The Kunst 1600 Dry Piston Vacuum Pump Model - Research Paper Example

Kunst 1600 Pump 67 Table of contents 1.0 Executive Summary 0 2.0 Introduction 2 3.0 Analysis 2 3.1 SWOT Analysis 4 3.2 Value and Price 6 3.3 Additional Value 8 4.0 Market Testing 9 5.0 Targeted Market 11 6.0 Recommendations 13 References 14 1.0 Executive Summary A market research on Kunst 1600 valve pump was carried out by designated research firms. The main areas of interest included the key quantifiable values and price elements associated with the Kunst 1600, additional elements that could not be quantified in monetary terms, assessing the potential market segments for commercialisation purposes, and carrying out an analysis on the market segment of choice, customer value statement notwithstanding. Market research findings revealed that the low end market was the most lucrative with respect to pump 1600. Further, it revealed that the competing models did not last as long as their manufacturers had projected in addition to high hidden costs associated with them. Kunst vacuum pumps also came to the realization that it was not a common a brand on its potential market. It was recommended that Kunst work on its brand name to facilitate penetration into its potential market. Additionally, a recommendation was made to offer top value to the customer with respect to value and cost. Finally, it was recommended that potential threats be mitigated through strategies like value migration where the firm offers its product at a cheaper price with an aim of winning customers. 2.0 Introduction A vacuum pump is a gadget that gets rid of gas molecules from a sealed volume with an aim of leaving a fractional vacuum behind. The Kunst 1600 Dry Piston vacuum pump model, also known as the 1600, is a superior pump compared to its competing models. Its superiority is clearly depicted by the properties it holds. These properties are its horsepower, its speed, and weight (it weighs lighter compared to other conventional pumps). Additionally, it has fewer working parts, its running time is longer compared to other conventional pumps and it is associated with a lot of cost cutting measures. The cost cutting measures attributed to the use of this machine by business owners can be translated to imply profitability for the business, which basically is the core objective of virtually every business (Hill, 2002). Incidentally, the 1600 pump has a prolonged useful life in contrast to other vacuum pumps. Its useful life is estimated to be twice that of other conventional pumps. 3.0 Analysis The underlying problem is that it is a new product in the market that requires aggressive and comprehensive marketing. Kunst Vacuum Pumps, a manufacturer of vacuum pumps, is making attempts to identify and penetrate the 1600 in new market segments. The fact that the company has sound reputation coupled with the impeccable qualities possessed by the 1600 vacuum pump would make it seem easy to penetrate the market segment. Unfortunately this is not the case; marketing of the 1600 by the firm’s product division is proving to be an uphill task (Haar, 2001). Difficulties that Kunst Vacuum Pumps Company is experiencing from the marketing of this product are as a result of a number of factors: (i) The target market Kunst Vacuum Pumps, though established, is not well versed with the high end market. Market research on potential revenue of Vacuum pumps in the United States indicates that, 60,000 units of refrigerator repairs are attributed to homes, 40,000 units of refrigerator repairs belong to light commercial, and the number of air conditioners repaired are at an overwhelming 125000 units. This then can be concluded that the market likely to deliver high returns on the 1600 is the low end market. The challenge here is that the target market is not familiar with the brand name Kunst (Osmonbekov et al, 2009). (ii) Competitors: Kunst Company is trying to tap into a market that has players who are established and well versed with market considering that theirs has been an ongoing trade over the years (Wert-Gray, 2002). Case in point is Pump wizard, notably a top brand industry for more than forty years and which consumers claimed they had faith in and were contented with its products. (iii) Customer Loyalty Trying to persuade consumers to abandon brands they are used to and switch over to a new brand is virtually impossible (Golfetto, 2006). During the market research study, consumers were in doubt of the new product. Some were of the opinion that the 1600 was only fit for light commercial and home refrigerator repairs. Therefore, for the 1600 to stand a chance of penetrating the market, it is imperative for Kunst to devise means on how it could win customer loyalty (Golfetto, 2006). 3.1 SWOT Analysis Penetration into the market segments by Kunst vacuum pumps is difficult but possible. The first step therefore that the Kunst Company should take would be to ascertain the factors that are working for and against them. They should then work on the favourable ones and mitigate on the unfavourable ones. The findings on the market research study on vacuum pumps plays a central role on this area, that is, on ascertaining strengths and weaknesses that Kunst might experience when campaigning for the 1600 (Fleury & Fleury ,2003). The following analysis is appropriate: SWOT Strengths Weakness Technology: Lighter models Effective use: No changing oil Longer life Slightly higher price Vulnerable to breakages Ease of corrosion Pump too small to handle Opportunities Threats Better sales during high season More competitors in the market Similar technology Strengths Technicians admitted