BioCell – Losing a Loyal Customer | SDM-2-0006

SDM-2-0006 | www.etcases.com

4th FLAME International Conference on Research and Teaching Cases,

June 21st 2018 & June 22nd 2018

ET CASES – FLAME INDUSTRY EXPERIENCE CASE AWARD for presenting the

MOST INNOVATIVE INDUSTRY EXPERIENCE CASE

BIOCELL – LOSING A LOYAL CUSTOMER

Dr. Gurudas Nulkar, Adjunct Faculty, Head of Strategy and General Management,
Symbiosis Centre for Management and HRD, Pune

“What? We lost the BioCell order! I can’t believe they don’t want to buy from us! All our products are
performing to their satisfaction and they have awarded our services last year!” said K. Unni (Unni) to
Kannan, his Product Manager, who had given the news. “Get me Sumant on line,” he shouted out to his
secretary. Unni, the Founder and Head of Thermochem Corporation1 (Thermochem), couldn’t quite come
to terms with this news. His secretary tried calling Sumant Bharadwaj (Sumant), Senior Sales Engineer at
Thermochem and the account manager for BioCell.

1
Thermochem Corporation Pvt. Ltd. was established in 1987 as a Thermax Channel Associate for Karnataka, Kerala and Coimbatore
regions, currently serving over 1,000 customers. The company is head quartered in Bangalore and supplies Thermax products
such as Water Treatment chemicals for Boilers, Cooling Towers, Effluent Treatment, Ion Exchange resins and Liquid Process
Filters. They also provide Annual Maintenance Contracts for efficient operations (http://www.thermochem.net/about-us.html).

The caselet is intended to be used as the basis for classroom discussion rather than to illustrate either effective or ineffective handling of a management
situation. This is a fictional caselet prepared from the available public information and authors’ independent research. Names, characters, businesses,
places, events and incidents quoted in this caselet are either the products of the author’s imagination or used in a fictitious manner. Any resemblance
to actual persons, living or dead, or actual events is purely coincidental.
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 SDM-2-0006 | BioCell – Losing a Loyal Customer

Unni had successfully led the company to become a star channel partner of Thermax Limited (Thermax)2,
India’s leading manufacturer of industrial boilers, water and sewage treatment equipment, founded in Pune
in the year 1966. Based in Bangalore, Thermochem was doing a business of over INR50 million for Thermax.
Thermochem has a team of twelve sales engineers and two product managers, who had helped Thermax’s
market share to grow to nearly 50% in small industrial boilers and 40% in water treatment equipment, in
Karnataka, in a short span of ten years.
Losing the BioCell order was unexpected for Unni. Thermochem was bidding for an order of 12 units of
US-18 Water filter softener (Annexure I), which amounted to INR1.86 million3. While this was not a large
order, BioCell was a prestigious account for Thermax and a loyal customer since 2011. Moreover, BioCell was
a good reference in securing orders with biotech and pharmaceutical customers. Losing this order could set
a precedent at BioCell to look for cheaper alternatives to Thermax products.
“Sir, Sumant sent a message that he is with a client and will call later,” said Unni’s secretary. Sumant,
Thermochem’s seasoned Sales Engineer, had been with Thermochem since 2012. He had an impressive sales
record and was good at forging relationships with key accounts of the company. Unni called in Kannan
(Kannan), Sumant’s boss and Product Manager for water treatment equipment at Thermochem.
“Kannan, are you sure we have lost the BioCell order to Sri Ganesh Softeners? Who’s this Sri Ganesh? Do they
even have a factory? Sumant has managed to do the impossible! We have never lost a single order in BioCell
to any local competition. What are your guys up to?” shouted Unni. “Tell me how we lost it – what’s your
analysis?”
Kannan sighed, “Sir, to be honest, BioCell is Sumant’s client and he was handling this enquiry all by himself.
I had made one visit with him and I was confident that BioCell will choose Thermax’ softeners. Sumant says
we lost the order on low price. BioCell had never bought on price and we just didn’t have a strategy to
respond to Sri Ganesh’s low price.”
“Kannan, get me all the facts, I’ll see what can be done – you know how upset Sudhir is going to be with this
news. To lose an order at BioCell is sacrilege for Thermax. They will take up their own investigations on this
loss,” said Unni. Sudhir Vahal (Sudhir) was the Head of Channel Sales at Thermax, Pune.
By evening, Kannan got the facts from Sumant and explained to Unni. “Sir, Pratap Murthy (Pratap), Purchase
Manager of BioCell, Hosur, floated this enquiry for 12 units of 50m3/hr filter softener. Our first quote for the
US-18 model, was INR165,000 each. But during negotiations, we offered INR155,000. As you know, Pratap,
has been our loyal buyer for many years. Last year he had bought two Thermopac TP-01 thermic fluid heaters
from us, despite being the most expensive. He regularly buys resins from us, again preferring our quality over
unbranded products. Sumant visits him at least once a quarter to check the product performance and for any
enquiries,” said Kannan.
“Before sending in the quotation, Sumant spoke to Pratap. The softeners are required to filter and soften
water in their 12 laboratories all over India. The softened water was being used for cleaning glassware like
flasks, beakers and test tubes, in their laboratories. It is a non-critical application for BioCell and that is why
they chose a lower priced product. Sri Ganesh picked up the order at INR105,000 each! Sumant had made a
good proposal and communicated our unique features and quality well,” said Kannan.
“If what you say is right, then there’s a valid reason for them to buy at low price. We don’t have a product in
that price range, and there’s nothing else we can do. There’s no point in me taking up any more efforts then,”
said Unni.

