Kunst 1600 Case Study

1. What are the major, quantifiable value and price elements associated with the Kunst 1600?

Value Elements
- Oil Free vacuum pump, As the Kunst 1600 is oil free, Most of the light commercial refrigerator
repair segment find it to be a positive value which will help them save costs as well as save time
which is wasted on cleaning the mess which happens immediately after changing the oil.
Although Heavy refrigeration people find this value to be neglectable.
- Greater Product efficiency, A 1.5 CFM vacuum pump which is to be used for 30 mins in the light
commercial refrigerator repair will now take 20 mins. Reducing 10 mins/job done means
technicians would be able to convert the time saved into revenue by completing at least two more
jobs per week.
- Injection molded - As the Kunst 1600 is injection molded, it has few working parts which results
in lesser wear and tear.

Price Elements
- Product Durability (Higher productivity in low pressure settings) - Although Owners and
Technicians don't really keep a track as to how long their vacuum pumps last, speaking with the
wholesalers of vacuum pumps, it is noted that a 1 CFM pump lasts about 3 years, 1.5 CFM lasts
about 2 years and 3-6 CFM lasts about 2.5 years.
Firms can reduce this cost, as the Kunst 1600 promises a lifetime of 6 years with a rough and
tough usage.

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

Weight - Since the Kunst 1600 is made out of aluminum, it will weigh 5 to 10 points less than competing
products. The technicians appreciate the weight savings as they needed to carry pumps to unusual
locations at job sites.

Injection molded and more durable - Kunst 1600 being injection molded, means less wear and tear and
less changes of corrosion and will thus last longer than its competitors.

Environmental benefits - Kunst 1600 does not use oil hence is more environmentally friendly and does
not require oil disposal or dumping.
3. Construct a customer value model for the Kunst 1600 in the residential AC, home refrigerator,
and light commercial refrigerator repair market segments.

Particulars Residential AC repair Home Repair Segment Light Commercial

segment Refrigerator Repair
Segment

Oil Price/change $8 (page 6) $4 (page8) $4 (page8)

Cleaning Supplies $ 0.65 (page 6) $ 0.65 (page8) $ 0.65 (page8)

Labor Cost $6 $ 7.5 $ 12

Disposal Cost 1.25 0.625 0.625

Total $15.90 $12.775 $17.275

Oil changes/yr 20 (once a week late 12 (once a month) 12 (once a month)

April to early Sept)

Cost Saving/year from $ 318 $ 153.30 $ 207.30

oil change

Extra profit from time NA NA $ 720

saved

Total Value $318 $153.30 $ 927.30

Differential Price per $16.67 ($33.33) $16.67

year

Labor Cost

Residential AC repair segment Time taken 30 mins labor cost/hr - $12 (page 6, second last para)

Home Repair Segment, Time taken 30 mins labor cost/hr - $15

Light Commercial Refrigerator Repair Segment Time taken 30 mins labor cost/hr- $24

Disposal Cost
1 Gallon = 4 Quarts

Residential AC repair segment - Price change/ Gallon = $5 , Price/Change = $5/4 = $1.25

Oil changes per year

Residential AC repair segment - once a week, from Late April to early sept. Total changes = 20

Home Repair Segment - once a month, year long, Total changes - 12

Light Commercial Refrigerator Repair Segment - once a month, year long, Total changes - 12

Extra profit from time saved

Light Commercial Refrigerator Repair Segment - 2 extra jobs/week. The demand skyrockets during
summer. Summer time = 3 months = 12 weeks. Total extra jobs =24 (12*2) Profit per job = $30. Overall
Profit = 24*30 = $720

Differential Price per year

(Traditional pump price/Expected lifetime of traditional pump) – (Kunst 1600 price/Expected lifetime of
Kunst 1600)

Residential AC repair segment

= (250/2.5)-(500/6) = $100-$83.33 = $16.67

Home Repair Segment

=(150/3) - (500/6) = $50-$83.33 = ($33.33)

Light Commercial Refrigerator Repair Segment

= (200/2)-(500/6) = $100-$83.33 = $16.67

4. Using your value model, select a target market segment(s) for commercialization efforts. Justify
your choice.

Evan and Will should consider targeting only a single market segment at this point in time given Kunst’s
status as a new acquisition. They should put all their limited resources in the segment that has the most
feasible chances of success.

According to the value model made and the responses received from each target market, the best suited
target market at present would be the Light Commercial Refrigerator Repair Segment.

The values that align with this market segment are as follows
- No oil change, saves up quite a bit of money and time.
- Value for money
- More time to do more work as Kunst reduces 10 mins from the total time taken to complete 1
repair. Which leads to 2 extra repairs per week which come in handy especially during summer
months as the market skyrockets.
- No oil mess also makes the employees happy and they no longer have to get annoyed with the
 whole process of cleaning the mess after oil change.
- Save Environment, using Kunst will eliminate the need to dispose of oil or dump oil that might
cause fines to the firm and the individual.

The Residential AC repair segment is not feasible at all because this segment uses pumps that are between
3-6 CFM and Kunst 1600 is underspecified at 1.6CFM.
The home refrigerator repair segment may be viable in long term, however the Kunst 1600 is
overspecified as the segment uses pumps that are of 1 CFM.