that it is hectic to carry the vacuum pumps around to unconventional locations at work sites. Therefore, the 1600 is deemed convenient as it is lighter compared to other competing models. Then there is the issue of oil change; both business owners and technicians collectively agreed that changing of oil is necessary at the completion of every task. Incidentally, they also expressed dislike at the job. This plays directly in the hands of Kunst Company considering that the 1600 does not require oil change. Not changing oil in a vacuum pump also plays a pivotal role in the reduction of costs, as it costs $4 per oil change. The more jobs a technician can do in a given time span the more revenue they earn. A technician can only do more jobs through spending less time per job, the study revealed that a light commercial refrigerator repair technician took 30 minutes using a 1.5 cubic feet per minute, but using the 1600 would reduce this time to 20 minutes. The market research revealed that competing models did not live to full capacity of their useful life as proposed by their manufacturers. This was highlighted by the inconsistency revealed on the high number of sales relating to vacuum pumps and the respondents’ statements, if the statements made by the respondents on longevity of the competing models useful life was true, then the rate of vacuum pump sales would have been relatively low. The findings revealed that 3-6 CFM on average lasted two and half years, while the 1 CFM has a life span of three years. The 1.5 CFM has a life span of two years. It is worth noting that it takes the 1600 1.6 CFM the same time it would as that of competing models to evacuate an air conditioning system (Wert-Gray, 2002). Weaknesses The weaknesses relating to the 1600 is the aluminium foils which the respondents pointed out that would make it easily vulnerable to breakages. Additionally, some were of the opinion that acids exhausted on the 1600 could easily accumulate and this could easily lead to corrosion of its housing at an extremely fast rate. The size of 1600 was also an issue as most consumers expressed dissatisfaction on its size claiming that it was too small to handle residential air conditioner repair jobs. Opportunities On opportunity, the business should take full advantage at the time when the season is at its highest (Berawi, 2003), that is, between April and September when there is high demand for air conditioning repair. This gives an opportunity that the company would never want to miss on as it is likely that it is the season that demand for vacuum pumps is the highest. Threats Basically, threat comes from its competitors and competing models (Gormann & Corbitt, 2002). Competitors of the Kunst vacuum pumps were identified as: Air master, Toledo, Pump wizard, Vacuum technologies, Pump and valve. Respondents to the study specifically expressed satisfaction on Pump wizard and Air master vacuum pumps. According to the respondents, vacuum pumps from Pump wizard were exclusively manufactured for the air conditioning market place, virtually every respondent expressed contentment at products manufactured from Pump wizard. Incidentally, respondents were of the opinion that both Air master and vacuum technologies had presently offered competitive models of similar quality. Air master was ranked as the top brand by the respondents when it came to the production of between 1 to 1.5 CFM vacuum pump (Kunst 1600 Note). 3.2 Value and Price If looked at from a quantitative perspective, the key elements that attribute to the price and superior value of the Kunst 1600 entail price element and value element. It can be concluded that the price element is far much economical than competing model in terms of durability. The 1600 has a longer useful life compared to that of competing models. This implies that should repair firms opt to buy vacuum pumps other than the 1600, they would end up buying more than they would have actually bought if they had gone for the 1600. This has an adverse impact on the firm’s finances since it ends up paying twice or three times as much on vacuum pumps. There are two value elements associated with the 1600: savings in terms cost and incremental profits and revenue. Savings in terms of cost is as a result of elimination of expenses that relate to oil change. Incremental profit and revenue are defined as gains that arise as a result of increased or improved efficiency. Based on the case study, incremental gains are realised in one area only, the light commercial refrigerator repair segment. Value elements can be translated as follows: Savings in cost per every oil change is a function of (price of oil, cost of labour, clean up provisions, and cost of oil disposal). Cost of labour is a function of (hourly rate by the number of hours used). Clean up provisions is a function of (the price of scouring soap and price of cloth towel). Recycling cost of disposed oil entails recycling cost per oil gallon by the number of oil gallons recycled (Ulaga, 2001; Haar, 2001). Mathematical interpretations Savings in cost per oil change with respect to residential air condition repair is equivalent to 15.9 dollars, that is: 8+ (12 x 0.5) + (15 x 0.5) + (5 x 0.25) Annual cost savings in oil changes is equivalent to 318 dollars, that is: 15.9 x 20weeks Savings in cost per oil change with respect to home refrigerator repair is equivalent to 12.775, that is: 4+ (15x0.5) + (0.5+0.15) + (0.5x0.125) Annual cost savings in oil changes is equivalent to 153.3 dollars, that is: 12.775x12 weeks Savings in cost per oil change with respect to light commercial refrigerator repair is equivalent to 17.25 dollars, that