MBM Assignment 1

17 September 2019
Ankita Singh(PGP/22/330)
1.What are the major, quantifiable value and price elements associated with the Kunst 1600?

Quantifiable Value

 Pumping speed of 1.6CFM

 Pump weighs 16.5 pound
 Aluminium body
 The Kunst 1600 is a reconfigured compressor outfitted with a screen over its input nozzle to
catch contaminants.
 Fewer working parts
 Oil Free pump, as a result cost involved in oil changing is reduced

Price Elements

 Kunst will sell the 1600 to its network of wholesalers for $400
 Resale price of $500
 The Kunst 1600 reduces 10 mins of technicians vacuuming time
 No oil cost involved
 Increased pump durability

2. What additional value placeholders, elements not presently quantified, merit consideration in your
value model?

Additional Value

 As no oil change is required, technicians save 30 mins

 No extra labour cost associated with oil changing
 No disposal and recycling cost associated with oil based liquids
 Brand Equity - Potential customers will be willing to pay a price premium to obtain a vacuum pump
with the Kunst brand name on it
 Durable and light weight as compared to other competitors

3. Construct a customer value model for the Kunst 1600 in the residential AC, home refrigerator, and
light commercial refrigerator repair market segments.

Customer value model – Calculations

Cost savings per oil change = Oil price + Labor cost + Clean-up supplies + Oil disposal cost

Labor cost = Hourly rate of individual changing oil x Hours of time required per change

Clean-up supplies = monetary amount of scouring soap used + price of cloth towel

Oil disposal cost = recycling charge per gallon of oil x number of gallons recycled
For Residential AC Repair segment (using maintenance worker):
Cost savings per oil change = $8 + ($12 x .5) + (.15 + .50) + ($5 x .25) = $15.90
Cost savings per year for oil changes = $15.90 x 20 = $318

For Home Refrigerator Repair segment:

Cost savings per oil change = $4 + ($15 x .5) + (.50 + .15) +($5 x .125) = $12.775
Cost savings per year for oil change = $12.775 x 12 = $153.30

For Light Commercial Refrigerator:

Cost savings per oil change = $4 + ($24 x .5) + (.50 + .15) + ($5 x .125) = $17.275
Cost savings per year for oil change = Cost savings per oil change x Number of oil changes per year
= $17.275 x 12 = $207.30

Incremental profit per year = (Number of additional jobs per week x Average profit per job) x Weeks
per busy season

For Light Commercial Refrigerator:

Incremental profit per year = (2 x $30) x 12 = $60 x 12 = $720

Differential price per year = (Incumbent pump price/Expected number of years) – (Kunst 1600
price/Expected number of years)

For Residential AC:

Differential price per year = ($250/2.5) – ($500/6) = $100 - $83.33 = $16.67

For Home Refrigerator:

Differential price per year = ($150/3) – ($500/6) = $50 - $83.33 = - $33.33

For Light Commercial Refrigerator:

Differential price per year = ($200/2) – ($500/6) = $100 - $83.33 = $16.67

Factors Residential AC Home Light Commercial

Segment Refrigerator Refrigerator
Segment Segment
Oil Change 318 153 207
Savings
More Jobs and 0 0 720
profit
Price 16.67 -33.33 16.67
Net value($) 334.67 119.97 943.97
4. Using your value model, select a target market segment(s) for commercialization efforts. Justify
your choice.

We will choose Light Commercial Refrigerator Segment because the Net Value is maximum for it.

5. Write a value proposition for the Kunst 1600 for the target market(s).

 Reduce service time

 No change in Oil required
 Life Time