Acqualisa

1. Is this a good product?

Simply a Better Shower

 Segments

a) Market over view

b) Quartz
c) Analysis
c) Approach
d) Learning
Shower Market overview
 Product Variants

a) Electric: No need for hot water supply. Bulky box. Low flat rate.
• Gainsborough-- ( 95 pounds to 230 pounds)

b) Mixer Shower: Require hot and cold water supply. Additional pump for
pressure. Excavation required for installation.
• Acqua valve-- ( 390 pounds to 715 pounds)

c) Power shower: Require hot and cold water supply. Additional pump for
pressure. Less reliable than mixer shower
• Acqua stream --( 480 to 670 pounds)
 Channels

a) Trade Shops: Carried all brands Sold to plumbers who worked for developer,
showroom, contractors and end customers. Acqualisa was stocked in 40% of
outlets. Focus on selling brand/product asked for by the customer
b) Showrooms: Distributors supplied to showroom. Stocked and sold high-end thru a
consultative process to end customers– selling solutions. Installation offered to
customers thru plumbers. 2000 showrooms in UK– 25% stocked Acqualisa
c) DIY sheds: Discount, mass market , DIY products Electric showers preferred choice–
cheaper and easier to retrofit. Acqua lisa not available thru this channel but
Gainsborough was available in 70% of outlets
d) Plumbers: 10000 master plumbers after several years of master training and
apprenticeship. Shortage of plumbers in UK.
• Standard shower requiring excavation took 2 days to install.
• Plumbers charged 40 pounds to 80 pounds per hour and did 40 to 50 installs in
a year
• Plumber sold material plus service at a small mark up. Break up not known to
customers
• Wary of unfamiliar products – problems in installation and could triggger
complaints
• Distrusted innovation
 Acqualisa

• Differentiated products for different customer segments

o Acqua- Premium
o Showermax– Customised product for developer
o Gainsborough– Price proposition for DIY buyers
• Makes it easy for customer to identify relevant brand and select.
• Competitive pitching
• Price to product value proposition clearly understood
 Customer Segments for showers

a) Premium– Shopped in showrooms.

 High performance and service is a hygiene requirement.
 Key consideration -- Style
b) Standard– Performance and service key. Independent plumber to
recommend or select product
c) Value Segment– Convenience and Price. Minimum developmental work.
Independent plumber to select product

d) Do it Yourself (DIY)segment: Shopped from large retail outlets. Easy to

install , inexpensive models ( products were bulky and unattractive. Electric
showers -preferred choice for the segment
e) Property developer market: Price – sensitive except for the premium/luxury
builders. Independent plumbers installed selected product. Shower-max --
which was a stripped down version ( did not need high pressure elements)
sold thru specialised contract outlets was the preferred product
Birth of Quartz
 Birth of Quartz

a) Historically premium brand – number 2 in mixing valves and number 3 overall

b) Acqualisa Slipping; Competitors catching up; perception it is overpriced and service
was dropping.10% of product defects
c) Priority to build R&D.
d) Market research indicated that
 Customers were looking for Good looks/good pressure/ease to use and reliable
 Plumber- Easy to install, No break-down product; no servicing
e) Product developed with electronics innovation
 Need for mechanism that will mix water remotely--- eliminate excavation and
facilitated good looks.
 Flexi-pressure
 Flexi- temperature
 Radically different
f) The research effort thru a state of art facility had 9 patents,
Several products in pipeline and more ideas in early development stage
 Birth of Quartz

g) Quartz came in 2 variants– standard ( where pump was already available and
Quartz Pumped shower.
h) Processor located away from unit. Minimum excavation.
I) Installation in half of day as against 2 days. Plumbers Raved about the ease of
installation and time saved– ‘Push-fit-connect- done’
II) Consumer: Efficient and reliable water pressure and temperature. One touch
control. Easy to use. Set to desired temperature and light to guide . No need to keep
fiddling with controls. Customer experience – Wow