is: 4 + (24x0.5) + (0.5+0.15) + (5x 0.125) Annual cost savings in oil changes is equivalent to 207.3 dollars, that is: 17.275 x 12weeks Incremental profit Annual incremental profit is a function of (additional jobs in one week by each job’s average profit) x the number of weeks in a peak season. The only area that the use of 1600 can facilitate additional jobs is in the light commercial refrigerator repairs segment. Thus annual incremental profit is equivalent to 720 dollars, that is: 2 days x 30 dollars x 12 weeks 3.3 Additional Value There are a number of values related to the 1600 that cannot be quantified yet they are significant: (i) The Weight Differences: the 1600 is lighter in weight as compared to other regular pumps presently used in the repairs of residential air conditioners and heavier in weight compared to those used in the light commercial and home refrigerator repairs. (ii) Durable parts: The Kunst 1600 is made up of moulded aluminium, this therefore implies that its parts are less vulnerable to rust which ultimately translates to a long useful life. (iii) Estimated value relating to fines as a result of dumping oil: Savings in this area could either be treated as quantifiable or place holders. Should it be treated as a quantifiable element, then the anticipated probability of getting fined should be included and classified as cost savings. The savings in terms of cost would thus be the function of “the summation of each fine multiplied by the prospects of getting caught multiplied by the number of times the oil is disposed per annum.” The only reason that this value is not computed as a cost saving but rather as an additional value is because it is mainly based on assumptions (Kunst 1600 Note). 4.0 Market Testing Kunst ought to come up with effective marketing strategies in terms of its brand and product that would guarantee their penetration in the market. The company should then follow up and carry an evaluation if the marketing skills they possess have any impact on their presence in the market. A typical example is drawn from Dell computers who display exemplary marketing skills. Their secret lies in building strategic relationships with their customers and vendors alike; this in turn offers them a competitive edge (Fleury & Fleury, 2003; Sorce, 2002). There are critical areas that executives need t evaluate so as to manage and create effective market driven strategies with regards to their products. The 1600 is a new product in the market, as a means of attaining success in terms of its delivery to potential consumers; Kunst Company has an obligation of incorporating some common dimensions that have been tried and tested over the years and add these dimensions to their own (Day, 1994; Vorhies, Harker & Rao, 1998). Business Design Business design entails: company’s consumer focus, proposition with respect to value and processes that ensure delivery of higher value to the consumer hence generation of profits. Incidentally, alteration of business design encompasses creation of market entry strategies, and executing and managing these strategies to ensure success (Gormann & Corbitt, 2002). Kunst is assessing the market. An ideal measure that it ought to put in place as a means of testing the market is through development and incorporation of early warning systems into the business design (Golfetto, 2006). Create market vision abilities that can easily enable the company to detect potential threats and opportunities. It is worth noting that threats emanating from fresh business design are common in many firms, of even more importance is that the threats are usually in the open only that executives choose to overlook them. In summary, the product management division should have an action plan that aims at: coming up with processes of promoting new products, incorporation of technology and new products into the business design, a follow up to evaluate the impact of the developed business design (Cravens , Piercen & Prentice, 2000; Berawi, 2003) Data collection and analysis The initiative behind this notion is to prepare a survey questionnaire. Based on the nature of this research with respect to the required information it is advisable that respondents be derived from sales and marketing departments and individuals in the vacuum pumps business as this group is more familiar with the product in question (Ljungquist, 2007; Nwokah & Ahiauzu, 2007). Product managers and the personnel in their departments should be the main informants. A hand distributed survey with the assistance of research assistants should be distributed to the relevant sources. Information derived from these questionnaires would play a focal role in giving the company the information it needs regarding the market (Wert-Gray, 2002; Osmonbekov et al 2009; Saran, Guo & Kulviwat, 2007). 