the contrary, customers in the standard segment preferred performance and the service provided with the product and they usually relied on an independent plumber to recommend a shower to them. Thirdly, customers in the value segment were primarily concerned with convenience and price. They did not like the idea of excavation in their showers and they mainly relied on a plumber to select the product for them. In addition to these segments, there were two more segments: do-it-yourselfers and developers.
Do-it-yourselfers shopped at retail outlets and were interested in cheap models that were easy to install and they did not care about the unattractive bulky shape of the showers. Landlords and apartment dwellers were the main customers and electric showers were the overwhelming choice in this segment. Finally, developers were the customers who preferred reliable, nice-looking products that could work in multiple settings. Besides, developers did not have to worry about the pressure problems because new houses were almost exclusively built with high-pressure systems. The important characteristic of this segment was their price sensitivity. Aqualisa, knowing this behavior, had sold them its redesigned Aquavalve showers under the brand name of ShowerMax at a lower price and the developers loved it because it gave them the Aquavalve technology at a remarkable lower cost.
Are plumbers regarded as channels or customers? Channels are customers too. Either way, they are important buyers and, at the same time, influential ones. Plumbers tried to install a special shower wherever they normally went for a job because unfamiliar showers could bring about unknown problems regarding and a revisit to fix the problem led to an extra cost for the plumbers. Furthermore, plumbers could receive some sort of service form the manufacturer if they stuck to that special brand. Generally, plumbers did not trust innovation especially if it involved electronics because of their bad experiences with the poorly designed products in the past.
They wanted a shower that was easy to install with a guarantee to not break down or require servicing. Plumbers had a remarkably strong involvement in mixer shower selection (48%) whether directly or indirectly (see EXHIBIT 2).Apart from that, 54% of the mixer shower installation was carried out by them (see EXHIBIT 3).Aqualisa had the second biggest market share in mixer showers having Aquavalve 609 as their core product in that category (see EXHIBIT 1). Aquavalve 609, selling 60000 units per year, was considered Aqualisa’s top-selling shower and it was regarded by the plumbers as being a high-quality reliable mixer shower with state-of-the-art technology. Therefore, Plumbers perception of the brand was quite positive.
THE COMPANY AND THE CHANNELS OF DISTRIBUTION
Showers were sold through three channels of distribution, which were trade shops, showrooms and DIY outlets. Trade shops carried products of all the brands in the market and all they cared about was to make sure they had the right stock of products that were in demand. The main customer of trade shops were plumbers who worked for developers, showrooms, contractors and customers. Aqualisa brand was available in 40% of trade shops. The second channel was showrooms which tended to be more high-end. Showrooms often offered more than just showers and they offered installation services by subcontracting with contractors and plumbers. Aqualisa brand was sold in about 25% of them.DIY sheds offered discount, mass-market do-it-yourself products. Electric showers, being cheaper, were selling really well in this channel (see EXHIBIT 4).Aqualisa had no product in this channel but its Gainsborough was available in 70% of these outlets.
Aqualisa’s brand had always been considered as a strong one in the U.K and the company had been recognized as having top-quality showers, a premium brand and a good service. The company’s market share in mixing showers was ranked second and ranked third in the overall U.K shower market. The company had to take these facts into consideration and not make a decision regarding positioning and target marketing that would lead to a decrease in these values. However, the company had encountered some problems too. There was a strong competition in terms of product quality in the first place and the company had to be on its toes to deal with this case. Moreover, Aqualisa products were seen to be overpriced and this was something the competitors could take advantage of. Also, in terms of services, Aqualisa had become a little sloppy and it had not improved its 10% rate of break down for many years. Although it had a 25% net return on sales, its future was not secured.
Aqualisa’s new product would eliminate almost all the problems that the customers had including the cumbersome box in the shower, the low pressure and the varying temperature. Aqualisa had come up with the idea of locating the mechanism remotely outside the shower which would eliminate the need for excavation. Aqualisa launched Quartz into the market after three years of development. The product came into two versions: standard shower designed for installations that already had a pump and pumped shower which included a pump. One of the key advantages of quartz was its ease of installation. While other showers took two whole days to install, Quartz would take only four hours and this was a great source of pleasure both for the customer and the plumber.
In addition to all other advantages like high pressure, stable temperature, ease of installation and remote mechanism, the one touch control mounted on the shower wall was appealing to the customers as well. Quartz was loved by everyone; parents liked it because its automatic temperature control was safe for their children who could shower on their own now; the elderly loved it because they did not have to struggle with stiff valves and so on. Quartz had some other potential features as well, which had not yet been put into effect. The Body Jet product and the Slave Remote were two additional products that could boost the sales of the product in the future. The Body Jet product was so popular among women because they could wash their bodies without getting their hair wet and the slave remote enabled the consumer to control the temperature from a distance.
It is time to recommend the best target market to Mr. Rawlinson now. We would recommend that he choose the first option which is targeting the customers directly. Before we talk about the pros and cons of this approach, let’s consider the other two options which are targeting do-it-yourselfers and targeting developers. The do-it-yourself sheds, as said before, simply offer cheap and easy to assemble showers. Therefore, this place is not a proper place for a premium brand like Quartz. Besides, Quartz is an expensive product and it cannot be a fit in the DIY sheds; the customers who go there are basically looking for cheap showers rather than expensive ones no matter what the function is.