Product that solved all the problems for a BETTER shower experience
 Initial result

• Acqualisa had 20 sales executives who sold to distributors, trade shops,

showrooms, developers and plumbers
• Had direct relationship with a group of plumbers– loyal to Acqua
• First 4 months – only 81 units sold and channel was sitting on huge
inventory
• Need to be selling 100 to 200 per day to break thru mainstream
• Main problem– Plumber was wary of innovation – ( past issues with
innovation).
• Didn’t want to take a chance and risk failures
• Is quartz a niche or mainstream product?
• Deficiencies in existing products is the rationale for Quartz??
 Acqualisa

1. How important a product is Quartz to Acqualisa? Importance to Harry?

2. Is this product worth the investment of 5.8 million pounds
 Acqualisa

1. How important a product is Quartz to Acqualisa? Importance to Harry?

2. Is this product worth the investment of 5.8 million pounds

 Product innovation that promised to change the market FOREVER

 Technologically miles ahead
 Water pressure ( without gravity)
 Easy to install
 Easy to use
 Outstanding design
 Great value
 The R&D effort has created a good pipeline of
great products. The break thru product justifies
the investment on its own steam but it has also
paved the way for more exciting products to come
 Acqualisa

• Is quartz a niche product or a mainstream product?

 Acqualisa

• On the face of it appears niche– Milk quartz for margin

• Sometimes the urge to protect existing brands/range can blind us
to the opportunity
• Quartz has the potential to cut across segments by offering VALUE
with its break-thru product.
• Making it niche will limit what the product can do the brand and
company
• It can create a HUGE lead over competition if positioned as
mainstream.
• Pitch at a higher price?
• Create Value perception even if priced higher?
 Acqualisa

1. How does it create value

• For customer
o Looks and design
o Pressure and temperature
o Low TOTAL cost
o Low Maintenance cost
• For Plumber?
o Quick installation
o Trouble free
 Acqualisa

 Why is it not selling?

• Existing showers plagued with problems ( Pressure and temperature)
• Quartz Vastly Superior and yet not selling

 Resistance from plumbers– suspicious of innovation

 Trade inertia
 Upfront higher price– value not understood
 Acqualisa

1. How do the channels differ?

 Which Channel is most likely to embrace Quartz
 Which consumer shops from which channel?
 Which customer segment is most likely to accept/prefer quartz
 Acqualisa

1. Who are the critical players in the shower market?

 Acqualisa
1. Plumber influences about 75% of all sales and are involved in 54% of installs of
mixer shower.
2. Loyal to product– may be not to company
3. Does not want to experiment or take chances
Customer
Brand   Channel       Segment
DIY sheds ( 70%
Gainsborough   presence)       DIY/value buyerr
 
    Distributor   Showroom   Premium buyer
20% mixer
Acquaisa   25% presence   installs    
             
Standard or
    Trade shops   Master plumber   value buyer
 
Shower max       Developer    
20% of mixer New home
wo pump       installs   buyer
 Acqualisa

1. Economic Value of Quartz

 Acqualisa

1. Economic Value of Quartz

Without Quartz
  Figs in Euros
Acqua valve 609 715
Acquaforce pump 520
Two days labour charge 960
Total cost 2195
   
With Quartz
  Figs in Euros
Quartz Pumped 1080
.5 days work 240
Total cost 1320
 Acqualisa

1. Is it worth converting a plumber---- given his resistance to innovation

2. What is the lifetime value of converting a plumber
 Acqualisa

1. What is the life time value of converting a consumer

Life time value of plumber

Number of installs per uear 50
Contribution from each shower ( pounds) 310
Total value per year 15500
Value from a plumber over 5 years 77500
 Acqualisa

• What should Rawlinson do to generate sales momentum for

Quartz?
o Should he change his marketing strategy and target
customers directly or target the developers or the DIY retail
outlets?
o Should he lower the price?
o Or something different altogether?
 Where to start

Option 1
• Target customer. Spend another 3 to 4 million pounds and generate customer pull

Option 2
• Target DIY market pitching the easy to install proposition

Option 3
• To target Developers—High volume channel

Option 4
• Position in the niche premium segment
 Where to start

Option 1- Target customer—Spend another 3 to 4 million pounds

• Economically risky and inefficient .