5.0 Targeted Market The Kunst Company is faced with a challenging task. The problem spans around brand identification as the potential market that the company aims at establishing itself is not quiet familiar with the firm’s brand name. Based on the research findings it was revealed that the low end market was the most lucrative market that the 1600 could be launched, particularly the Air conditioner repair market and the light commercial refrigerator market. Yearly sales of the Air conditioner are projected at 125000 units coupled with a growth rate of 15 percent per annum (Kunst 1600 Note). On the commercial refrigerator, it poses as a potential lucrative market in the sense that the business is ongoing through out the year with business at its peak during summer in the form of emergency repairs. For the company to have comprehensive information of its potential market, it is imperative that it carries a diagnosis on the information. Information diagnosis entails: ascertaining information concerning potential customers, competitors and other stake holders including influential factors in the market, cross functional methods of information dissemination, interpreting the connotations within the ascertained information so as to decide on the next course of action (Hill, 2001). Building strategic relationships would play a big role in enabling the company penetrate the market. Benefits on this include: Amplifying relationships which facilitate their capabilities and coordination of departments thus enhancing efficiency and quality. Therefore it is essential that the Kunst vacuums company critically look at these areas highlighted above if it desires its penetration into the new market to be a success story (Haar, 2001; Ulaga, 2001). Customer value statement The customer value statement shows the foregone cost or rather the opportunity cost that the customer incurs in a situation where they chose to purchase other convenient pumps at the expense of the Kunst 1600 dry piston pump. Differences arise as a result of the projected useful lives; this difference can be expressed mathematically thus: Differential price per annum is a function of: (Current pump price / projected no. of years) – (The 1600 price / projected no. of years) Assuming Kunst 1600 projected useful life is 6 years then, Residential Air conditioner’s differential price per annum is equivalent to 16.67 dollars, that is: (250/2.5) - (500/6) The home refrigerator differential price per annum is equivalent to 33.33 dollars, that is: (150/3) – (500/6) The Light Commercial Refrigerator differential price per annum is equivalent to 16.67 dollars, that is: (200/2) - (500/6) 6.0 Recommendations The Kunst Company must strengthen its brand name for it to be able to penetrate its potential market. Therefore the Kunst Company must have appropriate measures in place to facilitate this move, that way, consumers would easily identify with the product. There is also the issue of offering top value to the consumer. Top value to the consumer implies that either the company’s product has unique features; it is cheaper compared to its competing models, or has a combination of both. Kunst Company should consider the latter option, offering a unique product at an affordable price. Also of importance is taking the consumers concerns into consideration, potential consumers to the 1600 expressed worry over the aluminium mould thus the company should ascertain ways to comprehensive deal with this concern. Mitigation of potential threats should also be addressed; this could take the form of value migration. This is a business strategy where the firm makes an effort to win consumers by offering attractive values for their products. Any business that employs this strategy always has an edge over its competitors. References Berawi, M. A. (2003). Quality revolution: leading the innovation and competitive advantages. International Journal of Quality & Reliability Management, 21 (4): 425-438. Cravens, W.D., Piercy, F.N., & Prentice, A. (2000). Developing market-driven product strategies, Journal of Product & Brand Management, 9 (6):369-388. Day, G. S. (1994). The capabilities of market-driven organizations. Journal of Marketing, 2(1): 37-53. Fleury, A. & Fleury, M. T. (2003). Competitive strategies and core competencies: Perspectives for the industrialization of industry in Brazil. Integrated Manufacturing Systems, 14 (1): 16-25. Golfetto F, G. M. (2006). Marketing competencies and the sources of customer value in business markets. Industrial Marketing Management, 35 (8): 904-912. Gormann, G.E. & Corbitt, C. J. (2002). Core competencies in information management education, New Library World, 103 (1182/1183): 436-445. Haar J, K. R. (2001). Creating value that cannot be copied. Industrial Marketing Management, 30 (8): 627-636. Hill, J. (2002). A Multidimensional study of the key determinants of effective marketing activity: Part 2. International Journal of Human Entrepreneurial Behaviour and Research. 7(5): 171 – 204. Kunst 1600 Note, Available from http://www.scribd.com/doc/22349185/Commercializing-Kunst-1600-Note (18 July, 2010). Ljungquist, U. (2007). Specification of core competence and associated components. European Business Review, 20(1):73-90. Nwokah, G.N. & Ahiauzu, A.I (2007). Managerial competencies and marketing effectiveness in corporate organizations in Nigeria. Journal of Management Development 27 (8): 858-878. Osmonbekov, T. Gregory. B. T., Brown, W. & Xie, F.T. (2009) Measurement, and analysis for marketing: How consumer expertise moderates the relationship between materialism and attitude toward advertising. Journal of Targeting 3(1/2): 321-327. Saran, A., Guo, C., & Kulviwat, S. (2007). Marketing strategy in transition economies: the case for India. International Journal of Business Research, 19 (8): 563-642. Sorce, P. (2002). Relationship marketing strategy. Journal of Marketing Research, 1(2): 415-429. Ulaga, W. C. S. (2001). Measuring customer-perceived value in business markets: A prerequisite for marketing strategy development and implementation. Industrial Marketing Management, 2(3): 525-540. Vorhies, W. D., Harker, M., & Rao, C. P. (1998).The capabilities and performance advantages of market-driven firms. European Journal of Marketing, 33 (11/12):1171-1202. Wert-Gray, S. (2002). Marketing strategy and competitive environment as determinants of business performance: A study of American manufacturers. Journal of Marketing Research: 2 (1): 345-590. Read More