2
The Thermax Group is an INR4,704 crore ($750 million) company, in the business of engineering solutions to the energy and
environment sectors. The company is headquartered in Pune, India and operates globally through 33 International offices and
13 manufacturing facilities - 7 of which are in India and 6 overseas (https://www.thermaxglobal.com/about-us/).
2

3
Each unit of US-18 Water filter softner costs INR155,000.

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 BioCell – Losing a Loyal Customer | SDM-2-0006

“No Sir, I don’t see any point in it,” agreed Kannan.

Unni got the expected call from Sudhir Vahal. He informed Sudhir that the order was lost on price. “We
couldn’t sell our premium price against a very similar offering at nearly half the price, for a simple washing
application. If it were a more critical use, there is no way BioCell would have bought from Sri Ganesh,” said
Unni to Sudhir. The BioCell closure report only said “OUTPRICED”.
However, Sudhir couldn’t believe that BioCell would buy on low price. He called up his contacts at BioCell and
got the facts of the case. This is what Sudhir got to hear:
Dr. Karthik Kumar (Dr. Kumar), the Head of R&D at BioCell had noticed that lately, lab experiments in their
Hosur laboratory, came up with unexpected results. When the same experiments were conducted in the
Mysore laboratory, they gave the desired results. Upon analyzing the problem, Dr. Kumar concluded that the
problem was in the laboratory glassware (Exhibit I).
The water used for washing and rinsing the glassware, had high hardness salts in it. As the rinsed glassware
was left to dry, the washing water left a sediment in the glassware. Hardness salts were deposited in the
glassware and they fouled with the reagents in an experiment which led to the erratic results. To overcome
this problem, Dr. Kumar decided to use filtered & softened water for rinsing glassware at all the laboratories
of BioCell, to ensure the problem does not crop up in other places. He asked Sujata Rao, (Sujata), the Lab
In-charge at Hosur, to come up with desired specifications for the rinsing water and prepare a requisition for
purchase of 12 filter softeners. BioCell, Hosur, was a CGMP certified facility4 and they were in the final stages
of getting a USFDA5 approval for an upcoming vaccine. The approval process was headed by Joydeep Sarkar,
Head of Quality and Certifications at BioCell, who had committed to the management that the USFDA approval
would be done in the financial year of 2016, which was less than six months from today.
Sujata prepared the water specifications desired and sent it to Pratap who floated the enquiry with their
usual suppliers. Pratap received quotes and the technical proposals. He sent the technical specifications to
Sujata for evaluation and recommendation. She approved all the four offers on technical grounds and sent
them back to Pratap to make the choice. She sent a note to Purchase Department to choose one with low
maintenance and a small footprint, since there was a shortage of floor space in the laboratory.
As all the suppliers were technically acceptable to the laboratory, Pratap saw this as an opportunity to achieve
his price reduction target. Sujata had cleared all four vendors on technical grounds and Pratap evaluated
each one for commercial risks. Sri Ganesh’s offer of nearly 40% lower price than Thermochem, was indeed
attractive. Pratap knew that BioCell order would be a big break for Sri Ganesh, and they would try hard to
prove themselves. In the purchase order, Pratap specified that Sri Ganesh commits a service deployment
within 6 hours and local stocking of essential spares in Hosur. During the negotiations, Sumant had tried
leveraging Thermax’s track record over Sri Ganesh’s inexperience, but could not convince Pratap of the huge
price difference. Finally, after all negotiations, Pratap placed the order on Sri Ganesh.
Sudhir had a larger problem at hand. His marketing team had identified this application of filter softeners as
a big potential for Thermax. Usually all laboratories rinse their glassware with plain water, and here was an
opportunity. BioCell would have been a great reference client for this application. But now, armed with the
BioCell order, Sri Ganesh could potentially beat Thermax in this application. With their low price and BioCell
reference, Thermax would not stand a chance. Thermochem had lost an INR1.8 million order, but Thermax
stood to lose a far larger new market opportunity.