Option 2- DIY market

• pitching the easy to install proposition—
• But should a premium product be positioned for discount channel
• Or can one sustain a higher price even in this segment with the value offered?
Option 3- Target Developers—
• High volume channel and break-thru with a view developers can
provide volume break thru
• Downside: Time lag in customers experiencing the product and this
will allow competition to catch up. Also sell premium product at
steep discount didn’t seem right
Option 4
• Sell niche as premium??
• But niche implies LOW leveraging of product that transforms the user experience !!
 Where to start

None of the 3 options actually seem to be attractive…..

• So what to do?
•
 Where to start

• Plumbers move across the channel and are primary gatekeepers.

• As they play a key installation role , they are best placed to advise customers and
accelerate adoption
• Launch a service support program to reassure plumbers that Acqua will directly
service any issue that may come up
o Thru Own service team or outsourced ( retained) plumbers Or even have a
program where the plumber is mapped to accounts installed by him and any
service is directed to him for a FEE paid by Acqua
• Launch an recommend and install incentive for plumber.
• Launch plumber education program
 Where to start
a) The only channel with the ability to showcase the end product to customers and
also exert pressure on plumbers is the SHOWROOM channel
• Showroom will help
o Educate customers
o WEAN/WIN early adopters
o Convert plumbers
o Extract maximum value for the product
o Support the brand stand as an innovator
 Learning from the case

• It is easy to sell a great product

 Learning from the case

• Myth 1 Its easy to sell a great product

• Not Always
o Value is in Customer’s mind
o Sometimes Customer does not realize the value immediately
o Perception and Behaviour is entrenched
o Value is not always a rational cost-benefit analysis
o Sunk cost.
o Changeover time
o Eco-system not being developed can ALSO be a key factor–
complementary/adjunct/associated products not being available or
being expensive
 Learning from the case

Corollary
• Its tough to sell a bad product. Not necessarily
• Expectation– with competition--- Quality improves, price drops, customer
decides and opts for the best
• However need to take into account the following at-least in the short-term
o Inertia/Complacency/ imperfect information
o Lack of killer instinct amongst competitors
 Learning from the case

• Myth 2:Brand equity equals brand power

o Is brand equity fungible ( trade can be traded)
o Does it translate to or does it spell power
 Learning from the case

• Acqua is unable to cash in on its equity

• Tata has not been able to transfer its brand power to Telecom
• Customers do not EVEN upgrade within the scale /continuum of their
preferred brand.
• Brand Loyalty sometimes is on a very narrow plank.
o Maruti Alto to i-10
 Learning from the case

• Myth 3: Innovations tend to spread-out linearly.

o Early adopters followed by mainstream laggards

• Sometimes innovation can spread in a HUB and spoke fashion with each
spoke then becoming a center and sending out its own ripple

• In Acqualisa case this role is played by the plumber who is touching

/migrating across the various channel members. They are not opinion
leaders or early adopters . If anything they are rigid
• They are the most invested in the system with the least incentive to
change.
• Sometime people cling on to inferior technologies paralyzed by the fear
of change or lacking in vision of what the new can offer
 Learning from the case

• Myth 4: The easiest way to go is the best way to go

 Long term connect

• DIY plan and Developer plan offer marketing efficiencies

• But it does not connect with the larger strategic challenge faced by the
company--- which is to evolve as an innovation driven enterprise
• What does it take to transform an organization
• What is sustainable in the long term
• Stronger foundation for a skyscraper--- sometimes need to invest in
building organizational competencies
 Acqualisa

1. Is this a good product?

Thank You