KONE – THE MONOSPACE LAUNCH IN GERMANY

Submitted By:
Meghana KSP
PRN: 18021141055

Q1: Put yourself into Hatala's shoes and prepare marketing plan. (Pricing, positioning,
marketing efforts, sales efforts). Justify your recommendations and spend with anticipated
sales and contributions.
A. The German Market Scenario:
i. Product:
The elevator Market of 15500 units was to shrink by 15% from 1996-2000
48% of 1995 sales were residential & out of this:
92% were PH (Least expensive)
6% were PT (Mid-Priced)
2% were PU (Lesser than most expensive)

ii. Price deciding factors:

o Legal approval needed in each state for the installation of Monospace
o Brand building and differentiation efforts by the company
o No subsidy from the government for the elevator industry
o Headquarters’ suggestion to keep prices high due to lesser market share of corn

iii. Consumer:
o Price sensitive consumer
o Quality conscious
o Focused on service
o Favours the energy efficient products

B. Pricing:

Pricing of the MONOSPACE

Type of PH - MONOSPAC PT- PU- PS-
Elevator Hydraulic E Gearless Traction Traction
Price (DM) 60000 65000 75000 80000 120000

i. Reasons for this pricing from the Customer’s point of view (Why they should pay higher)

• The energy consumption is much lesser. The customer can save the energy cost as much
as 1/6th of the cost of the MONOSPACE every year, which shows that he recovers the
17% cost of MONOSPACE in 1st year only.
• No machine room is required in the installation of MONOSPACE which means
customers can save that much of the space and can utilize it for some other productive
use.

ii. Reason for pricing from Company point of view (Why moderate pricing is important)
 • The market pricing has been reduced by 8% for PH, MONOSPACE current pricing is
8% higher than PH and if we count the reduced price, then it would be 16%, which
shows a fair revenue gain from a market which is due growing by 8%.
• Installation time is 60 Hrs less than other elevators hence save on cost.
• No oil is used in MONOSPACE which shows a lesser maintenance (after sale service
cost) which company can recover from the customer in the service contract.

C. Positioning:
• Energy efficient machine
• No oil requirement
• Fire and other environmental hazards are eliminated
• Quick installation
• Service with quality product

D. Marketing & Sales Strategy:

• A working MONOSPACE has to be created in Germany similar to Netherlands to build

the trust of the customers.
• The productivity of the sales call without increasing in Number of person or hours has
to be reviewed and sales people to be trained accordingly.
• Meeting with all the five stake holder which are required for decision making which
includes 01) Owner 02) Construction Company Manager 03) Architect 04)
Construction Company purchasing agent 05) Service Manager.
• Involve the stakeholders for similar requirement at the common platform for dinner and
demonstrate them with the working MONOSPACE.
• Articles in local and national architectural Journals and local newspaper which focuses
on saving energy and giving more space in the House.
• Lucrative Incentive structure to the sales person on each conversion.

E. Marketing tools to be used:

• Monospace Brochure
• Working model of Monospace for demonstration
• Separate PowerPoint presentation for all 4 decision maker’s group
• Direct mail
• Events and road shows
• CAD rendering of Monospace

F. Anticipated Sales and Investment

Total Elevators installed in 1995 15500

Elevators in 1996 (Shrink of 3% per year) 15035
Anticipated Sales as per Current Market Share
Market Projected
Company 1995
Share 1996
Schindler 19.40% 3007 2917
Otis 11.60% 1798 1744
Thyssen 12.90% 2000 1940
KONE 9.20% 1426 1383
Others 46.90% 7270 7051
Value Value
Total Elevators installed in 1995
15500 88033
(Sale through V1)

Elevators in 1996 (Shrink of 3%

15035 85392.01
per year)
Revenue by selling 1383 Units (DM '000)
92% MONOSPACE 1272 82703.4
6% PT (GEARLESS TRACTION) 83 6223.5

2% PU (TRACTION) 28 2212.8

Revenue earned by KONE in 1996

1383 91139.7
(DM '000)

Last year (1995) Revenue from V1

1426 88033
Sales (DM '000)

Growth over last year (DM '000) -43 3106.7

% Growth over last year 97% 104%

MARKETING SPENDS FOR THE LAUNCH (DM

'000)

