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Aqualisa Quartz: Simply A Better Shower Essay

1. Situation Analysis
1.1. Customers
Shower buyers mainly fall into one of the three pricing segments: • Premium segment: They buy in showrooms, value high performance and service, and also style is an important selection determinant.

• Standard segment: They emphasize performance and service, and usually rely on independent plumber to recommend or select a product for them
• Value segment : They are primarily concerned with convenience and price, avoid solutions which require any excavation and tend to rely on independent plumber to select a product for them.
There are two additional subsegments, which are part of the above segments, but are worth of mentioning separately, because of their specific characteristics: • Do-it-yourself (DIY) subsegment: They usually buy at large retail outlets and are interested in inexpensive, easy-to-install models (electric showers). They fall into standard and value segment.

• Developer market subsegment: They are looking for reliable, nice-looking products that could work in multiple settings. They are price-sensitive, with exception of luxury builders, and usually have relationships with independent plumbers who install a product they (developers) selected. They are present in all above segments.

1.2. Channel
Showers in the UK were sold wrought variety of channels:
• Trade shops: Their primer customers were plumbers, who worked for developers, showrooms, contractors or directly to customers. Aqualisa brand
was available in 40% of all trade shops, where they stocked whatever there was demand for. They offered all of Aqualisa’s core products, selling around 30% of all electric showers, 72% of all mixer showers and 73% of all power showers sold by Aqualisa1. They focus on product availability and not technical advice.

• Showrooms: The channel mainly sells to high-end customers, who were looking for a service, which would include a whole bathroom “solution”. Showrooms held no inventory, but instead focused on displaying the offering to the customers. They mainly carried high-end product lines and brands, where Aqualisa brand was available at around 25% of them. They sold around 5% of all electric showers, 13.5% of all mixer showers and 13.5% of all power showers.

• DIY Sheds: Those retail outlets offered discount, mass-market, do-it-yourself products. Electric showers led sales in this channel. Aqualisa brand was unavailable though this channel, but its Gainsborough brand was available in 70% of all outlets in UK. They sold around 50% of all electric showers, 14.5% of all mixer showers and 13.5% of all power showers.

• Plumbers: Aqualisa brand had long-standing relationships with a group of plumbers, very loyal to Aqualisa brand. Generally, plumbers preferred to instal a single shower brand and were extremely reluctant to switch brands, because of the expertise in brand’s installation procedure and avoidance of unknown performance or failure problems. Because of bad past experience, they usually distrusted innovation, especially if it involves electronics.

1.3. Competition
Aqualisa’s three main competitors were Triton, Mira and Masco. Triton had managed to build brand awareness at the customers level and sold around 545,500 units of shower per year, Mira sold about 390,000 and Masco around
120,000. Aqualisa, with around 325,500 total sold units2 thus ranked 3rd on the market. If we look at specific type of shower, we can see that Aqualisa’s child brand Gainsborough comes 2nd in the electric showers segment (after Triton), Aqualisa main brand 2nd in the mixer shower segment (after Mira) and both brands together 3rd in the mixer shower segment (after Triton and Mira). Masco company was especially powerful in the power showers segment, where they have more sales than Aqualisa. In other two and total sales they lack behind.

Percentage of total units sold per type of shower in year 2000 (source: Aqualisa Quartz Case, Exhibit 6, page 15)

1.4. Company & Market Environment
Aqualisa’s reputation on UK market had always been strong. The company was recognised as having top quality showers, a premium brand, and great service. It was niche oriented, with 25% net return of sales and 5% o 10% growth in the mature market. It differentiated itself from competitors with a strong R&D team, which brought additional value to the company. However company had problems with focusing mainly on existing customers (90%) instead of new ones, low brand awareness and poor distribution (it was available at only 40% of trade shops and 25% of showrooms). Looking at the net profit of around €17 million, Aqualisa was most probably still a relatively small company compared to its competitors. The market was not saturated. Because of many problems, most people used bathtubs and only about 60% of UK homes had showers. Main problems were poor-to-low water pressure and frequent fluctuations in pressure, which caused high temperature variations. Three main shower types were offered on the market: electric showers, mixer shower valves and integral power showers. Customers were generally uninformed about the showers and brand awareness was low.