4
CGMP refers to the Current Good Manufacturing Practice regulations enforced by the FDA. CGMPs provide for systems that assure
proper design, monitoring, and control of manufacturing processes and facilities. The CGMPs are minimum requirements and
many pharmaceutical manufacturers use more comprehensive, modern quality systems and risk management approaches that
exceed these minimum standards.
5
The US Food and Drug Administration is responsible for protecting the public health by ensuring the safety, efficacy, and security
of human and veterinary drugs, biological products, and medical devices in the United States of America. Vaccines, like the one
3

made by BioCell, require a USFDA approval, before entering the US market (https://www.fda.gov/AboutFDA/WhatWeDo/default.htm).

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Assignment Questions
I. What are the various product categories in the B2B segment? Discuss about the Purchase Orientation
of the product presented in the caselet. What was the Buy Class?
II. What could have Sumant done to secure the order? How can Sumant steer the decision criteria from
low price (for the buyer) to value (to the user)?

Exhibit I: Laboratory Glassware

Source: Photo by Elevate on https://unsplash.com/search/photos/beaker?utm_source=unsplash&utm_medium=referral&utm_

content=creditCopyText (Accessed Date: September 12th 2018)
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 BioCell – Losing a Loyal Customer | SDM-2-0006

Annexure I: Water Filters and Softeners

Softening is a widely used technology for reducing hardness forming ions (Ca & Mg) which precipitate and scale
at very low temperatures and pressures. Water Softening is a reversible ion exchange process wherein the hardness
forming ions are exchanged with sodium ions present in the resin group. After the softening process, the scale
causing hardness salts in water are reduced.
Thermax offers a wide range of softening plants with versatility in flow, flexibility in resin quantities and ease in
operation. Thermax is one of the largest manufacturers of the strong acid cation resin used in this process.
Thermax Advantages:
• Tulsion brand resins of Thermax have a high resistance to
mechanical shock,longer life, high exchange capacity and
low consumption of salt.
• The closely controlled resin bead size minimizes pressure
loss.
• User-friendly, low maintenance & easy to install.
• Variety of cost effective standard models.
• Improved aesthetics & rugged design.
• Simpler distribution & collection systems.
• Easily up-gradable for higher output.
• Easy operation & maintenance.
• Quick availability.
A filtration system precedes the softener to make the Water
Filter-Softener. The filter helps removal of suspended undissolved
solids in the water. Thermax offers a wide range of filtration systems standardized on the basis of specific velocities
for each type of filter. Filters are available with single 5-way valve operation & multiple valve operation depending
on the flow rate & the application. Filters are available in MS (painted), FRP & HDPE construction.
Types of Filters:
• Dual media
• Activated Carbon
• Iron removal
• Garnet
• Pressure sand
All standard filters are painted internally with anti-corrosive paint & externally with two coats of enamel paint.
Semi-automatic versions of the filters are also available.

Source: “Water and Waste Solutions – Softener”, https://www.thermaxglobal.com/water-treatment-and-waste-recycling-solutions/

pdf/SoftenerBrochure.pdf
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