Article in the Journal 50

Gather the potential buyers for

250
Dinner
Travelling cost in meeting with
100
the Decision Makers
Sales Incentive Scheme 100

Sales Kit for all sales employees 75

Total 575
Q 2: How important is this launch for company? What are the implications of success / failure
of MonoSpace to company?
A: The importance for launching the product by KONE is immense because Germany is the
largest elevator market of continental Europe. This market has also been contributing to the
profits of KONE despite the fact that the overall profits of KONE were almost zero. Apart from
this, the importance of the launch of this product was also very high due to the fact that this
product had not performed well in other two major markets of Europe which are United
Kingdom and France. The launch of Monospace in the German market would prove to be
successful due to the fact that the German market was a mid size market and this product would
prove to be successful in the low-rise residential elevators segment. This segment has occupied
almost 74% of the total elevator market in Germany. Therefore, the new product of KONE
would have a solid scope to get successful in this market and the company was considering a
solid scope to build and position the new product in the German low-rise elevator market. Apart
from this, the company had also received a very positive customer feedback, such as the
customer’s very response to the launch of this new product’s new by saying that why did the
company did not come up with this product earlier and at least there is something new in the
elevator industry now. The success or failure of this product in the German market would have
a lot of implications regarding the future of the company. The success or failure of this project
would decide that how much this technology would be accepted by the customers and then
what would be the future direction of this technology. Apart from these implications, the
tangible and intangible benefits of Monospace such as energy efficiency, shorter installation
time period, less space requirements, design and aesthetics flexibility, ride-comfort and safety
and environmental friendliness would all make this product unique and successful which would
in turn increase the sales of the company in the German market where the profits are too low
and the other products of the company are not performing quite well.
Q 3: What can be learned from test markets & launches in other three countries? How does
German markets differ from other market? What are the implications of transferring
experiences from other markets to German market?
A: The launch of the various products of the company in the different market such as the
French, Dutch and the British markets, offer valuable recommendations and lessons which
should be applied to the launch of Monospace in Germany.
It has been demonstrated by Netherlands that being a market leader it is important to design
the marketing campaign for the targeted DMUs. Therefore, the management of KONE had
offered individual and face to face presentations that were very effective to help in selling all
the tangible and intangible benefits of Monospace. KONE has now gained the market
knowledge that the new product of the company would have outstanding sales if it is geared
against traction elevators in the correct environment.
Another important lesson learned by the management of KONE was that setting an
uncompetitive price would have a certain type of reaction from the cost sensitive buyers in the
UK market. Also the segmentation of the United Kingdom market in rock bottom elevators and
top of the line elevators meant that the management of the company lacked an appropriate
target segment of the market which they could attack. Similarly, the France market also had
the same type of broad demand of mid quality and the mid range elevators as in the Dutch
market, but the issue was that the marketing program of the company was less directed and
much more haphazard.
Although, there are many lessons that are important to be learned but still attention should be
paid to the differences between all the markets and special considerations should be made
towards the German market. For instance, the Netherlands market was a small market which
was already dominated by KONE. Other differences include the prevalence of the two stage
bidding process in Germany and also the regulatory environment. However, KONE still had
9.2% of the total market share in the German market due to KONE Aufzug. The company had
a strong presence in Germany and had substantial resources and operation such as man power,
sales force, offices and the potential market to launch a new product like MonoSpace in
Germany.

Q4: How do you expect competitor's to react to your launch plan (Answer to Q. 1)? How you
will manage competitor's retaliation?
A The competition reaction would not be instant as for them this technology will be new and
if we pick up a faster pace of installation, the competition would be left behind and by the time
they react to the situation and come with the similar technology- we would have gained at least
another 5 % of the market share.
Other probable reaction from the competition:-

• Giving negative feedback to the customers on weak areas of Monospace

• Competitors like OTIS and Schindler may get into price wars
• As OTIS has tried such product in the past, they may re-launch with better technology

Q5: Where does Monospace fit in terms of price and performance wise in relation to Kone's
products and competitors product? or Does potentially change anything? Do you foresee any
long run as well as short term implication to your proposal?
A
• Otis is our biggest competitor right now as even it invests into R&D and other programs
which is why it is doing well across except for Netherlands post the inhibition of our
product. Kone was able to increase its market share and position by standing out against
Otis.
• Coming to Schindler they are emphasizing more on services. So if there is any drop in
the service of existing because of this new launch that will be a great profit to Schindler
and the other way round for us.
• Mitsubishi is expanding its product portfolio so that external factors like in Germany
will not affect its Income Statements at the end of the year.
Overall if we see we are competing in terms of product development with Otis, service with
Schindler. This new change has improved the positioning of our product in terms of delivering
better results as compared to our competitors.
There is definitely an implication. Short-term penetration is difficult and making sure that
competitors don’t replicate ours is also a challenge which will eventually happen in the long
run. Expanding to other regions is a challenge but will be short term based on which a long
term decision of expanding and promotion or removing the product from specific geographical
location can be taken.
Q6: What key weaknesses in Kone's current capabilities need to be managed to increase
chances of MonoSpace success?
A Following are the weaknesses Kone has to manage through their sales force strategy and
communication mix:
• The MONOSPACE could not be used in the building with PENTHOUSE as public
access was necessary.
• It was not suitable to use outdoor because its temperature has to be maintained between
5-40 Degree
• Compare to other players Kone has smaller sales force
• No proactive sales approach