2. Value Proposition to Customers
The main benefit of the Quartz shower to the customers was the efficient and reliable water pressure and stable water temperature. Therefore it solved the two main drawbacks that customers identified about their current showers. In addition, the new product featured a modern look with addition of a breakthrough “one-touch” control mounted on the shower wall. It was easy to use and enabled customers to automatically set the water temperature instead of having to manually set and then test the water temperature for multiple times. It was easy to install, required no excavation, and was also very safe to use for kids and elderly. Aquavalve 690 mixer shower was regarded as being a high-quality, reliable and state-of-the-art shower, but required excavation, which was often two day job. Also, the product had to be supplemented by an Aquaforce booster pump to create stronger pressure. Furthermore, if we look at the comparison of the economic value between Quartz shower with pump (Quartz Pumped Premium) and Aquavalve 690 standard mixer shower with supplemental booster pump (Aquaforce 1.0/1.5) we can see that the customers are for €800 better off buying a Quartz shower and for €950 better off if customers buy the Aquaforce

2.0/3.03. Therefore, the new Quartz shower had economic and usage benefits to the customer compared to the Aquavalve 690 shower.

3. Value Proposition to Plumbers
The plumbers wanted a shower that was easy to install, with a guarantee to not break down or require servicing. As already mentioned in Section 1.2, they distrust innovation and have a bad past experience with showers that had electronic components inside. However, the new Quartz shower amazed them with the ease of installation. They could finish the job in half a day and they could even send their apprentices to do the job for them. But lets look at the benefits to the plumber economically4. If we calculate the profit of the plumber when installing a new product to the customer and standardize it on two days, we can compare how much better off a plumber would be when installing different types of showers. Table 2 in Appendix 2 contains the comparison between the different Aqualisa products. We can immediately see that installing Quartz shower either type, would bring the plumber the most profit, since the installation is the quickest and the profit of re-selling high. More specifically, the plumber is best off installing Quartz Premium shower, followed by Quartz Standard shower and Aquastream Thermostatic.

Installing Quartz shower brings the plumber minimally 60% more profit than the second best alternative and maximally 187,92% more profit. On average, the plumber is 98,85% better off when installing Quartz shower than other alternatives. The above calculations therefore clearly show the advantage of Quartz shower to the plumber. The value preposition could be performed with demonstrations in trade shops, where plumbers represent the majority of customers, in order to persuade them to start using the Quartz shower. Demonstrations should be clear and logical to the plumbers, in order to outline the biggest advantage of the new showers — ease and quickness of installation. Instead of spending two days at one customer installing one shower, they could sell and install four showers in the same time, increasing their retail shower margin profit by four.

4. Targeting Strategy
4.1. Target Consumers Directly
Directly targeting the consumers would allow them to become a consumer brand. This way, they could compete agains Triton more aggressively, and presumably take some of their market share. They have the right product to do it, since it differentiates itself from the competition by removing the main problems that consumers had with showers and delivering additional features, which were well received in consumer’s eyes. However, on the other hand this would be the most risky and also very costly strategy, since Aqualisa brand did not have strong relationship with consumers yet (only 6% of all installed mixer showers were a commercial installation). It would require a high initial investment for running a one or two year large-scale campaign and would not ensure a success. It should also be very consistent to break through into consumer minds and this requires patience, which Aqualisa doesn’t have, since the competition is not far behind.

4.2. Target Do-It-Yourselfers
Because of the ease of installation, Aqualisa could also target the DIY market. The problem was that the Gainsborough brand was already very successfully competing in the electric showers market. A potential launch could result in the cannibalisation of one brand. Also, the product was perceived as a premium one, but it could loose that value when people would associate it with a discount channel. On the other hand, they had already established a channel of distribution and have potential business partners, making it easier to reach the final consumers. They might also be willing to pay a premium because of its premium value and Aqualisa’s business partners could help them with advertising though media or TV, which would result in much lower campaign costs.