As long as the customer is unaware of the fantastic features of the new product he/she will not consider buying it when there are much cheaper alternatives which have proved to be good enough for their price. The advantage of targeting the DIV sheds is that because these outlets introduce easy to install showers, the customers who have that advantage in mind, will go there and they will get interested in the unique features of Quartz especially its ease of installation. As a result, some of them may buy the product and after experiencing the convenience in using it they will recommend it to others.
The third option which is targeting the developers may seem interesting at first because they can have a huge volume of sales at the start and increase their profits but in practice, it is not going to be so. The developers want a very low price for their mass purchases and this is not what the company might want to encounter for two reasons; firstly, the image of the product as an innovative premium brand is lost and secondly, the company’s profits plummet due to the almost 50% discount that the developers might expect. If the company focuses on developers, it will only cover 15% of overall shower sales in the U.K (see EXHIBIT 6) while there is a much more potential for shower installation because of other reasons like replacement or new penetration.
One might say that targeting developers is beneficial because developers subcontract plumbers to install the showers for them and the plumbers having experienced the ease of installation may use Quartz for their independent jobs as well. However, this does not sound practical because plumbers are not satisfied with electric showers whatsoever and they try to avoid new products because those types of showers might cause unprecedented problems which lead to extra costs for them. Apart from that, plumbers receive less installation fees working for 4 hours while with other products they will spend a lot more hours and receive higher installation fees.
The first option which is targeting the customers directly seems less disadvantageous although it is more risky. As rule of thumb, higher risk is associated with higher return. Targeting the customers directly using the media might be costly but the probable high returns from that cover the costs very quickly. A large scale campaign would cost about €3 million to €4 million over two years. The company is presently in a good financial status with 25% net returns on sales. Therefore, it would be rational if it used some of that profit on advertising its new product and thought of this expenditure as investment rather than cost. The breakeven point for Quartz is 18710 units (see EXHIBIT 5).Since Aqualisa has a good market share; it could definitely sell more than the breakeven point units. Total number of units sold in a year only for Aqualisa products (excluding Gainsborough) is 122000(see EXHIBIT 1).This big number looks promising.
Here is what Aqualisa should do: It should have a large-scale advertisement on the product, flood the trade shops with the product and enjoy results! You might say this is insane and there is going to be a deadly cannibalization by applying this plan. Well, there might be some cannibalization but it does not do much. Let’s consider a pessimistic result in terms of units sold if cannibalization occurs. Currently, Aqualisa is yearly selling 6000 units of electric showers, 94000 units of Mixer showers and 22000 units of Power showers (see EXHIBIT 1). Assume that in case of cannibalization, the number of units sold per year change into: 0 units of electric showers, 70000 units of mixer showers, 15000 units of power showers and 30000 units of their new product, Quartz.
By looking at the manufacturer’s price in EXHIBIT 8 and multiplying them by the number of units sold accordingly we can calculate the sales for each case. The normal case has sales of €37.3 million and the second case that happens after the launch of Quartz and the consequent cannibalization has sales of €44.71 million. It brings about a €7.41 million increase in sales (see EXHIBIT 9). Quite remarkable! The two channels that are proper for Quarts are trade shops and showrooms. Quartz has already attracted a lot of customers in the showrooms and the company just has to keep that excellence in place using their great service. Currently, only 40% of trade shops offer Aqualisa’s products. Aqualisa should improve this number to 70% or more through the launch of Quartz. In addition, this approach may encourage the plumbers to switch to Quartz as their default shower for installation although they might not like to switch to a new product with unprecedented features.
For the implementation plan, we will elaborate on the strategies the company should apply in terms of the 4Ps which are _product_, _price_, _placement_ and _promotion_. The product was analyzed in the product analysis sector and there is much more to say about it. Regarding price we should say that Quarts seems to be overpriced but in reality it is not. Here is the reason we claim so. Consider the top-selling product Aqualisa has in the market, that is to say, Aquavalve 609.the price of this product is €715.but once the customer buys the product the real costs begin to show themselves. This type of shower needs two days for complete installation which means 16 hours for the plumber; the plumber charges €60 per hour. Then, the installation fee is €960(16*60).there are also other costs like additional booster pump(€450) and excavation charge(€200).the sum of all these is €2325 which is the total cost for Aquavalve showers. Now let’s see how much a Quartz Standard costs: €850 for product purchase and €240 for four hours of installation (4*60) and 450 for additional booster pump.
No excavation is needed. The sum of these ones is €1560.it is remarkably lower than the one incurred by Aquavalve. The role of Promotion begins from this stage. The company should clearly inform the customers of the hidden charges of other showers (not mentioning Aquavalve) through the advertisements in different media like the TV, newspapers and magazines. On the whole, the company should implement a problem solving approach in their advertisements.This simple information will create a good image in the minds of the customers and they will know that the price is placed somewhere between their valuation of the product and the cost of it. The company could also apply transformational appeals in their approach regarding creative strategies to persuade the customer.
One example would be displaying a happy businessman who has had a great day and at the end of the day when he wants to take a shower, he faces the low pressure or the varying temperature of the shower. The ad could quickly turn that situation to a pleasant one by focusing on Quartz and the difference it makes. The actions to be taken regarding product placement were mentioned in the recommendation part, which was targeting trade shops and showrooms as their channels of distribution. This creates a mainstream positioning ,which will be more profitable because the product is not highly priced if you look at it economically, taking all its advantages over the other showers into consideration.