4.3. Target Developers
Developers could conceivably be a large-volume channel, since getting few of them on-board would result in a lot of sold and installed showers. Due to
the fact that they usually choose the product for the new properties, they would force the plumbers to get familiar with it, creating awareness also among them. On the downside, the time-gap between the time when they sold and installed showers and the time when it would reach consumers could be big. Moreover, they were in general looking for sophisticated, reliable products, with modern design and ability to work in multiple settings. Quartz shower delivered such value, but the problem was its premium status. Even with discount, they did not sell well, and the company was also Aqualisa Quartz: Simply A Better Shower REPORT

reluctant to give them discount because of its break-though status. With 15%, they also represent a small portion of the market of new installed showers, and again there was a possibility of cannibalisation, since Aqualisa’s ShowerMax brand was already generating some of their sales.

4.4. Target Plumbers & Trade Shops
Plumbers have big influence on the decision making process of the consumers. Looking at some numbers, we can see that 28% of consumers take the plumber’s advice on type and brand of shower, 25% of them leave the decision to the plumber alone and 20% of them choose a shower that plumber recommends, but decide on the brand by themselves. Furthermore, 54% of all shower installations were done by independent plumbers and 46,7% of all showers were sold in trade shops, which usually re-sell to plumbers. Above figures therefore clearly show the importance of the this two channels to the Aqualisa company. Also, Aqualisa had already established a good relationship with a group of plumbers loyal to its brand and sold to around 40% of all UK trade shops. The main problem was the distrustfulness of plumbers, who disliked innovation, especially with electronic components, were difficult to sway and persuade to change their favourite brand. Also, trade shops carried other brands and did not care about the product features or the brand itself, but just wanted to make sure they have the right stock for the right demand in the right time.

4.5. Target Showrooms
Showrooms sold the products to the high-end customers, who were also searching for good service and advice on their selection and design of a bathroom “solution”. They focused on the niche market, by only carrying high-end products and brands, so they provided great opportunity to Aqualisa, which actually competed in that segment. As noted in the case, the Quartz shower already gained popularity in the segment, especially because of the working displays, where its advantages were immediately noticed and loved by the consumers. The problem was that due to the niche market the size was quite small with only about 20% of all new showers sold through showrooms. Also, Aqualisa was only sold in 25% of them. Targeting only high-end customers would not be sufficient for the realisation of their desired strategy — to dream big and go mainstream.

4.6. Recommendations For Targeting
In my opinion, Aqualisa should target plumbers & trade shops and showrooms. Plumbers should be their main target, since they influence consumers the most, and also bring the highest  percentage of sales, by buying either from trade shops or from Aqualisa directly. Figures show, they will be four times more productive and on average two times more profitable than before. This should be a clear rationale for them to start using and pushing the Quartz shower to the consumers, which have already shown great interest in the new shower system, due to the ease of use and modern design. They can get better product for their money and will experience less problems with their shower than before. Therefore, the awareness of the brand and the product will increase.

By targeting plumbers, Aqualisa will also strengthen their relationships with them and establish-long term bonds, since plumbers mostly stay loyal to one brand in which they have gained their expertise. This should generate sufficient future cash flow. Secondly, they should also focus on showrooms, due to their premium status, and use that channel to target the ones who are not price-sensitive. Such consumers are a great target for sales of additional products (like shower accessories), which could follow due to the innovative, advanced and limitless shower technology.

4.7. The Action Plan
To generate sales momentum I recommend the following steps and actions to be taken: • First, the Marketing department should create advertising material that could be distributed to their salesforce and then to trade shops, plumbers, showrooms and final consumers.bThey should also continue advertising in magazines that cover topics on modern lifestyle, leisure and also some of the special trade and housing magazines.

• Secondly, they should force the plumbers to at least try their products. They would achieve that by either giving few free Quartz showers to plumbers or selling few promotional showers directly to plumbers at discount price and enabling them to return them free of charge it the consumer wouldn’t like it. They should also donate few of Quartz showers to plumber schools, where apprentices could practice on them, elderly homes and schools, where final consumers would become aware of the brand and would use it, and use working displays on major shows, where plumbers and trade shop employees usually go to see the new trends that will come in the future.

• Thirdly, they should educate their salesforce on how to target plumbers, and focus their sales on new customers from 10% to 40%. They should keep their customers updated with regular news either by sending them newsletters over mail or creating a special loyalty club. • Fourthly, they should increase the percentage of showrooms that offer their products and offer additional accessories, which could be sold together with showers in the showrooms.

Aqualisa Quartz: Simply A Better Shower REPORT

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